HOUSTON, July 31, 2024 (GLOBE NEWSWIRE) -- Whitestone REIT (NYSE:WSR) ("Whitestone" or the "Company") today announced its operating and financial results for the second quarter of 2024. Whitestone creates neighborhood center communities in its high-quality open-air shopping centers that it acquires, owns, manages, develops, and redevelops primarily in some of the largest, fastest-growing, high-household-income markets in the Sunbelt. "Whitestone delivered a very strong quarter driven by restaurants and fitness offerings that saw 6.6% Same Store Net Operating Income, GAAP leasing spreads of 33% on new leases and 14% on renewal leases, portfolio annualized base rent per square foot increasing 5% from a year ago and occupancy of 93.5%. With the majority of our debt maturities locked until 2027, we have clear visibility to achieve our leverage objectives. The leasing environment in our markets remains robust, extending our streak of nine consecutive quarters with leasing spreads of 17% or greater. Our curated portfolio in some of the fastest growing markets in the U.S. provides clear visibility on continued earnings growth to enhance shareholder value. We are reiterating our 2024 Core FFO per share guidance, which provides for 11% year-over-year growth at the midpoint." –    Dave Holeman, Chief Executive Officer Second Quarter 2024 Operating and Financial ResultsAll per share amounts are on a diluted per common share and operating partnership ("OP") unit basis unless stated otherwise.Reconciliations of Net Income Attributable to Whitestone REIT to FFO, Core FFO, NOI and EBITDAre are included herein. Revenues of $37.6 million versus $36.5 million for the second quarter of 2023. Net Income attributable to common shareholders of $2.6 million, or $0.05 per diluted share, versus $11.3 million, or $0.22 per diluted share for the second quarter of 2023. Core Funds from Operations ("FFO") of $12.6 million versus $10.6 million for the second quarter of 2023. FFO per diluted share of $0.22 versus $0.21 for the second quarter of 2023. Core FFO per diluted share was $0.24 versus $0.21 for the second quarter of 2023. EBITDAre of $20.2 million versus $19.2 million for the second quarter of 2023. Same-Store Net Operating Income ("NOI") grew 6.6% to $24.1 million versus $22.6 million for the second quarter of 2023.  Net Effective Annual Base Rental Revenue per leased square foot was up 5.4% to $24.00, compared to the prior year quarter. Operating Results For the three-month periods ending June 30, 2024 and 2023, the Company's operating highlights were as follows:   Second Quarter 2024 Second Quarter 2023 Occupancy:     Wholly Owned Properties – All 93.5% 93.3% >10,000 Sq Ft Occupancy 97.0% 96.9% ≤ 10,000 Sq Ft Occupancy 91.4% 91.2% Same Store Property Net Operating Income Change (1) 6.6% 0.4% Rental Rate Growth - Total (GAAP Basis): 17.5% 18.7% New Leases 33.3% 32.2% Renewal Leases 13.9% 16.2% Leasing Transactions:     Number of New Leases 30 27 New Leases - Lease Term Revenue (millions) $16.1 $12.0 Number of Renewal Leases 47 58 Renewal Leases - Lease Term Revenue (millions) $20.7 $14.5 Balance Sheet and Debt Metrics As of June 30, 2024, Whitestone had total debt of $666.7 million, along with capacity and availability of $115.0 million each under its $250 million revolving credit facility. As of June 30, 2024, the Company has undepreciated real estate assets of $1.3 billion. Dividend On June 10, 2024, the Company declared a quarterly cash distribution of $0.12375 per common share and OP unit for the third quarter of 2024, to be paid in three equal installments of $0.04125 in July, August, and September of 2024.  2024 Full Year Guidance The Company has updated its 2024 full-year guidance for net income attributable to Whitestone REIT, same store net operating income growth, general and administrative expense, the gain on sale of property to include the impact of the gain recognized on the sale of Mercado at Scottsdale Ranch, interest expense expectations partially related to timing differences of property sales and acquisitions, and the impact of proxy contest costs.  The guidance update is as follows:     Q2 2024 Revised Guidance 2024 Original Guidance     (unaudited, amounts in thousands except per share and percentages) Net income attributable to Whitestone REIT (1)(2)   $21,368 - $24,368 $16,600 - $19,600 Core FFO (3)   $50,985 - $53,985 $50,985 - $53,985         Net income attributable to Whitestone REIT per share   $0.41 - $0.47 $0.32 - $0.38 Core FFO per diluted share and OP Unit (3)   $0.98 - $1.04 $0.98 - $1.04         Key Drivers:       Same store net operating income growth (4)   3.0% - 4.5% 2.5% - 4.0% Bad debt as a percentage of revenue   0.60% - 1.10% 0.60% - 1.10% General and administrative expense (1)   $22,057 - $23,557 $19,700 - $21,200 Interest expense   $33,400 - $34,900 $32,600 - $34,100 Ending occupancy   93.8% - 94.8% 93.8% - 94.8% Gain on sale of property (2)   $6,525 $0 Net Debt to EBITDAre Ratio (5)   7.0X - 6.6X 7.0X - 6.6X (1) 2024 revised guidance includes estimated proxy contest costs of $1,757. (2) 2024 revised guidance includes a gain on sale of property that occurred during the first quarter. (3) For the reconciliation of forward-looking non-GAAP financial measure to the comparable GAAP financial measure, see the "Core FFO per diluted share and OP unit" reconciliation table. Core Funds from Operations ("Core FFO") is a non-GAAP measure. (4) Excludes straight-line rent, amortization of above/below market rates and lease termination fees. (5) Fourth quarter annualized EBITDAre. For EBITDAre and Debt/EBITDAre, non-GAAP financial measures, please see the respective reconciliation tables.     Portfolio Statistics As of June 30, 2024, Whitestone wholly owned 57 Community-Centered Properties™ with 5.1 million square feet of gross leasable area ("GLA"). Six of the 57 Community-Centered Properties™ are land parcels held for future development. The portfolio is comprised of 31 properties in Texas and 26 in Arizona. Whitestone's Community-Centered Properties™ are located in the MSA's of Austin (6), Dallas-Fort Worth (9), Houston (13), Phoenix (26), and San Antonio (3). The Company's properties in these markets are generally in high-traffic locations, surrounded by high-household-income communities. The Company also owned an 81.4% equity interest in eight properties containing 0.9 million square feet of GLA through its investment in Pillarstone OP. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. As of June 30, 2024, our ownership in Pillarstone OP no longer represents a majority interest. At the end of the second quarter, the Company's diversified tenant base was comprised of 1,465 tenants, with the largest tenant accounting for only 2.1% of annualized base rental revenues. No single tenant exceeded 2.1% of total revenue. Lease terms range from less than one year for smaller tenants to more than 15 years for larger tenants. Whitestone's leases generally include minimum monthly lease payments and tenant reimbursements for payment of taxes, insurance and maintenance, and typically exclude restrictive lease clauses. Conference Call Information In conjunction with the issuance of its financial results, the Company invites you to listen to its earnings release conference call to be broadcast live on Thursday, August 1, 2024, at 8:30 A.M Eastern Time / 7:30 A.M. Central Time. The call will be led by Dave Holeman, Chief Executive Officer. Conference call access information is as follows: To listen to a webcast of the conference call, click on the Investor Relations tab of the Company's website, www.whitestonereit.com, and then click on the webcast link. A replay of the call will be available on Whitestone's website via the webcast link until the Company's next earnings release. Additional information about Whitestone can be found on the Company's website. Dial-in number for domestic participants:   1-877-407-0784 Dial-in number for international participants:  1-201-689-8560     The conference call will be recorded, and a telephone replay will be available through Thursday, August 15, 2024. Replay access information is as follows: Replay number for domestic participants: 1-844-512-2921 Replay number for international participants: 1-412-317-6671 Passcode (for all participants): 13742563     Supplemental Financial Information The second quarter earnings release and supplemental data package will be located in the "News and Events" and "Financial Reporting" tabs of the Investor Relations section of the Company's website at www.whitestonereit.com. The earnings release and supplemental data package will also be available by mail upon request. To receive a copy, please call Investor Relations at (713) 435-2219. About Whitestone REIT Whitestone REIT (NYSE:WSR) is a community-centered real estate investment trust (REIT) that acquires, owns, operates, and develops open-air, retail centers located in some of the fastest growing markets in the country: Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio. Our centers are convenience focused: merchandised with a mix of service-oriented tenants providing food (restaurants and grocers), self-care (health and fitness), services (financial and logistics), education and entertainment to the surrounding communities. The Company believes its strong community connections and deep tenant relationships are key to the success of its current centers and its acquisition strategy. For additional information, please visit www.whitestonereit.com.  Forward-Looking Statements This Report contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition and results of operations, statements related to our expectations regarding the performance of our business, and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as "may," "will," "should," "potential," "predicts," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.  Factors that could cause actual results to differ materially from any forward-looking statements made in this Report include: the imposition of federal income taxes if we fail to qualify as a real estate investment trust ("REIT") in any taxable year or forego an opportunity to ensure REIT status; uncertainties related to the national economy and the real estate industry, both in general and in our specific markets; legislative or regulatory changes, including changes to laws governing REITs; adverse economic or real estate developments or conditions in Texas or Arizona, Houston and Phoenix in particular, including the potential impact of public health emergencies, such as COVID-19, on our tenants' ability to pay their rent, which could result in bad debt allowances or straight-line rent reserve adjustments; increases in interest rates, including as a result of inflation, which may increase our operating costs or general and administrative expenses; our current geographic concentration in the Houston and Phoenix metropolitan area makes us susceptible to local economic downturns; natural disasters, such as floods and hurricanes, which may increase as a result of climate change may adversely affect our returns and adversely impact our existing and prospective tenants; increasing focus by stakeholders on environmental, social, and governance matters; financial institution disruptions; availability and terms of capital and financing, both to fund our operations and to refinance our indebtedness as it matures; decreases in rental rates or increases in vacancy rates; harm to our reputation, ability to do business and results of operations as a result of improper conduct by our employees, agents or business partners; litigation risks; lease-up risks, including leasing risks arising from exclusivity and consent provisions in leases with significant tenants; our inability to renew tenant leases or obtain new tenant leases upon the expiration of existing leases; risks related to generative artificial intelligence tools and language models, along with the potential interpretations and conclusions they might make regarding our business and prospects, particularly concerning the spread of misinformation; our inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws; geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine, the conflict in the Gaza Strip and unrest in the Middle East; the need to fund tenant improvements or other capital expenditures out of operating cash flow; and the risk that we are unable to raise capital for working capital, acquisitions or other uses on attractive terms or at all the ultimate amount we will collect in connection with the redemption of our equity investment in Pillarstone Capital REIT Operating Partnership LP ("Pillarstone" or "Pillarstone OP."); and other factors detailed in the Company's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents the Company files with the Securities and Exchange Commission from time to time  Non-GAAP Financial Measures This release contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accounting principles ("GAAP") including EBITDAre, FFO, Core FFO, NOI and net debt. Following are explanations and reconciliations of these metrics to their most comparable GAAP metric. EBITDAre: The National Association of Real Estate Investment Trusts ("NAREIT") defines EBITDAre as net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization and impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus or minus losses and gains on the disposition of depreciable property, including losses/gains on change in control and adjustments to reflect the entity's share of EBITDAre of the unconsolidated affiliates and consolidated affiliates with non-controlling interests. We calculate EBITDAre in a manner consistent with the NAREIT definition. Management believes that EBITDAre represents a supplemental non-GAAP performance measure that provides investors with a relevant basis for comparing REITs. There can be no assurance the EBITDAre as presented by the Company is comparable to similarly titled measures of other REITs. EBITDAre should not be considered as an alternative to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. EBITDAre does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness. FFO: Funds From Operations: NAREIT defines FFO as net income (loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We calculate FFO in a manner consistent with the NAREIT definition and also include adjustments for our unconsolidated real estate partnership. Core Funds from Operations ("Core FFO") is a non-GAAP measure. From time to time, we report or provide guidance with respect to "Core FFO" which removes the impact of certain non-recurring and non-operating transactions or other items we do not consider to be representative of our core operating results including, without limitation, default interest on debt of real estate partnership, extinguishment of debt cost, gains or losses associated with litigation involving the Company that is not in the normal course of business, and proxy contest costs. Management uses FFO and Core FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.  Because real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself.  In addition, securities analysts, investors and other interested parties use FFO as the primary metric for comparing the relative performance of equity REITs. FFO and Core FFO should not be considered as alternatives to net income or other measurements under GAAP, as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.  FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness. Although our calculation of FFO is consistent with that of NAREIT, there can be no assurance that FFO and Core FFO presented by us is comparable to similarly titled measures of other REITs. NOI: Net Operating Income: Management believes that NOI is a useful measure of our property operating performance. We define NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Other REITs may use different methodologies for calculating NOI and, accordingly, our NOI may not be comparable to other REITs. Because NOI excludes general and administrative expenses, depreciation and amortization, deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of properties, loss on disposal of assets, and includes NOI of real estate partnership (pro rata) and net income attributable to noncontrolling interest, it provides a performance measure that, when compared year-over-year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. We use NOI to evaluate our operating performance since NOI allows us to evaluate the impact that factors such as occupancy levels, lease structure, lease rates and tenant base have on our results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about our property and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of our overall financial performance since it does not reflect the level of capital expenditure and leasing costs necessary to maintain the operating performance of our properties, including general and administrative expenses, depreciation and amortization, equity or deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of properties, and gain or loss on sale or disposition of assets. Same Store NOI: Management believes that Same Store NOI is a useful measure of the Company's property operating performance because it includes only the properties that have been owned for the entire period being compared, and that it is frequently used by the investment community. Same Store NOI assists in eliminating differences in NOI due to the acquisition or disposition of properties during the period being presented, providing a more consistent measure of the Company's performance. The Company defines Same Store NOI as operating revenues (rental and other revenues, excluding straight-line rent adjustments, amortization of above/below market rents, and lease termination fees) less property and related expenses (property operation and maintenance and real estate taxes), Non-Same Store NOI, and NOI of our investment in Pillarstone OP (pro rata). We define "Non-Same Stores" as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company's Same Store NOI may not be comparable to that of other REITs. Net debt: We present net debt, which we define as total debt net of insurance financing less cash plus our proportional share of net debt of real estate partnership, and net debt to pro forma EBITDAre, which we define as net debt divided by EBITDAre because we believe they are helpful as supplemental measures in assessing our ability to service our financing obligations and in evaluating balance sheet leverage against that of other REITs. However, net debt and net debt to pro forma EBITDAre should not be viewed as a stand-alone measure of our overall liquidity and leverage. In addition, our REITs may use different methodologies for calculating net debt and net debt to pro forma EBITDAre, and accordingly our net debt and net debt to pro forma EBITDAre may not be comparable to that of other REITs. Investor and Media Relations:David MordyDirector, Investor RelationsWhitestone REIT(713) Whitestone REIT and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)     June 30, 2024     December 31, 2023                     ASSETS   Real estate assets, at cost                 Property   $ 1,258,799     $ 1,221,466   Accumulated depreciation     (240,535 )     (229,767 ) Total real estate assets     1,018,264       991,699   Investment in real estate partnership     —       31,671   Cash and cash equivalents     3,231       4,572   Restricted cash     —       68   Escrows and deposits     17,679       24,148   Accrued rents and accounts receivable, net of allowance for doubtful accounts (1)     30,919       30,592   Receivable from partnership redemption     31,643       —   Receivable due from related party     1,532       1,513   Unamortized lease commissions, legal fees and loan costs     14,566       13,783   Prepaid expenses and other assets(2)     12,065       4,765   Finance lease right-of-use assets     10,471       10,428   Total assets   $ 1,140,370     $ 1,113,239                     LIABILITIES AND EQUITY   Liabilities:                 Notes payable   $ 665,667     $ 640,172   Accounts payable and accrued expenses(3)     33,223       36,513   Payable due to related party     1,577       1,577   Tenants' security deposits     9,038       8,614   Dividends and distributions payable     6,228       6,025   Finance lease liabilities     797       721   Total liabilities     716,530       693,622   Commitments and contingencies:     —       —   Equity:                 Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of June 30, 2024 and December 31, 2023     —       —   Common shares, $0.001 par value per share; 400,000,000 shares authorized; 50,064,267 and 49,610,831 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively     50       50   Additional paid-in capital     627,459       628,079   Accumulated deficit     (217,401 )     (216,963 ) Accumulated other comprehensive income     8,152       2,576   Total Whitestone REIT shareholders' equity     418,260       413,742   Noncontrolling interest in subsidiary     5,580       5,875   Total equity     423,840       419,617   Total liabilities and equity   $ 1,140,370     $ 1,113,239                     Whitestone REIT and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands)     June 30, 2024     December 31, 2023   (1) Accrued rents and accounts receivable, net of allowance for doubtful accounts                 Tenant receivables   $ 17,758     $ 16,287   Accrued rents and other recoveries     26,343       26,751   Allowance for doubtful accounts     (14,044 )     (13,570 ) Other receivables     862       1,124   Total accrued rents and accounts receivable, net of allowance for doubtful accounts   $ 30,919     $ 30,592                     (2) Operating lease right of use assets (net)   $ 75     $ 109   (3) Operating lease liabilities   $ 75     $ 112                     Whitestone REIT and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands)     Three Months Ended June 30,     Six Months Ended June 30,       2024     2023     2024     2023   Revenues                                 Rental(1)   $ 37,480     $ 36,241     $ 74,221     $ 71,738   Management, transaction, and other fees     167       219       590       573   Total revenues     37,647       36,460       74,811       72,311                                     Operating expenses                                 Depreciation and amortization     8,521       8,360       17,321       16,206   Operating and maintenance     7,015       6,899       13,364       12,985   Real estate taxes     3,912