EX-99.2 3 exhibit992supplementaloper.htm EXHIBIT 99.2 Exhibit
suppcover201909a01.jpg








CORPORATE PROFILE
 
 
 
 
 
 
 
 
 
NYSE: WSR
 
Whitestone REIT (NYSE: WSR) is a self-managed fully integrated real estate investment trust that primarily
Common Shares
 
owns, manages and redevelops high quality retail properties which we refer to as Community Centered
 
 
Properties®. As of September 30, 2019, we wholly owned 57 Community Centered Properties® with
57 Community Centers
 
approximately 4.8 million square feet of gross leasable area, located in six of the top markets in the United States in
4.8 Million Sq. Ft. of gross
 
terms of population growth: Austin, Chicago, Dallas-Fort Worth, Houston, Phoenix and San Antonio.
leasable area
 
Headquarted in Houston, Texas, we were founded in 1998. We also own an 81.4% interest in 11 properties with
1,364 tenants
 
approximately 1.3 million square feet of gross leasable area through our equity investment in Pillarstone
 
 
Capital REIT Operating Partnership LP (“Pillarstone OP”).
 
 
 
6 Top Growth Markets
 
We focus on value creation in our properties, as we market, lease and manage our properties. We invest in
Austin
 
properties that are or can become Community Centered Properties® from which our tenants deliver needed services
Chicago
 
to the surrounding community. We focus on properties with smaller rental spaces that present opportunities for
Dallas-Fort Worth
 
attractive returns.
Houston
 
 
Phoenix
 
Our strategic efforts target entrepreneurial, service-oriented tenants at each property who provide services to their
San Antonio
 
respective surrounding communities. Operations include an internal management structure providing cost-effective
 
 
services to locally-oriented, smaller space tenants. Multi-cultural community focus sets us apart from traditional
Fiscal Year End
 
commercial real estate operators. We value diversity on our team and maintain in-house leasing, property
12/31
 
management, marketing, construction and maintenance departments with culturally diverse and multi-lingual
 
 
associates who understand the particular needs of our tenants and neighborhoods.
Common Shares &
 
 
Units Outstanding*:
 
We have a diverse tenant base concentrated on service offerings such as specialty retail, grocery, restaurants,
Common Shares: 40.5 Million
 
medical, educational and financial services and entertainment. These tenants tend to occupy smaller spaces (less
Operating Partnership Units:
 
than 3,000 square feet) and, as of September 30, 2019, provided a 47% premium rental rate compared to our larger
     0.9 Million
 
space tenants. The largest of our 1,364 tenants at our wholly owned properties comprised only 2.9% of our
 
 
annualized base rental revenues for the three months ended September 30, 2019.
Distribution (per share / unit):
 
 
 
 
 
 
 
 
Quarter: $ 0.2850
 
Investor Relations:
 
 
 
 
Annualized: $ 1.1400
 
Whitestone REIT
 
 
 
 
 
ICR Inc.
Dividend Yield: 8.0%**
 
Kevin Reed, Director of Investor Relations
 
 
 
Brad Cohen
 
 
2600 South Gessner, Suite 500, Houston, Texas 77063
 
 
 
203.682.8211
Board of Trustees:
 
713.435.2219 email: ir@whitestonereit.com
 
 
Nandita V. Berry
 
website: www.whitestonereit.com
 
 
Donald F. Keating
 
 
 
 
Paul T. Lambert
 
Analyst Coverage:
 
 
 
 
 
 
Jack L. Mahaffey
 
B. Riley FBR
 
JMP Securities
 
Ladenburg Thalmann
 
Maxim Group
James C. Mastandrea
 
Craig Kucera
 
Mitch Germain
 
John J. Massocca
 
Michael Diana
David F. Taylor
 
540.277.3366
 
212.906.3546
 
212.409.2543
 
212.895.3641
Trustee Emeritus:
 
ckucera@brileyfbr.com
 
mgermain@jmpsecurities.com
 
jmassocca@ladenburg.com
 
mdiana@maximgrp.com
Daniel G. DeVos
 
 
 
 
 
 
 
 
 
 
SunTrust Robinson Humphrey
 
 
 
 
 
 
 
 
Ki Bin Kim, CFA
 
 
 
 
 
 
* As of October 30, 2019
 
212.303.4124
 
 
 
 
 
 
** Based on common share price
 
kibin.kim@suntrust.com
 
 
 
 
 
 
of $14.26 as of close of market on
 
 
 
 
 
 
 
 
October 30, 2019.
 
 
 
 
 
 
 
 
 
 
We are followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding our performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of our management. We do not by our reference above or distribution imply our endorsement of or concurrence with such information, conclusions or recommendations.

1


Whitestone Reports Third Quarter 2019 Results
-Solid Results Reflect Steady Long Term Approach-
-Portfolio Occupancy Increases 100 Basis Points from Prior Quarter to 90.4%-
-100% Lease Up of Two Recent Pad Site Developments-
-$39.7 Million of Non-Core Dispositions (Owned through Equity Investment in Real Estate Partnership) Post Quarter-
-Increases 2019 Net Income Guidance and Affirms 2019 FFO and FFO Core Guidance-

HOUSTON, October 30, 2019 - Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) a pure-play community-centered retail REIT that acquires, owns, manages, develops and redevelops high quality “E-Commerce Resistant” neighborhood, community and lifestyle retail centers principally located in the largest, fastest-growing and most affluent markets in the Sunbelt, today announced operating and financial results for the third quarter ended September 30, 2019.

Highlights*
*All per share amounts presented in this news release are on a diluted per common share and operating partnership (“OP”) unit basis unless stated otherwise.
Third Quarter 2019 Compared to Third Quarter 2018:
•
Net Income attributable to Whitestone REIT was $1.8 million, or $0.04 per share, compared to $7.8 million, or $0.19 per share. Third quarter 2018 included a gain on sale of properties of $4.4 million, representing $0.11 per share.
•
Grew rental rates 6.6% and 7.6% (GAAP basis) on new and renewal leases signed last twelve months, respectively.
•
Occupancy improved 100 basis points from the second quarter to 90.4%.
•
Average Annual Base Rent per Square Foot (Straight Line Basis) increased 4% to $19.64 from $18.97 in third quarter of 2018.
•
Funds from Operations (“FFO”) of $9.2 million, or $0.22 per share, compared to $10.8 million, or $0.26 per share
•
FFO Core of $11.0 million, or $0.26 per share, compared to $12.3 million, or $0.29 per share

Jim Mastandrea, Chairman and Chief Executive Officer of Whitestone REIT, stated, “We are pleased to have driven a sequential increase of 100 basis points in occupancy from the second quarter, while effectively managing operating costs in the third quarter. We continue to extract value from our portfolio of well-positioned Community Centered Properties® in high growth markets to create incremental cashflow. By making timely investments in our existing assets, we can ultimately improve occupancy and create meaningful long-term value for our shareholders.”

Financial Results
Reconciliations of Net Income to FFO and FFO Core are included herein.
Net Income attributable to Whitestone REIT was $1.8 million, or $0.04 per share, for the third quarter of 2019, compared to $7.8 million, or $0.19 per share, for the same period in 2018. Included in third quarter 2018 net income was a $4.4 million gain from sale of properties, representing $0.11 per share. FFO was $9.2 million, or $0.22 per share, for the third quarter of 2019, compared to $10.8 million, or $0.26 per share, for the same period in 2018. FFO Core was $11.0 million, or $0.26 per share, in the third quarter of 2019, compared to $12.3 million, or $0.29 per share, in the same period of 2018.

Operating Results
For the period ending September 30, 2019, the Company’s operating highlights were as follows:
 
3Q-2019
 
YTD 2019
 
 
 
 
Ending Occupancy - Wholly Owned Properties
90.4%
 
90.4%
Same Store Property NOI Growth from 2018 Period
(1.2)%
 
0.34%
Rental Rate Growth (1):
 
 
 
Total Leases
14.4%
 
8.4%
New Leases
6.6%
 
6.5%
Renewal Leases
16.4%
 
8.7%
 
 
 
 
Leasing Transactions:
 
 
 
Number of New Leases
26
 
88
New Leases - Lease Term Revenue (millions)
$9.3
 
$23.5
Number of Renewal Leases
42
 
153
Renewal Leases - Lease Term Revenue (millions)
$9.4
 
$37.1

2


(1) Rental rate growth represents the percentage increase on rental rates per square foot, on comparable leases signed during the period, compared to rental rates per square foot on the previous leases. Growth rates are calculated on a GAAP basis.

Real Estate Portfolio Update

Community Centered PropertiesTM Portfolio Statistics:
Whitestone’s optimal mix of national, regional and local tenants provide daily necessities, needed services and entertainment to the communities in which they are located. As of September 30, 2019, Whitestone wholly owned 57 Community Centered Properties® with 4.8 million square feet of gross leasable area ("GLA"). Whitestone’s Retail Community Centered Properties® are located in Austin (4), San Antonio (3), Chicago (1), Dallas-Fort Worth (7), Houston (15) and the greater Phoenix metropolitan area (27).

In addition to being business friendly, these are five of the top markets in the country in terms of size, economic strength and population growth. 2017 estimates show the projected 5-year population growth rates for both Austin and Dallas-Fort Worth to be 9.7%, San Antonio to be 8.6%, Houston to be 8.0%, and Phoenix to be 6.6% (1). The Company’s retail properties in these markets are located on the best retail corners embedded in affluent communities. The Company also owns an equity interest in and manages 11 properties containing 1.3 million square feet of GLA through its investment in Pillarstone OP.

At the end of the third quarter, the Company's diversified tenant base was comprised of approximately 1,364 tenants, with the largest tenant accounting for only 2.9% of annualized base rental revenues. Lease terms range from less than one year for smaller tenants to over 15 years for larger tenants. The Company’s leases generally include minimum monthly lease payments and tenant reimbursements for payment of taxes, insurance and maintenance, and typically exclude restrictive lease clauses.

Leasing Activity:
During the third quarter of 2019, the leasing team signed 68 leases totaling 175,714 square feet in new, expansion and renewal leases, compared to 75 leases totaling 170,944 square feet in the third quarter of 2018. The total lease value was $18.7 million compared to $23.8 million during the same period last year.

The Company's total portfolio occupancy stood at 90.4% at quarter end compared to 89.4% at June 30, 2019 and 91.9% at the end the third quarter 2018.

Development:
The Company completed construction at its Fulton Towne Ranch pad on a development pad site. The 7,209 square foot Community Centered Property® is 100% leased and is located in Chandler, Arizona,

Balance Sheet and Liquidity

Balance Sheet:

Reflecting the Company’s acquisition and disposition activity during the year and selective development and redevelopment, undepreciated real estate assets were $1.06 billion and $1.05 billion at September 30, 2019 and September 30, 2018, respectively.

Liquidity, Debt and Credit Facility:

At September 30, 2019, 49 of the Company’s wholly-owned 57 properties were unencumbered by mortgage debt, with an undepreciated cost basis of $765.4 million. At September 30, 2019, the Company had total real estate debt of $622.7 million, of which approximately 87% was subject to fixed interest rates. The Company’s weighted average interest rate on all fixed rate debt as of the end of the third quarter was 4.08% and the weighted average remaining term was 5.5 years.

At quarter end, Whitestone had $5.5 million of cash available on its balance sheet and $164.0 million of available capacity under its credit facility.

Dividend

On September 23, 2019, the Company declared a quarterly cash distribution of $0.285 per common share and OP unit for the fourth quarter of 2019, to be paid in three equal installments of $0.095 in October, November, and December of 2019.

(1) Source: Claritas, April 2017.
 

3



2019 Guidance

The Company updates its 2019 full year guidance for Net Income attributable to Whitestone REIT per share to be in the range of $0.55 to $0.59 and affirms its 2019 full year guidance for FFO, as defined by NAREIT, per share to be in the range of $0.90 to $0.94 and FFO Core per share (as defined by the Company) to be in the range of $1.06 to $1.10.

Whitestone REIT and Subsidiaries
2019 FINANCIAL GUIDANCE
 
 
Projected Range
 
 
Full Year 2019
 
 
Prior Guidance
 
Updated Guidance
 
 
Low
 
High
 
Low
 
High
Net income attributable to Whitestone REIT
 
$
0.21

 
$
0.25

 
$
0.55

 
$
0.59

 
 
 
 
 
 
 
 
 
Adjustments to reconcile net income to FFO(1):
 
 
 
 
 
 
 
 
Depreciation expense, amortization, gain on disposal of assets
 
0.69

 
0.69

 
0.68

 
0.68

(Gain) loss on sale or disposal of assets or properties
 
—

 
—

 
(0.34
)
 
(0.34
)
Net income attributable to redeemable operating partnership
 
—

 
—

 
0.01

 
0.01

    FFO
 
$
0.90

 
$
0.94

 
$
0.90

 
$
0.94

 
 
 
 
 
 
 
 
 
Adjustments to reconcile FFO to FFO Core:
 
 
 
 
 
 
 
 
Share based compensation expense
 
0.16

 
0.16

 
0.15

 
0.15

Early debt extinguishment costs of real estate partnership
 
—

 
—

 
$
0.01

 
$
0.01

     FFO Core
 
$
1.06

 
$
1.10

 
$
1.06

 
$
1.10


(1) Includes pro-rata share attributable to real estate in unconsolidated partnership.

Note: Guidance reflects management’s view of current and future market conditions, as well as the earnings impact of events referenced in our earnings release and supplemental data package. This guidance does not include the operational or capital impact of any future unannounced acquisition or disposition activity. Estimates involve numerous assumptions such as rental income, interest rates, tenant default, occupancy rates, expenses, the consolidation of the Company’s non-wholly owned portfolio of non-retail assets and numerous other factors, and excludes potential future acquisitions and dispositions, acquisition and disposition transaction income and expenses and professional service fees. Not all of the factors are determinable at this time and actual results may vary from the projected results, and may be above or below the range indicated.

4



Subsequent Event - Post Quarter Asset Sales

On October 14, 2019, the Company announced the sale of three Houston non-core properties owned through an equity investment in a real estate partnership for a total sale price of $39.7 million. The sale represented a capitalization rate of 6.8% on trailing twelve month net operating income. The Company expects to record a gain on sale of approximately $14 million in the fourth quarter, representing its ownership percentage of the real estate partnership. Net proceeds received by the real estate partnership were $12.3 million, after closing costs and repayment of mortgage debt. Whitestone received $11 million in cash as a result of the sale, and expects to recycle the capital into development and redevelopment of existing assets, acquisitions and general corporate purposes.

Webcast and Conference Call Information

To listen to a live webcast of the conference call, click on the Investor Relations tab of the Company’s website, www.whitestonereit.com, and then click on the webcast link. A replay of the call will be available on Whitestone’s website via the webcast link until the Company’s next earnings release. Additional information about Whitestone can be found on the Company’s website.

The third quarter earnings release and supplemental data package will be located in the Investor Relations section of the Company’s website. For those without internet access, the earnings release and supplemental data package will be available by mail upon request. To receive a copy, please call the Company’s Investor Relations line at (713) 435-2219.

In conjunction with the issuance of its financial results, you are invited to listen to the Company’s earnings release conference call to be broadcast live on Thursday, October 31, 2019 at 10:00 A.M. Central Time. Conference call access information is as follows:

Dial-in number for domestic participants:         (800) 289-0438
Dial-in number for international participants:     (323) 794-2423

The conference call will be recorded and a telephone replay will be available through Thursday, November 14, 2019. Replay access information is as follows:

Replay number for domestic participants:        (844) 512-2921
Replay number for international participants:    (412) 317-6671
Passcode (for all participants):            5958525


Supplemental Financial Information

Supplemental materials and details regarding Whitestone's results of operations, communities and tenants are available on the Company's website at www.whitestonereit.com.

About Whitestone REIT
Whitestone is a community-centered retail REIT that acquires, owns, manages, develops and redevelops high quality "e-commerce resistant" neighborhood, community and lifestyle retail centers principally located in the largest, fastest-growing and most affluent markets in the Sunbelt. Whitestone’s optimal mix of national, regional and local tenants provides daily necessities, needed services and entertainment to the communities in which they are located. Whitestone's properties are primarily located in business-friendly Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio, which are among the fastest growing U.S. population centers with highly educated workforces, high household incomes and strong job growth. For additional information, visit www.whitestonereit.com.

Forward-Looking Statements


5


Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by the Company's use of forward-looking terminology, such as “may,” “will,” “plan,” “expect,” “intend,” “anticipate,” “believe,” “continue,” “goals” or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters.

The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements: the Company's ability to meet its long-term goals, its assumptions regarding its earnings guidance, including its ability to execute effectively its acquisition and disposition strategy, to continue to execute its development pipeline on schedule and at the expected costs, and its ability to grow its NOI as expected, which could be impacted by a number of factors, including, among other things, its ability to continue to renew leases or re-let space on attractive terms and to otherwise address its leasing rollover; its ability to successfully identify, finance and consummate suitable acquisitions, and the impact of such acquisitions, including financing developments, capitalization rates and internal rates of return; the Company’s ability to reduce or otherwise effectively manage its general and administrative expenses; the Company’s ability to fund from cash flows or otherwise distributions to its shareholders at current rates or at all; current adverse market and economic conditions; lease terminations or lease defaults; the impact of competition on the Company's efforts to renew existing leases; changes in the economies and other conditions of the specific markets in which the Company operates; economic, legislative and regulatory changes, the success of the Company's real estate strategies and investment objectives; litigation risks; the Company's ability to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended; and other factors detailed in the Company's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents the Company files with the Securities and Exchange Commission from time to time.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and the Company does not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

This release contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accounting principles (“GAAP”) including FFO, FFO Core, and NOI. Following are explanations and reconciliations of these metrics to their most comparable GAAP metric.

FFO: Management believes that FFO is a useful measure of the Company’s operating performance. The Company computes FFO as defined by NAREIT, which states that FFO should represent net income available to common shareholders (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. FFO does not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an alternative to net income as an indication of the Company’s performance or to cash flow from operations as a measure of liquidity or ability to make distributions and service debt.

Management considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, management believes that FFO provides a more meaningful and accurate indication of the Company's performance and useful information for the investment community to compare Whitestone to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.

Other REITs may use different methodologies for calculating FFO, and accordingly, the Company's FFO may not be comparable to other REITs. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding OP units for the periods presented.


6


FFO Core: Management believes that the computation of FFO in accordance with NAREIT's definition includes certain non-cash and non-comparable items that affect the Company's period-over-period performance. These items include, but are not limited to, legal settlements, non-cash share-based compensation expense, rent support agreement payments received from sellers on acquired assets and acquisition costs. In addition, the Company believes that FFO Core is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as many REITs provide some form of adjusted or modified FFO. However, other REITs may use different adjustments, and the Company's FFO Core may not be comparable to the adjusted or modified FFO of other REITs.

NOI: Management believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because NOI excludes general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, gain or loss on sale or disposition of assets and capital expenditures and leasing costs, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company's property and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, gain or loss on sale or disposition of assets, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties. Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to that of other REITs.


Whitestone REIT Contacts:
Investors Contact:
Kevin Reed, Director of Investor Relations
Whitestone REIT
(713) 435-2219
ir@whitestonereit.com


7



Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
 
 
 
 
September 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
ASSETS
Real estate assets, at cost
 
 
 
 
Property
 
$
1,062,283

 
$
1,052,238

Accumulated depreciation
 
(131,508
)
 
(113,300
)
Total real estate assets
 
930,775

 
938,938

Investment in real estate partnership
 
26,423

 
26,236

Cash and cash equivalents
 
5,539

 
13,658

Restricted cash
 
106

 
128

Escrows and acquisition deposits
 
8,163

 
8,211

Accrued rents and accounts receivable, net of allowance for doubtful accounts
 
22,232

 
21,642

Receivable due from related party
 
379

 
394

Financed receivable due from related party
 
5,661

 
5,661

Unamortized lease commissions, legal fees and loan costs
 
9,011

 
6,698

Prepaid expenses and other assets(1)
 
3,471

 
7,306

Total assets
 
$
1,011,760

 
$
1,028,872

LIABILITIES AND EQUITY
Liabilities:
 
 
 
 
Notes payable
 
$
621,737

 
$
618,205

Accounts payable and accrued expenses(2)
 
38,933

 
33,729

Payable due to related party
 
73

 
58

Tenants' security deposits
 
6,440

 
6,130

Dividends and distributions payable
 
11,820

 
11,600

Total liabilities
 
679,003

 
669,722

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, 2019 and December 31, 2018
 
—

 
—

Common shares, $0.001 par value per share; 400,000,000 shares authorized; 40,517,569 and 39,778,029 issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
 
40

 
39

Additional paid-in capital
 
540,116

 
527,662

Accumulated deficit
 
(207,824
)
 
(181,361
)
Accumulated other comprehensive gain (loss)
 
(7,356
)
 
4,116

Total Whitestone REIT shareholders' equity
 
324,976

 
350,456

Noncontrolling interest in subsidiary
 
7,781

 
8,694

Total equity
 
332,757

 
359,150

Total liabilities and equity
 
$
1,011,760

 
$
1,028,872





8


Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)


 
 
September 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
(1) Operating lease right of use assets (net) (related to adoption of Topic 842)
 
$
697

 
N/A

(2) Operating lease liabilities (related to adoption of Topic 842)
 
$
701

 
N/A


9

Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
 
Rental(1)
 
$
29,368

 
$
30,085

 
$
87,527

 
$
88,211

Management, transaction, and other fees
 
511

 
619

 
1,624

 
1,751

Total revenues
 
29,879

 
30,704


89,151

 
89,962

 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Depreciation and amortization
 
6,789

 
6,477

 
19,865

 
19,044

Operating and maintenance
 
5,118

 
5,452

 
14,760

 
15,325

Real estate taxes
 
4,410

 
4,379

 
12,474

 
12,260

General and administrative(2)
 
5,597

 
4,982

 
16,514

 
17,987

Total operating expenses
 
21,914

 
21,290

 
63,613

 
64,616

 
 
 
 
 
 
 
 
 
Other expenses (income)
 
 
 
 
 
 
 
 
Interest expense
 
6,679

 
6,419

 
19,738

 
18,705

Gain on sale of properties
 
(37
)
 
(4,380
)
 
(37
)
 
(4,629
)
Loss on sale or disposal of assets
 
37

 
3

 
152

 
256

Interest, dividend and other investment income
 
(141
)
 
(251
)
 
(550
)
 
(792
)
Total other expense
 
6,538

 
1,791

 
19,303

 
13,540

 
 
 
 
 
 
 
 
 
Income before equity investments in real estate partnerships and income tax
 
1,427

 
7,623

 
6,235

 
11,806

 
 
 
 
 
 
 
 
 
Equity in earnings of real estate partnership
 
524

 
502

 
1,480

 
1,762

Provision for income tax
 
(102
)
 
(92
)
 
(324
)
 
(261
)
Income from continuing operations
 
1,849

 
8,033

 
7,391

 
13,307

 
 
 
 
 
 
 
 
 
Gain on sale of property from discontinued operations
 
—

 
—

 
701

 
—

Income from discontinued operations
 
—

 
—

 
701

 
—

 
 
 
 
 
 
 
 
 
Net income
 
1,849

 
8,033

 
8,092

 
13,307

 
 
 
 
 
 
 
 
 
Less: Net income attributable to noncontrolling interests
 
42

 
198

 
184

 
342

 
 
 
 
 
 
 
 
 
Net income attributable to Whitestone REIT
 
$
1,807

 
$
7,835

 
$
7,908

 
$
12,965




10

Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands, except per share data)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Basic Earnings Per Share:
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Whitestone REIT excluding amounts attributable to unvested restricted shares
 
$
0.04

 
$
0.20

 
$
0.18

 
$
0.33

Income from discontinued operations attributable to Whitestone REIT
 
0.00

 
0.00

 
0.02

 
0.00

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares
 
$
0.04

 
$
0.20

 
$
0.20

 
$
0.33

Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Whitestone REIT excluding amounts attributable to unvested restricted shares
 
$
0.04

 
$
0.19

 
$
0.17

 
$
0.31

Income from discontinued operations attributable to Whitestone REIT
 
0.00

 
0.00

 
0.02

 
0.00

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares
 
$
0.04

 
$
0.19

 
$
0.19

 
$
0.31

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
40,187

 
39,327

 
39,942

 
39,200

Diluted
 
41,446

 
40,635

 
41,084

 
40,541

 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
1,849

 
$
8,033

 
$
8,092

 
$
13,307

 
 
 
 
 
 
 
 
 
Other comprehensive gain (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on cash flow hedging activities
 
(2,235
)
 
605

 
(11,740
)
 
4,163

Unrealized gain on available-for-sale marketable securities
 
—

 
—

 
—

 
18

 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
(386
)
 
8,638

 
(3,648
)
 
17,488

 
 
 
 
 
 
 
 
 
Less: Net income attributable to noncontrolling interests
 
42

 
198

 
184

 
342

Less: Comprehensive gain (loss) attributable to noncontrolling interests
 
(51
)
 
15

 
(266
)
 
107

 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Whitestone REIT
 
$
(377
)
 
$
8,425

 
$
(3,566
)
 
$
17,039


11

Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
    (1) Rental
 
 
 
 
 
 
 
 
Rental revenues
 
$
21,623

 
$
21,964

 
$
64,752

 
$
65,018

Recoveries
 
8,240

 
8,121

 
23,701

 
23,193

Bad debt
 
(495
)
 
N/A

 
(926
)
 
N/A

Total rental
 
$
29,368

 
$
30,085

 
$
87,527

 
$
88,211


(2) Bad debt included in general and administrative expenses prior to adoption of Topic 842
 
N/A
 
$
308

 
N/A
 
$
970






12

Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
Nine Months Ended
 
 
September 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income from continuing operations
 
$
7,391

 
$
13,307

Net income from discontinued operations
 
701

 
—

Net income
 
8,092

 
13,307

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
19,865

 
19,044

Amortization of deferred loan costs
 
814

 
902

Loss on sale of marketable securities
 
—

 
20

Loss (gain) on sale or disposal of assets and properties
 
115

 
(4,373
)
Bad debt
 
926

 
970

Share-based compensation
 
4,548

 
4,894

Equity in earnings of real estate partnership
 
(1,480
)
 
(1,762
)
Changes in operating assets and liabilities:
 
 
 
 
Escrows and acquisition deposits
 
48

 
214

Accrued rents and accounts receivable
 
(1,762
)
 
(1,724
)
Receivable due from related party
 
15

 
696

Distributions from real estate partnership
 
1,005

 
505

Unamortized lease commissions, legal fees and loan costs
 
(202
)
 
(1,396
)
Prepaid expenses and other assets
 
(6,838
)
 
619

Accounts payable and accrued expenses
 
5,206

 
(2,979
)
Payable due to related party
 
15

 
(403
)
Tenants' security deposits
 
310

 
226

Net cash provided by operating activities
 
29,976

 
28,760

Cash flows from investing activities:
 
 
 
 
Additions to real estate
 
(9,953
)
 
(8,733
)
Proceeds from sales of properties
 
—

 
12,574

Proceeds from financed receivable due from related party
 
—

 
1,000

Proceeds from sales of marketable securities
 
—

 
30

Net cash provided by (used in) investing activities
 
(9,953
)
 
4,871

Net cash provided by investing activities of discontinued operations
 
701

 
—

Cash flows from financing activities:
 
 
 
 
Distributions paid to common shareholders
 
(34,047
)
 
(33,642
)
Distributions paid to OP unit holders
 
(793
)
 
(890
)
Proceeds from issuance of common shares, net of offering costs
 
8,546

 
—

Payments of exchange offer costs
 
(5
)
 
(128
)
Proceeds from bonds payable
 
100,000

 
—

Net proceeds from (payments to) credit facility
 
(90,200
)
 
9,000

Repayments of notes payable
 
(7,502
)
 
(1,972
)
Payments of loan origination costs
 
(4,088
)
 
(30
)
Repurchase of common shares
 
(776
)
 
(1,699
)
Net cash used in financing activities
 
(28,865
)
 
(29,361
)
Net increase (decrease) in cash, cash equivalents and restricted cash
 
(8,141
)
 
4,270

Cash, cash equivalents and restricted cash at beginning of period
 
13,786

 
5,210

Cash, cash equivalents and restricted cash at end of period
 
$
5,645

 
$
9,480


13

Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

 
 
Nine Months Ended
 
 
September 30,
 
 
2019
 
2018
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest
 
$
19,176

 
$
18,181

Cash paid for taxes
 
$
396

 
$
304

Non cash investing and financing activities:
 
 
 
 
Disposal of fully depreciated real estate
 
$
203

 
$
904

Financed insurance premiums
 
$
1,238

 
$
1,273

Value of shares issued under dividend reinvestment plan
 
$
104

 
$
101

Value of common shares exchanged for OP units
 
$
37

 
$
1,545

Change in fair value of available-for-sale securities
 
$
—

 
$
18

Change in fair value of cash flow hedge
 
$
(11,740
)
 
$
4,163

Reallocation of ownership percentage between parent and subsidiary
 
$
—

 
$
24



14


Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
FFO (NAREIT) AND FFO CORE
 
2019
 
2018
 
2019
 
2018
Net income attributable to Whitestone REIT
 
$
1,807

 
$
7,835

 
$
7,908

 
$
12,965

  Adjustments to reconcile to FFO:
 
 
 
 
 
 
 
 
Depreciation and amortization of real estate
 
6,718

 
6,405

 
19,657

 
18,836

Depreciation and amortization of real estate assets of real estate partnership (pro rata)
 
651

 
702

 
1,921

 
2,127

(Gain) loss on disposal of assets and properties of continuing operations, net
 
—

 
(4,377
)
 
115

 
(4,373
)
Gain on sale of assets and properties of discontinued operations, net
 
—

 
—

 
(701
)
 
—

Loss on sale or disposal of properties or assets of real estate partnership (pro rata)
 
13

 
10

 
20

 
10

Net income attributable to noncontrolling interests
 
42

 
198

 
184

 
342

FFO (NAREIT)
 
9,231

 
10,773

 
29,104

 
29,907

  Adjustments to reconcile to FFO Core:
 
 
 
 
 
 
 
 
Share-based compensation expense
 
1,719

 
1,497

 
4,770

 
4,894

Proxy contest professional fees
 
—

 
—

 
—

 
2,534

FFO Core
 
$
10,950

 
$
12,270

 
$
33,874

 
$
37,335

 
 
 
 
 
 
 
 
 
FFO PER SHARE AND OP UNIT CALCULATION
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
FFO
 
$
9,231

 
$
10,773

 
$
29,104

 
$
29,907

Distributions paid on unvested restricted common shares
 
—

 
(117
)
 
(41
)
 
(225
)
FFO excluding amounts attributable to unvested restricted common shares
 
$
9,231

 
$
10,656

 
$
29,063

 
$
29,682

FFO Core excluding amounts attributable to unvested restricted common shares
 
$
10,950

 
$
12,153

 
$
33,833

 
$
37,110

Denominator:
 
 
 
 
 
 
 
 
Weighted average number of total common shares - basic
 
40,187

 
39,327

 
39,942

 
39,200

Weighted average number of total noncontrolling OP units - basic
 
927

 
1,002

 
927

 
1,039

Weighted average number of total common shares and noncontrolling OP units - basic
 
41,114

 
40,329

 
40,869

 
40,239

 
 
 
 
 
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
Unvested restricted shares
 
1,259

 
1,308

 
1,142

 
1,341

Weighted average number of total common shares and noncontrolling OP units - diluted
 
42,373

 
41,637

 
42,011

 
41,580

 
 
 
 
 
 
 
 
 
FFO per common share and OP unit - basic
 
$
0.22

 
$
0.26

 
$
0.71

 
$
0.74

FFO per common share and OP unit - diluted
 
$
0.22

 
$
0.26

 
$
0.69

 
$
0.71

 
 
 
 
 
 
 
 
 
FFO Core per common share and OP unit - basic
 
$
0.27

 
$
0.30

 
$
0.83

 
$
0.92

FFO Core per common share and OP unit - diluted
 
$
0.26

 
$
0.29

 
$
0.81

 
$
0.89


Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(continued)
(in thousands)

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
PROPERTY NET OPERATING INCOME
 
2019
 
2018
 
2019
 
2018
Net income attributable to Whitestone REIT
 
$
1,807

 
$
7,835

 
$
7,908

 
$
12,965

General and administrative expenses
 
5,597

 
4,982

 
16,514

 
17,987

Depreciation and amortization
 
6,789

 
6,477

 
19,865

 
19,044

Equity in earnings of real estate partnership
 
(524
)
 
(502
)
 
(1,480
)
 
(1,762
)
Interest expense
 
6,679

 
6,419

 
19,738

 
18,705

Interest, dividend and other investment income
 
(141
)
 
(251
)
 
(550
)
 
(792
)
Provision for income taxes
 
102

 
92

 
324

 
261

Gain on sale of assets and properties of continuing operations, net
 
(37
)
 
(4,380
)
 
(37
)
 
(4,629
)
Gain on sale of assets and properties of discontinued operations, net
 
—

 
—

 
(701
)
 
—

Management fee, net of related expenses
 
(14
)
 
(48
)
 
(64
)
 
(149
)
Loss on disposal of assets and properties of continuing operations, net
 
37

 
3

 
152

 
256

NOI of real estate partnership (pro rata)
 
1,714

 
1,875

 
5,152

 
5,885

Net income attributable to noncontrolling interests
 
42

 
198

 
184

 
342

NOI
 
$
22,051

 
$
22,700

 
$
67,005

 
$
68,113



 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net income attributable to Whitestone REIT
 
$
1,807

 
$
7,835

 
$
7,908

 
$
12,965

Depreciation and amortization
 
6,789

 
6,477

 
19,865

 
19,044

Equity in earnings of real estate partnership
 
(524
)
 
(502
)
 
(1,480
)
 
(1,762
)
Interest expense
 
6,679

 
6,419

 
19,738

 
18,705

Provision for income taxes
 
102

 
92

 
324

 
261

Gain on sale of assets and properties of continuing operations, net
 
(37
)
 
(4,380
)
 
(37
)
 
(4,629
)
Gain on sale of assets and properties of discontinued operations, net
 
—

 
—

 
(701
)
 
—

Management fee, net of related expenses
 
(14
)
 
(48
)
 
(64
)
 
(149
)
Loss on disposal of assets and properties of continuing operations, net
 
37

 
3

 
152

 
256

EBITDA adjustments for real estate partnership
 
1,651

 
1,812

 
4,900

 
5,692

Net income attributable to noncontrolling interests
 
42

 
198

 
184

 
342

EBITDA
 
$
16,532

 
$
17,906

 
$
50,789

 
$
50,725




15


Whitestone REIT and Subsidiaries
SAME STORE PROPERTY ANALYSIS
(in thousands)

 
 
Three Months Ended September 30,
 
 
 
 
 
 
2019
 
2018
 
Change
 
Percent Change
Same Store(1) (51 properties excluding development land)
 
 
 
 
 
 
 
 
Property revenues
 
 
 
 
 
 
 
 
Rental
 
$
29,368

 
$
29,807

 
$
(439
)
 
(1
)%
Management, transaction and other fees
 
283

 
369

 
(86
)
 
(23
)%
Total property revenues
 
29,651

 
30,176

 
(525
)
 
(2
)%
 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Property operation and maintenance
 
4,888

 
5,267

 
(379
)
 
(7
)%
Real estate taxes
 
4,410

 
4,306

 
104

 
2
 %
Total property expenses
 
9,298

 
9,573

 
(275
)
 
(3
)%
 
 
 
 
 
 
 
 
 
Total same store net operating income
 
20,353

 
20,603

 
(250
)
 
(1
)%
 
 
 
 
 
 
 
 
 
Non-Same Store(2) (2 Properties excluding development land)
 
 
 
 
 
 
 
 
Property revenues
 
 
 
 
 
 
 
 
Rental
 
—

 
278

 
(278
)
 
Not meaningful
Total property revenues
 
—

 
278

 
(278
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Property operation and maintenance
 
16

 
(16
)
 
32

 
Not meaningful
Real estate taxes
 
—

 
73

 
(73
)
 
Not meaningful
Total property expenses
 
16

 
57

 
(41
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Total Non-Same Store net operating income (loss)
 
(16
)
 
221

 
(237
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Pro rata share of real estate partnership
 
1,714

 
1,875

 
(161
)
 
(9
)%
 
 
 
 
 
 
 
 
 
Total property net operating income
 
22,051

 
22,699

 
(648
)
 
(3
)%
 
 
 
 
 
 
 
 
 
Less total other expenses, excluding pro rata share of real estate partnership net operating income, provision for income taxes, gain on sale of properties, gain (loss) on disposal of assets and gain on sale of properties from discontinued operations
 
20,202

 
14,666

 
5,536

 
38
 %
 
 
 
 
 
 
 
 
 
Net income
 
$
1,849

 
$
8,033

 
$
(6,184
)
 
(77
)%


16


Whitestone REIT and Subsidiaries
SAME STORE PROPERTY ANALYSIS
(in thousands)

 
 
Nine Months Ended September 30,
 
 
 
 
 
 
2019
 
2018
 
Change
 
Percent Change
Same Store(1) (51 properties excluding development land)
 
 
 
 
 
 
 
 
Property revenues
 
 
 
 
 
 
 
 
Rental
 
$
87,527

 
$
87,382

 
$
145

 
—
 %
Management, transaction and other fees
 
931

 
991

 
(60
)
 
(6
)%
Total property revenues
 
88,458

 
88,373

 
85

 
—
 %
 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Property operation and maintenance
 
14,015

 
14,567

 
(552
)
 
(4
)%
Real estate taxes
 
12,474

 
12,044

 
430

 
4
 %
Total property expenses
 
26,489

 
26,611

 
(122
)
 
—
 %
 
 
 
 
 
 
 
 
 
Total same store net operating income
 
61,969

 
61,762

 
207

 
—
 %
 
 
 
 
 
 
 
 
 
Non-Same Store(2) (2 Properties excluding development land)
 
 
 
 
 
 
 
 
Property revenues
 
 
 
 
 
 
 
 
Rental
 
—

 
828

 
(828
)
 
Not meaningful
Management, transaction and other fees
 
—

 
3

 
(3
)
 
Not meaningful
Total property revenues
 
—

 
831

 
(831
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Property operation and maintenance
 
116

 
152

 
(36
)
 
Not meaningful
Real estate taxes
 
—

 
216

 
(216
)
 
Not meaningful
Total property expenses
 
116

 
368

 
(252
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Total Non-Same Store net operating income (loss)
 
(116
)
 
463

 
(579
)
 
Not meaningful
 
 
 
 
 
 
 
 
 
Pro rata share of real estate partnership
 
5,152

 
5,885

 
(733
)
 
(12
)%
 
 
 
 
 
 
 
 
 
Total property net operating income
 
67,005

 
68,110

 
(1,105
)
 
(2
)%
 
 
 
 
 
 
 
 
 
Less total other expenses, excluding pro rata share of real estate partnership net operating income, provision for income taxes, gain on sale of properties, gain (loss) on disposal of assets and gain on sale of properties from discontinued operations
 
58,913

 
54,803

 
4,110

 
7
 %
 
 
 
 
 
 
 
 
 
Net income
 
$
8,092

 
$
13,307

 
$
(5,215
)
 
(39
)%


17


(1) 
We define “Same Stores” as properties that have been owned during the entire period being compared. For purposes of comparing the three months ended September 30, 2019 to the three months ended September 30, 2018, Same Stores include properties owned before July 1, 2018 and not sold before September 30, 2019. For purposes of comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018, Same Stores include properties owned before January 1, 2018 and not sold before September 30, 2019.

(2) 
We define “Non-Same Stores” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. For purposes of comparing the three months ended September 30, 2019 to the three months ended September 30, 2018, Non-Same Stores include properties acquired between July 1, 2018 and September 30, 2019 and properties sold between July 1, 2018 and September 30, 2019, but not included in discontinued operations. For purposes of comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018, Non-Same Stores include properties acquired between January 1, 2018 and September 30, 2019 and properties sold between January 1, 2018 and September 30, 2019, but not included in discontinued operations.


18


Whitestone REIT and Subsidiaries
OTHER FINANCIAL INFORMATION
(in thousands, except number of properties and employees)

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Other Financial Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tenant improvements (1) (2)
 
$
1,422

 
$
1,003

 
$
2,690

 
$
2,799

Leasing commissions (1) (2)
 
$
820

 
$
842

 
$
2,191

 
$
1,786

Maintenance capital (1)
 
$
1,355

 
$
1,170

 
$
3,833

 
$
3,047

Scheduled debt principal payments (1)
 
$
516

 
$
576

 
$
1,545

 
$
1,742

Straight line rent income (1)
 
$
249

 
$
979

 
$
1,155

 
$
1,851

Market rent amortization income from acquired leases (1)
 
$
215

 
$
315

 
$
656

 
$
801

Non-cash share-based compensation expense (1)
 
$
1,719

 
$
1,497

 
$
4,770

 
$
4,894

Non-real estate depreciation and amortization (1)
 
$
70

 
$
72

 
$
208

 
$
208

Amortization of loan fees (1)
 
$
300

 
$
319

 
$
875

 
$
963

Undepreciated value of unencumbered properties
 
$
765,381

 
$
747,626

 
$
765,381

 
$
747,626

Number of unencumbered properties
 
49

 
47

 
49

 
47

Full time employees
 
103

 
96

 
103

 
96


(1)
Includes pro-rata share attributable to real estate partnership.

(2) 
Does not include first generation costs needed for new acquisitions, development or redevelopment of a property to bring the property to operating standards for its intended use.



19


Whitestone REIT and Subsidiaries
MARKET CAPITALIZATION AND SELECTED RATIOS
(in thousands, except per share amounts and percentages)
 
 
As of September 30, 2019
MARKET CAPITALIZATION:
 
Percent of Total Equity
 
Total Market Capitalization
 
Percent of Total Market Capitalization
Equity Capitalization:
 
 
 
 
 
 
Common shares outstanding
 
97.8
%
 
40,517

 
 
Operating partnership units outstanding
 
2.2
%
 
925

 
 
Total
 
100.0
%
 
41,442

 
 
 
 
 
 
 
 
 
Market price of common shares as of
 
 
 
 
 
 
September 30, 2019
 
 
 
$
13.76

 
 
 
 
 
 
 
 
 
Total equity capitalization
 
 
 
570,242

 
48
%
 
 
 
 
 
 
 
Debt Capitalization:
 
 
 
 
 
 
Outstanding debt
 
 
 
$
622,989

 
 
Less: Cash and cash equivalents
 
 
 
(5,539
)
 
 
Total debt capitalization
 
 
 
617,450

 
52
%
 
 
 
 
 
 
 
Total Market Capitalization as of
 
 
 
 
 
 
September 30, 2019
 
 
 
$
1,187,692

 
100
%


SELECTED RATIOS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
INTEREST COVERAGE RATIO
 
2019
 
2018
 
2019
 
2018
EBITDA/Interest Expense
 
 
 
 
 
 
 
 
EBITDA
 
$
16,532

 
$
17,906

 
$
50,789

 
$
50,725

 
 
 
 
 
 
 
 
 
Interest expense
 
6,679

 
6,419

 
19,738

 
18,705

Pro rata share of interest expense from real estate partnership
 
420

 
554

 
1,263

 
1,658

Less: amortization of loan fees
 
(300
)
 
(319
)
 
(875
)
 
(963
)
Interest expense, excluding amortization of loan fees
 
6,799

 
6,654

 
20,126

 
19,400

 
 
 
 
 
 
 
 
 
Ratio of EBITDA to interest expense
 
2.4

 
2.7

 
2.5

 
2.6

 
 
 
 
 
 
 
 
 


20


Whitestone REIT and Subsidiaries
MARKET CAPITALIZATION AND SELECTED RATIOS
(continued)
(in thousands, except per share amounts and percentages)
 
 
 
LEVERAGE RATIO
 
September 30,
 
 
2019
 
2018
Debt/Undepreciated Book Value
 
 
 
 
Outstanding debt (1)
 
$
622,741

 
$
619,770

Less: Cash
 
(5,539
)
 
(9,389
)
Add: Proportional share of net debt of real estate partnership
 
31,311

 
38,510

Outstanding debt after cash
 
$
648,513

 
$
648,891

 
 
 
 
 
Undepreciated real estate assets
 
$
1,062,283

 
$
1,049,315

Add: Proportional share of real estate from unconsolidated partnership
 
64,629

 
69,944

Undepreciated real estate assets
 
$
1,126,912

 
$
1,119,259

Ratio of debt to real estate assets
 
58
%
 
58
%

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Debt/EBITDA Ratio
 
 
 
 
 
 
 
 
Outstanding debt (1)
 
$
622,741

 
$
619,770

 
$
622,741

 
$
619,770

Less: Cash
 
(5,539
)
 
(9,389
)
 
(5,539
)
 
(9,389
)
Add: Proportional share of net debt of unconsolidated real estate partnership
 
31,311

 
38,510

 
31,311

 
38,510

Total Net Debt
 
$
648,513

 
$
648,891

 
$
648,513

 
$
648,891

 
 
 
 
 
 
 
 
 
EBITDA
 
$
16,532

 
$
17,906

 
$
50,789

 
$
50,725

Share based compensation
 
1,719

 
1,497

 
4,770

 
4,894

Proxy contest costs
 
—

 
—

 
—

 
2,534

EBITDA, adjusted
 
$
18,251

 
$
19,403

 
$
55,559

 
$
58,153

 
 
 
 
 
 
 
 
 
Impact of partial period acquisitions and dispositions
 
—

 
(210
)
 
—

 
(481
)
 
 
 
 
 
 
 
 
 
Pro forma EBITDA, adjusted
 
18,251

 
19,193

 
55,559

 
57,672

 
 
 
 
 
 
 
 
 
Pro forma annualized EBITDA, adjusted
 
$
73,004

 
$
76,772

 
$
74,079

 
$
76,896

 
 
 
 
 
 
 
 
 
Ratio of debt to pro forma EBITDA, adjusted
 
8.9
 
8.5
 
8.8
 
8.4

(1) 
Outstanding debt excludes financed insurance balance of $248 and $255 for the periods ended September 30, 2019 and 2018, respectively.






21


 Whitestone REIT and Subsidiaries
SUMMARY OF OUTSTANDING DEBT AND DEBT MATURITIES
TOTAL OUTSTANDING DEBT
(in thousands)

Description
 
September 30, 2019
 
December 31, 2018
Fixed rate notes
 
 
 
 
$10.5 million, 4.85% Note, due September 24, 2020 (1)
 
$
9,320

 
$
9,500

$50.0 million, 1.75% plus 1.35% to 1.90% Note, due October 30, 2020 (2)
 
—

 
50,000

$50.0 million, 1.50% plus 1.35% to 1.90% Note, due January 29, 2021 (3)
 
—

 
50,000

$100.0 million, 1.73% plus 1.35% to 1.90% Note, due October 30, 2022 (4)
 
100,000

 
100,000

$165.0 million, 2.24% plus 1.35% to 1.90% Note, due January 31, 2024 (5)
 
165,000

 
—

$80.0 million, 3.72% Note, due June 1, 2027
 
80,000

 
80,000

$6.5 million 3.80% Note, due January 1, 2019
 
—

 
5,657

$19.0 million 4.15% Note, due December 1, 2024
 
19,000

 
19,000

$20.2 million 4.28% Note, due June 6, 2023
 
18,713

 
18,996

$14.0 million 4.34% Note, due September 11, 2024
 
13,542

 
13,718

$14.3 million 4.34% Note, due September 11, 2024
 
14,300

 
14,300

$15.1 million 4.99% Note, due January 6, 2024
 
14,469

 
14,643

$2.6 million 5.46% Note, due October 1, 2023
 
2,397

 
2,430

$50.0 million, 5.09% Note, due March 22, 2029
 
50,000

 
—

$50.0 million, 5.17% Note, due March 22, 2029
 
50,000

 
—

$1.2 million 4.35% Note, due November 28, 2019
 
248

 
—

Floating rate notes
 
 
 
 
Unsecured line of credit, LIBOR plus 1.40% to 1.90%, due January 1, 2023(6)
 
86,000

 
241,200

Total notes payable principal
 
622,989

 
619,444

Less deferred financing costs, net of accumulated amortization
 
(1,252
)
 
(1,239
)
Total notes payable
 
$
621,737

 
$
618,205



(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 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 at 1.50%.

(4) 
Promissory note includes an interest rate swap that fixed the LIBOR portion at 1.73%.

(5)
Promissory note includes an interest rate swap that fixed the LIBOR portion of the interest rate at an average rate of 2.24% for the duration of the term through January 31, 2024.

(6) 
Unsecured line of credit includes certain Pillarstone Properties as of December 31, 2018 which were released from collateral during 2019.


22


SCHEDULE OF DEBT MATURITIES AS OF SEPTEMBER 30, 2019
(in thousands)

Year
 
Amount Due
 
 
 
2019
 
$
743

2020
 
10,801

2021
 
1,611

2022
 
101,683

2023
 
113,863

Thereafter
 
394,288

Total
 
$
622,989



23


Whitestone REIT and Subsidiaries
SUMMARY OF OCCUPANCY AND TOP TENANTS

 
 
Gross Leasable Area as of
 
Occupancy % as of
 
 
September 30,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
Community Centered Properties®
 
2019
 
2019
 
2019
 
2019
 
2018
Whitestone
 
4,848,652

 
90
%
 
89
%
 
90
%
 
90
%
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated real estate partnership
 
1,307,930

 
77
%
 
77
%
 
79
%
 
80
%
 


24



Whitestone REIT and Subsidiaries
SUMMARY OF OCCUPANCY AND TOP TENANTS
(continued)

Tenant Name(1)
 
Location
 
Annualized Rental Revenue (in thousands)
 
Percentage of Total Annualized Base Rental Revenues (2)
 
Initial Lease Date
 
Year Expiring
 
 
 
 
 
 
 
 
 
 
 
Safeway Stores Incorporated (3)
 
Austin, Houston and Phoenix
 
$
2,498

 
2.9
%
 
11/14/1982, 5/8/1991, 7/1/2000, 4/1/2014, 4/1/2014 and 10/19/16
 
2020, 2021, 2021, 2022, 2024 and 2034
Whole Foods Market
 
Houston
 
2,042

 
2.4
%
 
9/3/2014
 
2035
Frost Bank
 
Houston
 
1,910

 
2.3
%
 
7/1/2014
 
2024
Newmark Real Estate of Houston LLC
 
Houston
 
1,009

 
1.2
%
 
10/1/2015
 
2026
Walgreens & Co. (4)
 
Houston and Phoenix
 
946

 
1.1
%
 
11/14/1982, 11/2/1987, 8/24/1996 and 11/3/1996
 
2022, 2027, 2049 and 2056
Verizon Wireless (5)
 
Houston and Phoenix
 
917

 
1.1
%
 
8/16/1994, 2/1/2004, 5/10/2004, 1/27/2006 and 5/1/2014
 
2019, 2019, 2022, 2023 and 2024
Bashas’ Inc. (6)
 
Phoenix
 
848

 
1.0
%
 
10/9/2004 and 4/1/2009
 
2024 and 2029
Alamo Drafthouse Cinema
 
Austin
 
690

 
0.8
%
 
2/1/2012
 
2027
Dollar Tree (7)
 
Houston and Phoenix
 
628

 
0.7
%
 
8/10/1999, 6/29/2001, 11/8/2009, 12/17/2009, and 5/21/2013
 
2021, 2023, 2025, 2025 and 2027
Wells Fargo & Company (8)
 
Phoenix
 
565

 
0.7
%
 
10/24/1996 and 4/16/1999
 
2022 and 2023
Kroger Co.
 
Dallas
 
483

 
0.6
%
 
12/15/2000
 
2022
Ruth’s Chris Steak House Inc.
 
Phoenix
 
466

 
0.6
%
 
1/1/1991
 
2030
Regus Corporation
 
Houston
 
442

 
0.5
%
 
5/23/2014
 
2025
Paul’s Ace Hardware
 
Phoenix
 
427

 
0.5
%
 
3/1/2008
 
2023
Original Ninfas LP
 
Houston
 
395

 
0.5
%
 
8/29/2018
 
2029
 
 
 
 
$
14,266

 
16.9
%
 
 
 
 

(1) 
Excludes Pillarstone OP owned properties.

(2) 
Annualized Base Rental Revenues represents the monthly base rent as of September 30, 2019 for each applicable tenant multiplied by 12.



25


(3) 
As of September 30, 2019, we had six leases with the same tenant occupying space at properties located in Phoenix, Houston and Austin. The annualized rental revenue for the lease that commenced on April 1, 2014, and is scheduled to expire in 2034, was $1,047,000, which represents approximately 1.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on April 1, 2014, and is scheduled to expire in 2024, was $43,000, which represents less than 0.1% of our annualized base rental revenue. The annualized rental revenue for the lease that commenced on May 8, 1991, and is scheduled to expire in 2021, was $344,000, which represents approximately 0.4% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on July 1, 2000, and is scheduled to expire in 2020, was $321,000, which represents approximately 0.4% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on November 14, 1982, and is scheduled to expire in 2022, was $318,000, which represents approximately 0.4% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on October 19, 2016, and is scheduled to expire in 2021, was $425,000, which represents approximately 0.5% of our total annualized base rental revenue.

(4) 
As of September 30, 2019, we had four leases with the same tenant occupying space at properties located in Phoenix and Houston. The annualized rental revenue for the lease that commenced on November 3, 1996, and is scheduled to expire in 2049, was $279,000, which represents approximately 0.3% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on November 2, 1987, and is scheduled to expire in 2027, was $189,000, which represents approximately 0.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on November 14, 1982, and is scheduled to expire in 2022, was $181,000, which represents approximately 0.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on August 24, 1996, and is scheduled to expire in 2056, was $298,000, which represents approximately 0.4% of our total annualized rental revenue.

(5) 
As of September 30, 2019, we had five leases with the same tenant occupying space at properties located in Phoenix and Houston. The annualized rental revenue for the lease that commenced on August 16, 1994, and is scheduled to expire in 2019, was $21,000, which represents less than 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on January 27, 2006, and is scheduled to expire in 2023, was $132,000, which represents approximately 0.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on February 1, 2004, and is scheduled to expire in 2019, was $38,000, which represents less than 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on May 1, 2014, and is scheduled to expire in 2024, was $719,000, which represents approximately 0.8% of our total annualized rental revenue. The annualized rental revenue for the lease that commenced on May 10, 2004, and is scheduled to expire in 2022, was $6,000, which represents less than 0.1% of our total annualized base rental revenue.

(6) 
As of September 30, 2019, we had two leases with the same tenant occupying space at properties located in Phoenix. The annualized rental revenue for the lease that commenced on October 9, 2004, and is scheduled to expire in 2024, was $119,000, which represents approximately 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on April 1, 2009, and is scheduled to expire in 2029, was $729,000, which represents approximately 0.9% of our total annualized base rental revenue.

(7) 
As of September 30, 2019, we had five leases with the same tenant occupying space at properties in Houston and Phoenix. The annualized rental revenue for the lease that commenced on August 10, 1999, and is scheduled to expire in 2025, was $88,000, which represents approximately 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on December 17, 2009, and is scheduled to expire in 2025, was $110,000, which represents approximately 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on June 29, 2001, and is scheduled to expire in 2021, was $168,000, which represents approximately 0.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on May 21, 2013, and is scheduled to expire in 2023, was $110,000, which represents approximately 0.1% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on November 8, 2009, and is scheduled to expire in 2027, was $151,000, which represents approximately 0.2% of our total annualized base rental revenue.

(8) 
As of September 30, 2019, we had two leases with the same tenant occupying space at properties located in Phoenix. The annualized rental revenue for the lease that commenced on October 24, 1996, and is scheduled to expire in 2022, was $131,000, which represents approximately 0.2% of our total annualized base rental revenue. The annualized rental revenue for the lease that commenced on April 16, 1999, and is scheduled to expire in 2023, was $434,000, which represents approximately 0.5% of our total annualized base rental revenue.



26


Whitestone REIT and Subsidiaries
SUMMARY OF LEASING ACTIVITY

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
RENEWALS
 
 
 
 
 
 
 
 
Number of Leases
 
42

 
36

 
153

 
130

Total Square Feet (1)
 
122,615

 
85,343

 
468,806

 
314,234

Average Square Feet
 
2,919

 
2,371

 
3,064

 
2,417

Total Lease Value
 
$
9,368,000

 
$
9,378,000

 
$
37,115,000

 
$
29,219,000

NEW LEASES
 
 
 
 
 
 
 
 
Number of Leases
 
26

 
39

 
88

 
103

Total Square Feet (1)
 
53,099

 
85,601

 
190,328

 
266,967

Average Square Feet
 
2,042

 
2,195

 
2,163

 
2,592

Total Lease Value
 
$
9,260,000

 
$
14,403,000

 
$
23,483,000

 
$
35,784,000

TOTAL LEASES
 
 
 
 
 
 
 
 
Number of Leases
 
68

 
75

 
241

 
233

Total Square Feet (1)
 
175,714

 
170,944

 
659,134

 
581,201

Average Square Feet
 
2,584

 
2,279

 
2,735

 
2,494

Total Lease Value
 
$
18,628,000

 
$
23,781,000

 
$
60,598,000

 
$
65,003,000


(1) 
Represents the square footage as the result of new, renewal, expansion and contraction leases.


27


Whitestone REIT and Subsidiaries
SUMMARY OF LEASING ACTIVITY

Type
 
Number of Leases Signed
 
Lease Value Signed
 
GLA Signed
 
Weighted Average Lease Term (2)
 
TI and Incentives (3)
 
TI and Incentives per Sq. Ft.
 
Contractual Rent Per Sq. Ft. (4)
 
Prior Contractual Rent Per Sq. Ft. (5)
 
Annual Increase (Decrease) in Contractual Rent
 
Cash Basis Increase (Decrease) Over Prior Rent
 
Annual Increase (Decrease) in Straight-lined Rent
 
Straight-lined Basis Increase (Decrease) Over Prior Rent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comparable: (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comparable Total Leases:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
53

 
$
12,857,359

 
141,219

 
3.3

 
$
655,507

 
$
4.64

 
$
19.21

 
$
17.88

 
$
188,460

 
7.4
 %
 
$
348,891

 
14.4
%
2nd Quarter 2019
 
74

 
19,815,722

 
224,467

 
3.6

 
512,015

 
2.28

 
18.56

 
18.91

 
(77,384
)
 
(1.9
)%
 
226,404

 
5.6
%
1st Quarter 2019
 
63

 
13,356,942

 
159,291

 
3.9

 
249,511

 
1.57

 
19.74

 
19.95

 
(32,650
)
 
(1.1
)%
 
217,369

 
7.2
%
4th Quarter 2018
 
61

 
15,206,873

 
121,337

 
4.3

 
627,521

 
5.17

 
24.51

 
25.10

 
(72,085
)
 
(2.4
)%
 
135,186

 
4.5
%
Total - 12 months
 
251

 
$
61,236,896

 
646,314

 
3.7

 
$
2,044,554

 
$
3.16

 
$
20.11

 
$
20.10

 
$
6,341

 
—
 %
 
$
927,850

 
7.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comparable New Leases:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
11

 
$
3,489,257

 
18,604

 
5.8

 
$
347,513

 
$
18.68

 
$
28.09

 
$
28.56

 
$
(8,713
)
 
(1.6
)%
 
$
33,063

 
6.6
%
2nd Quarter 2019
 
19

 
5,068,397

 
31,505

 
5.8

 
259,037

 
8.22

 
23.87

 
24.77

 
(28,390
)
 
(3.6
)%
 
38,486

 
5.3
%
1st Quarter 2019
 
10

 
1,075,361

 
18,798

 
2.7

 
69,722

 
3.71

 
16.48

 
16.24

 
4,567

 
1.5
 %
 
25,723

 
9.3
%
4th Quarter 2018
 
14

 
2,925,718

 
26,354

 
4.5

 
297,589

 
11.29

 
23.06

 
23.11

 
(1,377
)
 
(0.2
)%
 
39,248

 
6.9
%
Total - 12 months
 
54

 
$
12,558,733

 
95,261

 
4.8

 
$
973,861

 
$
10.22

 
$
23.01

 
$
23.37

 
$
(33,913
)
 
(1.5
)%
 
$
136,520

 
6.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
Comparable Renewal Leases:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
42

 
$
9,368,102

 
122,615

 
2.9

 
$
307,994

 
$
2.51

 
$
17.86

 
$
16.25

 
$
197,173

 
9.9
 %
 
$
315,828

 
16.4
%
2nd Quarter 2019
 
55

 
14,747,325

 
192,962

 
3.2

 
252,978

 
1.31

 
17.70

 
17.95

 
(48,994
)
 
(1.4
)%
 
187,918

 
5.7
%
1st Quarter 2019
 
53

 
12,281,581

 
140,493

 
4.1

 
179,789

 
1.28

 
20.18

 
20.44

 
(37,217
)
 
(1.3
)%
 
191,646

 
7.0
%
4th Quarter 2018
 
47

 
12,281,155

 
94,983

 
4.2

 
329,932

 
3.47

 
24.91

 
25.66

 
(70,708
)
 
(2.9
)%
 
95,938

 
4.0
%
Total - 12 months
 
197

 
$
48,678,163

 
551,053

 
3.5

 
$
1,070,693

 
$
1.94

 
$
19.61

1.00

$
19.54


$
40,254

 
0.4
 %
 
$
791,330

 
7.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

28


Whitestone REIT and Subsidiaries
SUMMARY OF LEASING ACTIVITY
(continued)
Type
 
Number of Leases Signed
 
Lease Value Signed
 
GLA Signed
 
Weighted Average Lease Term (2)
 
TI and Incentives (3)
 
TI and Incentives per Sq. Ft.
 
Contractual Rent Per Sq. Ft. (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New & Renewal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
68

 
$
18,627,801

 
175,714

 
3.5

 
$
1,181,535

 
$
6.72

 
$
20.07

 
 
 
 
 
 
 
 
 
 
2nd Quarter 2019
 
92

 
26,144,460

 
283,777

 
4.1

 
1,728,883

 
6.09

 
18.30

 
 
 
 
 
 
 
 
 
 
1st Quarter 2019
 
81

 
15,825,899

 
199,643

 
3.9

 
688,431

 
3.45

 
19.11

 
 
 
 
 
 
 
 
 
 
4th Quarter 2018
 
75

 
17,683,294

 
146,239

 
4.4

 
819,513

 
5.60

 
23.89

 
 
 
 
 
 
 
 
 
 
Total - 12 months
 
316

 
$
78,281,454

 
805,373

 
4.0

 
$
4,418,362

 
$
5.49

 
$
19.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
26

 
$
9,259,699

 
53,099

 
4.8

 
$
873,541

 
$
16.45

 
$
25.17

 
 
 
 
 
 
 
 
 
 
2nd Quarter 2019
 
35

 
10,711,818

 
83,510

 
6.0

 
1,390,932

 
16.66

 
19.75

 
 
 
 
 
 
 
 
 
 
1st Quarter 2019
 
27

 
3,511,673

 
53,719

 
3.8

 
508,249

 
9.46

 
17.65

 
 
 
 
 
 
 
 
 
 
4th Quarter 2018
 
28

 
5,402,139

 
51,256

 
4.8

 
489,581

 
9.55

 
21.99

 
 
 
 
 
 
 
 
 
 
Total - 12 months
 
116

 
$
28,885,329

 
241,584

 
5.0

 
$
3,262,303

 
$
13.50

 
$
20.95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter 2019
 
42

 
$
9,368,102

 
122,615

 
2.9

 
$
307,994

 
$
2.51

 
$
17.86

 
 
 
 
 
 
 
 
 
 
2nd Quarter 2019
 
57

 
15,432,642

 
200,267

 
3.3

 
337,951

 
1.69

 
17.70

 
 
 
 
 
 
 
 
 
 
1st Quarter 2019
 
54

 
12,314,226

 
145,924

 
4.0

 
180,182

 
1.23

 
19.64

 
 
 
 
 
 
 
 
 
 
4th Quarter 2018
 
47

 
12,281,155

 
94,983

 
4.2

 
329,932

 
3.47

 
24.91

 
 
 
 
 
 
 
 
 
 
Total - 12 months
 
200

 
$
49,396,125

 
563,789

 
3.5

 
$
1,156,059

 
$
2.05

 
$
19.45

 
 
 
 
 
 
 
 
 
 

(1) 
Comparable leases represent leases signed on spaces for which there was a former tenant within the last twelve months and the new or renewal square footage was within 25% of the expired square footage.
(2) 
Weighted average lease term is determined on the basis of square footage.
(3) 
Estimated amount per signed lease. Actual cost of construction may vary.
(4) 
Contractual rent represents contractual minimum rent under the new lease for the first month, excluding concessions.
(5) 
Prior contractual rent represents contractual minimum rent under the prior lease for the final month.


29


Whitestone REIT and Subsidiaries
LEASE EXPIRATIONS(1) 

 
 
 
 
 
 
 
 
Annualized Base Rent(2)
 
 
 
 
Gross Leasable Area
 
as of September 30, 2019
Year
 
Number of
Leases
 
Square Feet
 
Percent
of Gross Leasable Area
 
Amount
(in thousands)
 
Percent of
Total
 
Per Square Foot
2019
 
177

 
233,434

 
4.8
%
 
$
4,462

 
5.3
%
 
$
19.11

2020
 
281

 
768,099

 
15.8
%
 
13,337

 
15.7
%
 
17.36

2021
 
209

 
572,602

 
11.8
%
 
10,468

 
12.4
%
 
18.28

2022
 
195

 
675,256

 
13.9
%
 
12,584

 
14.9
%
 
18.64

2023
 
154

 
470,811

 
9.7
%
 
9,670

 
11.4
%
 
20.54

2024
 
169

 
671,117

 
13.8
%
 
12,735

 
15.0
%
 
18.98

2025
 
56

 
210,159

 
4.3
%
 
4,646

 
5.5
%
 
22.11

2026
 
29

 
199,233

 
4.1
%
 
4,022

 
4.7
%
 
20.19

2027
 
27

 
165,545

 
3.4
%
 
3,382

 
4.0
%
 
20.43

2028
 
21

 
107,029

 
2.2
%
 
2,431

 
2.9
%
 
22.71

Total
 
1,318

 
4,073,285

 
83.8
%
 
$
77,737

 
91.8
%
 
$
19.08


(1) 
Lease expirations table reflects rents in place as of September 30, 2019, and does not include option periods.

(2) 
Annualized Base Rent represents the monthly base rent as of September 30, 2019 for each tenant multiplied by 12.


30


Whitestone REIT and Subsidiaries
2019 FINANCIAL GUIDANCE
 
 
Projected Range
 
 
Full Year 2019
 
 
Prior Guidance
 
Updated Guidance
 
 
Low
 
High
 
Low
 
High
Net income attributable to Whitestone REIT
 
$
0.21

 
$
0.25

 
$
0.55

 
$
0.59

 
 
 
 
 
 
 
 
 
Adjustments to reconcile net income to FFO(1):
 
 
 
 
 
 
 
 
Depreciation expense, amortization, gain on disposal of assets
 
0.69

 
0.69

 
0.68

 
0.68

(Gain) loss on sale or disposal of assets or properties
 
—

 
—

 
(0.34
)
 
(0.34
)
Net income attributable to redeemable operating partnership
 
—

 
—

 
0.01

 
0.01

    FFO
 
$
0.90

 
$
0.94

 
$
0.90

 
$
0.94

 
 
 
 
 
 
 
 
 
Adjustments to reconcile FFO to FFO Core:
 
 
 
 
 
 
 
 
Share based compensation expense
 
0.16

 
0.16

 
0.15

 
0.15

Early debt extinguishment costs of real estate partnership
 
—

 
—

 
0.01

 
0.01

     FFO Core
 
$
1.06

 
$
1.10

 
$
1.06

 
$
1.10

 
 
 
 
 
 
 
 
 
Same Store NOI Growth
 
0.50
%
 
2.00
%
 
 
 
 
Occupancy
 
90.0
%
 
92.0
%
 
 
 
 
Average interest rate on all debt
 
4.3
%
 
4.3
%
 
 
 
 
Weighted average shares and OP units
 
42,357

 
42,327

 
 
 
 

(1) Includes pro-rata share attributable to real estate in unconsolidated partnership.

Note: Guidance reflects management’s view of current and future market conditions, as well as the earnings impact of events referenced in our earnings release and supplemental data package. This guidance does not include the operational or capital impact of any future unannounced acquisition or disposition activity. Estimates involve numerous assumptions such as rental income, interest rates, tenant default, occupancy rates, expenses, the consolidation of the Company’s non-wholly owned portfolio of non-retail assets and numerous other factors, and excludes potential future acquisitions and dispositions, acquisition and disposition transaction income and expenses and professional service fees. Not all of the factors are determinable at this time and actual results may vary from the projected results, and may be above or below the range indicated.

31


 
Whitestone REIT and Subsidiaries
Property Details
As of September 30, 2019
 
 
Community Name
 
 
 
Location
 
 
Year Built/
Renovated
 
Gross Leasable
Square Feet
 
Percent
Occupied at
9/30/2019
 
Annualized Base
Rental Revenue 
(in thousands) (1)
 
Average
Base Rental
Revenue Per
Sq. Ft. (2)
 
Average Net Effective Annual Base Rent Per Leased Sq. Ft.(3)
Whitestone Properties:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ahwatukee Plaza
 
Phoenix
 
1979
 
72,650

 
86
%
 
$
724

 
$
11.59

 
$
13.50

Anthem Marketplace
 
Phoenix
 
2000
 
113,293

 
98
%
 
1,757

 
15.82

 
15.82

Anthem Marketplace Phase II
 
Phoenix
 
2019
 
6,853

 
81
%
 
63

 
11.35

 
34.01

Bissonnet Beltway
 
Houston
 
1978
 
29,205

 
85
%
 
370

 
14.90

 
14.50

BLVD Place
 
Houston
 
2014
 
216,944

 
99
%
 
8,783

 
40.89

 
43.30

The Citadel
 
Phoenix
 
2013
 
28,547

 
99
%
 
487

 
17.23

 
15.64

City View Village
 
San Antonio
 
2005
 
17,870

 
100
%
 
509

 
28.48

 
29.10

Davenport Village
 
Austin
 
1999
 
128,934

 
95
%
 
3,210

 
26.21

 
25.57

Desert Canyon
 
Phoenix
 
2000
 
62,533

 
93
%
 
855

 
14.70

 
14.50

Eldorado Plaza
 
Dallas
 
2004
 
219,287

 
99
%
 
3,307

 
15.23

 
15.43

Fountain Hills
 
Phoenix
 
2009
 
111,289

 
88
%
 
1,632

 
16.66

 
16.95

Fountain Square
 
Phoenix
 
1986
 
118,209

 
80
%
 
1,737

 
18.37

 
17.92

Fulton Ranch Towne Center
 
Phoenix
 
2005
 
120,575

 
91
%
 
1,806

 
16.46

 
17.93

Gilbert Tuscany Village
 
Phoenix
 
2009
 
49,415

 
100
%
 
956

 
19.35

 
18.87

Gilbert Tuscany Village Hard Corner
 
Phoenix
 
2009
 
14,603

 
100
%
 
124

 
8.49

 
8.91

Heritage Trace Plaza
 
Dallas
 
2006
 
70,431

 
93
%
 
1,491

 
22.76

 
23.18

Headquarters Village
 
Dallas
 
2009
 
89,134

 
85
%
 
2,312

 
30.52

 
33.32

Keller Place
 
Dallas
 
2001
 
93,541

 
95
%
 
989

 
11.13

 
11.10

Kempwood Plaza
 
Houston
 
1974
 
91,302

 
95
%
 
1,057

 
12.19

 
12.86

La Mirada
 
Phoenix
 
1997
 
147,209

 
84
%
 
2,631

 
21.28

 
22.77

Lion Square
 
Houston
 
2014
 
117,592

 
86
%
 
1,464

 
14.48

 
13.54

The Marketplace at Central
 
Phoenix
 
2012
 
111,130

 
99
%
 
1,012

 
9.20

 
8.99

Market Street at DC Ranch
 
Phoenix
 
2003
 
244,888

 
98
%
 
4,663

 
19.43

 
19.52

Mercado at Scottsdale Ranch
 
Phoenix
 
1987
 
118,730

 
86
%
 
1,740

 
17.04

 
16.33

Paradise Plaza
 
Phoenix
 
1983
 
125,898

 
90
%
 
1,574

 
13.89

 
12.16

Parkside Village North
 
Austin
 
2005
 
27,045

 
100
%
 
838

 
30.99

 
30.88

Parkside Village South
 
Austin
 
2012
 
90,101

 
88
%
 
2,061

 
25.99

 
26.03

Pima Norte
 
Phoenix
 
2007
 
35,110

 
69
%
 
440

 
18.16

 
18.83

Pinnacle of Scottsdale
 
Phoenix
 
1991
 
113,108

 
96
%
 
2,244

 
20.67

 
21.43

Pinnacle Phase II
 
Phoenix
 
2017
 
27,063

 
100
%
 
750

 
27.71

 
26.16

The Promenade at Fulton Ranch
 
Phoenix
 
2007
 
98,792

 
87
%
 
1,321

 
15.37

 
15.16

Providence
 
Houston
 
1980
 
90,327

 
92
%
 
890

 
10.71

 
11.77

Quinlan Crossing
 
Austin
 
2012
 
109,892

 
93
%
 
2,387

 
23.36

 
23.72

Seville
 
Phoenix
 
1990
 
90,042

 
78
%
 
2,252

 
32.06

 
35.93

Shaver
 
Houston
 
1978
 
21,926

 
100
%
 
297

 
13.55

 
14.69

Shops at Pecos Ranch
 
Phoenix
 
2009
 
78,767

 
79
%
 
1,693

 
27.21

 
28.12

Shops at Starwood
 
Dallas
 
2006
 
55,385

 
97
%
 
1,473

 
27.42

 
27.09

The Shops at Williams Trace
 
Houston
 
1985
 
132,991

 
93
%
 
2,010

 
16.25

 
15.93

South Richey
 
Houston
 
1980
 
69,928

 
97
%
 
755

 
11.13

 
11.10

Spoerlein Commons
 
Chicago
 
1987
 
41,455

 
79
%
 
670

 
20.46

 
20.61

Starwood Phase II
 
Dallas
 
2016
 
35,351

 
81
%
 
1,020

 
35.62

 
36.32

The Strand at Huebner Oaks
 
San Antonio
 
2000
 
73,920

 
97
%
 
1,604

 
22.37

 
22.89

SugarPark Plaza
 
Houston
 
1974
 
95,032

 
100
%
 
1,190

 
12.52

 
12.75

Sunridge
 
Houston
 
1979
 
49,359

 
79
%
 
526

 
13.49

 
12.54

Sunset at Pinnacle Peak
 
Phoenix
 
2000
 
41,530

 
82
%
 
640

 
18.79

 
18.26

Terravita Marketplace
 
Phoenix
 
1997
 
102,733

 
52
%
 
1,197

 
22.41

 
22.74

Town Park
 
Houston
 
1978
 
43,526

 
100
%
 
992

 
22.79

 
22.01

Village Square at Dana Park
 
Phoenix
 
2009
 
323,026

 
90
%
 
6,566

 
22.59

 
22.53

Westchase
 
Houston
 
1978
 
50,332

 
88
%
 
628

 
14.18

 
13.91

Williams Trace Plaza
 
Houston
 
1983
 
129,222

 
93
%
 
1,872

 
15.58

 
15.38

Windsor Park
 
San Antonio
 
2012
 
196,458

 
97
%
 
1,916

 
10.05

 
9.78

Woodlake Plaza
 
Houston
 
1974
 
106,169

 
62
%
 
916

 
13.92

 
14.00

Total/Weighted Average - Whitestone Properties
 
 
 
 
 
4,848,652

 
90
%
 
84,401

 
19.34

 
19.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land Held for Development:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BLVD Phase II-B
 
Houston
 
N/A
 
—

 
—

 
—

 
—

 
—

Dana Park Development
 
Phoenix
 
N/A
 
—

 
—

 
—

 
—

 
—

Eldorado Plaza Development
 
Dallas
 
N/A
 
—

 
—

 
—

 
—

 
—

Fountain Hills
 
Phoenix
 
N/A
 
—

 
—

 
—

 
—

 
—

Market Street at DC Ranch
 
Phoenix
 
N/A
 
—

 
—

 
—

 
—

 
—

Total/Weighted Average - Land Held For Development (5)
 
 
 
 
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grand Total/Weighted Average - Whitestone Properties
 
 
 
 
 
4,848,652

 
90
%
 
$
84,401

 
$
19.34

 
$
19.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties owned in Unconsolidated Real Estate Partnership (81.4% ownership):
 
 
 
  
 
 
 
  
 
  
 
 
9101 LBJ Freeway
 
Dallas
 
1985
 
125,874

 
62
%
 
$
1,360

 
$
17.43

 
$
17.36

Corporate Park Northwest
 
Houston
 
1981
 
174,359

 
77
%
 
1,793

 
13.36

 
13.70

Corporate Park West
 
Houston
 
1999
 
175,665

 
76
%
 
1,557

 
11.66

 
12.35

Corporate Park Woodland
 
Houston
 
2000
 
99,937

 
91
%
 
1,001

 
11.01

 
12.22

Corporate Park Woodland II
 
Houston
 
2000
 
14,344

 
100
%
 
239

 
16.66

 
16.66

Holly Hall Industrial Park
 
Houston
 
1980
 
90,000

 
82
%
 
651

 
8.82

 
9.20

Holly Knight
 
Houston
 
1984
 
20,015

 
90
%
 
372

 
20.65

 
21.07

Interstate 10 Warehouse
 
Houston
 
1980
 
151,000

 
67
%
 
558

 
5.52

 
5.45

Plaza Park
 
Houston
 
1982
 
105,530

 
75
%
 
697

 
8.81

 
8.77

Uptown Tower
 
Dallas
 
1982
 
253,981

 
75
%
 
4,025

 
21.13

 
22.34

Westgate Service Center
 
Houston
 
1984
 
97,225

 
100
%
 
736

 
7.57

 
8.42

Total/Weighted Average - Unconsolidated Properties
 
 
 
 
 
1,307,930

 
77
%
 
$
12,989

 
$
12.90

 
$
13.48



(1)   
Calculated as the tenant’s actual September 30, 2019 base rent (defined as cash base rents including abatements) multiplied by 12. Excludes vacant space as of September 30, 2019. Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with generally accepted accounting principles, historical results differ from the annualized amounts. Total abatements for leases in effect as of September 30, 2019 equaled approximately $152,000 for the month ended September 30, 2019.
 
(2)   
Calculated as annualized base rent divided by leased square feet as of September 30, 2019.  

(3) 
Represents (i) the contractual base rent for leases in place as of September 30, 2019, adjusted to a straight-line basis to reflect changes in rental rates throughout the lease term and amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases of September 30, 2019.

(4) 
Includes (i) new acquisitions, through the earlier attainment of 90% occupancy or 18 months of ownership, and (ii) properties that are undergoing significant development, redevelopment or re-tenanting.

(5) 
As of September 30, 2019, these parcels of land were held for development and, therefore, had no gross leasable area.

32

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