Whitestone REIT Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 1, 2025
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Operator

Ladies and gentlemen, greetings, and welcome to the Whitestone REIT First Quarter twenty twenty five 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Modi, Director of Investor Relations.

Operator

Please go ahead.

David Mordy
David Mordy
Director of Investor Relations at Whitestone REIT

Good morning, and thank you for joining Whitestone REIT's first quarter twenty twenty five earnings conference call. Joining me on today's call are Dave Holman, Chief Executive Officer Christine Mastendrea, President and Chief Operating Officer and Scott Hogan, Chief Financial Officer. Please note that some statements made during this call are not historical and may be deemed forward looking statements. Actual results may differ materially from those forward looking statements due to a number of risks, uncertainties and other factors. Please refer to the company's earnings news release and filings with the SEC, including Whitestone's most recent Form 10 Q and 10 ks for a detailed discussion of these factors.

David Mordy
David Mordy
Director of Investor Relations at Whitestone REIT

Acknowledging the fact that this call may be webcast for a period of time, it is also important to note that this call includes time sensitive information that may be accurate only as of today's date, 05/01/2025. The company undertakes no obligation to update this information. Whitestone's earnings news release and supplemental operating and financial data package have been filed with the SEC and are available on our website in the Investor Relations section. We published first quarter slides on our website yesterday afternoon, which highlight topics to be discussed today. I will now turn the call over to Dave Hulman, our Chief Executive Officer.

David Holeman
David Holeman
CEO at Whitestone REIT

Good morning. For a lot of investors looking at a lot of companies, they may not view the first quarter as overly indicative of the future as it was entirely pre tariff announcement. We believe there are a number of reasons to look at Whitestone's first quarter results and view it exactly as the type of quarter you should expect. This morning, we are reiterating our core FFO guidance, and I'd like to walk you through the reasons why we believe this quarter very much represents what investors will see in terms of continued performance from Whitestone. There are three primary reasons.

David Holeman
David Holeman
CEO at Whitestone REIT

First, our redevelopment efforts are translating into same store net operating income growth exactly as we expected and exactly in the way we're anticipating our ongoing redevelopment will translate into financial results. The capital is modest, 20,000,000 to $30,000,000 over the next few years, anticipate our investments will deliver strong results. Second, as we've discussed on the last earnings call, Whitestone is designed to benefit as change occurs. This design means we're capable of performing better in various economic cycles, and today we'll highlight how our business model and the actions we've taken over the past three years provide both accelerated growth and greater durability of cash flows if economic conditions worsen. And third, our properties are at the heart of the reshoring dynamic that is occurring right now.

David Holeman
David Holeman
CEO at Whitestone REIT

We strongly believe reshoring isn't really a matter of whether tariffs succeed or not. Trillions of dollars of Chinese manufacturing no longer has a young labor force needed to operate effectively and globalization is breaking down. That translates into TSMC's new operations in Phoenix and Apple's announcement of a 250,000 square foot manufacturing facility in Houston. Those investments transform the communities around them, and we benefit as long as we ensure that our centers remain anchored to the community and adapt in tandem. We are confident there is more reshoring on the horizon, and our strategy and operational model is set up to benefit from that.

David Holeman
David Holeman
CEO at Whitestone REIT

In 2024, we spent roughly $8,000,000 in capital above the 2023 level, and this translated into an approximate 1% lift in same store NOI growth that we delivered this quarter. Of the six redevelopment centers shown on slides '20 and '20 '1, Williams Trace was the vanguard in terms of our efforts and Windsor Park is well underway. We've issued press releases on redevelopment efforts at Lions Square, Terra Vida, and Davenport, and collectively those centers are anticipated to create up to 100 basis points of same store NOI growth lift in 2026, 'twenty seven, and 'twenty eight. So here's what we delivered for the quarter. Core FFO per share of $0.25 for the quarter, up 4.2% versus Q1 'twenty four.

David Holeman
David Holeman
CEO at Whitestone REIT

Same store net operating income growth of 4.8%, near the top of our forecasted range. Straight line leasing spreads of 20.3%, our twelfth consecutive quarter with leasing spreads in excess of 17%, and we raised our annual net effective ABR per square foot 4% over Q1 'twenty four. All of this fits perfectly within our longer term expectation of 4% to 6% organic core FFO per share growth, driven by 3% to five percent same store NOI growth. As a reminder, that same store NOI growth breaks down to 2% from contractual escalators, 1% to 2% from new and renewal leasing, and up to 1% from redevelopment. I'm going to have Christine talk about what we've done organically that provides greater durability of cash flows, but I wanted to touch briefly on our acquisition and disposition activity.

David Holeman
David Holeman
CEO at Whitestone REIT

In 2020, we were one of the top performing retail REITs as measured by year over year same store NOI performance or as measured by bad debt levels. Since 2020, we have sold 11 properties and acquired Lake Woodlands, Arcadia, Garden Oaks, Scottsdale Commons, Two non owned multi tenant pads at Dana Park, and a non owned pad site at our Anderson Arbor property in Austin. One obvious benefit from our capital recycling has been to raise the average household income level and ABR for our properties. But what is more important is that we have a greater degree of confidence about the growth of the communities surrounding our centers and our ability to continue matching tenants to that growing demand. That science of connecting tenants to demand is the key to performing in any economic environment, and we're always eager to walk investors through exactly how we do that.

David Holeman
David Holeman
CEO at Whitestone REIT

While the overall macroeconomic environment has uncertainty to it right now, the dynamics in our markets, especially for service based businesses, are much more favorable. Green Street's population forecast for our footprint is 50 to 70 basis points higher versus the national average, and the job growth CAGR is forecasted to run 40 basis points above the rest of the nation. According to Commercial Edge, Phoenix, our largest market, leads the country in terms of industrial construction underway. All of these trends are in line with what we've seen over the past decade, and it allows demand to recover much more quickly from any shocks to the system. We pay close attention to the current environment in terms of the decisions we make, but we are making decisions with a multi year horizon in mind, and we are very bullish on the future of service based businesses in the Sunbelt.

David Holeman
David Holeman
CEO at Whitestone REIT

We're looking forward to seeing many of you at REIT Week in June. Please reach out to our Investor Relations if you'll be at the conference would like to spend some time with management. And I'll now turn the call over to Christine.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Good morning, everyone. We delivered a very strong quarter with $31,000,000 of total lease value signed. It is the highest first quarter amount we've ever signed with 40% over the average of the last decade. Leasing spreads were 22.6% for new leases and 19.9% for renewals, giving us a combined leasing spreads of 20.3% for the quarter. This activity combined with our previous strong quarters translated into a 4.8% same store NOI growth, which is the key to our delivering our targeted earnings growth.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

As we discussed on the fourth quarter call, our SHOP space at 77% of ABR versus the peer average of 50% provides greater flexibility to adapt to surrounding demand, more flexibility in terms of the mix of businesses that we can accommodate and is more attractive to a sophisticated multichannel services business. Complementing the physical design advantage of high value shop space is our ability to utilize local knowledge and relevant data from Esri constantly pay attention to the demand drivers that translate into the success of for the businesses populating our centers. Matching the tenants to the community not only provides Whitestone the opportunity to deliver peer leading growth, it provides better downside protection in three distinct ways. First, relying strictly on anchor tenants in order to drive success for shop space tenants exposes shop space tenants unnecessarily to the anchor. Rather, we ensure that all tenants are connected to the primary demand needs driven by the community and accordingly limit the risk presented by roping our climbers together.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Second, businesses that are out of sync with the community are the first businesses to become more problematic during difficult times. Our proactive approach to minimize the risk of stale businesses gives financial guarantees and long leases that don't protect the traffic and the vibrancy of the center, which is why our underwriting process goes well beyond the financial guarantees and assesses the ability of the businesses to thrive in their new location. For existing tenants, our team constantly assess the health of each tenant and does not wait for the end of the lease term to take action if we can upgrade to a tenant that better serves the community. This proactive approach better protects cash flows in challenging times. Sierra Vida is a perfect example.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

We had a previous tenant that wasn't adapting to the changing demographic in the area. The surrounding area was dominated by second homes but has been rapidly changing as high paying jobs for Taiwanese semiconductors facility and other reshoring operations are causing young upwardly mobile families to transform the community into one dominated by primary residents. We identified this mismatch between the prior tenant and the community early and moved to bring in a tenant that would capture the community shift. We are already familiar with the Picklers, the best in class operators. We brought them in our McKinney, Texas, El Dorado Center.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

We knew they'd be a high traffic driver capturing the active minded families and health conscious individuals into the Teradata community. The third and final dynamic I'll mention in terms of downside protection is the diversity of service based tenants we achieved in combination with our high percentage of shop space. Having a diverse spread of strong local, regional and national tenants removes leverage dynamics that can work against REITs in difficult times. During the pandemic, many property owners relying on national tenants for achieving the security were pressured by these tenants leveraging the size in order to obtain numerous concessions from REITs. Our largest tenant is 2.2% of Whitestone's annual base rental revenues, and this definitely helped translate into our outperformance during the pandemic.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

So, those are reasons SHOP space produces greater durability of cash flows. In a strong environment, shop space tenants have higher rents, sign higher escalators, and are far more flexible. This flexibility allows Whitestone to better control the real estate and far better ability to capture opportunities as we constantly evaluate bringing in the strongest tenants possible. Shop space is also perfectly suited to service tenants that have a lower capital requirements, allowing us to use the cash flow for growth, either in the forms of redevelopment or acquisitions, both of which are important components of our 5% to 7% core FFO growth target. Dave spoke on some of these financial benefits anticipated with our overall redevelopment efforts, but I'd like to dive into one specifically to give a little color on what our investments look like.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Lions Square should represent a little over the sixth of the overall $20,000,000 to $30,000,000 forecasted redevelopment spend. Lions Square sits within the Houston, Asia Town, which attracts over 9,000,000 visitors annually. We've recently improved the center bringing in Sunwing Supermarket and are closely monitoring Park 8 Place, a $1,000,000,000 investment down the road that is transferring Halliburton's former campus into a 70 acre mixed use project centered on a healthier lifestyles. Blinds Square benefits from the high barriers to entry of the area being adjacent to this development. We expect 30% to 50% boost in the center's NOI as a result of this redevelopment project.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Our capital is extremely well targeted and time to deliver strong results. We are also seeing an acceleration in construction timeframes as the government university project cancellations free up resources. It is important to note that taking advantage of newly available construction resources isn't something that happens without forethought. Plans, permits, vendors need to be ready to go, and we are primed to take advantage of the current environment when the pricing changes. I'll wrap up by pointing out the percentage of shop space versus the peer set we show on slide 12.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

It's important for investors to recognize that our higher percentage of shop space only delivers results because it's paired with our ability to connect with the surrounding community and because we built a company with the operational chops to manage it. The team there is guiding keeping the pedal down and advancing our continued growth. I'd like to thank them for keeping us at the front of the pack. With that, I'll turn things over to Scott to cover the financials.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

Thank you, Christine. This morning, we reiterated our $1.03 to $1.07 core FFO per share guidance and our longer term 3% to 5% same store NOI growth target. For the quarter, as planned, we took back some space slightly lowering our occupancy from the prior quarter, and we produced strong same store NOI growth of 4.8%. Intentionally taking back space in order to bring in higher performing tenants and drive growth is a fundamental part of our quality of revenue focus. Specifically, this quarter, we made room for the Pickler and Ace Hardware coming in at Teravita.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

All in all, we are reiterating our 3% to 4.5% same store net operating income projection for 2025. The longer term 3% to 5% is higher in anticipation of the full impact of redevelopment projects. We continue to see opportunities to acquire centers that fit our stringent criteria and that have the potential to contribute to earnings in both the short and long term as our leasing team utilizes data from Placer.ai and Esri to anchor tenants to surrounding demand to a much greater degree than previous owners. I'll estimate that we have about $50,000,000 in acquisitions in the current pipeline financed primarily through cash flow and dispositions. Touching on the balance sheet, our debt to EBITDAre was 7.2 times versus 7.8 times a year ago, and we remain on track to continue to strengthen our balance sheet in 2025.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

In terms of Whitestone's liquidity, we have $16,000,000 in cash and $98,000,000 available under the credit facility. Our dividend remains very well supported with a nearly 50% payout ratio, and we anticipate strong dividend growth as we grow the dividend in conjunction with earnings growth. And with that, I'll keep my comments brief and open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. The The first question comes from the line of Gaurav Mehta from Alliance Global Partners. Please go ahead.

Gaurav Mehta
Managing Director at Alliance Global Partners

Thank you. Good morning. I wanted to follow-up on your comments around occupancy taking some space back. Can you provide some more color on why the occupancy went lower?

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

Yes, sure. Hi, Garv. Good morning. This is Scott. The biggest piece of the decline in occupancy is from a retenanting effort at Terra Vida.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

There a low paying tenant in there at the end of the year. That's about a 37,000 square foot space that was formerly a grocery store. And we have two great new tenants coming in, the Pickler and Ace Hardware. And so while we prepare that space for the new tenants to take occupancy, there's a slight there's a roughly 0.7% decline in occupancy from the end of the year. And that's the majority of it.

Gaurav Mehta
Managing Director at Alliance Global Partners

Okay. Second question on your comments around $50,000,000 in acquisitions and current pipeline. So is that amount that you guys are looking at or is that something that you already have under contract?

David Holeman
David Holeman
CEO at Whitestone REIT

Hey, Gaurav. It's Dave. Thanks for your question. Yeah, I think we're currently obviously looking for opportunities in our market to acquire properties that match our what we look for as far as characteristics and our ability to add value. So $50,000,000 is just is an estimate of where we are right now with our expectation.

David Holeman
David Holeman
CEO at Whitestone REIT

If you look back, we've done roughly that level over the last couple of years. And we've funded that from cash flow and dispositions. So currently, that's what we expect this year. Obviously, we are looking for opportunities and are continuing to do so. But right now, we're very confident in kind of that $50,000,000 amount that Scott talked about being able to add properties.

David Holeman
David Holeman
CEO at Whitestone REIT

We've done that. Through that, we've improved the overall quality of the portfolio. I think we talked about you've seen the increase in our ABR. You've seen the increase probably in our Green Street TAP scores. So that's really an effort just to continue to refine and improve the quality of this portfolio.

Gaurav Mehta
Managing Director at Alliance Global Partners

Okay. And then lastly, on your debt to EBITDA at 7.2 times, it seems a little higher than 6.6 times in 4Q. Can you provide some color on your expectations for your leverage level this year?

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

Yeah, I think we expect to end the year in the low sixes. That's where we expect to end up. There's always a little bit of extra NOI that comes in in the fourth quarter around percent sales from tenants. Tenants tend to hit their breakpoints in the fourth quarter, and so we see a pretty sizable increase in percentage rent in the fourth quarter that doesn't repeat in the first quarter. Then we also had some termination fees in the fourth quarter that were higher than we had in the first quarter here.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

So I think when we get to the end of the year, we expect to be in the low sixes.

David Holeman
David Holeman
CEO at Whitestone REIT

Hey, Garb, Dave. I might just add. I think you've seen obviously over the last few years our focus on continuing to strengthen the balance sheet. Through that, we received an investment grade credit rating. We continue to be committed to growing obviously earnings per share, but also strengthening the balance sheet.

David Holeman
David Holeman
CEO at Whitestone REIT

So I think if you look back, Scott mentioned the seasonality, if you look back clearly, I think we're down 600 basis points from the first quarter of twenty twenty four. Think it was 7.2 versus 7.8. So super pleased with the progress we're making. We think we've taken some big steps there and you should continue to see us not only grow earnings at a rate we think will be very attractive, but also have a stronger balance sheet.

Gaurav Mehta
Managing Director at Alliance Global Partners

Okay. Thank you. That's all I had.

Operator

Thank you. The next question comes from the line of Mitch Germain from Citizens Bank. Please go ahead.

Mitch Germain
Managing Director - Real Estate Research at Citizens JMP Securities, LLC

Good morning. I wanted to touch on some of the redevelopment efforts. I think all of you provided some perspective on them. And I get that you're doing work on pet sites. It seems like a lot of those though are build to sell.

Mitch Germain
Managing Director - Real Estate Research at Citizens JMP Securities, LLC

I just guess more granularly, what are the projects that are underway at your centers that you think are really contributing to that 100 basis point lift in same store?

David Holeman
David Holeman
CEO at Whitestone REIT

Hey, Mitch, it's Dave. I'm going to give just a quick intro to your question, then I'm going to turn it over to Christine to give you some more details. But one of the things we've tried to do is show the building blocks for investors of how we continue to have consistent sustainable earnings growth. And a piece of that is through redevelopment, remerchandising and making sure that we're getting the most value out of each piece of our property. As you said in our deck, I think we have a series of slides that shows the properties we're working.

David Holeman
David Holeman
CEO at Whitestone REIT

And maybe I'll just pause and turn it over to Christine to maybe talk about the specifics. I think in her comments, talked about Lion Square. But Christine, hit anything you want to hit. It'd be great.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Sure. I think the important part in the redevelopment process is to evaluate where the opportunity in the lease term, at least this term. Right? So we always evaluate the terms,

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

and then look where we

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

can turn tenants and improve the quality of revenue. In addition to that, that requires, some investment usually in the facade, but also into some of the TI with those tenants. And so we found really good opportunities. Think the one that we've used as an example was Williams Trace where we re tenanted with an EOS Fitness and that allowed us to free up some of the parking for some pads. In addition to that, Lion Square is one of the larger ones that we'll be doing this year, should be completed or the majority of the completion should be by the end of the year.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

That'll allow us to re tenant some of the space too to again higher quality of revenue. This is we look for these ideal locations where we're also seeing adjacent development activity. So we ramp up some of those opportunities tied to where we're seeing massing and new development coming to the area. So I anticipate that along those lines too, for example, Garden Oaks has a very large track next to it. It should be sold at some point.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

There's rumblings with various large grocers looking at the site. When that turns, we're already starting to do the planning effort to invest in that property. The planning is something that's really most of the time when you do an investment like this, most of it's into the planning. The actual execution takes anywhere from six months to eight months to complete. So you're seeing the ones, especially the ones that we've been talking about on page twenty and twenty one.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

These are already in planning and we'll start continuing the execution through 2020 this year 2025 and 2026. And we're already starting to look at 2027 and 2028 with additional properties. So hopefully it gives you a little bit of color as to what we look for and why. And then again, that's where we expect that we'll be able to drive quite a bit of returns in our portfolio.

Mitch Germain
Managing Director - Real Estate Research at Citizens JMP Securities, LLC

Great. That's helpful. On to the balance sheet, there were some nuances, some notes were a portion of some notes paid seems like with the revolver. Can you just talk about kind of what happened in the quarter and what is that leg to push leverage lower? I know Pillarstone is certainly something that is out there, but what else exists that's going to bring us into the kind of low six times range?

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

Mitch, it's Scott. Thanks for the question. First, the debt that was paid in the first quarter was just some amortization on our Prudential bonds that we rolled into the revolver. Lowering leverage, think it's going to come from both the increase in earnings that we expect to realize over the course of the year and over the next few years, and then also cash flow from operations. Last year, we had about $58,000,000 from operating cash flows.

J. Scott Hogan
J. Scott Hogan
CFO & Controller at Whitestone REIT

We were able to use a good portion of that to improve our balance sheet. And this year, think we'll be in the 50,000,000 to $60,000,000 range in operating cash flows again. And so there's both just continuing operating cash flow improvement and certainly the Pillarstone when we work through that bankruptcy process, And we expect those proceeds to be probably between 50 and 70 million dollars but it's hard to predict the timing. That's why we haven't included it in our guidance. We'll certainly also improve the balance sheet and they'll lower our leverage.

Mitch Germain
Managing Director - Real Estate Research at Citizens JMP Securities, LLC

Great. Last one for me and probably for Christine. I know you and your team do a really fantastic job getting the pulse of what is happening at your centers and your tenants. Obviously with everything happening in the world, there is some likelihood of a consumer pullback. And I'm curious if some of your tenants on the service side or on the restaurant side are seeing any indication of that trend happening at this point?

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Thank you for the question, Mitch. It is something that we've been having a close eye on. It may have mentioned this earlier, but one of the things that we see this as a trend more than just a pullback, but alcohol sales for our restaurants have decreased. It seems like dry January is extending into the year, but we see it more related to people making helpful choices in lifestyle. We have not.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

We've been tracking quite closely on the fitness side to see if there's been a decrease in traffic and that has not been the case. If anything, we've seen it pick up on fitness. Again, I look at that as people really looking for the comfort of their communities. The restaurant portion, you know, do have a few restaurants that are towards the high end. Surprisingly, that's probably been a little bit where we've seen some pullback, but then we've had two restaurants that just that do serve a little bit more on the higher end of the community in Phoenix just opened with huge success.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

So it's been something we've been watching but we haven't really seen it impact us yet. But again closely monitoring it but hasn't been we're not seeing the full effects of it and we're also not seeing people pull back from on the traffic yet as well. So the traffic's still there. Sales may be changing. Definitely do see the restaurant trade that they're starting to move again towards a different mix for items that they're producing out there to entice people.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

But there hasn't been a big pullback in sales yet.

David Holeman
David Holeman
CEO at Whitestone REIT

Hey Mitch, it's Dave. The only thing I might add, Christine is spot on, but I will tell you that her and her team do a tremendous job of picking the right operators. I mean, obviously, in any market, picking the right operators. So our underwriting standards, our tenant identification standards have improved significantly since Christine has taken leadership of that team. And so that's a big part of what Whitestone does is obviously watching, but ensuring we're picking the strongest tenants, the local knowledge and data.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Yes. And I just will add one more thing to it. This is really something that's been very striking is we're definitely seeing the contractors coming out of their book shortening in 2026, which is one of the reasons why we're looking at amping up some of that investment into the centers because we see that there might be a bending of the cost curve with construction projects.

Operator

Mitch, do you have any more questions?

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Thank you.

Operator

Thank you. The next question comes from the line of John Massocca from B. Riley Securities. Please go ahead.

John Massocca
Senior Research Analyst at B Riley Financial

Good morning.

David Holeman
David Holeman
CEO at Whitestone REIT

Good morning, John.

John Massocca
Senior Research Analyst at B Riley Financial

So you talked a little bit about kind of what was moving the numbers around in the occupancy this quarter. But if you included those two leases you talked about where you brought in kind of a higher paying tenant, what would kind of be the occupancy on like a signed but not open basis, if you will, roughly?

David Holeman
David Holeman
CEO at Whitestone REIT

I think it was roughly flat. If you look at just Terra Vida and moving out the tenant that Scott talked about and the two new ones, Pickler and ACE, roughly that makes up our we think we were 93.9% last quarter. Correct me, Scott. But we were down about 700 basis points from last quarter and it's largely flat with those two new tenants. We don't report signs not open like some of our peers because typically it's not as big a gap for us because we get tenants open very quickly.

David Holeman
David Holeman
CEO at Whitestone REIT

But I think roughly it would be flat, John.

John Massocca
Senior Research Analyst at B Riley Financial

That's very helpful. And then bigger picture, just in kind of the context of tariffs, as you think about your SHOP tenant base today, what's kind of the rough divide between people offering services and people selling kind of hard goods?

David Holeman
David Holeman
CEO at Whitestone REIT

Yes. I'll start out and Christine will probably maybe add some as well. But I think in our deck, we do have a slide that talks about our mix. We've always focused on services and kind of e commerce compatible tenants. And so if you look at our space that we've identified as kind of hard soft goods, it's probably 15%.

David Holeman
David Holeman
CEO at Whitestone REIT

But we don't have your traditional big boxes. So our tenants tend to be a little less impacted clearly by the impact of tariffs. And I'll let Christine add if she'd like.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

Yeah. I mean, that's one of the reasons why we've leaned into the services side because of the challenge of the goods being just if you look back just with Amazon. So we've always been defined our role around that in the community as to be more service focused. And so along with that, I'd say it's really less than 15%, if that. We've asked again, checked and touched base with some of our restaurants.

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

And again, they're able to pivot quite quickly, so they haven't been as affected. We do have some we do have Ferguson's in the portfolio. That we haven't seen anything from them yet that would cause us concern. But again, that's less than 15%, maybe a fact that's maybe a generous portion.

John Massocca
Senior Research Analyst at B Riley Financial

Okay, that's helpful. And then I know it's only 60 basis points, but, your Dollar Tree exposure, just as a reminder, are those true Dollar Trees? Are those Family Dollars? And kind of, if they are Family Dollars, what are you kind of expecting in terms of a credit underwriter credit impact from the split?

Christine Mastandrea
Christine Mastandrea
President & Chief Operating Officer at Whitestone REIT

They're all Dollar Tree.

John Massocca
Senior Research Analyst at B Riley Financial

Right. That answers that. That's it for me. Thank you very much.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Dave Holman for his closing comments. Dave?

David Holeman
David Holeman
CEO at Whitestone REIT

Thank you. Thanks to all for joining us today. We very much appreciate your attending and your interest in Whitestone. We're pleased with our start to 2025 and really remain very optimistic about our business model and the ability to produce in different economic cycles. Obviously, there's a fair amount of uncertainty today in the economic environment, but Whitestone is positioned very well.

David Holeman
David Holeman
CEO at Whitestone REIT

We look forward to engaging with a number of you at upcoming conferences, IC, SC and NAREIT. And with that, I'll wish everyone a great day. Thank you.

Operator

Thank you. Ladies and gentlemen, the conference of Whitestone REIT has now concluded. Thank you for your participation. You may now disconnect your lines.

Executives
    • David Mordy
      David Mordy
      Director of Investor Relations
    • David Holeman
      David Holeman
      CEO
    • Christine Mastandrea
      Christine Mastandrea
      President & Chief Operating Officer
    • J. Scott Hogan
      J. Scott Hogan
      CFO & Controller
Analysts
    • Gaurav Mehta
      Managing Director at Alliance Global Partners
    • Mitch Germain
      Managing Director - Real Estate Research at Citizens JMP Securities, LLC
    • John Massocca
      Senior Research Analyst at B Riley Financial
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Key Takeaways

  • Whitestone reported Q1 2025 core FFO per share of $0.25 (up 4.2% YoY) and 4.8% same-store NOI growth, reaffirming full-year core FFO guidance of $1.03–$1.07 per share and 3%–5% same-store NOI growth.
  • Modest capital redeployments ($8 M above 2023) into six redevelopment projects, including Williams Trace and Lions Square, are expected to drive an additional 100 bps of same-store NOI uplift by 2026–2028 with total investments of $20 M–$30 M.
  • Whitestone’s high-value shop space (77% of ABR vs peer 50%) and diverse service-oriented tenant mix, combined with proactive tenant remerchandising based on local market data, are designed to enhance cash-flow durability through economic cycles.
  • Debt/EBITDAre improved to 7.2× (down from 7.8×) with $16 M cash, $98 M undrawn credit capacity, and a 50% dividend payout ratio; management targets low-six-times leverage and has a ~$50 M acquisition pipeline funded by cash flow and dispositions.
  • Whitestone’s properties are positioned to capitalize on manufacturing reshoring trends—such as TSMC in Phoenix and Apple in Houston—driving higher population and service-sector demand in its Sunbelt markets.
AI Generated. May Contain Errors.
Earnings Conference Call
Whitestone REIT Q1 2025
00:00 / 00:00

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