Greetings. Welcome to Whitestone REIT’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, that this conference is being recorded. At this time, I’ll turn the conference over to David Mordy, Director of Investor Relations. Mr. Mordy, you may begin.

Good morning. And thank you for joining Whitestone REIT’s second quarter 2022 earnings conference call. Joining me today on today’s call are Dave Holeman, Chief Executive Officer; Christine Mastandrea, Chief Operating Officer; and Scott Hogan, Chief Financial Officer. Please note, that some statements made during this call are not historical and may be deemed forward-looking statements. Actual results may differ materially from those forward-looking statements due to a number of risks, uncertainties and other factors. Please refer to the Company’s earnings news release and filings with the SEC including Whitestone’s most recent Form 10-Q and 10-K for a detailed discussion of these factors. Acknowledging the fact that this call may be webcast for a period of time, it is also important to note that this call includes time-sensitive information that may be accurate only as of today’s date, August 3, 2022. The company undertakes no obligation to update this information. Whitestone second quarter earnings news 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’d also like to draw investor attention to the fact that we published second quarter 2022 slides on our website yesterday afternoon and will reference page numbers throughout this call. I will now turn the call over to Dave Holeman, our Chief Executive Officer.

Thank you, David. Good morning. And thank you for joining Whitestone’s second quarter 2022 earnings conference call. I will begin on slide number two. We’re pleased to announce another strong quarter of operating and financial results, driven by continued demand for spaces in our centers and associated leasing activity. Versus the second quarter of 2021, our revenue grew over 14%. FFO per share is $0.25 per share, up from $0.24. Same-store net operating income increased 8%. Total occupancy is 91.5%, up 150 basis points from Q2 2021 and up 50 basis points from the first quarter. As of the end of the second quarter, our net effective annual base rent per square foot was $21.72, up nearly 9% from a year ago and up over 2% from the first quarter. And our balance sheet continues to strengthen with lower debt leverage, as shown by the improvement of our net debt-to-EBITDAre ratio to 8.3 times. Total second quarter 2022 leasing spreads were very strong and I’ll have Christine discuss leasing further in her section. Our strategy of designing necessity-based community centers located in high growth, high household income, Sunbelt markets continues to produce strong and improving results. Given another quarter of successful results, I wanted to discuss some of the positive steps we’ve taken over the last six months. I’ve shared some of the big focus points over the last several conference calls. We have enhanced our governance, increased our investor outreach and interaction, strengthened our leadership team while reducing overhead expenses, grown FFO per share by 25% and meaningfully improved our debt leverage. Our dedicated team of associates share a common purpose to meet the needs of our communities, position our tenants to reach their success and to create value in commercial real estate better than anyone in our industry. We value hard work, teamwork, integrity and growth, and I am honored to lead a team dedicated to executing on our business model and delivering long-term shareholder value. Our strategy is clear and consistent. Whitestone has had the right strategy in place for over a decade and we believe the environment has never been stronger to showcase that strategy. First in terms of strategic consistency, our focus has been on well-located necessity-based retail centers located in high household income neighborhoods in the best submarkets in the fastest growing MSA and today our portfolio is located 99% in the top markets in the Sunbelt. The importance of geographic focus is something the industry has recently and rightfully placed tremendous value on. Beyond our geographic focus, and even more important, is our strategy of crafting service-oriented centers designed around meeting local needs. This strategy has always been embraced throughout the company, including our acquisitions team, where we have utilized local experts to find centers in high-income neighborhoods capable of transforming into one of our growth centers. This strategy is relentlessly pursued by our in-house leasing agents who are engrained in the surrounding communities and know how to attract tenants to meet the demands of their communities. This strategy is embedded in the way we write our contracts, opting for shorter leases, because of our strong belief in the tenants we choose for our centers, validated by the successful track record of growth of our tenant base. This strategy is understood by our tenants as they grow, strengthening a center's connection with the surrounding neighborhood and benefiting from increased traffic levels. And finally, this strategy is also embraced by our development and redevelopment team eager to find opportunities to build value through improvements to our current properties and through adding additional leasable area. I’ll have Christine expand on some of the details behind our strategy, specifically on leasing and by walking through a property development cycle. But I have a couple of new additions to the team I wanted to mention first. Tim Ng recently joined the team as our Vice President of Acquisitions and brings over 20 years of real estate experience, most recently in similar roles with Fifth Corner and AmREIT. Tim has great relationships in our markets, knows our product type very well and we’re excited to have him on board. For the balance of 2022, he will be focused on our disposition efforts and sourcing great new acquisitions for the Whitestone portfolio. I also want to welcome our newest Board member, Amy Feng to Whitestone. As part of our continued focus on governance, we are strengthening our Board through the addition of Amy and increasing the number of independent trustees on our Board. Amy is currently the Director of Investor Relations for Shopify, a leading provider of essential internet infrastructure for many of the same businesses we work with. Amy brings significant depth and experience in providing strategic counsel to hundreds of companies in her time at several leading strategic financial communications firms. She has tremendous capital markets knowledge, having spent her time as an analyst on the sell side and we’re thrilled to have her join our Board. And with that, I’ll turn things over to Christine.

Thanks, Dave. One of our team’s strengths is leveraging our tenant relationships who continue to produce strong results. Since we’ve made the changes, Dave mentioned earlier, we’ve continued to grow our occupancy, which is now at 91.5%, 150 basis points higher than the prior year and a new record for Whitestone. Aggregate leasing spreads were positive 17.4% in the second quarter and are positive 13.8% over the last 12 months. New leasing spreads were up 15.6% in the second quarter and have grown 11.2% over the trailing 12 months. Renewal leasing spreads expanded 17.6% in the second quarter and increased 14.3% over the trailing 12 months. The qualitative reasons behind these impressive leasing spreads on slide three depict our strategy that we have pursued over the last decade and positions us well to benefit from the trends that have been emerging the last few years, primarily, demand for smaller spaces continues to increase, especially in the 2000 square-foot range. Convenience, necessity, and service are ever more critical to our customers and cannot solely be replaced with an online presence that is optimized by a combined brick-and-mortar strategy. Second, we are seeing a strong rebound in the fitness category, which has numerous brands coming in a variety of sizes and are strong and sticky traffic drivers. Demand for restaurant space continues to strengthen; convenience and casual restaurants are seeing a significant uptick in demand. This may be a part of a post-pandemic trend, but we think the larger influence is a generational shift as demand from millennials and Gen Z strengthens, with both groups spending a higher percentage of their income in this category. Importantly, a number of our centers are reaching higher levels of occupancy, which allows us to optimize tenants and their rents. On slide four, we show that within our specific metros, we are in the best location within each of our metropolitan statistical areas, as evidenced by the premium rents we collect versus the average for each MSA. Looking at the specifics in each metro, in Phoenix, we targeted key neighborhoods in the immediate aftermath of the 2009 financial crisis and acquired the base of our centers that were well below replacement cost. Our strategic focus on the East Valley in North Scottsdale has paid off due to the outsized gains in job growth and out-of-state relocations, which have driven traffic at our well-located centers. In Houston, a majority of our NOI comes from the main retail district known as the Uptown District or Galleria, and from the affluent western suburbs. In Dallas, we were early investors in the northern suburbs that have been magnets for corporate relocations and are among the fastest growing zip codes in the country. In Austin and San Antonio, we purchased centers in prime locations in both cities before the migration from coastal cities really gained strength. Often the reason we’re able to secure these premier locations within cities is because we’re very in tune with where concentrations of educated talent are attracting employers. Looking at the chart in the bottom right, the portfolio average base rent per square foot with the blue bars and the same-store straight line basis rent increases with the green line that takes out some of the variability with different sized tenants and shows the overall rent trend in addition to the fact that rents are accelerating as we’re coming out of the pandemic. On slide five, we illustrate the general lifecycle of our properties, which is the inner ring of the slide. It’s an example we use Lakeside Market, a 2021 acquisition which is rapidly moving through the phases. Added acquisition in 2021, Lakeside Market had an occupancy of just over 80%. Lakeside was sandwiched between more developed areas and had an unmet demand for young families, prime to invest money in their children in need of services designed for hardworking parents with limited time. The same dynamics that attracted us to making this acquisition also attracted HEB as a shadow anchor shortly thereafter, closing down the property. Most recently, a new Kohl’s across the street is opening as well. In just over a year, we have grown the occupancy to over 90%, while increasing renewal rates as we go. In conjunction with adding new tenants, we are rebranding Lakeside with a new identity. The location strongly centers around educational and fitness offerings for kids, as well as affordable casual dining and dessert offerings that young families seek out as they spend time together. Here in the process of developing the pad sites in order to take advantage of morning commuters as well. We anticipate that within a short time Lakeside will join the roughly 40% of our properties in the refining phase with an occupancy over 95%. Once a property reaches this level, we heavily monitor the sales reports and further strengthen the center by referencing thriving businesses that tie strongly with the surrounding neighborhood and are more likely to endure through any economic cycle. Often, a property will take two to three years to make the refining part of the cycle, but still has several years of strong improvement within that planning phase. Achieving all this takes a dedicated, well-trained team and I’d like to thank our team for driving results and for their commitment to our communities, tenants and customers. And with that, I’ll turn things over to Scott to go over the results in detail.

Thank you, Christine. As you can see on slide six, NAREIT funds from operations per diluted share was $0.25 for the quarter versus $0.24 for the same period in 2021. You will notice that we have shared drivers regarding our 2022 FFO. As Dave and Christine have shared, the core business is doing very well, which is driving up our occupancy and base rents. Reduction in management compensation was most impactful in Q1 and will continue to be impactful in future quarters. Development opportunities may be a modest driver late in the year. Our guidance contains an assumption on interest expense increasing versus 2021. We anticipate we will refinance the majority of our 2022 and 2023 maturities within the next few months, which will provide us with greater clarity on our future interest expense. Earnings growth continues to contribute to our strengthening balance sheet. Total net debt was $638 million, improving our debt-to-gross book real estate loss ratio to 51%, an improvement from 52% a year ago. We are pleased with the significant progress we have made on strengthening our balance sheets and we remain steadfast in our commitment in this area. Our Board approved a quarterly dividend of $0.12 per share for the second quarter, representing an annualized dividend amount of $0.48 per share and an 11.6% increase versus the previous level. To wrap up, I would like to reaffirm our previously issued 2022 guidance. FFO for fully diluted common share and OP unit guidance is expected to range from $0.98 to $1.02, representing a 14% to 19% increase from 2021. This includes $0.04 of non-recurring stock forfeitures and severance costs from the first quarter. Our key assumptions related to the guidance have not changed. With that, we will now take questions. Operator, please open the lines.

Thank you. Thank you. And our first question is from the line of Mitch Germain with JMP Securities. Please proceed with your questions.

Thank you. Is there anything changed with regards to the lease negotiation? I guess, I’m curious, you’re requiring more security deposit or requirement for financials, anything different in terms of the discussions you’re having with your tenants?

Thank you for your question. I believe what they are noticing is the effect of inflation and a request for longer lease terms. However, we are maintaining our shorter lease terms, as this approach has been advantageous for us, allowing us to reevaluate their business and lease agreements. In terms of additional security, we shifted our focus to a revenue quality approach about two years ago, primarily during COVID. This has significantly enhanced our product line and strengthened our client relationships. This strategy entails a comprehensive examination of their financials as well as their operational resources, including how they function, the composition of their teams, and the quality of their vendors. By assessing their current operations, we gain insights into their business metrics, their dedication as owners, and their overall engagement. These are some of the areas where we have redirected our team's focus, and it has proven to be beneficial.

Hey, Mitch. It’s Dave. I’ll just add a couple of things to Christine’s comments. As she said, we continue to focus on quality revenue. And just to highlight, we have seen, obviously, that to be very successful. If you look at our leasing activity, as well as our leasing spreads, they’re trending very well, with this quarter being 17.5% leasing spreads on a GAAP basis and 9% just on a starting point basis. So really pleased with the activity levels we’re seeing in our centers, pleased with the leasing activities, and really a focus on continuing to lock in really quality revenue.

Great. Question on same-store performance, the results have clearly exceeded guidance. Are you suggesting a possible slowdown in the latter half of the year, or are you simply taking a cautious stance regarding your guidance?

Thanks for the question. It’s Scott. I think we expected the first part of the year to yield higher same-store results, because we were still in a recovery mode from COVID. In the first few quarters, and by the time we got to the back half of the year, we started to see improved collections; our occupancy ended up with record leasing, and by the time we got to the end of the year and since. So I think it’s more related to 2021 than it does to 2022 results.

What should I consider regarding asset sales later this year? Are there any assets available, and if so, what is the status of discussions?

Yeah. As we communicated previously, we expect to do some recycling this year. We do have a handful of assets that are hitting the market. I think we’ve targeted somewhere less than $50 million in dispositions and acquisitions. We are actively in the market on a handful of dispositions that come up to about that amount, and we’re sourcing potential recycling deals for those. So I think we’re on track and look forward to having more to report potentially in the next couple of quarters.

Thank you.

Thank you. The next question comes from the line of Gaurav Mehta with EF Hutton. Please proceed with your question.

Thank you. Good morning. Following up on your comment on sourcing potential transactions, can you provide some color on what you guys are seeing in the acquisition market?

Good morning, Gaurav. This is Dave. So what we’re seeing, obviously, is some softening of pricing. But it’s a little early; we’re still seeing a fairly decent gap between sellers and buyers on cap rate expectations. But Whitestone has always looked for a little different type of asset. Part of our search is our depth in the markets we’re in through our relationships. We tend to look for assets that are widely marketed. So I think we’ll have greater visibility into that as we get a little further into the process. Right now, we’re tending to look for probably a little smaller asset, maybe a type of asset that is in an area of capital, where Whitestone could get in at a price that’s attractive. So we’re seeing opportunities, but probably not a whole lot more to comment on until we get further along the line.

Okay. And on the assets that you’re trying to sell, can you talk about your expectations for those assets?

We are discussing the properties owned in our joint venture, specifically the non-core assets. Whitestone is in the process of liquidating that equity investment. Currently, we have approximately $35 million invested in non-retail assets, and we are working on monetizing them. The timing for this is difficult to predict at the moment, but we are actively focused on recycling those properties as well.

Okay. And then lastly on the balance sheet, you talked about the potential refinancing of 2022 and 2023 debt expirations in the next few months. Can you provide some color on what you guys are doing as far as interest rates? And then the 2023 debt expiration that the credit line with floating rate debt, should we expect you guys to enter fixed rate debt as you try to refinance the maturities?

Hello, I’m Scott. We are currently working on the recast. We plan to fix the interest rates on the $260 million that are currently fixed and likely leave about 20% of our debt as variable, but we are evaluating that throughout the process. Those are our current expectations.

I want to add that there has been significant volatility in rates; however, they have decreased slightly. Currently, Treasury rates are similar to where they were four years ago when we last adjusted our credit facility. The five-year swap rates are around 25% today, with some variability. There is a lot of activity in the banking sector with refinancing, and we anticipate closing in the third quarter. We have incorporated a bit of extra interest expense into our guidance for the second half of the year, and we will have better visibility on that as we proceed. We are on track with refinancing to address the 2022 and 2023 maturities and are also looking to structure our debt in a staggered manner, considering both fixed and variable rates. We believe having about 20% of our debt in variable rates is reasonable at this time.

Okay. Thank you.

Thank you.

The next question comes from the line of Craig Kucera with B. Riley Securities. Please proceed with your questions.

Hey. Good morning, guys. You’ve reported a loss in your joint venture portfolio for the first time, I think, since you reported it. It looks like occupancy dropped sequentially at some of those properties. Can you give some color on what’s going on there? Were there any one-time adjustments, maybe impairments or what are your expectations for the rest of the year?

No. There weren’t any impairments in that portfolio. There are a number of properties that I believe they’re trying to cycle the leases out of there to have flexibility with purchasers, and so we do see NOI going down in a number of those properties. In several of those cases, they’re just getting them ready to sell.

And all I might add to that is, Craig, that we clearly would like to exit those assets. I think there might have been some additional expenses incurred by the general partner this quarter that were charged as well. But I think we think clearly from Whitestone perspective, it’s in the best interest of our shareholders to exit, and we’re working toward that and recycling that into the retail assets that we do very well at.

Got it. And I would say, for over the last year, you’ve been able to keep a lid on taxes pretty well, but there was a pickup this quarter. Were there any one-time adjustments in there or is that just a function of the rising value of the assets?

In the Texas market, there’s sort of a three-step process in the tax valuations, and that’s where a good chunk of our assets are. So there’s an initial valuation, then we get a chance to protest and then we litigate. Oftentimes, we see a little bump until we work our way all the way through that three-step process. We’re conservative in the way that we estimate those taxes, and we would expect those two valuations to get lower as we work through the process this year.

Got it. No. I appreciate the color. Just one more for me— with the potential for recycling capital, are you guys looking at maybe getting involved in any sort of development or redevelopment of your existing properties that placing capital there versus maybe making acquisitions? What are your current thoughts there?

Sure. I’ll start with just a couple of comments and have Christine give more thoughts. We’re continuing to look at, so just on the dispositions and recycling, obviously, focused on 2022 to get back into the markets, obviously, do some acquisitions and do it in a capital-neutral way through recycling. We do also have several opportunities within the portfolio that may be small or larger development, but we’re ramping those up and expect to have that come in. I will let Christine add anything she may not want to, but we have—within the portfolio, as we’ve acquired assets over the years, sometimes we’ve picked up land parcels, sometimes you picked up a little extra parking field, and we’re working internally to look for pad site opportunities, development opportunities, and really getting those started to plan up so they can contribute to our earnings over the coming years. So we think we’ll have more to announce on that, but right now our plan is to extract that value to start to work toward that and provide more details later.

Okay. Thanks.

Thanks, Craig.

At this time, I will turn the floor back to management for further closing remarks.

Well, thank everyone for joining on today’s call. We very much appreciate your interest in Whitestone. Should you have any questions, I encourage you to reach out to David Mordy or anyone on our team. And once again, we thank you for your interest and have a great day.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.