Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Whitestone REIT Fourth Quarter and Full Year 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. David Mordy, Director of Investor Relations for Whitestone REIT. Thank you.

begin. may You

David Mordy

thank and and joining REIT's Whitestone Good Year you XXXX Quarter Full Earnings Fourth morning, for Conference Call.

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

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

data may may March Xst, the as this news with note a quarter webcast date, supplemental our that for undertakes time, be operating information. Whitestone's of includes available today's important The section. are Acknowledging the call period information company time-sensitive fourth website financial have accurate update this to on that in obligation call fact Investor release and only no that SEC be it and package Relations earnings this been to XXXX. and the filed of is also

slides topics XXXX quarter website fourth which our highlighted published We afternoon, to yesterday today. discussed be on

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

Dave Holeman

David, Thank morning, today. you everyone. and good Thanks, for joining us

passionate the is Whitestone, estate There than centers who create vision what to aspects we every and discuss, keep We that are value wanted vision our meet evolving and to humble anyone I champion team our members eager create start do in needs Dream in a best-in-class but continually We business. and our communities. for team very team position the strive of me, to that that about of day. many our sharing to vision. better real results success inspired thriving have At I'm strong the to through by clients in to American

Whitestone We net results, on for especially spread occupancy annual per for the record it exceeded company achieving good on and our many FFO robust fronts. very quarter same-store guidance high strong a debt-to-EBITDAre. leasing year very year for ended with levels. and fourth hitting G&A was XXXX share, growth, with We note the an NOI

trends see to supporting thriving spaces our strategic further benefited in are of evolving boxes. centers growing markets. and right continue big the limited of macroeconomic our needs our demand neighborhood results We These markets. number work, new on and amount that mix the supply minimal meet smaller our centers to by convenience-focused focus a from migration of amplified positive the markets, large We towards We growth, and that communities. locations tenants including an population factors of have driving optimal with hybrid demand sun-belt populate from a suburban shopping shifts in the

strong and forward anticipate our of hard strength centers, will XXXX to momentum in of testament continue, is We positive our the the team. the Our performance our success and of our we're a of work on the XXXX. building looking tenants, quality

We by highlights same-store X%. by year, few achieving on leasing laser-focused a major to to staying a fronts. NOI share. by year provide the per FFO nearly our Let accomplished from and basis XX% growth was of on $X.XX me raising throughout This multiple XX.X% points occupancy grew accomplishments nearly XXX of

Our an by in occupancy points. we fourth from basis additional QX the reported ending record occupancy XXX sequentially quarter improved

improving capital that growth, improved growing criteria leverage. the X.Xx and X.Xx XX.X% from were a ratio strong per share of dual spreads supported and recycling a our met through quarter. this primarily acquisitions ago. XX.X% from to leasing debt-to-EBITDA positive We and dispositions year fourth year, Straight-line FFO We the EBITDA for by for our realized

price of an aggregate million During rate for XXXX, price and a aggregate we upside acquired at at current, properties of $XX.X sold a cap greater future X.X% and X for with cap million an $XX.X X properties X rate.

As a XXx ratio our at reminder, debt-to-EBITDA over in stood XXXX.

just by level. progress lowered $X.X great our years. made the X XXXX expenses from G&A in million We we've So

that did repeat benefit some we in Although from onetime years. will reductions not future

us of included and report. in will submission which analysts clarity made and corporate our corporate in score our we bulk by out demand X; shorter our importantly, from this and social were moving through our to to grow and efforts G&A actions our the And first momentum position in year-over-year we for Scott X. provide recognized ESG while well additional with, an grade which by adding We X our to allow area credit ISS and institutions will publishing The great leasing tenant updated governance by to ESG We our X or truly sell-side showed score investment enter strong corporate structures, X our increasing to rents liquidity, environmental the score portfolio. an received our as with of fueled engaged debt our from we beyond. These our improvements, efforts heavily of coverage. rate responsibility adding across side lease from ownership on year on X; and improvements with rating. filing XXXX maturities governance and future multiple to fixing with the to in us credit shareholders XXXX interaction commitment greater GRESB the facility, XX% of

we greater our of or XX% properties quarter at In were the that third XX% over of occupancy. shared XXXX,

hit XX.X%. that of nearly leasable demand, is in XX% properties square small feet rents, believe differentiator in Whitestone XX.X%. is provide for we more were footage smaller is greater spaces, that have XX% upside space those premium occupancy over in and of our XX,XXX were for significant flexibility to occupancy occupancy a One area square our record As we occupancy have much which our over of spaces year-end, and spaces. portfolio above and hit occupancy, or at Anchored XX% rate overall XX% our a

tenant space center focus, full accelerate we demand As per to presenting tenants. populated with been of individual our and peers. risk never centers a we terms lease differentiated prove small our a are ensure surrounding successful opportunity tests tremendous and to with that are growth constant, diversify of our and more remains communities. centers our strong flexible with With high demand and better over time the than our shorter ABR more selection disciplined that through their near occupancy There leases strategy, needs has businesses meet

and take a leasing it to we that through does ongoing Let today. our success and current many on the see which environment environment we expectations tenant, necessarily me of eyes with not the focused understand comment just as now strong the economic We operate in moment match Fed this of in our investors.

impact returns of investors, inflation. have of crystal stay in the can provide for But focused of regardless macroeconomic the terms We will do we ball a strategy on environment our believe taming ahead. is stronger economic what which no we

staying our growth most passionate and shareholders. our industry-leading of focus remains value strengthen by acquisitions NOI improving balance and to share Our overhead same-store to growth, and metrics, FFO reduce with driving continuing in debt to revenue continuing and, costs for long-term continuing as adhering our per about importantly, being on to percent a to disciplined drive strategy, dispositions, patient remaining respect our sheet

forward Whitestone for you made the for and shareholders like delivering looks progress would their your my XXXX. thank again team work we've fellow I thank members contribution team our to for in to XXXX. to I our hard in

that, with it And to Christine turn discuss to I'll over operations.

Christine Mastandrea

morning, everyone. Good

focus in achieved go believe we've by terms the mentioned, we to gains. there remerchandising improving on XXX Dave occupancy XXXX, to XX.X%. As XXXX. in have strong will But further a We in results strong occupancy basis be points of

so and on a relative NOI our neighborhoods XXXX. growth with in we're tenants, cities we are driver poised in growth for and necessity-based stability going And strong high-growth, bigger again on a outperformed in positioned XXXX, becomes basis same-store our high-income through We and X.X% same-store in NOI growth service well for With focus a COVID. locations forward. sun-belt a

We upside serving additional communities. successfully are discipline now striving and through our operational for

and aligned to XXXX, shift With the a in change in into as the team management retail. paradigm we execute lean

home. model time and work prime increase long begins with rather in team Whitestone with spent positioning As much connections, strategy acquisition the our both for the close they and have than local in to term consumers locations. we're competitive for work we engaging just a pandemic, more family. And time facet a settle consumer selection into how of for hybrid looking traffic,

driving Our fourth convenience a a quarter Center is consistent a Woodlands across the center grocer center, of and the acquisition HEB Woodlands Lake a Lake location. and stream traffic to steady fitness perfect top-performing is the adjacent to from of example.

average average per completed dispositions filling anticipate the center of quality income foot square in us improve and the $XX income positioned access starts of rent surpass the vacancy, With to ideally We household the an of just to radius for from the is square per it $XXX,XXX, our base X-mile that of foot. This neighborhood. ease above with portfolio. XX% allowing the excess we

core succeed. strategy evaluating what makes the to businesses Also entrepreneurial is our

are Our eye differentiator see our profits making is made. employees how sure businesses on Whitestone within

span years. at with will the of our XX a process light to a But looking business locations underwriting anticipation just XX a Our lease. isn't for business the that with remain current growing in

to businesses of we're because tenants strong lot same-store same-store serve of Our accelerate ability we a performance NOI our a to is and have tenants, whose the success And growth. their NOI reflection our thriving, communities. their consistently able of are

long-standing become leases tenants our trajectory the and centers. leases intentionally confidence multiple for we to the times, trajectory in renewing our our structure have X-year of most expect I because terms tenants a and Although we of X- of

in increased it well-located has conscious centers our shorter of availability excursions markets, has local in especially This in sector, has, have their as its retail rather, neighborhoods. certainly the the to Within and just X,XXX foot which is time well-designed demand slowed consumers square spaces, limited. X,XXX to construction shifted isn't

Whitestone young, pandemic store. quarter, and in increasing of jumped Houston, the for connections. square restaurant, change convenience in fast-growing the Houston and center for Plaza foot This entire categories, immediately low-performing need Land, and replacing The community is located fitness, our financial rent location the Trace outside aging right medical, the entertainment. per Sugar a for average In consumers' up we fourth to Texas, tenant added the by Williams an their is grocery base XX%. and center growing accelerated education, diverse for the desire fitness while EoS fit

able We the about to we've talk diverse the thereby younger, for quality the By and a reposition neighborhood for to been demographic of location increasing levels proactively revenue. traffic growing and needs, often remerchandising center.

that, revenue most annual the of have quality are the of majority important with XX% leases X% of to our leases the over note year an And the strong performance, those value of another X%. I'll will be triple over aspect our to it terms of important escalator XXXX tenant, believe turn showcasing and in strength that While Scott. net of leases, operational to the differentiated rent of is of We also firmly that our it's strategy.

Scott Hogan

for XXXX Thanks, walk earnings drivers expect. and drivers better Christine. a I'll have in and through investors analysts so XXXX, understanding of our what to anticipated

Slide key $X.XX per share or of FFO of being walk of on cost is our in from $X.X on of Slide with separate $X.XX The reductions level. same-store finished $X.XX we All $X.XX X. Exclusive onetime million benefit restricted per we $X.XX are translating drivers X. of on forfeitures this XXXX a savings XXXX includes X.X% generated $X.XX. of per of which an of shares. share, shown that share the share. NOI which the with change onetime $X.XX G&A to with increase per And We onetime, associated XXXX of additional

Other $X.XX per in share positive share NOI contribution per and for resulting decrease. interest higher a $X.XX expense non-same-store primarily a

share. ending $X.XX refinancing XXXX per the the to of XXXX, our $X.XX. from FFO growth to Looking improvements per negative we occupancy XX.X% projecting of the $X.XX, $X.XX did forward $X.XX of XXXX to share range SOFR is The are of guidance Using anticipated as share on a well and XXXX. same-store to $X.XX per drivers of savings per in of in other share. we curve. of higher variance result quarter the NOI non-same-store result positive variance, be primarily as G&A midpoint third for primarily XXXX, a key a interest XX.X%, of for to change the Based in NOI the This current of is $X.XX expense

in will that a the per a or headwind move anticipate of XXX SOFR the the point $X.XXXX depending curve on direction variance, tailwind share a result a We either of rates. FFO basis

anticipate similar $X approximately and share their a half many pattern percent had million quarter from a XXXX, stronger revenue we'll the XXXX, fourth finish In in fourth $X.XX XXXX. breakpoints. that per with of over we annual little quarter anticipate or in tenants we sales We a when hit in with

X. significant in G&A and our In progress efficiency A Slide greater our XXXX, focusing bit expenses, G&A employees. by made number by reductions with reducing conjunction reducing compensation both we on on management with commentary more

compensation This our along in focus Excluding million with targeting million the G&A finished continue onetime revenue for anticipated XXXX. growth, in $X.X G&A expense XXXX adjustment, and $XX.X $XX.X in costs million percentage million at to of on lower revenue we're strong XXXX we a to and reducing is cost, years. as $XX.X future to

Let me wrap the value. to investors truly to the convey believe by that and remain saying last scale maximizing we've committed apparent we changes over appreciate the year we up are and of our made intend shareholder

questions. And with analysts that, and we'll take investor

Operator

the comes first Our question Germain Instructions] from JMP line with Mitch of [Operator Securities.

Mitch Germain

year. everyone, the Congratulations, great on

Dave Holeman

Mitch. Thanks,

Mitch Germain

sales you baked you've outlook. that active cash just sales contemplating, into that further flow are Is -- from is asset that could a Or create decline sales? there reduction can a leverage operations in further about Curious be and leverage? your asset additional got

Scott Hogan

Mitch, it's Scott.

some XXXX, reduce of debt think little that a would to earnings for from along plan rest the leverage to to and operating improved year. amount come I bit during we flow is the cash capital. going way recycle use reduction of we the the of And

Dave Holeman

EBITDA. largely maybe It's -- largely to driven of continuing I'll maybe sure, make kind grow and honestly by -- it's

next I and well. expect the improve were year think did I very think our able we to to we point organic this through as by balance metric growth, one do year, what pleased sheet we're we over that's that like organically

Mitch Germain

Got you continue plan? the to your any that is and with strategy still -- you. dispositions to way contemplating recycle? potential match Is Do the that acquisitions you're capital

Dave Holeman

difficult. Dave. It's is Mitch. Yes, Obviously, transaction today the market

not where recycling then us a lot activity do And assets disciplined we've properties, look think hear a value very like perspective, our and anyone the the extracted those. the properties, for from portfolio side. We're on we like would with continuing we're and to you continuing from As out others, patient of of and those acquisition just be at look or to recycle potentially really I there. feel

what acquisitions. of XXXX, we now, have for we'll in what right included and with a upside. with our So X growth X efforts pleased selling an modeling consistent buying a Really 'XX, properties X any recycling do were at we at recycling. this in included But did not We've X, some then properties we aggregate more cap which our about -- cap in couple year. with a lot

Mitch Germain

Got you.

into one last to been macro just think And a given increase. headwinds for of some that the potential is Bad some has the me. year? there changes create curious, I watch in from Or debt. Obviously, little conservatism any I'm baking to economic list? guidance you're an and bit your

Scott Hogan

bad ended debt. about believe forecasted we we X.XX% X.XX%. Well, to X.XX% of And or X.X% 'XX I at

haven't seen end low today. this we So progress collections really our in towards the of the any and year, range backwards

is seen been and historically, bottom to on of range. closer haven't And upward pressure 'XX, any or top where So collections that been on is we where the we've pressure end debt range in bad yet. really end a it's downward the we've

Operator

question the Gaurav next Mehta with Hutton. comes of EF from Our line

Gaurav Mehta

you First was question, some expecting what for hoping I 'XX? your on in provide could color Pillarstone you're assets if

Dave Holeman

Gaurav, question. your Thanks Dave. for it's

through advanced our that's So interest is we that monetize have that our desire legal in being Largely, Pillarstone. an currently. it's effort to expressed activities

than in provide on So do it's we're thing We the public filings. whole continuing can those and working Whitestone to shareholders to there's so. a investment lot legal we're our an our for say best that not update I monetize obviously activities other believe to

Gaurav Mehta

Okay.

'XX leasing underwriting you What in guidance. Second are guidance? spreads kind the question your of on

Scott Hogan

you be add leasing to are Christine, 'XX, -- spreads strong The end of similar leasing lower there? know, don't we've in pricing see and what of the if seen color before to balance that we've the inflation. for leasing still towards fourth expect the I the 'XX expiring quarters to third We 'XX. leases towards And seen of any want would

Christine Mastandrea

improved we've had year see -- to over same spreads the the continuing. continue leasing last that We in and

a through see slowdown first It's bit yet. in quarter. haven't the moderated much just little leasing We

In addition also to well remerchandising that, our on for as focusing we're centers.

plan have we premium where traffic how look in an years over rents. we an and each X asset best increase for center, and we remerchandise those So next and for the

Operator

Kucera Our question Riley line Instructions] Craig B. [Operator the next of with comes from Securities.

Craig Kucera

your Does all in of help your investment-grade rating line credit? at pricing on

Scott Hogan

received The pricing investment rating grade not there's we from investment from the Kroll that in a break from Kroll.

our have. that the we going may line our continue to to reduction able earnings, we we of do going debt in pricing credit. to markets access it's improve forward to as be may achieve improve improve anticipate and forward pricing And we any our going However,

Dave Holeman

might if sheet a you ton Results step the of to look that. just level. the with made the back year strengthened. balance I I are progress company has improving add Yes, high we've Obviously, this profile. and The strong. mean at just in overall

those all the of were done important for Really of part late that 'XX, team was progress getting is it important. So the an proud our that and of us in and recast made which in reflected activities getting done. very Scott

debt If look have a going no But us until maybe from higher really of little -- variable little any maturities, forward, maturities no you of -- some a significance. at debt 'XX, bit than others. 'XX portion our we

progress the receiving to us a made, in the investment-grade credit forward we've better position. rating, much So I think going position the of all

Craig Kucera

maybe if it. other some path with planning down are pricing, possible? to rating any you agencies see the Got And better on going

Scott Hogan

for We we consider as move don't that. have may it. we forward, But any plans immediate

Craig Kucera

a last of nice new on 'XX? year, Okay. able color so programs? some the a you out want and expenses. can just you relatively your quarter, bit a flat of us they X talk want were I your little just clip, healthy in to NOI give operating about how Great. those any line at Did improvement for up quarters pretty margin. this first I kind say to keep Or you roll expectations to were in

Dave Holeman

Maybe, well. significant the things we've Christine, out, do But jump I done objectives. a of will as accountability, Scott maybe of company can I in think one clarity discipline, but implement as start is

the of the has this Christine done with talk done then things been some And things we've team. maybe let I'll in one properties, with Scott and the when area. to is so leading great working And we've the of Christine

Scott Hogan

In is involved And the quarter, Craig, Scott. this property is expenses. there with timing third

repairs have quarter. in in quarter, the have repairs schedule more they -- Sometimes scheduled may you another

So in in than annual I think about more context it the quarterly a context.

Christine Mastandrea

And with focused we're on planning. really that,

so And of part is the each property we do. of study need what to

is with a period, plan forward X-year X- in we to capital that over done the haven't past. a Going

part implemented that's So year. past this of we've what

smooth it addition, the over really operations also difference. streamlined helps and too. team big headcount the we've bit. year made In And quite a That's reduced a

about is last look year, so about with And year the alignment. that. was And next awards accountability. year we This for

Operator

JMP from question Mitch Our of next comes line the Germain Securities. with

Dave Holeman

there You Mitch?

Mitch Germain

Sorry that. monetizing or pad progress bunch redevelopment and to opportunities. or guys sites of of working I if about I'm some a begin any decision there's curious know have you that?

Dave Holeman

excess Yes. opportunity more the a that let pad from portfolio going have But some I'm the land ton probably extracting into in of give we maybe do start info. and then to and sites. turning of Christine still

to historically, of just as because it probably provide didn't deck slide happens. quarter excited think this we had I information kind in we that we're include a our

developments, see those but are attractive And pad -- she great opportunity. and add I'll let to there to between is color. still And more Christine, we no sites if so build there progress at maybe there, opportunity there But other returns. significant wants very was nothing

Christine Mastandrea

to time planning had on last the lot What bit has with we of with. municipalities a worked year a Mitch. is do lead that little we've some that the Yes, longer

the on continue COVID up effects have. backed all our bit. the they of we were of quite of sites Some a that that But we pad

well. So projects, detail delivering making those as year. we're we the both larger more as we're much number a giving come. We'll projects we And detail keep keep to on -- each -- of more we'll making those be headway on

Operator

to Mr. comments. that Holeman our session. for gentlemen, and final the concludes turn question-and-answer any I'll floor Ladies back

Dave Holeman

everyone. Thanks,

our look our And forward we energized made us for that look joining to today, carrying great you very are updating a to shortly We by 'XX. 'XX in on XXXX. progress and day. progress. we've and forward Have into Thanks

Operator

Thank you. conference. This concludes today's

your disconnect participation. this lines You your Thank may at time. you for

Whitestone REIT (WSR) 1 Mar 232022 Q4 Earnings call transcript