Yahoo Finance Whitestone REIT (WSR) Q1 2024 Earnings Call Transcript Highlights: Strategic Developments and ...
FFO Per Share: Grew from $0.86 in 2021 to $0.91 in 2023.
Debt to EBITDA Ratio: Improved from 9.2 times in Q4 2021 to 7.5 times in Q4 2023.
Occupancy Rate: Increased to 94.2% at year-end 2023 from 91.3% at year-end 2021.
Same-Store Net Operating Income Growth: 7.9% in 2022 and 2.7% in 2023.
Core FFO Per Share Guidance for 2024: Projected to be between $0.98 to $1.4.
Asset Sales: Approximately $80 million completed by end of Q2 2024 at an aggregate cap rate of 6.2%.
Leasing Spreads: Straight-line leasing spreads were 21.8% for the quarter, with 37.3% on new leases and 15.3% on renewals.
Dividend Increase: Announced a 3% increase in monthly dividend level.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Whitestone REIT (NYSE:WSR) reported a growth in FFO per share from $0.86 in 2021 to $0.91 in 2023, despite higher interest costs.
The company successfully improved its balance sheet metrics, reducing debt to EBITDA from 9.2 times in Q4 2021 to 7.5 times in Q4 2023.
Record occupancy was achieved in the portfolio, rising from 91.3% at the end of 2021 to 94.2% at the end of 2023.
Whitestone REIT (NYSE:WSR) has made significant progress with its balance sheet improvement plan, obtaining an investment grade credit rating.
The company's asset recycling program has allowed for the upgrading of the overall quality of the portfolio, with approximately $80 million in asset sales completed at an aggregate cap rate of 6.2%.
Negative Points
The company faced significant litigation expenses which impacted the financial metrics.
Same-store net operating income growth slowed down to 2.7% in 2023 from 7.9% in 2022.
Interest expenses increased due to the amendment of the credit facility in the third quarter of 2022.
There are ongoing legal and bankruptcy proceedings related to the Pillarstone investment, which could affect financial stability.
The company anticipates a dip in occupancy in the upcoming quarter due to strategic remerchandising, which could impact revenue short-term.
Q & A Highlights
Q: Can you provide some perspective on the potential opportunities embedded in the portfolio and how you feel about those opportunities being monetized? A: David Holeman, CEO of Whitestone REIT, mentioned that the company is balancing improving the balance sheet and driving earnings with capitalizing on development opportunities. Christine Mastandrea, COO, added that most development opportunities involve pads and smaller buildings, which are quicker to build once approved, suggesting a strategic approach to enhancing value through manageable projects.
Q: What percentage of your portfolio comes from smaller tenants relative to larger ones, and how should we think about that? A: David Holeman, CEO, explained that approximately 75% of Whitestone's Annual Base Rent (ABR) comes from smaller spaces, which are in high demand, highlighting this as a key differentiator for the company in the sector.
Q: What drove the increase in property operating maintenance, and was that the main reason why same-store NOI for 2023 was at the low end of the guidance? A: Scott Hogan, CFO, clarified that the increase was due to accelerated large maintenance items like exterior painting and parking lot resurfacing at several properties in Arizona, which have lower recovery rates, impacting same-store NOI.
Q: Regarding the Eris asset management's proposal to nominate two directors to the Board and the proposal to liquidate, what discussions has the Board had? A: David Holeman, CEO, stated that while the company welcomes shareholder feedback, they do not publicly discuss individual shareholder discussions. He emphasized the Board's strategic role in value creation and their satisfaction with the current board composition.
Q: What are the chances that Whitestone can fully recover the monetary judgment from the Pillarstone ruling, now that Pillarstone has filed for bankruptcy? A: David Holeman, CEO, expressed confidence in the value of the underlying assets of Pillarstone, which are believed to be worth more than the company's recorded investment, indicating optimism about recovering the full monetary judgment.
Q: What's the plan for the vacant 24,000 square feet box at Windsor Park, and what type of demand are you seeing for this space? A: Christine Mastandrea, COO, mentioned strong demand for the space, with negotiations ongoing to overcome restrictive covenants typical of power centers. She expressed confidence in filling the space within the year, highlighting the strategic approach to tenant placement that drives traffic and benefits the community.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
