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Whitestone REIT (WSR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered steady operating momentum (Same Store NOI +4.8%, GAAP leasing spreads 20.3%, occupancy 92.9%), while GAAP net income diluted EPS of $0.07 was lower year over year given no property sale gains this quarter .
  • Revenue ($38.0M) and EPS ($0.07) came in modestly below S&P Global consensus (revenue $39.01M*, EPS $0.087*); Core FFO/share was $0.25 vs FFO/share consensus $0.262*; strong leasing trends and reiterated FY25 Core FFO guidance offset the slight miss .
  • FY25 guidance reaffirmed: Core FFO/share $1.03–$1.07; same-store NOI growth 3.0%–4.5%; ending occupancy 94%–95%; interest expense $32–$33M; G&A $20.8–$22.8M .
  • Near-term catalysts: active retenanting (Picklr + Ace at Terravita), redevelopment ramp (e.g., Lion Square), and balance sheet trajectory toward low-6x leverage by year-end; management reiterated confidence in Sunbelt service-centric thesis .

What Went Well and What Went Wrong

What Went Well

  • “Whitestone delivered a very strong quarter, delivering 4.8% Same Store Net Operating Income growth, GAAP leasing spreads of 20.3% and occupancy of 92.9%… We reiterated our 2025 Core FFO per share guidance” – CEO Dave Holeman .
  • Leasing engine remains robust: 12th consecutive quarter with leasing spreads >17%; combined Q1 GAAP leasing spreads 20.3% (new 22.6%, renewal 19.9%); $31.3M total lease value signed (highest first-quarter level in a decade) .
  • Net effective ABR/sf rose 4% YoY to $24.79 and Same Store NOI increased to $24.66M (+4.8% YoY), supporting durable organic growth .

What Went Wrong

  • Modest underperformance vs consensus: revenue of $38.0M and EPS of $0.07 came in below S&P Global estimates ($39.01M*, $0.087*), and FFO/share of $0.25 was below $0.262*; largely a function of no gains on sale and seasonally lower percentage rent/termination fees vs Q4 .
  • Occupancy dipped sequentially to 92.9% (from 94.1% in Q4) as the team intentionally took back space to retenant Terravita with higher-return tenants (Picklr and Ace Hardware) – a near-term drag with medium-term upside .
  • Leverage remains elevated at 7.2x Net Debt/EBITDAre in Q1 (down from 7.8x YoY but above Q4’s 6.6x); path to low-6x depends on earnings and Pillarstone proceeds timing .

Financial Results

Income and FFO vs prior periods and estimates

MetricQ1 2024Q4 2024Q1 2025Q1 2025 Consensus
Revenue ($USD Millions)$37.164 $40.838 $38.003 $39.006*
Diluted EPS ($USD)$0.18 $0.33 $0.07 $0.0867*
FFO per diluted share ($USD)$0.23 $0.28 $0.25 $0.262*
Core FFO per diluted share ($USD)$0.24 $0.28 $0.25 N/A
Same Store NOI ($USD Millions)$23.522 $25.042 $24.661 N/A
Same Store NOI Growth (%)3.1% 5.8% 4.8% N/A
Occupancy (%)93.6% 94.1% 92.9% N/A
EBITDAre ($USD Millions)$20.541 $23.008 $21.396 N/A

Values with asterisk retrieved from S&P Global.

Interpretation:

  • Revenue and EPS were modest misses vs consensus; Core FFO/share held at $0.25 but below FFO/share consensus; operating metrics (SS NOI, leasing spreads) remained strong .

Operating KPIs (leasing and rate growth)

KPIQ3 2024Q4 2024Q1 2025
GAAP Leasing Spreads – Total (%)25.3% 21.9% 20.3%
GAAP Leasing Spreads – New (%)22.7% 36.1% 22.6%
GAAP Leasing Spreads – Renewal (%)25.9% 19.0% 19.9%
Net Effective ABR per leased sf ($)$23.65 $24.51 $24.79
New Leases (count)26 29 22
Renewal Leases (count)46 50 62

Balance Sheet and Debt

MetricQ4 2024Q1 2025
Total Debt ($USD Millions)$632.5 $642.2
Cash and Equivalents ($USD Millions)$5.224 $5.586
Restricted Cash ($USD Millions)$10.146 $10.228
Net Debt / Pro Forma EBITDAre (x)6.6x 7.2x
Interest Coverage (EBITDAre / Interest) (x)N/A2.7x

Tenant Type Mix (as of March 31, 2025)

Tenant Type% of ABR
Restaurants & Food Service27%
Salons9%
Medical & Dental8%
Grocery8%
Financial Services7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net income attributable per diluted shareFY 2025$0.33–$0.37 $0.33–$0.37 Maintained
Core FFO per diluted share and OP UnitFY 2025$1.03–$1.07 $1.03–$1.07 Maintained
Same Store NOI growthFY 20253.0%–4.5% 3.0%–4.5% Maintained
Bad debt (% of revenue)FY 20250.75%–1.00% 0.75%–1.00% Maintained
G&A expense ($USD Millions)FY 2025$20.8–$22.8 $20.8–$22.8 Maintained
Interest expense ($USD Millions)FY 2025$32–$33 $32–$33 Maintained
Ending occupancy (%)FY 202594.0%–95.0% 94.0%–95.0% Maintained
DividendQ2 2025$0.045/month ($0.135/qtr) declared Same Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Redevelopment pipelineQ4: Detailed strategy; EOS opened at Williams Trace; Windsor Park in flight; double-digit returns targeted Continued ramp; Lion Square redevelopment underway; expected 30–50% NOI boost at center over time Up
Reshoring/tariffs macroQ3: SS NOI guidance raised; Sunbelt tailwinds highlighted CEO emphasized benefits from reshoring (TSMC Phoenix, manufacturing in Houston) and the portfolio’s service orientation Up
Shop space strategy & tenant curationQ4: 77% ABR shop space; proactive remerchandising and termination fees underpin growth Renewed focus; Terravita retenanting with Picklr/Ace to upgrade revenue quality Stable/constructive
Balance sheet & leverageQ4: 6.6x at year-end; goal to reduce further 7.2x in Q1; management targeting low-6x by year-end Improving into 2H
Technology & data usageQ4: ESRI/Placer.ai drive leasing decisions Reinforced as a differentiator in underwriting and tenant health monitoring Stable
Dividend policyQ4: Dividend increased; ~50% payout ratio Dividend supported; strong cash flow and expected growth Stable

Management Commentary

  • CEO (prepared remarks): “Core FFO per share of $0.25… Same-store NOI growth of 4.8%… raised our annual net effective ABR per square foot 4%… fits perfectly within our longer-term expectation of 4% to 6% organic core FFO per share growth” .
  • COO: Emphasized shop space flexibility and proactive tenant curation using ESRI and Placer.ai; example of upgrading Terravita with Picklr to capture changing demographics and drive traffic .
  • CFO: “Debt-to-EBITDAre was 7.2x versus 7.8x a year ago… $16M cash and $98M revolver availability… dividend near 50% payout; anticipate leverage in low 6s by year-end” .

Q&A Highlights

  • Occupancy decline: ~0.7% sequential decrease driven by retenanting Terravita (37k sf), preparing for Picklr and Ace Hardware; signed-not-opened would have made occupancy roughly flat .
  • Acquisition pipeline: ~$50M expected in 2025 funded by cash flow and dispositions; continued portfolio quality upgrade .
  • Leverage trajectory: Expect low-6x by year-end; Q1 higher vs Q4 due to seasonality (lower percent rents, fewer termination fees) .
  • Consumer trends: Monitoring for pullback; modest softness at higher-end restaurants, offset by fitness strength; alcohol sales trending lower as lifestyle shifts .
  • Pillarstone proceeds: Properties sold/under contract/offers outstanding; proceeds expected well north of ~$45M balance sheet receivable; timing uncertain, not in guidance .

Estimates Context

MetricQ4 2024 ActualQ1 2025 Consensus*Q1 2025 ActualSurprise
Revenue ($USD Millions)$40.838 $39.006*$38.003 −$1.003 (−2.6%)
Primary EPS ($USD)$0.33 $0.0867*$0.07 −$0.0167
FFO / Share (REIT) ($USD)$0.28 $0.262*$0.25 −$0.012

Values with asterisk retrieved from S&P Global.

Implications:

  • The modest miss appears driven by expected seasonality (lower percentage rent and fewer termination fees vs Q4) and the strategic occupancy dip from retenanting. Core operating metrics and reiterated FY25 guidance suggest limited need for broad estimate downgrades; focus should be on SS NOI drivers and redevelopment timing .

Key Takeaways for Investors

  • Leasing momentum intact (Q1 GAAP spreads 20.3%, SS NOI +4.8%); expect SS NOI growth within 3.0%–4.5% and Core FFO/share $1.03–$1.07 for FY25, reaffirmed .
  • Occupancy dip is deliberate and should reverse as Picklr/Ace open; this quality-of-revenue strategy historically lifts ABR and traffic .
  • Leverage path still constructive: 7.2x in Q1 vs 6.6x in Q4; management targets low-6x by year-end via earnings growth and potential Pillarstone proceeds (timing uncertain) .
  • Dividend supported by ~50% payout and strong operating cash flow; management continues to signal growth alongside earnings .
  • Watch redevelopment cadence (Lion Square, Windsor Park, Williams Trace) for incremental SS NOI lift into 2026–2028; selective acquisitions (~$50M) can add upside .
  • Near-term trading: Slight miss vs consensus may temper reaction, but reiterated guidance, robust leasing spreads, and clear Sunbelt service demand narrative are supportive.
  • Medium-term thesis: Service-centric, data-driven curation in high-income Sunbelt markets + redevelopment optionality positions WSR for 4%–6% organic Core FFO/share growth through cycles .