Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Whitestone REIT Second Quarter 2023 Earnings Conference 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 our host, David Mordy. you. Thank

sir. begin, may You

David Mordy

Officer; morning and quarter are Whitestone second Chief for Holeman, Officer. Chief thank earnings conference you Operating Mastandrea, XXXX Christine call Executive joining Scott call. Hogan, Chief Financial REIT's Officer; Good and On Dave today's

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

quarter of includes undertakes the also and this to supplemental today's time, discussed note information. that, are Acknowledging as sensitive financial accurate XXXX. time to The it's Company slides no be fact the website this which with period website call been quarter and important call earnings that, that August section. published news have in highlight be second yesterday the and our XX, on of may our Whitestone's We only obligation may available will information XXXX date, release Investor third data topics be this filed a webcast update Relations SEC to on package the today. for afternoon, operating

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

Dave Holeman

otherwise what to But headline these number. be we a year related Good termination ongoing. joint conference quarter strong cause David. of second impacts venture to morning you our associated strong quarter joining and earnings former very investment, be expenses call. this not XXXX. for short-term you, detracted to Thank and another expect XXXX thank from earnings our Legal of CEO second delivered would our for Whitestone's and Operations quarter in

$X.XX, over higher Revenue second discuss guidance me litigation X.X% in ago. our income. of the detail, results. year partially increased operating but net interest from with a second primarily operations was offset XXXX. from quarter decrease legal will expense and property quarter of from share start $X.XX grew Funds let down was We by result This the the and greater per

by Same-store operating quarter six for the improved income up X.X% and for net the is months. X.X%

expect full of in spreads balance strong year projecting occupancy the second full of be year of in impact operating growth us excess income which We the get for X% NOI growth the our gains of our same-store the should leasing guidance. and the reflected to to same-store and half more are net year,

occupancy of points Total up is and the quarter of from XXXX. points XX.X%, sequentially the up basis XX from XXX basis second quarter first XXXX,

second our from increase $XX.XX, of X.X% year and net X.X% quarter, end up feet As ago the of of base square an effective was first per from quarter. rent the annual a

We be organic those trends that fundamental are this XXXX year. beyond will of continue to very we driving seeing trends. will growth optimistic well anticipate we couple I last outline as in

The country. properties between portfolio growing and in the MSAs XXXX XXXX. first fourth First and ranked are and the through the well of in cities Houston, number Dallas, our fastest of located in residents new greatest Phoenix of foremost, Austin terms

the third of a take row Paychex This to generally spaces, in in have Phoenix foot just drives centers both large of business month fill Index eighth in us Houston and for growth the influx to businesses. Business allows rankings. synergies. small topped optimally the multiple Small us with and options enabling Jobs advantage to to traffic growth, business This robust kind maximize fill to coming

we over continue decade strong these and growth within for a high We benefits. have been positioned see almost to exclusively cities

challenging. shutting markets in sectors on rates the This right and Acquiring is are product new is The because extremely focus limited interest center centers both seeing of lack right is other second are our now a off of higher key trend for in and valve supply. neighborhoods existing we development. trail because the new

now leasing a of pickup XX% the dampening no and in current of GAAP of spread We construction a have we're that seeing five combined excess quarters environment. of in delivered pipeline cause consecutive evidence the would

trend, found and Despite Woodlands we our end this of Arcadia. supply quarter our two at recently last our to great additions with second year the acquisitions acquisition Lake have portfolio of

properties where upgrade were limited quality felt to of additional we a value order with out the of portfolio, in to ABR, continue our We trading these acquisitions. number gains lower make

quarters our produced Arcadia the has we've in roughly two results half acquisitions. owned acquisition second may and activity and during the acquisition. the balance on fantastic the XXXX, we'll we're Woodlands financing leasing similarly first of additional Lake and disposition we have two We Our anticipate the terms already property of for front team about excited the some

venture Capital pill joint Now in our monetize me investment. which general an second late and REIT, filed frustrate to interest approximately expenses Pillarstone of let solely have address of in the In contractual our XX% partner legal assets, redeem estate poison ownership a to XXXX included our quarter we in the real results. our rights

beneficially former XX.X% REIT. Pillarstone CEO Our owns of Capital

that amount receiving statutory a and award precluded Delaware permit approximately from redeem the and Whitestone rate. partner's Whitestone investment. of around Whitestone or initiated interest including XXXX its asking a an monetary of declare seeks in $XX to the the misconduct at the and pre- and mid-XXXX Whitestone in million, poison December unenforceable monetize court to lawsuit post-judgment General damages pill to of

confident well. and The Delaware trial weeks held poison We just went removing pill our was very will on position. the ago support remain court the two over

our the in estimated initial to legal going difficult of to in is shortly. intent Necessarily expenses of of legal greater the to have The we year. vehicle unfortunately we're predict that assets, guidance. back original these our anticipate before significant matters, end these very was get to type a Pillarstone a timing been non-core decision and While monetize and than

expense. Our included legal expenses our in G&A are

have legal this real expenses their will Both full in his in significantly on charge greater Additionally, Pillarstone partnership or those charges to results that Capital provide Scott year detail and and will quarter's equity has numbers partnership. the reflected is share pro REIT, impacted estate rata communicated the general guidance. our earnings remarks. they partner, in of

As profile year, our during green over dramatically the many improved hard out of you third board we're governance with quarter. advance initiatives. new last know, the objectives several working and be the we environmental rolling to leases across our We'll

charging number helps both facilitate addition, stations vehicles. the are installation we to customers transition which our of and a attracts electric of In centers, at evaluating the

in the industry. wider believe practices our benchmarking with as it's part We versus vital across real completed we progress to filing ESG the we our tool believe is for estate climate GRESB second June, which Finally, grapples an our do world change. important

The is will is firing we that till short. year occurring cylinders, very will is and comment the up about believe on litigation become ever now more noise wrap past and get business all likely we that apparent My end. as last

And I'll that, with Christine. turn the to over call

Christine Mastandrea

Good morning, everyone.

front, the year XXX leasing we from had to and the target basis spreads, quarter leases volume by strong since on second deliver XX.X, occupancy rose for the leasing we've a largest are points and year. the ago signing same-store to achieved up on a of XXXX. growth last On quarter of Occupancy NOI

overall renewals. that location will interesting leases, boost on the quarter, we're value the signing we've definite for traffic XX.X% very on a used by XX.X% seeing were drive trend and centers. spreads level XX.X% and of the retail. tenants One new is uptick importantly, Most of hit Leasing our in that numbers technology these

using right to the This our to as mix merchandising For in our with the ESRI attract acquisitions our success same believe more the traffic populate is we're finding not and years, determine now that order and able by center. the only we are have tenants, terms us. we drive of concrete used centers. technology We value boosting Placer.ai but also tenants will provided and tenants to have our in benefit renewals new to

also shift We're smaller with home the from the be retail the closer neighborhood customer. mall from spaces to continues search work the to see retail continuing to to and to

seems and beyond we movement exciting IPO be is right expansion a of and that This mode. In away towards to well that are cups or bowls. consuming plates eating fact generational Starbucks the several a from terms of kava an tenant strong success now. off the seeing have goes out There categories,

capturing America's days and opening. and increasing on great got Child and phenomenon there Bluestone to like and Australian demand Lane great crowd it's drawn our building Woodlands coffee restaurants Flower five the location KPOT, expanding Lake cafe Lane and the for caffeine. see that an franchises We've opened at ago Swig for coffee like and the Bluestone is shop

a for and a in at We've delight go is a Swig sugar Fort of ground rapidly options and beverage, want mixologisst. they're you caffeine,, for signed where Keller our just with expanding Worth. to lease Swig the you amateur Center if pad

each about complete pads drive creation three to will fact, revenue We carved In revenues same of the anticipate Swig about from of fantastic and the enhance to is additional just a we've XXX,XXX able the our revenues and way anticipate out per for three future. leases be pad one in demand. that foreseeable year very we'll year in we number in signed pads Pad is XXXX. help

long-term XX% center Plano, in a We at occupancy. Starbucks XXXX over Texas. for we've just at lease the pad Market just Lakeside a signed bought in created

XX the pad portfolio recently we're initial with value Street XX% Now score with of and an our for the portfolio. reached we've TAP occupancy creating additional sites. scored Green

the is Within earnings top of pure set our presentation. shown in of X our third Slide

real Power have population, We education, is create we a the believe our gauge to of Street's neighborhood the living reflection strength Trade estate an common across excellent combines U.S. Score Area TAP centers markets. metric demand for or of to income, cost Green in and this

and believe improve Arizona the we continue that, to outshine and ranking. will relative Although coastal Texas also our markets

and release Phoenix hubs manufacturing quarter. benefit the this is We House to to for and Designating will city Phoenix prior way table, House five the in because semiconductor The in made hub and May. White in Scottsdale. as our last a manufacturing, the Manufacturing believe the one of and optical battery it per mineral in leasing Phoenix is centers the Phoenix is this designation already efforts. our led White workforce as critical booming largest growing market,

convenience wrap XXXX lives connection, in our and up I'll work continue needs is of as second of by the a commerce. meeting team improve energized we the community Scott? by half strong for of others to saying the

Scott Hogan

Christine, and morning. you, good Thank

mentioned, in sector to Christine and growth in leading XXXX. Dave same-store results be to we year, the NOI very full strong continue delivered quarter As and on-track produce operating

share related and per expenses FFO significantly quarter legal CEO. second impacted our Our former by was to Pillarstone

provide me minute this on let a to subject. detail take So

with within Contained is by to legal for of litigation incurred Pillarstone CEO. related and $X.XX Whitestone our former quarter expenses G&A the our

incurred of REIT, that or they Pillarstone expense by charge We the $X.XX litigation have Capital communicated which they also partnership. will estimated to have

be are litigation of and this by to claim related expenses by incurred are we accounting amounts REIT. amounts. of these from and trial the these their ultimately current accrue no in litigation a that, Partnership Pillarstone reimbursable our part believe these not requires do is that damages amounts Whitestone GAAP Any received there we when While reflected while cash Delaware, expenses impact recovery to Whitestone Capital will by

As our these range full a FFO of guidance we legal by are $X.XX. share XXXX reducing expenses, per result year

as Looking and look think XXXX, XXXX few forward, thoughts. me provide are there begin about to and Slide a let number at XX positives a for of analysts

Pillarstone First, should we XXXX. in us are allow and from to G&A related litigation XXXX This improve CEO. the $X.XX former to anticipating in

in if we should Second, gain our a we redeem earnings do and and the we when And equity OP line end. expect Pillarstone when record activity units. the to

FFO and share equity is by decrease $X.XX in projected per XXXX. Our to earnings

once expense. reducing be significantly interest in total the monetize will debt our related to our OP cash units, we able are meaningful Third, Pillarstone and

units anticipate timing year. yet XXXX, OP this monetizing greater the the clarity to later during hope we we and While on the estimate timing have cannot

a The up to somewhere negative year rates renewing XXXX. credit any in minor likely expect for a and $X.XX impact. will of reason modest so was our and facility. we debt a Fourth, move the interest between fixed, our XX% from mostly be impact We negative currently this have expense in positive have

value. entire the of to same-store continuation NOI discussed has all that management of to Finally, per clear team are shareholder expected and to growth in our Christine I'll that share a FFO a create a forward result path its and vision in Dave The drivers mention XXXX. and contribution growth in

We the are do investors upcoming and update we as eager so. milestones will hit to

we'll And line for questions. the with open that,

Operator

you. Thank

question first Please We session. JMP will Germain question-and-answer is conducting proceed. Our be now Mitch with Instructions] a [Operator from Securities.

Mitch Germain

talked think, about I or Scott, but Can I release your you first in talks about is, I in $X.XX. bit think I a Pillarstone, legal about costs, comments, $X.XX press talk little the if is guess might? Because my $X.XX $X.XX? it in question $X.XX G&A, the I

impact the trying just quarter? what I'm to So was on understand the

Scott Hogan

quarter The line. of impact legal the $X.XX was versus we impact that we quarter the $X.XX of $X.XX makes from had Pillarstone equity $X.XX the guidance, on on if and guidance the the we had had expense, for but the quarter Overall any sense. in

Mitch Germain

Okay.

$X.XX net-net were guided guidance, Pillarstone so that that $X.XX had G&A And it? extra about think so then You in to had Is penny. initially you in way $X.XX not the you're by estimating charges an you. of in

Scott Hogan

That's right for the second quarter.

Mitch Germain

new surprise guess come a up Pillarstone And you take been versus here? shift is a terms a or Okay. a of bit view of a probably start saw bit than thinking with I to little what any why how you previously, out, momentum have the of rather about you but in the with conservative process to may would've little not played charges bit if

Dave Holeman

it's take Scott may I'll to one that Hey and it. Sure. Dave. Mitch, add

part I Pillarstone of as well. required the has been not financial think has the contract frustration information they're per provided as

but So, little we're best, during notified our in expenses bit best the surprise I of of think the and not had that numbers, are of. a been those us doing quarter and previously to they notified our that team Scott estimate understand a doing

Mitch Germain

they're are and side. So, Is it? the there think any in way numbers Pillarstone now that litigation not before of to previous charges your about the in

Scott Hogan

quarter, up in didn't became have and The the they the That's the the second they reason right. were and -- aware quarter, charging partner in partnership. We held was that trial to we until any believe charging the second general actually was were partnership that July.

So, would heavier one be litigation probably QX the of expense quarters.

Mitch Germain

guess expenses, the about $X.XX from talked this and four. had But seems it a I in expect litigation perspective, quarter modeling you like year

how rest how much the remind of was estimating for and much year. XQ then Just me in you're the

Dave Holeman

we expense we're into side, X.X being baked and million $X.XX Whitestone between guidance full the the estimating of had on difference the that year. for year what So the entire legal for with the for already

the Whitestone of $X.XX So, of the the balance side, side balance year the we're versus the additional year. two on estimating on cents then guidance impact of for Pillarstone for the and

Dave Holeman

in guidance. Mitch, if from up if you release guidance And we G&A breakout, I show -- at do table, look approximately think the a initial press give we the million a

related deficit which litigation. earnings, that's we think show the, And litigation. that's to all I then the related the in is all

in So, do the the provide think we of table. guidance those I detail

Mitch Germain

Two Did What the more questions occupancy from quarter? on the impact was me. the from lift acquisition? that have any

Dave Holeman

don't It it's didn't I it believe really, know I small be number. -- with our up had I the number, mean, whole of the activity. But was I to do. it pleased but I part an clarify, really don't impact a that's think, -- we're easy and were think honest, such I it. to follow can on with pleased we our pretty leasing

I think look clear if Christine leasing you up. the it can at activity,

a far quarter as so of we've leases period occupancy new a the time the had solid a with really activity good had in leasing increasing. highest think I were as

is over AVR year. moving about X% right well our in think direction I the as

Mitch Germain

until not to you're that way impact But part think that financial the back to the leasing saying probably the of about year? going it? is Is of the hit

Scott Hogan

Yes, and the to have same-store Mitch, growth fourth around third expecting it's Scott, QX QX. and each quarters X% we're

incentives lease to the that just just in and rolling that's, fourth activity. got from the and leasing be earlier off leases We've continued are So, up. are some strong differences there quarter, lease the going third

Mitch Germain

I Seemed some of from number booked the down. And assets and there gains are quarter? asset any you last me. sales like you, Were mean, one in the

Scott Hogan

those gain assets in about recorded Houston XX. a in June on sold Chase million West actually sold and called $X two small were Sunridge We

from So, the down credit those the were million. assets by actually used of July $XX in to two pay proceeds sales the facility

Dave Holeman

as And on think some our I our those material cap details we do in earnings rates the provide deck. to in

it room, of the on was think in cap all that it dispositions I slide the the rate the of -- deck, shows dispositions. believe have it the I So there's acquisitions Anybody and dispositions. does Slide X a

talked to we Mitch, recycling. doing be we've So, like about. our continue

a also we said, we will the think more coming year. throughout I have few

this But accretive that's in. can we all-in-all, assets we balancing one. that and And importantly, doing day a cap we are buying add in rates we're we're that year a then, obviously, manner from think value more

on one Mitch, sales, the about the and side, July. debt, time proceeds debt and pay more $X.XX Just down quarter ended we in we with million million of took those $XX the $XXX from

Operator

Thank you.

Kucera Craig question Riley B. Please Securities. is proceed. next from Our with

Craig Kucera

I've got your like September pill against regarding first, component duty. move Whitestone countersuit what guess, last of that expense a agreement the Pillarstone was by poison the fiduciary of expectations? as I as the Is kind to looks breach a couple then lawsuits referencing you're G&A by filed a far of we'll it business. on there on -- and suit

Dave Holeman

I'll did want as of succinctly Craig, couple and the you letter the as thanks which for lawsuits question. what a time. try year-end we kind In -- A this items. to of our ton out a the spend year, last of are. to lays components possible. do Obviously, three literally don't

For three and litigation. return on pieces which us, But are is issue, investment, there providing our has of the sitting to JV biggest our our monetizing a books shareholders. not obviously, been

and about we're agreement. the in Pillarstone well. litigation There's employment also that former is just -- breach some monetize but One investor little in really the and where for of then is, believe claim management of suit -- what small transfer a litigation litigation not former just that litigation of sure deck, as page -- filed, sued has our JV But of piece with owned our CEO our a piece contract. there's our just And a is is here I have XX% they've the we where a our by Pillarstone. is to in there's beneficially investment CEO.

which really, do. well way But suit shareholders, unlocking to the venture, for on important for is joint our the us, the we're

Craig Kucera

Got value it. you of the you're plus $XX what interest to in approaching market share to assets? And fair be million that believe are Okay. seeking, Is damages. believe, your Or coming number? I of that about how you the

Dave Holeman

Yes.

expert, basically, the blocked. on as when value December is real were rights -- 'XX, is his which So the our estate based of of our that's we believe damages of which

was of receive and the assets. So to that's our we we those believe of value the probably claim. representative But Ultimately, there look that's would damages the assets value whatever time. liquidate at

They're our think, $XX I at, on books million.

very So receive what's proceeds above on we're confident we'll well that our books.

Craig Kucera

Got Okay. to the there circle like recycling expectations this gains. guidance? of looks what into back baked may Can it. sort I It And for guidance, will additional on be guidance. your some about net are you talk the based year capital your income

Scott Hogan

we've think, now is in in guidance actual gain million half the talk what $X.X I that Dave, And of recycling? the want realized got So just June. the you then second about to we of

Dave Holeman

Sure.

Just about dispositions in we've acquisitions year. summary, of expected got for and $XX the million

we of then the June And closed half near number half in on the acquisition mentioned, XX. we two closed assets -- year, the side. Arcadia is on the our the on first which I about that of on side, think disposition Scott

others. we have a And so few

total So for about the million we $XX have in year.

of of the expect the balance for the end the $XX in think $XX done million out. roughly half all or million year, $XX that to we year, But million and at dispositions. first in acquisitions we've I

Craig Kucera

sales on Are any Kind going your were current Got to for on that, thoughts the ask quarter. both seems transaction quarter, this it and deepening? Last are able shallow, market. what pretty had me. to the purchase just execute mentioned was you seeing And you just here it. market? you of but a some I thinks, last one

Dave Holeman

The -- continuing think Yes, strong. are see business about helping be helping of the to to that really business. fundamentals some the talked Craig. we continues tight. supply the Obviously, transaction be are continues not organic Thanks, I the to demand

prune continuing opportunities. for to and upgrade the portfolio, being continuing look judicious So we're to and just

a not at available. business on Like many happen. But positioning and the public looking strengthen we we've think pricing and significant really be point, I seeing and there's the still We're -- those continuing to this of spread we between business, to But our business when expect pricing. to ready the continuing to got private peers, strengthen eye our are it.

Operator

Holeman time, there floor I Mr. back for no As this comments. the further closing would over questions like turn are at to to Dave

Dave Holeman

joining operator. call. you, everyone for today's to Thank Thanks

As to strong trends Thank continue well. do fundamental optimistic are you. to very going reach business, we've there's us anything future. again for if to joining and Thank be are a really said, XXXX today. And the of about really we which can about the very we our anticipate out. excited please you We help, finish

Operator

you concludes for This teleconference. Thank your today's participation.

may disconnect lines. your now You

Whitestone REIT (WSR) 2 Aug 232023 Q2 Earnings call transcript