Earnings call transcript Q3 2022

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Operator

Greetings and welcome to Whitestone REIT Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, David Mordy. begin. may you you, Thank

David Mordy

Good morning quarter Whitestone third for thank earnings conference you XXXX joining call. REIT’s and

Joining me Hogan, on Officer; today’s call are Dave Chief Officer; Officer. Christine Holeman, Operating and Financial Scott Chief Mastandrea, Chief Executive

note, a and be differ number historical materially of some are results forward-looking those statements. may made most this risks, deemed during Please the recent call that statements these not from Company’s Actual forward-looking may other XX-Q statements earnings to due news SEC factors. including filings and factors. and for Whitestone’s uncertainties XX-K the with Form of and a Please release discussion to refer detailed

the Acknowledging no that obligation accurate XXXX. only also this is important undertakes webcast be to date, information. The as note company of may for be today’s call may November information a fact that X, to of time-sensitive it that period this time, this update call includes

and have on the and earnings third quarter operating which financial on supplemental quarter third in XXXX website be our and package data section. SEC yesterday to today. Investor slides discussed the news We Whitestone's highlights afternoon website Relations published with filed are release our been topics available

over I the Holeman, turn call Executive Officer. Dave will Chief now our to

David Holeman

Good And very David. call. We financial you strong and Whitestone’s for delivered quarter joining quarter you, Thank morning. results. another XXXX thank third earnings conference of operating

XXXX, grew up from X%, the over is of revenue months for our share our X.X%, third net Same-store the $X.XX. up nine quarter operating is X% year. per First $X.XX, is income the over of and FFO increased

basis points from points XXX XXX is from and occupancy quarter. total Our up XXXX basis XX.X%, the second QX

debt from debt the XXXX. base foot up and strong for proud effective I consistent quarter, ratio was improvement net is our our the lower first producing balance these where to results. We leverage of of the X.X% end to know our exactly per months the as shown throughout square EBITDAre that the times As nine of in is year-to-date am results team of And X.X continues by that's for with times annual very execution the to our sheet focus rent strengthen company. versus $XX.XX, net delivering vital of XXXX. third X

I our Specifically, business the with positioned of results that company's ensure and was was we're communities daily a distractions. on focused attention a to respective consistent started a business this to XXX% serve cash that since numerous appointed, deliver strategic executing core drive to and the portfolio has able our It interests unlocking aligning We on that value on plan. to turned a basis properties and process from growth. model the been are unique of flow elimination strong

upper our have range XXXX we the a investment answer thought $X.XX Today making take delivered the received $X.XX a share approach of target year-to-date narrowing our interactive. little some to different might community. the we make from we and share bit have questions the We more of We'll to and range, $X.XX guidance to new the are FFO we per portion share. per call

Following from that, today. call questions we'll audience take additional our on the

David?

David Mordy

with start and it question close gap? What's valuation you Thanks Dave. a I'll How your Dave. common have do you answer Whitestone's investor plan?

David Holeman

a as what with we've already short done start amount in Let's accomplished, we've time. tremendous amount of a

we achievement. over but earnings the an well beyond our at just per XX.X%, of extend record year-over-year for accomplishments XX% and Target are We FFO occupancy delivered share growth just

have operating Numerous approval was of governance including JV in Feng. actions with Since on our the executive our been been Chair the the roles, CEO Capital investment place, a pill, removal set path has divest new refreshment of company addition reduced the executive REIT Furthermore, of Board to team and extended splitting Amy and of significantly. the and we shareholder credit partnership. in put bylaws, taken, to the Pillarstone compensation poison access facility

at additional leverage. to demonstrate connected market quarterly far, We of pleased unlocked. confident I foot continue by curated we've these so accomplished recognize need centers still value that opportunities square delivering earnings being what appreciate best exist reduce We we and to XXXX will successful spaces to we operating XXXX improve. results. with to continue we're need We community well remaining occupied with So items, consistent a are vibrant, but on If businesses. the to the need and am mix deliver grow the to

David Mordy

Dave. Thanks,

shouldn't as a with for environment at view if go ceiling, another Whitestone's in occupancy high. we're the again question Why investors current changed? regarding the and is Let's not, record a company's occupancy is you what's The occupancy. just

David Holeman

David. Thanks,

truly making growing we steps We to Upon and understand the on in have believe we're our groups focus with for occupancy role, with is are so we long-term to the shareholders. various began engage take I which far issues numerous immediately level, result maximizing actions XXXX. value our taking CEO stakeholder the the of progress taken the business the to in pleased

know I the with and we steps. in As following my leasing. call, high begins earnings quality first Accordingly, this stated we ends taken have

additional in to executive the First, leadership changes community. achieve team investment the made alignment we with

accountability. we Second, increased

faster clear for and and we micromanagement Specifically, management better strengthened leasing the allowing and providing priorities, and streamlined regional and property execution. goals teams eliminating

community, dramatically the restoring has began which real the our transaction the our within estate increased with brokers flow. of process especially Third, relationships we

by is the the clear for were and Importantly, we've with that improved morale aligned tools in greater which success giving team, objectives throughout more productivity. management resulting employees effective company

these combination, and expanded have In our potential leasing on steps occupancy.

never outperform. our and our and nothing for our We have tenants, value. create strategy, team more an time to our wants competitive properties, has extremely team better results drive to than been a There that

David Mordy

turn how for Dave. Staying occupancy to let XXXX? Christine questions. goal occupancy, me a go? couple with Thanks, Christine, can for What's the of high

Christine Mastandrea

Well, we'll with call. XXXX our target growth address QX the occupancy

it's However, important is occupancy an I that outcome. note think to

traffic, that community and bring focus in the quality we successfully and tenants, successful the increase space. community right adding In centers, Our order tenants is target the fill the co-tenants. We rates rental the that value of serve are not designing to out compliment just grow revenue. who can seek tenants to

critical I component businesses -- of when point when connected thriving. surrounding far just the remerchandising those square under. this square occupancy tenantable well community. should have out increases and between XX,XXX does is foot the It's Review than feet that more the broke center are successful not are our also we to is XX,XXX you out quarter tenants. occupancy ensuring that time, spaces a and for greater Rent first

under to XX.X% square foot and believe quarter was and our competency, the core XX,XXX for Our still we which occupancy, substantial room increase. is has

additional seeing is the local office centers increasing the as we demand reaping are that orbit its workforce is buildings, reduces the those we're One trends of benefits. around our in and

David Mordy

more guys give color environment? on the you Thanks, current Christine. Can us

Christine Mastandrea

We our within continue great see footprint. to demand

pre-pandemic Our have total XX a throughout education, momentum mention the categories, point, lease occupancy during should found This -- runs feet first you walked the reflects only and strong million up is strength XXX call. basis in that making QX has also year-over-year leading of we is the we our the $XX quarter square restaurants, the quarter Dave tenant representing XXXX. changes value. through. This point XXX,XXX to versus environment, leases this but demand signed including improvement medical, to reference month fitness, and not of from the that I for remained

higher higher and a XX% foot XX% on a The third and lease lease year-to-date basis total XX% on a basis, basis. on higher on a basis was square square total and XX% quarter with foot higher value

later plans remind rate X% centers accident. to that a announced grocer and you a today lease on Dallas, powerhouse of HEB, Heritage positive ceremony Lakeside that is break The allowing a Fort Plaza more lease across leasing strong structures happy opening they a for Market for our opening the to spreads with from grand gaining Worth, new pleased for Recently XX% store no lease shadow basis are our total cash they'll the the were a quarter am are continuation store Texas I and have frequent GAAP Trace designed basis shorter within I'll strategically and in Center. our increases. just ground Plano street respectively, on terms adjacent our anchors our and

the benefits make did Our our reap and into consumers data-driven we communities. acquisitions and the move are prime businesses locations as determination same to

watching growing affluent recent on you, six each to Asian restaurants barbecue [ph] two If communal quarter, we're communities a that the pot focused and market centers think opened location. of a with not change, our family signs component. we experiences for all this what with dining hot different the the restaurants up [ph] environments. within in We and believe downturn, trends, such centers of we set. example that's Like bringing performance per us weather leasing markets of fit A Moving are staying quality the value to but desirable highly with strong our we seeing. FFO our and is true and perfectly that should revenue total casual of these on was allow businesses services in share strategy on of to sunbelt peer off against XXXX, XXXX range a X% as only focusing great which between was our growing of economic we will effectively of our very operate to economic,

David Mordy

next a allocation Christine. is how Scott few over the shift be investor prioritized? capital I'll Thanks, few How handled now key the with will of over to Scott, capital questions. years? course

Scott Hogan

it growing means have goals earnings means growth returns of leverage. recycling It In near-term. need and to opportunities redevelopment or order to to projects recurring twin has to our to activating and returns growth. focus enough fuel in current achieve to Whitestone strong of Thanks, our assets earnings, a We're have in we and land need that organic David. twin with embedded projects non-income acquisitions strong the the environment, twin on development our fortunate improving parcels objectives. strong and producing goals in achieve number properties also

rising We of doubly sharing are properties actively acquisition patience the and value-add criteria. recycling well-located, and disconnected seeking will costs market look shallow the to projects balance we transaction is the progress forward dual The they are quarters. information more the coming On so capital, side, over as our and with current important. on capital meet discipline of that our

David Mordy

in quarter Thanks, Scott. interest the during the extension development quarter? projection facility. of for was fourth major the One credit What's expense your Whitestone's

Scott Hogan

David. Thanks,

of our amended to renewed extension to six-month liquidity credit our us our facility XX% advantage rate credit options and sheet in of We additional opportunities in our moves the corporate portfolio The allowed the amendment terms reflect financial take maturities the and of until the with beyond amendment us and Also, the in have on attractive bulk to flexibility provides pleased and current quarter. two extended revolver. facility's our of third XXXX interest This on are balance our the inclusive agreement credit debt. lock marketplace. strengthening and

curve at have expense we anticipate our [ph] sofa of group $X.X third higher quarter forward million fourth our current XXXX debt Looking our will continue support had from the debt quarter. the We at and overall to level, improve the interest bank strong leverage. versus

David Mordy

Scott. how What's differentiation? Thanks, question of quite does Dave, ask simply, I'll one your Whitestone compelling out? stand final

David Holeman

Thanks, we We everything believe factors really at non-formulaic be do. that to development. Whitestone two. of numerous I'll David. unique have tremendous in center had highlight and interest core is differentiating time, In the a I of make or This believe the there growth is just we one attractive.

If box good centers or power looking with for low anchored paying cap Whitestone. for you're big tenants, not that's centers grocery a rates company soft and operating

and designed and growth that a high neighborhoods, in and And higher based great family serve to on centers with those offerings needs all rents. serve communities can educational a thriving high we effectively believe income in medical, anchor centers combined locations center quick Sunbelt basis outperform better daily restaurants, cycles. deliver in believe economic fitness, are We locations, with

range XX,XXX switching tenant to are for especially XXXX Our larger in and less leases. rent designed center square expense profitability XXXX timing foot and tenants larger restrictions often under we these versus provide for space In base $XX.XX and contained believe the out approval higher rights in the that of a a giving risk, is and square and average larger spaces. spaces the feet properly $XX.XX the

David Mordy

our to some Operator? take remarks we're Whitestone prepared ready Thanks, and now Dave. by This concludes team the questions.

Operator

you, have is Thank The question Germain [Operator from from sir. JMP Mitchell Instructions] Securities. first we

Mitchell Germain

that so national more a call, from? typical. bit taking on Great. Maybe Maybe in I the just some the in than most a the I'm you're leasing pipeline, types color for appreciate on hearing that. terms tenants you guys doing smaller tenants of lot seeing something spaces little the of thanks traction

Christine Mastandrea

Mitch. question, This same categories to the for consistently type We're across markets. our Christine. is Thanks drive of come into for the seeing activity all

would I I from, would has restaurants. that be say from our in been there. regional interest and strength it still say, brands increased of most continual franchises the this So But also would of

national about and it and it's talked we beauty health, is And health, and so franchises is brands wellness many coming whether there's still say strong, of wellness iterations as new that, or expanding. last that in quarter, would to addition Fitness, still, beauty out.

So and it's new ideas we're of a coast, of locations the and but coming the in, HHIs. east there. from the out our they types move They both new -- lot of a new because seeing our there usually product come so west into start

I there of these think are, earlier, along the new mentioned lines And as think I trends. you some of, see I

brands coming -- two the in, up example, we've restaurants, pot in all hot for Korean again, opening locations. them one Austin, strong year they're and regional one opened all barbecue Dallas, in So our and Houston this three six, from and six all in in each of

David Holeman

it's Mitch, one just add might to Dave. thing I comments. Hey, Christine's

exactly of spaces mentioned size right. You the the

We continue the see that demand in really have. we spaces to

-- on we look at and really always our you If well XXXX properties, XXXX foot those we've space we're to square we positioned. said focus tenants

its Christine the on be types to on of focus size So a the smaller then continues and spaces as tenants. space

Christine Mastandrea

that finding a in on Number we’re more looking that retail have is it’s kind companies want centers be couple And one. storefront, for different the interesting number seeing of their is, have brand trend spaces to reasons. One two, the taking to ability of we’re they seeing closer out talent. about case the are just new home one that in to a that workforce that’s of

X,XXX spaces come around move cases. that So at a the unique also amenities they’re brand than some the and workforce about been up had creating larger opportunity a a have bit norm, We’ve actually those to to for of little feet. for the XXXX X,XXX and square back, so And the that’s much couple too. to in closer spaces fill been

Mitchell Germain

opportunities Dave, and weigh do fairly screens on get return to portfolio, obviously some I maybe the development/ de-leveraging, unfavorably significant Great. for within you, you how question appreciate do broad you I sheet But to know that. balance versus pretty redevelopment a opportunity significant pretty your that. peers. a that

to capital how allocation more broadly view talk forward? little bit a about you going me So

David Holeman

Yes, thanks Mitch. Excuse me.

indicated in that’s that focused Scott comments we and think dual I his today. are way have the we goals

balance but We are going to improve that look sheet. drive growth, to also take actions that our earnings

posted the and sheet. tell that in call, that opportunities, opportunities, look going that, think pad I the on believe So goals and a of growth consistent activate we that there’s look a the there redevelopment as we that us I for we balance I some at focused have but parcels slide are, sites, but our to we as those with have have been within are have deck improving management with overnight, portfolio for of a number we team years income. and earnings create happens then land to on driving will those you we’re opportunities delivering None of we and our

Mitchell Germain

noise there’s just but or Got on that’s issues preventing, market a some on the update that, that? sale Pillarstone, broadly that other weighing is know least or you. that’s of it are it is delaying that the some at I obviously some And delaying

David Holeman

Whitestone comment that a is relationship the So but setting we’ve on communicated than is There whole business is investment believe that shareholders focus, that of partnership, so of Whitestone a There clearly be exit other monetizing for focused intent our the that path venture in that. we I investment in thing it, best doing not JV exiting on because to taking our is the Currently do a that are, then involved interest our to that, shareholders. in our reinvest nothing but litigation the no that generating the those, shareholders. our can’t back we’re for some looking right and our in are we and lot -- actions our with Pillarstone. return assured that lot to is of

update, to the course. monetize investment we saying that looking are So than do for due focused to not any and Whitestone other taking steps in Mitch, and that

Mitchell Germain

operating from me. of one Last need happening quarter? to Anything aware property you. that operating Got this be in expenses, we

Scott Hogan

the is leases, And that I’ll with as along Yes, by our also and insurance years, we should mention mid been This recovery in and we, question, triple-net move mentioning for from are that common increases XXs, occupancy costs of real our our that Scott. to occupancy our that meaning next. over our the high that last thanks taxes percentage tenants. up Mitch. quarter vast few to has one the start just leases estate majority our from area I’ll recover expenses,

do have well. degree higher well year, in year-to-date timing Arizona. look around with in increases of on percentage the some we are expense as utilities and seasonality and the this operations third in and it’s We was typically and revenue at Texas quarter repairs. take as is XX% Houston just have XXXX. a quarter decreases in a which the summer in did which third basis, months, so of same utilities just And repair cost the based in the on you But a of highest the as the if it is far And

XXXX of And remain the around it expect full XX%. so for I to year

Mitchell Germain

it. Great. Thanks. I appreciate

David Holeman

Mitch. Thanks,

Operator

is Gaurav next from have Hutton. Mehta EF question we from The

Gaurav Mehta

remarks, you the how goals. understand, leverage help are company’s morning. taking good your talked targets Can leverage lower long-term questions. what far long-term one your my and Yes, plan us as for as maybe Thanks you about In you prepared as of to leverage? lowering

David Holeman

debt. from cash operations reduce to and start, to really Gaurav. really EBITDA may using our the answer with EBITDA Scott additional further growing excess or want key on think create I a But we’re focus that is Dave. I’ll I’ll and start. add comments. some This is doing Thanks,

debt nine to I the you for we’re this a that’s down X.X, leverage at ago. think above year months our If debt-to-EBITDA year, from look of down X

So that by expect Xs we this a into can the down be of, significantly. year. just by measure believe We’ve to debt-to-EBITDA we of set seven target organic think, end of XXXX, end growth focusing turns on by we and reduce I

Gaurav Mehta

Okay.

the Second any that’s question on there that you rate the G&A going your driving G&A, XXXX. guys or run for item Was like one think time you lowered forward? guidance long-term

Scott Hogan

that the hover million puts to in $X in and around some is ex-CEO associated have the non-recurring may but of Scott, associated takes the exit cost savings range expect our right with going We, we executives existing I the high in at We the, $X G&A $X.XX did the the G&A of costs to Pillarstone, forward. so first million do expect G&A savings legal this with have litigation quarter, of to some and with with continue. I time.

Gaurav Mehta

you. thank Okay,

Operator

[Operator question from sir. we you, Thank Instructions] Riley. Kucera The Craig is B. from have next

Craig Kucera

morning, you pretty, a any would same there of to things in have helpful. the sort the of million. I at And earlier on transactions, meaningful looking I guys. mentioned I’d Are you you Good spread but at sort sort tightened? for back in get the perhaps potentially selling half the part you $XX transaction seeing some know of be sort be cap conditions Yes. sort market rate recycling challenging believe of arbitrage. those you more the thought of evaluate year time assets that were be able curious, that you’d you of year, Just opportunities as discussed or color

David Holeman

Thanks its for Dave. question. Hey, the Craig

progressing closure. next forward probably on to is obviously I really but between give There’s what you’re as that in and look from others. potentially you move deals lots market are similar sharing hearing the fairly probably on our shallow. think we now, we to transaction quarter dislocation It’s activity the right of the and to less ask, efforts comment I’ll recycling bid with

small a looking So obviously identified $XX target that. million I to think a we redeploy dispositions had of around in amount, then, and

our We’re that little in finding market. [ph] that are money buyers put money XXXX that’s still needs XXXX this They’re so assets work. have there out to the smaller be to still still, bit

the with you would look give to more on what share of more, can’t but love do have and to but this I’d that We’ll we year we ahead on we are coming forward track more months, sharing said on myself. to get details. So

Craig Kucera

Okay, great. And me. just one more from

going to XX% there to which outstrip Board earnings below paying dividend, the think Is now is dividend that the or see forward? it room you’re the was forward? I FFO the the right going thinking with about quite where prior was out dividend just of a pandemic. is to about growth grow bit maybe On How managing earnings

David Holeman

Good obviously Scott once and think the I’ll have I looking we’re the when at our add. may of tax REIT, start, dividend requirement But we as something a look to criteria. at as question, Craig. again key one

allocation, to got capital as at the portfolio drive in great some looking We’ve opportunities value. Scott and said. We’re invest

with we’ve at of We think So but comfortable for tax our think I level options the the create and our lot as opportunities our in of FFO then there’s monitor our and obviously sync dividend will some that light in to a opportunities then income, the light with taxable looking earnings development do of Board requirement light is great of different of well cash. that the our for We’ll dividend some level we’re dividend grow in value. growth, got in our to continue room level.

Craig Kucera

Okay. Thank you.

David Holeman

Craig. Thanks,

Operator

from Diana final Michael have is The we from Group. Maxim you. Thank question

Michael Diana

or Pillarstone a or there on is because your between your and of you. your considering ability dispose your on there or and working and are More development Okay, and you of there thank leverage bringing also dispositions, partners -- development for to in thinking your is assets redevelopment, redevelopment? linkage considerations,

David Holeman

Thanks, Michael.

We do think positive to of flow able that that we’re dispositions that smaller we invest in well. Pillarstone, and a just as the capital of available as investment value. projects have some about the in can creates cash that we significant way think redeploy when more I in these think I

well we the at I pad side of bit our as cash think recycling. fund from look flow you redevelopment as opportunities, opportunities, of a many So when development, can organic little

the portfolio activating partner. towards that opportunities a a those couple have might We and we’re of in larger development involve working do

putting looking those. We’re the not a move development some to of of those potentially A lot flow, our our can smaller residential ways. are best looking of continue with the ones, retail, needed. most we do we’re organic through capital the line to But in but opportunities, couple forward from cash on

Michael Diana

your Great, communities? Okay, of any is disposing And Chicago thanks. there consideration to

David Holeman

what with is which just we you we like I look would to stock and a do do right of holdings we at the ones we think can, determine all portfolio, time monetize. our it’s

is Chicago with the our under our consideration properties. It very all in as a list outside it’s So is asset is well absolutely of but our it but footprint, center, well. operating

Michael Diana

Dave. great. Okay, Thanks

Operator

sir. stage, further ahead, no go you, like comments. Thank Dave for to back floor to questions. turn this are At closing Please sir. there Holeman I would over the

David Holeman

Thank the any you, appreciate us day, We great in Whitestone or reach we pleased hesitate with to Mordy the to us. today like If further, for the a your thanks. call on are on and to progress interest of out everyone Operator. we’re thank making. team. executive I'd David just help joining Have very can don’t

Operator

Thank Ladies gentlemen, Thank that and you, sir. concludes for joining today’s conference. you us. then

You may lines. disconnect now your

Whitestone REIT (WSR) 2 Nov 222022 Q3 Earnings call transcript