Q1 2024 Whitestone REIT Earnings Call

Participants

David Mordy; Investor Relations; Whitestone REIT

David Holeman; Chief Executive Officer, Trustee; Whitestone REIT

Christine Mastandrea; Chief Operating Officer; Whitestone REIT

Scott Hogan; Chief Financial Officer; Whitestone REIT

Mitch Germain; Analyst; Citizens JMP

Anthony Howe; Analyst; Truist Securities

Barry Oxford; Analyst; Colliers

John Associate; Analyst; B. Riley Securities

Michael Diana; Analyst; Maxim Group

Presentation

Operator

Greetings and welcome to the Whitestone REIT Fourth Quarter 2023 earnings call. (Operator Instructions) As reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Mr. David Mordy, Director of Investor Relations for Whitestone Re. Thank you. You may begin.

David Mordy

Good morning and thank you for joining Whitestone REIT's Fourth Quarter 2023 earnings conference call. On today's call are Dave Holeman, Chief Executive Officer, Christine Masson, Dreyer, 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. It may be accurate only as of today's date, March 7, 2024.
The Company undertakes no obligation to update this information for Whitestone's fourth quarter earnings news release and supplemental operating and financial data package have been filed with the SEC and are available on our website in the Investor Relations section.
We published Q4 2023 earnings slides on our website yesterday afternoon, which highlight topics to be discussed today. I will now turn the call over to Dave Holeman, our Chief Executive Officer.

David Holeman

Thank you, David, and good morning, everyone. Welcome to our fourth quarter 2023 earnings conference call. I'll break my comments into three parts. First, what we've done, second, ongoing initiatives that continue to drive value, and finally, how our core strategy thinks very well with the current environment, I'll get straight into it in terms of what we've done.
This management team began in January of 2022. So we're two years into our run here's a high-level list of our accomplishments for FFO per share has grown from $0.86 in 2021 to $0.91 for 2023. This is despite higher interest costs, primarily as we renewed and extended our credit facility in the third quarter of 2022.
With that in place until 2027, we anticipate a higher earnings trajectories ahead of us. I'll have Scott cover our projections in greater detail. We've rapidly improved our balance sheet metrics, bringing our debt to EBITDA are even down from 9.2 times for the fourth quarter of 2021 to 7.5 times for the fourth quarter of 2023. This is despite significant litigation expense impacting our numbers we've focused and prioritized our disciplined leasing efforts on high quality tenants, resulting in record occupancy in our portfolio, up 290 basis points from 91.3% at year end 2021 to 94.2% at year end 2023.
Breaking this down further, we've grown our small space occupancy by 320 basis points to 92.1%. And our larger space occupancy has grown by 200 basis points to 97.5%. We had same-store net operating income growth of 7.9% in 2022, followed by 2.7% in 2023. Scott and Christine will provide more detail on this important metric later in the call, we've strengthened our Board, bringing on three new board members for half of our six person board of trustees.
This refreshment has been a company that has been accompanied by a host of shareholder-friendly actions, including rightsizing our executive compensation, splitting the role of Chair and CEO and providing shareholders with access to bylaws, we've worked hard to successfully conclude the litigation with our former CTO and exit our investment in his related party joint venture. We are nearing conclusion. Whitestone has a very clear strategy and path to value creation that continues to be more clear as this noise is removed.
And finally, culture, we've simultaneously brought on very talented individuals, reduced our head count and improved employee satisfaction. In short, we're improving G&A while achieving better results. I'm super proud of the team and their long list of accomplishments over the last two years, only a few of which I have highlighted. I'm equally excited about how we're continuing to drive value.
Three initiatives are at the heart of our creating value, our quality of revenue initiative, our balance sheet improvement plan and our capital recycling plan. I'll have Christine cover the quality of revenue initiative, and I'll provide a bit of color on the other two, we've had significant progress with our balance sheet improvement plan over the last two years, obtaining an investment grade credit rating.
We have more work to do here and have the right people, the right plan and the market tailwinds supporting our efforts our debt metrics will continue to improve as we grow EBITDA RY., apply free cash flow to reduce debt, monetize our Pillarstone investment investment and activate the land parcel and pad site development opportunities within the portfolio.
We expect debt to EBITDA are even below seven times by year end 2024, and we anticipate further improvement in 2025. Our asset recycling program has allowed us to upgrade the overall quality of our portfolio selling properties with lower upside and ABR and redeploying the proceeds into acquisitions with significantly higher upside, higher ABR and characteristics that capture more of the key demand drivers in today's market.
We anticipate that since October of 2022, we will have completed approximately $80 million in asset sales by the end of the second quarter at an aggregate cap rate of 6.2%, I say anticipate because we have a sale upcoming, but not yet announced and we believe we'll keep the effort going at about the same pace we've had over the last two years. I think it's important to note here that we are very capable of driving results via organic growth.
So we're not reliant on the transaction market or the equity market cooperating in order in order to drive earnings growth. However, we are starting to see valuations adjust slightly for the higher interest rate environment and our team is ready to take advantage of those opportunities that align with our strategy.
The final area I would like to cover today is what we're seeing in terms of the current environment. Frankly, this is a great environment for most of the retail rates as limited supply of retail centers is driving good results across the peer group. The limited supply, combined with country leading job and population growth in our markets and Whitestone's ownership of the right type of retail centers makes this current dynamic, especially powerful for Whitestone.
Our strategy and our assets are very well matched to take advantage of this environment. And we've made a number of strategic decisions that are producing great outcomes. Specifically, we have shorter leases with annual rent bumps, the ability to capture mark to market rents quicker and high quality, diversified tenant roster and limited Cap Ex needs as compared to other peers.
This strategic decision to operate with shorter leases and being more active owners is fundamental to what we do because of the confidence we have in our team to populate centers with fast growing tenants, we are better positioned to share in their success. We are 100% Sunbelt focused in business-friendly states migration trends in our markets, lead the country and are acting as a strong tailwind, not only in terms of our operating results, but for the underlying value of our centres.
Lastly, our centres have a much larger percentage of small spaces than most of our peers. We and others continue to see strong demand from businesses seeking out spaces in the 1,500 to 3,000 square foot range we've intentionally acquired centers and made modifications to meet this demand, and we believe this trend will continue as businesses adjust to properly meet the needs of the surrounding communities.
We introduced 2024 core FFO per share guidance yesterday of $0.98 to $1.4. We have a few more near term unknowns than I'd like, but I've never been more bullish about the fundamentals, driving our business and the strategy we have in place. I'll have Scott walk everyone through our 2024 projections and the assumed variables once again, let me say I'm very proud of the team here and everything we've accomplished, and I'll now turn the call over to Christine.
Thank you, Dave.

Christine Mastandrea

We've had a real strong quarter and operations. Occupancy rose to 94.2%, up 50 basis points from last year's record. Finish occupancy may dip a bit for the upcoming quarter as it did for the first quarter of 2023. This is because we closed a large number of deals in the fourth quarter, and we intentionally are remerchandising in the first quarter for revenue quality.
However, while we may see a first quarter dip, we have a strong pipeline of deals and we're forecasting an occupancy of 93.8 to 94.8 by year end 2024. Occupancy for 10,000 square foot plus spaces came in at 97.5%, with our higher ABR, small spaces coming in at 92.1%. Straight-line leasing spreads were 21.8% for the quarter was 37.3% on new leases and 15.3% on renewals.
For the last 12 months, combined straight-line leasing spreads were 21.7%. Frankly, as strong as our leasing spreads are keeps getting better. If you dig into the numbers just recently, Marcus & Millichap showed asking rents in Phoenix, our largest market jumping 12.6% between 2022 and 2023. Not only did we capture those jobs more quickly because of our shorter term leases averaging four years. But the recency of the job bodes well for our leasing spreads in 2024, 2025 and 2026.
This isn't just a number on a spreadsheet and matches what our leasing agents are seeing in the ground migration trends, Phoenix manufacturing, boom, consumer trends and a shortage of retail neighborhood centers are all combining to make this one of the strongest environments we've ever seen. Some of our peers have recently been talking about the value of vacancy and their vacancy allows them to better align us center for the surrounding demographics, often a new younger demographic rather than letting a center get out of touch.
However, as you can see, from the fact we just hit the record occupancy vacancy at our centers is limited. This leads us to our quality of revenue initiative. We strongly believe that high upgrading our tenants during the good time creates long-term shareholder value. As we drive traffic with fast growing businesses and further improving collection rates and lowering our intended and unintentional turnover. We often compare what we do to gardening.
And then intentional pruning is key to make sure that you have high-quality tenants primed for growth. Oftentimes, we're swapping in a business with higher long-term growth potential and the ability to drive center traffic. It's necessary because over 60% of our centers are at 95% or greater occupancy given our average lease length.
I like to think of this initiative is halfway through from when the management team stepped down by 2026, we will have intensely reviewed. The large majority of our tenants were confident investors will benefit from these efforts as we set this up for a long-term robust same-store NOI growth.
Despite our great success in smaller spaces, we've had a number of positive things going on in the larger spaces to our former Bed Bath & Beyond space is being transformed into a high-demand pickle ball and entertainment venue.
Our new tenant Pichler is extremely strong operator and we've recently signed a long-term contract with them at Eldorado or Trader Joe's anchored center in Dallas and the locations have opened so far, Pichler has enjoyed a strong first mover advantage and they've shown themselves to be adept at going after a younger demographic or EOS. build-out at Williams, trace is taking longer than anticipated, pushing back the commencement date While this impacted our same-store NOI growth in 2023, it will have some impact on 2024.
But I want to remind everybody it's a great replacement of an underperforming grocer and triples our revenue for 51,000 square feet of space. This change is anticipated to drive strong center traffic for years to come.
Many of the businesses that are cycling out right now are those challenged by the higher capital costs in the current environment, the business businesses moving and are adjusted to the higher capital cost. However, this has been a limited number of businesses in our portfolio is the margin of the bulk of our tenants are low inventory and low capital businesses serving the communities that we have. I'd add one comment to Dave's regarding our capital recycling initiative.
With the sales for line in Chicago, we've exited our one property that didn't fit our geographic profile. At this time. We only have one property that doesn't fit our strategic profile that is owning services that serve the nearby community. That property is our headquarters office building would like to take a hard look at exiting would like this year, we strongly believe in having a very focused strategy of sticking to our expertise. I often comment on categories of tenants that are showing strength during the quarter.
However, almost every category of tenant type is performing well right now from restaurants, health, beauty, education, fitness and financial and other service-oriented businesses. We are seeing growth. I'm eager to drive results and see what leasing team can accomplish in 2024. And I'm eager to report those results as the year progresses.
And with that, we'll have Scott cover the financials.

Scott Hogan

Thank you, Christine. We delivered $0.24 in core FFO per share for the fourth quarter of 2023 versus $0.23 in the fourth quarter of 2022 and $0.91 for the full year 2023 versus $1.3 for the full year 2020.
To Now I'll walk you through the 2022 to 2023 core FFO per share earnings variance. And you may want to follow along on slide 11, same-store NOI growth was our key positive driver as it should be every year, adding $0.05 G&A drove a $0.05 reduction in FFO core per share, including $0.04 of benefit in the first quarter of 2022 associated with the forfeiture of outstanding restricted shares from our former CEO and other employees that was not repeated in 2023.
While G&A normally reflects year-over-year increases in compensation expense powers also contains litigation expense related to Pillarstone and our former CEO other items drove a $0.01 reduction and interest expense drove an $0.11 reduction.
As a reminder, we amended our credit facility in the third quarter of 2022 for the variance between the former and current credit facility primarily impacted the first three quarters of 2023 as Dave mentioned, we introduced 2024 core FFO per share guidance yesterday with a range of $0.98 to $1.4. Let me walk you through the forecasted changes between the 2023 core FFO per share amount of $0.91 and the midpoint of the 2024 guidance and $1.1 same-store NOI is expected to improve $0.07 in 2024.
G&A cost reductions should drive a $0.01 increase, primarily as our former CEO and Pillarstone related litigation expense is expected to be significantly reduced other items primarily driven by non-same-store NOI and no longer reflecting earnings deficits from our equity method investment in Pillarstone following our OP unit redemption in January of 2024, our forecasted add $0.03 Interest expense is forecasted to drive a $0.01 reduction in core FFO per share.
We anticipate higher interest expense in the first part of the year, both because of the shape of the sulfur curve and because we assume some paydown of debt with partial Pillarstone monetization in July overall, if you divide our annual guidance into four quarters. I anticipate the first quarter will be a couple of cents under the average, primarily due to interest expense.
And I anticipate the fourth quarter to be a couple of cents over the average due to lower interest expense percent sales clauses and growth that's expected to occur over the course of the year.
In addition to the headline Let me cover a few other elements of our guidance. Same-store NOI is forecasted to be between 2.5% and 4%. The delay in EOS. commencement is a reason that changes a little lower, but we still we are still expecting strong growth. Bad debt is expected to be between 0.6% and 1.1% and we improved bad debt by 18 basis points in 2023, bringing it down to 0.65%.
Our quality of revenue initiatives should help keep this number low Finally, our debt to EBITDA RY. metric is forecasted to improve to between 6.6 and seven times by the fourth quarter of 2024. And that assumes we're not able to monetize the majority of our Mode Pillarstone investment until 2025. We are very pleased to announce a 3% increase in our monthly dividend level. We believe dividend should grow with earnings, and we believe we'll have good earnings growth in 2024 and continuing in 2025 and beyond.
Thank you all for joining our earnings call. And with that, we'll open the line for questions.

Question and Answer Session

Operator

Mitch Germain, Citizens JMP.

Mitch Germain

I wanted just obviously you talked a little bit about quality of revenue. And, you know, it's I don't know, it seems like your bad debt and is forecasted to be a little bit higher in 2024. I'm just curious in terms of, you know, I'm sure there's a little hint of conservatism in that number, but is there anything specific that is driving that midpoint of that number to be higher year-over-year?

Scott Hogan

Imagine, Scott, the bad debt is of the bad debt assumptions we put into the forecast or a range that we're comfortable with. The midpoint isn't necessarily where we expected. And no, there's there's no specific tenants that we have identified that are going to drive higher bad debt next year.

Mitch Germain

Okay. That's helpful. On what percentage of your portfolio comes from the smaller tenants relative to the larger ones, how that how should we think about that? Obviously, we talk about that, obviously trend above peers, but what does it specifically?

David Holeman

Yes, I think, Tim, it's Dave in our in our PowerPoint for the call today. I think David Morton is going to give me a page number, but there's a page number that breaks out.
Page 6 breaks out our tenant base. Approximately 75% of our ABR is in the smaller spaces that are really in high demand today. So we think that's a key differentiator of Whitestone versus many others in the sector. And we have the type of spaces that are in high demand agreed.

Mitch Germain

Okay. Obviously, we've got a lot of products that are seem to be going smaller and smaller. Dave talk about, you know, obviously you're in the process of deleveraging, but you interestingly mentioned activating your land parcels and some of your redevelopment opportunities. Clearly, that creates a little bit of higher leverage initially before the EBITDA commences. So maybe if you could just provide some perspective on the potential opportunities that you've got embedded in the portfolio and how you feel on some of those potential opportunities could be monetized?

David Holeman

Yes, Mitch, I'll give a couple high-level comments and maybe I'll ask Christine to share some more about the development opportunities. And I will tell you our goal and our challenge is to do a number of things over the last couple of years we've improved our balance sheet. We've driven earnings. We've capitalized on development opportunities.
So it's always a balance. We're focused on the balance sheet improvement plan, and we've made strong progress and then we're obviously top-line focused on value creation. And maybe I'll let Christine comment a little bit on the development opportunities emerge.

Christine Mastandrea

I think the best way to look at our portfolio is most of these are pads and smaller buildings. And so the timeframe it takes to get these positioned through and approval process, which is a low cost venture to start out right, that just takes time by the time you get that in place. And then you actually build, which is when you start your year significant capital costs, that's like a six month timeframe.
So it doesn't take that long to build these pads out. It takes a while to approve to get them approved within and within the zoning districts that you have to work with. So I'd like to say I think these things are very easy. Once you get once you get approval, then it's then your capital costs are significant capital costs and that's maybe six months. And then once you get them out of the ground, then of course, you're able to achieve on your returns with rents.

Mitch Germain

So most of ours are how many are you have now how many these fans have entitlements right now?

Christine Mastandrea

We have we're doing three a year, and I'm looking to amp that up to like four to five in the following years to six. It depends like Dana has a number of small pads that are already approved. But what we're doing is working through the right leasing strategy to move those forward.
Those are already fully approved at Dana Park. And those have, let's say I've got one too, about seven pads there alone on the portfolio. We have about we have well over, I think about 15 to 16 pads that we can work through over time. It's just a question of making sure that we can manage it appropriately appropriately within our timeframe, the lease ability with it and also our resources with the team.

Mitch Germain

And the last one for me, just Dave, maybe some perspective on the timing of the resolution of the damages associated with the Pillarstone ruling? Obviously, I believe on the ruling had provided some sort of timeframe where some sort of Remedy or valuation was necessary to be provided? Maybe if for some perspective on where that stands, please it.

David Holeman

Sure. And obviously, we're very pleased with that. The ruling, which on our investment in Pillarstone, the court ruled that obviously, we had been damaged. And what we're looking for is a is an exit. We've communicated that all along.
So Pillarstone has some obligations to the court to provide a value as well as a payment to us. I would tell you we're moving into the collection phase and we are we are focused on getting that collected and exited as quickly as possible. Scott put Scott commented that in the guidance we only have a partial quarter of that part of that monetization.
And this year we have the balance in 25. I'd love to report in the year that we got that much more quickly. So right now, we're we're very pleased with where we are as far as the decision but we're looking for at an orderly monetize exit plan of exit, which I believe we kind of have in progress and we'll move quickly. It's hard to give you exact timing just because we're working through the court system.
We're working through a number of things, but all of the decisions have been very supportive and very much in Whitestone's favor at this point.

Operator

Anthony Howe, Truist Securities.

Anthony Howe

Good morning, guys. Thanks for taking my question. So this morning, I saw the news that Eris asset management plans to nominate two directors to the Board and the rest of your questions, right, come since that December press release for other discussions and conversation. Have the Board had with Bruce and his proposal to liquidate and have you guys thought about adding Board members to have more relevant real estate experience and Thanks, Anthony.

David Holeman

It's Dave. I'll give a couple of comments to that. And first of all, just off the top, obviously, we don't comment on articles like the Bloomberg article we don't comment on market rumors or quotes from our name sources. We did publish in December a letter we received from Mr. Schanzer with Erez. We did that because we think it's important to be transparent.
We want to have great discussions with shareholders and we want to minimize misinformation. We love and welcome shareholder feedback and discussion, but we don't discuss individual shareholder discussions, obviously publicly, but really proud of the progress we've made over the last a couple of years. We're focused on execution and delivery.
And obviously at this point, that's that's kind of what we can say. I think we've published a letter from Bruce. We've published our response, obviously happy with the follow up question, Anthony, but I think that's the comment I would make at this point on your question.
The other thing I would add is we've done a lot of refreshing and upgrading our Board brought on a great new skill scale and diversity continue to look at that, continue to evaluate that. We have the right people in place, and I think our board feels very good about that. Our Board also takes the strategic role they have in looking at the ways we create value very seriously, and we take that very seriously.

Anthony Howe

Okay. I'm sorry if I missed it, but my property operating maintenance was up 27% in the same-store pool this quarter. What drove that increase? Was it? And was that the main reason why same-store NOI for 2023 was at the low end of the guidance.

Scott Hogan

And Scott, on the maintenance side, we accelerated some large maintenance items, exterior painting of buildings, parking lot resurfacing and six or seven properties in Arizona. We think that's going to add value and help the leasing rates. Those properties happen to have a little lower recovery rate than the majority of our portfolio. So that that was a component of the same-store being a little lower than expected.
The other the other one was I think Christine mentioned delayed commencement in EOS. drove another portion of it. And then we had Bed Bath & Beyond it was re-tenanted towards the end of the year. That was a smaller piece. So there's those are the three components of the same-store decrease. And then once again on the maintenance side, those are pending and parking lot services or once every 10 year type of expenses structure.

Anthony Howe

And then a quick one on Pillarstone. I know that you guys are going through the bankruptcy court now. What are the chances that Whitestone can fully recover the monetary judgment of that?

David Holeman

Hey, Anthony, it's Dave. As you. As you said, we are moving toward the collection phase at this point with the real rate is receiving very positive rulings that we've been damaged and that we had the right to exit. As you said, Pillarstone is by has filed bankruptcy and we're moving through that.
We remain confident in the value of that investment. When you look at the underlying assets are our investment on our books is roughly $30 billion. We continue to believe that the value of the underlying assets is north of that. So it's hard to nail down a number. But I do think we're in the process now of moving through that and hopefully getting this noise out of the story very shortly.

Operator

Barry Oxford, Colliers.

Barry Oxford

Greg, I guess on the disposition market, when you guys are looking at that is it fairly fluid and are the our buyers able to get financing relatively easily?

David Holeman

A Barry and Dave, a good question, and I think we're continuing. We are seeing a little bit of uptick in the transaction market. I think as we all get more clarity on on where interest rates are still not not super deep, but we're seeing more transactions and I would say we are seeing the buyers able to get financing.
So in some recent transactions, there's been a financing component and we've seen the ability to get financing it at rates that are probably now closer to the we did that closer to 6%, a little bit above that, but the rates that they can work.
So we are seeing that market normalize. We're also seeing on the sales side on the acquisition side, we're seeing cap rates move up a bit. So we're continuing to monitor that for for great opportunities.

Barry Oxford

Is it your plan as much as humanly possible to match the dispositions and acquisitions? Or do you think one will run in front of the other this year?

David Holeman

Yes, I think we I'll say it this way. We we are our responsibility and what we focus on every day is creating and adding value. Over the last couple of years, we've been continuing to upgrade the portfolio through a bit of recycling really selling assets and redeploying into new assets.
I think right now, I think I mentioned in my remarks that we've done about $80 million of that in $80 million of that in the last 18 to 20 months. We believe that kind of that level is probably appropriate for a portfolio. Our size on an ongoing basis.
And you know, our guidance we've given is the asset base as it is today. But we do believe there's going to be opportunities are starting to open up for for acquiring assets and potentially growing and scaling this platform as well, where as we've said for the last couple of years, we're going to be very, very disciplined in capital allocation, making sure those decisions are the right decisions for long-term value. But at the last couple of years, it's been largely sales and dispositions.
One for one. I would expect that that would be similar in 24, but we think there's going to be opportunities as things continue to improve.

Operator

John M. Associate, B. Riley Securities.

John Associate

Good morning. And then as you think about the DM, the guidance. As you think about kind of a $0.03 drag from you have costs associated with the ongoing situation around Pillarstone? And B, can you provide a little more color as to what you're assuming there is resolution two, you have legal issues in bankruptcy court related issues now in July or is it is that kind of ongoing for the full year as you look at guidance today, and I'll let Scott maybe to target guidance.

David Holeman

But on the Pillarstone front, I think largely our efforts are related to collection. So think of it that way. In other words, now we've we've moved through the process. We've done our redemption of our ownership effort and now we're going to work to get those amounts collected. So that's largely the activities. And I'll let Scott maybe give further comments.

Scott Hogan

Well, on the guidance side, I don't think it's a $0.03 drag. I think we've got $0.03 of additional just in the other category. And so when you look at the guidance for 24 against what we had in 2023, we're expecting a lower litigation costs around Pillarstone. And then also we redeemed our OP units in January. So the line on our income statement that's had a deficit related to Pillarstone goes away starting in January 25th, or so. So I think we expect a little bit of pick up from front just no longer recognizing equity method deficits associated with Pillarstone. And we move on to collecting the amounts that were due.

John Associate

And then we expect lower litigation costs and by it's a $0.03 drag, I mean versus kind of run rate? No Pillarstone at all.

David Holeman

Okay. Okay. Okay.

John Associate

I mean, are you kind of assuming that being at a full year, the kind of of those elevated G&A costs or is that something that, you know, should end roughly in July just because you mentioned it adds when you expected to or at least we're guiding to start monetizing or collecting some kind of monetization from the Pillarstone assets while we've forecasted about $1.5 of litigation expense associated with Pillarstone.

Scott Hogan

It's hard to predict the timing of when all those matters get resolved.

John Associate

That's fair. And then apologies if I missed this earlier in the call, but the acquisition in February guard notes. Can you provide some color as to pricing and going in yield on that investment?

David Holeman

Sure. Hey, John. So kind of in early 24 were we pleased to close on a really nice acquisition in Houston in the garden Oak sub market, which is an area that is very, very strong continues to improve. And so really pleased with that.
And all the it's a center that has an Aldi has several tenants that are the type tenants. And we like that support the surrounding community and has real upside, I think from continuing to apply what we do well, which is Christine and her team, just really looking at the tenants and what we what they provide the community. So we're very pleased.
The acquisitions they get fits. Our portfolio well was part of our capital recycling program. So I think we've upgraded to a much better asset there with greater upside than what we disposed of as far as pricing and cap rates. I think that at this point, we have not I think the 10 K we'll have the acquisition price. I think David probably will be in the 10 K that's filed, but we haven't given individual cap rates on acquisitions.
But I will tell you it is I think we shared with you the capital recycling program that we've been able to sell assets kind of at the six to cap rate going out. And we are buying assets above that. So this fits in that the scenario. But there will be some of the actually the I can't remember the exact amount it was in the 2020 to $30 million range, what the acquisition price was, but that make that exact amount will be in the 10-K we file very shortly.

John Associate

And then just we haven't given cap rates on individual of sales or dispositions interested?
And then maybe bigger picture, I know you've given very clear at NOI guidance, but yes, how should we think about rent growth as a component of that is what you were seeing in 23, something you think you can continue into 24 or is a lot of that NOI guidance going to be a maybe lighter maintenance CapEx, just given some of the items that we're in, your 23 results?

David Holeman

Yes, I think we're still seeing continued rent growth in all of our markets and I think the benefit now is we have have filled most of our larger boxes. And again, we don't have that many of them, but that was the challenge coming in 2022 and early 2023. And so the smaller spaces and by the way, smaller spaces doesn't mean smaller balance sheets and so in, there are a lot less capital intensive to turn.
And we anticipate with that again with their revenue, you know, the quality of revenue initiatives, a lot of what we're looking at is if we do have weaker tenants that aren't serving successfully serving the communities in this strong market, it makes sense to actually look at those businesses and transition them out and build in a stronger operations and John, one thing I might just add, I know you know this, but just one of the benefits obviously is Whitestone's shorter leases, which enables us to capture those those market increases more quickly.
So if you look at our our spreads, they're very strong and I think they're even stronger when you take into account the length of our leases compared to some of the others that report spreads.

Operator

(Operator Instructions) Michael Diana, Maxim Group.

Michael Diana

Okay. Thank you. Obviously most of my questions have been asked just and you made great progress on getting rid of non-core assets that don't fit. I think you said the only one that's left really is your headquarters building a deep. Do you have anything and any comment about that?

David Holeman

And I'll just add. So our headquarters office building is a six-story suburban office building. It is probably roughly 50% occupied. So it's very similar to some of that office product incredibly different than everything else we have in our portfolio, which are community centers and support neighborhoods so I think we, as Christine mentioned, we would expect to probably exit that property for us. It's just making sure we have we find a nice home for our roughly 50 people in Houston that occupy that were headquarters. They are we'd love to be in one of our retail centers.
Similarly, we have in some other markets, but I think when we look at our portfolio, kind of the noncore assets that don't fit this, the geography or the strategy. We've made a lot of progress there and would like is the only one we identify recycling wise, we'll always be looking at properties that we've owned for a period of time.
We've added value and we feel like there's there's a better way to redeploy those proceeds just like you would do with the stock portfolio. So strategically really would like would probably be the only property at this point that doesn't fit the strategy and then capital recycling will continue to look at it, redeploying proceeds where we can create more value for it.

Operator

Anthony Howe, Truist Securities.

Anthony Howe

Hey, guys. Sorry, just a quick follow-up on I noticed that the 24,000 square feet box at Windsor Park is still vacant. What's the plan for that space? And what type what type of demand, I guess seeing for this box?

Christine Mastandrea

Strong demand, but it's one of our only centers that's a power center and it has similar situations that other power centers have and it has some of those restrictions and covenants that you have to work through. So the demand is there.
We actually have a very interested party and we're just having to work through those what I would consider and items that are negotiable, but just take time because we have to work through that with the other tenants. So the demand's there and I'm I'm not concerned about filling it. Actually, we have a two interested parties on it. So it's just working through one, the timing with a couple of other tenants that are existing in the center.

Anthony Howe

So I'm assuming that you guys are trying to those covenants, right?

Christine Mastandrea

Because I know, that's one of the I think one of the key that they've always talked about, yes, as you know, that's something that we that's one of the business models that we have that we avoid. This is one of the very few centers that we have that it's one of the legacy assets, but and it's also a very well located Center in San Antonio, it's right at two major highways. So like I said, the demand is is there. But you know, this is a little bit slow going, but we anticipate that we'll have that completed this year?

Anthony Howe

And how would the Office Depot at that? I think there's Office Depot at the same asset, right.

Christine Mastandrea

I'm just saying yes, there is. And so what I'm finding is Office Depot has changed their business model a little bit and act more like a distribution center and a little less like retail, but it performs well. They're all the tenants that are there performed very well. Thanks.

David Holeman

Hey, Anthony. One thing I would just want to know with us is that there is we are finding that there's a different type of demand now for larger boxes. But there is demand that actually is coming around fairly strongly in retail just shifted to a different type of user. What do you mean by that lender or out of the room that Yes.

Christine Mastandrea

And yes, less hard goods, more services or a product and a service. So it's just a it's a move to that's why we moved to work with EOS at one of our centers, right? Because why compete with two other large grocers in the market that are already performing well. And when we did the study and found out that there was they were missing a fitness type of operator. We went for the strongest operator that was coming into the market. So and that's what you look at with these boxes?
I will I will, instead of leaning into hard goods, I will lean into something that drives repeat visits because then it benefits all the other clients in the center and it benefits the market as a whole. And when we do that, because again, there's more of a drive for services right now that number product you know, the sale of hard goods and soft goods and elect for these big box.

Anthony Howe

But have you guys ever consider just like you know, and I like dividing the space up to like smaller spaces because I know some of your peers have noted this idea that writes I convert these big boxes more are these small shop space to drive higher rents for the for the center?

David Holeman

Yes, it depends on the demand in the area. And one of the things that we always have to look at with this type of there's always a cost without.
And so how much linear square footage that you're how much linear feet Do you have a frontage compared to what type of data you have?
So fortunately we don't have a lot of that type of problem missing the portfolio. And we've been able to fill the boxes pretty effectively this year and last year because there is again the demand is just tapping in the right type of demand and making sure that it evolves with that, you know, the shift and the change in the neighborhood. But yes, we've done that and, you know, a couple of times where necessary. But, you know, we're always kind of cognizant of what the returns would be for doing that.

Anthony Howe

And sorry, just one last one for me, which tenant we placed.

David Holeman

That said that the on-box that was the pink color. So as we're finding this to be a very interesting source of traffic for our centers and especially with repeat businesses. So we had a number and two things about this because this is such a hot sport right now, and it's really interesting to see that's a very it's a hotspot for very interesting demographic. We're finding that the demographic that visits for this has a high repeat visit factor of like three times a week number one. And also it happens to be younger people that are playing the sport indoors, right?
So they're younger career oriented professionals that are looking to make sure they can reserve a core time versus waiting for the weather and other types of elements to play outside. So and so we studied this. We investigated a number of operations that are growing very, very fast. And we made a decision to our work with one that was more dedicated to the sport, and that's the Pichler and they're out of Utah, and they've done a really good job with their We study. We not only study then we went to visit them.
We went to visit other business units as well to understand how they make money and you know, it's a relatively low labor cost and it's actually a low capital costs that you need to put into these things. But the returns are pretty high on their sales so as we wanted to find the right one, the one that understood how to tap into the market quickly and had the first mover advantage. And so we worked with the Pichler and very happy that they just got their permit and we expect them to be open shortly.

Anthony Howe

That's pickle ball, right. I just want to make sure, yes, I think about I'm sorry, this is a yes or no, because there are wondering who the particular is adds pickle ball game and there are, you know, a number of variance on this, but we moved more towards the people that are more interested in playing and less towards the entertainment type of venue like come, chicken and Pickle, which are great, but they're a higher capital cost. So we went more into what we consider that the hardcore and the consistent player that likes to show up every week.

Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Holeman for any final comments.

David Holeman

We'll first of all thank everyone for attending today. As I said in my comments, I can't be more bullish about the strong fundamentals of our business and how Whitestone is positioned. We are excited and looking forward to a strong 2024 and look forward to providing updates as we move throughout the year. So once again, thanks to all and hope you have a great day. Thank you.

Operator

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