10-Q 1 wstr20220930_10q.htm FORM 10-Q wstr20220930_10q.htm
0001175535 Whitestone REIT false --12-31 Q3 2022 0.001 0.001 50,000,000 50,000,000 0 0 0 0 0.001 0.001 400,000,000 400,000,000 49,382,809 49,382,809 49,144,153 49,144,153 0.1075 0.1200 0.1200 0.1058 0.1075 0.1075 5 8 1 1 3 4 8 1 0.001 2 81,000 7 28,000 100,000 1.73 1.35 1.90 165,000 2.24 1.35 1.90 265,000 3.18 1.45 2.10 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 20,200 20,200 4.28 4.28 June 6, 2023 June 6, 2023 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 2,600 2,600 5.46 5.46 October 1, 2023 October 1, 2023 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 1,800 1,800 3.15 3.15 November 28, 2022 November 28, 2022 1.50 1.50 2.10 2.10 September 16, 2026 September 16, 2026 7 0 0 0 11 0 0 1 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 0.001 Operating lease liabilities $ 150 $ 231 We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of September 30, 2022 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. We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of September 30, 2022 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. We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of September 30, 2022 have not been made available to us, we have estimated net income and its components based on the information available to us at the time of this report. There was no ineffective portion of our interest rate swaps to recognize in earnings for the three and nine months ended September 30, 2022 and 2021. For a reconciliation of cash, cash equivalents and restricted cash, see supplemental disclosures below. Representing eight property interests and 926,798 square feet of GLA, as of September 30, 2022 and December 31, 2021. 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. Loan was fully paid off on September 16, 2022. 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. 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 right of use assets (net) $ 145 $ 222 On December 26, 2021, the Board of Trustees of Pillarstone REIT adopted a new rights agreement (the “Pillarstone Rights Agreement”), pursuant to which each holder of Pillarstone REIT common stock received one preferred share purchase right (a “Right”) per common share held as of the applicable record date. Each Right entitles the registered holder to purchase from Pillarstone REIT one one-thousandth (a “Unit”) of a series D preferred share of Pillarstone at a purchase price (“Purchase Price”) of $7.00 per Unit, subject to adjustment. The Rights are exercisable upon the occurrence of certain events as described in the Pillarstone Rights Agreement, including the acquisition by certain holders of 5% or more of the common shares of Pillarstone REIT (an “Acquiring Person”). Upon the acquisition of Pillarstone REIT common shares by an Acquiring Person, each holder of a Right (other than an Acquiring Person), will have the right to receive upon exercise a number of Pillarstone REIT common shares having a market value of two times the Purchase Price.As set forth in the Amended and Restated Limited Partnership Agreement of Pillarstone OP, dated as of December 8, 2016 (the “Pillarstone Partnership Agreement”), we have the contractual right to have our limited partnership interests in Pillarstone redeemed at our discretion. However, upon receipt of a redemption notice, Pillarstone OP has the option of the applicable redemption price in cash, based on the market value of Pillarstone REIT common shares, or in Pillarstone REIT common shares. To the extent we seek to have our partnership units in Pillarstone OP redeemed and Pillarstone OP elects to pay the applicable redemption price in Pillarstone REIT common shares (and such shares represent 5% or more of the outstanding common shares of Pillarstone REIT), the Rights could become exercisable. To the extent the Rights are exercised as a result of our Pillarstone OP units being redeemed for Pillarstone REIT common shares, our ownership interest in Pillarstone REIT would be significantly diluted, which could adversely impact the value of our investment in Pillarstone OP. Because the Pillarstone Rights Agreement seeks 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 due to Pillarstone REIT’s breach of the Pillarstone OP partnership agreement, breach of its fiduciary duty as general partner of Pillarstone OP to Whitestone OP, and breach of the implied covenant of good faith and fair dealing under the Pillarstone OP partnership agreement. The lawsuit seeks rescission and voiding of the Pillarstone Rights Agreement; a declaration that the Pillarstone Rights Agreement is unenforceable, invalid, and of no force and effect; an order permanently enjoining enforcement of the Pillarstone Rights Agreement; an award of monetary damages; and broad restrictions on Pillarstone REIT’s ability to conduct its business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions.On September 8, 2022, the Company’s Motion to Preserve the Status Quo was granted by the Court, limiting Pillarstone from engaging in any acts outside the ordinary course of business and otherwise imposing restrictions on Pillarstone to ensure that Whitestone’s right of redemption right is not impaired while the underlying dispute is being considered by the Court.While we do not believe the overall impact of the Pillarstone Rights Agreement on the carrying value of our investment in Pillarstone OP is material, we cannot reasonably estimate a range of possible loss at this time. Rental Rental revenues $ 25,244 $ 23,177 $ 75,023 $ 67,041 Recoveries 10,152 8,720 29,092 24,375 Bad debt (367 ) 172 (615 ) (500 ) Total rental $ 35,029 $ 32,069 $ 103,500 $ 90,916 We rely on reporting provided to us by our third-party partners for financial information regarding the Company's 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 September 30, 2022

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 November 2, 2022, there were 49,386,066 common shares of beneficial interest, $0.001 par value per share, outstanding.

 

 
Table of Contents

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

1
 

Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021

1
 

Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021

3
 

Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, June 30 and September 30, 2022 and 2021

6
 

Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021

8
 

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

57

Item 4.

Controls and Procedures.

57

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

58

Item 1A.

Risk Factors.

58

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

59

Item 3.

Defaults Upon Senior Securities.

59

Item 4.

Mine Safety Disclosures.

59

Item 5.

Other Information.

59

Item 6.

Exhibits.

59
 

Exhibit Index

60
 

Signatures

61

 

 
Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

  

September 30, 2022

  

December 31, 2021

 
  

(unaudited)

     

ASSETS

 

Real estate assets, at cost

        

Property

 $1,206,605  $1,196,919 

Accumulated depreciation

  (212,084)  (190,333)

Total real estate assets

  994,521   1,006,586 

Investment in real estate partnership

  34,891   34,588 

Cash and cash equivalents

  9,504   15,721 

Restricted cash

  63   193 

Escrows and acquisition deposits

  12,329   11,323 

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

  25,183   22,395 

Receivable due from related party

  1,333   847 

Unamortized lease commissions, legal fees and loan costs

  12,131   8,442 

Prepaid expenses and other assets(1)

  9,978   1,995 

Total assets

 $1,099,933  $1,102,090 
         

LIABILITIES AND EQUITY

 

Liabilities:

        

Notes payable

 $637,138  $642,842 

Accounts payable and accrued expenses(2)

  35,797   45,777 

Payable due to related party

  1,560   997 

Tenants' security deposits

  8,443   8,070 

Dividends and distributions payable

  6,004   5,366 

Total liabilities

  688,942   703,052 

Commitments and contingencies:

  —   — 

Equity:

          

Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31, 2021

  —   — 

Common shares, $0.001 par value per share; 400,000,000 shares authorized; 49,382,809 and 49,144,153 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

  49   48 

Additional paid-in capital

  623,838   623,462 

Accumulated deficit

  (226,374)  (223,973)

Accumulated other comprehensive income (loss)

  7,646   (6,754)

Total Whitestone REIT shareholders' equity

  405,159   392,783 

Noncontrolling interest in subsidiary

  5,832   6,255 

Total equity

  410,991   399,038 

Total liabilities and equity

 $1,099,933  $1,102,090 

 

See accompanying notes to Consolidated Financial Statements.

 

 

1
Table of Contents

 

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

   

September 30, 2022

    

December 31, 2021

  
   

(unaudited)

          

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

   $ 145     $ 222  

(2) Operating lease liabilities

   $ 150     $ 231  

 

See accompanying notes to Consolidated Financial Statements.

 

2
Table of Contents

 

 

 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2022

    

2021

    

2022

    

2021

  

Revenues

                                

Rental(1)

   $ 35,029     $ 32,069     $ 103,500     $ 90,916  

Management, transaction, and other fees

     354       375       1,003       1,191  

Total revenues

     35,383       32,444       104,503       92,107  
                                 

Operating expenses

                                

Depreciation and amortization

     7,889       7,340       23,661       21,458  

Operating and maintenance

     7,317       5,789       19,253       16,072  

Real estate taxes

     4,513       4,589       13,867       12,787  

General and administrative

     4,832       5,672       13,063       16,036  

Total operating expenses

     24,551       23,390       69,844       66,353  
                                 

Other expenses (income)

                                

Interest expense

     6,816       6,142       19,111       18,417  

(Gain) loss on sale or disposal of assets, net

     7       48       12       (177 )

Interest, dividend and other investment income

     (13 )     (31 )     (43 )     (103 )

Total other expenses

     6,810       6,159       19,080       18,137  
                                 

Income before equity investment in real estate partnership and income tax

     4,022       2,895       15,579       7,617  
                                 

Equity in earnings of real estate partnership

     65       151       304       429  

Provision for income tax

     (112 )     (100 )     (313 )     (274 )

Income from continuing operations

     3,975       2,946       15,570       7,772  
                                 

Gain on sale of property from discontinued operations

     —       —       —       1,833  

Income from discontinued operations

     —       —       —       1,833  
                                 

Net income

     3,975       2,946       15,570       9,605  
                                 

Less: Net income attributable to noncontrolling interests

     60       47       239       165  
                                 

Net income attributable to Whitestone REIT

   $ 3,915     $ 2,899     $ 15,331     $ 9,440  

 

See accompanying notes to Consolidated Financial Statements.

 

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Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share data)

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

Basic Earnings Per Share:

                

Income from continuing operations attributable to Whitestone REIT, excluding amounts attributable to unvested restricted shares

 $0.08  $0.06  $0.31  $0.17 

Income from discontinued operations attributable to Whitestone REIT

  —   —   —   0.04 

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

 $0.08  $0.06  $0.31  $0.21 

Diluted Earnings Per Share:

                

Income from continuing operations attributable to Whitestone REIT, excluding amounts attributable to unvested restricted shares

 $0.08  $0.06  $0.31  $0.17 

Income from discontinued operations attributable to Whitestone REIT

  —   —   —   0.04 

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

 $0.08  $0.06  $0.31  $0.21 
                 

Weighted average number of common shares outstanding:

                

Basic

  49,274   46,883   49,211   44,268 

Diluted

  50,129   47,825   49,916   45,108 
                 

Consolidated Statements of Comprehensive Income

                
                 

Net income

 $3,975  $2,946  $15,570  $9,605 
                 

Other comprehensive income

                
                 

Unrealized gain on cash flow hedging activities

  5,962   1,273   14,623   4,783 
                 

Comprehensive income

  9,937   4,219   30,193   14,388 
                 

Less: Net income attributable to noncontrolling interests

  60   47   239   165 

Less: Comprehensive income attributable to noncontrolling interests

  90   20   223   82 
                 

Comprehensive income attributable to Whitestone REIT

 $9,787  $4,152  $29,731  $14,141 

 

See accompanying notes to Consolidated Financial Statements.

 

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Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2022

    

2021

    

2022

    

2021

  

(1) Rental

                                

Rental revenues

   $ 25,244     $ 23,177     $ 75,023     $ 67,041  

Recoveries

     10,152       8,720       29,092       24,375  

Bad debt

     (367 )     172       (615 )     (500 )

Total rental

   $ 35,029     $ 32,069     $ 103,500     $ 90,916  

 

See accompanying notes to Consolidated Financial Statements.

 

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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

  

Gain (Loss)

  

Equity

  

Units

  

Dollars

  

Equity

 
                                     

Balance, December 31, 2021

  49,144  $48  $623,462  $(223,973) $(6,754) $392,783   771  $6,255  $399,038 

Exchange of noncontrolling interest OP units for common shares

  1   —   —   —   —   —   (1)  —   — 

Issuance of shares under dividend reinvestment plan

  1   —   15   —   —   15   —   —   15 

Repurchase of common shares (1)

  —   —   —   —   —   —   —   —   — 

Share-based compensation

  —   —   (1,413)  —   —   (1,413)  —   —   (1,413)

Distributions - $0.1075 per common share / OP unit

  —   —   —   (5,897)  —   (5,897)  —   (92)  (5,989)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   5,894   5,894   —   92   5,986 

Net income

  —   —   —   7,078   —   7,078   —   111   7,189 

Balance, March 31, 2022

  49,146  $48  $622,064  $(222,792) $(860) $398,460   770  $6,366  $404,826 

Exchange of noncontrolling interest OP units for common shares

  —   1   7   —   —   8   —   (8)  — 

Issuance of shares under dividend reinvestment plan

  2   —   17   —   —   17   —   —   17 

Repurchase of common shares (1)

  (26)  —   (278)  —   —   (278)  —   —   (278)

Share-based compensation

  119   —   783   —   —   783   —   —   783 

Distributions - $0.1200 per common share / OP unit

  —   —   —   (5,909)  —   (5,909)  —   (94)  (6,003)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   2,634   2,634   —   41   2,675 

Net income

  —   —   —   4,338   —   4,338   —   68   4,406 

Balance, June 30, 2022

  49,241  $49  $622,593  $(224,363) $1,774  $400,053   770  $6,373  $406,426 

Exchange of noncontrolling interest OP units for common shares

  75   —   608   —   —   608   (75)  (608)  — 

Issuance of shares under dividend reinvestment plan

  2   —   17   —   —   17   —   —   17 

Repurchase of common shares (1)

  (21)  —   (249)  —   —   (249)  —   —   (249)

Share-based compensation

  86   —   869   —   —   869   —   —   869 

Distributions - $0.1200 per common share / OP unit

  —   —   —   (5,926)  —   (5,926)  —   (83)  (6,009)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   5,872   5,872   —   90   5,962 

Net income

  —   —   —   3,915   —   3,915   —   60   3,975 

Balance, September 30, 2022

  49,383  $49  $623,838  $(226,374) $7,646  $405,159   695  $5,832  $410,991 

 

See accompanying notes to Consolidated Financial Statements

 

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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

  

Gain (Loss)

  

Equity

  

Units

  

Dollars

  

Equity

 
                                     

Balance, December 31, 2020

  42,391  $42  $562,250  $(215,809) $(14,400) $332,083   773  $6,243  $338,326 

Issuance of shares under dividend reinvestment plan

  2   —   15   —   —   15   —   —   15 

Repurchase of common shares (1)

  (37)  —   (324)  —   —   (324)  —   —   (324)

Share-based compensation

  223   1   1,397   —   —   1,398   —   —   1,398 

Distributions - $0.1058 per common share / OP unit

  —   —   —   (4,622)  —   (4,622)  —   (83)  (4,705)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   2,180   2,180   —   41   2,221 

Net income

  —   —   —   1,415   —   1,415   —   26   1,441 

Balance, March 31, 2021

  42,579  $43  $563,338  $(219,016) $(12,220) $332,145   773  $6,227  $338,372 

Issuance of common shares - ATM Program, net of offering costs

  3,025   2   25,369   —   —   25,371   —   —   25,371 

Exchange offer costs

  —   —   (31)  —   —   (31)  —   —   (31)

Issuance of shares under dividend reinvestment plan

  1   —   15   —   —   15   —   —   15 

Repurchase of common shares (1)

  (13)  —   (104)  —   —   (104)  —   —   (104)

Share-based compensation

  101   —   1,177   —   —   1,177   —   —   1,177 

Distributions - $0.1075 per common share / OP unit

  —   —   —   (4,952)  —   (4,952)  —   (83)  (5,035)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   1,268   1,268   —   21   1,289 

Reallocation of ownership between parent and subsidiary

  —   —   —   —   (14)  (14)  —   14   — 

Net income

  —   —   —   5,126   —   5,126   —   92   5,218 

Balance, June 30, 2021

  45,693  $45  $589,764  $(218,842) $(10,966) $360,001   773  $6,271  $366,272 

Issuance of common shares - ATM Program, net of offering costs

  2,991   3   27,961   —   —   27,964   —   —   27,964 

Exchange offer costs

  —   —   (18)  —   —   (18)  —   —   (18)

Issuance of shares under dividend reinvestment plan

  2   —   15   —   —   15   —   —   15 

Repurchase of common shares (1)

  (28)  —   (250)  —   —   (250)  —   —   (250)

Share-based compensation

  182   —   1,491   —   —   1,491   —   —   1,491 

Distributions - $0.1075 per common share / OP unit

  —   —   —   (5,334)  —   (5,334)  —   (83)  (5,417)

Unrealized gain on change in value of cash flow hedge

  —   —   —   —   1,253   1,253   —   20   1,273 

Reallocation of ownership between parent and subsidiary

  —   —   —   —   (13)  (13)  —   13   — 

Net income

  —   —   —   2,899      2,899   —   47   2,946 

Balance, September 30, 2021

  48,840  $48  $618,963  $(221,277) $(9,726) $388,008   773  $6,268  $394,276 

 

(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.

 

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Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Nine Months Ended September 30,

  
   

2022

    

2021

  

Cash flows from operating activities:

                

Net income from continuing operations

   $ 15,570     $ 7,772  

Net income from discontinued operations

     —       1,833  

Net income

     15,570       9,605  

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

                

Depreciation and amortization

     23,661       21,458  

Amortization of deferred loan costs

     824       822  

(Gain) loss on sale or disposal of assets, net

     12       (177 )

Bad debt

     615       500  

Share-based compensation

     239       4,066  

Equity in earnings of real estate partnership

     (304 )     (429 )

Changes in operating assets and liabilities:

                

Escrows and acquisition deposits

     (1,006 )     (1,163 )

Accrued rents and accounts receivable

     (3,403 )     518  

Receivable due from related party

     (486 )     (316 )

Unamortized lease commissions, legal fees and loan costs

     (1,575 )     (2,531 )

Prepaid expenses and other assets

     (6,266 )     1,548  

Accounts payable and accrued expenses

     4,642       (1,572 )

Payable due to related party

     563       405  

Tenants' security deposits

     373       802  

Net cash provided by operating activities

     33,459       31,703  

Cash flows from investing activities:

                

Acquisitions of real estate

     —       (53,364 )

Additions to real estate

     (10,118 )     (6,058 )

Net cash used in investing activities

     (10,118 )     (59,422 )

Net cash provided by investing activities of discontinued operations

     —       1,833  

Cash flows from financing activities:

                

Distributions paid to common shareholders

     (17,049 )     (14,063 )

Distributions paid to OP unit holders

     (263 )     (248 )

Proceeds from issuance of common shares, net of offering costs

     —       53,335  

Payments of exchange offer costs

     —       (49 )

Net payments of credit facility

     (5,000 )     (25,000 )

Repayments of notes payable

     (2,705 )     (2,403 )

Payments of loan origination costs

     (4,144 )     —  

Repurchase of common shares

     (527 )     (678 )

Net cash provided by (used in) financing activities

     (29,688 )     10,894  

Net decrease in cash, cash equivalents and restricted cash

     (6,347 )     (14,992 )

Cash, cash equivalents and restricted cash at beginning of period

     15,914       25,956  

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

   $ 9,567     $ 10,964  

 

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

 

See accompanying notes to Consolidated Financial Statements.

 

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Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Nine Months Ended September 30,

  
   

2022

    

2021

  

Supplemental disclosure of cash flow information:

                

Cash paid for interest

   $ 18,980     $ 17,732  

Cash paid for taxes

   $ 366     $ 364  

Non cash investing and financing activities:

                

Disposal of fully depreciated real estate

   $ 80     $ 284  

Financed insurance premiums

   $ 1,846     $ 1,712  

Value of shares issued under dividend reinvestment plan

   $ 49     $ 45  

Value of common shares exchanged for OP units

   $ 616     $ —  

Change in fair value of cash flow hedge

   $ 14,623     $