Bob Aronson - Director, IR Jim Mastandrea - Chairman and CEO Dave Holeman - CFO.

Mitch Germain - JMP Securities LLC Peter Martin - JMP Securities LLC RJ Milligan - Robert W. Baird & Co. Craig Kucera - Wunderlich Securities Carol Kemple - Hilliard Lyons.

Good day and welcome to the Whitestone REIT Second Quarter 2015 Earnings Conference Call. Today's conference is being recorded. All lines are in a listen-only mode and we will conduct a question-and-answer session at the end of our speaker remarks. At this time, I would like to turn the conference over to Mr. Bob Aronson, Director of Investor Relations.

Please go ahead, sir..

Thank you, Kylie. Good morning and welcome to Whitestone REIT's second quarter conference call. With us on the call this morning is Jim Mastandrea, Chairman and Chief Executive Officer; and Dave Holeman, Chief Financial Officer. Jim and Dave will begin the call with some prepared remarks.

Following that, they will both be available to take your questions. 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 and uncertainties.

Please refer to the Company's filings with the SEC including Whitestone's Form 10-K and Form 10-Q for a detailed discussion of these risks.

Acknowledging the fact that this call may be webcast for a period of time, it is also important to note that today's call includes time sensitive information that may be accurate only as of today's date, August 6, 2015.

Whitestone's second quarter earnings press release and supplemental operating and financial data package have been filed with the SEC. Our Form 10-Q will be filed shortly. All of these documents will be available on our website whitestonereit.com in the Investor Relations section.

Also included on the supplemental data package are the reconciliations from GAAP financial measures. And now with that said, I would like to turn the call over to Jim..

Thanks, Bob. And good morning, everyone, and thank you for joining us today on our second quarter conference call. I'll start by providing a high level overview of our performance for the quarter and then Dave will follow with a more detailed discussion of our results for the period and our revised outlook for the balance of 2015.

I'm pleased to say that our proven strategic business model has produced exceptional results for the second quarter highlighted by across the board increases in our financial key metrics.

Each quarter we build on the momentum of the previous quarter; but when compared to the same quarterly period in the previous year, revenues were up 27% and operating income was up 33%, funds from operation core was up 27% and funds from operation core per share was up 21%.

Our story is more appropriately captured over a longer timeframe, which brings into perspective the strength of our management team. On a year-over-year basis, this quarter marks our 19th consecutive quarter of revenue and NOI growth, our 20th consecutive quarter of FFO core growth, and our 9th consecutive quarter of FFO core per share growth.

At the forefront of our business, we develop and train our associates who in turn have produced a solid track record of acquiring value-add Community Centered Properties in high growth market such as Texas and Arizona and concurrently implement our development, redevelopment, leasing, and management plan to help us achieve our corporate objectives.

We have previously expanded our holdings in San Antonio, Dallas, Fort Worth, and Phoenix; and in late May, we entered the economically strong and fast growing Austin market with the acquisition of Davenport Village.

Davenport Village, which was acquired for $45.5 million, is a Class A neighborhood community center with approximately 129,000 square feet of leasable space. At the time of the acquisition, the center was 87% leased with considerable lease-up and value-add potential.

Subsequent to the end of the second quarter, we acquired two additional service oriented centers in Austin and now have a total of approximately 246,000 square feet of leasable space in one of the fastest growing and most vibrant cities in the country producing net operating income of around $6 million per year.

We now have $135 million invested in Austin and San Antonio, which we manage out of our newly opened divisional office in Austin, and expect to continue making off-market acquisitions in both of these dynamic city with an objective of becoming a leading owner and operator in each market.

Furthermore, we expect to close on additional acquisitions from our deep pipeline of value-add high value, high yield acquisition targets over the balance of 2015. So, there's even more to come. We remain bullish on Texas and experienced little or no impact from the rollback in energy markets to date.

In particular, the primary cities that we are building investment portfolios in have experienced positive economic and demographic growth. These cities support our service based business model that is designed to meet the daily needs of consumers who live in the communities surrounding our properties in these markets.

With limited supply of rental space in our target markets, the demand for space in our centers is strong.

Additionally, with most of our small space service tenant leases maintaining few or no covenants, our lease agreements are largely unencumbered by value limiting clauses as is typically found in many national credit and discount tenant agreements.

And with economies of scale in our respective markets, we have a competitive advantage to deliver quality space with exceptional outdoor gathering areas to our tenant.

In addition to investing in these new acquisitions, we continue to strategically invest in upgrading and leasing our existing community centers to optimize tenant mix, drive up rental rates, and increase overall occupancy.

Due to the efforts of our leasing team, rental rates on new and renewal leases were up over the same quarter last year as was our overall occupancy, which increased 40 basis points to 86.4%. We also broke ground and started an expansion on a parcel of land at our Starwood property in Frisco, which is just north of Dallas.

The expansion at the shops of Starwood will add 26,700 square feet of restaurant and retail space and 11,500 square feet of executive office space to the center and is expected to produce an annualized cash-on-cash return of approximately 10%.

Our second quarter performance clearly reflects the successful execution of our community centered property business model, which continues to drive outstanding results.

This model addresses two key paradigm shifts that we are faced with today; which are first, there is a greater percentage of households with two wage earners and second, online commerce particularly for soft and hard goods of household continues to transform the way that consumers shop.

In our community centric properties, we strive to match service oriented tenants with the daily needs of the surrounding neighborhood. Our tenant base spans a complementary mix of grocery and dining, health, wellness and beauty, education, and services.

Out typical tenants are growing businesses that occupy smaller spaces, but produce premium rental rates and seldom contain restrictive lease clauses. As a leader in this space, our focus on a complementary or consumer centric tenant mix differentiates Whitestone from our peers and allows for continued higher value creation in our communities.

The momentum in our business is growing. We have delivered significant increases since our IPO in revenues, net operating income, and FFO core and have seen FFO core per share stabilize and grow. We have also transitioned our portfolio on a geographic and product type base.

On a geographic basis, we have transitioned from the majority of our properties in Houston to a dynamic portfolio in Austin, San Antonio, Dallas, Fort Worth, Houston, Phoenix, and Chicago.

On a product type basis, we have shifted our product specialties on an invested capital basis to 85% retail and 15% office and flex space from approximately 45% retail and 55% office and flex space mix that existed at the time of our IPO. We expect this trend to continue resulting in a pure play retail community center portfolio.

We have a proven business model and a strategy for growth and we are proud of our accomplishments and achievements over the past five years.

We also have a rich history of success and as we look ahead, we are even more energized by the opportunities that we have as a company supported by our solid balance sheet and flexible capital structure to further grow Whitestone and enhance shareholder value. I'd now like to turn the call over to Dave Holeman, our Chief Financial Officer.

Dave, please..

Thanks, Jim. As Jim said, we had an outstanding second quarter as our innovative community centered business model continues to drive profitable growth. As compared to last year's second quarter, revenues increased 27.3% to $22 million and FFO core was up 27.3% to $8.5 million.

On a per diluted share and operating partnership unit basis, FFO core was $0.35 which represents a strong $0.06 increase or 20.7% over last year. We also generated a more than 33% year-over-year improvement in property net operating income.

Once again, these results reflect the strength of our operating model and the positive impact of our growth initiatives.

These growth initiatives, which include acquisitions of new properties and repositioning, redeveloping, and increasing overall occupancy and rental rates in our existing properties continued to be effective producing positive leasing spreads on both a cash and GAAP basis as well as higher occupancy levels.

On a GAAP basis, our spreads were 2.8% and 10.1% on new and renewal leases signed in the quarter respectively. Occupancy was also up for the quarter increasing to 86.4% from 86%. We have a diverse tenant base minimizing our individual tenant credit risk with our largest tenant representing only 2.1% of our annualized rental revenues.

Our general and administrative expenses for the quarter include $596,000 in acquisition costs and expenses of $1.7 million related to the amortization of non-cash share-based incentive compensation. Excluding these costs, general and administrative expenses were 12.4% of revenues, which is down 30 basis points from last year's second quarter rate.

We continue to see the benefit as we gain scale from our larger base of assets, on our property expenses, and our overhead costs. We also continue to believe that a performance based compensation program is the best way to align our team with all of our shareholders.

At the end of the quarter, we had 83 employees, which is up by only five employees from a year ago. Now, let me turn to our balance sheet. Our capital structure remains solid with one class of stock, no joint ventures, and a combination of property and corporate level debt.

Our weighted average interest rate on all fixed rate debt as of the end of the quarter was 3.92% and our underlying debt structure remains sound with a prudent mix of secured and unsecured debt as well as well laddered maturities.

This composition gives us significant support and the financial flexibility to react quickly to growth opportunities and changing macro economic conditions. On June 26, we completed a secondary offering of 3.8 million shares and we received net proceeds of approximately $49.7 million after underwriting fees and expenses.

We deployed $45 million of these proceeds to acquire two additional properties in Austin in early July. These two properties are 100% leased and were immediately accretive to earnings. We did not issue any shares under our ATM program during the quarter.

We'll continue to evaluate all sources of capital including usage on our corporate credit facility, recycling of capital generated from non-core property sales, debt issuance, and other accretive capital transactions.

At the end of the second quarter we had a total market capitalization, which includes both the market value of our equity and debt, of $753 million producing approximately $60 million in annual net operating income.

Our real estate debt was $403 million and our ratio of debt to EBITDA was 8.3 times at the end of the quarter, which is down 65 basis points from the level at the end of 2014. We continue to maintain a largely unsecured debt structure with 45 unencumbered properties out of 65 with an undepreciated cost basis of $481 million.

And lastly, based on our strong second quarter results, we are raising our full-year FFO core per share guidance to now be in the range of $1.27 to $1.32 per share. We plan to continue to make acquisitions from our robust pipeline and to pursue additional opportunities to drive our ongoing growth.

That concludes our remarks and Jim and I will now be happy to take your questions..

[Operator Instructions] We will take our first question from Mitch Germain from JMP Securities..

Good morning, guys. So, it seems like the investment focus is now shifting away from Phoenix into Texas and I know one of the big keys in Phoenix was playing on the ability to find distressed transactions.

So I'm curious in Austin, San Antonio; where are you guys sourcing your deals and maybe just talk about where your pipeline rests today?.

Mitch, this is Jim. We're not actually shifting from Phoenix to any other markets. We still have potential acquisitions in Phoenix. What we see is that the prices have had significant appreciation.

I mean we bought properties on a value-add basis in Phoenix as low as $58 a square foot, $75 a square foot, $78 a square foot; those properties are close to being 100% leased right now. So, what we've done is we've become one of the Top 4 largest property owners in Phoenix.

So, what we do is we then send our primary team into like for example Austin and San Antonio and then we work through some sources that we have there that have ferreted out properties for us that have opportunities for value-add.

And our objective is, to give you an example, in Houston for example and we don't strive for this, but it just happens the way it turns out that we are now listed as one of the Top 100 public companies in Houston.

I think we rank 66 out of 100, which we were surprised even to know the list existed and that we're on it and we're also in the Top 100 property owners in Houston. We now are in the Top 4 or 5 in Phoenix.

And so what we want to do is to grow our position in markets like Austin, San Antonio, Dallas, Fort Worth that we think we are strong markets so we can have really a competitive advantage in those markets.

So, where we're sourcing our deals to answer to that part of your question is that these are relationships that we've had long term that knew we've had an interest in these markets and have been setting up deals for us to look at when we felt it was time to move in that direction.

Currently we have two deals under contract that are in addition to what we've talked about and each of those deals are Community Centered Properties, one has a [Cougar] [ph] and the other one has a Randalls and they're very similar and I will say that we have one in each of the markets that I've mentioned..

One thing we obviously continue to believe is that geographic diversification makes sense and so what we've done is obviously as we built on our portfolio, we are balancing our portfolio in several markets.

As Jim mentioned, we have about $135 million invested in San Antonio and Austin today, roughly $350 million in Arizona, about $100 million in Dallas, and then the balance in Houston. So, we'll continue to geographically diversify into markets and fill out the markets maybe that don't have as many opportunities that exist..

Excellent. Peter's got one..

Could you just comment on kind of the smaller tenant momentum you're seeing today? I mean what's the sentiment there and anything with regards to leasing? Thanks..

Actually our approach to the small tenant is once we own a property, we determine what types of tenants will really serve the needs of that community and then we target on the best tenant in the marketplace that don’t want to expand into one of properties. So, we don't sit back and wait for a broker to bring us deals or respond on calls on signs.

For example our Market Street in DC Ranch in Scottsdale, when we bought it, it was in the 70% range; it's now past 90% and we have a few spaces left there and what's missing. We have seven restaurants that generate approximately $20 million a year in sales, a steakhouse, a ladies lounge, a men's lounge; and what's missing there is a cigar lounge.

So, have been studying cigar lounges. We have laid out space that we felt was the right type of space that would attract any high quality operator and now we had two cigar lounge operators competing for the space and we now have a letter of intent.

In a similar way in the very same type of tenant, we have a letter of intent for a space in north of Dallas in one of our properties there, it's a cigar lounge. The idea is that how do you pull people to your centers and how do they look at them as a place to meet or to hang out. So, we are seeing the momentum because we're pushing the momentum.

In other words, we're driving the kind of tenants that we want in our properties.

We've also gone through a small tenant configuration, which is we actually refer to it as [indiscernible], which is interior space in properties; it could be a retail property or one of our office properties; where we actually sell space on a daily, weekly, or monthly basis that's really designed for high technology.

And so, we are driving that type of business as well. So that's a long answer, but overall the small tenant space there's a great demand for it. They love what we do to our properties, they love how they can hang out and have a Starbucks or a Coffee Bean and have a cigar and meet their friends.

And so, we're beginning now to reach the point where tenants will look to be in more than one of our properties..

I'll add just a couple financial metrics that are kind of supportive of Jim's comments. Peter, as you know, about 70% of our tenants are less than 3,000 square foot tenants; smaller space tenant, service oriented. Those tenants provide a 53% premium on the rental rate versus our larger tenants and make up about as I said 70% of our tenant base.

Probably the best indicator of the success of those tenants has been our ability as we've renewed leases or signed new tenants they increase rates.

I think as we quoted, the leasing spreads on new leases were about 10% for the quarter and renewal leases were about 17% for the quarter on a GAAP basis as well as we had healthy increases really on a cash basis for the starting lease.

So, we've really seen those tenants do well and we've been able to inch the rates up as their businesses do very well..

Thanks, guys. Appreciate it..

We’ll take our next question from RJ Milligan with Baird..

Good morning, guys. So, same store NOI up almost 7% in the quarter.

I'm just curious is that a trend that you expect to continue throughout the rest of the year or is there some going on with the year-over-year comps that's boosting that number?.

We've given guidance for the year of 3% to 5% on same-store NOI growth, obviously it was a little larger that in the quarter. If you look at the year, it's I think more in the 4% range. So far for the year our NOI growth is pretty well on the guidance we've given, really nothing unusual in this quarter.

We have seen the leasing spreads, as I had mentioned, be very healthy that we continue to believe there is significant same-store growth in this portfolio..

Okay. So, still the 3% to 5% same-store NOI for the year..

Correct..

Okay.

And on the acquisitions, the two under contract or the two that were purchased after the end of the quarter, can you talk about what the initial going in yields were and what do you think the upside is given the fact that they're 100% leased?.

Well, one property we have is -- both of them are north 7%..

Let me give just the financial measures and then I'll let Jim give some color to it. So subsequent to the second quarter, we acquired two properties called Parkside North and Parkside South in Austin, approximately $45 million in combined acquisition price.

Jim mentioned those properties had about a 7% cash-on-cash going in yield and they were 100% occupied. So from a financial perspective, those are the two. We also have two under contract that are approximately $50 million in total value and the returns on those are similar, maybe a little bit lower occupancy levels..

And I would say the two that we acquired that are 100% occupied, there's really room in rolling over that leases that will increase significantly over the next three to five years.

What they do is they give us a stable income right now, they give us some economies of scale in the Austin market, one of the properties we have under contract will actually complement two other properties, and the one we have under contract has some additional upside that comes with some land.

And we love to buy properties parceled with land that we can actually expand the square footage..

One thing we've seen in a lot of our markets as well especially Phoenix where we acquired a lot of properties is gaining scale, as Jim mentioned, gives us the ability to really move tenants around to have flexibility to get other tenants.

So, obviously we now have six properties in Austin and San Antonio so getting that scale is very important as well..

Okay. And one final question.

Given the fact that cap rates have moved lower in the markets where you guys operate, any progress or thoughts on dispositions? I know there's some non-core assets that you'd eventually like to sell, but obviously it's dependent on pricing and I was just wondering how that market's looking for the disposition side?.

We're scrubbing our portfolio right now. We probably have 10 to 15 properties that we'll be looking at removing from our portfolio sometime in the next 12 months.

I think that from an operating perspective, we've been able to extract about as much cash flow as we can from them and they've really become less significant to our overall business model and to the total amount of the portfolio.

We've always felt that it's better to get closer to $1 billion in asset price before we roll off some of the non-core assets. But our objective is to become a dominant player in the retail segment. We may not be the largest, but we truly would want to be one of the most profitable in the retail segment of the industry.

And I think there is an opportunity to be one of the most profitable retail companies and when I say retail, retail oriented companies as opposed to being the largest. So, that's one of our key objectives..

Okay. Thanks, guys..

We’ll take our next question from Craig Kucera with Wunderlich Securities..

Appreciate the color on kind of how you see the business shaping out going forward, but I wanted to ask about your G&A. Your growth in your G&A expenses has been outpacing your revenue and I recognize that going into new markets, you've got to hire new people.

But at what point do you see it starting to get a little bit more scale? I think this quarter your G&A was about 23% of revenue and maybe a year or year-and-a-half ago it was maybe closer to 18%.

At what point do you think we'll start to see a little bit more scale?.

So, one of the things we have is we have some accounting or amortization of the stock comp that doesn't necessarily match up obviously with the vesting or earning of those shares. The accounting rules have you expense that sometimes in earlier periods so we're seeing a lot of amortization expense.

One of the measures I quoted is if you pull that out just for comparability purposes, we are about 12.4% of revenue with the stock comp and the one-time acquisition expenses. That's also a factor. If you look at this quarter, we had about $600,000 of acquisition expenses which are one-time, same quarter last year we had a much smaller number.

I think our first acquisition in 2014 was in July. From a headcount perspective, we've managed it very tightly. We now have 83 employees; as I mentioned, that's only up five employees from the prior year. So, the biggest part of the G&A expense you see is really an amortization of stock comp.

When you look period-over-period, that's probably cause of a lot of the increase this year. If you take those items out, 12.4% in the second quarter of 2015 which is down as I mentioned about 30 basis points from the same period of the prior year..

And let me just add to that. Offsetting the stock comp example, and I'll just use Dave and I as an example, we have kept our salary and bonuses flat.

In other words, our salary has been flat for three years and we've taken no bonus in three years because we are participating in the stock program so when our shareholders are rewarded, we're rewarded as well.

And I think that not only is that fitting, we are also in the bottom 25 percentile on the compensation scale in terms of salary, bonus, those kinds of things at the two top levels. So, we're very conscious of that. I'd like to also add that we're probably the only REIT in existence where every single Whitestone associate owns a share to its stock.

They all participate in the same program. For example we've recently hired a porter and a porter who really polishes the building and every day gets a wage of $12.50 an hour plus he has 800 shares of stock.

So Dave and I, when we hit the targets and we're awarded a percentage of the shares we have, this porter is awarded the same percentage when we hit the target at the same time.

So, I think that as a company having everyone who walks around feeling like owners is really an important ingredient to drive the same kinds of numbers that we're reporting not only this quarter, but I mean for 19 consecutive quarters we've produced year-over-year changes and this program has been in existence for that entire time..

Okay. And I guess this is more of a balance sheet question maybe for you guys. You're carrying a pretty decent amount of floating rate debt.

Sort of philosophically, how do you feel about the balance between fixed rate and floating rate debt given where we are in the interest rate cycle and kind of what the market is expecting in regard to interest rates going forward?.

We believe obviously we have a new credit facility that went into at the end of 2014. That credit facility is $500 million unsecured, we have nine of the top banks in the country in that facility. That facility gives us a lot of flexibility to close very quickly and to take advantage of opportunities that come before us.

One of the things we've done regularly is make sure that as we use that facility, we ladder our debt, we go ahead and fix rates. But as you mentioned, right now at the end of the quarter our variable rate debt is probably a little higher than it historically has been. In 2014 we put in place some fixed rates.

We're in the process of doing that as well and so you'll see us probably for the balance of the year lock down a little higher percent of our debt at fixed rates. Typically we've been in the probably 70%, 75% fixed of our debt and you'll see us trend there as well.

So, one of the things we'll do for the balance of the year is you'll see us take some of the variable rate and change that to fixed rate and then do additional laddering of our maturities.

As you know on the interest rate side, everyone's been predicting a rise in interest rates for a long time so from a current perspective, obviously there'll be a little bit of incremental interest expense if we do that, but that's really built into our plan..

Okay, great. Thanks, guys..

We’ll take our next question from Daniel Donlan with Ladenburg Thalmann..

It's actually [John Massocca] [ph] for Daniel. My first question is when do you guys expect Phase III of the expansion of the shops at Starwood to stabilize occupancy? I know it's a little ways out.

And also is any of that expansion already leased at this point?.

So the shops at Starwood Phase III, we have broken ground and begun on the development. We have significant pre-leasing, I want to say we have approximately 30% of the 35,000, 38,000 square feet that's currently under LOI heading to a lease. It's small; as you know, it's only 30,000 some square feet.

It's adjacent to our operating property, which is pretty close to 100% occupied. There's a tremendous amount of demand in that area of Frisco. There's lots of great things going on.

So I think from an underwriting standpoint we typically model out about an 18 month period to stabilize, but we believe with this asset given the demand in the area and the size, we'll be able to beat that stabilization timeframe..

And then moving on to Austin, what kind of cap rates specifically in that market are you seeing? And at Davenport, my kind of rough math there you guys bought it below at 6%, I don't know if that's what you guys are coming up with, and you said the subsequent acquisition was at 7%. So, it seems like there's a bit of a range there.

Is that an accurate way to look at that market?.

I'll touch the numbers and Jim can probably add some color. I think when you look at Davenport, a couple of things. The NOI going in was approximately 6.5% of the purchase price, but that purchase price was 85% leased so I guess if you translate that cap rate, that's north of 7%. As you mentioned, Parkside was around 7%.

So, we're seeing those initial cash-on-cash yields going in that 7% range. As Jim mentioned, we believe there's upside for rental roll as well as really just the economies of scale continuing to build out that portfolio. The Austin market is incredibly dynamic.

I don't know if you've been there a while, but obviously the trends are very good there, the growth rates, a lot of great activity in the Austin market..

I would say, Dan, on the surface you're going to literally see lower cap rates on properties going in. But what we do is we really get underneath the leases and we look for short expiration cycles and we study the market very carefully to look at what the market rent should be.

And what we find on properties our size and particular service based properties, we are totally focused on the service based community and so we know how to take and get in and we restructure these properties ultimately to yield in the double-digit range.

So you might see some low cap rates like that going in, but it doesn't mean that that's going to be the return on a long-term basis..

And then lastly with your new core FFO per share guidance, does that take into account the acquisition made subsequent to 2Q15 end and just how much of your guidance increase was tied to that acquisition?.

So, the guidance increase takes into account any acquisitions we have announced so we have built into the acquisition guidance the two Parkside properties.

Really the key drivers of the guidance we've just updated; they are 3% to 5% same-store growth, all of the acquisitions we have announced which include the two just subsequent to the quarter, and then as I mentioned, we've also built into it little bit of additional interest expense cost for the balance of the year from laddering and fixing some rates.

So, all of those items are built into the $1.27 to $1.32. Obviously we anticipate that we'll continue to see opportunities to grow in a profitable way over the balance of the year and we will update the guidance that's necessary for those factors..

Alright. That's it for me. Thank you very much..

And we will take our final question from Carol Kemple with Hilliard Lyons..

Good morning.

When you'll were talking about your small shop space, you all have a number for how much your small shop occupancy is compared to your anchor or larger space occupancy?.

Carol, that's a great question, I'd be glad to follow up with you on that. I think if you look at the pure play retail in our portfolio, it's I believe 88% occupied as of the end of the quarter. That's a little higher than the blended average. Most of that is the smaller spaces that I would be glad to follow up with that info for you.

I don't have that right now..

Okay. And then I noticed your operation and maintenance number as a percent of your rental revenue came down from last year.

Was that synergies or are you all just being smarter? What's the reason for that?.

I think it's hopefully all of those items. But as we grow, we continue to see the ability to manage our vendors and get improved rates. We have the ability to manage our people at our properties that help to take care of the properties and the tenants. So, some of that will come with scale.

Also as we've grown, we've tended to buy properties that were a little newer and vintage that require a little more upbeat than some of the legacy properties. So, I think you'll continue to see us being more efficient from a margin perspective on the properties similar to what we've done this quarter..

Okay.

And then there's just a little amount from discontinued operations in the quarter, what was that related to?.

So in end of 2014 we sold three properties, three small office properties here in Houston so those are the three properties that are classified as discontinued ops. Those properties were disposed in end of 2014, I think there's a small amount in this year just related to some trailing transaction costs with closing up those properties.

I can't remember the exact amount, but it was a pretty small amount I think, Carol..

Okay. Thanks..

And I would now like the conference back over to James Mastandrea for any additional or closing remarks..

Thank you, all. Thank you for joining us. So in closing, what I would like to do is thank you all again for joining us on our call today and also to thank you for your continued confidence in Whitestone. To quickly recap, we generated strong increases across the board in our key financial measures.

We increased rental rates and occupancy, we continued to enhance the quality and size of our portfolio, we closed on accretive acquisition in Austin, and we have prudently managed our expenses and capital structure.

We're pleased with these accomplishments and truly believe that we are well positioned with a proven concept and business model to continue on our path of profitable growth.

As we continue to build an industry leading real estate enterprise, we expect the market to recognize this success and reward our shareholders with a higher valuation multiple that reflects the true market value of our underlying assets and our forward thinking business model that has over 19 past quarters proved that it has strong roots in success.

We look forward to speaking to you again and please feel free any of you to come by and visit or call me or Dave and we can answer any of your question. With that operator, we will end our call for today..

Thank you. This does conclude today's conference. Thank you all for your participation. You may now disconnect..