Greetings, welcome to the Whitestone REIT Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Operator instructions were provided. As a reminder, this conference is being recorded. At this time, I will now turn the conference over to Rebecca Elliott, Vice President of Corporate Communications. Rebecca Elliott, you may now begin.

Thank you, operator. Good morning, and thank you for joining Whitestone REIT's second 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. 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, August 4, 2021. The company undertakes no obligation to update this information. Whitestone's second quarter earnings news release and supplemental operating and financial data package have been filed with the SEC and are available on our website at www.whitestonereit.com in the Investor Relations section. Now over to Jim Mastandrea, our Chairman and CEO, to update you on our second quarter results. Jim.

Thank you, Rebecca. Good morning, and thanks for joining us today. I will focus my remarks on our performance, the demand characteristics around those results, provide some insight on our operations and the strategic direction of the company, then Dave will provide financial insight into the quarter. It is a pleasure to start out telling you we have a great business with great properties and we run them well. As a result, we had a record second quarter 2021, and our focus remains on leasing and more leasing, which fuels our growth and supports our dividends to a core payout ratio of 41%. It also validates the quality of our portfolio, drives cash flow, which strengthens our balance sheet and reduces risk. Our second quarter leasing activity brought our total occupancy to 89.9%, up 120 basis points from the first quarter, highlighting the increased demand from new businesses entering our markets, where an average between 15 to 20 new tenants represent a 1% increase in occupancy. We attribute this growing demand to several factors, including the location, quality and maturity of our properties, and tenants expanding their businesses and moving to second and third Whitestone locations. Our properties also are benefiting from population migration and a robust recovery in the Sunbelt markets, where we target properties that are in densely populated high-income neighborhoods, located in the fastest growing cities in Texas and Arizona. We achieved net income per share of $0.12, up from $0.03 in the prior quarter, and up from $0.01 in the prior year. And FFO Core per share increased 13% to $0.26 a share from $0.23 in the prior quarter and increased 18% from $0.22 in the prior year. Our increases in per share earnings are derived from adding new essential-service-focused tenants to our existing base of grocery stores, restaurants, salons, pet care centers, drugstores, banks and financial advisories, medical outpatient care centers, health and wellness and other services. We grew our asset base organically and by making off-market acquisitions of properties that we believe had significant upside and would benefit from applying the principles and processes of our business model: streamlining property management, reconfiguring and redeveloping our community centers and adding features that attract additional visits and extend consumer time at the properties. This is best evidenced by almost an 18% increase in foot traffic at our 59 centers in the first half of the year. As an example of projects that drive traffic to our centers, we installed outdoor misting systems in Arizona for customer comfort during the three hottest months of the year, where temperatures can average 100 degrees. We currently have five million square feet of space that generates $30.6 million in revenue for Q2. Within each property we curate the tenant mix. With more than 1,400 tenants serving customers from the surrounding neighborhoods, our properties stay vibrant 18 hours a day, seven days a week. One proactive example that is driving increased visits is a rotation among our properties of 'coffee and cars' at our Market Street property in Scottsdale, Arizona, and our Starwood property in Plano, Texas. These venues display high-end sports cars and appeal to a large variety of car lovers and families. On a given Saturday during each month, we accommodate upwards of 150 cars in each location, whose owners and admirers return as customers for our local tenants. Increased foot traffic to our centers is one of the most important drivers of tenant sales and attracts potential new tenants to our properties. Our tenants occupy an average of 3,000 square feet of space and provide e-commerce-resistant services. They are entrepreneurial businesses, capture sales revenues and keep alive the American dream. Our tenant profile is at its core entrepreneurial, with owners and founders of local and regional businesses prioritizing their companies because it supports their families, livelihood and future, which aligns with our high collection levels. As they recover, Whitestone reported industry-leading collections. Our model was tested and proven during COVID. Our culture is about personalizing our service to tenants and our property managers and associates applying a hands-on approach. This teamwork uniting Whitestone tenant relationships gives us a competitive advantage over other retail centers in our local neighborhood markets. Our culture of service produced leasing spreads on a weighted-average basis of 6.8% on new and renewal leases in the second quarter. We expect this trend to continue, as we receive annual lease increases of 2% to 3% on new and renewal tenant leases and pass-through triple-net expenses, helping us to hedge against inflation. Another driver of our revenue is increasing our leasable square footage. Adding space to existing properties with no added cost of land and land development is very profitable. We have approximately $230 million of development and redevelopment opportunities in our portfolio that we believe will add significant value. Our diversified tenant base also has a notable impact on our balance sheet. For Whitestone, those single tenants can impact our revenues by more than 2.9%. During the second quarter, as our earnings increased, we strengthened our balance sheet and improved our debt-to-EBITDA ratio by 1.2 turns to 8.2 turns. We have remained committed to lowering our debt service leverage. We also are committed to lowering our G&A as a percent of revenue. We are seeing progress as our asset base expands and our revenues increase. In the second quarter, G&A as a percent of revenue was 14.6%, improving from 15.7% one year ago. Turning to growth. In July, we reactivated our acquisition program and acquired our newest property, Lakeside Market in Plano, a flourishing upscale neighborhood of Plano. It is anchored by Texas iconic regional grocer H-E-B, and it is their first flagship format store in the Dallas market. The purchase price of Lakeside Market was $53.2 million, and it has significant upside from leasing up the current 19% vacant square footage, rental rate increases, and developing the additional pad sites to add leasable square footage. We currently are working with other sellers on other properties in our pipeline in locations in Dallas, Austin, Houston and Phoenix. Potential sellers who have owned property in our markets for many years understand that they could benefit from spreading their risk over a large pool of quality properties, achieve liquidity, and receive a tax-efficient transaction with Whitestone utilizing our OP unit currency. In turn, Whitestone benefits by expanding our asset base, lowering our cost of capital and increasing our economies of scale. Dividends are an important component of the REIT structure. Our dividend is well funded, with a payout ratio in the second quarter of 41% of FFO Core. I would like to expand more on our dividend and our policy. We have a solid record of paying 131 consecutive monthly dividends since our IPO in 2010 and in total paid our shareholders more than $300 million in dividends during the same time. In March of 2021, we increased our dividend by $0.01, or 2.4%, reflecting our strong recovery. Our policy is to evaluate our dividend regularly and consider many factors including our profitable growth, cash flow and progress towards creating long-term shareholder value. In the meantime, we use our excess cash flow to fund internal development opportunities, acquisitions and reducing debt. I would also like to discuss how we expect to achieve our long-term value goals and increase our valuation. Our primary focus of creating and driving long-term real estate value is integral in everything we do. As we lease up our portfolio and bring our development land on stream and make accretive acquisitions, the intrinsic embedded value in our assets will begin to be reflected in our valuation. While the value we are creating is not yet fully reflected in the market, we trade at a significant discount to our true valuation. We know that as we continue to grow occupancy, revenue and cash flow, it will be recognized by the investment community. Achieving our long-term goals is a function of our assets. Our portfolio of quality real estate is spread over great markets and demand for space in our centers, as they become nearly full, is highly valued. And our rental income produces a solid, stable cash flow. Our great locations, quality of properties and strong operating performance is notable in our success in extracting value from our properties. Along with our ability of sourcing and closing new acquisitions from our deep pipeline of properties, we will continue to keep us at the forefront of our industry as we grow. In summary, 10 years ago, we developed and began to build a contrarian business model with entrepreneurial tenants that would be e-commerce resistant. We started with a relatively small asset base of approximately $150 million and have expanded to 59 properties in eight major cities, with over 1,400 tenants and approximately $1.5 billion in real estate value today. We continue to be passionate in executing our plan and are pleased to deliver our second quarter results. I would now like to turn things over to Dave Holeman to provide more detailed results on financial performance. Dave.

Thanks, Jim. I appreciate the opportunity to share some great results for the second quarter. During the quarter, our best-in-class geographic concentration and strategically designed tenant mix have produced strong top-line and bottom-line growth, and our long-term focus and day-to-day execution have allowed us to make significant progress toward our long-term goals of scaling our infrastructure and improving our overall debt leverage. The MSAs that we operate in continue to see significant population migration and corporate relocations, producing jobs from other areas of the country. This is best evidenced by second quarter and year-to-date, year-over-year and quarter-over-quarter top-line revenue growth, year-over-year and quarter-over-quarter property net operating income growth, and year-over-year and quarter-over-quarter net income and FFO Core per share growth. This growth is driven by our strong leasing activity, resulting in increased occupancy levels and strong positive leasing spreads. The growth is driven by reduced debt levels and borrowing costs, greater scale of our G&A infrastructure and asset sales at attractive prices. Total revenue for the second quarter was $30.6 million, up 5% from the first quarter and up 11% from the second quarter of 2020. The revenue growth was driven by a sequential 1.2% increase in occupancy, and a 0.7% improvement compared to Q2 2020. We are also benefiting from our ABR per square foot, rising 1.2% sequentially, and 1.9% from a year ago, along with lower uncollectibility reserves. Property net operating income was $22.0 million for the quarter, up 4% sequentially and 10% from the second quarter of 2020. Our Q2 same-store net operating income increased 8.4% from Q2 of 2020. Net income for the quarter was $0.12 per share, up from $0.03 per share in the first quarter and $0.01 per share in the prior year quarter. Funds from operations Core was $0.26 per share in the quarter, an increase of 13% from the first quarter, and an increase of 18% from the 2020 second quarter. Our leasing activity in the quarter continued to build on our very strong first quarter with 35 new leases, representing 75,000 square feet of newly occupied square footage. Our new lease activity for the six months is 100% higher on a square-foot basis than 2020, and 40% higher than 2019. Leasing spreads on a GAAP basis have been positive 8% over the last 12 months, and second quarter leasing spreads increased by 3.1% on new leases and 7.9% on renewal leases signed. Our annualized base rent per square foot on a GAAP basis at the end of the quarter grew 1.2% to $19.95 from $19.71 in the previous quarter, and a 1.9% increase from a year ago. Total occupancy stood at 89.9%; all of our markets saw increased quarter-over-quarter occupancy, led by our Dallas market at a 3.6% increase. Austin and Phoenix both grew 0.8% from the first quarter, and Houston grew 0.6% from the first quarter. Our collections were very strong for the quarter, returning to normal pre-COVID levels. Reflecting the high collection levels, our reserve for uncollectible revenue for the quarter was $143,000, or approximately 1.5% of our revenue, down from $529,000 or 1.8% of revenue in the first quarter, and $2.3 million or 7.9% of revenue in the second quarter of 2020. Our total tenant receivables improved 8.4% from the first quarter and 13.5% from a year ago. Our interest expense was 5% lower than a year ago, reflecting our lower debt levels. At quarter end, we had $21.3 million in accrued rents and accounts receivable. Included in this amount is $16.4 million of accrued straight-line rents and $1.5 million of agreed-upon deferrals. Our agreed-upon deferral balance is down 34.4% from year end, reflecting tenants honoring their payment plans. Turning to our balance sheet, since early last year we have implemented various measures to strengthen our liquidity. Our total net debt is $601.3 million, down $48 million from a year ago, improving our debt to gross book real estate cost ratio to 52% and an improvement from 56% a year ago. Our debt-to-EBITDA ratio also improved 1.2 times from the first quarter to 8.2 times. Reflecting our post-quarter acquisition and our continued focus on deleveraging, we expect our debt-to-EBITDA ratio to be approximately 8 by year end, reflecting significant progress on our long-term debt reduction goals. At quarter end, we have $160.5 million of undrawn capacity, and $55.1 million of borrowing availability under our credit facility. During the second quarter, we sold approximately three million common shares under our ATM program, resulting in $25.4 million in net proceeds to the company. After the quarter, we acquired Lakeside Market in Plano, Texas for $53.2 million, financing the acquisition with approximately $30 million in equity, $10 million in debt from our corporate credit facility, and $13 million from cash flow and cash on hand. These results are a testament to the strength of Whitestone's strategic geographic focus and business model. We are encouraged by the acquisition of Lakeside Market and look forward to continued delivery of value to all of Whitestone's stakeholders. With that, we will now take questions. Operator, please open the lines.

Thank you. Operator instructions were provided. Our first question will be coming from the line of Craig Kucera with B. Riley Securities. Please proceed with your question.

Hi, good morning, guys. I may have missed this, but what were the actual rent collections this quarter? I think last quarter it was running about 95%.

Hey Craig, this is Dave. Thanks for your question. I think at this point, we feel like our collections are basically at the pre-COVID levels. It kind of becomes a tough exercise between 98% and 99%. But our collections were as reflected in our collectability reserve at the level we saw before the pandemic. Our AR balance has continued to go down. So, we didn't report a collection percent just because it becomes very difficult at that last little percentage level. But our collections were extremely strong, bringing our AR down and allowing our collectability reserve to be really back to the net 2019 levels.

Got it. And do you have a sense of how much rent that was previously deferred that you think you will be collecting through the remainder of this year or any sort of structured payments for the rest of the year?

We have about $1.5 million in deferred amounts. The large majority of it will be collected over the balance of 2021.

2021?

Yes.

Sorry, can you hear me?

Yes, Craig, did you hear my answer?

You did cut off for a second, but I think I got it. And just kind of working through the bad debt, obviously you have a very meaningful drop-off since kind of the peak of second quarter last year, even sequentially. Should we interpret that you see the weaker tenants had pretty much been washed out of the portfolio and are you kind of expecting bad debt to run at similar levels for the rest of the year?

Yes. Good question. I think that is accurate, Craig. I mean, obviously there is some volatility, but our tenants are doing very well. Just to touch on maybe the cash-basis tenants: we had minimal tenants that we converted to cash-basis this quarter and our tenants that are on cash-basis, which are approximately 50 tenants, paid us almost 90%. So, I think we are seeing strong collection levels. We are seeing traffic levels. I think Jim talked about the traffic in our centers; just sequentially from the fourth quarter of 2020 to today, we see an 18% rise in traffic. So, I think from a tenant perspective, we didn't wash out a lot of tenants. Our occupancy is up year-over-year. So, our tenants did very well through this. Obviously, we worked with some of them on the timing of the rent payments, but they have all done very well, and we are seeing very few troubled tenants in our portfolio at this time.

Great, I will change gears and talk about the Lakeside Market acquisition for a bit. You mentioned as far as financing that you had about $30 million of equity, $10 million of debt and $13 million in cash flow on hand. I know you issued about $25 million in the second quarter; is that $30 million incremental to what was already issued? Are you basically taking into account what was issued in the second quarter?

Yes, the $30 million is a little bit that was issued at the beginning of the third quarter and early July. So, we raised $25 million in the quarter, and then about another $5 million just in the two weeks post quarter.

Got it. And can you talk about what the going-in yield is on that asset and what you are expecting on a stabilized basis? I think there is a pretty decent amount of occupancy upside potential there?

Yes, I think we think there is a great opportunity there. Obviously Jim talked about the characteristics and the location and the iconic grocer H-E-B. I think going-in occupancy has about 19% vacancy. So, we did meet the criteria of all of our community centers we buy; we funded it in a way that obviously contributed to delivering scale to our G&A. And upon stabilization, it's probably in the kind of 8% cash-on-cash yield range.

Got it. And do you need to make any significant redevelopment there or is that pretty much just standard lease-up?

Yes Craig, this is Jim. The center is about 81% occupied, as we mentioned. It has three pads and we are going in; we see a lot of interest. We expect an announcement of H-E-B next quarter, which is their first flagship store and will have some impact in terms of even compressing the cap rate a bit. So, we see upside in terms of the vacancy there. We see a couple of lots where we are already in negotiations; we have one particular restaurant that we have a carryover deal on. I want to point out that we had this property under contract a year ago. When COVID hit, this was the acquisition we put the brakes on and paused. We kept the relationship with the sellers and talked to them during the COVID period. We went back and were able to buy it for less than what we had originally under contract. I use that as an example of how we work our pipeline.

Got it. You did mention OP units in your commentary about your pipeline. Are you finding potential sellers that are looking at OP units as attractive currency? Do you think we might see those types of transactions this year?

We think you will see some, whether it is this year or next year. They are in discussions right now. We have made — I want to say — three to five OP deals in the past. They have all been at around our net asset value of the company, not our share price. What we found going through COVID is some folks who have owned properties for 20 or 30 years, very good properties in great locations, typically one-off owners, found that they don't really want to go through the COVID scare again and are doing some estate planning. Those are the kinds of sellers that we are talking to.

Okay, great. Thanks for your time.

Thanks Craig.

The next question comes from the line of Aaron Hecht with JMP Securities. Please proceed with your question.

Hey guys, it's Alex on for Aaron. A couple questions here. First, have you seen any impact on foot traffic from the Delta variant?

We have looked at it. We monitor our foot traffic very regularly. We are in Texas and Arizona, which have been markets that have been much more open and recovered much more quickly. We really have not seen any impact on our traffic levels from the Delta variant.

Great. And you guys mentioned how you are being judicious on acquisitions. I just kind of want to get more color around that. Do you have like a cap rate range for the assets you are interested in or how are you guys feeling about that?

Good question. What we look at are properties within our markets where we can leverage our infrastructure and gain economies of scale. We look at properties that aren't necessarily on the market, one-off buyers or sellers rather. We often go principal-to-principal to negotiate those deals. We have been accumulating the pipeline for a number of years now. We go into a market and determine where we want to buy. I'll give you some of the criteria: for example, if we look at a property with a big-box tenant that is vulnerable and represents more than 50% of the square footage, we would take a pass. If it is 20% or 30%, we look at it and how we can reconfigure the box. Everything we buy, we look at it as having a component of upside that we can redevelop and add square footage and increase the rent. We consider an asset stabilized when it is 95% occupied within the market and is getting market rents. So, we might buy something that is 95% occupied but whose rents are below market, and we can bring those up. On the other hand, we might find something where the market rate is down. We have very strong guidelines that we use when targeting acquisitions.

One thing I might add as a little color on the Lakeside vacancy: the roughly 19% vacancy, which translates to about 30,000 square feet, is all small spaces, which is right in our wheelhouse. So, it's not like the vacancy is at a big box that will be tough to fill; the vacancy consists of a number of small spaces, and we already have lots of interest and activity on those.

Okay, great. Thanks guys.

Thanks Alex.

Our next question is from the line of Michael Diana with Maxim Group. Please proceed with your question.

Thank you. Actually I was going to ask more about the Lakeside. In terms of you mentioned that Dallas was the strongest occupancy growth area. So, how long will it take to lease up the 19% vacancy at Lakeside?

As we speak today, we have a team up there looking and examining the market. Once we buy an asset, Michael, we put it into our strategic group and they look at how we want to define the tenant mix. Then we work with our leasing team there and they begin to look at the types of tenants that we think will complement the property.

We are very, very confident in our ability to lease it up quickly, Michael. Obviously we all hesitate to put timelines on those things, but we feel great about the market. Dallas is going great. We have seen a lot of positive characteristics in Dallas — migration has been strong. This asset is located in a prime area in Plano with great household incomes and activity levels. We are very confident in our ability to lease that up to stabilize occupancy.

The other thing I wanted to ask about: $230 million of development and redevelopment opportunities — even with your cash flow, that is a big number. Have you been exploring at all some co-investment opportunities for those projects?

Great question, Michael. We have a great opportunity in our portfolio to extract some value through the development of pad sites, some larger developments and redevelopment. Those total about $230 million for us today. We are going to be judicious and timely in how we execute on those, making sure that we have demand for the spaces as we add GLA. We are looking at different sources of capital that are out there. So, we are going to do those developments over time. It is a great value that is embedded in our portfolio and probably not reflected today in the marketplace. I think you will see us start to execute on some of those over the coming quarters.

Great, thanks very much.

Thank you, Michael.

Thank you. We have reached the end of our question-and-answer session. I will turn the call back to James Mastandrea for closing remarks.

Well, thank you all. Thank you all for joining us. In closing, I would just like to say that Dave and I are pleased to report our second quarter results, and we would like to thank you again for your continued constant support of Whitestone. I want you to know that we continue to focus on increasing cash flow, Core FFO per share and Whitestone's long-term value. As our progress continues, I trust in God to guide our work and to give me wisdom to support and service our shareholders. Thank you very much. Thank you, operator.

You are welcome. Thank you for joining us today everyone. You may now disconnect your lines at this time and thank you for your participation.