Whitestone REIT

If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Mordy, Director of Investor Relations. Please go ahead.

Good morning. Thank you for joining Whitestone REIT's third quarter 2023 earnings conference call. 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-K, for a detailed discussion of these factors. 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, November 1st, 2023. The company undertakes no obligation to update this information. Whitestone's third 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 third quarter 2023 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.

Thank you, David. Good morning, and thank you for joining Whitestone's third quarter 2023 earnings conference call. We had another very strong quarter with combined straight-line leasing spreads of 24.4%, and combined cash basis leasing spreads of 10.5%. Same store net operating income increased 4.9% versus the third quarter of last year. And this now marks six consecutive quarters with a combined straight line leasing spreads in excess of 17%. We're extremely proud of this accomplishment, which highlights the strength of our high quality portfolio. Consistently strong leasing spreads and same-store NOI growth are not only our recent past, but they're the heart of our plan going forward. We've corrected a lot of things over the last year and a half, from listening and responding to shareholders to improving our governance and balance sheet. As I look forward, the road ahead is comprised of continued excellence in execution and successfully ending the litigation we have with our former CEO, and proving our thesis that active management focused on targeted, strong geographies, smaller spaces, and strong tenants can outperform the sector. The path ahead includes significantly lower G&A levels, strong leasing spreads, best-in-class same-store growth, and eventually opportunities to scale our platform through disciplined, accretive acquisitions. Our passion and our strategy over the next five years is to prove that by focusing on quality of revenue, we can operate neighborhood centers that will deliver consistently strong lease and spreads and NOI growth. Investors should expect earnings growth, and they should expect dividends to grow with earnings. Investors may be able to look at our recent performance, our assets, or at market dynamics and see a lot of promise for Whitestone. However, it is management's plan to add a longer track record in terms of consistently delivering improved performance. I'll have Christine delve more into how we accomplish this, but let me review the quarterly numbers first. Revenue grew 4.9% from the third quarter of 2022. Funds from operations per share was 23 cents down from 24 cents a year ago. The decrease was primarily the result of higher interest and legal expenses significantly offset by increased property net operating income. Our total occupancy was 92.7% up 20 basis points from the third quarter of last year. And we're reiterating our 93.5% to 94.5% occupancy guidance for the year. We've got a number of leases we expect to commence in the fourth quarter, as our leasing team continues to see strong demand for our smaller spaces. And as of the end of the third quarter, our net effective annual base rent per square foot was $22.82, up 5% from a year ago. Investors may have noticed that some of the themes that are core to who we are are now being echoed across the sector. The strength of the Sun Belt, the idea that restaurants can be extremely valuable anchors, talking about the strong demand for smaller spaces, talking about using technology like Esri and Placer AI, and discussing the supply shortage. especially when looking specifically at neighborhood centers, are all themes that are being discussed by many of our peers. These ideas aren't new to us. They've driven our acquisition strategy and are key elements in how our leasing team operates. So now the onus is on us to show that Whitestone's strong position with these drivers translates into outperformance. Whitestone continues to be well prepared for either a higher inflationary environment or a harder landing. Our shorter lease structure allows us to better share in the success of our tenants and increase rates during inflationary periods. In terms of a harder landing, although there isn't much evidence of downside yet, but within the industry, we're starting to see that higher interest rates are causing problems backed by private equity. Fortunately, a very low percentage of our tenant base is funded by private equity or impacted by troubles there. Our tenants can often fund operations out of cash and generally have very low working capital requirements as they're service oriented rather than being focused on hard and soft goods. We also believe that the shorter leases with less restrictive structures and are constantly reviewing the strength of our tenants allows us to stay ahead of the changes in the retail space, strengthening our position if there is a harder landing. There has been an industry shift with a higher recognition of the value of small space, locally connected tenants. We've embraced this view for many years, and these tenants allowed us to perform very well during the pandemic. In summary, we've consistently delivered over the last year and a half, and we look forward to building on that track record. And looking ahead, I wouldn't trade our position with anyone else in the industry. One final note, last quarter I mentioned that we were evaluating the installation of charging stations at a number of our centers. I am pleased to report that we've signed an agreement with Tesla to build stations at our Whole Foods Anchored Boulevard location in Houston. and we expect to continue to explore additional locations within our portfolio. We believe this will help drive traffic at Boulevard, and we're excited to be part of the solution on the transition to electric vehicles. Christine?