WSR - Earnings call transcript Q1 2020

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Operator

Good morning, and thank you for joining Whitestone's REIT First Quarter 2020 Earnings Conference Call.

Joining me on today's call are Jim Mastandrea, our Chairman and Chief Executive Officer; and Dave Holeman, our Chief Financial Officer. I’ll now hand the call over to Kevin Reed. Please go ahead.

Kevin Reed

Thank you. you Call. Whitestone's thank XXXX First and Conference Earnings morning, for REIT joining Quarter Good

on call our me Executive Joining today's Officer; and our and Chief Chairman Dave Holeman, Chief Officer. are Financial Jim Mastandrea,

factors. that a and be differ number uncertainties historical materially of note are results forward-looking those other statements. may some this risks, deemed during Please call made statements not from Actual forward-looking may statements due and to

of Whitestone's call important most Please of date, XXXX. a the to including with earnings may the XX-K release Form time-sensitive May period press these also the this that fact it as discussion call filings includes is Form refer that be for today's and be note may recent for information this X, to of company's webcast Acknowledging detailed and XX-Q that time, SEC, only accurate a factors.

data press section. with The quarter supplemental our operating company update available Relations are in Whitestone's information. website, financial undertakes have obligation on no www.whitestonereit.com earnings the and release SEC the and package Investor been first to and the filed

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

Jim Mastandrea

in the and first on for quarter. then joining how will us to XXXX a business provide open relates quarter financial all preliminary David detailed our as of did for will our we first an a at investor and Thank Great. Whitestone, I the update Holeman COVID-XX during quarter provide on questions. you we if on first and look XXXX the overview April call. XXXX, it will

many business, impacted economics United [Audio we that impacting fiber the of the it [Audio stretched the our our time The so and concerns to learned in of States will built primarily the XXXX was has pandemic, during that tenants coronavirus the XXXX the are and across all recession many incorporate of our and Gap] health Whitestone continue Gap] during predicted our we evolve wellness employees, lessons the that health the of company. on these times extraordinary focus communities. Well, into is the to

focused Our full and businesses to tenants and our I our employee time. are is base think back tenants, safe to operating get just their

provide Texas community communities well Arizona. Our high-end portfolio in Quality essentials. centers design with tenants by necessities has to and to located and estate adjacent real

remained March, of during tenants pandemic. have our Since active degree have all centers to a the open. To-date, remained many limited

are capacity. yet be operated community to Our at centers normal

work executive team and full strength. continued at employees Our have to

on we both the provide April month Dave color far. thus X, begun opening approximately for Recently, a business. more May for openings. Arizona XX% May of will and our of collected Through Texas phased and have these rents for XX%

All that have of high many stimulate neighborhoods and anchored pharmacies quality centers and centers our of to traffic. of income grocery continue our by are stores

provided has and service up centers pick the Most of curbside some pandemic. our have restaurants during and

grown. years from learned over in all what incorporated last into the industry, have past, career have cycles down of Whitestone the years XX multiple During and estate XX my experienced have I’ve we as over we I real the

the quickly prove us pandemic. that be enabled we a de created would Within and and we to We’ve with decisively. the policies culture this firewall structure built to operations policies became and facto beneficial and when to of to react somewhat grow of safeguards resilient processes a Whitestone, our processes that faced

and heavily states, friendly resistant services focuses consumer. needs creating that properties business that an were populated in was and internet business model cities. Whitestone located acquiring built of on by a fast-growing By

owner while and by tenant through of creating providing with to tenant leases develop rent our annual triple commitment a X% tenant and co-tenancy increases By mix, X% rights, passing minimal making people. and diverse structuring and train approval nets tenant by recourse by to a and

of increase Whitestone The XXXX. renewal two and on start leasing signed solid continued months to was and and per X.X% off X.X% half ABR square by highlighted in strong of of a spreads XXXX first new foot leases with lease an in XX.X%

an salaries to Reduce our March, employee became all all postpone $XX to down suspend costs dividend, was overhead reduce expenses and increases. business million unnecessary XX% disruptive. us of XX, credit, and going However, all we to fee it by on and minimize projects, line development including freeze our be redevelopment that under current acquisitions, borne our all travel. revolving announced in our immediate March And draw and clear plan

action long and unpredictable and/or Eased with of balance sheet, strengthened are with our to how portions financial our the country regard buried. These our liquidity times will be off flexibility. business closed the

high in recovery. are showing early properties quality strong signs of high of markets concentration growth Our

don't recovery that However, how long will unfamiliar is towards through are an we recovery know times. uncertain What what do we take. path the know navigating is we

and know also have we a We that liquidity. strong balance sheet

it ball We focused tenants, people Dave? our and we Dave and that, are we markets, collections. let know We know know to consumer, properties, Holeman. know the we our over me we revenue our with know our we turn know on business our

Dave Holeman

Jim. Thanks

I position. capacity, speak follow about to orders open XX% longer The no theaters distancing steps up as revenue. discuss social movie up current begun Retailers of then first of to place. XX% operations Texas to they be are guidelines. will Stay-at-home economy. allowed which long and and open our in and so the markets up In to make state has me results our Let financial market our our and are

service, Restaurants up sign XX% up of occupancy restaurant. the to dine-in can of the open listed

read. we further Hair guidelines. be As with capacity to early nail this expand salon, may XX%. as capacity not social and is barbershops, retail are It clear May distancing or May allowed on requirements occupancy exceed restaurants be XX, X, their to salon spacing to expect when when XX% will open

centers the are buildings gym gloves our the can of open on maintain May reopen but maintain XX, must be Office In and distance feet required facilities. customers six social to distancing. will Fitness Arizona wear however, steps until market state begun to our of stay-at-home economy. in the some effect XX, Statewide, about May XX% up restrictions have are open up revenue. The which lifted. has make orders also in been

XX, resume safety retail in-person On Starting sanitation services as Arizona, and operations may May X, based also. businesses Cosmetologists measures and and dine-in are resume coffee can services barbershops appointment distancing long shops May followed. restaurants measures. as resume in guidelines physical with can

to Arizona Today life crisis and be and open timeline them operating our and all for centers restaurant. throughout gyms regarding eased greater have no retail and is when theaters of movie yet May. this to and requirements or will in expect in There further remained we come spacing

of implemented protective our we include each centers measures enhanced which In cleaning have procedures.

encouraged of Our curbside to grocery needed many for tenants restaurants of the takeouts additional revenue surrounding are them. solutions become tenants the food efforts future which are we our in neighborhood record and by sales and could sources volumes experiencing providing creative through

service operating monthly XX% and revenue. property, our general Our CapEx debt including expenses of operating and taxes, administrative about run expenses, expenses,

remarks. of further is on So collections touch April about my liquidity will I shortfall in later our expenses $XXX,XXX. operating to our

these including of to situations their our been them governmental XX% actively and understand operating financial help individual financial the we working assist assistance tenants in Approximately and programs have resources and have requested accessing and help large of ultimately which funds to obligations. We amount believe tenants programs our applied that rent, available. have a will are pay receive and them that salaries, other for will

case We case a are with those by requested who basis. have working tenants help on

understanding payment back agreed to that these financial amount a better in running will and upon completed as resources discussions of expect deferral get quarter financial receiving quickly. lead and We the and aid the of they're up to tenant's ability second plan we have their the largely

that deferral short in not for agreement result forgiveness. expect plans payment We the payment payment term unpaid generally rent, will

significantly situations. that While opportunistic in us not do and by COVID-XX pursue less most have resources an intend believe significant we in we with the crisis, us been our are these tenants we financial to due our under acting have of agreement manner contractual impacted aggressively the impacted paid amounts tenants that have

process yet terms and June Generally associated additional collected rent of and what in speaking, and is of fully fluid this predict with at deferrals tenants rent know difficult to deferrals. could bring rent point. May not do working the on very We

that flows. Additionally, cash some results reopen not expect businesses will this we do near and term and could our impact

we team. said, remain properties, great long-term confident Jim in prospects As strong due to a our markets and great

let Now the turn results quarter. for me to our operating

to prior the largely expectation mid-March Our line quarter COVID-XX. through results for with in our were

on As tenants. in impact the a impact we collectability of of test stress the our tenant COVID-XX result our base,

straight-line As loss this rent a result credit have $XXX,XXX review, the reserve, recorded COVID-XX a we and primarily associated with of pandemic.

and circumstances process quarters fluid a and be several will adjusted facts the will Collectability next as be over change.

and reduction revenue core operating quarter the XXX from by impacted funds first income operations basis income, net approximately and COVID-XX same-store share by $X.XX funds approximately points. per Our from growth impacted net in our operations

summary of feet X.X% $X lease value value of of to renewals XXX,XXX new increase square short included XX,XXX $XX.X with from key $X leasing highlights of $XX.XX leases base feet with million. a square value XX.X%, a of foot our million total for million XX,XXX the XX lease A a of square an occupancy in quarter of per total – – the of rent and of leased $XX.XX, volume annualized XX

renewal increased new for with tenant the X.X% leases. XXXX XX.X% spreads Our leasing ended trailing and for months XX QX for

net income approximately X.X% associated primarily loss XXX decreased operating a points basis pandemic. COVID-XX result credit reserve as same-store Our the of the quarter, first of the for with

expenses from XX.X% year XXXX. an a of in the improvement General improved quarter, ago improvement administrative XX.X% the as of to quarter revenue fourth percentage XX.X% first from and an a in and

Now turning liquidity. to

liquidity pandemic as of the revenues past versus need maturities terms XX factors, taking days well the into XXXX, and company’s account Over potential been potential since expenses. as carefully numerous have we analyzing in hit, including year this debt the

XXXX one maturities, mortgage loan debt matures and XXXX. maturity of terms no In in that we in $X have million

we service, of need rent terms expenses, to revenues of G&A debt CapEx. to expenses, and operating In our our versus collect approximately cover potential XX%

collected at same about amount XX% point time. this we in so in which and far, we have XX%, we April collected May in April In collected is had have the

of are credit we So at million. $XX Taking took decisive largely annual May collections consideration, in that our facility $XX into in percentage including our million step line our reducing April. running on factors approximately discussed, dividend by the point these this the Jim and we all drawing saw with

previously XXXX. We light short-term throughout basis greater clarity a circumstances, as we year. in for current COVID-XX and on impact of the move guidance have on to the have Lastly, the we withdrawn hope stated long-term

will With we now take questions. that, your

Operator

B. Thank right. take Kucera All you. question of our Riley ahead. Craig FBR. [Operator from go now We’ll first Instructions] Please

Craig Kucera

there working you’re on having with tenants Appreciate the I few rent you’re color how questions. Hey, guess are escalators guys. or the the a managing requested but just terms for least asking you them, cash whether better you be had maybe at good as have are follow-up think longer or or deferrals, any that that’s increased morning, challenges color I any would collections, about in leases term a helpful. as

Dave Holeman

one Yes, And be be part look are to we improved, that is Sure. those discussions. all are the of like terms feel of fluid these discussion. the lease Thanks, also need things there Craig. very if will we for will

can win-win As to Jim and that to leases. for throughout tenant would of restrictions and co-tenant look many tenants, fee have this our we We mentioned, we impacted, the do been very with have do so a significantly intend improve, of these if them Whitestone. have looking we But really we’re both for few the work some in for and those process. we

Jim Mastandrea

Craig, that at as we’ll And look out. the buy we a specifically, X a we we have surrounding miles. great property space, very and I we from mean, to X go Yes. sociographics tenant property,

So of we and understand in needs how tenants dice are. our to what the slice terms

also And it and when our driven all basis has into And X% have mix on said it the as well. pick of then sounds been – annual escalator I pick very well so in we my the a in an centers. leases we where when tenants, that we remarks that to them X%

believe we we is not their personal sign we every if do the feel the it. The the don’t that lease to that guarantees we for that lease on other we reason their And they going they we’re sign. business, guarantee a believe Either personal that ask business. thing is in in on get or

is have And which time, they’ve at so workers. tenants, we this very the on think over I smaller been thousand good

Craig Kucera

how it you’re such sort are as or those going are by in you And that things extending process, trying rent or of XXXX that’s Got of get along? it. through structure you back paid kind potentially you this the discussions year-end to are deferred XXXX moving

Dave Holeman

good Yes, question.

back truly fluid their of the and we’re is ability I’ve an understanding tenant’s a As part open and important to process it get said, process, the Craig, position, – operate. and

short-term But We at evolve as plans, at are looking plans, generally in prepayment nature. have will payment deferral are we looking that general, but plans we those payment are short-term further discussions. in

Jim Mastandrea

their and business nature are very to get going again. their back is business entrepreneurs. And Craig, Tenants, to get

kinds that’s as as important business hard our get working to in are to those you they really of have So just emphasize model. in we service. When tenants, them back are

we So there estimate not. tenant a are the the may there, that XX restaurant that think looks than that space restaurant be right through here, will fewer may a some And pretty we now make but it as – not than these crisis, other sound. maybe

Craig Kucera

Got it.

and rent of I should Or was there are more is comment, assume certain reserve So categories restaurants? that straight-line focused to tied based the credit that loss that on? that on more probably sort

Dave Holeman

Sure.

we As we were about as said, of XX tenants we amount took rent. this. was stress as were it collectability restaurants, our the this some did will an wrote-off continue group reserve of through roughly we a tenants the The straight-line was entertainment, that – those a tenants loss XX and to nature I impact of that test as but tenants well large additional given credit identified change go

the number XX that are quarters. just of we clarify reopen. as think, I know thing, to that obviously we that may go not Jim through we coming going one to indicated change had That probably today tenants

$XXX,XXX But additional tenants, being obligation. $XXX,XXX them that reserve and an And taken did probability – about bad long-term hard looking through our write-off. we their straight-line all was reserve really additional a were taking of understanding then and debt the what look really we reserve in the know rent did with we book lease at we at meet able of to – about

Craig Kucera

Okay, great. Thank you.

Dave Holeman

this may pay. point determined what just We that And to at – ultimately many wasn’t the we be. of time, probability tenants needed those it in

that as they So pay they revenue. will as will be be, obviously, recorded

Operator

[Operator Instructions] for the back to I’ll no remarks. any be additional or All turn right. There to speakers questions. closing further it appears

Jim Mastandrea

also the we closing, us In I’d you Okay. encouraged to We discussions a cautious operating have day. tenants do although short-term, outlook cash look every basis joining what at with thank the very a encouraged working our in in we We on Well, positive like seeing every for today. manner. ongoing position we’re long-term do and side and are closely with day, it, have we’re just business. a our by of the emphasize we’re

adjusting our been difficult think that it solution. company think We cycle predict, means to believe through And do – that near-term, in come for during to a down this. number will ability recognize evolve to quickly is to these withstand really the to evident and I times and of that hit. our going pass they’re and a I’ve continue March in down But cycles, has times the these it rapidly. are was built while I the to we that future just better will but extraordinary

we At near-term Whitestone on time, this during us long-term all going that we focused this meeting the know to really are carry those is towards and goals.

is is platform our focus we on proven remain Our resolute strong, on preservation. model capital and our business

entire And we’re really starts at some of day positioned passionate period, to and every a That’s these that to this can capture of crisis looking execute really when be opportunities think one navigate is opportunities. team team on the successfully them for. out. least We in senior these flipping really here future and market being what future companies we’ve with this every work positioned day. committed. the throughout I Our had to we’re

moving are We shoulders, you look unwavering on meeting focused this like our our on intend team ahead Thank know and with true long-term we and as to the our and all. remain stay our goals. serving to that we serving our our as our just I we you with and we work is God’s hand shareholders plan, values to and and we forward and all standards this And just pandemic. character, strategic close, to do

Operator

This concludes for call. today’s you your participation. Thank

now may You disconnect.

Whitestone REIT (WSR) 8 May 202020 Q1 Earnings call transcript