Good day, and welcome to the Whitestone REIT's Second Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kevin Reed, Director of Investor Relations. Please go ahead, sir.

Thank you, Eduardo. Good morning, and thank you for joining Whitestone REIT's Second Quarter 2020 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 press 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 6, 2020. The company undertakes no obligation to update the information. Whitestone's second quarter earnings press release and supplemental operating and financial data package have been filed with the SEC and are available on our website, www.whitestonereit.com, in the Investor Relations section. During this presentation, we may reference certain non-GAAP financial metrics which we believe allow investors to better understand the financial position and performance of the company. Including the earnings press release and supplemental data package are the reconciliations of non-GAAP measures to GAAP financial measures. With that, let me pass the call to Jim Mastandrea.

Thank you, Kevin, and thank you all for joining us on our second quarter investor call today. Today, I would like to share what I believe are pivotal to Whitestone's business, and our CFO, Dave Holeman, will provide even greater detail our operating and financial performance as well as a more detailed COVID update. Given that we've all been affected by COVID-19 pandemic, we hope that all of you, your families and the businesses are doing well and staying safe. The past 6 months have been incredibly challenging for everyone across the country and the world. As the U.S. economy fell off the cliff in March of 2020, we reacted quickly with safeguards we had in place. In terms of our markets and specifically, as it relates to our community-centered shopping centre's located within Texas and Arizona, we too have faced extraordinary challenges, although I believe somewhat less than other parts of the country, operating in states with more business-friendly characteristics as we are. At the time of our earnings call back in May, we were in the early stages of the pandemic and 63% of our tenants were open, and April collections were 64%. As I report today, I am pleased to say that 94% of our businesses are open, and we collected 81% of our rents during the second quarter and have collected 86% for July so far. Our business model, which has been crafted from the lessons we learned during the 2008 recession and prior economic downturn, performs exceptionally well in good times and minimizes financial risk in these toughest of times. Our business operations have produced exceptional compounded growth rates since our IPO in 2010, and this trend continues, with our relatively strong performance in the second quarter and in the face of very difficult headwinds.…

Thanks, Jim. First, I would like to take this opportunity to thank all of our associates who continue to produce the best results possible given very difficult times. We have a highly dedicated team that works every day to create local connections and communities that thrive, and we feel strongly that we are positioned to withstand the current headwinds and thrive into the future. Given the severe economic pressures caused by the stay-at-home orders during the quarter, our portfolio has held up remarkably well. Entering the pandemic, our overall occupancy stood at 89.7%. Despite having a significant amount of our tenant businesses closed or severely impacted for all or part of the quarter, we only had a handful of tenants closed for good, such that the portfolio occupancy rate held up well, ending the quarter at 89.2%. Also, our annualized space rent per square foot held relatively flat at $19.58. While our square foot leasing activity was down 37% from the second quarter of 2019, we were pleased with positive leasing spreads of 13.5% and 3.4% on renewals and new leases signed in the quarter. As Jim mentioned, for the quarter, we collected 81% of our rents. This includes base rent and triple net charges billed monthly. We have also entered into rent deferral agreements for 5% of our second quarter rents. As part of the deferral agreement, we have negotiated beneficial items such as entry into our online payment portal, reporting of tenant sales, suspension of co-tenancy requirements, loosening of exclusives or restrictions, allowing further development and stronger guarantees. Today, 94% of our businesses are open. As a result, July collections have shown improvement. To date, we have collected 86% of our July rents which compares favorably to Q2 and to the April collections of 64% we reported at…

[Operator Instructions]. We will now take our first question from Aaron Hecht at JMP Securities.

Dave, you made a comment about parking lots filling back up, consumer demand expanding. Just wondering if you guys could talk about that a little bit more. Do you have any metrics year-over-year on the traffic that you're seeing at your community centers? And is that traffic -- do you think that, that supports the majority of the businesses that are operating today in terms of the rent profile that they're paying?

Yes. Thanks, Aaron. I'll comment and Jim may comment as well. Great question. We do monitor the traffic at our centers as well as our tenants, and we have seen significant increases, obviously, since the beginning of the pandemic and continue to see increases. We also, as you know, operate in states that have been probably a little less restrictive on some of the shutdown orders and continued to operate businesses. So we are monitoring the traffic. We are seeing increased traffic. Obviously, it's still down from a year ago, but I think the trends are good in our markets and like many markets, I think you have people that are anxious to get out and go along with life in a very safe manner.

Aaron, this is Jim here. Thank you for the question. [indiscernible] by someone in our management team to be property managers or leasing [indiscernible]. And we still have activity of people interested in leasing space. Some of our properties are visited weekly by the corporate management. I personally try to visit each property 4 times a year. What we're seeing is a significant pickup in the traffic in and out of some of the lease -- some of our tenants and the key is it's an interesting time of year because in Phoenix, it's like 118 degrees. So it's relatively hot, and we still see tenants who are visiting the properties and visiting the floor tenants. You can smell when it is picking up. You see the traffic that's picking up. It's sometimes hard to find the parking space and just the obvious signs of happening. As far as the data representing that, we continue to track it. I think that we're collecting 81% of our billings for the second quarter, really puts us at the top of the heap in terms of collectibility. And keep in mind that that's relative to having a huge tenant base that we have. So we work with the tenants very closely. We get feedback from them and we respond to them. We know the social distancing hurt them. And most of the things that we hear is that they're looking forward to the year-end and they think this is being settled out.

Right. And obviously, some retailers have performed better during this environment than others. Are you seeing certain groups locally looking to expand their footprint and approaching you guys about that? Are there requests for -- or the market for space? Would that represent declines year-over-year if you changed our retailers -- kind of the demand from the retailer side and the price in out there? Can you comment on that?

Yes. I think a couple of comments. We are -- there are certain groups that are performing better than others as it's fairly obvious to see us look at our supplemental data, Page 25, you'll see our breakout of our tenant mix, which we think is well crafted. So there are groups that are performing a little better. Some of them, like entertainment venues, are having a little softer and slower times and getting back. But we are seeing -- we're seeing demand from kind of creative and new uses. I think one of the things we've seen is some of the traditional mall tenants are looking for spaces in open air centers. So that's something we feel very good about and looking -- reaching out some of those folks. And then our business model was crafted with smaller spaces, we're very focused geographically, know the markets really well, know the tenants. So we're very comfortable in our ability to re-lease quickly if we do have some fallout. And so I think we are seeing the demand. And as we mentioned, one of the things we're doing, obviously, is looking for ways to help tenants grow their revenues in these tough times. And so expanding into parking lots, doing those kind of things, being creative with tenants has gone a long way of showing our tenants that we are working with them.

Yes. And I'll add to that, Aaron. What we're seeing is we have some small office spaces called CUBEXEC. We're seeing an interest in those because they're enclosed and then they are basically individuals working alone and it is a safe environment, which they feel safe in it as well. We're seeing that continuing to increase in the 4 locations in our centers like that. We're seeing an interest in [indiscernible]. They're starting to branch up with our centers, where people having interest in [indiscernible] and that's starting to take on some more momentum today. We're -- eventually to forward our conference call, we're seeing in the cigar lounges that we have, which are easy in high-income neighborhood. We're seeing them fairly well crowded with the spacing that they require, but it seems like we're seeing a lot of interest in that. Some of the coffee shops we have, we're seeing some of the employees taking the role of being social police, which is kind of interesting. The takeout service seems to be picking up. I was talking to one of our -- one of the employees today. And they said 50% of their business now is e-mail. I can get their order and just walk-in and pick it up. So we're still -- we're seeing this pick up. We're seeing people adjust quite nicely. And what's interesting with our properties, they're all open air. And open air, people feel very good. And we're only in Texas and Arizona. So there is that. We have much benefit by just being in those 2 states.

Right. [indiscernible] good job on the collection.

[Operator Instructions]. There seems to be no further questions. I'll turn it back to James Mastandrea for any additional or closing remarks. Please, go ahead.

Well, we like it when we don't get a lot of questions. It says we've adequately covered the events that people would like to hear. I think one of the things just in closing, I'd like to say a few things. One is that we are in a very difficult industry and yet we've been able to perform relatively well. I've mentioned in my remarks about Whitestone trying to solidify its brand, and I think as investors begin to understand what we do and how we do it, I think they'll be very pleased with their investment in Whitestone. We recognize that these are really extraordinary times, and we continue to evolve and evolve rapidly. While the near term we see is relatively difficult to predict, we do believe it will come to pass and we do believe there are better times ahead. Our platform is strong. Our business model is proven, and we remain resolute on our focus of capital and value preservation. Our team is passionate and committed to successfully navigating the crisis and being positioned to execute on future opportunities which I will add that we're starting to see some really interesting opportunities in this marketplace. So we look forward to moving ahead and we intend to stay true to our values. We want to do that as we stay true to our strategic plan because it's working and so why change it if it's working, and work with our -- the same standards that we've been implying since we've really put this company together 10 years ago with the -- and unwavered to it though this pandemic. [indiscernible] on our shoulders as we remain focused on serving our shareholders and creating and preserving for you long-term value. So with that, I'd leave just by saying thank you. And for now, if anyone would like to call me or Dave or everyone with the company or visit our properties, please don't hesitate to do so. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.