Whitestone REIT Q1 FY2024 earnings call

• Dave Holeman mentioned the company is on track with 2024 guidance, with core FFO per share growth of 11%, strong same-store NOI growth, and aim to beat last year's occupancy.
• Christine Mastandrea discussed high occupancy (93.6%), strong leasing spreads (renewal 15%, new 25.9%), and highlighted acquisitions like Garden Oaks and Scottsdale Commons with strong fundamentals.
• Scott Hogan covered financials, noting core FFO per share was $0.24 for the quarter, same-store NOI growth of 3.1%, and discussed debt to EBITDAre and Pillarstone-related accounting changes.

In the first quarter, Whitestone Real Estate Investment Trust saw top line revenue grow over 3.7%, same-store NOI grew 3.1%, and core FFO per share was $0.24. Occupancy was 93.6%, up 90 basis points from the prior year. Net effective annual base rent per square foot was $23.83, a 7.2% increase from 2023. Leasing spreads were strong with new and renewal leases at a blended 17% increase on a straight-line basis and 9.3% on a cash basis.

• Management reaffirmed 2024 guidance with 11% core FFO per share growth, driven by strong same-store NOI growth.
• Forecast sub 7x debt to EBITDAre by the fourth quarter, not assuming bulk of Pillarstone judgment collection in 2024.
• Anticipate improvement in debt to EBITDAre due to annual percent of sale clauses in leases and drop in G&A expenses post proxy season.

• Proxy contest related professional fees impacted the balance sheet in the quarter.
• Bad debt from a small number of tenants, though not pervasive.
• Risks associated with collection efforts related to Pillarstone, though management is confident in recovering amounts.

Q: Can you provide some perspective on some of the nuances related to the JV accounting now that you've redeemed the units?

A: Scott Hogan explained that redeeming OP units changed accounting from equity method to one involving collection efforts for a $30-31 million receivable and noted the cancellation of management fees from Pillarstone.

Q: I wanted to follow up on the asset sales. Just to clarify, the $80 million number that you have in the slide, does that include $25 million or you would have $25 million on top of $80 million?

A: Dave Holeman stated the $84 million in dispositions and $100 million in acquisitions, with the next $25 million transactions expected to close soon.

Q: Maybe going back to the capital recycling, I caught the acquisition cap rates, but what's the disposition cap rates and the kind of the other leg of that -- of those transactions?

A: Scott Hogan said dispositions were at a 6.2% cap rate based on trailing 12-month NOI, while acquisitions were at a 7.1% cap rate on first year NOI.

Q: Christine, you mentioned that in 1 of the 2 recent acquisitions, you retenanted a lot or there was a lot of retenanting. Can you just give us some more detail why were the new tenants better than the old? What were you doing there?

A: Christine Mastandrea explained that they look for tenants that successfully serve the community, remerchandising weaker tenants in strong markets to get better operators and higher rents, using examples like the Woodlands property.