WSR - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Whitestone REIT Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kevin Reed, Director of Investor Relations. Please go ahead, sir.

Kevin Reed

Kevin. you, Thank thank quarter and joining REIT's Whitestone Good year-end you earnings fourth and conference XXXX morning, for call.

quarter press Financial uncertainties to may David time, forward-looking this be period information. Joining me are available company undertakes and The our have be webcast these for some and Chairman may date, may during due historical Relations and this to deemed recent Mastandrea, earnings risks, with from Jim Acknowledging SEC the no of that website, fourth data note call time-sensitive Chief of the financial operating factors. for refer today's statements Holeman, it Please are note made on those XX, today's Chief most been forward-looking statements and the call Executive and obligation materially a statements. with release are that this factors. also differ section. February filed number results package Officer. other Whitestone's call on of important call to Whitestone's supplemental and to includes only that as Please and may not and of our filings in information be XXXX. Officer; earnings the SEC, fact Investor release company's the a detailed including accurate this www.whitestonereit.com, is a update our discussion XX-Q press that Form Actual

are With earnings to company. reconciliations non-GAAP financial the me measures press Mastandrea. on GAAP and allow to the to investors the reference call in let During position data Jim and non-GAAP financial this supplemental of believe presentation, the of better we financial measures. pass package release measures, we that, certain the which may performance understand Included

Jim Mastandrea

progress look that quarter provide you, year Dave for success XXXX. XXXX our XXXX I And performance joining goals, strategy will term conference and details will e-commerce a and on our all provide highlights Pillarstone. thank long ownership and call. to towards end for you ahead Yeah, to includes fourth with us and and restatement quarter thank in IPO Kevin. Today, our interest unique Dave our related the the our resistance discuss since our on

long our to that As I retail in have distraction achieving contagion time to of given background its my would long our for in like our our of retail and remarks, creating a were successful industry disruption consuming rising I significant, and the implementation our accomplishments strategy real costly XXXX of contest, commitment you our to interest a With the impact term process three environment. the and rate term shareholders. today. value and proxy that, themes goals, business Maintaining a share with e-commerce estate on and

beginning to I that to shareholders the thing we first in to goals XXXX. dedicated these is The commitment achieving our our share team know can for and the would is way best growing and communicated to of maintaining drive a healthy like term we value our company at long that and continue vibrant

is Our strategy investment simple.

Our results. of sight high success never them has the best growth. proven worth well consumer. we strategy worth achieve in better, term will leading of that better to the and them know economic both let make know and is and in exceptional properties care and our times then we good quality us be some owning the in markets The acquiring of process turbulent lose markets taking of long and This property produce primary and way remarkable property industry always engine making

have enhancement process marketplace. have we we created that the and as However, to value the communicate,

delivery system focused Second response recognition to them was We when goods e-commerce and the retail deliberate. on in early our of disruption the is shifted like theme I'd services. the to provided share consumer

under Our deep apply boomers prospective showed that financial term high provide in to that markets rooms, that sensitive of now estimated approximately [indiscernible]. have states terms linkages within longevity real value and with driven our our all the home the and executed beneficial, selling communities. collecting of service, research trends $X.X The roadmap the a this buying strategically link repositioning, we integration and provide to millennials like estate in XXXX the leases retail markets. basically, process enterprise dive assets lease medical we’re Worth, base consumer of to a a the umbrella. address and baby value Arizona. the right friendly our properties, a are strategy market value varies like and of since Houston, needs. now has My exercise these creation foundation properties will we model consumer We us years scaling defined them our was that business powerful entrepreneurs and most to on been Texas quality and and have kitchen, real use. IPO and in billion this country over of can who third term $XXX call Creating portfolio long most service tenants growing information tenant value and into salon, established Phoenix, a emergency and on are viability tenants to are our and time estate operating room, cleaners, is within San include timely long selection life theme a real includes mutually entertainment, business, gave living Fort do public Whitestone has of an capital. on clearly various services integrating to contrarian were that business utilizing in choosing that markets Dallas, eight on, the and us that and million of through creation. continue owners somewhat to meet synchronization so. and We A We to is By Antonio and judiciously Austin, to began our in final retail analytics treatment, from the properties and offices, research of beauty primarily the great with and It began with the consumer that you highest with markets estate

and growth base of Some $XX.X from debt net store foot upsized XX overall non-core balance an in $XX of and profit of our spread same resulting X.X% included Pillarstone income X.X%, limited highlights sheet our rate, include with fixed for three per of investment lost the occupancy disposition with Strengthening the had properties upside improved the an at net million, quality credit our or a of million. operating that facility increases five expanded were of which and annualize basis term upgrading in our our XX% of portfolio points. of square growth achieving our

we've and in leverage making improvements debt and in achieved land. about is We're as out properties, our vacant of newly G&A, our work entitled portfolio, pipeline progress, cost XXXX optimistic redevelopment ratios. a and including opportunities parcels with reductions Our development

operating We an leasing have is that acquisition in units, for interested sellers energized. team exchanging partnership pipeline experienced an with properties

assure Whitestone all shareholders to At future Along is Graduate to these University. of business our continue for stands resources. training our look the programs, over towards progress Business With being long we as XXXX beginning, program. of our create REED, goal. to our our at and we shareholder. the to development market proposition managers we eight our with and that at real our Since our senior developing management's we years responsibility Rice is We associate I'd value and are continued which Key like Jones people executive our to year levels First has value towards a We’ve expect Scholar and regional School progress Program management within resistant it's was with past every program that, single term to it we make continued in development conclude the e-commerce signature leaders. estate Whitestone have conjunction strengthen and instituted levels, continue that portfolio. in a to training our

And XXXX expand margins now our footprint. to to as turn occupancies, We to expect we operating continue Dave? the net over and operating Dave. improve call I’ll income

David Holeman

Thanks, Jim.

let announced First, quarterly XXXX last time. address we me restatement the

in regarding concluded XXXX, to informed of give XXXX, from from underlying the company’s consideration of respect After $XX non-core Whitestone of I OP recognize the OP control transaction. subsequent transfer to previously under aggregate control ultimately the contribution XX-K method, of continued and determined continue and period criteria the standard the XXXX. X, units contribution. the Whitestone to this our we August control me to contribution asset, summary. change. it will our those it Accordingly, of XXXX in transfer XXXX, are on Pillarstone from the and sharing financial February our XXX of brief think that OP. for method and of contribution assets XX.X% company numerous Prior XX this in revenue regarding liabilities with XX.X% conclusion us regarding our prior for associated should continue the SEC letter the objected will for million In the the met, of implementation the liabilities it the related gain based objected comment topic in Because the March $XX advisors adopted properties financials is and we any to prior and that transaction new be contribution. XXXX, revenue the of this owned our change those of profit of with period with to of to would no consisting and the only to ending be not million profit the issued XX, affected to we December the of assets XXXX, company debt. X, helpful defer with has the million, of recognition applicable form properties giving that a these staff, after contributed Whitestone and to and XX criteria the the liabilities effect, ownership the do staff restate the a XXX, we assessment standard Post In our to three recognition which been judgment for by of recognition the January original of January required application the XXXX standards. recognition the had assets Pillarstone topic January accounted so and for under and assumption Pillarstone Pillarstone of recognize in sharing from gain new our filed XXXX. defer of in evaluated quarterly criteria, Based communication to consultation received on to the SEC approximately revenue the standard, financials this

the equity recognize million. de-recognize OP company’s XXXX investment restatement, will the our reflect of liabilities result and of the X, the earnings and XXXX financial assets company our as a method. with and contribution to release underlying in year-end discussed will January Pillarstone January the in and As under XXXX press reflect retained accounting by an X XX.X presented treatment The new increase today the adjustment associated

financial revenue amount. In procedures. could million, we and and reduce the and XX.X company’s determination September equity For for the over $XXX,XXX months material result and of partnership of and of ended process those reporting evaluating quarters earning XX, one the in impacts This favorably the million of impact to controls estate a and determination, in weaknesses expenses the expect respectively increase by facts a these the nine restatement effectiveness effectiveness in those the by year. in of controls restatement of more XXXX, of resulting adjustments one the previously are period XX.X of we're real to the million nominal increase And the evaluation third The X.X in we and roughly disclosure and identification reported of or expect amounts. net to internal FFO our quarterly controls light income.

few provide details and our results operating and Now, let the of for year. a quarter financial me

had not our As Jim and all. progress of we commented, were key XXXX, a several and in overcome able to on few we metrics make challenges to

on $X.XX per this the per our reducing progress decrease share NOI percentage creation from share-based in higher The items XXXX operations million costs $X.XX funds our While borrowing X.X contest acquisition funds believe term selective a have of $X.XX adjustments, will share by of our and a increase funds XXXX of from professional costs governance our our based We early these from operations per lower from cost other and in operations Funds administrative costs increases XXXX, our offset enhancing same-store definition made compensation larger X.X leverage, growth an in a from by costs. year, rate X.X% for operation our structure, of long from and based our in from report acquisition XXXX. fees costs, portfolio year, dispositions, increasing in proxy professional excluding result for G&A lower NAREIT core, corporate compensation, all largely in for shareholders. reduction was was core fees proxy including operations and million compensation expense were of down the general the XXXX, and adjusting we the funds XXXX This for which by reflects value and of from share was from includes and million. debt contest, acquisitions, Reflecting fixing upgrading XXXX. debt, for $X.XX core XXXX, driven X.X extinguishment increase debt share increasing and our share XXXX. tenure reducing improving $X.XX we the the

growth year, but our with for the our Our to acquisition for May strong of net XXXX second same operating store X.X% store half the income pool. X.X% inclusion in reduced the a was XXXX of same

basis second company approximately brochure Occupancy which driven for turn of in lease. out X%, coming relating quarter largely rent will grew points years. by same a the are XXXX, a move and was write This XX which TAM from into The the XX adjusted our a not adjustments this down market, tenant believe into to action off to from store low account We basis expected was taking Phoenix the to last positive in ground on end points quarter. half was repeat. but is year growth trueup, fourth

year break For lease, previously into foot the were per continued ABR XX,XXX foot compared lease. in big improvements on to and terminating Rental than this received at end and box a our rates space year by rate higher the this Whitestone ago. at at to square QX expand and square the with ground spaces building smaller Whitestone new land to a that XX.XX much owned XX.XX expects grocer. XX.XX lease

X% and robust, leasing of blended activity for on new XX.X%. spread XX.X% was XXXX in of leases a Our with leasing on renewal increase leases

our than weighted year $XX.XX, our higher at years was rates which place lease is was X.X Our term end. average contractual in X% and ABR

side, quarter were the lower cost a million than X.X expenses or On our fourth XX% G&A ago. year

acquisition XXXX million year. expenses proxy for lower were contest G&A XXXX for Our X% costs annual in cost, adjusting full and X.X in or the

Our XXXX a rate than higher increase in of debt. ago. This was driven year quarter interest the $XXX,XXX expense was a fourth X% by variable in our

higher of the was year year, million XXXX, for result approximately increase For our a expense rate. rising interest half this $X.X of interest the than is

additional intend on end, to an we of variable and fixing and increasing our of Subsequent to the As pricing term debt. the to XX rate percentage XX% have credit increase overall in our at amended today, of year terms, million, QX rates to debt improving million approximately XX% we rate and we fixed size extending overall XXXX. this the of facility, XXX

for providing initial are XXXX. guidance We financial our

XXXX X%, current not view conditions This growth and management’s of and per operations in guidance as XXXX net events any $X.XX include of impact XX% net of range of to to income of and to future funds acquisition income include or the future rate operations well occupancy data same of $X.XX the our $X.XX core average share. be debt year-end X.X% capital share the to of an to release our to supplemental X.X%. to in be for from to of market on per store reflects the share from unannounced impact as earnings XX% project operating funds in interest in assumption or $X.XX range $X.XX package. range the Fee earnings $X.XX, our disposition. guidance referenced and guidance be Our of operational does for We

Although will that happy highlight the and of to the like quarterly our a two to give and first thirds we fact quarter on we Jim has And professional way quarters. be basis, with accounting relative following are don't would I typically take guidance other that, the first fees higher questions. given I quarter, to your the into

Operator

Instructions] question We take Craig of first Kucera Riley B. our now [Operator from FBR. will

Craig Kucera

to think average start X.X, at your what your guidance. the like in X, with fourth quarter, With of something think wanted interest I is, assumptions in you're rate, were on at the looking a some kind X.X I of I fixed rate. you about

mentioned you to had provide taking you things XX%, that I the are firming out? on You XX% is? know line, you can I just little a what assumption more color guess, from assuming

David Holeman

Sure.

and as on looking then out variable increased factors, rate well. I we're the on building term debt. Craig, an think as of assumption debt of a secondly, about XX% we fix And remaining rate mentioned. couple to Obviously another our the

Craig Kucera

that And what Fed the I done rates. that might raising think be of assumed is markets kind assumption? the

David Holeman

assumed improvement we've rate within think I kind of one our projection.

Craig Kucera

you the that is a of or from the impact contribution quarterly And of assets annual standpoint were the what expected forward, Okay. income going give sold, some color sort Pillarstone post on be? us can to statement

David Holeman

make Maybe I I sure understand question. your will

the the obviously, disposition we’ve given that think assets reflects year. were of done guidance I this

So let it? I that, me was make question your beyond sure Craig, understand

Craig Kucera

method on reporting I of I'm will to and determine that net just impact you're the it a well, what be or Yeah, basis? quarterly on the not trying mean, equity annual

David Holeman

profit since in think, the change impact of presentation XXXX equity have the sharing impact out our We our method. of show financial results. grossing under accounting XXXX versus guidance the It’s the I method I in our think updated. the Pillarstone did a minimal on largely under disposition,

Craig Kucera

what how existing assets as expenses you we of And forward. that we standpoint operating have or asset going Do value kind have trying the Pillarstone of the for the operating -- the net margin expense expenses consider of we can to just maybe a about have think the we to calculations don't from but sense rents, consider?

David Holeman

presented think the so would be going and that forward, method kind our cetera. in results et levels, accounting, the of new fourth those the reflect the margin see of I you’d expected revenue results expected are quarter the

Operator

take our will of We now SunTrust. Hau question Anthony from next

Anthony Hau

rent is color lease to expected more in of bad previous XXXX debt be assumptions Can provide than terms and years. underlying some spreads, on occupancy the lower guys reserve? you bombs

Jim Mastandrea

you first end, your didn’t just part very Sorry, heard of repeat I the part. would question? hear the the first I

Anthony Hau

Sure.

to be guidance ‘XX expected same is years. previous So store lower than NOI

occupancy, you spreads, can in debt underlying and provide Just, terms of assumptions bumps bad rent reserves? on guys lease color the just more

Jim Mastandrea

Sure.

our we’ve the regarding same-store XXXX, So given X%. growth -- in given we’ve guidance, X.X% assumptions as to

I store as our was same mentioned, I a that’s of period growth X.X%, same entire assets other has assets different store think reported based on obviously period. the but for each pool

growth of the was same for acquisitions, X%. Our XXXX second the half our including store year,

we've in our So inclusion of store same XXXX. those in of assets that expectation reflected growth

and As debt given probably difference of those we've drivers from occupancy, then two we side, think Bad on bad far our debt, our assumptions, expect from levels. of XX% don't XX% -- any as large I NOI XXXX. regarding current to are guidance significant the the for

to flat see improve over year basically slightly, but that continue We year.

Anthony Hau

And bps typically how baked much revenue? XXX do you is it in, guys of

Jim Mastandrea

we How what? much do do

Anthony Hau

bps? debt embedded store is NOIs, of bad or revenue XX XXX bps much the reserve gross How same in

Jim Mastandrea

X% run Our the to bad debt has X% of generally in revenue.

show our X% revenue. quarterly really of that to then we X% in the see financial, you’ll that, but think typically in I

Anthony Hau

were leasing and should more quarter, provide this into heading so guys the you on trend can spreads how ‘XX? why And color weak that

Jim Mastandrea

inclusion just some is XX into that of thing the acquisitions first the pool. think I

One typically Whitestone to model our to will of of time begin a happened acquire to drive and And really apply bit takes a that us it then property. the rates. is things

XX there half that in the mention inclusion some change things the pool. largest in I about the don't of TAM the related and So of move-outs the year expect the quarter, trueups. repeat acquisitions we were of was fourth the to to $XXX,XXX did second in

Anthony Hau

raise caused And are by guys the money equity? increased share or that planning count the in is you in to ’XX, options

Jim Mastandrea

the share today. out additional of there impact dilutive shares the assumes really over in count But ‘XX Yes. what’s

assumption any raising not it's So shares. of additional

Operator

will from take Massocca our Ladenburg of next Thalmann. Instructions] We [Operator now John question

John Massocca

end, debt that? what of was of million the thought you on subsequent $XX that that rate kind the to So quarter

David Holeman

I is no think Pillarstone pieces of sheet three of balance was, referring our you're it but debt, had So debt. to longer on that kind

pieces which XX was the is the was I million debt, one amount are X% roughly of at is right -- roughly mortgage balance first a in million of think two it range, $X of then the in X%. the XX The and of it X% million Whitestone, at which is

John Massocca

well between what's interval, how plan that assets sell the opposed to you at Pillarstone, that, Pillarstone’s that gets that can continue as there Just the resolved the you provide long color assets then intercompany to as And any maybe for what forward? term is on point off? and data paying was you going

David Holeman

Sure.

XX and down expect contribution end million from I [indiscernible] original we think at approximately million to of paid loans XX was Pillarstone. of as we communicated, the X the about involves Whitestone to That million, year the further to to continue

John Massocca

with you is And going of would that's just or anything kind in that lease helpful. maybe growth in out be some any here role color or move you that anything than there expected ‘XX of moving the forward tenants the there's there other outlook occupancy kind up see out, coming other mentioned the any driving

David Holeman

largest mix all tenant is a lot of about our I think know, guys diversity, as tenant X%. has you

renew of and provide then – no lot activity. a we there's each typically, So a of year tenants lot

particular, move outs in amount nothing turn each there's portfolio. year. a our footage we're We large obviously fair expecting, can So in square no of

John Massocca

right was issue just this of kind opinion object kind caused entity? was of flagged you there as the of conversations of know rules a around examine your over that your to the how else what, go Or that and a or in them kind kind there highlighted we accounting. more Okay. the that effectiveness simply besides regards lastly, thinking Pillarstone kind maybe kind And to divergence to anything of of put to this you maybe there much as is and anything to then controls with of for were about? of interpretation you was accounting reasons. SEC, how classifying forward maybe Is with just it Pillarstone Am differing should pretty

David Holeman

yes, the I around involved we ultimately and on that. clear judgment to judgment, control, objected that think company the was made very determination a

And so there. else there's really nothing

over there's control, clearly effective. at far our as our will the and financial we and look reporting As evaluation disclosures where of assess controls

Operator

take Anthony our Hau question We SunTrust. next from will of not

Unidentified Analyst

[indiscernible] Just the to couple going accounting disclosures, back the the XXX% and is self-evaluating different self-policing about comments evaluating a question. or of guess I SEC on controls. that One and controls

there going or to Second, with be communication ongoing dialog is SEC regarding the controls? other

David Holeman

can't have aware Obviously, speak the SEC’s to dialog going actions I the ongoing any of to I'm forward. would we SEC. not with expect

of the participation the officers as conducted executive far way is As this the that works. in evaluation the is controls, that obviously that by company, of

Unidentified Analyst

And should reshuffling any there with quarters whole is accounting share impact FFO to Pillarstone? per previous the from we --

David Holeman

nominally is the and and There it’s of previous nominal the the though, a very, the quarters FFO, year a very think for – -- is, basis basis but of nominal said, but revenue share it it I nominal impact and impact not small a expenses on very be communicated I the is would net $X is income, small impact we the on on small. three for accretive, year and very to impact

Unidentified Analyst

of end end a the CEO goal? to I just kind was guess members. but overall everything what you like transaction? XX% I at of the really with of was day, At of background terms maybe and it day the do believe on was the that that's guys in to of And happened, board minor of the the deal, the it And worth it, sold couple that

David Holeman

and I that communicated go back and think some previously rehash we have to you all will discussed. I communicated give and that more previously been things of goals don't the transaction those clearly believe lifestyle. have time it

Jim Mastandrea

I'd you'd we to like this interest on pure some Yeah, and Whitestone expressed become comment an time it. we've a see I like always know play. make to that ago, a talked about

the we think approached way of a of it shareholders. because the the -- were time they bringing to play nature that assets, fire looked was selling without at we fair So getting the low didn't of Whitestone the valued pure become Whitestone to relatively we had and that transaction,

seep profitability our the out those hands. that Let of of assets

they price that's best of The transaction us the brings pure and of only this bankers further we all have to a now available in owed the risk. alternatives has it becoming what closer about to recommended future of play. liabilities to So beginning do hope with like and to Whitestone could upside. step debt. out SEC one investment went at a did at us development the looked no that you then and we we a light, those ruling no yet the XX% assets Pillarstone, transaction the is from no and Whitestone understand helpful and spinning that $X of liability in million of left the was Pillarstone, to which from in those any future I kind off in really It Whitestone risk interest made to a hands getting is XX% it all with it. by stores of situation the to of like assets profiting We strategic

Unidentified Analyst

quarter. and guidance your any co does I'm tendency the if on NOI, into is there in the -- Yeah. retailers mentioned that you of impact other just how configure center that fourth And [indiscernible] curious store how same there follow kind in to is one? that the

Jim Mastandrea

is there impact no Yeah, a Whitestone it to ground I And lease. think rent I communicated, lower center. was as

and impact is into there's of really the the guidance. all so any no of that to And centers our built impact

Operator

our take of now from question Thalmann. will John Ladenburg We Massocca next

John Massocca

G&A got follow you the be effectiveness of going quick front, as in controls potential of potential to the is of the SEC uptick and there examining for on guys me. kind understand with two there is one XQ? the dealing of kind G&A associated XQ, some seasonal with in Just with here for kind through of One is, also ups time-ish kind the maybe of some

David Holeman

decrease we a a perspective, this are year a higher to continue I of commented material. it. result has scale professional obviously -- that just fees typically related audit. end commitment nothing to So I Those as just fees as level think and accounting year little well as G&A this from probably a of a have but we’ve higher to say first percentage this, than quarter

John Massocca

any recut the then you impact have facility shouldn't guys And restatements in the XQ, credit correct? on

David Holeman

re-statements credit any will manner impact going The the facility right. they were calculated or have on previously forward. the be in no same That's covenant. of as They the

Operator

There would closing this management back to now time. any to are at turn call further for questions I or no the additional like remarks.

Jim Mastandrea

terms sheets to experience consumers we're locations to have the that thank year XXXX history we that the us. The like value about business. with a our interest also and us. to you that with had the and solid about with bring distractions say our multiple Again, to of you, to model. starting was it think up previous business of for were they we Well, are than joining all thank I back all balance opened operator and properties’ a still answers and Yes. overcome have very people in work time that less we and We go stronger excited us, and for the tenacity just and our you that many the have this questions tenants longer know, where consuming, portfolios We able skill driving remain as in no of one concerns ones.

and loyalty XXXX with all of terms really operator. Thank you, you to thank your I think us us do for your since very of a us consideration being And promising continued you're I find given the XXXX. IPO you've appreciate to and going confidence. So year our in for be of

Operator

concludes Thank today's you gentlemen, Ladies participation. conference and for call. this your

disconnect. now You may

Whitestone REIT (WSR) 28 Feb 192018 Q4 Earnings call transcript