WSR - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to the Whitestone REIT Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Rebecca Elliott, you may now begin.

Rebecca Elliott

operator. you, Thank thank XXXX and joining REIT's Whitestone Good conference you call. quarter earnings third morning for

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

update third you Now, over our to our to on CEO Mastandrea, results. and Jim quarter Chairman

James Mastandrea

Operating last to XX.X% highlights and of base call. to joining with the my would third rent begin on $XX.XX quarter Thank quarter. quarter. like sharing from and you, our third all Rebecca I last portfolio quarter XX.X% conference you $XX.XX us annualized thank increased for you increased from occupancy our to

XX% the higher Our in overall quarter XXXX XXXX. traffic centers same than in at was XQ our foot

its the versus pattern a we XQ but XXXX. COVID of the maintained variant, With slightly resurgence delta through steady, lighter

members Texas. Arizona visiting new our traffic the recurring from to shifts continue existing with migration centers experience to ongoing and continue population from individuals We as community and active and corporations

nine by Regarding $XX.X this compared our net $XX.X XXXX. which XXXX share quarter, is per and per and growth make for the respectively. $X.XX in A annual X% September base from ended operations grew long-term We dividend, X% revenue quarter as our FFO. the XQ million this driven debt well noted we trust growth, Same-store from and our to in in as square positive $X.XX one financial Along X% spreads. Equally is in to trust. EBITDA, times performance of our X.X to sacred. increases a XXth, now quarter and the previously was Funds ago. foot which QX consider operating with X.X indicator the reduced per progress of occupancy times financial the quarter as REIT is months deleveraging for rent by to this important core income down leasing goals key to share in year we of was towards million continue noted,

have IPO. now shareholders XXXth since for months consecutive to paid we quarterly Regarding our dividends dividend, our our the

dividend at remains to ratio at strong XX%. our Our yield core is FFO of a premium X.X% and exceptionally payout

Lakeside million. Market growth $XX.XX reactivated of acquisition a This quarter we Texas with plan our the at price external of Plano, purchase in

in which this Austin, and towards with is economies in our did a of of our Dallas, assets strong Phoenix. acquisition Along acquisition, key additional any attaining scale. component additional not properties we're pipeline pursuing actively this Importantly, require overhead, corporate

we feet our have leased. current at Looking X.X portfolio, X.X million of space of square now our million

a mix square our per complemented space grocery by XXXX is footage leases feet tenant, anchors. lease Our approximately X,XXX tenants' larger by of average square

By a relatively our big of the into spread revenue to the centers than of our higher vetting smaller relationships improvement group much out of so, our box in tenant cost and tenant and rigorous would a tenant cash of as tenant, risk X% a bring rent is pay to percentage flow. among square tenants like process doing for foot, tenant. of same costs larger I ensures tenants foot or the per of strong revenues. quality we square a one our of our new per Our X% our that annual stability of and escalators a point achieve space some portfolio our lower lease

addition, insurance, typically area taxes, maintenance. our and common In tenants pay

this Our strong performance quarter. activity leasing drivers and key is the one of

XX lease our count new Some year. is in important prior the highlight to and the XX XXXX XX in XQ for versus metrics that quarter prior

well. prior leasing you today highlights, spreads in prior the quarter Our the shared moving and of in which positive XXXX summary, I've in direction. year, X.X% X.X% X.X% the perform our In with to exceptionally in are both model a versus update continues for business are XQ particular,

And focusing continues goals. notably, we continuing results. produce progress long-term tenants to good our most make achieving strategy on leasing to entrepreneurial consistent Our to are

work remains Dave? While that our is we to we over ahead performance, committed our the improving are cut serving to turn the out, call and to increasing would Dave shareholders us like that pleased value. of but continued With now long-term know with Holeman. I our team

David Holeman

the to the Jim. some quarter. Thanks opportunity appreciate great third share for results I

a corporate tenant long-term day-to-day jobs is and occupancy During activity; This our overall MSAs we areas and the country. towards improving infrastructure growth, our goals topline mix best-in-class by infrastructure. migration of same-store and growth; leverage year-over-year other producing see revenue debt cost scaling greater for allowed strong levels the strategically and QX G&A quarter reduced FFO revenue the from significant to growth; of million progress rent The debt NOI, evidenced compared revenue, designed record growth; X% topline our The interest QX annualized occupancy leasing Total X.X% improvement second have XXXX. base robust sequential up third quarter-over-quarter debt up and continue of bottom-line X.X% $XX.X leasing X% best same-store leverage. in and quarter, our XXXX. make quarter, execution operate was of in to and and strong produced was us spreads; and focus have quarter that improved to from geography and from and of resulting long-term in, increase growth population the by metrics; NOI our a significant scale driven from our the and and relocations

operations $X.XX quarter Net was sequentially rising year-to-date sequentially QX up quarter, income up and along year increased was $X.XX net We the XXXX. $XX.X per share XXXX per NOI X% square share our in of XXXX. core QX from same-store lower the operating ago was the are in up per X.X% per same $X.XX year for quarter Property of also third and FFO was benefiting X% from X% a X.X% from the share ABR prior up Funds collectability X% the from from with reserves. and second quarter, from of from per X% income from foot, for the million and per of quarter. up share, quarter XXXX. share, core $X.XX period the

occupied on the quarters, representing very square first to of leases, spaces. Our newly XX and with build continued strong quarter XX,XXX new leasing second feet activity in our

value basis signed. on XX% new nine a for XXXX. foot basis, Our new XXXX months nine and was than XX% for the total activity leasing was our than On higher higher activity XXX% square higher lease leasing higher Leasing the GAAP months leases a new the XXX% XX.X% on third been renewal XXXX last spreads and on leasing a than XXXX. positive XX on increased a and and than by X.X% leases have spreads basis months over quarter X.X%

end the ago. a $XX.XX Our XX.X%, XX.X%, ago X.X% and X.X% basis annualized up operating quarter. second our the total X.X% year a in X.X% per grew occupancy $XX.XX square a at our year from quarter base foot X% rent at up to a acquisition from previous and up of increased newest year on quarter the ago. Total is GAAP from stood occupancy the Lakeside Market, Including from portfolio from

reflecting Our very collections the classified collections quarter, collection and in cash overall levels be basis. high tenants on to as the continued third strong

XXXX. $X of Our decreased an from improvement year-end tenant by receivables X.X% million,

than year $XX.X accrued receivable. accrued rents of million and agreed line $X.X was ago, deferrals. our end, upon Our debt. million of in X% lower rents this straight At is net expense interest in reflecting and quarter Included a we $XX million had amount lower accounts

upon agreed plans. XX% down is balance deferral year-end Our from their payment reflecting honoring tenants

Since last we balance early various strengthen have our year, sheet. Turning to to implemented measures our liquidity.

XX% down to cost Our our million total $XXX.X from XX% ratio real from was a estate $XX.X down a net debt year improving million, to gross ago, year book ago. debt

X.X Our a X.X from improved debt-to-EBITDA year from in second turn X.X ratio QX. ago to turns quarter times and the

remain debt steadfast significant are we progress We our goal area. this with commitment are the reduction our in in and long-term making pleased toward

credit million $XXX.X of availability have of $XX.X end, of our capacity As borrowing under million we quarter undrawn and facility.

in sold we proceeds to our focus results million of XXXX geographic of X Whitestone's ATM business testament $X.XX shares $XX program, During strong price a company strategic common the resulting in million These under net quarter, sale at average share. strength the to are an per the in and model.

-- acquisition the please stakeholders. Lakeside that open Market questions. in of the of now we by quarter forward look encouraged Whitestone's and all now to delivery of are We With to Operator, value the continued will lines. take

Operator

your with Instructions] time, question. proceed is we B. And first this [Operator Kucera our question-and-answer session. Craig be Please And a conducting question at with will from Riley.

Craig Kucera

Hi, good morning guys.

sequentially both there year-over-year. broad pretty just decent there function and and in items more that of any a increases items? operating expense a Were or expenses, and in utilities driving insurance in had other one-time effort is that You increase based

David Holeman

XXXX. one-time Craig. we our like Hey catching any where in say, items, bit obviously pulled those a back question. Not expenses would on XXXX, could we and up we're on for really I operating Thanks your in others,

just of reduction maintenance in XXXX. a in a of XXXX sorry, little reduction a So, -- and bit a a the normal a of bit little catch-up kind properties, XXXX, in catch-up of I'm but

Craig Kucera

had leasing a a Got from helpful. quarter spread it. Jim, solid That's perspective. you

look escalators the get get in your potentially leases? As to we start able specter economy. higher in perhaps Are of the pushing to to at and you inflation

James Mastandrea

Well, and X% participating. and that's probably and we're closer right increases your thanks now, now, averaging X% question Craig, annually to to for thanks for X%. Right

All common are taxes and expenses have all well. increases area tenant as to maintenance and through our those of passed the

have around And our participation is -- X.X% $X.X where example, a million. breakpoint also million, of and markets for somewhere percentage a we get -- places we'd clauses, XXX sales. local there operated percentage fine are and in of a over break local restaurants, the restaurants if anything get We which have $X.X the number is of point those on

up Phoenix exceptionally get well, So, another particularly $X to marketplace. X% million million, are the and it. restaurants on And you $X.X got the we if doing can in

time have there relatively the then we always doing take up of that three it's leases five well, are time. for for are. to and our at again, something which pick you usually at we've lease renewal, want the And at that we that on is we When or years. they where exceptionally to the stayed renewal, So, tenants term the short they greater end to able when term or at to their inflated the of market time we're back look market, go and rent stay

we built So, remind our done and we will I have XX% in, FFO of out precautions you and dividends. when pay we've that that along all

have month. we're accumulating we of and a huge cash So, a there cushion lot each

Craig Kucera

the Dave. back on gears to color going that. Got appreciate and shift I'm I

what in here are As here have what rents, this far recoveries may as quarter? COVID missed of I your quarter? was deferred recovered fourth and that your the expectations this kind rent

David Holeman

Yes.

COVID. our So, on we -- agreed during upon have of deferrals with kind

we've I year. XX initially XX% over -- this reduced about think that

over balanced we're next months. are really are rents, down the of million back So, deferred XX $X.X probably to -- largely paid about in which kind

cut in we've number year and expect to rest over that the the XX it months. half So, come in next end from of

Craig Kucera

maybe and Dallas, commentary, Okay, made Dallas you're that's and are or acquisitions, some can here? a to quarter looking and Austin probably your you're Phoenix in you see year late decision of in the that's this thinking at helpful. we acquisition enough but of other we along for Jim, it as talk make about far well you made you well. close fourth as expectations -- something kind something too next might about early what quarter Is sort

James Mastandrea

Austin on Sure. we're We confidentiality under agreement. a contract in and do property a have

have it at say great very looked the say can't in it's thin that, at property, the I that it the our other are really portfolio, than I we've got people there. our but we market. So, a Austin, -- anything that we more attracted are pickings looked on ground very two have fits And to properties cannot --

each of grow to regions. is goal Our the one

Worth; one Fort we to estate Phoenix, our two at easier and some we as be that, If our Dallas, where of try billion. size do to can Austin would assets plan the top well Antonio; down, to San same where rank we -- example, capital towards that For we We'll Houston about as marketplace. $X and in of owners headway as on and year. Dallas real control or And San acquire. as Antonio, making that about or keep strategic track much point of for cost in are time comes next growth the the

Craig Kucera

Got do there you're closer but Year-to-date, may more I common, of at, OP you've your know be past any it. been And to looking issuing course, to in of unit price OP the so deals unit these you've deals? deal, are NAV. able been

James Mastandrea

on by way, part OP OP do than it's units, deal an at observation one it's asset we the because have to issue price. value do We net we great that's looking something your the market that and a at the closer

Craig Kucera

Thanks. me. Okay. That's from it

David Holeman

Yes.

Operator

question [Operator Group. with Michael with our Please your And Instructions] proceed next Diana from is question. Maxim

Michael Diana

you. thought new and lease was Thank leasing you important? a that particularly The renewal us was strong Can very you give maybe the examples one quarter. two or in of lease activity

James Mastandrea

Thanks for question. your Michael. Sure

we in little me worked called million to in Italian That's move another Cafe. enormous it's property probably her we and in worked it's open called give that bit tenant restaurant. which been four a When Ola's, Scottsdale sales, go only which just a Soul then, years We her. has Sunset our reputation & you background and a a with an $X She year was about is called history. with Vic back. and -- closely half. away marketplace Since and several amazing miles is was year back Let an and slight a open very there restaurant marketplace, an bought the now doing success, a about of been

the a, structure the facilities there deal success, of that, and taxes banquet in all same that property, XX% to opened get and Copper Following she not parties large has common maintenance, do the the income. Thanksgiving, our Christmas, that with Club insurance what's is the called net around revenues, we pays she area and operating

where year, now age building last lease and well. They and Scottsdale we her during negotiated opened has doing restaurant with at another it's leases then a property exceptionally it And on all Alma one open with very to breakpoint second new tequila, Carlton Market All it's kind Complex theme that's Road So, where now -- a called exceptionally a Seville across we new a COVID, the our and restaurant group, down well. that a TI percentage are property. from even different in our her that Street example. on just generation restaurants of she little do has that's and have just signed have we doing they're Ritz Mexican a it and to

example their restaurant have on Jalapeno called We third us. with are another Inferno. They

opening. that We a we're new Cigar have Lounge

cigar lounges. We have eight

particular a that interest have equity XX% tenant. We in

We a we to that leased year studio ago. have a Pilates over

studio who that We that we interest equity license earmarked instructors Pilates have would certify to a have a and XX% woman has in about other runs studios. XX the like who Pilates properties to and Pilates

works. an how Just that you to example give of

and things then have You we the we for at TI, We're and $XX,XXX have operator. minimal equipment and then about paint that. opportunity franchise existing, the that it's to lighting your looking like space, possibly already purchase the

more approach of that's more tenants that incubation the on the we and of of approach. we're some leases entrepreneurial of an of an color doing, So, some have

Michael Diana

Okay.

to I look. to to you any you what's us mold way go it updates it give as you property, as there? Lakeside, want acquire you on the soon Now, trying on on been Can about know going

James Mastandrea

that flagship what's center but back now. under a H-E-B private H-E-B construction store the bifurcates goes and street and it's Lakeside is their -- Dallas that main it it's is about Lakeside parcel came XXth. it's COVID seller their peeled closely. with pause. contract not Yes, we is Lakeside March and a under on It very street, on what we to that put into and had H-E-B literally great is back and is in a part about -- around, opening we at worked a The back around that We was. whole came it knew on intention when contract parcel. our us

were property. so we that able the And to make and reactivate Wonderful acquisition.

through I it. think two we signed leases or already three have

-- and was was been that team on going going our well So, very that already so focusing far. that's

Michael Diana

you've acquisitions. any opportunities Great. the recent properties development what are? on Then the I there have with know possible undeveloped Is that tabs update you acquired

James Mastandrea

what -- to we Yes. Dunkin' to we'd my or back about equity million feed so an it ago say We leased cost it in the What off past with our generates a outparcel, $XXX,XXX COVID that's cap going we of on couple just they over several about doing land it's it -- we enough We top not before initiated Chicago in the come X% head income. and generate them in and will been pulled property. a to the every months we that market a -- $X of those and had one had about net year. been a have into in value operating rate usually is of it Donuts and I'm build believe

that should be-- So,

David Holeman

sorry Hey, $XXX,XXX Jim, income. -- it's in it's net operating I'm about about,

James Mastandrea

In capital. Yes.

David Holeman

$X cap and We're would about our building Jim's about to value be $X it a creation. million million at point creation, about value

James Mastandrea

REIT from operation, at that put can away either and doesn't or to great properties triple feed it just properties make can of capital the we it. funds about forgets in owner quarters from two can in it funds where situation look is later interesting a Michael sell it's stream. to gain, net and -- from What's a a So, operations but take you our leading our a it we market these

not from take our operations out funds of very And to so, we're flow. careful cash

for created While we Market give Sunnyslope. We for area $XX on hand, just value you other that. property enormous an me of In sell Marketplace, and square We one there, you The more that our with Walmart rate in you within numbers Arizona, almost and $XX opportunities. is called $XX they foot, property a XX% in between we've the that grocery bought have today let give cap appreciated occupied. million store X%, and the could million put will it's a called Street it's precise And not Walmart land we sub portfolio, example like like. X%. somewhere a property if

So, in there, reduced just you've you've it profit sell your got this operation. if funds from but huge you

we're can examples up So, where of selling profits but give if capital looking see the these we start there's properties. you property-by-property, in can down go and of we like that I to advantage some enormous taking more a we assets build lot. in that of replace these and some

about on own On that $XXX acquired development million the land development $XXX the already front, million properties. that of we opportunities we have to acquisitions with was of

Michael Diana

great much. a you Thank update. that's Okay, very

James Mastandrea

welcome. You're

David Holeman

Michael. Thanks

Operator

next question from Aaron is with Securities. proceed your our And Hecht JMP Please with question.

Aaron Hecht

deal Obviously, of within guys. if gain pipeline. you better I'm wondering somewhat be my captured underwriting simply for helpful? a where Any you for cap did new flow deals Are today. you have deals parameters us would Hey like on give some the occupancy you one the recently thoughts taking the standards for and stabilized for upside, Are effective deals? questions. there's you've looking new portfolio looking Thanks around can more rate?

James Mastandrea

in it to leased you -- at stabilization And market XX% give to property. determine look we Sure, is what marketplace us that couple. property that I'll a and and a the our receiving takes the heavy from previous down we've a stabilize rates. all conversations Aaron, on in corporate we're know properties And you of I We had wide. company. artificial think AI the time run intelligence on each We

So, the property but might market under rent. XX% that's let's be a say we it occupied, buy XX%

leased. a a and if but probably why it's you it's it's foot, square tells it's market, -- square $XX getting $XX be fully which it So, might obviously under foot, $X.XX

with criteria what we little cost. one is very stabilize to do do need it -- additional little So, is

The is sure we of it. land look thing we parcel second make always for comes as there a that with

at. be, cap the we X.X things criteria it. cap at we when that within buy cap piece it, it And have whatever third something about the land announce or first a we of and expand X rate rate, might that a XX so rates or usually then criteria, also look can X.X we So, has has we

criteria and is there won't it's a at square on center, a a if say the Third box we're of is XXX,XXX is box we the buy XX% feet, looking over it it if when center.

to but we down spaces, too do break So, like to we don't if percentage a it is into smaller want boxes high.

want into of smaller We corner property, the sure the it and make sections areas. carve we that also piece so a up to make it can boxes, different the -- into corner

the criteria rear behind and go that add sure So, great they're to those properties LOI. at at income see the are delivery I make we at some before three personally low the We don't always systems tax properties look property I neighborhoods. might least every credit of neighborhood. clean. times we or two the any of to an it. to look like We We look and at really like

them look on we fly that have carefully. drones these at properties we and very We

LOI agrees is prior So, then and a we've a we the never this like so that, the it but committee, which lot we Board of an we to it, the thick sign the we to we taken -- finance Board Trustees. Once property trap, make, we course, contract. the we a -- done air of from do we make the as process signed it a how contract, do. sign it to diligence, to of when full at a the after is, run the do course of every and to and likes well. we they go we we've contract. our it's the it accretive to Once due inch Committee, on in property contract then look of for financial Investment walked about a go to after of look we packet take we have we've from all then looks contract, Trustees that then what we an an through property it at from And LOI, our sign When and investment once

on closing side. XXX% have We our rate

little hope that anything helps I a to bit. do there. want Dave, So, you add

David Holeman

It does--

Aaron Hecht

Thank you.

Sorry, Dave.

David Holeman

Go ahead Aaron.

Aaron Hecht

occupancy. is on could I think does up is spread you -- sounds market you going at have cap value portion? deal on So like I it a to add -- or if guess looking provide for investment added down give us the trying to I a every effective to to to spread creation it stabilized you've are component. ideas rents you it cap, simplify have X is was increased an that gotten a spread value or that of minimum sort a there get range to market or X improvements on there? for any once example us Like a

David Holeman

property contribution at and look obviously can to improvements we look start basis the cost net a Yes, add and income the forma I'll Jim maybe Obviously, then the bit. make. the of capital, a with of it versus the we operating pro at expect initially our on we of

the the than So, the that test for the property. is produced the acquisition income raised from is first capital less

operation of the look also at property. the We

of doing overhead. contributes then our year, total cap. we're from that as so scales and as leverages to cost for earnings continue buying our is way done our scale a goal also And additional in a it's it a overhead, overhead One of accretive and of that reducing where going an properties percent big no Lakeside long-term perspective, the to to continuing our we're we've Market goals to corporate this required us debt

Aaron Hecht

that both? that if mode. do say I or Is implies leverage going you fair a how ability characterize that would while equitized to you're going to acquisitions over the bit Okay. would growth into be And guess little reduce to

David Holeman

down leverage significantly, that we've fair -- that's million I'll months $XX moved to our obviously, going very was pace say, look at to million We've the our of give we've from million. this basically contribute $XX and million forward probably $XX about Lakeside, that year, of $XX assets. We not fund for paid million the you cash the improve financed was this on instance, we proceeds and and balance quite debt by Yes, of to assets. our to that of acquisition our debt forward, target you about debt improvements deals if million nine $XX to equity $XX XX% metrics. but just flow a of year, added that going the --

James Mastandrea

we engineer add if Once we just a hear total Once going a say on I'll in purchase return. financially potential to -- cash-on-cash We price always we it. that. on analyze and if Yes XXX% acquisition X.X rate, X you so or to us cap it NOI. rate based own a then the cap decide we want

pure the at look rate cap first. we So,

Aaron Hecht

Dave. Thanks Appreciate response Jim. that

David Holeman

Aaron. Thanks

Operator

appears reached for call session. I end now the the question turn we over back remarks. to will the and closing Mastandrea of that have It answer Jim

James Mastandrea

talk questions. appreciate about Yes, really we you -- the thank company thanks as can tell. you and We to really I all. love the

with again. you it's share results quarter been pleasure For to our me, a

the pleased very worked an goals Arizona. are towards believe diligently opportunity progress to company to and achieve report our of quality Texas REIT heart and to is owning own very that and we achieving both increasing and a value We interest our long-term soul the properties shares some them. an best continuing of We in and in as Whitestone shareholder

best-in-class the our and then and leasing to we remain Just on apply as continue to you we very fuels. acquiring know focused disciplined management want properties that

has Q&A day. by plan a able great their serving and all that our morning given grow I'm shareholders been our achieve have of have to of him stakeholders. We serve very you success. help Thank please businesses god many to some tenants and explained I've in their reminded each much us as a and the

Operator

lines And your may this you for concludes you participation. at your this disconnect time. Thank today's conference and

Whitestone REIT (WSR) 27 Oct 212021 Q3 Earnings call transcript