My name is Mitch Germain. I'm a senior analyst with Citizens JMP, and it's my pleasure and honor to introduce you to David Holeman, Chief Executive Officer of Whitestone REIT. I guess, we just... We're chatting, and we've known each other for about 13 years? That's right. I've been covering the company for quite some time. Dave's one of the nicest and most honest people that I know in this business, so it's truly a pleasure and honor to be up here with him. Dave's gonna spend some time talking about Whitestone so everyone can familiarize themselves with the company, and then we're gonna do some Q&A. If you have a question, just raise your hand, and I'll facilitate making sure we get an answer. Dave? It's a pleasure to be with you today. It's a pleasure to be with you, Mitch. I think Mitch said. Can you hear me okay? I was one of the most honest. I don't know if that's a—I don't know if you can put a qualifier on that—but, pleasure to be here. Love the opportunity to, to share with you about Whitestone REIT, which I think is an exciting company, and happy to, happy to answer any questions you might have. That's it? That's it. We- Well, Let's talk a little bit about the company. Let me, let me tell you about Whitestone. So let me just give you a bit about us and maybe what differentiates Whitestone, what makes us interesting. So we are we're a community-centered REIT. We acquire, own, operate, develop, you know, open-air retail, and really, one of the key differentiators is we're very targeted geographically. If you look at Whitestone today, we hold, hold properties in Texas and Arizona, in some of the fastest-growing markets. We're in the Phoenix market and, and, and surrounding submarkets of that, of that MSA, and then in Texas, Austin, San Antonio, Dallas, Fort Worth, and Houston. You know, our centers are really convenience-focused, so, we've put together a tenant mix, a merchandising mix that has service-oriented tenants. Key, key areas for us are food. Food is a huge category, a little different than some of our peers in this sector, in that we're not solely grocery-anchored. We very much view the community and the neighborhood as the anchor. We look for lots of demand drivers, but we put together a tenant mix that has food, grocery, and restaurants, self-care, health and fitness services, I would say financial, logistics, and then education and entertainment continue to be key drivers of consumer activity. We believe very strongly that our strong community connections and really deep tenant relationships are key to our strategy, and I was pleased to step into the CEO role back in early 2022. was the longtime CFO, but beginning in 2022, we really changed a number of things in the company and happy to share some of those with you and the, and the philosophy and thoughts on that. Yeah, so let's start with that. That's a great segue. You know, it's been two years now since you had the opportunity to take over as CEO. Maybe just talk about, you know, kind of what was the initial strategy, and then shift toward, you know, kinda now that we're two-plus years into this process- Yeah ... where are we headed? Yep, happy to share some thoughts on that, and may cause some questions. Mm-hmm. But, I remember years ago, there was a book I read, you know, Good to Great, and, it's an old book but had some very simple concepts in it that have always stuck with me. You know, a few of those were, you know, get the right people in place, be brutally honest about the areas you need to improve, and then make incremental changes. So, when I was honored to step into the seat in early 2022, one of the first things we did was make sure that we had the right people on the team. Our executive team at that time was six people, and we changed 50% of that team, including the former CEO. We then, you know, formed the team, put together people who knew exactly where to drive the business, and I'm very pleased that they've executed very well as planned in really probably three primary areas of our accomplishments. Right off the bat, we said, "You know, we've gotta execute. This is real estate. The fundamentals drive so much, so let's have operational excellence." Over the time since I've been in this role, we've been able to lease the portfolio up. We've increased our occupancy by over 230 basis points since the fourth quarter of 2021. And not only have we done that, but if you look at the quality of our tenants, the quality of our revenue, we've driven our average base rent up about 15%, and then we've delivered 8 consecutive quarters of nearly 20% leasing spreads. So that was very important to do. Additionally, one of the things we needed to do right off the bat was repair some of our shareholder relations. So we immediately engaged with shareholders and took a number of actions just to do the right things as a corporate entity. That had included everything from governance changes. We refreshed our board of trustees, bringing in some new members. We, we eliminated a poison pill that was in place at that time, and then, most importantly, we got out and interacted with shareholders. This is, this is our, our third, NAREIT, and we've been a public company for 14 years. So a number of years-..., you know, Whitestone wasn't out interacting with shareholders, wasn't possibly taking advantage of this, of this session. So thrilled to be here, thrilled to, to, to be with, with you, and, it's an important part of what we do every day. And then a number of other, you know, host of other smaller items. But maybe the last thing I'll note as far as our, our key initiatives when I stepped into the seat were improving our leverage. We had a debt leverage that was probably one of the highest in the sector. At that time, our debt, net debt to EBITDA was 10.2x. And I'm, you know, pleased to report we've taken that down to 7.8x as of the most recent quarter, and we're projecting a range of 6.6-7x by the end of this year. Our leverage improvement has been driven by earnings growth, taking our retained earnings and using that to improve the balance sheet. And we'll have some one-time items I can touch on a little bit coming in the future. We have an investment in a joint venture that we're exiting, and there's about, probably about $50 million in proceeds that have been non-performing for us for a number of years that will contribute to operations growth as well as balance sheet improvement. And then maybe I'll just pivot to, that's two years into this, Mitch. What's changed? You know, where are we today? If I think about where we are today, we have a portfolio that we've substantially improved the tenant base. We're forecasting 11% FFO per share growth this year. I think in the sector, that probably puts us near the top. We have a majority of our debt locked in. So if you look at our debt maturities, very little maturities over the coming years, really all locked in through about 2027. We continually look to de-risk that by having multiple counterparties, laddered maturities. And the supply-demand fundamentals for us are fantastic, just like others you've heard in this group, and our leasing team is delivering. I think the road ahead of us is pretty clear, pretty straight away. You know, our current focus is delivering the earnings growth we've projected in 2024. And then if you look at our tenants, our strategy, our markets, we feel very good about delivering similar earnings growth in 2025 and 2026. I think if we can, we can do that kind of thing, Mitch, you and I will be sitting here a few years from now and have a great story to tell. Smiles on our face. You know, let's just talk about that because, you know, what really differentiates Whitestone, in my mind, is, you know, it's the markets, right? And it's the tenants. So maybe let's get into... You gave a little bit of, you know, kind of briefly talked about the e-commerce or service-oriented- Mm-hmm. ... e-commerce and service-oriented tenants, but talk about, A, the Sun Belt markets that you're in, and what are the characteristics that really differentiate the strength of those markets? And B, you know, 75% or so of your tenants tend to be smaller sized. Yeah. What, you know, kind of edge do you have with dealing with those sort of, smaller tenants versus the larger national credits? Good question. So what makes us different? I mean, you guys sit here and hear these stories from people like me in my seat, from others. I would say one of the key couple items of differentiation for Whitestone is a very targeted approach geographically. We believe strongly in the fundamentals of the Sun Belt. That's not a big shock. A lot of people have that same feeling. But we've circled that and really put our team and our efforts in that area of the country. I think we're probably the only pure play Sun Belt REIT in our category. And if you look at, you know, Texas and Arizona, clearly markets that have had very strong population job growth. Historically, those have been markets that, you know, had a little bit more unconstrained supply. But in today's world, with the supply dynamics where they are, with the, the population and migration into those markets, we're sitting in a really nice spot, benefiting both from the supply and the demand angle. Texas and Arizona, business-friendly. The number of startup businesses obviously in, in our markets, leads the country, and we think a lot of the, the policies there help us to, to do well. Then if I, I think a little bit about another key differentiator, it's been our, our focus on the high-demand, smaller spaces. You know, years ago, we were hearing at these conferences, hearing things like, "The shop space is tough, right? The shop space occupancies are 80%. They'll never be greater than that. We love the bigger box long-term leases. Whitestone's always said: You know what? We're gonna be active managers of real estate. If you look at smaller spaces, that's where the demand is. Actually, 94% of our tenants occupy less than 10,000 sq ft. So we have 1,500 tenants. Less than 90 of those are in spaces larger than 10,000 sq ft. So that, you know, that large majority of small spaces makes up 75% of our revenue, and that probably differentiates Whitestone pretty significantly from the rest of the group. If you look across the sector, I would say the average would be maybe 50%. So we're obviously very bullish on the smaller spaces. They're flexible, high demand. We're not seeing any of our potential tenants really saying, "I want bigger spaces." Everyone is looking to be more efficient in the way they operate. So high demand, the logic is that's where the demand is. We also believe that the concept of an anchor and what drives traffic has changed. It's important for us to understand consumer behavior, and the items that drive traffic today are much different. Visits to the grocery store for most families don't happen as often as they have in the past. People are eating out more often. So we're always looking for traffic drivers, demand drivers, tenants that contribute to the other tenants in the center, and we believe that the neighborhood can be an excellent anchor. Really, the key for us is utilizing our local knowledge along with technology. You've all seen the advances in technology from tracking of traffic levels to understanding the surrounding community, to understand what are the needed services and what is missing. Then, obviously, one other factor is during the pandemic and with the change in the way people work, our centers tend to be located in neighborhoods in suburban areas, and we've seen much more of an orbiting of people around their homes, working from the home, visiting tenants in our centers that are closer to the home. So we've benefited from that change from the pandemic. So with low 90s occupancy, 94, almost mid-90s occupancy, no real supply that's coming online, you know, one of the real differentiators of Whitestone is you have a weighted average lease term that's only about 4 years in your portfolio, and a lot of that's driven by the smaller spaces 'cause you don't wanna have... you know, commit significant resources. So talk about how you're getting that real benefit, you know, today in this environment with rent growth, and kinda where has rent growth been in your portfolio? Yeah. A very intentional crafting of our lease structures has been an important component for us. As Mitch said, we love being active managers of the real estate. I wanna be able to change and move with consumer demand. I want to be able to do that in a great environment, and I wanna be able to do that in a tough environment. Strong believer that active management of retail real estate is gonna outperform, you know, more passive management all the time. Obviously, I've never seen an environment on the retail side like we have today. We mentioned the supply dynamics, which are great. And so what Whitestone is focused on right now is we've moved our occupancy substantially. I think there's still room to go there, but then really just high-grading our tenants. We challenge our leasing team daily, weekly, really, who are the tenants in your properties? Tell me the ones that are serving the community well, and tell me the ones maybe that are just not the best tenant to serve the community. They may be paying rent, but let's maybe think about bringing in someone else in the center that can do that. Obviously, with the rents being able to move at the rates we're moving them, you need businesses that are doing well, that know how to operate in the environment we're in, know how to produce strong sales that support that level. And, you know, I think I've... I was at ICSC a few weeks ago, a lot of talk about the current environment, and frankly, I just, I don't see a change. I see the strong pattern that we have in our markets, a very specific continuing. So if you look at really from an earnings trajectory, a 3%-4% same-store NOI growth, and we have, since I stepped in the seat back in 2022 through the end of 2023, I think our same-store NOI was about 5.3%. Once again, positions us very well in the group. But even if you say, you know, 3%-4% NOI growth, in our portfolio, that translates to about 7%, FFO growth per share. So, you've got a great organic growth profile in this portfolio. You've got a solid base, you got the demand drivers, and then you have the ability to flex. You know, we continue to look at the mix of tenants, and we can touch on that a little bit, but we look at the mix, very, very important. I think back years ago, this was more of a financial model maybe for this type of real estate, where you were signing long-term leases, looking for credit tenants, locking that down. Now, it is a much more an operating business, understanding what drives traffic, what are the key drivers, and we spend a lot of time working on that mix. So a good pivot to remerchandising efforts, right? So improving the quality, the credit profile, the quality of revenue in your portfolio, you know, talk a little bit about what you guys have been accomplishing, you know, to do that. Yeah. Quality of revenue sounds good. What does it mean? For us, it's making sure we have best-in-class operators in our centers. I believe that the local boots on the ground, along with the data, helps that. We have smart people. We have continued to look at our underwriting standards. We have a portfolio that's a bit more local, local and regional tenants than national tenants. At one point, I think people said, "Ooh, that's scary from a credit perspective." I will tell you, the local and regional tenants we have have operated very strongly. Our tenant base, these are, you know, proven operators. They have multiple locations. They're not start-up businesses. And then when I think about tenant mix, we look at each property really as a business. We challenge our operating teams to understand the mix, what are the categories in that property that need to be expanded? What are the ones that maybe don't need to be expanded? And I'll give... maybe I'll give a couple examples of some things we've done recently. In McKinney, Texas, which is a suburb in Dallas, just north of Dallas, we have a center that's Trader Joe's is there, one of the stronger tenants. Had a Bed Bath & Beyond in that space. Like others, we were, you know, thinking about very, very happy to get that Bed Bath & Beyond space back, and really thinking about: what's the right, what's the right answer? What's the, what's the right mix for that center? We looked at some of the categories you would think at. We looked at a furniture store and some others, and then we ended up, you know, settling on a pickleball concept, Picklr. And so what we did with the team that said, "Hey, this is a cool concept," obviously, we're seeing pickleball everywhere. That's great! Tell me how they make money. So love new concepts, but very important that we were able to understand the fundamentals of the business. Mm. How do they make money? Who are they? Who's behind it? What's their track record? What's the formula? And we put Picklr in, just opened a couple days ago. All of their memberships that are pre-sold were sold out prior to opening, and super pleased with that addition into a center that's added some vibrancy and life. Similarly, in Houston, in Sugar Land, which is a market in Houston, a younger age market, we had a grocery store in that, a Safeway grocery store in that property that had been there for a number of years. A lot of grocers in the area, and quite frankly, this store was not super well-run, not performing well, but they wanted to continue their lease at I think it was around $8 a sq ft. We thought really hard about it, and we said, "You know what? That's not driving what we want in that center. Let's make a decision to take a bigger box out. Let's make a decision to bring in a tenant that would drive more regular traffic, that would contribute to the others." So we looked for potential options. We ended up settling on EoS Fitness. So EoS is one of the strongest brands out there. We were able to... This is one of our few larger spaces in the portfolio, about 50,000 sq ft. We were able to do that new lease at a rate that was 3 times the grocery lease in place, and when you look at the frequency of visits, the drivers of traffic, I mean, you tend to see people in that fitness category visiting 3-4 times a week. And grocery store visits in a well-performing grocery store might be, you know, once every week to 2 weeks. So we've been really pleased with that change. You know, financially, it was a smart thing to do, but more importantly, thinking about the value of the center, the ability to attract the kind of customers we wanted in that center and benefit the other tenants. Great, and just a reminder, if anyone has any questions, just raise your hand, and I'll call on you. So you have some value creation potential that's embedded within the portfolio. Maybe, A, describe, you know, some of these efforts, and potential timeline to unlock this value. Yeah. So, you know, we're in an environment today where financial discipline is key, right? So it's always key, but right now, Whitestone is financially disciplined. We're looking at every dollar we spend. One of the opportunities we have is continuing to put pads, smaller pad sites that are very, very attractive financially on land we own. So one of the benefits in Texas and Arizona is you tend to have less density in your centers, so you have more parking areas. And currently, we've been doing probably 2-3 pad sites a year. Obviously, done a number of Starbucks, and so you'll see us continue to do that. We've got 15 or 20 of those available, so we've got a runway to add NOI and returns that are very attractive. Today, we're able to build those pad sites probably at a kind of a 9% cash-on-cash on our construction cost, and obviously the value of those is above that. So we've got the small amount of development. And then we've got two larger development opportunities in the portfolio that are one is in Houston, one is in our Phoenix market. The one in Houston is a Whole Foods center that has the ability to it's got a 5-story parking garage, has the ability to add about another 200,000 sq ft of retail to it in a terrific area where you're seeing hotel development, you're seeing a number of developments. So we'll do that. Also, there potentially would be a multifamily or boutique office. I know that's a, that's a dirty word to say, office, but multifamily or a boutique office component of that development as well. When it comes to anything we would do outside of our core retail expertise, we would likely partner with someone who was an expert in that area. Dana Park in Phoenix, we have an adjacent land parcel in a 320,000 sq ft lifestyle center that is zoned for multifamily. We were having discussions probably a couple years ago with several. Obviously, multifamily is a bit on pause now, but I think there will be an opportunity there to partner with a multifamily partner. Whitestone would likely just contribute its land. So if you think about a return perspective, we have some land at Boulevard in Houston, some land at Dana Park, that really is producing no return now, and so we'd like to activate some of that return over the coming years. Gonna make sure it makes sense, but not only do you get the return, but you get a strong benefit to the centers. Beyond that, it's just continuing to make sure we have the best-in-class tenants, small development opportunity, and then, obviously, we believe this is a model that can be scaled. When I think about growth, that's a 100% focus on growth in value per share, and we've got a tremendous amount of that embedded in our portfolio. I do believe this is a platform over time that can be expanded into other markets with targeted, you know, a targeted approach in markets that have similar characteristics to the Texas and Arizona markets we're in today. Great. Go ahead, please. Just for clarification- Yeah. The outparcels- Yeah ... you mentioned where you're building to a development operator, whether it's 9%- Yeah ... Starbucks. Yeah. Well- Why don't we just the questions on the outparcels and what sort of economics are related to the developments? Yeah, and, you know, to be obviously transparent, we've got the land cost embedded, so I'm not adding the land cost to that returns. That's probably a little higher in your thinking with the... For us, it's part of a parking lot that's kind of already embedded in the back cost of our center. You're looking at 9%, and then you could potentially sell that property for- Well- 2,300- That's not maybe- Yeah. Obviously, part of our recycling, we've done, we've done a little bit of recycling efforts over the last couple years. We were able to sell, you know, in, in 2023, some of the, like, Dunkin' Donuts-type pad sites for, for 4.9%-5% cap rates. Those, those rates are moving around a little bit, but, but, you know, smaller chunks, and I guess I would tell you, compared to some of our larger peers, those are more meaningful, right? Those, those move the numbers more in a 700 million equity market cap company than they do in a multi-billion dollar company. Great. Yeah. Well, we're pretty much nearing our time to be done. Dave, thank you- Yeah ... very much. It's a pleasure. It's great to have you at this conference. Yeah. Thank you everybody for attending the panel. Thank you.