DEBT

Mortgages and other notes payable consist of the following (in thousands):



	December 31,
Description	2018			2017
Fixed rate notes
$10.5 million, LIBOR plus 2.00% Note, due September 24, 2020 ⁽¹⁾	$	9,500		$	9,740
$50.0 million, 1.75% plus 1.35% to 1.90% Note, due October 30, 2020 ⁽²⁾	50,000			50,000
$50.0 million, 1.50% plus 1.35% to 1.90% Note, due January 29, 2021 ⁽³⁾	50,000			50,000
$100.0 million, 1.73% plus 1.65% to 2.25% Note, due October 30, 2022 ⁽⁴⁾	100,000			100,000
$80.0 million, 3.72% Note, due June 1, 2027	80,000			80,000
$37.0 million 3.76% Note, due December 1, 2020 ⁽⁵⁾	—			33,148
$6.5 million 3.80% Note, due January 1, 2019	5,657			5,842
$19.0 million 4.15% Note, due December 1, 2024	19,000			19,000
$20.2 million 4.28% Note, due June 6, 2023	18,996			19,360
$14.0 million 4.34% Note, due September 11, 2024	13,718			13,944
$14.3 million 4.34% Note, due September 11, 2024	14,300			14,300
$16.5 million 4.97% Note, due September 26, 2023 ⁽⁵⁾	—			16,058
$15.1 million 4.99% Note, due January 6, 2024	14,643			14,865
$2.6 million 5.46% Note, due October 1, 2023	2,430			2,472
Floating rate notes
Unsecured line of credit, LIBOR plus 1.40% to 1.95%, due October 30, 2019 ⁽⁶⁾	241,200			232,200
Total notes payable principal	619,444			660,929
Less deferred financing costs, net of accumulated amortization	(1,239		)	(1,861		)
	$	618,205		$	659,068


⁽¹⁾	Promissory note includes an interest rate swap that fixed the interest rate at 3.55% for the duration of the term through September 24, 2018 and 4.85% beginning September 24, 2018 through September 24, 2020.


⁽²⁾	Promissory note includes an interest rate swap that fixed the LIBOR portion of Term Loan 1 (as defined below) at 0.84% through February 3, 2017 and 1.75% beginning February 3, 2017 through October 30, 2020.


⁽³⁾	Promissory note includes an interest rate swap that fixed the LIBOR portion of Term Loan 2 (as defined below) at 1.50%.


⁽⁴⁾	Promissory note includes an interest rate swap that fixed the LIBOR portion of Term Loan 3 (as defined below) at 1.73%.


⁽⁵⁾	Promissory notes were assumed by Pillarstone OP in December 2016 and included in our consolidated balance sheet under the profit-sharing method of accounting through December 31, 2017, as discussed in Note 5.


⁽⁶⁾	Unsecured line of credit includes certain Pillarstone Properties (as defined and described in more detail below) in determining the amount of credit available under the 2018 Facility (as defined and described in more detail below).

On May 26, 2017, we, through our subsidiary, Whitestone BLVD Place LLC, a Delaware limited liability company, issued a $80.0 million promissory note to American General Life Insurance Company (the “BLVD Note”). The BLVD Note has a fixed interest rate of 3.72% and a maturity date of June 1, 2027. Proceeds from the BLVD Note were used to fund a portion of the purchase price of the acquisition of BLVD Place (See Note 4).

On November 7, 2014, we, through our Operating Partnership, entered into an unsecured revolving credit facility (the “2014 Facility”) with the lenders party thereto, with BMO Capital Markets Corp., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and U.S. Bank, National Association, as co-lead arrangers and joint book runners, and Bank of Montreal, as administrative agent (the “Agent”). The 2014 Facility amended and restated our previous unsecured revolving credit facility. On October 30, 2015, we, through our Operating Partnership, entered into the First Amendment to the 2014 Facility (the “First Amendment”) with the guarantors party thereto, the lenders party thereto and the Agent. We refer to the 2014 Facility, as amended by the First Amendment, as the “2018 Facility.”

Pursuant to the First Amendment, the Company made the following amendments to the 2014 Facility:


•	extended the maturity date of the $300 million unsecured revolving credit facility under the 2014 Facility (the “Revolver”) to October 30, 2019 from November 7, 2018;


•	converted $100 million of outstanding borrowings under the Revolver to a new $100 million unsecured term loan under the 2014 Facility (“Term Loan 3”) with a maturity date of October 30, 2022;


•	extended the maturity date of the first $50 million unsecured term loan under the 2014 Facility (“Term Loan 1”) to October 30, 2020 from February 17, 2017; and


•	extended the maturity date of the second $50 million unsecured term loan under the 2014 Facility (“Term Loan 2” and together with Term Loan 1 and Term Loan 3, the “Term Loans”) to January 29, 2021 from November 7, 2019.

Borrowings under the 2018 Facility accrue interest (at the Operating Partnership's option) at a Base Rate or an Adjusted LIBOR plus an applicable margin based upon our then existing leverage. As of December 31, 2018, the interest rate was 4.28%. The applicable margin for Adjusted LIBOR borrowings ranges from 1.40% to 1.95% for the Revolver and 1.35% to 2.25% for the Term Loans. Base Rate means the higher of: (a) the Agent’s prime commercial rate, (b) the sum of (i) the average rate quoted by the Agent by two or more federal funds brokers selected by the Agent for sale to the Agent at face value of federal funds in the secondary market in an amount equal or comparable to the principal amount for which such rate is being determined, plus (ii) 1/2 of 1.00%, and (c) the LIBOR rate for such day plus 1.00%. Adjusted LIBOR means LIBOR divided by one minus the Eurodollar Reserve Percentage. The Eurodollar Reserve Percentage means the maximum reserve percentage at which reserves are imposed by the Board of Governors of the Federal Reserve System on eurocurrency liabilities.

We serve as the guarantor for funds borrowed by the Operating Partnership under the 2018 Facility. The 2018 Facility contains customary terms and conditions, including, without limitation, affirmative and negative covenants such as information reporting requirements, maximum secured indebtedness to total asset value, minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges, and maintenance of a minimum net worth. The 2018 Facility also contains customary events of default with customary notice and cure, including, without limitation, nonpayment, breach of covenant, misrepresentation of representations and warranties in a material respect, cross-default to other major indebtedness, change of control, bankruptcy and loss of REIT tax status.

The 2018 Facility includes an accordion feature that will allow the Operating Partnership to increase the borrowing capacity to $700 million, upon the satisfaction of certain conditions. As of December 31, 2018, $441.2 million was drawn on the 2018 Facility and our unused borrowing capacity was $58.8 million, assuming that we use the proceeds of the 2018 Facility to acquire properties, or to repay debt on properties, that are eligible to be included in the unsecured borrowing base. Proceeds from the 2018 Facility were used for general corporate purposes, including property acquisitions, debt repayment, capital expenditures, the expansion, redevelopment and re-tenanting of properties in our portfolio and working capital. We intend to use the additional proceeds from the 2018 Facility for general corporate purposes, including property acquisitions, debt repayment, capital expenditure, the expansion, redevelopment and re-tenanting of properties in our portfolio and working capital.

On December 8, 2016, in connection with the Contribution, the Operating Partnership entered into the Second Amendment to the 2018 Facility and Reaffirmation of Guaranties (the “Second Amendment”) with Pillarstone OP, the Company and the other Guarantors party thereto, the lenders party thereto and the Agent. Pursuant to the Second Amendment, following the Contribution, Whitestone Offices, LLC and Whitestone CP Woodland Ph. 2, LLC were permitted to remain Material Subsidiaries (as defined in the 2018 Facility) and Guarantors under the 2018 Facility and their respective Pillarstone Properties were each permitted to remain an Eligible Property (as defined in the 2018 Facility) and be included in the Borrowing Base (as defined in the 2018 Facility) under the 2018 Facility. In addition, on December 8, 2016, Pillarstone OP entered into the Limited Guarantee (the “Limited Guarantee”) with the Agent, pursuant to which Pillarstone OP agreed to be joined as a party to the 2018 Facility to provide a limited guarantee up to the amount of availability generated by the Pillarstone Properties owned by Whitestone Offices, LLC and Whitestone CP Woodland Ph. 2, LLC. As of December 31, 2018, Pillarstone accounted for approximately $5.7 million of the total amount drawn on the 2018 Facility.

As of December 31, 2018, our $178.2 million in secured debt was collateralized by 9 properties with a carrying value of $279.1 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. In 2018, we were not in compliance with respect to the tangible Net Worth covenant as defined in the 2018 Facility and had received two waivers as of December 31, 2018. Had we been unable to obtain a waiver or other suitable relief from the lenders under the 2018 Facility, an Event of Default (as defined in the 2018 Facility) would have occurred, permitting the lenders holding a majority of the commitments under the 2018 Facility to, among other things, accelerate the outstanding indebtedness, which would make it immediately due and payable. As referred to in Note 20, the 2019 Facility contains a similar tangible Net Worth covenant that resets at a new threshold and changes the definition of Net Worth to add back accumulated depreciation. However, we can make no assurances that we will be in compliance with this covenant or other covenants under the 2019 Facility in future periods or, if we are not in compliance, that we will be able to obtain a waiver.

Scheduled maturities of our outstanding debt as of December 31, 2018 were as follows (in thousands):



	Amount Due
Year	(in thousands)
2019	$	248,199
2020	60,801
2021	51,611
2022	101,683
2023	20,720
Thereafter	136,430
Total	$	619,444

Contractual Obligations

As of December 31, 2018, we had the following contractual obligations:



			Payment due by period (in thousands)
Consolidated Contractual Obligations	Total		Less than 1 year (2019)		1 - 3 years (2020 - 2021)		3 - 5 years (2022 - 2023)		More than 5 years (after 2023)
Long-Term Debt - Principal	$	619,444	$	248,199	$	112,412	$	122,403	$	136,430
Long-Term Debt - Fixed Interest	60,492		13,131		22,772		12,689		11,900
Long-Term Debt - Variable Interest ⁽¹⁾	6,633		6,633		—		—		—
Unsecured credit facility - Unused commitment fee ⁽²⁾	98		98		—		—		—
Operating Lease Obligations	185		85		100		—		—
Related Party Rent Lease Obligations	963		441		522		—		—
Total	$	687,815	$	268,587	$	135,806	$	135,092	$	148,330

⁽¹⁾

As of December 31, 2018, we had one loan totaling $241.2 million which bore interest at a floating rate. The variable interest rate payments are based on LIBOR plus 1.40% to LIBOR plus 1.95%, which reflects our new interest rates under the 2018 Facility. The information in the table above reflects our projected interest rate obligations for the floating rate payments based on one-month LIBOR as of December 31, 2018, of 2.35%.


⁽²⁾	The unused commitment fees on the 2018 Facility, payable quarterly, are based on the average daily unused amount of the 2018 Facility. The fees are 0.20% for facility usage greater than 50% or 0.25% for facility usage less than 50%. The information in the table above reflects our projected obligations for the 2018 Facility based on our December 31, 2018 balance of $441.2 million.