Whitestone REIT’s Positive Earnings Call Highlights Growth

Whitestone Reit ((WSR)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Whitestone REIT was marked by a largely positive sentiment, highlighting the company’s significant achievements in occupancy rates, net operating income (NOI) growth, and leasing spreads. The call underscored the company’s improved credit facility and successful asset recycling efforts, which are expected to bolster Whitestone’s growth trajectory. Despite challenges such as increased real estate taxes and pending resolutions in the Pillarstone joint venture, the positive aspects of the call outweighed these hurdles.

Near Record Occupancy

Whitestone REIT reported an impressive occupancy rate of 94.2% this quarter, reflecting a 30 basis point increase from the previous quarter. This achievement underscores the company’s strong leasing performance and sets a positive tone for the remainder of the year.

Same-Store Net Operating Income Growth

The company experienced a 4.8% increase in same-store net operating income, driven by robust leasing activities in Texas and Arizona. This growth is a testament to Whitestone’s strategic focus on enhancing shop space leases in key markets.

Improved Credit Facility Terms

Whitestone REIT successfully extended and improved its credit facility terms, a strategic move that locks down a crucial variable for achieving long-term core funds from operations (FFO) per share growth targets of 5% to 7%.

Increased Average Base Rent

The average base rent for Whitestone REIT rose to $25.59, marking an 8.2% increase over the third quarter of last year and a 26% increase over the past four years, translating to a 5.9% compound annual growth rate.

Strong Leasing Spreads

The company reported a straight-line leasing spread of 19.3% for the quarter, continuing its impressive streak of 14 consecutive quarters with spreads above 17%.

Successful Asset Recycling

Whitestone disposed of the Sugar Park Plaza property in Houston after enhancing its NOI by 22% over the last three years. The company plans further acquisitions and dispositions by year-end, signaling a proactive asset management strategy.

Real Estate Tax Increases

The quarter saw a significant uptick in real estate tax accruals, particularly in Texas, due to the state’s inconsistent real estate valuation process. This increase presents a challenge that the company is actively addressing.

Leverage Ratios

Whitestone’s debt-to-EBITDAre ratio stood at 7.2% as of the third quarter, with expectations for improvement in the fourth quarter, reflecting the company’s commitment to maintaining healthy leverage metrics.

Pillarstone Joint Venture Settlement Pending

While a settlement has been reached in the Pillarstone joint venture, court approval is still pending, with proceeds distribution expected in December. This resolution is anticipated to positively impact the company’s financial standing.

Forward-Looking Guidance

Whitestone REIT’s forward-looking guidance remains optimistic, with a 94.2% occupancy rate and a 4.8% growth in same-store NOI. The company expects redevelopment efforts to contribute an additional 1% to same-store NOI growth over the next few years. Core FFO per share is targeted to grow between 5% and 7% annually, with a reiterated 2025 core FFO per share guidance of $1.03 to $1.07. The company also improved its same-store NOI growth range to 3.5% to 4.5%.

In conclusion, Whitestone REIT’s earnings call painted a positive picture of the company’s current performance and future prospects. With strong occupancy rates, NOI growth, and strategic financial maneuvers, Whitestone is well-positioned for continued success, despite facing some challenges in the real estate tax landscape and joint venture settlements.