| SELECTED QUARTERLY FINANCIAL DATA (unaudited) |
SELECTED QUARTERLY FINANCIAL DATA (unaudited) The following is a summary of our unaudited quarterly financial information for the years ended December 31, 2018 and 2017 (in thousands, except per share data): | | | | | | | | | | | | | | | | | | | | First | | Second | | Third | | | | | Quarter | | Quarter | | Quarter | | Fourth | | | (As restated) | | (As restated) | | (As restated) | | Quarter | 2018 | | |
| | |
| | |
| | |
| Revenues | | $ | 29,785 |
| | $ | 29,473 |
| | $ | 30,704 |
| | $ | 29,901 |
| Net income | | $ | 3,269 |
| | $ | 2,005 |
| | $ | 8,033 |
| | $ | 8,674 |
| Net income attributable to Whitestone REIT | | $ | 3,181 |
| | $ | 1,954 |
| | $ | 7,835 |
| | $ | 8,457 |
| Basic Earnings per share: | | |
| | |
| | |
| | |
| Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares (1) | | $ | 0.08 |
| | $ | 0.05 |
| | $ | 0.20 |
| | $ | 0.21 |
| Diluted Earnings per share: | | | | | | | | | Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares (1) | | $ | 0.08 |
| | $ | 0.05 |
| | $ | 0.19 |
| | $ | 0.21 |
| | | | | | | | | | | | First | | Second | | Third | | Fourth | | | Quarter | | Quarter | | Quarter | | Quarter | 2017 | | | | | | | | | Revenues | | $ | 28,267 |
| | $ | 30,208 |
| | $ | 33,653 |
| | $ | 33,831 |
| Net income | | $ | 1,493 |
| | $ | 2,043 |
| | $ | 3,077 |
| | $ | 1,975 |
| Net income attributable to Whitestone REIT | | $ | 1,440 |
| | $ | 1,983 |
| | $ | 2,993 |
| | $ | 1,921 |
| Basic Earnings per share: | | | | | | | | | Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares (1) | | $ | 0.05 |
| | $ | 0.05 |
| | $ | 0.07 |
| | $ | 0.05 |
| Diluted Earnings per share: | | | | | | | | | Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares (1) | | $ | 0.04 |
| | $ | 0.05 |
| | $ | 0.07 |
| | $ | 0.05 |
|
| | (1) | The sum of individual quarterly basic and diluted earnings per share amounts may not agree with the year-to-date basic and diluted earning per share amounts as the result of each period’s computation being based on the weighted average number of common shares outstanding during that period. |
Quarterly Restatement of the 2018 Unaudited Quarterly Financial Statements
As previously disclosed in the Company’s Current Form 8-K filed with the SEC on February 27, 2019, on January 1, 2018, the Company adopted Topic 606, as subsequently amended, using the modified retrospective method and applied Topic 606 to those contracts that were not completed as of January 1, 2018. We applied Topic 606 to account for sales of real estate (that do not meet the definition of a business) to customers. We accounted for sales of real estate (that do not meet the definition of a business) to noncustomers under Accounting Standards Codification 610, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets” (“ASC 610”), which requires the application of certain concepts from ASC 606. In August 2018, the Company received a comment letter from the Staff relating to its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018. The Staff requested that the Company provide them with an analysis of the Company’s determination that the contribution of assets to Pillarstone OP (as described in the Form 8-K) did not meet the requirements for derecognition of the underlying assets under Topic 606, and an explanation of the Company’s consideration of the immaterial accounting errors related to Pillarstone OP in its conclusion that the Company’s disclosure controls and procedures and internal controls over financial reporting were effective as of June 30, 2018 and December 31, 2017. In September 2018, the Company responded to the Staff’s letter with the requested analysis and explanation. In October 2018, the Company received a comment letter from the Staff with certain follow up questions. Subsequently, the Company engaged in verbal discussions with the Staff regarding its responses, and in February 2019, the Staff verbally informed the Company that it objected to the Company’s conclusion regarding the assessment of the transfer of control criteria in Topic 606 with respect to the contribution and objected to the Company’s continued recognition of the underlying assets and liabilities associated with the contribution subsequent to the adoption of Topic 606 on January 1, 2018. Accordingly, the Company concluded that the Company’s 2018 Quarterly Financial Statements should be restated. Because this change from the profit sharing method is only applicable for periods ending after giving effect to the implementation of Topic 606, no periods prior to January 1, 2018 are affected by this error. See Note 5 Investment in Real Estate Partnership for further details.
As a result of Topic 606 and ASC 610 adoptions and as reflected in the Quarterly Restatement, the Company has derecognized the underlying assets and liabilities associated with the Contribution as of January 1, 2018 and has recognized the Company’s investment in Pillarstone OP under the equity method of accounting. As a part of the Quarterly Restatement, the Company has made the following adjustments to the 2018 Quarterly Financial Statements.
| | | | | | | | | | | | | | CONSOLIDATED BALANCE SHEETS | (in thousands, except per share data) | | | Unaudited
March 31, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | ASSETS | Real estate assets, at cost | | | | | | | Property | | $ | 1,148,176 |
| | $ | (96,192 | ) | | $ | 1,051,984 |
| Accumulated depreciation | | (135,599 | ) | | 36,811 |
| | (98,788 | ) | Total real estate assets | | 1,012,577 |
| | (59,381 | ) | | 953,196 |
| Investment in real estate partnership | | — |
| | 19,298 |
| | 19,298 |
| Cash and cash equivalents | | 9,337 |
| | (2,361 | ) | | 6,976 |
| Restricted cash | | 257 |
| | — |
| | 257 |
| Escrows and acquisition deposits | | 6,690 |
| | (1,133 | ) | | 5,557 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | | 24,675 |
| | (2,866 | ) | | 21,809 |
| Receivable due from related party | | — |
| | 894 |
| | 894 |
| Financed receivable due from related party | | — |
| | 15,473 |
| | 15,473 |
| Unamortized lease commissions and loan costs | | 8,260 |
| | (1,238 | ) | | 7,022 |
| Prepaid expenses and other assets | | 9,451 |
| | (10 | ) | | 9,441 |
| Total assets | | $ | 1,071,247 |
| | $ | (31,324 | ) | | $ | 1,039,923 |
| | | | | | | | LIABILITIES AND EQUITY | Liabilities: | | | | | | | Notes payable | | $ | 668,526 |
| | $ | (48,540 | ) | | $ | 619,986 |
| Accounts payable and accrued expenses | | 30,198 |
| | (1,576 | ) | | 28,622 |
| Payable due to related party | | — |
| | 699 |
| | 699 |
| Tenants’ security deposits | | 7,028 |
| | (1,262 | ) | | 5,766 |
| Dividends and distributions payable | | 11,489 |
| | — |
| | 11,489 |
| Total liabilities | | 717,241 |
| | (50,679 | ) | | 666,562 |
| 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, 2018 | | — |
| | — |
| | — |
| Common shares, $0.001 par value per share; 400,000,000 shares authorized; 39,179,540 issued and outstanding as of March 31, 2018 | | 38 |
| | — |
| | 38 |
| Additional paid-in capital | | 522,730 |
| | — |
| | 522,730 |
| Accumulated deficit | | (184,853 | ) | | 19,272 |
| | (165,581 | ) | Accumulated other comprehensive gain | | 5,528 |
| | — |
| | 5,528 |
| Total Whitestone REIT shareholders’ equity | | 343,443 |
| | 19,272 |
| | 362,715 |
| Redeemable operating partnership units | | 10,642 |
| | 4 |
| | 10,646 |
| Noncontrolling interest in subsidiary | | (79 | ) | | 79 |
| | — |
| Total equity | | 354,006 |
| | 19,355 |
| | 373,361 |
| Total liabilities and equity | | $ | 1,071,247 |
| | $ | (31,324 | ) | | $ | 1,039,923 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. | | | | | | | | | | | | | | CONSOLIDATED BALANCE SHEETS | (in thousands, except per share data) | | | | | | | | | | Unaudited
June 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | ASSETS | Real estate assets, at cost | | | | | | | Property | | $ | 1,149,528 |
| | $ | (96,757 | ) | | $ | 1,052,771 |
| Accumulated depreciation | | (141,442 | ) | | 37,746 |
| | (103,696 | ) | Total real estate assets | | 1,008,086 |
| | (59,011 | ) | | 949,075 |
| Investment in real estate partnership | | 4,419 |
| | 15,465 |
| | 19,884 |
| Cash and cash equivalents | | 3,125 |
| | — |
| | 3,125 |
| Restricted cash | | 213 |
| | — |
| | 213 |
| Escrows and acquisition deposits | | 6,515 |
| | — |
| | 6,515 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | | 20,464 |
| | — |
| | 20,464 |
| Receivable due from related party | | — |
| | 772 |
| | 772 |
| Financed receivable due from related party | | — |
| | 15,473 |
| | 15,473 |
| Unamortized lease commissions and loan costs | | 6,911 |
| | — |
| | 6,911 |
| Prepaid expenses and other assets | | 10,217 |
| | — |
| | 10,217 |
| Total assets | | $ | 1,059,950 |
| | $ | (27,301 | ) | | $ | 1,032,649 |
| | | | | | | | LIABILITIES AND EQUITY | Liabilities: | | | | | | | Notes payable | | $ | 667,595 |
| | $ | (48,241 | ) | | $ | 619,354 |
| Accounts payable and accrued expenses | | 29,157 |
| | 347 |
| | 29,504 |
| Payable due to related party | | — |
| | 1,067 |
| | 1,067 |
| Tenants’ security deposits | | 5,769 |
| | — |
| | 5,769 |
| Dividends and distributions payable | | 11,628 |
| | — |
| | 11,628 |
| Total liabilities | | 714,149 |
| | (46,827 | ) | | 667,322 |
| Commitments and contingencies: | | — |
| | — |
| | — |
| Equity: | | | | | | | Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of June 30, 2018 | | — |
| | — |
| | — |
| Common shares, $0.001 par value per share; 400,000,000 shares authorized; 39,743,829 issued and outstanding as of June 30, 2018 | | 38 |
| | — |
| | 38 |
| Additional paid-in capital | | 524,191 |
| | — |
| | 524,191 |
| Accumulated deficit | | (194,520 | ) | | 19,516 |
| | (175,004 | ) | Accumulated other comprehensive gain | | 6,430 |
| | — |
| | 6,430 |
| Total Whitestone REIT shareholders’ equity | | 336,139 |
| | 19,516 |
| | 355,655 |
| Noncontrolling interest in subsidiary | | 9,662 |
| | 10 |
| | 9,672 |
| Total equity | | 345,801 |
| | 19,526 |
| | 365,327 |
| Total liabilities and equity | | $ | 1,059,950 |
| | $ | (27,301 | ) | | $ | 1,032,649 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. | | | | | | | | | | | | | | CONSOLIDATED BALANCE SHEETS | (in thousands, except per share data) | | | Unaudited
September 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | ASSETS | Real estate assets, at cost | | | | | | | Property | | $ | 1,146,951 |
| | $ | (97,636 | ) | | $ | 1,049,315 |
| Accumulated depreciation | | (145,807 | ) | | 38,642 |
| | (107,165 | ) | Total real estate assets | | 1,001,144 |
| | (58,994 | ) | | 942,150 |
| Investment in real estate partnership | | 2,770 |
| | 17,616 |
| | 20,386 |
| Cash and cash equivalents | | 9,389 |
| | — |
| | 9,389 |
| Restricted cash | | 91 |
| | — |
| | 91 |
| Escrows and acquisition deposits | | 7,702 |
| | — |
| | 7,702 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | | 21,906 |
| | (12 | ) | | 21,894 |
| Receivable due from related party | | — |
| | 308 |
| | 308 |
| Financed receivable due from related party | | — |
| | 14,473 |
| | 14,473 |
| Unamortized lease commissions and loan costs | | 6,847 |
| | — |
| | 6,847 |
| Prepaid expenses and other assets | | 10,597 |
| | — |
| | 10,597 |
| Total assets | | $ | 1,060,446 |
| | $ | (26,609 | ) | | $ | 1,033,837 |
| | | | | | | | LIABILITIES AND EQUITY | Liabilities: | | | | | | | Notes payable | | $ | 666,624 |
| | $ | (47,939 | ) | | $ | 618,685 |
| Accounts payable and accrued expenses | | 32,846 |
| | 332 |
| | 33,178 |
| Payable due to related party | | — |
| | 1,276 |
| | 1,276 |
| Tenants’ security deposits | | 5,920 |
| | — |
| | 5,920 |
| Dividends and distributions payable | | 11,600 |
| | — |
| | 11,600 |
| Total liabilities | | 716,990 |
| | (46,331 | ) | | 670,659 |
| 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, 2018 | | — |
| | — |
| | — |
| Common shares, $0.001 par value per share; 400,000,000 shares authorized; 39,772,105 issued and outstanding as of September 30, 2018 | | 38 |
| | — |
| | 38 |
| Additional paid-in capital | | 525,780 |
| | — |
| | 525,780 |
| Accumulated deficit | | (198,199 | ) | | 19,706 |
| | (178,493 | ) | Accumulated other comprehensive gain | | 7,034 |
| | — |
| | 7,034 |
| Total Whitestone REIT shareholders’ equity | | 334,653 |
| | 19,706 |
| | 354,359 |
| Noncontrolling interest in subsidiary | | 8,803 |
| | 16 |
| | 8,819 |
| Total equity | | 343,456 |
| | 19,722 |
| | 363,178 |
| Total liabilities and equity | | $ | 1,060,446 |
| | $ | (26,609 | ) | | $ | 1,033,837 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | Unaudited
Three Months Ended March 31, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | Property revenues | | | | | | | Rental revenues | | $ | 24,946 |
| | $ | (3,274 | ) | | $ | 21,672 |
| Other revenues | | 8,650 |
| | (537 | ) | | 8,113 |
| Total property revenues | | 33,596 |
| | (3,811 | ) | | 29,785 |
| | | | | | | | Property expenses | | |
| | | | |
| Property operation and maintenance | | 5,708 |
| | (852 | ) | | 4,856 |
| Real estate taxes | | 4,657 |
| | (681 | ) | | 3,976 |
| Total property expenses | | 10,365 |
| | (1,533 | ) | | 8,832 |
| | | | | | | | Other expenses (income) | | |
| | |
| | |
| General and administrative | | 6,314 |
| | 13 |
| | 6,327 |
| Depreciation and amortization | | 7,221 |
| | (947 | ) | | 6,274 |
| Equity in earnings of real estate partnership | | — |
| | (674 | ) | | (674 | ) | Interest expense | | 6,501 |
| | (528 | ) | | 5,973 |
| Interest, dividend and other investment income | | (99 | ) | | (158 | ) | | (257 | ) | Total other expense | | 19,937 |
| | (2,294 | ) | | 17,643 |
| | | | | | | | Income before gain (loss) on sale or disposal of properties or assets, and income taxes | | 3,294 |
| | 16 |
| | 3,310 |
| | | | | | | | Provision for income taxes | | (129 | ) | | 19 |
| | (110 | ) | Gain on sale of properties | | 266 |
| | (17 | ) | | 249 |
| Loss on sale or disposal of assets | | (197 | ) | | 17 |
| | (180 | ) | | | | | | | | Net income | | 3,234 |
| | 35 |
| | 3,269 |
| | | | | | | | Redeemable operating partnership units
| | 84 |
| | 4 |
| | 88 |
| Non-controlling interests in Consolidated Partnership | | 122 |
| | (122 | ) | | — |
| Less: Net income attributable to noncontrolling interests | | 206 |
| | (118 | ) | | 88 |
| | | | | | | | Net income attributable to Whitestone REIT | | $ | 3,028 |
| | $ | 153 |
| | $ | 3,181 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | Unaudited
Three Months Ended
March 31, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | Basic Earnings Per Share: | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.08 |
| | $ | 0.00 |
| | $ | 0.08 |
| Diluted Earnings Per Share: | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.07 |
| | $ | 0.01 |
| | $ | 0.08 |
| | | | | | | | Weighted average number of common shares outstanding: | | | | |
| | |
| Basic | | 39,066 |
| | — |
| | 39,066 |
| Diluted | | 40,088 |
| | — |
| | 40,088 |
| | | | | | | | Distributions declared per common share / OP unit | | $ | 0.2850 |
| | $ | — |
| | $ | 0.2850 |
| | | | | | | | Consolidated Statements of Comprehensive Income | | | | | | | | | | | | | | Net income | | $ | 3,234 |
| | $ | 35 |
| | $ | 3,269 |
| | | | | | | | Other comprehensive gain | | | | | | | | | | | | | | Unrealized gain on cash flow hedging activities | | 2,645 |
| | — |
| | 2,645 |
| Unrealized gain on available-for-sale marketable securities | | 18 |
| | — |
| | 18 |
| | | | | | | | Comprehensive income | | 5,897 |
| | 35 |
| | 5,932 |
| | | | | | | | Less: Net income attributable to noncontrolling interests | | 206 |
| | (118 | ) | | 88 |
| Less: Comprehensive gain attributable to noncontrolling interests | | 71 |
| | — |
| | 71 |
| | | | | | | | Comprehensive income attributable to Whitestone REIT | | $ | 5,620 |
| | $ | 153 |
| | $ | 5,773 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Unaudited Three Months Ended
June 30, 2018 | | Unaudited Six Months Ended
June 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | | | | | | | Property revenues | | | | | | | | | | | | | Rental revenues | | $ | 24,650 |
| | $ | (3,268 | ) | | $ | 21,382 |
| | $ | 49,596 |
| | $ | (6,542 | ) | | $ | 43,054 |
| Other revenues | | 8,422 |
| | (331 | ) | | 8,091 |
| | 17,072 |
| | (868 | ) | | 16,204 |
| Total property revenues | | 33,072 |
| | (3,599 | ) | | 29,473 |
| | 66,668 |
| | (7,410 | ) | | 59,258 |
| | | | | | | | | | | | | | Property expenses | | | | | | |
| | |
| | | | |
| Property operation and maintenance | | 5,838 |
| | (821 | ) | | 5,017 |
| | 11,546 |
| | (1,673 | ) | | 9,873 |
| Real estate taxes | | 4,485 |
| | (580 | ) | | 3,905 |
| | 9,142 |
| | (1,261 | ) | | 7,881 |
| Total property expenses | | 10,323 |
| | (1,401 | ) | | 8,922 |
| | 20,688 |
| | (2,934 | ) | | 17,754 |
| | | | | | | | | | | | | | Other expenses (income) | | | | |
| | |
| | | | | | |
| General and administrative | | 6,624 |
| | 54 |
| | 6,678 |
| | 12,938 |
| | 67 |
| | 13,005 |
| Depreciation and amortization | | 7,396 |
| | (1,103 | ) | | 6,293 |
| | 14,617 |
| | (2,050 | ) | | 12,567 |
| Equity in earnings of real estate partnership | | — |
| | (586 | ) | | (586 | ) | | — |
| | (1,260 | ) | | (1,260 | ) | Interest expense | | 6,854 |
| | (541 | ) | | 6,313 |
| | 13,355 |
| | (1,069 | ) | | 12,286 |
| Interest, dividend and other investment income | | (119 | ) | | (165 | ) | | (284 | ) | | (218 | ) | | (323 | ) | | (541 | ) | Total other expense | | 20,755 |
| | (2,341 | ) | | 18,414 |
| | 40,692 |
| | (4,635 | ) | | 36,057 |
| | | | | | | | | | | | | | Income before gain (loss) on sale or disposal of properties or assets, income taxes, and profit sharing expense | | 1,994 |
| | 143 |
| | 2,137 |
| | 5,288 |
| | 159 |
| | 5,447 |
| | | | | | | | | | | | | | Provision for income taxes | | (84 | ) | | 25 |
| | (59 | ) | | (213 | ) | | 44 |
| | (169 | ) | Gain on sale of properties | | — |
| | — |
| | — |
| | 266 |
| | (17 | ) | | 249 |
| Profit sharing expense | | (81 | ) | | 81 |
| | — |
| | (203 | ) | | 203 |
| | — |
| Loss on sale or disposal of assets | | (74 | ) | | 1 |
| | (73 | ) | | (271 | ) | | 18 |
| | (253 | ) | | | | | | | | | | | | | | Net income | | 1,755 |
| | 250 |
| | 2,005 |
| | 4,867 |
| | 407 |
| | 5,274 |
| | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | 45 |
| | 6 |
| | 51 |
| | 128 |
| | 10 |
| | 138 |
| | | | | | | | | | | | | | Net income attributable to Whitestone REIT | | $ | 1,710 |
| | $ | 244 |
| | $ | 1,954 |
| | $ | 4,739 |
| | $ | 397 |
| | $ | 5,136 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Unaudited
Three Months Ended
June 30, 2018 | | Unaudited
Six Months Ended
June 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | | | | | | | Basic Earnings Per Share: | | | | | | | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.04 |
| | $ | 0.01 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.01 |
| | $ | 0.13 |
| Diluted Earnings Per Share: | | | | | | | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.04 |
| | $ | 0.01 |
| | $ | 0.05 |
| | $ | 0.11 |
| | $ | 0.01 |
| | $ | 0.12 |
| | | | | | | | | | | | | | Weighted average number of common shares outstanding: | | | | |
| | | | | | | | | Basic | | 39,204 |
| | — |
| | 39,204 |
| | 39,136 |
| | — |
| | 39,136 |
| Diluted | | 40,679 |
| | — |
| | 40,679 |
| | 40,519 |
| | — |
| | 40,519 |
| | | | | | | | | | | | | | Distributions declared per common share / OP unit | | $ | 0.2850 |
| | $ | — |
| | $ | 0.2850 |
| | $ | 0.5700 |
| | $ | — |
| | $ | 0.5700 |
| | | | | | | | | | | | | | Consolidated Statements of Comprehensive Income | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 1,755 |
| | $ | 250 |
| | $ | 2,005 |
| | $ | 4,867 |
| | $ | 407 |
| | $ | 5,274 |
| | | | | | | | | | | | | | Other comprehensive gain | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gain on cash flow hedging activities | | 913 |
| | — |
| | 913 |
| | 3,558 |
| | — |
| | 3,558 |
| Unrealized gain on available-for-sale marketable securities | | — |
| | — |
| | — |
| | 18 |
| | — |
| | 18 |
| | | | | | | | | | | | | | Comprehensive income | | 2,668 |
| | 250 |
| | 2,918 |
| | 8,443 |
| | 407 |
| | 8,850 |
| | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | 45 |
| | 6 |
| | 51 |
| | 128 |
| | 10 |
| | 138 |
| Less: Comprehensive gain attributable to noncontrolling interests | | 23 |
| | — |
| | 23 |
| | 94 |
| | — |
| | 94 |
| | | | | | | | | | | | | | Comprehensive income attributable to Whitestone REIT | | $ | 2,600 |
| | $ | 244 |
| | $ | 2,844 |
| | $ | 8,221 |
| | $ | 397 |
| | $ | 8,618 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Unaudited Three Months Ended
September 30, 2018 | | Unaudited Nine Months Ended
September 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | | | | | | | Property revenues | | | | | | | | | | | | | Rental revenues | | $ | 25,256 |
| | $ | (3,292 | ) | | $ | 21,964 |
| | $ | 74,852 |
| | $ | (9,834 | ) | | $ | 65,018 |
| Other revenues | | 9,340 |
| | (600 | ) | | 8,740 |
| | 26,412 |
| | (1,468 | ) | | 24,944 |
| Total property revenues | | 34,596 |
| | (3,892 | ) | | 30,704 |
| | 101,264 |
| | (11,302 | ) | | 89,962 |
| | | | | | | | | | | | | | Property expenses | | | | | | |
| | |
| | | | |
| Property operation and maintenance | | 6,374 |
| | (922 | ) | | 5,452 |
| | 17,920 |
| | (2,595 | ) | | 15,325 |
| Real estate taxes | | 5,253 |
| | (874 | ) | | 4,379 |
| | 14,395 |
| | (2,135 | ) | | 12,260 |
| Total property expenses | | 11,627 |
| | (1,796 | ) | | 9,831 |
| | 32,315 |
| | (4,730 | ) | | 27,585 |
| | | | | | | | | | | | | | Other expenses (income) | | | | |
| | |
| | | | | | |
| General and administrative | | 4,959 |
| | 23 |
| | 4,982 |
| | 17,897 |
| | 90 |
| | 17,987 |
| Depreciation and amortization | | 7,483 |
| | (1,006 | ) | | 6,477 |
| | 22,100 |
| | (3,056 | ) | | 19,044 |
| Equity in earnings of real estate partnership | | — |
| | (502 | ) | | (502 | ) | | — |
| | (1,762 | ) | | (1,762 | ) | Interest expense | | 6,951 |
| | (532 | ) | | 6,419 |
| | 20,306 |
| | (1,601 | ) | | 18,705 |
| Interest, dividend and other investment income | | (84 | ) | | (167 | ) | | (251 | ) | | (302 | ) | | (490 | ) | | (792 | ) | Total other expense | | 19,309 |
| | (2,184 | ) | | 17,125 |
| | 60,001 |
| | (6,819 | ) | | 53,182 |
| | | | | | | | | | | | | | Income before gain (loss) on sale or disposal of properties or assets, income taxes, and profit sharing expense | | 3,660 |
| | 88 |
| | 3,748 |
| | 8,948 |
| | 247 |
| | 9,195 |
| | | | | | | | | | | | | | Provision for income taxes | | (115 | ) | | 23 |
| | (92 | ) | | (328 | ) | | 67 |
| | (261 | ) | Gain on sale of properties | | 4,380 |
| | — |
| | 4,380 |
| | 4,646 |
| | (17 | ) | | 4,629 |
| Profit sharing expense | | (73 | ) | | 73 |
| | — |
| | (276 | ) | | 276 |
| | — |
| Loss on sale or disposal of assets | | (15 | ) | | 12 |
| | (3 | ) | | (286 | ) | | 30 |
| | (256 | ) | | | | | | | | | | | | | | Net income | | 7,837 |
| | 196 |
| | 8,033 |
| | 12,704 |
| | 603 |
| | 13,307 |
| | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | 193 |
| | 5 |
| | 198 |
| | 326 |
| | 16 |
| | 342 |
| | | | | | | | | | | | | | Net income attributable to Whitestone REIT | | $ | 7,644 |
| | $ | 191 |
| | $ | 7,835 |
| | $ | 12,378 |
| | $ | 587 |
| | $ | 12,965 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Unaudited
Three Months Ended
September 30, 2018 | | Unaudited
Nine Months Ended
September 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | | Previously Reported (1) | | Adjustments | | Restated | | | | | | | | | | | | | | Basic Earnings Per Share: | | | | | | | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.19 |
| | $ | 0.01 |
| | $ | 0.20 |
| | $ | 0.31 |
| | $ | 0.02 |
| | $ | 0.33 |
| Diluted Earnings Per Share: | | | | | | | | | | | | | Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares | | $ | 0.19 |
| | $ | 0.00 |
| | $ | 0.19 |
| | $ | 0.30 |
| | $ | 0.01 |
| | $ | 0.31 |
| | | | | | | | | | | | | | Weighted average number of common shares outstanding: | | | | |
| | | | | | | | | Basic | | 39,327 |
| | — |
| | 39,327 |
| | 39,200 |
| | — |
| | 39,200 |
| Diluted | | 40,635 |
| | — |
| | 40,635 |
| | 40,541 |
| | — |
| | 40,541 |
| | | | | | | | | | | | | | Distributions declared per common share / OP unit | | $ | 0.2850 |
| | $ | — |
| | $ | 0.2850 |
| | $ | 0.8550 |
| | $ | — |
| | $ | 0.8550 |
| | | | | | | | | | | | | | Consolidated Statements of Comprehensive Income | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 7,837 |
| | $ | 196 |
| | $ | 8,033 |
| | $ | 12,704 |
| | $ | 603 |
| | $ | 13,307 |
| | | | | | | | | | | | | | Other comprehensive gain | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gain on cash flow hedging activities | | 605 |
| | — |
| | 605 |
| | 4,163 |
| | — |
| | 4,163 |
| Unrealized gain on available-for-sale marketable securities | | — |
| | — |
| | — |
| | 18 |
| | — |
| | 18 |
| | | | | | | | | | | | | | Comprehensive income | | 8,442 |
| | 196 |
| | 8,638 |
| | 16,885 |
| | 603 |
| | 17,488 |
| | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | 193 |
| | 5 |
| | 198 |
| | 326 |
| | 16 |
| | 342 |
| Less: Comprehensive gain attributable to noncontrolling interests | | 15 |
| | — |
| | 15 |
| | 107 |
| | — |
| | 107 |
| | | | | | | | | | | | | | Comprehensive income attributable to Whitestone REIT | | $ | 8,234 |
| | $ | 191 |
| | $ | 8,425 |
| | $ | 16,452 |
| | $ | 587 |
| | $ | 17,039 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. | | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) | | | Unaudited
Three Months Ended
March 31, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Cash flows from operating activities: | | | | | | | Net income | | $ | 3,234 |
| | $ | 35 |
| | $ | 3,269 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | | | | Depreciation and amortization | | 7,221 |
| | (947 | ) | | 6,274 |
| Amortization of deferred loan costs | | 327 |
| | (25 | ) | | 302 |
| Loss on sale of marketable securities | | 20 |
| | — |
| | 20 |
| Loss (gain) on sale or disposal of assets and properties | | (69 | ) | | — |
| | (69 | ) | Bad debt expense | | 478 |
| | (32 | ) | | 446 |
| Share-based compensation | | 1,845 |
| | — |
| | 1,845 |
| Equity in earnings of real estate partnership | | — |
| | (674 | ) | | (674 | ) | Changes in operating assets and liabilities: | | | |
|
| | | Escrows and acquisition deposits | | 3,414 |
| | (1,055 | ) | | 2,359 |
| Accrued rent and accounts receivable | | (1,649 | ) | | 534 |
| | (1,115 | ) | Receivable due from related party | | — |
| | 110 |
| | 110 |
| Distributions from real estate partnership | | — |
| | 505 |
| | 505 |
| Unamortized lease commissions | | (493 | ) | | 90 |
| | (403 | ) | Prepaid expenses and other assets | | 494 |
| | (57 | ) | | 437 |
| Accounts payable and accrued expenses | | (8,828 | ) | | 1,531 |
| | (7,297 | ) | Payable due to related party | | — |
| | (980 | ) | | (980 | ) | Tenants’ security deposits | | 143 |
| | (71 | ) | | 72 |
| Net cash provided by operating activities | | 6,137 |
| | (1,036 | ) | | 5,101 |
| Cash flows from investing activities: | | |
| | |
| | | Additions to real estate | | (5,090 | ) | | 1,047 |
| | (4,043 | ) | Proceeds from sales of properties | | 4,433 |
| | — |
| | 4,433 |
| Investment in real estate partnership | | — |
| | — |
| | — |
| Proceeds from sales of marketable securities | | 30 |
| | — |
| | 30 |
| Net cash provided by (used in) investing activities | | (627 | ) | | 1,047 |
| | 420 |
| Cash flows from financing activities: | | |
| | |
| | |
| Distributions paid to common shareholders | | (11,145 | ) | | — |
| | (11,145 | ) | Distributions paid to OP unit holders | | (309 | ) | | — |
| | (309 | ) | Distributions paid to noncontrolling interest in Consolidated Partnership | | (115 | ) | | 115 |
| | — |
| Net proceeds from credit facility | | 9,000 |
| | — |
| | 9,000 |
| Repayments of notes payable | | (903 | ) | | 325 |
| | (578 | ) | Payments of loan origination costs | | — |
| | — |
| | — |
| Repurchase of common shares | | (466 | ) | | — |
| | (466 | ) | Net cash used in financing activities | | (3,938 | ) | | 440 |
| | (3,498 | ) | Net increase in cash, cash equivalents and restricted cash | | 1,572 |
| | 451 |
| | 2,023 |
| Cash, cash equivalents and restricted cash at beginning of period | | 8,022 |
| | (2,812 | ) | | 5,210 |
| Cash, cash equivalents and restricted cash at end of period | | $ | 9,594 |
| | $ | (2,361 | ) | | $ | 7,233 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. | | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS Supplemental Disclosures
(in thousands) | | | Unaudited
Three Months Ended
March 31, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Supplemental disclosure of cash flow information: | | |
| | |
| | |
| Cash paid for interest | | $ | 6,316 |
| | $ | (510 | ) | | $ | 5,806 |
| Non cash investing and financing activities: | | | |
|
| | | Financed insurance premiums | | $ | 1,273 |
| | $ | — |
| | $ | 1,273 |
| Value of shares issued under dividend reinvestment plan | | $ | 33 |
| | $ | — |
| | $ | 33 |
| Value of common shares exchanged for OP units | | $ | 4 |
| | $ | — |
| | $ | 4 |
| Change in fair value of available-for-sale securities | | $ | 18 |
| | $ | — |
| | $ | 18 |
| Change in fair value of cash flow hedge | | $ | 2,645 |
| | $ | — |
| | $ | 2,645 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.
| | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) | | | Unaudited
Six Months Ended
June 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Cash flows from operating activities: | | | | | | | Net income | | $ | 4,867 |
| | $ | 407 |
| | $ | 5,274 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | | | | Depreciation and amortization | | 14,617 |
| | (2,050 | ) | | 12,567 |
| Amortization of deferred loan costs | | 653 |
| | (50 | ) | | 603 |
| Loss on sale of marketable securities | | 20 |
| | — |
| | 20 |
| Loss (gain) on sale or disposal of assets and properties | | 5 |
| | (1 | ) | | 4 |
| Bad debt expense | | 761 |
| | (99 | ) | | 662 |
| Share-based compensation | | 3,246 |
| | — |
| | 3,246 |
| Equity in earnings of real estate partnership | | — |
| | (1,260 | ) | | (1,260 | ) | Changes in operating assets and liabilities: | | | |
|
| | | Escrows and acquisition deposits | | 1,401 |
| | — |
| | 1,401 |
| Accrued rent and accounts receivable | | 15 |
| | (1 | ) | | 14 |
| Receivable due from related party | | — |
| | 232 |
| | 232 |
| Distributions from real estate partnership | | — |
| | 505 |
| | 505 |
| Unamortized lease commissions | | (852 | ) | | — |
| | (852 | ) | Prepaid expenses and other assets | | 504 |
| | 2 |
| | 506 |
| Accounts payable and accrued expenses | | (6,370 | ) | | (40 | ) | | (6,410 | ) | Payable due to related party | | — |
| | (612 | ) | | (612 | ) | Tenants’ security deposits | | 75 |
| | — |
| | 75 |
| Net cash provided by operating activities | | 18,942 |
| | (2,967 | ) | | 15,975 |
| Cash flows from investing activities: | | |
| | |
| | | Additions to real estate | | (7,566 | ) | | 1,669 |
| | (5,897 | ) | Proceeds from sales of properties | | 4,433 |
| | — |
| | 4,433 |
| Investment in real estate partnership | | (649 | ) | | 649 |
| | — |
| Proceeds from sales of marketable securities | | 30 |
| | — |
| | 30 |
| Net cash used in investing activities | | (3,752 | ) | | 2,318 |
| | (1,434 | ) | Cash flows from financing activities: | | |
| | |
| | |
| Distributions paid to common shareholders | | (22,348 | ) | | — |
| | (22,348 | ) | Distributions paid to OP unit holders | | (604 | ) | | — |
| | (604 | ) | Payments of exchange offer costs | | (128 | ) | | — |
| | (128 | ) | Net proceeds from credit facility | | 9,000 |
| | — |
| | 9,000 |
| Repayments of notes payable | | (1,923 | ) | | 649 |
| | (1,274 | ) | Repurchase of common shares | | (1,059 | ) | | — |
| | (1,059 | ) | Net cash used in financing activities | | (17,062 | ) | | 649 |
| | (16,413 | ) | Net decrease in cash, cash equivalents and restricted cash | | (1,872 | ) | | — |
| | (1,872 | ) | Cash, cash equivalents and restricted cash at beginning of period | | 5,210 |
| | — |
| | 5,210 |
| Cash, cash equivalents and restricted cash at end of period | | $ | 3,338 |
| | $ | — |
| | $ | 3,338 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. | | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS Supplemental Disclosures
(in thousands) | | | Unaudited
Six Months Ended
June 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Supplemental disclosure of cash flow information: | | |
| | |
| | |
| Cash paid for interest | | $ | 12,377 |
| | $ | (1,022 | ) | | $ | 11,355 |
| Cash paid for taxes | | $ | 392 |
| | $ | (88 | ) | | $ | 304 |
| Non cash investing and financing activities: | | | |
|
| | | Disposal of fully depreciated real estate | | $ | 960 |
| | $ | (56 | ) | | $ | 904 |
| Financed insurance premiums | | $ | 1,273 |
| | $ | — |
| | $ | 1,273 |
| Value of shares issued under dividend reinvestment plan | | $ | 66 |
| | $ | — |
| | $ | 66 |
| Value of common shares exchanged for OP units | | $ | 752 |
| | $ | — |
| | $ | 752 |
| Change in fair value of available-for-sale securities | | $ | 18 |
| | $ | — |
| | $ | 18 |
| Change in fair value of cash flow hedge | | $ | 3,558 |
| | $ | — |
| | $ | 3,558 |
| Reallocation of ownership percentage between parent and subsidiary | | $ | 12 |
| | $ | — |
| | $ | 12 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.
| | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) | | | Unaudited
Nine Months Ended
September 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Cash flows from operating activities: | | | | | | | Net income | | $ | 12,704 |
| | $ | 603 |
| | $ | 13,307 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Depreciation and amortization | | 22,100 |
| | (3,056 | ) | | 19,044 |
| Amortization of deferred loan costs | | 976 |
| | (74 | ) | | 902 |
| Loss on sale of marketable securities | | 20 |
| | — |
| | 20 |
| Loss (gain) on sale or disposal of assets and properties | | (4,360 | ) | | (13 | ) | | (4,373 | ) | Bad debt expense | | 1,123 |
| | (153 | ) | | 970 |
| Share-based compensation | | 4,894 |
| | — |
| | 4,894 |
| Equity in earnings of real estate partnership | | — |
| | (1,762 | ) | | (1,762 | ) | Changes in operating assets and liabilities: | | | |
|
| | | Escrows and acquisition deposits | | 214 |
| | — |
| | 214 |
| Accrued rent and accounts receivable | | (1,736 | ) | | 12 |
| | (1,724 | ) | Receivable due from related party | | — |
| | 696 |
| | 696 |
| Distributions from real estate partnership | | — |
| | 505 |
| | 505 |
| Unamortized lease commissions | | (1,394 | ) | | (2 | ) | | (1,396 | ) | Prepaid expenses and other assets | | 618 |
| | 1 |
| | 619 |
| Accounts payable and accrued expenses | | (2,924 | ) | | (55 | ) | | (2,979 | ) | Accounts payable due to related party | | — |
| | (403 | ) | | (403 | ) | Tenants’ security deposits | | 226 |
| | — |
| | 226 |
| Net cash provided by operating activities | | 32,461 |
| | (3,701 | ) | | 28,760 |
| Cash flows from investing activities: | | |
| | |
| | | Acquisitions of real estate | | — |
| | — |
| | | Additions to real estate | | (11,300 | ) | | 2,567 |
| | (8,733 | ) | Proceeds from sales of properties | | 12,574 |
| | — |
| | 12,574 |
| Proceeds from financed receivable due from related party | | — |
| | 1,000 |
| | 1,000 |
| Investment in real estate partnership | | 843 |
| | (843 | ) | | — |
| Proceeds from sales of marketable securities | | 30 |
| | — |
| | 30 |
| Net cash provided by investing activities | | 2,147 |
| | 2,724 |
| | 4,871 |
| Cash flows from financing activities: | | |
| | |
| | |
| Distributions paid to common shareholders | | (33,642 | ) | | — |
| | (33,642 | ) | Distributions paid to OP unit holders | | (890 | ) | | — |
| | (890 | ) | Payments of exchange offer costs | | (128 | ) | | — |
| | (128 | ) | Net proceeds from credit facility | | 9,000 |
| | — |
| | 9,000 |
| Repayments of notes payable | | (2,949 | ) | | 977 |
| | (1,972 | ) | Payments of loan origination costs | | (30 | ) | | — |
| | (30 | ) | Repurchase of common shares | | (1,699 | ) | | — |
| | (1,699 | ) | Net cash used in financing activities | | (30,338 | ) | | 977 |
| | (29,361 | ) | Net increase in cash, cash equivalents and restricted cash | | 4,270 |
| | — |
| | 4,270 |
| Cash, cash equivalents and restricted cash at beginning of period | | 5,210 |
| | — |
| | 5,210 |
| Cash, cash equivalents and restricted cash at end of period | | $ | 9,480 |
| | $ | — |
| | $ | 9,480 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. | | | | | | | | | | | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS Supplemental Disclosures
(in thousands) | | | Unaudited
Nine Months Ended
September 30, 2018 | | | Previously Reported (1) | | Adjustments | | Restated | Supplemental disclosure of cash flow information: | | |
| | |
| | |
| Cash paid for interest | | $ | 19,879 |
| | $ | (1,698 | ) | | $ | 18,181 |
| Cash paid for taxes | | $ | 392 |
| | $ | (88 | ) | | $ | 304 |
| Non cash investing and financing activities: | | | |
|
| | | Disposal of fully depreciated real estate | | $ | 963 |
| | $ | (59 | ) | | $ | 904 |
| Financed insurance premiums | | $ | 1,273 |
| | $ | — |
| | $ | 1,273 |
| Value of shares issued under dividend reinvestment plan | | $ | 101 |
| | $ | — |
| | $ | 101 |
| Value of common shares exchanged for OP units | | $ | 1,545 |
| | $ | — |
| | $ | 1,545 |
| Change in fair value of available-for-sale securities | | $ | 18 |
| | $ | — |
| | $ | 18 |
| Change in fair value of cash flow hedge | | $ | 4,163 |
| | $ | — |
| | $ | 4,163 |
| Reallocation of ownership percentage between parent and subsidiary | | $ | 24 |
| | $ | — |
| | $ | 24 |
|
(1) Previously reported balances are from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. |