Earnings call transcript: Whitestone REIT’s Q3 2025 earnings beat expectations, stock rises

Whitestone REIT reported stronger-than-expected earnings in its Q3 2025 results, with earnings per share (EPS) of $0.35, surpassing the forecasted $0.10. Revenue also exceeded expectations, coming in at $41 million compared to the anticipated $39.13 million. Despite this positive news, the stock saw a slight decline in pre-market trading, dropping 1.58% to $11.85, although it had previously risen by 3.74% in the regular session.

Key Takeaways

• Whitestone REIT’s Q3 EPS of $0.35 significantly beat the forecast of $0.10.
• Revenue increased by 6% year-over-year, reaching $41 million.
• The stock experienced a 3.74% increase during regular trading hours.
• Occupancy rates improved to 94.2%.
• The company is focusing on redevelopment projects and expects further growth.

Company Performance

Whitestone REIT demonstrated robust performance in Q3 2025, with core funds from operations (FFO) per share reaching $0.26. The company’s revenue increased by 6% compared to the same period last year. This growth is attributed to higher occupancy rates and successful redevelopment projects. The real estate investment trust continues to benefit from strong demographic trends in its key markets, particularly in Texas and Arizona, where population growth supports demand for retail spaces.

Financial Highlights

• Revenue: $41 million, up 6% year-over-year.
• Earnings per share: $0.35, significantly above the forecast of $0.10.
• Core FFO per share: $0.26.
• Average base rent increased by 8.2% year-over-year to $25.59.

Earnings vs. Forecast

Whitestone’s Q3 2025 EPS of $0.35 was 250% higher than the forecasted $0.10, marking a substantial earnings surprise. Revenue also exceeded expectations by 4.78%, reflecting the company’s strong operational performance and effective cost management strategies.

Market Reaction

The stock price of Whitestone REIT rose by 3.74% during regular trading hours, closing at $12.04. However, in pre-market trading, the stock saw a slight decline of 1.58%, bringing the price to $11.85. This movement reflects a mix of investor enthusiasm over the earnings beat and cautious sentiment about future performance.

Outlook & Guidance

Looking ahead, Whitestone REIT maintains a positive outlook with a core FFO per share guidance of $1.03 to $1.07 for 2025. The company anticipates continued growth in same-store net operating income (NOI) and plans to leverage redevelopment projects to drive future earnings. Whitestone also expects to make strategic acquisitions and dispositions in the coming quarter.

Executive Commentary

CEO Dave Holeman stated, "Our path forward is clear. Deliver on consistent earnings growth." He emphasized the company’s commitment to enhancing shareholder value through strategic investments and operational efficiency. President and COO Christine Mastandrea highlighted the popularity of pickleball facilities, noting their appeal to younger demographics.

Risks and Challenges

• Potential economic downturns could impact retail leasing demand.
• Rising interest rates may affect financing costs and profitability.
• Competition from other retail space providers could pressure rental rates.
• Regulatory changes in key markets like Texas and Arizona might impact operations.
• Fluctuations in consumer spending could affect tenant performance.

Q&A

During the earnings call, analysts inquired about Whitestone’s leasing spreads and future redevelopment plans. The company expects consistent leasing spreads into 2026 and plans to focus on selective pad site developments. Additionally, questions were raised about the leverage ratio, which is projected to be in the mid-to-high 6% range in Q4.

Full transcript - Whitestone REIT (WSR) Q3 2025:

Conference Call Operator: Greetings and welcome to the Whitestone REIT third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. David Holeman.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Please go ahead. Good morning and thank you.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: you for joining Whitestone REIT’s third quarter 2025 earnings conference call. Joining me on today’s call are Dave Holeman, Chief Executive Officer, Christine Mastandrea, President and 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, October 30, 2025. The company undertakes no obligation to update this information.

Whitestone’s 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 2025 slides on our website yesterday afternoon, which highlight topics to be discussed today. I will now turn the call over to Dave Holeman, our Chief Executive Officer.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thanks David. Good morning and thanks again for joining our call. We’ve got a number of great things to discuss this quarter, so I’ll start in with some highlights for the quarter and our overall achievements. We hit 94.2% occupancy this quarter, up 30 basis points from Q2. This is near record occupancy, and given that the fourth quarter is typically our strongest leasing quarter, we’re set up for a very strong finish to the year. We delivered 4.8% same store net operating income growth for the quarter, again fueled by increases across the spectrum of shop space leases, various tenant types in both Texas and Arizona. The quality of our portfolio continues to be recognized by third parties as Green Street has now increased our TAP score by five points since Green Street started scoring our portfolio two and a half years ago.

In that time, the five point increase leads the peer group and is a testament to the strength of our acquisitions, our operations, and our recycling efforts, as well as the demographic trajectory of the area surrounding our properties. We extended and improved the terms of our credit facility, locking down one of the key variables for us to achieve our long term 5% to 7% core FFO per share growth target. Scott will provide greater detail on our debt metrics in his remarks. We’re near completion on redevelopment for La Mirada in Scottsdale, we’re in full swing on our work at Lion Square in Houston, and we’ve kicked off redevelopment at Terravita in Scottsdale.

We forecasted that redevelopment will add up to 1% to Whitestone’s same store NOI growth with a $20 million to $30 million capital spend over the next couple years, and we’re on track to have this initiative deliver in 2026. Our average base rent is now $25.59, an 8.2% increase over the third quarter last year and a 26% increase versus this quarter four years ago, translating to a 5.9% compound annual growth rate. Specific to this quarter, we delivered $0.26 in core FFO per share. As a reminder, we typically have a lift of a couple cents in the fourth quarter versus the third quarter as a result of new lease commencements and percent of sales clauses that trigger as we close out the year. Straight-line leasing spreads were 19.3% for the quarter, our 14th consecutive quarter above 17% on leasing spreads. Those are the recent highlights.

Let me go on now to talk a little about what we have planned ahead. Our path forward is clear. Deliver on consistent earnings growth. Deliver on the targets we put in front of our investors. If you have any doubts about our ability to deliver these results and don’t see the value of our differentiated business model, come talk to us. Dig into our great results and come see our properties. We know many investors have asked themselves, why not Whitestone? How is this small cap delivering growth that’s larger than many of our peers? Don’t accept a quick, inaccurate answer. We’ll help you understand the building blocks underpinning our 5% to 7% core FFO growth target and will help you understand why our cash flows are very durable because our success is rooted in operations. We believe investors gain a tremendous amount by seeing our operations.

We’ll be at REIT World in Dallas this December. We’ll be showing investors properties on Monday, December 8 and we’ll have one on ones on Tuesday. We hope you’ll be able to join us at this conference as part of our ongoing asset recycling efforts. We disposed of one property this quarter, Sugar Park Plaza in Houston. Over the last three years we have increased the NOI in this property by 22% by transforming the center into a grocery anchored center and remerchandising the shop space and the time was right to sell and deploy the proceeds where we can create greater value over the coming years. This disposition brings our total acquisitions and dispositions over the past three years to approximately $150 million. I anticipate we’ll have a couple more acquisitions very shortly and should have one to two dispositions to finish out the year.

Our markets are continuing to show significant strength as Texas and Arizona’s business friendly environments and strong demographic trends continue to support demand. Our acquisition team continues to identify neighborhoods with upwardly mobile consumers where our leasing team can have the greatest impact applying our business model. In closing, we remain steadfast in our belief that a company with a well aligned forward thinking team, a well located portfolio with a concentration of high value shop space properly anchored to the community, can outperform the herd. I look forward to connecting with investors in the months ahead and I look forward to being able to lay out our 2026 plan on the fourth quarter call. Christine, good morning everyone.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: On the leasing front, we had a strong quarter and we’re accelerating as we close in on year end. We signed $29.1 million in total lease value with spreads on new leases at 22.5% and renewals at 18.6% for a combined 19.3% on straight-line leasing spreads. Same store NOI growth was 4.8% for the quarter, allowing us to raise the lower end of the same store NOI growth target by 50 basis points. Foot traffic across the portfolio is up 4% versus the third quarter of 2024. That’s a good indicator we’ve got in terms of the health of the consumer specific to our footprint in our locations. What we’re seeing in terms of successful tenants right now are those that are successfully expanding on their offerings, for restaurant delivery services have gone from a nice add to a critical component of the business.

In addition, we continue to see an expansion of beauty, health, wellness, fitness, and see the spend on overall health and mental wellness continues to increase. Understanding these avenues for the tenant’s success is critical for Whitestone REIT to stay on top as we curate our centers to the neighborhood needs. On the redevelopment front, we’ve completed the facade renovation at La Mirada, which puts us on track to finish this by year end. At Lion Square, the transformation of striking is about 75% complete. With the redevelopment at Lion Square, the grocery brought in last year, Sunwing, will expand, creating value by making this grocery-anchored center the heart of Houston’s Asiatown. Now we’re kicking off the facade work at Terravita, which we talked about on the second earnings call, bringing in the Pickler and Ace Hardware.

This will further accelerate the transformation of the center, which is experiencing dynamic growth as a result of TSMC’s nearby semiconductor fabrication facility. We also generally move a couple of pads into action each year. This year, we created a pad at Lakeside in Dallas and brought in Central National Bank on that pad. We also signed a tenant for a pad at Scottsdale Commons. As a reminder, we purchased Scottsdale Commons in 2024, so the creation of the new pad represents a significant value creation pretty rapidly post acquisition. We anticipate bringing a couple of additional pads online in 2026 as well. We continue to see pickleball succeed as the demand with the younger demographic accelerates.

We’re looking at bringing pickleball on the roof of Boulevard, which is adding value to where we had no income stream for that square footage previously, and welcome this as an opportunity to add value also for the office community in the area. On the last several calls, we’ve talked about the intentional design of our business model to benefit from change, both in terms of change allowing us to enhance our growth trajectory and change enabling us to ensure more durable cash flows, a key component of what we do. Proactively tracking and understanding consumer behavior and capitalizing on that knowledge. We will see change as the result of three primary forces. First, change is a result of generational shifts as the younger generations step up into new roles both as consumers and business owners. 2.

Migratory change as consumers move to more business-friendly areas and take advantage of opportunities there, such as our markets and what we’ve seen over the last number of years, and number three, technological change as both consumers and businesses become more sophisticated in utilizing technology and as spending patterns shift accordingly. Both generational change and migratory change show up in the ESRI data heavily used by our acquisitions team and our leasing team. Migratory change is a bit slower moving but also a critical component for the acquisitions team to get it right. The Houston metro area has added nearly 2 million people over the last 15 years, while the Phoenix metro area has added 1 million residents during that time as well. Ensuring we benefit from that phenomenal growth is very important in terms of Whitestone REIT’s success.

All three types of change also impact the consumer data and traffic data that we follow in Placer AI. This is critical for leasing but is key in our underwriting process. Our assessment of the business’s ability to meet the future consumer demands weighs heavily into our decisions to move forward on any lease we sign. For all of our leasing agents, our weekly leasing meetings provide an opportunity to discuss what changes we’re seeing as they interact with their neighborhoods and the tools they’re using to evaluate those changes around our centers. The biggest takeaway for investors here is that our ability to translate change into a higher same store NOI growth starts with our assets and our business model, but also relies heavily on technology, but ultimately needs to be embedded in our culture and our processes to which Whitestone delivers our results.

We delivered strong finishes in both 2023 and 2024, and the team here is pushing hard to take advantage of the year end dynamics and clear close leases, and with that I turn it over to Scott to cover the financials.

Scott Hogan, Chief Financial Officer, Whitestone REIT: Thank you, Christine. This morning we reiterated our 2025 $1.03 to $1.07 core FFO per share guidance, improved our same store NOI growth range to 3.5% to 4.5%, and reiterated our long term growth rates on our leverage metrics. We’re making steady progress, and I anticipate our fourth quarter annualized debt to EBITDA RE ratio will be in the mid to high sixes. The most significant development this quarter on the financial side was our amended and extended credit facility. We accomplished everything we wanted to accomplish here in large part because of the actions we’ve taken over the last three years. We were able to expand our bank group and improve Whitestone’s valuation cap rate to 6.75% because there was wide recognition that we are consistently delivering, and we have steadily increased the value of our properties through our focused strategy and strong execution.

We increased the size of the facility to put Whitestone on par with our size based peers in terms of available revolver credit facility capacity, and we expect to continue our debt leverage improvement initiative over the coming quarters and years. We fixed an increased percentage of our overall debt, bringing the weighted average term on all of our debt to 4.3 years and the weighted average rate on our fixed debt to 4.8%. Most importantly, locking down our debt clears the runway for us to focus on executing our plan and delivering core FFO per share growth for shareholders. I will note that included in the quarter is approximately $800,000 of debt extinguishment costs related to our refinancing. We have adjusted for this amount in our core FFO.

Our revenue for the quarter was up 6%, and most importantly, the quality of revenue continues to strengthen as evidenced by our improvement in uncollectible accounts and downward revision to our full year bad debt guidance. Our total headcount is down 6% from a year ago, and we continue to focus on lowering G&A costs as we scale. As a reminder, our dividend is well covered with a healthy payout ratio, and we expect to grow the dividend in sync with earnings growth. With that, I’ll conclude my comments and open the line for questions.

Conference Call Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Mitch Germain with JMP Securities. Hi, good morning. This is Jodi on from Mitch. Just a few questions here. The first one being the rent expirations in 2026, the average rent is higher than average there. Should we expect similar leasing spreads as in recent quarter? I think it was 17% for the next year or so.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thanks, Jody. Excuse me, this is Dave. I’ll start out and Christine may want to add some granularity, but there’s always mix when you look at the. One of the things about our tenants is we have a highly diversified tenant base with 1,500 tenants. In any particular year you do have some mix, but there’s nothing unique about next year’s rental rates. We continue to see really strong leasing demand and there’s no sign of any weakening in our leasing spread. Great quarter this quarter. I think our, I can’t remember the number, but we’ve had many quarters over 17%. I think it’s been about three years. I’ll let Christine add anything she wants to add.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: We don’t see anything distinguishing next year any different than this past year.

Dave Holeman, Chief Executive Officer, Whitestone REIT: We see.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: We expect that we’re going to continue to see the.

Dave Holeman, Chief Executive Officer, Whitestone REIT: The same rate of.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Leasing spreads, if not more, continue because there’s just such a demand for retail space.

Conference Call Operator: Okay, that’s very helpful. Secondly, could you give any more information on the change in occupancy? I think the larger centers increase in occupancy. In the smaller ones, occupancy went down. Any more details, sir?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: It’s the same thing that we’ve been doing in the past couple years, where we’re taking some space back. The purpose for that on the smaller spaces is we see the opportunity for higher revenue and stronger quality tenants.

Dave Holeman, Chief Executive Officer, Whitestone REIT: That we want to bring in. We have been doing that for the

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Last couple of years, and we continue.

Dave Holeman, Chief Executive Officer, Whitestone REIT: To do so going forward.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: There have been a number of small spaces that we’ve taken back, and we expect to put to work with, you know, a higher income stream based off of our leasing efforts. We did fill a couple of larger spaces this year, and much of that timing has to do with just city approvals and the timing that we can bring that revenue online.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Hey, Jody, I might also just remind everyone that we report fully commenced occupancy. I know many of our peers report leased and commenced. Whitestone’s 94.2% is tenants that are in the space, and continuing to see good trends in occupancy. I think we were up 30 basis points just over the second quarter. As we said in our remarks, fourth quarter tends to be a very good time period for us. We’re excited about finishing out the year strong.

Conference Call Operator: Okay. The last one for me here is if you all have any update on the Pillarstone JV.

Dave Holeman, Chief Executive Officer, Whitestone REIT: I’m glad to give an update, Jody. I will encourage everyone to. We’ll file our 10-Q shortly and it has a very detailed description of the activities that have gone on. What I will say is we’re nearing the end. We’re in the collection phase of just collecting our funds from the partnership. The court recently, there was recently a settlement agreement filed with the court and we expect that to be approved. With that, there would be a distribution of proceeds. I encourage you very shortly, I encourage you to read the 10-Q because it gives all of the details. The short answer is we have reached a settlement with the court. The court has to approve that settlement and if it is done, then the proceeds are expected to be distributed by in December.

Conference Call Operator: Okay, thank you so much. I’m looking forward to that, and good luck with next quarter.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thanks, Jody.

Conference Call Operator: Our next question comes from Gaurav Mehta with Alliance Global Partners.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Thank you.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Good morning.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: I wanted to ask you on your leverage comments. Mid to high sixes in 4Q. It seems like it was 7.2 as of 3Q. I just want to get some more color on assumptions driving leverage lower in this quarter.

Scott Hogan, Chief Financial Officer, Whitestone REIT: Sorry, Gaurav, it’s Scott here. I didn’t catch the whole question. Are you asking about the leverage ratios? Yeah.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: I think you mentioned mid to high 6% expected in 4Q from 7.2% as of 3Q. I just want to get some more color on the assumptions driving leverage lower.

Scott Hogan, Chief Financial Officer, Whitestone REIT: Oh, sure. I think there’s two pieces to the puzzle. We continue to improve the balance sheet and we’re focused on that. Operations continue to improve. The fourth quarter is, as Dave mentioned before, usually our strongest quarter. Normally we have % sales break points that are hit in the fourth quarter. On an annualized basis, we do expect the fourth quarter to be in the mid to high 6% range on debt to EBITDA. We think we’ll continue to improve our balance sheet as we move forward this year. There’s been a little bit of timing in our recycling efforts. The acquisitions have gotten ahead of the dispositions, but we think we’ll balance those out as we move forward.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Okay. Follow up on acquisitions and dispositions. I think in the prepared remarks you said you’re expecting some acquisitions shortly and then you also mentioned a few more dispositions. Just in terms of timing, is that expected this quarter?

Dave Holeman, Chief Executive Officer, Whitestone REIT: Yes, we expect. I think I said in my remarks, Gaurav, that we’ve got what we expect is a couple more acquisitions and one to two dispositions to finish out the year. That would be expected to occur in the fourth quarter. I think what you’ll see is consistent with what we’ve done in the past, looking at properties that fit Whitestone’s model, continuing to upgrade the portfolio. I think we’ve got a chart in our investor deck that lays out what we’ve done, where we’ve bought properties that have what we believe is much more upside in better areas and sold properties that we see less growth in the future. Just continuing what we’re doing with a couple of those for the balance of the year. As we’ve said, we’re fairly well balancing the assets, acquisitions and dispositions at this point.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Okay, thank you. That’s all I had.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thank you.

Conference Call Operator: As a reminder, that is Star One. If you would like to ask a question, we’ll go next to Craig Kucera with Lucid Capital Markets.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Hey, good morning, guys.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Scott, you had a fairly large pickup.

Dave Holeman, Chief Executive Officer, Whitestone REIT: In real estate tax accruals this quarter, can you talk about your expectations for the year in regard to real estate tax?

Scott Hogan, Chief Financial Officer, Whitestone REIT: Sure.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Yeah.

Scott Hogan, Chief Financial Officer, Whitestone REIT: It’s mainly Texas. Texas.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Has a choppy real estate valuation.

Scott Hogan, Chief Financial Officer, Whitestone REIT: Process that we go through. We really go through a three or four step process to ultimately settle on what we’re going to pay. What we typically see is around July, what’s called the ARB process happens, and we usually settle in on a little higher valuation. We continue to protest those and we continue to litigate those. Ultimately, I think we feel confident that those will come down. We do pass through most of those costs to our tenants, but we work very hard to keep those low because it’s a burden on the tenants. Some of those can take two to three years to get through the full litigation process. I think it’s just a normal increase that you’d see in the third quarter, particularly in Texas.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Okay, that’s helpful. Excuse me.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Just circling back to your commentary, Dave.

Dave Holeman, Chief Executive Officer, Whitestone REIT: On the acquisitions and dispositions, I think earlier this year you were talking about maybe $40 million for the year. Has that number changed at all?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Is that still sort of the.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Expectation of having $40 million of acquisitions and maybe $40 million on the disposition side? Hey, Craig. Yeah, I don’t, I think we, like I said in page 10 of our deck, we’ve laid out, we’ve done two acquisitions this year and as I said, I have a couple more. I would say probably we’re going to be a little higher than those numbers on the acquisition and disposition side, not significantly different. If you look back so far, we’ve done basically $150 million over the last two and a half, three years. I think that run rate is consistent with where we are today, but we are seeing some nice opportunities. I’m very pleased with the acquisition of San Clemente in Austin earlier this year, which is across from our Davenport property and provides us some really nice synergies between those two properties.

We acquired Hewland in Fort Worth Market earlier this year, I think. Great acquisition for us and excited about a couple more that we should announce shortly, no huge change here. Just continuing to make sure we’re working the portfolio, we’re taking the steps we need to do to achieve our 5 to 7% long term FFO growth. Probably just a little bit more than the $40 million, but kind of a consistent pattern with what we’ve done over the last three years. Got it. Kind of changing gears here in the fourth quarter. I think you’ve got about 4% of your ABR expiring. Is that really just because you have a concentration of month to month leases or anything other going on there?

Scott Hogan, Chief Financial Officer, Whitestone REIT: I think if you’re looking at the number of leases.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Most just on.

Scott Hogan, Chief Financial Officer, Whitestone REIT: The lease count, most of that is in our, what we call the Cubic Zach product, which is a very small percentage of the portfolio, but it’s a shared office space concept. It’s a high number of leases that just tend to be either month to month or very short terms, and that’s normal. I think if we looked at just what we consider being our wheelhouse of leases, the number’s closer to 50 to 75 that are expiring in the fourth quarter, something like that, probably closer to 50. I think it’s mainly just Cubic Zach leases expiring.

Dave Holeman, Chief Executive Officer, Whitestone REIT: It’s actually very consistent with what we’ve always had. I mean, if you look back to the last fourth quarter, I think we’re a little smaller. Super pleased with the opportunity to continue to have roll. One of the things that I think is a benefit for Whitestone REIT is in this environment, we’re rolling a greater % of our leases than some of our peers. Obviously with the positive marks we’re having, we’re pleased with that. Consistent with what we’ve had is about 20% of our leases rolling. If you look at the 4% of revenue, that translates very closely, I think.

Scott Hogan, Chief Financial Officer, Whitestone REIT: On a square footage and ABR basis, where it’s actually lower than we were in this position last year. Craig.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Okay, that’s helpful. One more just on slide 10 on the investor presentation. Appreciate the color, first of all. That’s helpful. Just looking at it optically, it looks like you’re acquiring properties with higher rents at higher cap rates and selling assets with lower rents and lower cap rates. Obviously you’re getting that positive cap.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Rate arbitrage, which you reported over the past few years.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Is that just you executing your strategy, or is that a focus more on, you know, more small shop space?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: You can charge higher rents?

Dave Holeman, Chief Executive Officer, Whitestone REIT: I just would be interested in your color on how you’re doing that. I think it’s largely our strategy and it’s, I think if you look at the fundamental aspect of what we do, it’s capital allocation. Just continuing to look at our portfolio, we do believe that right now it’s the right time to continue to upgrade a number of things: upgrading the tenant base, upgrading the properties through higher income levels to potentially higher ABRs. It is a focused strategy to ultimately buy properties that we think have greater growth going forward. We’re doing that probably in a little better areas and upgrading the portfolio.

You’ve seen us move the ABR, you’ve seen us move kind of our consolidated TAP score, and most importantly, if you look at the chart on TAP, not only are we buying these properties at good rates, but Christine Mastandrea and her team are doing a fabulous job of stepping in day one, looking at the merchandising mix, looking at ways we can drive NOI. We’re buying it at more attractive cap rates, and we’re making very quick return increases as we move forward.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Okay, great. Appreciate the color.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thank you. Thanks, Greg.

Conference Call Operator: We’ll go next to Bill Chen with Rhizome Partners.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Hi.

Dave Holeman, Chief Executive Officer, Whitestone REIT: I was wondering if you have an update on Pillarstone in terms of timing and then if the dollar figures are.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Still in that same range of, I believe, 50 to 70 that you have previously guided.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Hey, Bill. Dave Holeman, thanks for your question. I think I said earlier, and I’ll remind folks, we’re going to file our 10Q very shortly. There is a very detailed explanation in the 10Q that goes through all the activities that have happened on Pillarstone. Just briefly, during the quarter, we received $13.6 million. That was payment of part of our proceeds due from Pillarstone. There has been a settlement reached with the court, with the plan agent that would result in about another $40 million coming to Whitestone. That settlement needs to be approved by the court. There will be a hearing to do so in November. If all of that’s approved, it’s expected the distribution of approximately $40 million would be made in mid-December. Obviously, we expect that to happen, but there are a number of steps to get there. That’s the update.

We’re very close to receiving what we believe is kind of the end of the joint venture. $13.6 million received in the quarter, and right now we estimate another $40 million to come in December.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Gotcha.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thank you for that.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Great color.

Scott Hogan, Chief Financial Officer, Whitestone REIT: Appreciate that.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Do your leverage ratios factor into those payments that you previously mentioned on the call earlier today?

Scott Hogan, Chief Financial Officer, Whitestone REIT: Right now, the guidance for the fourth quarter does not include the impact of any gains or losses or the Pillarstone proceeds.

Dave Holeman, Chief Executive Officer, Whitestone REIT: So.

Scott Hogan, Chief Financial Officer, Whitestone REIT: $40 million. The $40 million Dave mentioned would probably be right around a half turn.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Okay, I appreciate that.

Dave Holeman, Chief Executive Officer, Whitestone REIT: One last question, if I may, on the site developments. Is the strategy going forward to hold them or to kind of sell them?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: For the gain and redeploy the capital?

Dave Holeman, Chief Executive Officer, Whitestone REIT: Great question. I think that’s an individual by individual pad site that we go through. Obviously, we do think there’s value in having an aggregation of the properties that all go together. As you can see from what we’ve done in the last couple years, we selectively sold a couple pad sites that we thought the value was very attractive. As we do these pad sites, one of the things we look at is structuring them in a way with a lease that is attractive to a buyer and keeping that opportunity open to us. It’s really an individual decision we go through. We look at the pad site, we look at where it is in the center, we look at potentially the pricing in the market. We’re looking at a number of ways to do things that add value to shareholders.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Thank you for that. Appreciate it.

Dave Holeman, Chief Executive Officer, Whitestone REIT: I have no further questions. Thanks, Bill.

Conference Call Operator: Moving on to John Massocca with B. Riley.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Good morning. Apologies if I missed this earlier in the call. I know it’s not really how you tend to think about the portfolio, but as we think about 4Q rent and maybe even beyond that, do you have a signed, not open pipeline or a pipeline of things that are on, call it a free rent period that could be kicking in here in the next three to six months, and if so, what’s the broad parameters of how big that number is? Yeah, yeah.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: As I.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Hey, John. Dave. As I mentioned earlier, we report occupancy as commenced occupancy so that the tenants have taken possession of the space. Some of our peers report, I think, a leased occupancy and then a sign not open. One of the fundamental aspects of our business model is smaller tenants, shorter leases, much more quick and nimble. We just don’t have a substantial amount of leases that aren’t commenced because we move quickly. We get those tenants in very quickly. I also think when people report sign not open, they’re not reporting potential tenants that move out. There’s that sign not open gap that always sits there. Whitestone’s at a solid 94, over 94, fourth quarter moving forward. We sign leases and we get them commenced very quickly. I think I answered your question maybe.

Scott Hogan, Chief Financial Officer, Whitestone REIT: John, just the 3.5% to 4.5% same store guidance that we’ve given for the year includes any kind of free rent or anything of that nature in it as well.

Dave Holeman, Chief Executive Officer, Whitestone REIT: I guess maybe just as we think about 4Q, which is historically a big leasing quarter, is that stuff that’s in negotiation today, or is that things that have been negotiated in 3Q or 2Q that are essentially just formalities to close in the quarter?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: It’s both, John. I mean, leasing complicated leases can take six months to negotiate, to put in place.

Dave Holeman, Chief Executive Officer, Whitestone REIT: And.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Some are different. I mean, it’s across the board. Traditionally, we’ve always tried to take back some space at the beginning of the year, which always kind of dips.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Our occupancy a bit.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: We are moving towards either leasing activity well into the second and third. That delivers on the fourth, and then sometimes the fourth. For whatever reason, people wanting to start their businesses up at the beginning of the year just seems to always been a very productive quarter for us in the beginning. I think again, you kind of see the trend has been the same the last couple of years. We just expect it to keep being that way.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Yeah. I think obviously we’re not just saying that because it’s been that way. We’ve got great visibility into the leases. Christine and her team, every week we look at the activity, we look at leases in place. We feel good about where we are on the leasing side. At this point in the year, there’s substantial activity we believe to finish out in Q4.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: I haven’t seen a downtick in leasing activity this year, surprisingly.

Dave Holeman, Chief Executive Officer, Whitestone REIT: I thought there’d be a little bit.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Of pullback, it really has not been okay.

Dave Holeman, Chief Executive Officer, Whitestone REIT: On the kind of redevelopment or center enhancement CapEx you’re putting in, is all of the tailwind to same store NOI or NOI you’re expecting to see from that going to hit in 2026, or are there projects in place that are really more of a 2027 impact? How big could that be compared to what you’re going to complete this year or early next, and therefore have it be impacting the 2026 numbers?

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: We’ve been stacking this evenly across the board over the number of years just because the timing of lease rolls when we’re able to put production into place. I think, you know, we may see some of our larger projects come online in 2027, but 2026 is going to be similar to this past year.

Dave Holeman, Chief Executive Officer, Whitestone REIT: As far as what we’re able to.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Achieve as far as putting pads into production, et cetera. We have a couple of projects that we expect to see an uplift from. I think as we talked about, Lion Square, Terravita, a number of these take about six months to nine months to put in production. You see the results in 2020, the following year.

Dave Holeman, Chief Executive Officer, Whitestone REIT: We continue.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: That is part of the value add of our business that we find to be, as far as whenever we purchase an asset, we look at doing that. Garden Oaks will probably be the next one to start up. It is just how we do business, and that is how we were able to keep increasing and improving the value of the portfolio, the quality of the revenue, and deliver to the bottom line.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Maybe on a very short term basis, as I think about the acquisitions and dispositions that are in the pipeline for the remainder of the year, should we expect cap rates to be roughly aligned with what you’ve done historically on both ends of those transactions? The general answer is yes. No substantial changes. We’re working a program. The specific cap rates may be slightly different, but generally we’re seeing cap rates consistent with what we show on slide 10. As far as the acquisition side, most importantly to us is obviously the day one cap rate is important, but we’re equally focused on the day 300 cap rate. What can we do? How can we move the rents? It should be no substantial change in doing similar to what we’ve been doing.

I think I said in my remarks, what we plan to do is execute and deliver, share with investors where we think we can add value, and then do that. You should see that on the acquisition disposition side throughout the rest of the year.

Christine Mastandrea, President and Chief Operating Officer, Whitestone REIT: Okay, that’s it for me. Thank you very much.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thanks, John.

Conference Call Operator: This now concludes our question and answer session. I would like to turn the floor back to Dave Holeman for closing comments.

Dave Holeman, Chief Executive Officer, Whitestone REIT: Thank you. Thanks to everyone for joining our call. We’re very pleased with the progress we’re making. I think we’ve laid down another solid quarter and are excited about finishing out the year with a very strong year. We’d love to interact with anyone that was going to be at REIT World in Dallas in December. We’re going to be having a property tour and obviously meeting one on one with investors. If you’d like to do that, reach out to us. Thanks again for joining and have a great day.

Conference Call Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.

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