NYSE:WSR Whitestone REIT Q3 2024 Earnings Report $13.13 -0.01 (-0.08%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$13.30 +0.17 (+1.33%) As of 04/25/2025 05:35 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Whitestone REIT EPS ResultsActual EPS$0.15Consensus EPS $0.25Beat/MissMissed by -$0.10One Year Ago EPS$0.23Whitestone REIT Revenue ResultsActual Revenue$38.63 millionExpected Revenue$38.45 millionBeat/MissBeat by +$180.00 thousandYoY Revenue GrowthN/AWhitestone REIT Announcement DetailsQuarterQ3 2024Date10/30/2024TimeAfter Market ClosesConference Call DateThursday, October 31, 2024Conference Call Time8:30AM ETUpcoming EarningsWhitestone REIT's Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Whitestone REIT Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 31, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Greetings and welcome to Whitestone REIT Third Quarter 20 24 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, Mr. Operator00:00:28David Modi, Director of Investor Relations. Thank you, Mr. Modi. You may begin. Speaker 100:00:36Good morning and thank you for joining Whitestone REIT's Q3 2024 Earnings Conference Call. Joining me on today's call are Dave Holman, Chief Executive Officer Christine Mastandrea, 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. Speaker 100:01:14Acknowledging the fact that this call may be webcast for a period of time, it's also important to note that this call includes time sensitive information that may be accurate only as of today's date, October 31, 2024. The company undertakes no obligation to update this information. Whitestone's 3rd quarter 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 Q3 2024 slides on our website yesterday afternoon, which highlight topics to be discussed today. I will now turn the call over to Dave Holman, our Chief Executive Officer. Speaker 200:01:52Thank you, David. Good morning and thank you for joining Whitestone's Q3 2024 earnings conference call. We've had tremendous success over the past 3 years improving every facet of Whitestone From implementing governance best practices to the commitment and quality of our employees, the daily steps we've taken add up to a fundamentally different company versus Whitestone of the past. From time to time, we hear a comment that we are stuck or challenged to grow. Let me be clear, we are neither. Speaker 200:02:29We've led the peer group in total shareholder return over the last 3 years and we've implemented stronger shareholder engagement practices to gain a better understanding of shareholders' perspectives and better incorporate that into our decision making. And most importantly, core FFO per share, our key growth metric is robust and we are aligned to continue core FFO per share growth in 2025 beyond. Today, we reiterate our target of 11% core FFO per share growth for 2024. Not only is this growth something we're proud of, we believe it is directly connected to our operational improvements and the discipline with which we have pursued and will continue to pursue our strategy. Whitestone's momentum continued at a strong pace this quarter. Speaker 200:03:30We delivered our 10th consecutive quarter with leasing spreads above 17%. To be specific, combined total straight line leasing spreads were 25.3% for the quarter. We are increasing our same store net operating income target range for the 2nd quarter in a row, raising the midpoint another 50 basis points this quarter after delivering same store NOI growth of 4.6% in the 3rd quarter. The leasing team improved our occupancy up to 94.1% as we move into what has typically been a very strong quarter, the 4th quarter. We improved our debt to EBITDAre metric to 7.2 times and are on track to achieve our year end 6.6 times to 7 times for our Q4 annualized target. Speaker 200:04:31We are confident we will be able to continue improving leverage in 2025 via earnings growth, free cash flow and collecting on our Pillarstone settlement. But we'll leave that projection to our next earnings call. Last quarter, our Green Street Trade Area Power Score increased again. Green Street has updated their scoring and once again scored our portfolio within the top quartile in terms of the quality of the portfolio versus the peers and we completely agree with their conclusions on the strength of our portfolio. But I'll emphasize that it just isn't the high disposable incomes surrounding our centers or the strong traffic patterns ordering our centers to drive our success. Speaker 200:05:19What sets us apart is growing demand and our ability to remerchandise our centers to match the evolving neighborhood needs. This is made possible by active management by having the right structure in place, including our use of shorter leases, by having operational expertise, including a leasing team well versed in utilizing technology, disciplined underwriting and tenant selection. I mentioned earlier that we define growth as core FFO per share growth. Combined with a strengthening balance sheet, this measure most directly reflects what we as management control. We hold our teams accountable for FFO per share growth and the metrics that drive it forward. Speaker 200:06:07We do not deliver NAV or share price quarter after quarter. However, we firmly believe that consistent core FFO per share growth will reward our shareholders over the long run. As we have previously communicated, we have planned to announce and onboard 2 new trustees prior to year end. Our Board level Nominating and Governance Committee in combination with leading executive search firm, Spencer Stuart and utilizing valuable shareholder input is conducting an exhaustive search to identify Board member candidates that will further strengthen our Board, complementing the skills of existing trustees, holding management accountable and maximizing shareholder value. Keep an eye out for an announcement in the near future. Speaker 200:06:58We are eager to connect with investors at REIT World in a couple of weeks and we look forward to sharing more about Whitestone and gaining valuable investor feedback. And with that, I'll turn the call over to Christine. Speaker 300:07:12Good morning, everyone. Every Monday, our leasing team meets to discuss deals, very similar to what many investment firms do. We discuss prospective deals, pending leases and commence leases. We share what is working and what isn't. We discuss how to properly evaluate businesses and assess their ability to serve the community and drive the center forward. Speaker 300:07:33We check our progress against our targets for the year. And most importantly, we discuss long term successes and failures. If a tenant is struggling, our team knows we're going to discuss it and learn from it. If there is a lease cause that causes us a problem, our team knows it and we're going to study it. And if the tenant is successful driving traffic around them and allowing us to share in that success when the lease is renewed, we celebrate the success. Speaker 300:08:02This is how we're focused on continuous improvement and continuing to drive quality of revenue. While accountability is a key facet of this progress, the most important aspect is our ability to develop the leasing team and leverage their ability to learn from one another. This year, I've spoken about our remerchandising initiative. We challenged the leasing team to take back space and upgrade our tenants wherever it would result in strengthening our centers and our business in the long term. It is sometimes difficult to look beyond the immediate quarter, but especially in an environment this strong, it's the right thing to do for investors and for that center. Speaker 300:08:40Even beyond that, it is what our leasing team is trained to do, walk a mile in the shoes of the community and figure out if the tenant is truly meeting their needs and succeeding. We dropped 70 basis points in occupancy between the 4th and second quarters. This was deliberate. We did this thoughtfully in identifying stronger new tenants and negotiating favorable lease terminations. We're now back up to 94.1% occupancy rate and we're poised to move higher. Speaker 300:09:09We certainly aren't done with our remerchandising effort. Given our average lease length of approximately 4 years, we are a little over halfway through our first pass of the initiative and we're getting better as we go. This initiative is directly related to the strong results we've delivered this quarter and the momentum we have going into the Q4. The 94.1 percent occupancy rate is the 2nd highest in company history, second only to the Q4 of 2023. Anchor occupancy was up to 97 point 4%, up 140 basis points from a year ago. Speaker 300:09:47Small space occupancy was 92.2%, also up 140 basis points from a year ago. In the quarter, we achieved renewal leasing spreads of 25.9 percent and new leasing spreads of 22.7% for a combined overall positive leasing spread of 25.3%. For any business looking to expand opening a new physical location, one of the critical questions is, will this new location allow me to tap into a new customer base? Whitestone's different differentiation is that we're committed to answering that question just as much as the business owner is. Our leasing agents specialize in answering that question by knowing the community and utilizing technology to understand ongoing trends. Speaker 300:10:34They answer that question by knowing the center and assessing the synergies and they look at the business and the business's ability to acquire customers. Do they have an existing customer acquisition strategy? Are they sophisticated in terms of their social media outreach? Is the product something that pulls from a larger area? We recently had a space open up at Lakeside Market Center, which is an HEB shadow anchored center. Speaker 300:11:01By running the void analysis, we understood the needs in the area and look for a business that would be synergistic with HEB. We focused on finding the right tenant with a boutique feel and product offering. Our new tenant, Grapes and Grains, fit our vision perfectly. They offered a high end hard to get bourbons and liquors and because of their strong following on social, they had customers lined up overnight for the grand opening, pulling from a much larger distance than just the normal trade radius for the center. So what sets us apart here is not just our ability to capitalize on the attractiveness of an HEB anchor center, We also increased the ABR by over 50%, our ability to increase the traffic and reach the center and help ensure longer term success for both Whitestone and The Tennant. Speaker 300:11:47We had a similar success recently bringing in an Asian grocer, Sunwing, into our Lion Square Center in Houston. Not only did this allow us to transform the center into a grocery anchored center, Sunwing's customer following within the Asian community has greatly extended the reach of the center, often pulling customers from a greater 5 mile plus radius. Securing Sunwing is part of a larger remerchandising and redevelopment plan for Lyon Square. We have seen the community evolve with the demand increasing as incomes have risen and younger families are moving in. A major mixed use development project is occurring adjacent to the center and we'll be able to maintain a cash flow as we redevelop the center to match the evolving demographic and take advantage of higher traffic. Speaker 300:12:32In terms of the overall strength of demand, we're seeing no signs of slack. Fitness, health, beauty and wellness all continue to see an uptick, especially with the younger demographics. EOS Fitness opened at our Williams Trace Plaza. Inside they're offering everything from cryo to a theater room for those that want a much larger screen when they work out. However, one of the most interesting items is the social media space for those that want to share video of their workouts on social media. Speaker 300:13:01It's no wonder that we're seeing a strong demand for health and beauty for both men and women, particularly among millennials and Gen Z. The leasing team is energized to deliver in the Q4. I'd like to thank them for driving results this quarter and we're eager to see them close out the year strong. And with that, I'll turn it over to Scott to discuss our financials. Speaker 400:13:21Thank you, Christine, and good morning. We delivered core FFO of $0.25 per share and we have very good momentum going into the 4th quarter. Our annual guidance anticipates that FFO in the 4th quarter will benefit from leasing momentum and percent sales clauses kicking in more heavily in the 4th quarter similar to the last 3 years. Pursuant with our delivering same store NOI growth of 4.6% this quarter, we raised the full year same store NOI guidance range to between 3.75% and 4.75%, raising it 75 basis points at the bottom and 25 basis points at the top end of the range. On the debt side, after the quarter concluded, we added $20,000,000 of unsecured debt for our term loan and executed a hedge to lock the interest rate of 5.2 percent using the proceeds to pay down the revolver. Speaker 400:14:25Our term loan extends our scheduled debt and maturities with a Q1 2028 end date. This reduces the amount on our revolver below where we finished the quarter, which was at $129,000,000 with $79,000,000 of that representing our variable rate debt. We'll continue to look at opportunities to reduce that amount and ladder our maturities and at the end of the quarter 12% of our debt was variable and we had $121,000,000 of availability on the revolver. The revolver matures in 2026, not including 2 6 month extension options. We had one disposition in the quarter, Fountain Hills. Speaker 400:15:10This balances our acquisition disposition activity since we started with our asset recycling program in late 2022. Over the course of our recycling program, we've had an average disposition cap rate of 6.4%. Just looking at the individual TAP scores, dispositions are below the midpoint in terms of our property scores. This shows that where we've applied our expertise, the marketplace is a high valuation on our assets. As I mentioned last quarter, our goal is to make sure that our underlying growth engine becomes more and more visible to investors. Speaker 400:15:50We will do this both by eliminating noise and by continuing to drive same store NOI growth in order to deliver bottom line growth. With that, we will keep our comments brief today and I will open the line for questions. Operator00:16:06Thank you. We will now be conducting a question and answer session. The first question comes from the line of Mitch Germain with Citi's JMP. Please go ahead. Speaker 500:16:41Hey, Speaker 600:16:41thanks. Just on that asset sale, what were the characteristics of that asset that made you consider that for sale versus any other asset in the portfolio? Speaker 200:16:56Hey, Mitch, Dave Holman. Thanks for your question. I think the primary characteristic just at the high level was just looking at the potential growth, the potential value add in that asset as we look forward versus what we could do with recycling the capital and buying an asset where we can really apply our strategy, remerchandise and add value. So that asset we felt like we had positioned to the point where we could use those funds to add value better through the purchase of another asset. That's the high level. Speaker 600:17:32Got you. Great. About a third of your rents come from the restaurant sector. Hearing some headlines that have been less than flattering, pullback of the consumer clearly impacting some of them, higher wages, etcetera. So are you seeing any of that kind of flow through with your customers? Speaker 600:17:54Or has it been really been business as usual? Speaker 300:17:58Mitch, thanks for the question. 2 things that we would look for importance is how competitive are they in the market. And we have not seen really too much pullback in ours, maybe a little flattening in sales and some. But overall, we really are careful and cautious about how we underwrite our restaurant operators. Where we are seeing a pullback is on and it's not for us because we don't have these types of locations. Speaker 300:18:25And I would say that's more on the lower end of the spectrum. When you think about that area, the McDonald's, so on and so forth, they're being impacted. But ours really play more to the middle to the higher income customer. And we have not seen much in that area as of yet. But we do see that our operators are trying different offerings and tacking a little bit to the market conditions. Speaker 600:18:53Got you. Was there any specific lease that drove the spread this quarter? Speaker 300:18:59Not really. I mean, we've been just actively as we discussed really in the Q1 of this year and we started already in the previous year remerchandising. And again, I believe firmly when you have a strong market like this and a changing in demography, it's very important to serve your local community. And most of this has been with our remerchandising efforts. Operator00:19:23Got you. Speaker 500:19:24Okay, last one. So that's the last one. So that's the last one. Speaker 600:19:24So that's the last one. Speaker 400:19:25So Speaker 600:19:26Yes. Okay, great. And last one for me. I know that you had contemplated some Pillarstone in coming in and helping facilitate some of the deleveraging this year. I don't know, I mean, we're kind of 3 quarters of the way through. Speaker 600:19:41Is it kind of we pushing that to 2025 at this point because of what's happening there? Can you just give a quick update? Speaker 200:19:49Hey, Mitch, Dave. I'll start and then maybe get Scott to comment as well. But just to give a quick update, we are making progress with our working through our Pillarstone collection during the quarter. I think we've got a couple of positive steps and that we've now have a plan of liquidation that we've agreed upon. We have a 3rd party plant agent that's overseeing that. Speaker 200:20:14So I think we're making steps. And with that, obviously, we will continue to feel better about collecting and the timing. I think as far as the timing, I do think I'll let Scott comment on the guidance. Speaker 400:20:29Yes, sure, Mitch. Thanks for the question. Well, we've kept our core FFO range wide at this point in the year just because of some of the uncertainty around the monetization of Pillarstone. You've seen the same store growth numbers increase a little bit, but we did have a small amount forecasted in the Q4 for liquidation proceeds on Pillarstone. And it's just too hard to say whether we'll see that this year or next year given that it's in a bankruptcy process. Speaker 600:21:06Excellent. Thank you, Mike. Speaker 700:21:08Thanks, Mitch. Operator00:21:11Thank you. Next question comes from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead. Speaker 500:21:18Yes, thanks. Good morning. I wanted to ask you on your asset recycling program. Are there any more assets in your portfolio that may be sold in the future or you're finished with asset recycling? Speaker 200:21:32Thanks, Dara. Dave Holman. I think we view it as an investment portfolio. And so I believe you're always looking at your holdings and determining which ones do we feel like we should recycle out of. So our recycling program, I guess, maybe different than some of the others and that it's not been getting rid of non core assets or assets that don't fit our strategy. Speaker 200:21:57It's just making sure that we're investing our money in the best way to return value to shareholders. So I think you'll always see some level of to shareholders. So I think you'll always see some Speaker 600:22:05level of sales as we Speaker 200:22:05go forward from us. But I think we reported in our remarks we've done about $100,000,000 kind of since late 2022 and balanced that. So that's So that's $100,000,000 over a couple of years. Volume might be a little less than that, but you'll always see a little bit of recycling, I believe. Speaker 500:22:28Okay. I also wanted to ask you on your same store NOI guidance for the year of 3.75% to 4.75%. Just curious, Ron, what gets you to the lower end and the upper end of the guidance and what's forecasted for 4Q? Speaker 400:22:49I didn't understand the Speaker 100:22:51same store. Speaker 200:22:52I think you said, I'll start maybe. I think you said on the same store guidance, what's forecasted for 4Q and then what are the drivers kind of on the low end and high end? I think it's I'll start off and Scott you can talk about. I think it's largely timing, right? Anytime you're looking at leasing activity and new leases, etcetera, there's some uncertainty as the exact time when it starts. Speaker 200:23:14So that's probably the largest and I'll let Scott add to that. Speaker 400:23:18Yes. We have a range forecasted for 4Q. You're not going to get into specific amounts, but maybe a little tiny bit of a pullback from what we've seen in the 1st 3 quarters, but still strong same store growth in the Q4 and we would expect to see good same store growth in 2025 as well. Speaker 500:23:45Okay. Thank you. That's all I have. Speaker 200:23:48Thank you. Operator00:23:50Thank you. Next question comes from the line of John Massocca with B. Riley Securities. Please go ahead. Speaker 400:23:57Good morning. Speaker 200:23:59Good morning, John. Speaker 500:24:00Good morning. Speaker 700:24:01Maybe kind of building on that last question, is there something specific you're kind of seeing in the leasing pipeline today that's driving a little bit more conservatism around the 4Q same store NOI growth forecast? Or is that just kind of broad conservatism given a decent amount of leasing activity that's going to occur then? Speaker 200:24:22I do think, John, when you look at same store growth, obviously, you're comparing toward a period. I think we continue to be have great momentum, continue to be very aren't seeing any signs of slowing down. But I think when you look back at the Q4 of last year, it was a strong quarter you're comparing against. So with that, we're just looking at an annual number. So I would say and once again Scott can add, I would say I don't think we're seeing any slowdown of that sort. Speaker 200:24:49We're just we raised our same store NOI guidance by 75 bps at the bottom and 25 increased to 25 at the top. So I think we're continuing to see really positive momentum. Speaker 400:25:00Right. And there was some variation last year in same store growth from quarter to quarter that may have resulted in little higher number of 1 quarter versus another quarter this year. Speaker 700:25:12Okay. And then in terms of investment, how are you thinking about kind of external acquisitions today? Is that something you would need to match fund with capital recycling? Or do you think some of the liquidity you created with the term loan and the asset sale in the quarter allows you to just be a pure acquirer for kind of granular stuff? Speaker 200:25:34It's no different than you would always do, John. It's disciplined acquisitions, right? We're actively looking for opportunities where we can acquire assets and apply our skills in a ways that are accretive. Obviously, there's a lot of pieces there of finding the right purchase price and then looking at capital to put to work. We have the ability to grow. Speaker 200:26:01We have room on our credit facility. We have the ability to tap multiple sources. It's largely just disciplined underwriting. So I wouldn't answer that I would answer that with we have opportunities. We've just got to obviously make sure we're disciplined in that just like everyone in the space. Speaker 200:26:20Okay. Speaker 700:26:21And then last one on my end, just kind of a bigger picture question. In light of the very recent very active shareholder base recently and the demand in the retail space, what are your thoughts around running a formal strategic alternatives process? Speaker 200:26:40I'm not just hey, John. So I would tell you that our Board reviews the best things for shareholders all the time. So we are actively looking at what are the best ways to add value, what are the best ways to pursue return to our shareholders. So I think we are actively doing that just like we should. And so I'm not sure I'm clear with your question. Speaker 200:27:07But and then as far as the active shareholders, I would say we've had great engagement with our shareholder base over the last several quarters. We've really got great positive feedback. If you look at the results today and the progress we're producing, I think the shareholder feedback we've got has largely been we recognize that and we appreciate that 11% earnings growth FFO growth, which frankly is pretty much top of the pack. Speaker 700:27:36Okay. I mean is there anything you would like to see from a valuation perspective or maybe certain kind of achievements on the operating end if you're not getting kind of the price you think from the market to go out and maybe more actively seek, interest on an M and A from an M and A perspective? Or is it we're just going to keep executing and if we get inbound, that's great? Speaker 200:28:02No, I think we're going to I think we and the Board are going to keep very actively looking at what are the best decisions for all shareholders. We look at the market conditions, we look at the operating performance and regularly look at what are the best conditions. So there's no decision that says we're going to do this, we're going to do that. We're going to continually evaluate and look at what we think is the best course. Right now, our momentum is very strong. Speaker 200:28:30And so we're evaluating all sources and we'll continue to do so. Speaker 700:28:36Okay. I appreciate the color. Thank you very much. Thanks, Sean. Operator00:28:43Thank you. Next question comes from the line of Craig Kucera with Lucid Capital Markets. Please go ahead. Speaker 800:28:51Yes. Good morning, guys. Obviously, another solid leasing quarter. You mentioned the continued strength of fitness and health and beauty as a few examples. But I'd be curious sort of are those the tenant categories that you are more focused on during the quarter in the back half of the year? Speaker 800:29:06Or what are the categories that really kind of fit more for where Whitestone's shopping centers are today? Speaker 300:29:13Again, we've always focused on food rather restaurants. And as we just mentioned, we added another grocery anchor to one of our centers. And health, beauty, wellness has been just a really hot category over the last couple of years and continues to grow. But along with that, there's also continued other services too that we're finding that are unique to our environment. And I would say that we've stayed focused on these categories that Speaker 500:29:41have been Speaker 300:29:42essential and compatible with the Internet and it's worked well. And that's why we've been able to deliver the last couple of years and continue to do so. Speaker 800:29:52Okay, great. Changing gears, it looked like your real estate taxes, I think averaged about $4,000,000 in the prior three quarters. This quarter ticked up to $5,000,000 Were there any revised appraisals? Or is this just a timing issue? Speaker 400:30:08There's some talk in Harris County that the tax rates may be going up this year. And so what we do during the year until we get the tax bills is we consult with our tax advisors on what we ought to be accruing. And so just based on what we've heard about tax rates going up in Harris County, we increased our tax accruals a little bit this year and we'll actually get the tax bills later and be able to true those up in the Q4. Speaker 800:30:42Okay, got it. Appreciate the color. Just one more for me. You've been pretty successful in bringing down leverage year to date. The guide is, I think, 6.6 times to 7 times EBITDA by year end. Speaker 800:30:56But I guess, can you give us some color on kind of the longer term goal there? I mean, does that bring the balance sheet where you want it to be? Or do you think you'll continue to deleverage over time? Speaker 400:31:07I think we'll continue to deleverage over time. I think we probably Dave can comment here too, but low 6s, high 5s might be a great place to end up. But I think we've made a lot of progress from a couple of years ago when we were north of 10. We expect to end the year at 6.6 to 6.7 as you mentioned. And we look to continue to ladder our debt and strengthen our balance sheet as we go forward. Speaker 600:31:37Okay. Thank you. Speaker 300:31:38Thanks, Craig. Operator00:31:42Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Dave Holman for closing comments. Speaker 200:31:53Thanks so much. We very much appreciate all of you joining us on today's call. Look forward to seeing many of you at the NAREIT convention coming up in a couple of weeks. And should you have any questions, please reach out to our Investor Relations. But once again, thank you for your interest and thank you for participating in today's call. Operator00:32:16Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you forRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallWhitestone REIT Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Whitestone REIT Earnings HeadlinesWhitestone REIT Commences Redevelopment at Lion Square in Houston’s Asiatown DistrictApril 24, 2025 | finance.yahoo.comWhitestone REIT Commences Redevelopment at Lion Square in Houston's Asiatown DistrictApril 23, 2025 | gurufocus.comFrom Social Security to Social Prosperity?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 28, 2025 | Paradigm Press (Ad)Whitestone REIT (WSR) Begins Strategic Redevelopment in Houston's Asiatown | WSR Stock NewsApril 23, 2025 | gurufocus.comWhitestone REIT Commences Redevelopment at Lion Square in Houston's Asiatown DistrictApril 23, 2025 | globenewswire.comIf You Invested $10K In Whitestone REIT Stock 10 Years Ago, How Much Would You Have Now?April 19, 2025 | finance.yahoo.comSee More Whitestone REIT Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Whitestone REIT? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Whitestone REIT and other key companies, straight to your email. Email Address About Whitestone REITWhitestone REIT (NYSE:WSR) (NYSE: WSR) is a community-centered real estate investment trust (REIT) that acquires, owns, operates, and develops open-air, retail centers located in some of the fastest growing markets in the country: Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio. Our centers are convenience focused: merchandised with a mix of service-oriented tenants providing food (restaurants and grocers), self-care (health and fitness), services (financial and logistics), education and entertainment to the surrounding communities. The Company believes its strong community connections and deep tenant relationships are key to the success of its current centers and its acquisition strategy.View Whitestone REIT ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 9 speakers on the call. Operator00:00:00Greetings and welcome to Whitestone REIT Third Quarter 20 24 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, Mr. Operator00:00:28David Modi, Director of Investor Relations. Thank you, Mr. Modi. You may begin. Speaker 100:00:36Good morning and thank you for joining Whitestone REIT's Q3 2024 Earnings Conference Call. Joining me on today's call are Dave Holman, Chief Executive Officer Christine Mastandrea, 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. Speaker 100:01:14Acknowledging the fact that this call may be webcast for a period of time, it's also important to note that this call includes time sensitive information that may be accurate only as of today's date, October 31, 2024. The company undertakes no obligation to update this information. Whitestone's 3rd quarter 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 Q3 2024 slides on our website yesterday afternoon, which highlight topics to be discussed today. I will now turn the call over to Dave Holman, our Chief Executive Officer. Speaker 200:01:52Thank you, David. Good morning and thank you for joining Whitestone's Q3 2024 earnings conference call. We've had tremendous success over the past 3 years improving every facet of Whitestone From implementing governance best practices to the commitment and quality of our employees, the daily steps we've taken add up to a fundamentally different company versus Whitestone of the past. From time to time, we hear a comment that we are stuck or challenged to grow. Let me be clear, we are neither. Speaker 200:02:29We've led the peer group in total shareholder return over the last 3 years and we've implemented stronger shareholder engagement practices to gain a better understanding of shareholders' perspectives and better incorporate that into our decision making. And most importantly, core FFO per share, our key growth metric is robust and we are aligned to continue core FFO per share growth in 2025 beyond. Today, we reiterate our target of 11% core FFO per share growth for 2024. Not only is this growth something we're proud of, we believe it is directly connected to our operational improvements and the discipline with which we have pursued and will continue to pursue our strategy. Whitestone's momentum continued at a strong pace this quarter. Speaker 200:03:30We delivered our 10th consecutive quarter with leasing spreads above 17%. To be specific, combined total straight line leasing spreads were 25.3% for the quarter. We are increasing our same store net operating income target range for the 2nd quarter in a row, raising the midpoint another 50 basis points this quarter after delivering same store NOI growth of 4.6% in the 3rd quarter. The leasing team improved our occupancy up to 94.1% as we move into what has typically been a very strong quarter, the 4th quarter. We improved our debt to EBITDAre metric to 7.2 times and are on track to achieve our year end 6.6 times to 7 times for our Q4 annualized target. Speaker 200:04:31We are confident we will be able to continue improving leverage in 2025 via earnings growth, free cash flow and collecting on our Pillarstone settlement. But we'll leave that projection to our next earnings call. Last quarter, our Green Street Trade Area Power Score increased again. Green Street has updated their scoring and once again scored our portfolio within the top quartile in terms of the quality of the portfolio versus the peers and we completely agree with their conclusions on the strength of our portfolio. But I'll emphasize that it just isn't the high disposable incomes surrounding our centers or the strong traffic patterns ordering our centers to drive our success. Speaker 200:05:19What sets us apart is growing demand and our ability to remerchandise our centers to match the evolving neighborhood needs. This is made possible by active management by having the right structure in place, including our use of shorter leases, by having operational expertise, including a leasing team well versed in utilizing technology, disciplined underwriting and tenant selection. I mentioned earlier that we define growth as core FFO per share growth. Combined with a strengthening balance sheet, this measure most directly reflects what we as management control. We hold our teams accountable for FFO per share growth and the metrics that drive it forward. Speaker 200:06:07We do not deliver NAV or share price quarter after quarter. However, we firmly believe that consistent core FFO per share growth will reward our shareholders over the long run. As we have previously communicated, we have planned to announce and onboard 2 new trustees prior to year end. Our Board level Nominating and Governance Committee in combination with leading executive search firm, Spencer Stuart and utilizing valuable shareholder input is conducting an exhaustive search to identify Board member candidates that will further strengthen our Board, complementing the skills of existing trustees, holding management accountable and maximizing shareholder value. Keep an eye out for an announcement in the near future. Speaker 200:06:58We are eager to connect with investors at REIT World in a couple of weeks and we look forward to sharing more about Whitestone and gaining valuable investor feedback. And with that, I'll turn the call over to Christine. Speaker 300:07:12Good morning, everyone. Every Monday, our leasing team meets to discuss deals, very similar to what many investment firms do. We discuss prospective deals, pending leases and commence leases. We share what is working and what isn't. We discuss how to properly evaluate businesses and assess their ability to serve the community and drive the center forward. Speaker 300:07:33We check our progress against our targets for the year. And most importantly, we discuss long term successes and failures. If a tenant is struggling, our team knows we're going to discuss it and learn from it. If there is a lease cause that causes us a problem, our team knows it and we're going to study it. And if the tenant is successful driving traffic around them and allowing us to share in that success when the lease is renewed, we celebrate the success. Speaker 300:08:02This is how we're focused on continuous improvement and continuing to drive quality of revenue. While accountability is a key facet of this progress, the most important aspect is our ability to develop the leasing team and leverage their ability to learn from one another. This year, I've spoken about our remerchandising initiative. We challenged the leasing team to take back space and upgrade our tenants wherever it would result in strengthening our centers and our business in the long term. It is sometimes difficult to look beyond the immediate quarter, but especially in an environment this strong, it's the right thing to do for investors and for that center. Speaker 300:08:40Even beyond that, it is what our leasing team is trained to do, walk a mile in the shoes of the community and figure out if the tenant is truly meeting their needs and succeeding. We dropped 70 basis points in occupancy between the 4th and second quarters. This was deliberate. We did this thoughtfully in identifying stronger new tenants and negotiating favorable lease terminations. We're now back up to 94.1% occupancy rate and we're poised to move higher. Speaker 300:09:09We certainly aren't done with our remerchandising effort. Given our average lease length of approximately 4 years, we are a little over halfway through our first pass of the initiative and we're getting better as we go. This initiative is directly related to the strong results we've delivered this quarter and the momentum we have going into the Q4. The 94.1 percent occupancy rate is the 2nd highest in company history, second only to the Q4 of 2023. Anchor occupancy was up to 97 point 4%, up 140 basis points from a year ago. Speaker 300:09:47Small space occupancy was 92.2%, also up 140 basis points from a year ago. In the quarter, we achieved renewal leasing spreads of 25.9 percent and new leasing spreads of 22.7% for a combined overall positive leasing spread of 25.3%. For any business looking to expand opening a new physical location, one of the critical questions is, will this new location allow me to tap into a new customer base? Whitestone's different differentiation is that we're committed to answering that question just as much as the business owner is. Our leasing agents specialize in answering that question by knowing the community and utilizing technology to understand ongoing trends. Speaker 300:10:34They answer that question by knowing the center and assessing the synergies and they look at the business and the business's ability to acquire customers. Do they have an existing customer acquisition strategy? Are they sophisticated in terms of their social media outreach? Is the product something that pulls from a larger area? We recently had a space open up at Lakeside Market Center, which is an HEB shadow anchored center. Speaker 300:11:01By running the void analysis, we understood the needs in the area and look for a business that would be synergistic with HEB. We focused on finding the right tenant with a boutique feel and product offering. Our new tenant, Grapes and Grains, fit our vision perfectly. They offered a high end hard to get bourbons and liquors and because of their strong following on social, they had customers lined up overnight for the grand opening, pulling from a much larger distance than just the normal trade radius for the center. So what sets us apart here is not just our ability to capitalize on the attractiveness of an HEB anchor center, We also increased the ABR by over 50%, our ability to increase the traffic and reach the center and help ensure longer term success for both Whitestone and The Tennant. Speaker 300:11:47We had a similar success recently bringing in an Asian grocer, Sunwing, into our Lion Square Center in Houston. Not only did this allow us to transform the center into a grocery anchored center, Sunwing's customer following within the Asian community has greatly extended the reach of the center, often pulling customers from a greater 5 mile plus radius. Securing Sunwing is part of a larger remerchandising and redevelopment plan for Lyon Square. We have seen the community evolve with the demand increasing as incomes have risen and younger families are moving in. A major mixed use development project is occurring adjacent to the center and we'll be able to maintain a cash flow as we redevelop the center to match the evolving demographic and take advantage of higher traffic. Speaker 300:12:32In terms of the overall strength of demand, we're seeing no signs of slack. Fitness, health, beauty and wellness all continue to see an uptick, especially with the younger demographics. EOS Fitness opened at our Williams Trace Plaza. Inside they're offering everything from cryo to a theater room for those that want a much larger screen when they work out. However, one of the most interesting items is the social media space for those that want to share video of their workouts on social media. Speaker 300:13:01It's no wonder that we're seeing a strong demand for health and beauty for both men and women, particularly among millennials and Gen Z. The leasing team is energized to deliver in the Q4. I'd like to thank them for driving results this quarter and we're eager to see them close out the year strong. And with that, I'll turn it over to Scott to discuss our financials. Speaker 400:13:21Thank you, Christine, and good morning. We delivered core FFO of $0.25 per share and we have very good momentum going into the 4th quarter. Our annual guidance anticipates that FFO in the 4th quarter will benefit from leasing momentum and percent sales clauses kicking in more heavily in the 4th quarter similar to the last 3 years. Pursuant with our delivering same store NOI growth of 4.6% this quarter, we raised the full year same store NOI guidance range to between 3.75% and 4.75%, raising it 75 basis points at the bottom and 25 basis points at the top end of the range. On the debt side, after the quarter concluded, we added $20,000,000 of unsecured debt for our term loan and executed a hedge to lock the interest rate of 5.2 percent using the proceeds to pay down the revolver. Speaker 400:14:25Our term loan extends our scheduled debt and maturities with a Q1 2028 end date. This reduces the amount on our revolver below where we finished the quarter, which was at $129,000,000 with $79,000,000 of that representing our variable rate debt. We'll continue to look at opportunities to reduce that amount and ladder our maturities and at the end of the quarter 12% of our debt was variable and we had $121,000,000 of availability on the revolver. The revolver matures in 2026, not including 2 6 month extension options. We had one disposition in the quarter, Fountain Hills. Speaker 400:15:10This balances our acquisition disposition activity since we started with our asset recycling program in late 2022. Over the course of our recycling program, we've had an average disposition cap rate of 6.4%. Just looking at the individual TAP scores, dispositions are below the midpoint in terms of our property scores. This shows that where we've applied our expertise, the marketplace is a high valuation on our assets. As I mentioned last quarter, our goal is to make sure that our underlying growth engine becomes more and more visible to investors. Speaker 400:15:50We will do this both by eliminating noise and by continuing to drive same store NOI growth in order to deliver bottom line growth. With that, we will keep our comments brief today and I will open the line for questions. Operator00:16:06Thank you. We will now be conducting a question and answer session. The first question comes from the line of Mitch Germain with Citi's JMP. Please go ahead. Speaker 500:16:41Hey, Speaker 600:16:41thanks. Just on that asset sale, what were the characteristics of that asset that made you consider that for sale versus any other asset in the portfolio? Speaker 200:16:56Hey, Mitch, Dave Holman. Thanks for your question. I think the primary characteristic just at the high level was just looking at the potential growth, the potential value add in that asset as we look forward versus what we could do with recycling the capital and buying an asset where we can really apply our strategy, remerchandise and add value. So that asset we felt like we had positioned to the point where we could use those funds to add value better through the purchase of another asset. That's the high level. Speaker 600:17:32Got you. Great. About a third of your rents come from the restaurant sector. Hearing some headlines that have been less than flattering, pullback of the consumer clearly impacting some of them, higher wages, etcetera. So are you seeing any of that kind of flow through with your customers? Speaker 600:17:54Or has it been really been business as usual? Speaker 300:17:58Mitch, thanks for the question. 2 things that we would look for importance is how competitive are they in the market. And we have not seen really too much pullback in ours, maybe a little flattening in sales and some. But overall, we really are careful and cautious about how we underwrite our restaurant operators. Where we are seeing a pullback is on and it's not for us because we don't have these types of locations. Speaker 300:18:25And I would say that's more on the lower end of the spectrum. When you think about that area, the McDonald's, so on and so forth, they're being impacted. But ours really play more to the middle to the higher income customer. And we have not seen much in that area as of yet. But we do see that our operators are trying different offerings and tacking a little bit to the market conditions. Speaker 600:18:53Got you. Was there any specific lease that drove the spread this quarter? Speaker 300:18:59Not really. I mean, we've been just actively as we discussed really in the Q1 of this year and we started already in the previous year remerchandising. And again, I believe firmly when you have a strong market like this and a changing in demography, it's very important to serve your local community. And most of this has been with our remerchandising efforts. Operator00:19:23Got you. Speaker 500:19:24Okay, last one. So that's the last one. So that's the last one. Speaker 600:19:24So that's the last one. Speaker 400:19:25So Speaker 600:19:26Yes. Okay, great. And last one for me. I know that you had contemplated some Pillarstone in coming in and helping facilitate some of the deleveraging this year. I don't know, I mean, we're kind of 3 quarters of the way through. Speaker 600:19:41Is it kind of we pushing that to 2025 at this point because of what's happening there? Can you just give a quick update? Speaker 200:19:49Hey, Mitch, Dave. I'll start and then maybe get Scott to comment as well. But just to give a quick update, we are making progress with our working through our Pillarstone collection during the quarter. I think we've got a couple of positive steps and that we've now have a plan of liquidation that we've agreed upon. We have a 3rd party plant agent that's overseeing that. Speaker 200:20:14So I think we're making steps. And with that, obviously, we will continue to feel better about collecting and the timing. I think as far as the timing, I do think I'll let Scott comment on the guidance. Speaker 400:20:29Yes, sure, Mitch. Thanks for the question. Well, we've kept our core FFO range wide at this point in the year just because of some of the uncertainty around the monetization of Pillarstone. You've seen the same store growth numbers increase a little bit, but we did have a small amount forecasted in the Q4 for liquidation proceeds on Pillarstone. And it's just too hard to say whether we'll see that this year or next year given that it's in a bankruptcy process. Speaker 600:21:06Excellent. Thank you, Mike. Speaker 700:21:08Thanks, Mitch. Operator00:21:11Thank you. Next question comes from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead. Speaker 500:21:18Yes, thanks. Good morning. I wanted to ask you on your asset recycling program. Are there any more assets in your portfolio that may be sold in the future or you're finished with asset recycling? Speaker 200:21:32Thanks, Dara. Dave Holman. I think we view it as an investment portfolio. And so I believe you're always looking at your holdings and determining which ones do we feel like we should recycle out of. So our recycling program, I guess, maybe different than some of the others and that it's not been getting rid of non core assets or assets that don't fit our strategy. Speaker 200:21:57It's just making sure that we're investing our money in the best way to return value to shareholders. So I think you'll always see some level of to shareholders. So I think you'll always see some Speaker 600:22:05level of sales as we Speaker 200:22:05go forward from us. But I think we reported in our remarks we've done about $100,000,000 kind of since late 2022 and balanced that. So that's So that's $100,000,000 over a couple of years. Volume might be a little less than that, but you'll always see a little bit of recycling, I believe. Speaker 500:22:28Okay. I also wanted to ask you on your same store NOI guidance for the year of 3.75% to 4.75%. Just curious, Ron, what gets you to the lower end and the upper end of the guidance and what's forecasted for 4Q? Speaker 400:22:49I didn't understand the Speaker 100:22:51same store. Speaker 200:22:52I think you said, I'll start maybe. I think you said on the same store guidance, what's forecasted for 4Q and then what are the drivers kind of on the low end and high end? I think it's I'll start off and Scott you can talk about. I think it's largely timing, right? Anytime you're looking at leasing activity and new leases, etcetera, there's some uncertainty as the exact time when it starts. Speaker 200:23:14So that's probably the largest and I'll let Scott add to that. Speaker 400:23:18Yes. We have a range forecasted for 4Q. You're not going to get into specific amounts, but maybe a little tiny bit of a pullback from what we've seen in the 1st 3 quarters, but still strong same store growth in the Q4 and we would expect to see good same store growth in 2025 as well. Speaker 500:23:45Okay. Thank you. That's all I have. Speaker 200:23:48Thank you. Operator00:23:50Thank you. Next question comes from the line of John Massocca with B. Riley Securities. Please go ahead. Speaker 400:23:57Good morning. Speaker 200:23:59Good morning, John. Speaker 500:24:00Good morning. Speaker 700:24:01Maybe kind of building on that last question, is there something specific you're kind of seeing in the leasing pipeline today that's driving a little bit more conservatism around the 4Q same store NOI growth forecast? Or is that just kind of broad conservatism given a decent amount of leasing activity that's going to occur then? Speaker 200:24:22I do think, John, when you look at same store growth, obviously, you're comparing toward a period. I think we continue to be have great momentum, continue to be very aren't seeing any signs of slowing down. But I think when you look back at the Q4 of last year, it was a strong quarter you're comparing against. So with that, we're just looking at an annual number. So I would say and once again Scott can add, I would say I don't think we're seeing any slowdown of that sort. Speaker 200:24:49We're just we raised our same store NOI guidance by 75 bps at the bottom and 25 increased to 25 at the top. So I think we're continuing to see really positive momentum. Speaker 400:25:00Right. And there was some variation last year in same store growth from quarter to quarter that may have resulted in little higher number of 1 quarter versus another quarter this year. Speaker 700:25:12Okay. And then in terms of investment, how are you thinking about kind of external acquisitions today? Is that something you would need to match fund with capital recycling? Or do you think some of the liquidity you created with the term loan and the asset sale in the quarter allows you to just be a pure acquirer for kind of granular stuff? Speaker 200:25:34It's no different than you would always do, John. It's disciplined acquisitions, right? We're actively looking for opportunities where we can acquire assets and apply our skills in a ways that are accretive. Obviously, there's a lot of pieces there of finding the right purchase price and then looking at capital to put to work. We have the ability to grow. Speaker 200:26:01We have room on our credit facility. We have the ability to tap multiple sources. It's largely just disciplined underwriting. So I wouldn't answer that I would answer that with we have opportunities. We've just got to obviously make sure we're disciplined in that just like everyone in the space. Speaker 200:26:20Okay. Speaker 700:26:21And then last one on my end, just kind of a bigger picture question. In light of the very recent very active shareholder base recently and the demand in the retail space, what are your thoughts around running a formal strategic alternatives process? Speaker 200:26:40I'm not just hey, John. So I would tell you that our Board reviews the best things for shareholders all the time. So we are actively looking at what are the best ways to add value, what are the best ways to pursue return to our shareholders. So I think we are actively doing that just like we should. And so I'm not sure I'm clear with your question. Speaker 200:27:07But and then as far as the active shareholders, I would say we've had great engagement with our shareholder base over the last several quarters. We've really got great positive feedback. If you look at the results today and the progress we're producing, I think the shareholder feedback we've got has largely been we recognize that and we appreciate that 11% earnings growth FFO growth, which frankly is pretty much top of the pack. Speaker 700:27:36Okay. I mean is there anything you would like to see from a valuation perspective or maybe certain kind of achievements on the operating end if you're not getting kind of the price you think from the market to go out and maybe more actively seek, interest on an M and A from an M and A perspective? Or is it we're just going to keep executing and if we get inbound, that's great? Speaker 200:28:02No, I think we're going to I think we and the Board are going to keep very actively looking at what are the best decisions for all shareholders. We look at the market conditions, we look at the operating performance and regularly look at what are the best conditions. So there's no decision that says we're going to do this, we're going to do that. We're going to continually evaluate and look at what we think is the best course. Right now, our momentum is very strong. Speaker 200:28:30And so we're evaluating all sources and we'll continue to do so. Speaker 700:28:36Okay. I appreciate the color. Thank you very much. Thanks, Sean. Operator00:28:43Thank you. Next question comes from the line of Craig Kucera with Lucid Capital Markets. Please go ahead. Speaker 800:28:51Yes. Good morning, guys. Obviously, another solid leasing quarter. You mentioned the continued strength of fitness and health and beauty as a few examples. But I'd be curious sort of are those the tenant categories that you are more focused on during the quarter in the back half of the year? Speaker 800:29:06Or what are the categories that really kind of fit more for where Whitestone's shopping centers are today? Speaker 300:29:13Again, we've always focused on food rather restaurants. And as we just mentioned, we added another grocery anchor to one of our centers. And health, beauty, wellness has been just a really hot category over the last couple of years and continues to grow. But along with that, there's also continued other services too that we're finding that are unique to our environment. And I would say that we've stayed focused on these categories that Speaker 500:29:41have been Speaker 300:29:42essential and compatible with the Internet and it's worked well. And that's why we've been able to deliver the last couple of years and continue to do so. Speaker 800:29:52Okay, great. Changing gears, it looked like your real estate taxes, I think averaged about $4,000,000 in the prior three quarters. This quarter ticked up to $5,000,000 Were there any revised appraisals? Or is this just a timing issue? Speaker 400:30:08There's some talk in Harris County that the tax rates may be going up this year. And so what we do during the year until we get the tax bills is we consult with our tax advisors on what we ought to be accruing. And so just based on what we've heard about tax rates going up in Harris County, we increased our tax accruals a little bit this year and we'll actually get the tax bills later and be able to true those up in the Q4. Speaker 800:30:42Okay, got it. Appreciate the color. Just one more for me. You've been pretty successful in bringing down leverage year to date. The guide is, I think, 6.6 times to 7 times EBITDA by year end. Speaker 800:30:56But I guess, can you give us some color on kind of the longer term goal there? I mean, does that bring the balance sheet where you want it to be? Or do you think you'll continue to deleverage over time? Speaker 400:31:07I think we'll continue to deleverage over time. I think we probably Dave can comment here too, but low 6s, high 5s might be a great place to end up. But I think we've made a lot of progress from a couple of years ago when we were north of 10. We expect to end the year at 6.6 to 6.7 as you mentioned. And we look to continue to ladder our debt and strengthen our balance sheet as we go forward. Speaker 600:31:37Okay. Thank you. Speaker 300:31:38Thanks, Craig. Operator00:31:42Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Dave Holman for closing comments. Speaker 200:31:53Thanks so much. We very much appreciate all of you joining us on today's call. Look forward to seeing many of you at the NAREIT convention coming up in a couple of weeks. And should you have any questions, please reach out to our Investor Relations. But once again, thank you for your interest and thank you for participating in today's call. Operator00:32:16Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you forRead morePowered by