Greetings, and welcome to the Whitestone REIT First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Kevin Reed, Director of Investor Relations. Please proceed, sir.

Thank you, Tanya. Good morning, and thank you for joining Whitestone REIT's first quarter 2021 earnings conference call. Joining me on today's call are Jim Mastandrea, our Chairman and Chief Executive Officer; and Dave Holeman, our Chief Financial Officer. We would also like to introduce our new Vice President of Corporate Communications, Rebecca Elliott, who is also with us today. 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 Form 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, May 5, 2021. The Company undertakes no obligation to update this information. Whitestone's first quarter earnings press release and supplemental operating and financial data package have been filed with the SEC and are available on our website, www.whitestonereit.com, in the Investor Relations section. I will now turn the call over to Jim Mastandrea.

Thank you, Kevin, and thank you all for joining us on our first quarter 2021 investor call. I will provide a brief overview on Whitestone as well as an update on our business and current events in the first quarter. Following my remarks, I will turn the meeting over to Dave Holeman, who will provide a financial update on how we did during the first quarter and we will follow up with questions and answers. This quarter's results benefited from the decision to locate our portfolio in some of the country's fastest-growing Sunbelt markets where we are leading our nation's reopening. This is contributing to our performance on leasing, showing the resilience of our business model and corporate culture. Our operations team continues to demonstrate their ability to be flexible and quickly adaptable while supporting our strong financial infrastructure. At the end of Q1 this year, our operating portfolio occupancy was 89.1%, an increase of 0.5% from last quarter and down 0.6% from a year ago. Our rent collection versus billings continues to produce at the top of our industry peer group. During Q1, our collections remain strong, approximately 95% versus fourth quarter and for the month of April. Our new lease count was 46 for the quarter, significantly higher than last quarter's count of 28, and the total lease count was 94, 12% higher than the previous quarter. Our blended leasing spread was 7.8%, one full percentage point higher than last quarter's 6.8%. Our same-store net operating income decreased 4.3%, compared with flat last quarter, yet remains among the best in the industry. Additionally, in Q1 we increased our quarterly dividend by 2.4% and paid our monthly dividends to our shareholders for 120 consecutive months. Our employees are back working safely at our properties and our tenants' businesses are ramping up with increasing customer foot traffic. Consumers continue to resume their daily lifestyle routines visiting our properties while migration continues to flow into our markets. Our targeted geographic portfolio is comprised of institutional-quality, open-air real estate, with predictable cash flow. Our tenants include grocery stores, pharmacies, and restaurants. Our centers are made up of e-commerce-resistant tenants who provide necessities and essentials that drive late 18-hour traffic seven days a week to our properties. As a result, over the past year our centers have remained open, and most of our tenants remained active; some of them today are experiencing higher sales than their pre-pandemic levels. I remind our shareholders that Whitestone was built during the recession of 2008 to 2010 and many of the lessons that we learned during that time we incorporated into the fiber of the Company. Our company was built by acquiring properties that were located in business-friendly states, fast-growing and highly populated cities and high-income communities. By creating an internet-resistant business model that focuses on services and the essential needs of consumers. By creating a diversified portfolio of entrepreneurial tenants, by structuring leases with tenants on a recourse basis and minimal co-tenancy approval rights, by providing annual rent increases of 2% to 3% while passing through triple-net expenses, and by keeping our focus on training and developing our people for continued innovation. Our swift response to COVID-19 12 months ago strengthened our balance sheet, liquidity and financial flexibility to successfully navigate the economic impacts of the pandemic. Fast forward to the first quarter of 2021: we are activating our strategic growth plan. We are making plans for future redevelopment and development projects. We have reduced our overall debt level. We have increased our dividend and we are continuing to scale our infrastructure. Our history has been to grow our portfolio by making single off-market value-add acquisitions in a few specific markets — Austin, Dallas, Fort Worth, Houston and Phoenix. We intend to continue this strategy to assemble valuable properties in markets where tenants want to lease and consumers want to visit. By growing this way, we created a substantial value portfolio of properties. In fact, we are under contract to acquire property in one of our identified markets, our first acquisition since the pandemic began, and we expect to close this summer. This acquisition will add just under 200,000 square feet and will be immediately accretive to Whitestone's FFO per share and positively contribute to Whitestone's long-term goals related to debt, leverage and G&A coverage. In addition, our regional management team is in place, giving us operational economies as we scale our prior infrastructure. We look forward to providing more details as we progress through the year. Moving forward, Whitestone will be well-positioned with an improved balance sheet, enhanced liquidity and a laser focus on driving occupancy and revenue growth in leasing, leveraging our deep knowledge of our markets, properties and opportunities along with our business model to provide and craft tenant mixes that lease to entrepreneurial businesses. This is how we create long-term shareholder value. With that, I'd like to turn the call over to Dave.

Thanks Jim. First, I would like to provide a little more perspective on the strength of our markets. Our targeted geographic focus on top MSAs in the Sunbelt continues to produce great results. Texas and Arizona continued to see significant population migration and corporate relocation, producing jobs from other areas of the country. This is best evidenced by our first quarter leasing activity, occupancy levels, leasing spreads, and our average space rent per lease square foot. Our leasing activity in the quarter was very strong with 46 new leases, representing 117,000 square feet of newly occupied space. This level of new lease square footage was 98% higher than our average quarterly lease volume for the previous three-year period, and 21% higher than the highest quarter over the past three years. On a total lease value basis, this quarter was more than double our average quarterly lease volumes for the previous three-year period and 38% higher than the highest quarter over the past three years. Regarding occupancy, our operating portfolio occupancy stood at 89.1%, up 1.5% from the fourth quarter and down only 6.6% from a year ago, with our Austin market leading the way with almost a 4% increase in occupancy from Q4. Leasing spreads on a GAAP basis were positive 9% over the last 12 months, and first-year leasing spreads increased by 5.3% on new leases and 9.6% on renewals. Our annualized base rent per square foot on a GAAP basis at the end of the quarter grew 1% to $19.71 from $19.58 in the previous quarter, and it's basically in line with our pre-COVID ABR from a year ago. Funds from operations — core was $0.23 per share in Q1 compared to $0.24 per share in the prior year. As Jim mentioned, our collections continue to trend toward normal pre-COVID levels with 95% of our contractual rents collected in Q1. Restaurants and food service, our largest tenant category, which represents 23% of our ABR and 17% of our leased square footage, continued to perform very well, paying 95% in the quarter, and we also saw positive movement in some of our more impacted customer types. Entertainment, representing only 2% of our ABR and 2% of our leased square footage, paid 73% of the rent in the quarter, up from 48% in Q4. During the quarter we had minimal rent deferrals, representing 4.5% of our total contractual billings. Our same-store net operating income was down 4.3% for the quarter versus the prior year quarter, and we expect our same-store growth to resume as we move throughout the balance of the year and into 2022. Reflecting the continued improvement in the portfolio, our reserve for uncollectible revenue was $529,000, or 1.8% of revenue, down from 4% of revenue in Q4. To put that into further perspective, our first quarter reserve equates to only 9% of 2020 full-year reserves. Our interest expense was 8% lower than a year ago, reflecting $15 million in lower average debt and a decrease in our overall interest rate from 3.9% to 3.6%. Our first quarter is an encouraging start to 2021 and underscores the resiliency of our forward-thinking, well-crafted business model and the strength of our strategically chosen high-growth markets. Let me provide some further details on our collections and related receivable balances. Included on Page 27 of our supplemental data is the breakdown of our tenants by type. All of our tenant categories were above 89% collections in Q1, with the exception of entertainment, which I previously discussed. Our three largest categories — restaurants, grocery, and financial services — were at 95%, 100% and 99% respectively. At quarter end, we had $23.3 million in accrued rent and accounts receivable; included in this amount is $16.9 million of accrued straight-line rent and $1.8 million of agreed-upon deferrals. Our agreed-upon deferral balance is down 18% from year-end, reflecting tenants honoring their payment plans. Since early last year, we have implemented various measures to strengthen our liquidity and navigate the economic pressure caused by the pandemic. Our total net debt is $632 million, down $17 million from a year ago and our liquidity, representing cash and availability on our corporate credit facility, stands at $39 million at quarter end. We continue to make progress on our publicly stated goal of reducing leverage. During April, we paid down an additional $10 million on our corporate credit facility. Currently, we have $140.5 million of undrawn capacity availability and $25.9 million of borrowing availability under our credit facility. We are in full compliance with all of our debt covenants and expect to remain so in the future. As I stated earlier, 2021 is off to a very promising start. These results are testaments to the resiliency of Whitestone's business model. We are encouraged by the recovery, and we look forward to reengaging our growth strategy and our continued delivery of value to all of Whitestone's stakeholders. With that, we will now take questions. Operator, please open the lines.

Thank you. At this time, we will conduct a question-and-answer session. Our first question comes from Aaron Hecht with JMP Securities. Please proceed.

Good morning. It sounds like the increased leasing volume is very encouraging. Just wanting to get your take on what you think that means for future leasing spreads? I know the numbers look pretty good on a GAAP basis this quarter. I think they were a little bit negative on a cash basis. Is this really about lowering the amount of square footage available in your properties? And I guess surrounding areas well before you get that bigger bump on the cash side, and then on the collection side, given this demand, do you think that 5% uncollected rent is going to dwindle in short order?

Thanks Aaron. Just on the occupancy first, we are very pleased with our increase in occupancy from Q4. And we believe that will contribute positively to future quarters — much of the increase came towards the end of the quarter. Leasing spreads have been positive, as you said, on a GAAP basis, and a little lower on the beginning rent versus the ending rent. Some of that is just a result of, over the last 12 months as businesses ramp up and learn to operate differently, giving them a little bit of headway as they started with their new leases. We do expect our leasing spreads to continue to be robust. If you look at our track record over the last several years, they've typically been double-digit, with a little bit lower the last few quarters. We're very pleased with the lease-up. We're pleased with the spreads. And as I mentioned, the activity during the quarter was really outstanding — our highest quarter from a new lease perspective we've had and well above the highest quarter over the last three years.

Have you seen that traffic extend past the quarter or accelerate?

We have. One of our largest focuses is occupancy and revenue, so a lot of focus on the leasing of the space is continuing to drive revenue. We've seen that activity continue after the quarter as well.

We've also seen strong migration into both Texas and Arizona from outside of those states. Housing demand in our communities is strong; homes that are vacant are filling or reselling very quickly, and I think that gives us confidence for the prospective tenants we're seeing.

Right. And then on the acquisition, I'm excited to hear that you guys are getting into the investment game again. You talked a little bit about the cap rate or the yield and maybe on any development or redevelopment that you're doing what you're targeting in terms of investment yield?

I'll start with the redevelopment. We have approximately $240 million plus in opportunity within our portfolio beginning to activate growth and we don't do all of that at once; it's done over a period of time. And with regard to the one we have under contract that I can mention, the cap rate is very favorable. It has a positive spread and it's also accretive. What's interesting is as we add properties now, we do have the full team in place. Adding another property is like adding a property manager and a maintenance person. Other than that, we have no significant additional costs and we'll be able to leverage our infrastructure.

Historically our cap rates have effectively compressed for the assets we'd target. Over the last 12 months or so, as interest rates have gone down, cap rates have not changed as much in our sector and for the assets we'd be interested in.

In this case, the cap rate is higher than what we've seen in the past. It depends on the quality of the properties and the location. What we have seen through COVID is there are some owners who are older and have owned retail properties for a long time, and they don't want to go through another cycle; having gone through this past year, now they are putting their properties quietly — not necessarily on the market broadly — but making them available to buyers like us. We also are in discussions on properties in our key markets with pricing more commensurate with our net asset value. We've done that in the past with three or four deals. So, we are seeing some activity in the marketplace, particularly for the kinds of small entrepreneurial tenants we like, where a particular property is adjacent to a very well-regarded grocery store. It fits into the properties we are buying. We actually looked at one a year ago when the pandemic hit, put it on ice, and now have reengaged with the seller and advanced the deal. We like it very much.

Our next question comes from Craig Kucera with B. Riley. Please proceed.

Hey. Good morning guys. Congrats on the selections. Can you give us some color on what types of businesses you categorize with entertainment?

Yes. In the supplemental data on Page 27 we provided the category. Entertainment is 2% of our ABR and 2% of our leased square footage. In that category we have movie theaters — we really have one large movie theater in our portfolio. We have some venues like activity centers, places used for birthday parties and that sort of thing. It's a small group and, in fact, half of the total in that category are performing better than others.

Got it. So, are there any — I know you only had a very small amount of bankruptcies last quarter. Are there any bankruptcies in that segment or tenants that you believe are at risk?

It depends. I mentioned that one tenant in that category is a movie theater operator in bankruptcy. At this point, that theater is one of the best performing locations in the chain and is not listed as a potential closure. So, while there is one bankruptcy in the chain, our location is performing well.

Got it. And just want to talk about leasing this quarter. Clearly, a pretty big pickup. Were there any particular categories that you noticed had especially strong demand on the new lease side or was it pretty broad based?

It was broad. Second-generation restaurants and great restaurant operators learned to be creative throughout the pandemic — to operate and to build business based on takeout and curbside delivery they might not have had before. So we've seen a great amount of interest from really good restaurant operators in our markets, looking for spaces they can come into and start their businesses very quickly. In some of our properties, we have a product called CubeExec, which is an office product that fits right into the retail center. It's about 125 to 250 square feet. Those spaces are close to capacity right now. During the pandemic, folks who moved out of their offices and worked at home decided they wanted small workspaces outside the home but not back into their prior offices. We've seen increased occupancy in those spaces. It's nice to have that space in a non-traditional environment, having restaurants and services at your fingertips, making it easy to be with your family and work at the same time.

Got it. And one more from me, I just want to follow up on the acquisition you expect to close this summer. Is that one of your opportunistic deals that might be priced closer to NAV or are you looking to finance that with the line of credit? Any color on sources of capital would be useful.

We look forward to providing a lot more details at closing. At this point, we are comfortable with the financing of the property. We are conducting due diligence and are very confident in the close. But right now, we're not going to provide a lot of details on the financing structure until we get it closed.

Our next question comes from Michael Diana with Maxim Group. Please proceed.

Thank you. You just raised the dividend. Could you — we now see the outlook here looks good for 2021 and 2022. Can you remind us sort of how you look at changing the dividend?

Hey Michael, I'll start and Jim will probably add. We think dividends are a great way for individual investors to participate in real estate and enjoy the dividend and cash flow from that. We were pleased to raise our dividend in March, which reflects the trajectory of the recovery. We look at the dividend on a regular basis. We evaluate a couple of things: our payout ratio, our cash flow and what percentage we're paying out, and an appropriate yield for the real estate. If you look at both of those measures today, Whitestone's yield is in the high 4% range, close to 5%, and our payout ratio would be among the best in the industry, one of the lowest. So, we feel very confident in the stability of the dividend. As we continue to execute, we think there will be opportunities for shareholders to participate in growing free cash flow.

When we reduced the dividend last year, we didn't know how long the pandemic would last. We wanted to be prudent. Over the past year we demonstrated strong collections and a strong recovery. We also found that the artificial intelligence tools we used showed we produce a lot of traffic to our tenants, helping them come back. So we felt it was appropriate to use some of the cash we had preserved to give something back to shareholders, and because we are building confidence in the Company's stability. We had a long discussion about it and felt the raise was the right move.

Thank you. At this time, I would like to turn the call back over to Mr. Jim Mastandrea for closing remarks.

Yes, thank you, operator. First, I would like to emphasize that we have a positive outlook as we look through the long-term growth of Whitestone and we always think about the long-term goals, and we will continue to stay focused. We make decisions in the short term that will benefit our long-term goals and we are excited about what we see for the future. Our platform is strong. Our business model is proven. Our track record is evidence of our success. Our team is passionate, committed and well-positioned to find and execute on future opportunities. In closing, we look forward to moving ahead and intend to stay true to our values, our strategic plan and to work with the unwavering standards we have always maintained as we step forward. We know that God's hand is on our shoulders and our work is clear as we remain focused on our value-adding, long-term goals. Thank you all for joining us today.

This does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation. And have a great day.