10-Q 1 wstr20240331_10q.htm FORM 10-Q wstr20240331_10q.htm
0001175535 Whitestone REIT false --12-31 Q1 2024 0.001 0.001 50,000,000 50,000,000 0 0 0 0 0.001 0.001 400,000,000 400,000,000 49,958,896 49,958,896 49,610,831 49,610,831 0.1200 0.1200 5 1 13,632,764 1 5 8 7 265,000 265,000 3.18 3.18 1.45 1.45 2.10 2.10 January 31, 2028 January 31, 2028 80,000 80,000 3.72 3.72 June 1, 2027 June 1, 2027 19,000 19,000 4.15 4.15 December 1, 2024 December 1, 2024 14,000 14,000 4.34 4.34 September 11, 2024 September 11, 2024 14,300 14,300 4.34 4.34 September 11, 2024 September 11, 2024 15,100 15,100 4.99 4.99 January 6, 2024 January 6, 2024 50,000 50,000 5.09 5.09 March 22, 2029 March 22, 2029 50,000 50,000 5.17 5.17 March 22, 2029 March 22, 2029 2,500 7.79 February 28, 2025 50,000 50,000 3.71 3.71 1.5 1.5 2.1 2.1 September 16, 2026 September 16, 2026 http://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMember http://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMember 1.50 1.50 2.10 2.10 September 16, 2026 September 16, 2026 4 http://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMember http://fasb.org/us-gaap/2024#InterestExpense http://fasb.org/us-gaap/2024#InterestExpense 0 1 3 3 3 3 3 3 3 5 1 13,632,764 false false false false On December 26, 2021, the Board of Trustees of Pillarstone REIT adopted a new shareholder rights agreement (the “Pillarstone Rights Agreement”). Because Pillarstone REIT sought to use the Pillarstone Rights Agreement to prevent Whitestone OP from exercising its contractual Redemption Right, on July 12, 2022, Whitestone OP filed suit against Pillarstone REIT in the Court of Chancery of the State of Delaware challenging the Pillarstone Rights Agreement. On September 8, 2022, Whitestone OP’s Motion to Preserve the Status Quo was granted by the Court, limiting Pillarstone OP from engaging in any acts outside the ordinary course of business and otherwise imposing restrictions on Pillarstone OP to ensure that Whitestone’s right of redemption is not impaired while the underlying dispute is being considered by the Court. On January 25, 2024, the Delaware Court of Chancery: held that Pillarstone breached the implied covenant of good faith and fair dealing when it adopted the Pillarstone Rights Agreement that thwarted Whitestone OP from exercising the unfettered contractual redemption right it obtained in connection with its investment in the partnership; and the Court held that the Rights Plan was unenforceable as to the limited partner and allowed Whitestone OP to exercise its redemption right; allowed Pillarstone to determine the current value of the Partnership’s assets; and, as necessary, later enter a monetary judgment against Pillarstone for the difference between the amount Whitestone would have received in or around December 2021 and the current value. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. On March 4, 2024, Pillarstone REIT authorized and filed the Chapter 11 bankruptcy of itself, Pillarstone OP, and the remainder of its special purpose entities in the United States Bankruptcy Court for the Northern District of Texas. As of the date of this filing, Whitestone has not received consideration for its redemption of its equity investment in Pillarstone OP as required by the partnership agreement. We intend to pursue collection of amounts due from Pillarstone OP through all means, including further litigation if necessary and while we do not know the ultimate amount to be collected, we believe the amount will be in excess of the current carrying value of our equity investment in Pillarstone OP. We rely on reporting provided to us by Pillarstone OP’s general partner for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of March 31, 2023 have not been made available to us, we have estimated the value of the investment based on the information available to us at the time of this report. We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of March 31, 2023 have not been made available to us, we have estimated the value of the investment based on the information available to us at the time of this report. We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of March 31, 2023 have not been made available to us, we have estimated total assets and its components based on the information available to us at the time of this report. For a reconciliation of cash, cash equivalents and restricted cash, see supplemental disclosures below. The Company acquired common shares held by employees who tendered owned common shares to satisfy the tax withholding on the lapse of certain restrictions on restricted common shares. A portion of the unsecured line of credit includes an interest rate swap to fix the SOFR portion of the loan at 3.71%. Promissory note includes an interest rate swap that fixes the SOFR portion of the term loan at an interest rate of 2.16% through October 28, 2022, 2.76% from October 29, 2022 through January 31, 2024, and 3.32% beginning February 1, 2024 through January 31, 2028. There was no ineffective portion of our interest rate swaps to recognize in earnings for the three months ended March 31, 2024 and 2023. These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed. Operating lease liabilities $ 132 $ 129 We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of March 31, 2023 have not been made available to us, we have estimated total liabilities and equity and its components based on the information available to us at the time of this report. Operating lease right of use assets (net) $ 129 $ 124 Rental Rental revenues $ 26,521 $ 25,244 $ 78,780 $ 75,023 Recoveries 10,535 10,152 30,571 29,092 Bad debt (389 ) (367 ) (946 ) (615 ) Total rental $ 36,667 $ 35,029 $ 108,405 $ 103,500 Representing eight property interests and 926,798 square feet of GLA, as of December 31, 2023. Subsequent to January 25, 2024, the Company ceased utilizing the equity method following the exercise of its notice of redemption for the majority of its investment in Pillarstone OP. 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission File Number 001-34855

WHITESTONE REIT

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

76-0594970

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

2600 South Gessner, Suite 500

 

77063

Houston, Texas

  

(Address of Principal Executive Offices)

 

(Zip Code)

 

(713) 827-9595

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares of Beneficial Interest, par value $0.001 per share

WSR

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒Yes     ☐No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒Yes    ☐No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Small reporting company

     

Emerging growth company

   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ☒ No

 

As of April 26, 2024, there were49,959,638 common shares of beneficial interest, $0.001 par value per share, outstanding.

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

1

 

Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023

1

 

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2024 and 2023

3

 

Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2024 and 2023

6

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023

8

 

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

53

Item 4.

Controls and Procedures.

53

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

54

Item 1A.

Risk Factors.

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

55

Item 3.

Defaults Upon Senior Securities.

55

Item 4.

Mine Safety Disclosures.

55

Item 5.

Other Information.

55

Item 6.

Exhibits.

55

 

Exhibit Index

56

 

Signatures

57

 

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

  

March 31, 2024

  

December 31, 2023

 
   (unaudited)     

ASSETS

 

Real estate assets, at cost

        

Property

 $1,230,936  $1,221,466 

Accumulated depreciation

  (232,867)  (229,767)

Total real estate assets

  998,069   991,699 

Investment in real estate partnership

     31,671 

Cash and cash equivalents

  6,215   4,572 

Restricted cash

     68 

Escrows and deposits

  17,272   24,148 

Accrued rents and accounts receivable, net of allowance for doubtful accounts

  31,055   30,592 

Receivable from partnership redemption

  31,643    

Receivable due from related party

  1,522   1,513 

Unamortized lease commissions, legal fees and loan costs

  14,200   13,783 

Prepaid expenses and other assets(1)

  11,302   4,765 

Finance lease right-of-use assets

  10,406   10,428 

Total assets

 $1,121,684  $1,113,239 
         

LIABILITIES AND EQUITY

 

Liabilities:

        

Notes payable

 $644,981  $640,172 

Accounts payable and accrued expenses(2)

  32,133   36,513 

Payable due to related party

  1,577   1,577 

Tenants' security deposits

  8,799   8,614 

Dividends and distributions payable

  6,215   6,025 

Finance lease liabilities

  716   721 

Total liabilities

  694,421   693,622 

Commitments and contingencies:

        

Equity:

        

Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of March 31, 2024 and December 31, 2023

      

Common shares, $0.001 par value per share; 400,000,000 shares authorized; 49,958,896 and 49,610,831 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

  50   50 

Additional paid-in capital

  627,876   628,079 

Accumulated deficit

  (213,798)  (216,963)

Accumulated other comprehensive income

  7,517   2,576 

Total Whitestone REIT shareholders' equity

  421,645   413,742 

Noncontrolling interest in subsidiary

  5,618   5,875 

Total equity

  427,263   419,617 

Total liabilities and equity

 $1,121,684  $1,113,239 

 

See accompanying notes to Consolidated Financial Statements.

 

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

   

March 31, 2024

   

December 31, 2023

 
      (unaudited)          

(1) Operating lease right of use assets (net)

  $ 108     $ 109  

(2) Operating lease liabilities

  $ 112     $ 112  

 

See accompanying notes to Consolidated Financial Statements.

 

 

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Revenues

               

Rental(1)

  $ 36,741     $ 35,497  

Management, transaction, and other fees

    423       354  

Total revenues

    37,164       35,851  
                 

Operating expenses

               

Depreciation and amortization

    8,800       7,846  

Operating and maintenance

    6,349       6,086  

Real estate taxes

    4,238       4,708  

General and administrative

    6,180       5,084  

Total operating expenses

    25,567       23,724  
                 

Other expenses (income)

               

Interest expense

    8,519       7,903  

Gain on sale of properties

    (6,525 )      

Loss on disposal of assets

          6  

Interest, dividend and other investment income

    (8 )     (20 )

Total other expenses

    1,986       7,889  
                 

Income before equity investment in real estate partnership and income tax

    9,611       4,238  
                 

Deficit in earnings of real estate partnership

    (28 )     (218 )

Provision for income tax

    (119 )     (119 )

Net income

    9,464       3,901  
                 

Less: Net income attributable to noncontrolling interests

    124       54  
                 

Net income attributable to Whitestone REIT

  $ 9,340     $ 3,847  

 

See accompanying notes to Consolidated Financial Statements.

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands, except per share data)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Basic Earnings Per Share:

               

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares

  $ 0.19     $ 0.08  

Diluted Earnings Per Share:

               

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares

  $ 0.18     $ 0.08  
                 

Weighted average number of common shares outstanding:

               

Basic

    49,940       49,424  

Diluted

    51,112       50,160  
                 

Consolidated Statements of Comprehensive Income (Loss)

               
                 

Net income

  $ 9,464     $ 3,901  
                 

Other comprehensive income (Loss)

               
                 

Unrealized gain (loss) on cash flow hedging activities

    5,007       (4,587 )
                 

Comprehensive income

    14,471       (686 )
                 

Less: Net income attributable to noncontrolling interests

    124       54  

Less: Comprehensive income (loss) attributable to noncontrolling interests

    66       (64 )
                 

Comprehensive income (loss) attributable to Whitestone REIT

  $ 14,281     $ (676 )

 

See accompanying notes to Consolidated Financial Statements.

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

(1) Rental

               

Rental revenues

  $ 26,864     $ 25,740  

Recoveries

    10,477       10,081  

Bad debt

    (600 )     (324 )

Total rental

  $ 36,741     $ 35,497  

 

See accompanying notes to Consolidated Financial Statements.

 

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(in thousands)

 

                  

Accumulated

                 
          

Additional

      

Other

  

Total

  

Noncontrolling

     
  

Common Shares

  

Paid-In

  

Accumulated

  

Comprehensive

  

Shareholders’

  

Interests

  

Total

 
  

Shares

  

Amount

  

Capital

  

Deficit

  

Income (Loss)

  

Equity

  

Units

  

Dollars

  

Equity

 
                                     

Balance, December 31, 2023

  49,611  $50  $628,079  $(216,963) $2,576  $413,742   694  $5,875  $419,617 

Exchange of noncontrolling interest OP units for common shares

  44      355         355   (44)  (355)   

Issuance of shares under dividend reinvestment plan

  2      23         23         23 

Repurchase of common shares (1)

  (118)     (1,442)        (1,442)        (1,442)

Share-based compensation

  420      861         861         861 

Distributions - $0.1200 per common share / OP unit

           (6,175)     (6,175)     (92)  (6,267)

Unrealized loss on change in value of cash flow hedge

              4,941   4,941      66   5,007 

Net income

           9,340      9,340      124   9,464 

Balance, March 31, 2024

  49,959  $50  $627,876  $(213,798) $7,517  $421,645   650  $5,618  $427,263 

 

See accompanying notes to Consolidated Financial Statements

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(in thousands)

 

                  

Accumulated

                 
          

Additional

      

Other

  

Total

  

Noncontrolling

     
  

Common Shares

  

Paid-In

  

Accumulated

  

Comprehensive

  

Shareholders’

  

Interests

  

Total

 
  

Shares

  

Amount

  

Capital

  

Deficit

  

Income (Loss)

  

Equity

  

Units

  

Dollars

  

Equity

 
                                     

Balance, December 31, 2022

  49,423  $49  $624,785  $(212,366) $5,980  $418,448   695  $6,006  $424,454 

Issuance of shares under dividend reinvestment plan

  2      17         17         17 

Share-based compensation

        755         755         755 

Distributions - $0.1200 per common share / OP unit

           (5,931)     (5,931)     (83)  (6,014)

Unrealized loss on change in value of cash flow hedge

              (4,523)  (4,523)     (64)  (4,587)

Net income

           3,847      3,847      54   3,901 

Balance, March 31, 2023

  49,425  $49  $625,557  $(214,450) $1,457  $412,613   695  $5,913  $418,526 

 

(1)    The Company acquired common shares held by employees who tendered owned common shares to satisfy the tax withholding on the lapse of certain restrictions on restricted common shares.

 

See accompanying notes to Consolidated Financial Statements.

 

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Cash flows from operating activities:

               

Net income

  $ 9,464     $ 3,901  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    8,800       7,846  

Amortization of deferred loan costs

    265       277  

Gain on sale of properties

    (6,525 )      

Loss on disposal of assets

          6  

Bad debt

    600       324  

Share-based compensation

    861       755  

Deficit in earnings of real estate partnership

    28       218  

Amortization of right-of-use assets - finance leases

   

22

     

29

 

Changes in operating assets and liabilities:

               

Escrows and deposits

    6,876       2,796  

Accrued rents and accounts receivable

    (1,063 )     (1,646 )

Receivable due from related party

    (9 )     (26 )

Unamortized lease commissions, legal fees and loan costs

    (817 )     (521 )

Prepaid expenses and other assets

    997       (1,117 )

Accounts payable and accrued expenses

    (8,160 )     (7,843 )

Payable due to related party

          1  

Tenants' security deposits

    185       (85 )

Net cash provided by operating activities

    11,524       4,915  

Cash flows from investing activities:

               

Acquisitions of real estate

    (27,204 )      

Additions to real estate

    (3,041 )     (3,529 )

Proceeds from sales of properties

    25,661        

Net cash used in investing activities

    (4,584 )     (3,529 )

Cash flows from financing activities:

               

Distributions paid to common shareholders

    (5,969 )     (5,913 )

Distributions paid to OP unit holders

    (80 )     (83 )

Net proceeds from credit facility

    23,000       9,500  

Repayments of notes payable

    (20,869 )     (7,571 )

Repurchase of common shares

    (1,442 )      

Payment of finance lease liability

    (5 )     (2 )

Net cash used in financing activities

    (5,365 )     (4,069 )

Net increase (decrease) in cash, cash equivalents and restricted cash

    1,575       (2,683 )

Cash, cash equivalents and restricted cash at beginning of period

    4,640       6,355  

Cash, cash equivalents and restricted cash at end of period (1)

  $ 6,215     $ 3,672  

 

(1)

For a reconciliation of cash, cash equivalents and restricted cash, see supplemental disclosures below.

 

See accompanying notes to Consolidated Financial Statements.

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Supplemental disclosure of cash flow information:

               

Cash paid for interest, net of amounts capitalized

  $ 8,160     $ 7,610  

Non cash investing and financing activities:

               

Disposal of fully depreciated real estate

  $ 29     $ 864  

Financed insurance premiums

  $ 2,638     $ 3,002  

Value of shares issued under dividend reinvestment plan

  $ 23     $ 17  

Value of common shares exchanged for OP units

  $ 354     $  

Change in fair value of cash flow hedge

  $ 5,007     $ (4,587 )

Accrued capital expenditures

  $ 1,962     $  

Receivable from partnership redemption

  $ 31,643     $  

 

   

March 31,

 
   

2024

   

2023

 

Cash, cash equivalents and restricted cash

               

Cash and cash equivalents

  $ 6,215     $ 3,479  

Restricted cash

          193  

Total cash, cash equivalents and restricted cash

  $ 6,215     $ 3,672  
 

See accompanying notes to Consolidated Financial Statements.

 

9

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)

 

The use of the words “we,” “us,” “our,” “Company” or “Whitestone” refers to Whitestone REIT and our consolidated subsidiaries, except where the context otherwise requires.

 

1.  INTERIM FINANCIAL STATEMENTS

 

The consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2023 are derived from our audited consolidated financial statements as of that date.  The unaudited consolidated financial statements as of and for the period ended March 31, 2024 have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information on a basis consistent with the annual audited consolidated financial statements and with the instructions to Form 10-Q.

 

The consolidated financial statements presented herein reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of Whitestone and our subsidiaries as of March 31, 2024 and December 31, 2023, and the results of operations for the three month periods ended March 31, 2024 and 2023, the consolidated statements of changes in equity for the three months ended   March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023.  All of these adjustments are of a normal recurring nature.  The results of operations for the interim periods are not necessarily indicative of the results expected for a full year.  The statements should be read in conjunction with the audited consolidated financial statements and the notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Business.  Whitestone was formed as a real estate investment trust (“REIT”) pursuant to the Texas Real Estate Investment Trust Act on August 20, 1998.  In July 2004, we changed our state of organization from Texas to Maryland pursuant to a merger where we merged directly with and into a Maryland REIT formed for the sole purpose of the reorganization and the conversion of each of the outstanding common shares of beneficial interest of the Texas entity into 1.42857 common shares of beneficial interest of the Maryland entity.  We serve as the general partner of Whitestone REIT Operating Partnership, L.P. (the “Operating Partnership”), which was formed on December 31, 1998 as a Delaware limited partnership.  We currently conduct substantially all of our operations and activities through the Operating Partnership.  As the general partner of the Operating Partnership, we have the exclusive power to manage and conduct the business of the Operating Partnership, subject to certain customary exceptions.  As of March 31, 2024 and December 31, 2023, Whitestone wholly owned 55 and 55 commercial properties, respectively, in and around Austin, Dallas-Fort Worth, Houston, Phoenix and San Antonio.

 

As of March 31, 2024, these properties consist of:

 

Consolidated Operating Portfolio

 

 

50 wholly owned properties that meet our Community Centered Properties® strategy; and

 

Redevelopment, New Acquisitions Portfolio

 

 

five parcels of land held for future development.

 

Acquired properties are categorized in the new acquisitions portfolio until the earlier of 90% occupancy or 18 months of ownership.

 

As of March 31, 2024, our ownership in Pillarstone Capital REIT Operating Partnership LP (“Pillarstone” or “Pillarstone OP”) no longer represents a majority interest. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. As of the date of this filing, Whitestone has not received consideration for its redemption of its equity investment in Pillarstone OP as required by the partnership agreement.  We intend to pursue collection of amounts due from Pillarstone OP through all means necessary and while we do not know the ultimate amount to be collected, we believe the amount will be in excess of the current carrying value of our receivable, formerly our equity investment in Pillarstone OP. Please refer to Note 2 in this Quarterly Report on form 10-Q for more information regarding the accounting treatment of the redemption of our OP units in Pillarstone OP. 

 

10

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Basis of Consolidation.  We are the sole general partner of the Operating Partnership and possess full legal control and authority over the operations of the Operating Partnership. As of March 31, 2024 and December 31, 2023, we owned a majority of the partnership interests in the Operating Partnership. Consequently, the accompanying consolidated financial statements include the accounts of the Operating Partnership.

 

Noncontrolling interest in the accompanying consolidated financial statements represents the share of equity and earnings of the Operating Partnership allocable to holders of partnership interests other than us. Net income or loss is allocated to noncontrolling interests based on the weighted-average percentage ownership of the Operating Partnership during the period. Issuance of additional common shares of beneficial interest in Whitestone (the “common shares”) and units of limited partnership interest in the Operating Partnership that are convertible into cash or, at our option, common shares on a one-for-one basis (the “OP units”) changes the percentage of ownership interests of both the noncontrolling interests and Whitestone.

 

Estimates regarding Pillarstone OP’s financial condition and results of operations and guarantee. We rely on the reports furnished by our third-party partners for financial information regarding the Company’s investment in Pillarstone OP. As of March 31, 2024 and December 31, 2023, Pillarstone OP’s financial statements have not been made accessible to us. Consequently, we have estimated the financial status and operational outcomes of Pillarstone OP based on the information accessible to us at the time of this report.

 

The Company has a limited guarantee on Pillarstone OP’s loan for its Uptown Tower property located in Dallas, Texas. The guarantee is a so-called “bad boy” carve-out guarantee, which is generally only applicable if and when the borrower engages in acts such as fraud, prohibited transfers, breaches of material representations, environmental matters, and bankruptcy.  The debt matured on October 4, 2023, and was in default, as Pillarstone OP failed to refinance the loan. 

 

On December 1, 2023, the Company reached an agreement with the Lender that would avoid foreclosure and secure the release of the lien and discharge of the guarantee, and the Company negotiated and satisfied a payoff as of December 4, 2023, in the amount of $13,632,764 (the “DPO Amount”). We paid the DPO amount and will be entitled to assert a subrogation claim against Pillarstone OP. We recorded the DPO amount as an asset in our financial statement line escrows and deposits.  

 

The DPO Amount included a compromise settlement of approximately $1,688,000 for the disputed default interest and other fees.

 

On December 1, 2023, Pillarstone OP authorized and filed the Chapter 11 bankruptcy of its special purpose entity borrower that owns Uptown Tower (Whitestone Uptown Tower LLC) in the United States Bankruptcy Court for the Northern District of Texas.

 

On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP.

 

On February 9, 2024, the Lender filed suit in New York County, New York against the guarantor Whitestone OP and the Company for alleged amounts due under the guarantee. The compromise settlement is our best estimate of the amount due.

 

On March 4, 2024, Pillarstone Capital REIT (“Pillarstone REIT”) authorized and filed the Chapter 11 bankruptcy of itself, Pillarstone OP, and all of its remaining special purpose entities in the United States Bankruptcy Court for the Northern District of Texas (the “Pillarstone Bankruptcies”). As of the date of this filing, Whitestone has not received consideration for our redemption of our equity investment in Pillarstone OP as required by the partnership agreement.  

 

On April 24, 2024, the lender and Pillarstone OP filed a motion with the bankruptcy court seeking approval to settle the dispute and dismiss their mutual lawsuits including the lawsuit by the lender against the Company as Guarantor of the loan. On or before June 10, 2024, Pillarstone OP agreed to pay to the lender the sum of $1,123,950.24 plus all attorneys’ fees and costs (not to exceed $20,000.00) incurred by the lender from April 10, 2024 through the date of receipt of such payment. Upon timely receipt of the cash payment from Pillarstone OP, the lender shall retain and apply the $13,632,764.25 tendered to it by Whitestone REIT Operating Partnership, L.P. on or about December 4, 2023.

 

The Company does not believe a probable loss will be incurred, nor does it anticipate a material adverse effect on its financial position, results of operations, cash flows or liquidity. Therefore, the Company has not recorded a charge as a result of the Pillarstone Bankruptcies.

 

Equity Method. In compliance with Accounting Standards Update (“ASU”) 2014-09 (“Topic 606”) and Accounting Standards Codification (“ASC”) 610,Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets,” the Company previously accounted for its investment in Pillarstone OP using the equity method. However, subsequent to January 25, 2024, the Company ceased utilizing the equity method following the exercise of its notice of redemption for the majority of its investment in Pillarstone OP.

 

Accounting treatment of the redemption of our OP units in Pillarstone OP.  On January 25, 2024, we executed an irrevocable redemption of substantially all our investment in Pillarstone OP, converting our equity investment into a receivable. Pillarstone OP conveyed their intention to forego issuing equity, opting instead to liquidate the properties to satisfy creditors, with Whitestone being significantly the largest creditor. Based on insights from our legal team and advisors, we anticipate that the most probable outcome will involve the liquidation of all Pillarstone properties. 

 

The carrying value of our investment in Pillarstone OP was approximately $31.6 million as of January 25, 2024. We assert a claim of $70 million, inclusive of the $13 million default interest payment and accrued interest. It is anticipated that the claim and proceeds from liquidation will surpass the carrying value of our receivable for the redemption of our former equity investment in Pillarstone OP.

 

Subsequently, we reclassified our investment in Pillarstone OP to a receivable on our balance sheet after estimating 25 days of our share of the equity investment income. We will assess the credit losses of the receivable on a quarterly basis.

 

Any gains will be recognized once the proceeds received exceed our receivable.

 

This is within the scope of ASC 326, “Financial Instruments - Credit Losses.” The value of the unencumbered assets of Pillarstone OP is significantly in excess of Whitestone’s basis in the account receivable, but the precise value cannot be determined at this time. When applying the estimated loss rate method with a zero loss rate, the Current Expected Credit Losses (“CECL”) are zero according to ASC 326.  We will continue to monitor our legal team's assessment of the bankruptcy case and the value of the assets of Pillarstone OP to evaluate the credit risk of the receivable.

 

Basis of Accounting.  Our financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred.

 

Use of Estimates.   The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates that we use include the estimated fair values of properties acquired, the estimated useful lives for depreciable and amortizable assets and costs, the grant date fair value of common share units included in share-based compensation expense, the estimated allowance for doubtful accounts, the estimated fair value of interest rate swaps, the estimates supporting our impairment analysis for the carrying values of our real estate assets, and the estimates made regarding Pillarstone REIT Operating Partnership LP’s financial condition and results of operations.  Actual results could differ from those estimates. 

 

Reclassifications.  We have reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net income, total assets, total liabilities or equity.

 

11

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

Restricted Cash. We classify all cash pledged as collateral to secure certain obligations and all cash whose use is limited as restricted cash. During 2015, pursuant to the terms of our $15.1 million 4.99% Note, due January 6, 2024 (see Note 7 (Debt)), which was collateralized by our Anthem Marketplace property, we were required by the lenders thereunder to establish a cash management account controlled by the lenders to collect all amounts generated by our Anthem Marketplace property in order to collateralize such promissory note. The note was paid off in January 2024. As of March 31, 2024, we had no restricted cash.

 

Derivative Instruments and Hedging Activities. We utilize derivative financial instruments, principally interest rate swaps, to manage our exposure to fluctuations in interest rates. We have established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. We recognize our interest rate swaps as cash flow hedges with the effective portion of the changes in fair value recorded in comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Any ineffective portion of a cash flow hedges’ change in fair value is recorded immediately into earnings. Our cash flow hedges are determined using Level 2 inputs under ASC 820,Fair Value Measurements and Disclosures.” Level 2 inputs represent quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable. As of March 31, 2024, we consider our cash flow hedges to be highly effective.

 

Development Properties. Land, buildings and improvements are recorded at cost. Expenditures related to the development of real estate are carried at cost which includes capitalized carrying charges and development costs. Carrying charges (interest, real estate taxes, loan fees, and direct and indirect development costs related to buildings under construction) are capitalized as part of construction in progress. The capitalization of such costs ceases when the property, or any completed portion, becomes available for occupancy. For the three months ended March 31, 2024, approximately $ 134,000 and $ 61,000 in interest expense and real estate taxes, respectively, were capitalized. For the three months ended March 31, 2023, approximately $ 134,000 and $ 73,000 in interest expense and real estate taxes, respectively, were capitalized. 

 

Share-Based Compensation.  From time to time, we award nonvested restricted common share awards or restricted common share unit awards, which may be converted into common shares, to executive officers and employees under our 2018 Long-Term Equity Incentive Ownership Plan (the “2018 Plan”).  Awarded shares and units vest when certain performance conditions are met.  We recognize compensation expense when achievement of the performance conditions is probable based on management’s most recent estimates using the fair value of the shares as of the grant date.  We recognized $ 936,000 and $ 829,000 in share-based compensation net of forfeitures for the three months ended March 31, 2024 and 2023, respectively.

 

Noncontrolling Interests.  Noncontrolling interests are the portion of equity in a subsidiary not attributable to a parent. Accordingly, we have reported noncontrolling interests in equity on the consolidated balance sheets but separate from Whitestone’s equity.  On the consolidated statements of operations and comprehensive income (loss), subsidiaries are reported at the consolidated amount, including both the amount attributable to Whitestone and noncontrolling interests.  The consolidated statements of changes in equity is included for quarterly financial statements, including beginning balances, activity for the period and ending balances for shareholders’ equity, noncontrolling interests and total equity.

 

12

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

Accrued Rents and Accounts Receivable. Included in accrued rents and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. We review the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. We recognize an adjustment to rental revenue if we deem it probable that the receivable will not be collected. Our review of collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue. As of March 31, 2024 and December 31, 2023, we had an allowance for uncollectible accounts of  $13.9 million and $13.6 million, respectively. During the three months ending March 31, 2024 and 2023, we recorded an adjustment to rental revenue for bad debt, exclusive of straight-line rent reserve adjustments, resulting in a $0.6 million and $0.3 million decrease in revenue, respectively. The three months ended March 31, 2024 included 19 cash basis tenants, resulting in a decrease to rental revenue for straight-line rent adjustments of $0.02 million and a decrease to rental revenue for bad debt adjustments of $0.2 million. The three months ended March 31, 2023 included 71 cash basis tenants, resulting in a decrease to rental revenue for straight-line rent adjustment of $0.2 million and a decrease to rental revenue for bad debt adjustments of $0.2 million, respectively.

 

Revenue Recognition. All leases on our properties are classified as operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the consolidated statements of operations and comprehensive income (loss). Additionally, we have tenants who pay real estate taxes directly to the taxing authority. We exclude these costs paid directly by the tenant to third parties on our behalf from revenue recognized and the associated property operating expense.

 

Other property income primarily includes amounts recorded in connection with lease termination fees. We recognize lease termination fees in the year that the lease is terminated and collection of the fee is probable. Amounts recorded within other property income are accounted for at the point in time when control of the goods or services transfers to the customer and our performance obligation is satisfied.

 

See our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on significant accounting policies.

 

13

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

3.  LEASES 

 

As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the consolidated statements of operations and comprehensive income (loss).

 

A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842) under noncancelable operating leases in existence as of March 31, 2024 is as follows (in thousands):

 

Years Ended December 31,

 

Minimum Future Rents

 

2024 (remaining)

 $74,197 

2025

  88,159 

2026

  73,653 

2027

  60,780 

2028

  46,937 

Thereafter

  136,262 

Total

 $479,988 

 

As a Lessee. We have office space, automobile, and office machine leases, which qualify as operating leases, with remaining lease terms of one to five years.  As of March 31, 2024, the Company had one ground lease with the lease term of 98 years. The lease is classified as a finance lease. The ground lease provides for variable rental payments based on CPI adjustment. 

 

The following table summarizes the fixed, future minimum rental payments, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liabilities for our operating leases in which we are the lessee (in thousands):

 

Years Ended December 31,

 

Operating Leases

  

Finance Lease

 

2024 (remaining)

 $62  $46 

2025

  42   63 

2026

  10   64 

2027

  2   65 

2028

  2   66 

Thereafter

     2,709 

Total undiscounted rental payments

  118   3,013 

Less imputed interest

  6   2,297 

Total lease liabilities

 $112  $716 

 

For the three months ended March 31, 2024 and 2023, the total lease costs for operating leases were $ 19,000 and $ 33,000, respectively, and for the finance lease were $ 22,000 and $29,000, respectively. The weighted average remaining lease term for our operating leases and our finance lease was 2.3 and 98 years, respectively, at March 31, 2024. We do not include renewal options in the lease term for calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted average incremental borrowing rate was 4.7% for our operating leases and 6for our finance lease at March 31, 2024.

 

14

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

4. ACCRUED RENTS AND ACCOUNTS RECEIVABLE, NET

 

Accrued rents and accounts receivable, net consists of amounts accrued, billed and due from tenants, allowance for doubtful accounts and other receivables as follows (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 

Tenant receivables

 $16,869  $16,287 

Accrued rents and other recoveries

  27,126   26,751 

Allowance for doubtful accounts

  (13,919)  (13,570)

Other receivables

  979   1,124 

Total

 $31,055  $30,592 

 

 

5. UNAMORTIZED LEASE COMMISSIONS, LEGAL FEES AND LOAN COSTS

 

Costs which have been deferred consist of the following (in thousands):

 

   

March 31, 2024

   

December 31, 2023

 

Leasing commissions

  $ 20,335     $ 19,462  

Deferred legal cost

    335       356  

Deferred financing cost

    4,205       4,149  

Total cost

    24,875       23,967  

Less: leasing commissions accumulated amortization

    (9,020 )     (8,744 )

Less: deferred legal cost accumulated amortization

    (262 )     (272 )

Less: deferred financing cost accumulated amortization

    (1,393 )     (1,168 )

Total cost, net of accumulated amortization

  $ 14,200     $ 13,783  

 

 

6. INVESTMENT IN REAL ESTATE PARTNERSHIP

 

On December 8, 2016, we, through our Operating Partnership, entered into a Contribution Agreement (the “Contribution Agreement”) with Pillarstone OP and Pillarstone Capital REIT (“Pillarstone REIT”) pursuant to which we contributed all of the equity interests in four of our wholly-owned subsidiaries that, at the time, owned 14 non-core properties that did not fit our Community Centered Property® strategy (the “Pillarstone Properties”), to Pillarstone OP for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP (“Pillarstone OP Units”) and (2) the assumption of approximately $65.9 million of liabilities (collectively, the “Contribution”). As of March 31, 2024, our ownership in Pillarstone OP no longer represents a majority interest. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. As of the date of this filing, Whitestone has not received consideration for its redemption of its equity investment in Pillarstone OP as required by the partnership agreement.  We intend to pursue collection of amounts due from Pillarstone OP through all means necessary and while we do not know the ultimate amount to be collected, we believe the amount will be in excess of the current carrying value of our equity investment in Pillarstone OP. Please refer to Note 2 in this Quarterly Report on form 10-Q for more information regarding the accounting treatment of the redemption of our OP units in Pillarstone OP. 

 

15

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

In connection with the Contribution, Whitestone TRS, Inc., a subsidiary of the Company (“Whitestone TRS”), entered into a management agreement with the entities that own the contributed Pillarstone Properties (collectively, the “Management Agreements”). Pursuant to the Management Agreements, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services. The Management Agreements were terminated on August 18, 2022.  Prior to the termination of the Management Agreement, we reported approximately $144,000 in property management fee income on a quarterly basis. 

 

The table below presents the real estate partnership investment in which the Company holds an ownership interest (in thousands):

 

      

Company’s Investment as of

 
      

March 31, 2024

  

December 31, 2023

 

Real estate partnership

 

Ownership Interest

         

Pillarstone OP

  

81.4%

  $  $31,671 

Total real estate partnership(1)(2)(3)

     $  $31,671 

 

(1)

Representing eight property interests and 926,798 square feet of GLA, as of December 31, 2023. Subsequent to January 25, 2024, the Company ceased utilizing the equity method following the exercise of its notice of redemption for the majority of its investment in Pillarstone OP. We reclassified our investment in Pillarstone OP to a receivable on our balance sheet after estimating 25 days of our share of the equity investment income.

 

(2)

On December 26, 2021, the Board of Trustees of Pillarstone REIT adopted a new shareholder rights agreement (the “Pillarstone Rights Agreement”). Because Pillarstone REIT sought to use the Pillarstone Rights Agreement to prevent Whitestone OP from exercising its contractual Redemption Right, on July 12, 2022, Whitestone OP filed suit against Pillarstone REIT in the Court of Chancery of the State of Delaware challenging the Pillarstone Rights Agreement. On September 8, 2022, Whitestone OP’s Motion to Preserve the Status Quo was granted by the Court, limiting Pillarstone OP from engaging in any acts outside the ordinary course of business and otherwise imposing restrictions on Pillarstone OP to ensure that Whitestone’s right of redemption is not impaired while the underlying dispute is being considered by the Court. On January 25, 2024, the Delaware Court of Chancery: held that Pillarstone breached the implied covenant of good faith and fair dealing when it adopted the Pillarstone Rights Agreement that thwarted Whitestone OP from exercising the unfettered contractual redemption right it obtained in connection with its investment in the partnership; and the Court held that the Rights Plan was unenforceable as to the limited partner and allowed Whitestone OP to exercise its redemption right; allowed Pillarstone to determine the current value of the Partnership’s assets; and, as necessary, later enter a monetary judgment against Pillarstone for the difference between the amount Whitestone would have received in or around December 2021 and the current value. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. On March 4, 2024, Pillarstone REIT authorized and filed the Chapter 11 bankruptcy of itself, Pillarstone OP, and the remainder of its special purpose entities in the United States Bankruptcy Court for the Northern District of Texas. As of the date of this filing, Whitestone has not received consideration for its redemption of its equity investment in Pillarstone OP as required by the partnership agreement. We intend to pursue collection of amounts due from Pillarstone OP through all means necessary and while we do not know the ultimate amount to be collected, we believe the amount will be in excess of the current carrying value of our equity investment in Pillarstone OP.

 

(3)

We rely on reporting provided to us by Pillarstone OP’s general partner for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 have not been made available to us, we have estimated the value of the investment based on the information available to us at the time of this report.

 

16

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

The table below presents the Company’s share of net income (loss) from its investment in the real estate partnership which is included in deficit in earnings of real estate partnership, net on the Company’s consolidated statements of operations and comprehensive income (loss) (in thousands):

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 
         

Pillarstone OP

 $(28) $(218)

 

Summarized financial information for the Company’s investment in real estate partnership is as follows (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 

Assets:

        

Real estate, net

 $  $47,115 

Other assets

     6,680 

Total assets(1)

     53,795 

Liabilities and equity:

        

Notes payable

     14,292 

Other liabilities

     4,040 

Equity

     35,463 

Total liabilities and equity(2)

     53,795 

Company’s share of equity

     28,885 

Cost of investment in excess of the Company’s share of underlying net book value

     2,786 

Carrying value of investment in real estate partnership(3)

 $  $31,671 

 

(1)

We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 have not been made available to us, we have estimated total assets and its components based on the information available to us at the time of this report.

 

(2)

We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 have not been made available to us, we have estimated total liabilities and equity and its components based on the information available to us at the time of this report. 

 

(3)

We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 have not been made available to us, we have estimated the value of the investment based on the information available to us at the time of this report. 

 

17

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
  

 

 

For the Period from January 1, 2024 to January 25, 2024(1) (2)
 Three Months Ended March 31, 2023 (1)  
          

Revenues

 $591   $2,003 

Operating expenses

  (559)   (2,032)

Other expenses

  (56)   (206)

Net loss

 $(24)  $(235)

 

(1)

We rely on reporting provided to us by Pillarstone OP's general partner for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of March 31, 2024 and March 31, 2023 have not been made available to us, we have estimated net loss and its components based on the information available to us at the time of this report.

 

(2)

The estimated net loss and its components are calculated through January 25, 2024, the redemption date. 

 

The amortization of the basis difference between the cost of investment and the Company’s share of underlying net book value for the three months ended  March 31, 2024 and 2023 is $ 7,000 and $27,000 respectively. The Company fully amortized the difference into deficit in earnings of real estate partnership on the consolidated statements of operations and comprehensive income (loss).

 

The Company has evaluated its guarantee to Pillarstone OP pursuant to ASC 460,Guarantees,” and has determined the guarantee to be a performance guarantee, for which ASC 460 contains initial recognition and measurement requirements, and related disclosure requirements. The Company is obligated in two respects: (i) a noncontingent liability, which represents the Company’s obligation to stand ready to perform under the terms of the guarantee in the event that the specified triggering event(s) occur; and (ii) the contingent liability, which represents the Company’s obligation to make future payments if those triggering events occur. The fair value of our loan guarantee to Pillarstone OP is estimated on a Level 3 basis (as provided by ASC 820), using a probability-weighted discounted cash flow analysis based on a discount rate, discounting the loan balance. The Company recognized a noncontingent liability of $462,000 at the inception of the guarantee at fair value which is recorded on the Company’s consolidated balance sheets, net of accumulated amortization. The Company will amortize the guarantee liability into income over seven years. For the three months ended  March 31, 2024 and 2023, the amortization of the guarantee liability was approximately $ 0 and $ 9,000, respectively. 

 

18

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

7. DEBT 

 

Certain subsidiaries of Whitestone are the borrowers under various financing arrangements. These subsidiaries are separate legal entities, and their respective assets and credit are not available to satisfy the debt of Whitestone or any of its other subsidiaries.

 

Debt consisted of the following as of the dates indicated (in thousands):

 

Description

 

March 31, 2024

  

December 31, 2023

 

Fixed rate notes

        

$265.0 million, 3.18% plus 1.45% to 2.10% Note, due January 31, 2028 (1)

 $265,000  $265,000 

$80.0 million, 3.72% Note, due June 1, 2027

  80,000   80,000 

$19.0 million 4.15% Note, due December 1, 2024

  17,566   17,658 

$14.0 million 4.34% Note, due September 11, 2024

  12,354   12,427 

$14.3 million 4.34% Note, due September 11, 2024

  13,189   13,257 

$15.1 million 4.99% Note, due January 6, 2024

     13,350 

$50.0 million, 5.09% Note, due March 22, 2029 (Series A)

  35,714   42,857 

$50.0 million, 5.17% Note, due March 22, 2029 (Series B)

  50,000   50,000 

$2.5 million 7.79% Note, due February 28, 2025

  2,494    

$50.0 million, 3.71% plus 1.50% to 2.10% Note, due September 16, 2026 (2)

  50,000   50,000 

Floating rate notes

        

Unsecured line of credit, SOFR plus 1.50% to 2.10%, due September 16, 2026

  119,000   96,000 

Total notes payable principal

  645,317   640,549 

Less deferred financing costs, net of accumulated amortization

  (336)  (377)

Total notes payable

 $644,981  $640,172 

 

(1)

Promissory note includes an interest rate swap that fixes the SOFR portion of the term loan at an interest rate of 2.16% through October 28, 2022, 2.76% from October 29, 2022 through January 31, 2024, and 3.32% beginning February 1, 2024 through January 31, 2028.

 

(2)

A portion of the unsecured line of credit includes an interest rate swap to fix the SOFR portion of the loan at 3.71%.

 

19

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

On March 22, 2019, we, through our Operating Partnership, entered into a Note Purchase and Guarantee Agreement (the “Note Agreement”) together with certain subsidiary guarantors as initial guarantor parties thereto (the “Subsidiary Guarantors”) and The Prudential Insurance Company of America and the various other purchasers named therein (collectively, the “Purchasers”) providing for the issuance and sale of $100 million of senior unsecured notes of the Operating Partnership, of which (i) $50 million are designated as 5.09% Series A Senior Notes due March 22, 2029 (the “Series A Notes”) and (ii) $50 million are designated as 5.17% Series B Senior Notes due March 22, 2029 (the “Series B Notes” and, together with the Series A Notes, the “Notes”) pursuant to a private placement that closed on March 22, 2019 (the “Private Placement”). Obligations under the Notes are unconditionally guaranteed by the Company and by the Subsidiary Guarantors.

 

On December 16, 2022, Whitestone REIT (the “Company”) and its operating partnership, Whitestone REIT Operating Partnership, L.P. (the “Operating Partnership”), amended its Note Purchase and Guarantee Agreement originally executed on  March 22, 2019 (the “Existing Note Agreement”), pursuant to the terms and conditions of an Amendment No. 1 to Note Purchase and Guaranty Agreement, dated as of December 16, 2022 (the Existing Note Purchase Agreement, as so amended, the “Amended Note Agreement”), by and among the Company and the Operating Partnership, together with certain subsidiary guarantors as initial guarantor parties thereto and The Prudential Insurance Company of America and the various other purchasers named therein.

 

Neither the term of the Existing Note Agreement, the interest rate, nor the principal amounts, were amended. The purpose of the amendment is to conform certain covenants and defined terms contained in the Amended Note Agreement with the Company’s recently amended unsecured credit facility with the lenders party thereto, Bank of Montreal, as administrative agent, Truist Bank, as syndication agent, and BMO Capital Markets Corp., Truist Bank, Capital One, National Association, and U.S. Bank National Association, as co-lead arrangers and joint book runners.

 

The principal of the Series A Notes began to amortize on March 22, 2023 with annual principal payments of approximately $7.1 million. The principal of the Series B Notes will begin to amortize on March 22, 2025 with annual principal payments of $10.0 million. The Notes will pay interest quarterly on the 22nd day of March, June, September and December in each year until maturity.

 

The Operating Partnership may prepay at any time all, or from time to time part of, the Notes, in an amount not less than $1,000,000 in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus a make-whole amount. The make-whole amount is equal to the excess, if any, of the discounted value of the remaining scheduled payments with respect to the Notes being prepaid over the aggregate principal amount of such Notes (as described in the Note Agreement). In addition, in connection with a Change of Control (as defined in the Note Purchase Agreement), the Operating Partnership is required to offer to prepay the Notes at 100% of the principal amount plus accrued and unpaid interest thereon.

 

The Note Agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type and substantially similar to the Operating Partnership’s existing senior revolving credit facility, including limitations on liens, incurrence of investments, acquisitions, loans and advances and restrictions on dividends and certain other restricted payments. In addition, the Note Agreement contains certain financial covenants substantially similar to the Operating Partnership’s existing senior revolving credit facility, including the following:

 

 

maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

 

 

maximum secured debt to total asset value ratio of 0.40 to 1.00;

 

 

minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

 

 

maximum secured recourse debt to total asset value ratio of 0.15 to 1.00; 

 

 

maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of 75% of the Company's total net worth as of December 31, 2021 plus 75% of the net proceeds from additional equity offerings (as defined therein); and

 

 

minimum adjusted property NOI to implied unencumbered debt service ratio of 1.50 to 1.00.

 

In addition, the Note Agreement contains a financial covenant requiring that maximum unsecured indebtedness not exceed the ratio of unsecured indebtedness to unencumbered asset pool of 0.60 to 1.00. That covenant is substantially similar to the borrowing base concept contained in the Operating Partnership’s existing senior revolving credit facility.

 

The Note Agreement also contains default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants, cross-defaults with other indebtedness and guarantor defaults. The occurrence of an event of default under the Note Agreement could result in the Purchasers accelerating the payment of all obligations under the Notes. The financial and restrictive covenants and default provisions in the Note Agreement are substantially similar to those contained in the Operating Partnership’s existing credit facility.

 

20

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

Net proceeds from the Private Placement were used to refinance existing indebtedness. The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The Notes were sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

 

On September 16, 2022, we, through our Operating Partnership, entered into an unsecured credit facility (the “2022 Facility”) with the lenders party thereto, Bank of Montreal, as administrative agent (the “Administrative Agent”), Truist Bank, as syndication agent, and BMO Capital Markets Corp., Truist Bank, Capital One, National Association, and U.S. Bank National Association, as co-lead arrangers and joint book runners. The 2022 Facility amended and restated the Company's previous unsecured revolving credit facility, dated January 31, 2019 (the “2019 Facility”). 

 

The 2022 Facility is comprised of the following two tranches:

 

 

$250.0 million unsecured revolving credit facility with a maturity date of September 16, 2026 (the “2022 Revolver”);

 

 

$265.0 million unsecured term loan with a maturity date of January 31, 2028 (“Term Loan”).

 

Borrowings under the 2022 Facility accrue interest (at the Operating Partnership's option) at a Base Rate or an Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based upon our then existing leverage. As of March 31, 2024, the interest rate on the 2022 Revolver was 6.87%. Based on our current leverage ratio, the revolver has initial interest rate of SOFR plus 1.60% and a 10 basis point credit spread adjustment. In addition, we entered into interest rate swaps to fix the interest rates on the Term Loan. The Term Loan with the swaps has the following interest rates:

 

 

2.16% plus 1.55% through October 28, 2022

 

 

2.80% plus 1.55% from October 29, 2022 through January 31, 2024

 

 

3.42% plus 1.55% from February 1, 2024 through January 31, 2028

 

The 2022 Facility also has a pricing provision where the applicable margin can be adjusted by an aggregate 0.02% per annum based on the Company’s performance on certain sustainability performance targets. Base Rate means, for any day, the higher of: (a) the Administrative Agent’s prime commercial rate, (b) the sum of (i) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York for such day, plus (ii) 0.50%, or (c) the sum of (i) Adjusted Term SOFR for a one-month tenor in effect on such day plus (ii) 1.10%.  Adjusted Term SOFR means, for any such day, the sum of (i) the SOFR-based term rate for the day two (2) business days prior and (ii) 0.10%.

 

The 2022 Facility includes an accordion feature that will allow the Operating Partnership to increase the borrowing capacity by $200.0 million, upon the satisfaction of certain conditions. As of March 31, 2024, subject to any potential future paydowns or increases in the borrowing base, we have $81.0 million remaining availability under the 2022 Revolver. As of March 31, 2024, $434.0 million was drawn on the 2022 Facility and our unused borrowing capacity was $81.0 million, assuming that we use the proceeds of the 2022 Facility to acquire properties, or to repay debt on properties, that are eligible to be included in the unsecured borrowing base. 

 

21

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

The Company, each direct and indirect material subsidiary of the Operating Partnership and any other subsidiary of the Operating Partnership that is a guarantor under any unsecured ratable debt will serve as a guarantor for funds borrowed by the Operating Partnership under the 2022 Facility. The 2022 Facility contains customary terms and conditions, including, without limitation, customary representations and warranties and affirmative and negative covenants including, without limitation, information reporting requirements, limitations on investments, acquisitions, loans and advances, mergers, consolidations and sales, incurrence of liens, dividends and restricted payments. In addition, the 2022 Facility contains certain financial covenants including the following:

 

 

maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

 

 

maximum secured debt to total asset value ratio of 0.40 to 1.00;

 

 

minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

 

 

maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

 

 

maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of $449 million plus 75% of the net proceeds from additional equity offerings (as defined therein).

 

As of March 31, 2024, our $123.11 million in secured debt was collateralized by four properties with a carrying value of $190.7 million.  Our loans contain restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and are secured by deeds of trust on certain of our properties and by assignment of the rents and leases associated with those properties. As of March 31, 2024, we were in compliance with all loan covenants.

 

Scheduled maturities of our outstanding debt as of March 31, 2024 were as follows (in thousands):

 

Year

 

Amount Due

 

2024 (remaining)

 $45,150 

2025

  17,596 

2026

  186,143 

2027

  97,143 

2028

  282,143 

Thereafter

  17,142 

Total

 $645,317 

 

22

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

8.  DERIVATIVES AND HEDGING ACTIVITIES

 

The fair value of our interest rate swaps is as follows (in thousands):

 

  

March 31, 2024

 

Balance Sheet Location

 

Estimated Fair Value

 

Prepaid expenses and other assets

 $7,620 

 

 

  

December 31, 2023

 

Balance Sheet Location

 

Estimated Fair Value

 

Prepaid expenses and other assets

 $2,613 

 

On March 31, 2023, we, through our Operating Partnership, entered into an interest rate swap of $50 million (“Revolver Swap”) with Bank of Montreal that fixed the unhedged SOFR portion of the variable rate debt at 3.71%. Pursuant to the terms of the agreement governing the interest rate swap, Bank of Montreal assigned $10.0 million of the swap to U.S. Bank, $10.0 million of the swap to Capital One, $12.5 million of the swap to SunTrust Bank, and $2.5 million of the swap to Associated Bank. The swap began on March 31, 2023 and will mature on September 16, 2026. We designated the interest rate swap as a cash flow hedge with the effective portion of the changes in fair value recorded in comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The Company does not expect any amount of the existing gains or losses to be reclassified into earnings within the next 12 months.

 

On   September 16, 2022, we, through our Operating Partnership, entered an interest rate swap with Bank of Montreal that fixed the unhedged SOFR portion of Term Loan under the 2022 Facility at 3.32%. The notional amount of the swap begins at $100 million on  October 29, 2022, and increases to $265 million on  February 1, 2024, maturing on  January 31, 2028. Pursuant to the terms of the agreement governing the interest rate swap, Bank of Montreal assigned beginning and ending notionals of $20.7 million and $54.8 million of the swap, respectively, to U.S. Bank, National Association, beginning and ending notionals of $25.4 million and $67.2 million of the swap, respectively, to Truist Bank, beginning and ending notionals of $20.7 million and $54.8 million of the swap, respectively, to Capital One, National Association, and beginning and ending notionals of $5.9 million and $15.7 million of the swap, respectively, to Associated Bank. See Note 7 (Debt) for additional information regarding the 2022 Facility. We designated the interest rate swap as a cash flow hedge with the effective portion of the changes in fair value recorded in comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The Company does not expect any amount of the existing gains or losses to be reclassified into earnings within the next 12 months.

 

On  January 31, 2019, we, through our Operating Partnership, entered into an interest rate swap of $165 million with Bank of Montreal that fixed the LIBOR portion of our $165 million term loan under the 2019 Facility at 2.43%. Pursuant to the terms of the agreement governing the interest rate swap, Bank of Montreal assigned $32.6 million of the swap to U.S. Bank, National Association, $29.4 million of the swap to Regions Bank, $40.0 million of the swap to SunTrust Bank, and $15.0 million of the swap to Associated Bank. Effective September 7, 2022, Regions Bank novated $29.4 million of the swap to Bank of Montreal.  See Note 7 (Debt) for additional information regarding the 2019 Facility. The swap began on  February 8, 2021 and matured on  January 31, 2024. Effective September 16, 2022, our contracts indexed to LIBOR were converted to SOFR. We designated the interest rate swap as a cash flow hedge with the effective portion of the changes in fair value to be recorded in comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. 

  

23

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

A summary of our interest rate swap activity is as follows (in thousands): 

 

  Amount Recognized as Comprehensive Income (Loss) 

Location of Income Recognized in Earnings

 

Amount of Income Recognized in Earnings (1)

 

Three Months Ended March 31, 2024

 $5,007 

Interest expense

 $1,699 

Three Months Ended March 31, 2023

 $(4,587)

Interest expense

 $1,203 

 

(1)

There was no ineffective portion of our interest rate swaps to recognize in earnings for the three months ended March 31, 2024 and 2023.

 

 

9.  EARNINGS PER SHARE 

 

Basic earnings per share for our common shareholders is calculated by dividing net income excluding the net income attributable to unvested restricted common shares and the net income attributable to noncontrolling interests, by our weighted average common shares outstanding during the period.  Diluted earnings per share is computed by dividing the net income attributable to common shareholders, excluding the net income attributable to unvested restricted common shares and the net income attributable to noncontrolling interests, by the weighted average number of common shares including any dilutive unvested restricted common shares.

 

Certain of our performance-based restricted common shares are considered participating securities that require the use of the two-class method for the computation of basic and diluted earnings per share.  During the three months ended March 31, 2024 and 2023,663,622 and 694,470 OP units, respectively, were excluded from the calculation of diluted earnings per share because their effect would be anti-dilutive. 

 

  

Three Months Ended March 31,

 

(in thousands, except per share data)

 

2024

  

2023

 

Numerator:

        

Net income

 $9,464  $3,901 

Less: Net income attributable to noncontrolling interests

  (124)  (54)

Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares

 $9,340  $3,847 
         

Denominator:

        

Weighted average number of common shares - basic

  49,940   49,424 

Effect of dilutive securities:

        

Unvested restricted shares

  1,172   736 

Weighted average number of common shares - dilutive

  51,112   50,160 
         

Earnings Per Share:

        

Basic:

        

Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares

 $0.19  $0.08 

Diluted:

        

Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares

 $0.18  $0.08 

 

24

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 
 

10. INCOME TAXES

 

With the exception of our taxable REIT subsidiaries, federal income taxes are generally not provided because we intend to and believe we continue to qualify as a REIT under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and because we have distributed and intend to continue to distribute all of our taxable income to our shareholders.  As a REIT, we must distribute at least 90% of our REIT taxable income to our shareholders and meet certain income sources and investment restriction requirements.  In addition, REITs are subject to a number of organizational and operational requirements.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.

 

We are subject to the Texas Margin Tax, which is computed by applying the applicable tax rate (0.75% for us) to the profit margin, which generally will be determined for us as total revenue less a 30% standard deduction.  Although the Texas Margin Tax is not an income tax, FASB ASC 740,Income Taxes” applies to the Texas Margin Tax.  For the three months ended March 31, 2024 and 2023, we recognized approximately $ 120,000 and $ 119,000, respectively, in margin tax provision.

 

 

11.  EQUITY 

 

Common Shares         

 

Under our declaration of trust, as amended, we have authority to issue up to 400,000,000 common shares of beneficial interest, $0.001 par value per share, and up to 50,000,000 preferred shares of beneficial interest, $0.001 par value per share.

 

Equity Offerings

 

On May 20, 2022, our universal shelf registration statement on Form S-3 was declared effective by the SEC, which registers the issuance and sale by us of up to $500 million in securities from time to time, including common shares, preferred shares, debt securities, depositary shares and subscription rights.

 

On September 9, 2022, we entered into eleven equity distribution agreements for an at-the-market equity distribution program (the “2022 equity distribution agreements”) providing for the issuance and sale of up to an aggregate of $100 million of the Company’s common shares pursuant to our Registration Statement on Form S-3 (File No. 333-264881). Actual sales will depend on a variety of factors determined by us from time to time, including (among others) market conditions, the trading price of our common shares, capital needs and our determinations of the appropriate sources of funding for us, and were made in transactions that will be deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act. We have no obligation to sell any of our common shares and can at any time suspend offers under the 2022 equity distribution agreements or terminate the 2022 equity distribution agreements.

 

We have in the past, and expect to in the future, enter into at-the-market equity distribution programs providing for the issuance and sale of common shares. Actual sales will depend on a variety of factors determined by us from time to time, including (among others) market conditions, the trading price of our common shares, capital needs and our determinations of the appropriate sources of funding for us, and were made in transactions that will be deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"). For the three months ended March 31, 2024 and 2023, we did not sell shares under the equity distribution agreements. 

 

Operating Partnership Units

 

Substantially all of our business is conducted through our Operating Partnership.  We are the sole general partner of the Operating Partnership.  As of March 31, 2024, we owned a 98.7% interest in the Operating Partnership.

 

Limited partners in the Operating Partnership holding OP units have the right to redeem their OP units for cash or, at our option, common shares at a ratio of one OP unit for one common share.  Distributions to OP unit holders are paid at the same rate per unit as distributions per share to holders of Whitestone common shares.  As of March 31, 2024 and December 31, 2023, there were 50,487,256  and 50,182,938 OP units outstanding, respectively.  We owned 49,838,056 and 49,489,991 OP units as of March 31, 2024 and December 31, 2023, respectively. The balance of the OP units is owned by third parties, including certain members of our Board of Trustees.  Our weighted average share ownership in the Operating Partnership was approximately 98.7% and 98.6% for the three months ended March 31, 2024 and 2023, respectively. During the three months ended  March 31, 2024 and 202343,747 and 11 OP units, respectively, were redeemed for an equal number of common shares. 

 

25

WHITESTONE REIT AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
 

Distributions 

 

The following table summarizes the cash distributions paid or payable to holders of common shares and to holders of noncontrolling OP units during each quarter of 2023 and the three months ended March 31, 2024 (in thousands, except per share/per OP unit data):

 

  

Common Shares

  

Noncontrolling OP Unit Holders

  

Total

 

Quarter Paid

 

Distributions Per Common Share

  

Amount Paid

  

Distributions Per OP Unit

  

Amount Paid

  

Amount Paid

 

2024

                    

First Quarter

 $0.1200  $5,969  $0.1200  $80  $6,049 

Total

 $0.1200  $5,969