Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Whitestone REIT (WSR, Financial) achieved a 17.5% increase in leasing spreads, indicating strong demand and effective leasing strategies.
- The company reported a 6.6% growth in same store net operating income (NOI), showcasing operational efficiency and revenue growth.
- Occupancy rates improved to 93.5%, reflecting successful tenant retention and attraction strategies.
- Whitestone REIT (WSR) maintained a strong balance sheet with a debt to EBITDAre ratio of 7.5 times, excluding proxy contest fees.
- The company is actively remerchandising to align with demographic trends, enhancing tenant mix and revenue potential.
Negative Points
- Whitestone REIT (WSR) faces challenges with high debt levels, as indicated by a debt to EBITDAre ratio of 8 times when including proxy contest fees.
- Interest expense expectations have increased due to acquisitions outpacing dispositions, impacting financial flexibility.
- The company anticipates a deceleration in same store NOI growth in the second half of the year compared to the first half.
- There is uncertainty surrounding the potential impact of the Kroger-Albertsons merger on Whitestone's grocery-anchored centers.
- Whitestone REIT (WSR) is exposed to market volatility, particularly in variable interest rates, which could affect financial performance.
Q & A Highlights
Q: In the rental trend chart, rent growth for San Antonio and Austin moderated sharply, while Dallas saw an uptick. What are you seeing on the ground today for those markets?
A: We're seeing strength in all of our markets. It's just a matter of what leases are turning when and the size of the space. There's no real negative shift, and we're continuing on track with our expectations across all markets. Some markets are reaching full occupancy, which is why we're focusing on remerchandising efforts.
Q: Are there any restaurant tenants on your watch list given the struggles some fast-food chains are facing?
A: Not currently. We're observing that fast food is meeting the same pricing as fast casual, leading people to opt for a sit-down meal. This trend is not negatively impacting our restaurant tenants.
Q: Your same store guidance suggests a deceleration in the back half of the year. Can you explain the expectations there?
A: We're still expecting sequential same store growth. The second half of the year will be slightly lower compared to the first half due to a lower quarter last year. However, we have increased our same store guidance for the year, reflecting our satisfaction with the portfolio's performance.
Q: Can you provide an update on Pillarstone and any expected proceeds from asset sales?
A: We are in the collection phase for our redemption and expect proceeds as we go through the process. We anticipate about $13 million in proceeds this year, with no changes to that expectation. Assets from Pillarstone are for sale, and we are working to liquidate them to meet Whitestone's redemption.
Q: Regarding G&A guidance for the second half of 2024, does it include any non-recurring items?
A: In the first half, we had proxy defense costs of around $1.8 million, which increased G&A. We expect a more normalized G&A in the second half, as some legal fees were front-loaded into the first half.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
