Whitestone REIT (NYSE:WSR) Q4 2020 Earnings Conference Call February 25, 2021 9:00 AM ET Company Participants Kevin Reed - Director of Investor Relations Jim Mastandrea - Chairman & Chief Executive Officer Dave Holeman - Chief Financial Officer Conference Call Participants Aaron Hecht - JMP Securities Craig Kucera - B. Riley Securities Michael Diana - Maxim Group Operator Greetings, and welcome to the Whitestone REIT Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a liste ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Whitestone REIT's unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and accompanying notes for the specified periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets increased slightly to $1.065 billion from $1.056 billion at year-end 2019, primarily driven by an increase in cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$1,064,925** | **$1,056,260** | | Cash and cash equivalents | $38,990 | $15,530 | | Total real estate assets, net | $947,660 | $962,022 | | **Total Liabilities** | **$728,665** | **$703,162** | | Notes payable | $666,516 | $644,699 | | **Total Equity** | **$336,260** | **$353,098** | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For Q3 2020, total revenues remained flat at $29.9 million, while net income decreased by 50% to $0.9 million, reflecting increased expenses and bad debt Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $29,900 | $29,879 | $88,081 | $89,151 | | Total Operating Expenses | $22,730 | $21,914 | $65,328 | $63,613 | | Net Income Attributable to Whitestone REIT | $900 | $1,807 | $2,922 | $7,908 | | Diluted EPS | $0.02 | $0.04 | $0.07 | $0.19 | - Bad debt expense increased significantly, rising to **$1.3 million** in Q3 2020 from **$0.5 million** in Q3 2019, and to **$4.5 million** for the nine months of 2020 from **$0.9 million** in the prior year period, largely due to the impact of COVID-19[15](index=15&type=chunk)[50](index=50&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the nine months ended September 30, 2020, was $29.2 million, resulting in a net increase in cash of $23.5 million Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $29,220 | $29,976 | | Net Cash from Investing Activities | ($4,886) | ($9,252) | | Net Cash from Financing Activities | ($859) | ($28,865) | | **Net Increase (Decrease) in Cash** | **$23,475** | **($8,141)** | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, operations, and financial items, including COVID-19 impacts, debt, leases, and equity transactions - Due to the COVID-19 pandemic, the company received payments for approximately **90%** of contractual base rent and common area maintenance for Q3 and October 2020. The company is evaluating numerous tenant rent relief requests on a case-by-case basis[36](index=36&type=chunk) - The company recorded an adjustment to rental revenue of **$4.5 million** for the nine months ended September 30, 2020, due to increased bad debt and straight-line rent reserves, a significant increase from **$0.9 million** in the same period of 2019[50](index=50&type=chunk) - On April 30, 2020, the company received a Paycheck Protection Program (PPP) loan of **$1.73 million**, which accrues interest at **1.00%** and matures in May 2022. The company intends to apply for forgiveness[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial condition and operations, focusing on COVID-19 impacts, liquidity, capital resources, debt, and non-GAAP reconciliations [Impact of COVID-19](index=40&type=section&id=Impact%20of%20COVID-19) The COVID-19 pandemic materially impacted operations, leading to increased rent relief requests and bad debt, prompting liquidity and cost-saving measures - As of the report date, approximately **97%** of tenants (by ABR) were open and operating, and the company had collected about **90%** of contractual rent for Q3 and October[177](index=177&type=chunk) - Proactive liquidity measures include drawing down **$30 million** from the revolving credit facility in March 2020 and reducing the quarterly dividend, resulting in over **$30 million** of annualized savings[177](index=177&type=chunk)[178](index=178&type=chunk) - For the nine months ended September 30, 2020, the company recorded a bad debt adjustment of **$1.8 million** and a straight-line rent reserve adjustment of **$1.1 million** related to credit loss from converting **84 tenants** to cash basis accounting due to COVID-19[177](index=177&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) Operating results for Q3 and the nine-month period ended September 30, 2020, show a 4% decrease in Same Store NOI due to higher bad debt expense Q3 2020 vs Q3 2019 Performance (in thousands) | Metric | Q3 2020 | Q3 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $29,900 | $29,879 | $21 | 0% | | Net Income Attributable to Whitestone REIT | $900 | $1,807 | ($907) | (50)% | | FFO Core | $10,112 | $10,950 | ($838) | (8)% | | Same Store NOI | $18,936 | $19,822 | ($886) | (4)% | Nine Months 2020 vs 2019 Performance (in thousands) | Metric | Nine Months 2020 | Nine Months 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $88,081 | $89,151 | ($1,070) | (1)% | | Net Income Attributable to Whitestone REIT | $2,922 | $7,908 | ($4,986) | (63)% | | FFO Core | $30,312 | $33,874 | ($3,562) | (11)% | | Same Store NOI | $57,304 | $59,959 | ($2,655) | (4)% | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, the company maintained $39.1 million in cash and $13.0 million in credit facility availability, with operating cash flow exceeding distributions - Cash flow from operations of **$29.2 million** for the nine months ended September 30, 2020, exceeded total distributions of **$21.2 million** by approximately **$8.0 million**[217](index=217&type=chunk) - In March 2020, the company drew down **$30 million** from its revolving credit facility as a precautionary measure, leaving **$13.0 million** in remaining availability as of September 30, 2020[218](index=218&type=chunk) - On May 14, 2020, the Board adopted a shareholder rights plan (a "poison pill") to protect against opportunistic takeovers, which is set to expire on May 13, 2021[219](index=219&type=chunk)[220](index=220&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=56&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section defines and reconciles key non-GAAP metrics, including FFO, FFO Core, and Property Net Operating Income (NOI) FFO and FFO Core Reconciliation (in thousands) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Whitestone REIT | $900 | $1,807 | $2,922 | $7,908 | | **FFO (NAREIT)** | **$8,467** | **$9,231** | **$26,145** | **$29,104** | | Share-based compensation expense | $1,645 | $1,719 | $4,167 | $4,770 | | **FFO Core** | **$10,112** | **$10,950** | **$30,312** | **$33,874** | NOI Reconciliation (in thousands) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Whitestone REIT | $900 | $1,807 | $2,922 | $7,908 | | Adjustments | $20,372 | $20,244 | $60,043 | $59,097 | | **NOI** | **$21,272** | **$22,051** | **$62,965** | **$67,005** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations, with 79% of debt fixed-rate, alongside increased credit risk from tenants due to COVID-19 - As of September 30, 2020, **79%** of the company's total outstanding debt carried a fixed interest rate, with an average effective rate of approximately **4.1%**[263](index=263&type=chunk) - The company had **$139.5 million** in variable-rate debt. A **1%** change in interest rates would affect annual net income by about **$1.4 million**[264](index=264&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material impact from the temporary shift to remote work - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the period[266](index=266&type=chunk) - The shift to remote work during the first and second quarters of 2020 due to the COVID-19 pandemic did not materially affect the company's internal control over financial reporting[267](index=267&type=chunk) [PART II - OTHER INFORMATION](index=69&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various ordinary course legal proceedings, with management expecting no material adverse effect on financial position or results - The company states that it is not involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or operations[268](index=268&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) This section highlights material risks, primarily the ongoing COVID-19 pandemic's adverse impact on tenants, rent collection, liquidity, and dividend payments - The primary risk factor discussed is the COVID-19 pandemic, which is expected to materially and adversely impact tenants' businesses and the company's own financial results, liquidity, and ability to pay dividends[270](index=270&type=chunk) - Specific pandemic-related risks include tenants' inability to make timely rent payments, an increase in rent relief requests, potential tenant closures and bankruptcies, and difficulty in re-leasing vacant space[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - The pandemic could negatively impact the company's ability to access capital markets, comply with debt covenants, and could lead to substantial asset impairment charges if future cash flow estimates worsen[278](index=278&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2020, the company did not sell unregistered equity securities but repurchased 1,173 common shares from employees for tax withholding - In Q3 2020, **1,173 common shares** were repurchased from employees who tendered shares to cover tax withholding on vested restricted stock awards[281](index=281&type=chunk)

FOSTERING THRIVING COMMUNITIES AND LOCAL CONNECTIONS INVESTOR PRESENTATION SECOND QUARTER 2020 H O U S T O N | A U S T I N | D A L L A S | S A N A N T O N I O | P H O E N I X SERVING OUR STAKEHOLDERS SERVING SHAREHOLDERS BY GENERATING ATTRACTIVE RETURNS FROM PROPERTIES THAT APPRECIATE IN VALUE AND HEDGE AGAINST INFLATION SERVING LOCAL NEIGHBORHOODS BY LEASING, MANAGING, OWNING AND OPERATING COMMUNITY CENTERS IN TEXAS AND ARIZONA'S FASTEST GROWING CITIES SERVING ENTREPRENURIAL TENANTS TO ACHIEVE THE AMERICAN ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 001-34855 WHITESTONE REIT (Exact Name of Registrant as Specified in Its Charter) Maryland 76-0594970 (State o ...

Whitestone REIT (NYSE:WSR) Q2 2020 Earnings Conference Call August 6, 2020 11:00 AM ET Company Participants Kevin Reed - Director, IR James Mastandrea - Chairman & CEO David Holeman - CFO Conference Call Participants Aaron Hecht - JMP Securities Operator Good day, and welcome to the Whitestone REIT's Second Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kevin Reed, Director of Investor Relations. Please go ahead, sir. Kevin ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements of Whitestone REIT, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes explaining accounting policies, financial instruments, and recent events for the three months ended March 31, 2020 and 2019 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--------------------------------- | :--------------- | :---------------- | | Total assets | $1,071,326 | $1,056,260 | | Cash and cash equivalents | $36,774 | $15,530 | | Total real estate assets (net) | $956,802 | $962,022 | | Notes payable | $675,409 | $644,699 | | Total liabilities | $730,208 | $703,162 | | Total equity | $341,118 | $353,098 | [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Total revenues | $30,584 | $29,694 | +$890 | +3.0% | | Total operating expenses | $22,204 | $20,939 | +$1,265 | +6.0% | | Net income attributable to Whitestone REIT | $1,612 | $2,774 | -$1,162 | -41.9% | | Basic Earnings Per Share | $0.04 | $0.07 | -$0.03 | -42.9% | | Diluted Earnings Per Share | $0.04 | $0.07 | -$0.03 | -42.9% | | Comprehensive loss attributable to Whitestone REIT | $(9,109) | $(616) | -$8,493 | +1378.7% | - Unrealized loss on cash flow hedging activities significantly increased from **$(3,470) thousand** in Q1 2019 to **$(10,952) thousand** in Q1 2020, contributing to the higher comprehensive loss[15](index=15&type=chunk) [Consolidated Statements of Changes in Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Key Changes in Equity (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--------------------------------- | :--------------- | :---------------- | | Total Whitestone REIT shareholders' equity | $333,672 | $345,317 | | Total equity | $341,118 | $353,098 | - Unrealized loss on change in value of cash flow hedge was **$(10,721) thousand** for the three months ended March 31, 2020, compared to **$(3,390) thousand** for the same period in 2019[20](index=20&type=chunk)[22](index=22&type=chunk) - Distributions of **$0.285 per common share/OP unit** resulted in a total of **$(4,544) thousand** for Q1 2020, compared to **$(11,615) thousand** for Q1 2019[20](index=20&type=chunk)[22](index=22&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Net cash provided by operating activities | $5,213 | $6,065 | -$852 | | Net cash used in investing activities | $(1,593) | $(2,455) | +$862 | | Net cash provided by (used in) financing activities | $17,616 | $(12,716) | +$30,332 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $21,236 | $(9,106) | +$30,342 | | Cash, cash equivalents and restricted cash at end of period | $36,879 | $4,680 | +$32,199 | - The significant increase in cash from financing activities in Q1 2020 was primarily due to **$30,000 thousand** net proceeds from the credit facility, compared to net payments of **$(90,200) thousand** in Q1 2019[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Interim Financial Statements](index=13&type=section&id=1.%20INTERIM%20FINANCIAL%20STATEMENTS) This section explains the basis of preparation for the unaudited interim financial statements, confirming adherence to U.S. GAAP and consistency with annual audited statements. It also provides a business overview of Whitestone REIT, its properties, and its investment in Pillarstone OP - Whitestone REIT was formed in **1998 (Texas)** and reorganized to **Maryland in 2004**, operating primarily through Whitestone REIT Operating Partnership, L.P[35](index=35&type=chunk) - As of **March 31, 2020**, the company wholly-owned **58 commercial properties** in and around Austin, Chicago, Dallas-Fort Worth, Houston, Phoenix, and San Antonio[35](index=35&type=chunk) - The portfolio includes **52 wholly-owned Community Centered Properties®**, one additional wholly-owned Community Centered Property®, and **five parcels of land** for future development[36](index=36&type=chunk)[38](index=38&type=chunk) - The company holds an **81.4% majority interest** in **eight Pillarstone Properties**, which are accounted for using the equity method and do not meet the Community Centered Property® strategy[37](index=37&type=chunk) [2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the key accounting principles applied, including basis of consolidation, equity method for Pillarstone OP, accrual basis of accounting, and the use of estimates. It also highlights the impact of the COVID-19 pandemic on estimates and recent accounting pronouncements, particularly Topic 842 on leases - The company consolidates the Operating Partnership due to its sole general partner status and majority ownership[40](index=40&type=chunk) - Pillarstone OP is accounted for under the equity method since **January 1, 2018**, following the adoption of Topic 606 and ASC 610[42](index=42&type=chunk) - The COVID-19 pandemic introduces significant uncertainty to estimates, potentially impacting revenues, expenses, reserves, fair value measurements, and asset impairment charges[44](index=44&type=chunk) - Share-based compensation expense was **$1,326,000** for Q1 2020, down from **$1,951,000** in Q1 2019[52](index=52&type=chunk) - Allowance for uncollectible accounts increased to **$11.9 million** as of **March 31, 2020**, from **$11.2 million** as of **December 31, 2019**, with a **$0.4 million** adjustment to rental revenue due to COVID-19 related credit loss for approximately **40 tenants**[56](index=56&type=chunk) - Adopted Topic 842 (Leases) effective **January 1, 2019**, recognizing a lease liability and right-of-use asset of approximately **$1.1 million each**, with no material impact on net income[64](index=64&type=chunk) [3. Leases](index=18&type=section&id=3.%20LEASES) This section details the company's lease accounting as both a lessor and a lessee under Topic 842. It provides a summary of minimum future rents to be received from operating leases and fixed, future minimum rental payments for operating leases where the company is the lessee Minimum Future Rents to be Received (in thousands) | Years Ended December 31, | Minimum Future Rents | | :----------------------- | :------------------- | | 2020 (remaining) | $63,781 | | 2021 | $75,214 | | 2022 | $63,673 | | 2023 | $51,764 | | 2024 | $39,767 | | Thereafter | $114,195 | | **Total** | **$408,394** | Total Lease Liabilities as Lessee (in thousands) | Years Ended December 31, | March 31, 2020 | | :----------------------- | :--------------- | | Total undiscounted rental payments | $1,148 | | Less imputed interest | $40 | | **Total lease liabilities** | **$1,108** | - Weighted average remaining lease term for operating leases as lessee was **1.5 years** at **March 31, 2020**, with a weighted average incremental borrowing rate of **4.5%**[73](index=73&type=chunk)[75](index=75&type=chunk) [4. Accrued Rents and Accounts Receivable, Net](index=19&type=section&id=4.%20ACCURRED%20RENTS%20AND%20ACCOUNTS%20RECEIVABLE%2C%20NET) This section provides a breakdown of accrued rents and accounts receivable, net, including tenant receivables, accrued rents, allowance for doubtful accounts, and other receivables Accrued Rents and Accounts Receivable, Net (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------- | :--------------- | :---------------- | | Tenant receivables | $17,396 | $16,741 | | Accrued rents and other recoveries | $17,060 | $16,983 | | Allowance for doubtful accounts | $(11,945) | $(11,173) | | Other receivables | $385 | $303 | | **Total** | **$22,896** | **$22,854** | [5. Unamortized Lease Commissions, Legal Fees and Loan Costs](index=19&type=section&id=5.%20UNAMORTIZED%20LEASE%20COMMISSIONS%2C%20LEGAL%20FEES%20AND%20LOAN%20COSTS) This section details the deferred costs, including leasing commissions, deferred legal costs, and deferred financing costs, net of accumulated amortization Deferred Costs, Net of Amortization (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :--------------- | :---------------- | | Total cost | $14,421 | $14,169 | | Less: accumulated amortization | $(5,646) | $(5,209) | | **Total cost, net of accumulated amortization** | **$8,775** | **$8,960** | [6. Investment in Real Estate Partnership](index=20&type=section&id=6.%20INVESTMENT%20IN%20REAL%20ESTATE%20PARTNERSHIP) This section describes the company's investment in Pillarstone OP, including the contribution agreement, management agreements, and tax protection agreement. It also provides summarized financial information for Pillarstone OP and the company's share of its net income - Whitestone contributed **14 non-core properties** to Pillarstone OP in **2016** for approximately **$84 million**, consisting of Pillarstone OP Units and assumption of liabilities[79](index=79&type=chunk) - Whitestone TRS provides property management, leasing, and advisory services to Pillarstone Properties, earning monthly fees[80](index=80&type=chunk) - As of **March 31, 2020**, Whitestone holds an **81.4% ownership interest** in Pillarstone OP, which owns **eight properties** with **926,798 square feet of GLA**[85](index=85&type=chunk)[86](index=86&type=chunk) Company's Share of Net Income from Pillarstone OP (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Equity in earnings of real estate partnership | $192 | $492 | - The decrease in equity in earnings is primarily due to lower net income from Pillarstone OP following the sale of **three properties** in **October 2019**[235](index=235&type=chunk) - The company has a performance guarantee to Pillarstone OP, with a noncontingent liability of **$462,000** recognized at inception, amortized over **seven years**[89](index=89&type=chunk) [7. Debt](index=22&type=section&id=7.%20DEBT) This section details the company's debt structure, including fixed and floating rate notes, the 2019 unsecured credit facility, and the 2019 Note Purchase and Guarantee Agreement. It also outlines scheduled maturities and compliance with loan covenants Debt Composition (in thousands) | Type of Debt | March 31, 2020 | December 31, 2019 | | :----------------------- | :--------------- | :---------------- | | Fixed rate notes | $537,050 | $532,396 | | Floating rate notes (unsecured line of credit) | $139,500 | $109,500 | | **Total notes payable principal** | **$676,550** | **$645,896** | Scheduled Debt Maturities (in thousands) | Year | Amount Due | | :--- | :----------- | | 2020 | $11,605 | | 2021 | $1,611 | | 2022 | $101,683 | | 2023 | $167,363 | | 2024 | $228,573 | | Thereafter | $165,715 | | **Total** | **$676,550** | - The 2019 Facility includes a **$250 million unsecured revolving credit facility**, a **$165 million unsecured term loan (Term Loan A)**, and a **$100 million unsecured term loan (Term Loan B)**[109](index=109&type=chunk)[273](index=273&type=chunk) - On **March 20, 2020**, the company drew down **$30 million** under the 2019 Revolver as a precautionary measure due to COVID-19, leaving **$8.7 million** remaining availability as of **March 31, 2020**[107](index=107&type=chunk)[198](index=198&type=chunk) - The company issued **$100 million of senior unsecured notes** in **March 2019**, with Series A (**$50M**) amortizing from **March 2023** and Series B (**$50M**) from **March 2025**[95](index=95&type=chunk)[97](index=97&type=chunk) - As of **March 31, 2020**, **$171.0 million** in secured debt was collateralized by **eight properties** with a carrying value of **$268.8 million**, and the company was in compliance with all loan covenants[116](index=116&type=chunk)[286](index=286&type=chunk) - LIBOR is expected to be discontinued after **2021**, and the company is monitoring developments to ensure minimal impact on financial condition[94](index=94&type=chunk)[273](index=273&type=chunk) [8. Derivatives and Hedging Activities](index=27&type=section&id=8.%20DERIVATIVES%20AND%20HEDGING%20ACTIVITIES) This section discusses the company's use of interest rate swaps as cash flow hedges to manage interest rate fluctuations. It provides the fair value of these swaps and details various swap agreements Fair Value of Interest Rate Swaps (in thousands) | Balance Sheet Location | March 31, 2020 | December 31, 2019 | | :----------------------- | :--------------- | :---------------- | | Prepaid expenses and other assets | $0 | $59 | | Accounts payable and accrued expenses | $(16,553) | $(5,660) | - The company entered into multiple interest rate swaps in **January 2019** and **September 2018** to fix LIBOR portions of Term Loan A and other notes, maturing between **November 2020** and **January 2024**[120](index=120&type=chunk)[121](index=121&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Unrealized loss on cash flow hedging activities recognized in comprehensive income (loss) was **$(10,952) thousand** for Q1 2020, compared to **$(3,470) thousand** for Q1 2019[130](index=130&type=chunk) [9. Earnings Per Share](index=29&type=section&id=9.%20EARNINGS%20PER%20SHARE) This section explains the calculation of basic and diluted earnings per share, noting the exclusion of anti-dilutive OP units and distributions on unvested restricted shares Earnings Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to common shareholders (excluding unvested restricted shares) | $1,612 | $2,733 | | Weighted average number of common shares - basic | 42,048 | 39,649 | | Weighted average number of common shares - dilutive | 43,009 | 40,626 | | Basic Earnings Per Share | $0.04 | $0.07 | | Diluted Earnings Per Share | $0.04 | $0.07 | - **904,550 OP units** in Q1 2020 and **928,070 OP units** in Q1 2019 were excluded from diluted EPS calculation as they were anti-dilutive[132](index=132&type=chunk) [10. Income Taxes](index=30&type=section&id=10.%20INCOME%20TAXES) This section states the company's intent to qualify as a REIT, exempting it from federal income taxes on distributed income. It also details the Texas Margin Tax incurred - Whitestone REIT intends to qualify as a REIT, distributing at least **90% of taxable income** to shareholders to avoid federal income tax[137](index=137&type=chunk) Texas Margin Tax Provision (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------- | :-------------------------------- | :-------------------------------- | | Provision for income tax | $87 | $118 | [11. Equity](index=30&type=section&id=11.%20EQUITY) This section describes the company's common and preferred share authorization, equity offerings, and the structure of Operating Partnership Units. It also provides a summary of distributions paid to shareholders and OP unit holders - Authorized to issue up to **400 million common shares** and **50 million preferred shares**[139](index=139&type=chunk) - In Q1 2020, **170,942 common shares** were sold under the 2019 at-the-market equity distribution program, generating net proceeds of approximately **$2.2 million**[141](index=141&type=chunk) - As of **March 31, 2020**, Whitestone owned a **97.9% interest** in the Operating Partnership, with **42,917,552 OP units** outstanding[142](index=142&type=chunk)[143](index=143&type=chunk) Distributions Paid (in thousands, except per share/unit data) | Quarter Paid | Distributions Per Common Share/OP Unit | Amount Paid (Common Shares) | Amount Paid (Noncontrolling OP Unit Holders) | Total Amount Paid | | :----------- | :------------------------------------- | :-------------------------- | :------------------------------------------- | :---------------- | | Q1 2020 | $0.2850 | $11,928 | $258 | $12,186 | | Q1 2019 | $0.2850 | $11,301 | $264 | $11,565 | - On **March 24, 2020**, the Board reduced the monthly cash distribution for Q2 2020 to **$0.035 per share/unit** (quarterly **$0.105**, annualized **$0.42**), expecting over **$30 million** in annualized cash savings due to COVID-19[146](index=146&type=chunk) [12. Incentive Share Plan](index=32&type=section&id=12.%20INCENTIVE%20SHARE%20PLAN) This section details the company's long-term equity incentive plans (2008 Plan and 2018 Plan), including the types of awards granted (restricted common shares, restricted common share units, performance awards) and their vesting conditions. It also summarizes share-based compensation expense and unrecognized costs - The 2018 Long-Term Equity Incentive Ownership Plan, effective **July 30, 2018**, allows for the issuance of up to **3,433,831 common shares and OP units**[152](index=152&type=chunk) - Total compensation recognized for share-based payments was **$1,326,000** for Q1 2020, down from **$1,951,000** for Q1 2019[162](index=162&type=chunk) - As of **March 31, 2020**, there was approximately **$3.4 million** in unrecognized compensation cost for TSR Units (expected to vest over **21 months**) and **$3.6 million** for time-based shares (expected to vest over **30 months**)[163](index=163&type=chunk) - The company expects to record approximately **$5.0 million** in non-cash share-based compensation expense in **2020** and **$3.3 million** subsequent to **2020**[164](index=164&type=chunk) - **895,000 CIC Units** (Change in Control Units) are considered improbable to vest, so no expense has been recognized for them[164](index=164&type=chunk) [13. Grants to Trustees](index=35&type=section&id=13.%20GRANTS%20TO%20TRUSTEES) This section reports on common shares granted to independent trustees and a trustee emeritus in December 2019, including those elected in lieu of cash for board fees - On **December 12, 2019**, **19,562 common shares** were granted to **six independent trustees** and one trustee emeritus, with a grant fair value of **$13.54 per share**[167](index=167&type=chunk) - Two independent trustees elected to receive **3,398 common shares** (fair value **$13.54**) in lieu of cash for board fees[167](index=167&type=chunk) [14. Segment Information](index=35&type=section&id=14.%20SEGMENT%20INFORMATION) This section states that management does not differentiate results of operations by property type or location, and therefore does not present segment information - The company does not present segment information as management does not differentiate results of operations by property type or location[168](index=168&type=chunk) [15. Real Estate](index=35&type=section&id=15.%20REAL%20ESTATE) This section provides updates on property acquisitions and development activities - On **December 6, 2019**, Las Colinas Village (**104,919 sq ft**, **86% leased**) was acquired for **$34.8 million** in cash[169](index=169&type=chunk) - Construction at Anthem Marketplace Phase II (**6,853 sq ft**, **100% occupied**) was substantially completed as of **March 31, 2020**, with **$1.4 million** in construction costs incurred[170](index=170&type=chunk) [16. Related Party Transactions](index=35&type=section&id=16.%20RELATED%20PARTY%20TRANSACTIONS) This section describes transactions with Pillarstone OP, including rental income, interest expense, and management fees, following the adoption of the equity method of accounting Revenue and Expenses with Pillarstone OP (in thousands) | Location of Revenue (Expense) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Rent (Operating and maintenance) | $(264) | $(167) | | Property management fee income (Management, transaction, and other fees) | $156 | $66 | | Interest income (Interest, dividend and other investment income) | $0 | $56 | - A **$15.4 million** financed receivable from Pillarstone OP was paid off on **October 17, 2019**[172](index=172&type=chunk) [17. Commitments and Contingencies](index=36&type=section&id=17.%20COMMITMENTS%20AND%20CONTINGENCIES) This section discusses legal proceedings and claims in the ordinary course of business, noting management's belief that their resolution will not materially adversely affect the company's financial position. It specifically mentions a $2.3 million claim against Whitestone Pinnacle - Management believes that ongoing legal proceedings and claims will not have a material adverse effect on financial position, results of operations, cash flows, or liquidity[174](index=174&type=chunk) - A **$2.3 million** breach of contract claim against Whitestone Pinnacle is being vigorously defended, with management believing a loss is not probable[175](index=175&type=chunk) [18. Subsequent Events](index=36&type=section&id=18.%20SUBSEQUENT%20EVENTS) This section details the significant impact of the COVID-19 pandemic, including government mandates, rent relief requests, and the company's proactive measures. It also reports on the Paycheck Protection Program (PPP) loan received in April 2020 - COVID-19 pandemic declared a 'Public Health Emergency of International Concern' and characterized as a pandemic, leading to stay-in-place orders and non-essential business closures in Texas and Arizona[176](index=176&type=chunk) - As of the report date, the company received approximately **64%** of contractual base rent and common area maintenance reimbursables billed for April, and is evaluating rent deferral requests on a case-by-case basis[177](index=177&type=chunk) - On **April 30, 2020**, the company received a **$1,733,510 PPP Loan** under the CARES Act, maturing **May 6, 2022**, with a **1.00% interest rate**, intending to use proceeds for payroll, mortgage, rent, and utilities, with potential for forgiveness[178](index=178&type=chunk)[180](index=180&type=chunk) - The company has implemented a temporary response team for tenant concerns, paused acquisition activity, and reduced its quarterly dividend to conserve liquidity[177](index=177&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial condition, results of operations, and future outlook, with a significant focus on the impact of the COVID-19 pandemic and related mitigation strategies [Overview](index=38&type=section&id=Overview) - Whitestone REIT owns and operates commercial properties in Texas, Arizona, and Illinois, focusing on "Community Centered Properties®" in culturally diverse neighborhoods[188](index=188&type=chunk)[189](index=189&type=chunk) - As of **March 31, 2020**, the company wholly-owned **58 commercial properties**, including **52 Community Centered Properties®** (**4.9 million sq ft GLA**, **$903.7 million** carrying amount), one additional property (**0.1 million sq ft GLA**, **$34.5 million** carrying amount), and **five land parcels** for development (**$18.6 million** carrying value)[191](index=191&type=chunk)[194](index=194&type=chunk) - The company had **1,404 tenants** as of **March 31, 2020**, with the largest tenant comprising only **2.9%** of annualized rental revenues[192](index=192&type=chunk) - Completed **80 new and renewal leases** totaling **221,139 square feet** and **$22.0 million** in total lease value during Q1 2020, compared to **81 leases**, **199,643 square feet**, and **$15.8 million** in Q1 2019[192](index=192&type=chunk) - The company holds an **81.4% majority interest** in **eight Pillarstone Properties** (**926,798 sq ft GLA**) that do not fit its core strategy, accounted for using the equity method[195](index=195&type=chunk) [Impact of COVID-19](index=40&type=section&id=Impact%20of%20COVID-19) - COVID-19 has led to government-mandated closures and stay-in-place orders in Texas and Arizona, impacting tenant operations[197](index=197&type=chunk) - As of **May 11, 2020**, approximately **63% of tenants (by ABR)** are open and operating, and the company collected about **64%** of contractual base rent and common area maintenance for April[199](index=199&type=chunk) - The company drew down **$30 million** from its revolving credit facility, reduced its quarterly dividend (over **$30 million** annualized savings), paused acquisitions, and established a tenant response team to manage COVID-19 impacts[198](index=198&type=chunk)[204](index=204&type=chunk) - The full impact of the pandemic on future financial condition, results of operations, and cash flows remains highly uncertain and difficult to predict[197](index=197&type=chunk) [How We Derive Our Revenue](index=41&type=section&id=How%20We%20Derive%20Our%20Revenue) Total Revenues (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------- | :-------------------------------- | :-------------------------------- | | Total revenues | $30,584 | $29,694 | [Known Trends in Our Operations; Outlook for Future Results](index=41&type=section&id=Known%20Trends%20in%20Our%20Operations%3B%20Outlook%20for%20Future%20Results) [Rental Income](index=41&type=section&id=Rental%20Income) This section anticipates year-over-year rental income increases from property additions and rent increases, but acknowledges significant uncertainty due to COVID-19's impact on rent collection and acquisition activity - Expected rental income increase year-over-year from property additions and rent increases on renewal leases[203](index=203&type=chunk) - Due to COVID-19, the company has paused acquisition activity and is carefully evaluating development/redevelopment[203](index=203&type=chunk) - As of the report date, only **64%** of contractual base rent and common area maintenance for April was collected, with numerous rent relief requests being evaluated[203](index=203&type=chunk) [Scheduled Lease Expirations](index=41&type=section&id=Scheduled%20Lease%20Expirations) This section addresses the company's lease expiration schedule, tenant renewal rates, and strategies for re-leasing space, noting potential adverse impacts from market and macroeconomic conditions - Approximately **24% of GLA** is subject to leases that expire prior to **December 31, 2021**[204](index=204&type=chunk) - Over the last three years, the company renewed approximately **95%** of expiring leases[204](index=204&type=chunk) - Market conditions and macroeconomic factors (e.g., employment, interest rates, COVID-19) could adversely impact renewal rates and rental rates[205](index=205&type=chunk) [Acquisitions](index=42&type=section&id=Acquisitions) This section states the company's goal to grow GLA through acquisitions but notes a prudent pause in activity due to the COVID-19 pandemic, with uncertainty about when acquisition levels will return to normal - The company seeks to grow GLA through acquisitions but has paused activity due to COVID-19[206](index=206&type=chunk) - Expects future opportunities to acquire quality properties at attractive prices once COVID-19 impact decreases, but no assurance on timing[206](index=206&type=chunk) [Property Acquisitions, Dispositions and Development](index=42&type=section&id=Property%20Acquisitions%2C%20Dispositions%20and%20Development) This section reaffirms the strategy to acquire properties fitting the "Community Centered Properties®" model and provides updates on recent acquisitions and development projects - Acquired Las Colinas Village (**104,919 sq ft**, **86% leased**) for **$34.8 million** on **December 6, 2019**[208](index=208&type=chunk) - Substantially completed construction at Anthem Marketplace Phase II (**6,853 sq ft**, **100% occupied**) by **March 31, 2020**, with **$1.4 million** in construction costs[209](index=209&type=chunk) [Leasing Activity](index=43&type=section&id=Leasing%20Activity) This section presents a summary of leasing activity for the three months ended March 31, 2020, including comparable and non-comparable new and renewal leases, square footage, lease terms, and rent changes - As of **March 31, 2020**, the company owned **58 properties** with **4,953,571 square feet of GLA** and an occupancy rate of **90%**[211](index=211&type=chunk) Leasing Activity (Three Months Ended March 31, 2020) | Lease Type | Number of Leases Signed | GLA Signed (sq ft) | Weighted Average Lease Term (years) | TI and Incentives per Sq. Ft. | Straight-lined Basis Increase (Decrease) Over Prior Rent | | :---------------- | :---------------------- | :----------------- | :---------------------------------- | :---------------------------- | :------------------------------------------------------- | | Comparable Renewal | 55 | 166,435 | 4.3 | $2.05 | 8.4% | | Comparable New | 8 | 12,579 | 4.6 | $8.51 | (3.8)% | | **Total Comparable** | **63** | **179,014** | **4.4** | **$2.50** | **7.3%** | | Non-Comparable Renewal | 1 | 1,795 | 5.4 | $41.72 | N/A | | Non-Comparable New | 16 | 40,330 | 4.4 | $11.81 | N/A | | **Total Non-Comparable** | **17** | **42,125** | **4.4** | **$13.09** | **N/A** | [Capital Expenditures](index=43&type=section&id=Capital%20Expenditures) This section reports on capital expenditures for Q1 2020 and Q1 2019, noting a pause in acquisitions and careful evaluation of development/redevelopment due to COVID-19 - Due to the impact of the COVID-19 pandemic, the company has taken a prudent pause in acquisitions activity and is carefully evaluating development and redevelopment activities on a case-by-case basis[215](index=215&type=chunk) Capital Expenditures (in thousands) | Type of Expenditure | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Tenant improvements and allowances | $688 | $645 | +$43 | | Developments / redevelopments | $187 | $919 | -$732 | | Leasing commissions and costs | $376 | $399 | -$23 | | Maintenance capital expenditures | $718 | $891 | -$173 | | **Total capital expenditures** | **$1,969** | **$2,854** | **-$885** | [Results of Operations](index=45&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended March 31, 2020 and 2019](index=45&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) This section presents a summary comparison of key operational and financial metrics for the three months ended March 31, 2020, and 2019, noting the potential significant impact of COVID-19 on future comparability Key Operational and Financial Metrics (in thousands, except percentages) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Number of properties owned and operated | 58 | 57 | +1 | +1.8% | | Aggregate GLA (sq. ft.) | 4,848,652 | 4,841,660 | +6,992 | +0.1% | | Ending occupancy rate - operating portfolio | 90% | 90% | 0% | 0% | | Total revenues | $30,584 | $29,694 | +$890 | +3.0% | | Total operating expenses | $22,204 | $20,939 | +$1,265 | +6.0% | | Net income attributable to Whitestone REIT | $1,612 | $2,774 | -$1,162 | -41.9% | | Funds from operations (FFO) | $9,265 | $9,860 | -$595 | -6.0% | | Funds from operations core (FFO Core) | $10,591 | $11,811 | -$1,220 | -10.3% | | Property net operating income (NOI) | $21,655 | $22,972 | -$1,317 | -5.7% | | Distributions paid on common shares and OP units | $12,186 | $11,565 | +$621 | +5.4% | | Distributions per common share and OP unit | $0.2850 | $0.2850 | $0.0000 | 0% | | Distributions paid as a percentage of FFO Core | 115% | 98% | +17% | +17.3% | [Revenues](index=46&type=section&id=Revenues) This section analyzes the components of revenue, including rental revenues, recoveries, bad debt, and other revenues, for Same Store and Non-Same Store properties, highlighting the impact of COVID-19 on rent collection Revenue Components (in thousands, except percentages) | Revenue Type | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Same Store Total | $29,548 | $29,461 | +$87 | 0% | | Non-Same Store and Management Fees Total | $1,036 | $233 | +$803 | +345% | | **Total revenue** | **$30,584** | **$29,694** | **+$890** | **+3%** | - Same Store rental revenues decreased by **$267,000 (1%)** due to a slight decrease in average leased square feet and average rent per leased square foot[225](index=225&type=chunk) - Same Store recoveries revenue increased by **$1,120,000 (15%)** primarily due to increases in recoverable operations and maintenance costs[226](index=226&type=chunk) - Same Store bad debt increased by **$534,000 (196%)** due to converting approximately **40 tenants** to cash basis accounting as a result of COVID-19 collectability analysis, resulting in an **$853,000** decrease to revenue[227](index=227&type=chunk) - Non-Same Store total rental revenue increased due to the acquisition of Las Colinas Village in **December 2019**[229](index=229&type=chunk) - The company anticipates significantly lower rental revenue for Q2 2020 due to COVID-19, with only **64%** of April's contractual rent collected[230](index=230&type=chunk) [Operating expenses](index=47&type=section&id=Operating%20expenses) This section details the changes in operating expenses, including operating and maintenance, real estate taxes, and general and administrative expenses, for Same Store and Non-Same Store properties Operating Expenses (in thousands, except percentages) | Operating Expenses | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Same Store total | $9,564 | $8,248 | +$1,316 | +16% | | Non-Same Store and affiliated company rents total | $569 | $225 | +$344 | +153% | | Depreciation and amortization | $6,971 | $6,464 | +$507 | +8% | | General and administrative | $5,100 | $6,002 | -$902 | -15% | | **Total operating expenses** | **$22,204** | **$20,939** | **+$1,265** | **+6%** | - Same Store operating and maintenance costs increased by **$1,018,000 (24%)**, primarily due to repairs and maintenance, and contract services[231](index=231&type=chunk) - General and administrative expenses decreased by **$902,000 (15%)**, mainly due to a **$625,000** decrease in share-based compensation expense and a **$230,000** decrease in legal expense[233](index=233&type=chunk) [Other expenses (income)](index=48&type=section&id=Other%20expenses%20(income)) This section presents the components of other expenses (income), including interest expense, gain/loss on property sales, and investment income Other Expenses (Income) (in thousands, except percentages) | Other Expenses (Income) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Interest expense | $6,693 | $6,533 | +$160 | +2% | | Gain on sale of properties | $(46) | $0 | -$46 | Not Meaningful | | Loss on sale or disposal of assets | $253 | $2 | +$251 | Not Meaningful | | Interest, dividend and other investment income | $(62) | $(245) | +$183 | -75% | | **Total other expense** | **$6,838** | **$6,290** | **+$548** | **+9%** | - The increase in interest expense is primarily due to an increase in the average notes payable balance from **$620.6 million** in Q1 2019 to **$660.1 million** in Q1 2020[234](index=234&type=chunk) [Equity in earnings of real estate partnership](index=48&type=section&id=Equity%20in%20earnings%20of%20real%20estate%20partnership) This section reports on the decrease in equity in earnings from Pillarstone OP, primarily due to property sales - Equity in earnings of real estate partnership decreased by **$300,000** (from **$492,000** in Q1 2019 to **$192,000** in Q1 2020)[235](index=235&type=chunk) - This decrease is mainly attributed to lower net income from Pillarstone OP following the sale of **three properties** in **October 2019**[235](index=235&type=chunk) [Same Store net operating income](index=49&type=section&id=Same%20Store%20net%20operating%20income) This section provides a detailed breakdown of Same Store Net Operating Income (NOI), showing a slight decrease for the three months ended March 31, 2020, compared to 2019 Same Store NOI (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Total property revenues | $29,548 | $29,461 | +$87 | 0% | | Total property expenses | $9,564 | $8,248 | +$1,316 | +16% | | Total property revenues less total property expenses | $19,984 | $21,213 | -$1,229 | -6% | | Same Store straight line rent adjustments | $350 | $(460) | +$810 | -176% | | Same Store amortization of above/below market rents | $(217) | $(272) | +$55 | -20% | | Same Store lease termination fees | $(30) | $(209) | +$179 | -86% | | **Same Store NOI** | **$20,087** | **$20,272** | **-$185** | **-1%** | [Reconciliation of Non-GAAP Financial Measures](index=51&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Funds From Operations (NAREIT) ("FFO")](index=51&type=section&id=Funds%20From%20Operations%20(NAREIT)%20(%22FFO%22)) This section defines FFO according to NAREIT guidelines and explains its use as a supplemental measure for evaluating operating performance in the real estate industry, distinct from GAAP net income - FFO is defined as GAAP net income (loss) excluding real estate depreciation/amortization, gains/losses from property sales, change in control gains/losses, and impairment write-downs of real estate assets[242](index=242&type=chunk) - FFO is used by management, analysts, and investors as the primary metric for comparing equity REIT performance, as historical cost accounting for real estate can be insufficient[243](index=243&type=chunk)[244](index=244&type=chunk) [Funds From Operations Core ("FFO Core")](index=51&type=section&id=Funds%20From%20Operations%20Core%20(%22FFO%20Core%22)) This section introduces FFO Core as an adjusted FFO measure that excludes certain non-indicative items to improve period-over-period comparability of operating portfolio performance - FFO Core excludes items like legal settlements, proxy contest fees, debt extension costs, non-cash share-based compensation, rent support payments, management fees from Pillarstone, and acquisition costs to provide a more comparable measure of operating performance[246](index=246&type=chunk) [Property Net Operating Income ("NOI")](index=52&type=section&id=Property%20Net%20Operating%20Income%20(%22NOI%22)) This section defines NOI as operating revenues less property and related expenses, explaining its utility in evaluating property operating performance by focusing on revenues and expenses directly associated with real estate ownership and operation - NOI is defined as operating revenues (rental and other) less property and related expenses (operation, maintenance, real estate taxes)[250](index=250&type=chunk) - NOI helps evaluate operating performance by reflecting trends in occupancy, rental rates, and operating costs, providing a perspective not immediately apparent from net income[250](index=250&type=chunk) FFO, FFO Core, and NOI Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to Whitestone REIT | $1,612 | $2,774 | | **FFO (NAREIT)** | **$9,265** | **$9,860** | | **FFO Core** | **$10,591** | **$11,811** | | **NOI** | **$21,655** | **$22,972** | [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) - Short-term liquidity needs include distributions, recurring/non-recurring expenditures, debt service, and potential acquisitions[253](index=253&type=chunk) - Long-term capital requirements include debt maturities, development costs, and potential acquisitions, expected to be met by cash from operations, long-term debt, equity issuances, and property sales[255](index=255&type=chunk) - Cash provided from operating activities was **$5,213,000** for Q1 2020, while total distributions were **$12,186,000**, resulting in distributions exceeding cash flow from operations by **$6,973,000**[254](index=254&type=chunk) - The company drew down **$30 million** from its revolving credit facility as a precautionary measure due to COVID-19, leaving **$8.7 million** remaining availability as of **March 31, 2020**[255](index=255&type=chunk)[261](index=261&type=chunk) - Access to capital may be diminished due to potential reduction in borrowing base (from reduced real estate values/NOI) and common share price being below net asset value[255](index=255&type=chunk)[256](index=256&type=chunk) - On **April 30, 2020**, the company received a **$1,733,510 PPP Loan** under the CARES Act, intended for payroll, mortgage, rent, and utilities, with potential for forgiveness[259](index=259&type=chunk) - Cash, cash equivalents, and restricted cash increased by **$21,236,000** to **$36,879,000** as of **March 31, 2020**, primarily due to **$30 million** from the 2019 Facility and **$2.2 million** from common share issuance, offset by distributions and real estate additions[266](index=266&type=chunk)[268](index=268&type=chunk) [Contractual Obligations](index=59&type=section&id=Contractual%20Obligations) - The company has a Note Agreement for **$100 million senior unsecured notes** maturing in **March 2029**, with principal amortization starting in **2023** and **2025**[289](index=289&type=chunk) - The 2019 Facility is an unsecured credit facility comprising a **$250 million revolving credit facility** and two term loans (**$165 million** and **$100 million**), with maturities ranging from **January 2023** to **January 2024**[273](index=273&type=chunk) [Distributions](index=60&type=section&id=Distributions) - On **March 24, 2020**, the Board reduced the monthly cash distribution for Q2 2020 to **$0.035 per share/unit** (quarterly **$0.105**, annualized **$0.42**), expecting over **$30 million** in annualized cash savings[291](index=291&type=chunk) - The Board will regularly reassess the dividend based on clarity regarding the COVID-19 crisis and business conditions[292](index=292&type=chunk) Distributions Paid (in thousands, except per share data) | Quarter Paid | Distributions Per Common Share | Amount Paid (Common Shares) | Distributions Per OP Unit | Amount Paid (Noncontrolling OP Unit) | Total Amount Paid | | :----------- | :----------------------------- | :-------------------------- | :------------------------ | :----------------------------------- | :---------------- | | Q1 2020 | $0.2850 | $11,928 | $0.2850 | $258 | $12,186 | | Q1 2019 | $0.2850 | $11,301 | $0.2850 | $264 | $11,565 | [Taxes](index=60&type=section&id=Taxes) - The company intends to operate to remain qualified as a REIT for federal income tax purposes, distributing at least **90% of taxable income** to shareholders[293](index=293&type=chunk) [Environmental Matters](index=60&type=section&id=Environmental%20Matters) - No significant environmental costs, accrued liabilities, or expenditures have been incurred to mitigate or eliminate future environmental contamination[294](index=294&type=chunk) [Off-Balance Sheet Arrangements](index=60&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company may guarantee real estate partnership debt to help obtain lower-cost funding, receiving a fee or increased ownership interest in return[295](index=295&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section addresses the company's exposure to market risk, primarily interest rate fluctuations, and its strategies for managing this risk through fixed-rate debt and derivative instruments. It also discusses increased credit risk due to COVID-19 [Fixed Interest Rate Debt](index=61&type=section&id=Fixed%20Interest%20Rate%20Debt) - As of **March 31, 2020**, **$537.1 million (79%)** of total outstanding debt was subject to fixed interest rates, with an average effective interest rate of approximately **4.1%**[298](index=298&type=chunk) - A **1% increase or decrease** in interest rates would cause a **$20.7 million decline or increase**, respectively, in the fair value of fixed-rate debt[298](index=298&type=chunk) [Variable Interest Rate Debt](index=61&type=section&id=Variable%20Interest%20Rate%20Debt) - As of **March 31, 2020**, **$139.5 million (21%)** of outstanding debt was subject to floating interest rates (**LIBOR plus 1.40% to 1.90%**) and not currently hedged[299](index=299&type=chunk) - A **1% increase or decrease** in interest rates on non-hedged variable rate debt would result in a decrease or increase of annual net income by approximately **$1.4 million**, respectively[299](index=299&type=chunk) [Credit Risk](index=61&type=section&id=Credit%20Risk) - Credit risk is increased due to the COVID-19 pandemic, potentially leading to reductions in on-time payments or tenant closures[300](index=300&type=chunk) - While Q1 rental income was consistent, future periods may see adverse effects on results of operations, cash flows, and financial condition due to tenant financial challenges[300](index=300&type=chunk) [Item 4. Controls and Procedures.](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2020, and states that remote working arrangements due to COVID-19 have not materially affected internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=61&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management concluded that disclosure controls and procedures were effective as of **March 31, 2020**[301](index=301&type=chunk) [Changes in Internal Control Over Financial Reporting](index=62&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - Remote working arrangements due to COVID-19 have not had a material effect on internal control over financial reporting during Q1 2020[303](index=303&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings.](index=63&type=section&id=Item%201.%20Legal%20Proceedings.) This section states that the company is subject to various legal proceedings and claims in the ordinary course of business, which management believes will not have a material adverse effect on its financial position. It specifically mentions a $2.3 million claim against Whitestone Pinnacle - Management believes that the final outcome of ordinary course legal proceedings will not materially adversely affect the company's financial position, results of operations, or liquidity[304](index=304&type=chunk) - A **$2.3 million** breach of contract claim against Whitestone Pinnacle is being vigorously defended, with management believing a loss is not probable[305](index=305&type=chunk) [Item 1A. Risk Factors.](index=63&type=section&id=Item%201A.%20Risk%20Factors.) This section updates the risk factors, primarily focusing on the material and adverse impacts of the COVID-19 pandemic on the company's business, tenants, financial condition, and ability to service debt and pay dividends. It also mentions potential changes to U.S. federal income tax laws - The COVID-19 pandemic is expected to materially and adversely impact tenant businesses, the company's income, cash flow, results of operations, financial condition, liquidity, and ability to service debt and pay dividends[307](index=307&type=chunk) - As of the report date, only **64%** of contractual base rent and common area maintenance for April was collected, and rent relief requests are being evaluated[309](index=309&type=chunk) - Potential risks include tenant closures/bankruptcies, difficulty renewing leases, increased co-tenancy claims, delays in enforcing landlord rights, and a general decline in demand for retail space[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk) - COVID-19 could lead to reduced access to debt and equity capital, negative impact on dividend payments, potential non-compliance with financial covenants, and increased cybersecurity risks due to remote work[317](index=317&type=chunk) - Changes to U.S. federal income tax laws, including the Tax Cuts and Jobs Act and CARES Act, could adversely impact the business and financial results[319](index=319&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section reports on the repurchase of common shares from employees to satisfy tax withholding obligations on restricted share vesting Common Shares Repurchased from Employees (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--------------------------------------- | :----------------------------- | :--------------------------- | | January 1, 2020 through January 31, 2020 | 119,693 | $13.62 | | March 1, 2020 through March 31, 2020 | 33,218 | $8.04 | | **Total** | **152,911** | **$12.41** | - Shares were purchased from employees to satisfy tax withholding on the lapse of restrictions on restricted common shares[323](index=323&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=66&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) This section states that there were no defaults upon senior securities - No defaults upon senior securities[324](index=324&type=chunk) [Item 4. Mine Safety Disclosures.](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This section states that mine safety disclosures are not applicable to the company - Not applicable[325](index=325&type=chunk) [Item 5. Other Information.](index=67&type=section&id=Item%205.%20Other%20Information.) This section states that there is no other information to report - None[326](index=326&type=chunk) [Item 6. Exhibits.](index=68&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed, furnished, and incorporated by reference as part of the report, including financial information in XBRL format and various articles of amendment and certifications - Includes XBRL financial information (Consolidated Balance Sheets, Statements of Operations, Changes in Equity, Cash Flows, Notes) for Q1 2020 and Q1 2019[331](index=331&type=chunk) - Various Articles of Amendment and Restatement, Bylaws, and Certifications (Sarbanes-Oxley Act) are filed as exhibits[332](index=332&type=chunk) [Signatures](index=71&type=section&id=Signatures) This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report - Report signed by **James C. Mastandrea (CEO)** and **David K. Holeman (CFO)** on **May 11, 2020**[336](index=336&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________ FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 001-34855 ______________________________ WHITESTONE REIT (Exact Name of R ...

Financial Data and Key Metrics Changes - Whitestone REIT achieved a net income of $23.7 million or $0.57 per share for the year, compared to $21.4 million or $0.52 per share in 2018 [22] - Funds from operations (FFO) for the year was $38 million or $0.90 per share, down from $39.4 million or $0.94 per share in 2018 [23] - Core FFO for the year was $44.9 million or $1.06 per share, compared to $48.8 million or $1.16 per share in the prior year [24] - The company reported a debt-to-EBITDA ratio of 8.6x, improved from 8.7x in Q4 2018 [28] Business Line Data and Key Metrics Changes - Annualized base rent per share increased by 2.2% to $19.77, with same-store net operating income (NOI) growth of 4.7% for Q4 and 2.4% for the full year [11][12] - The company completed 2019 with minimal store closings and a solid balance sheet, indicating a larger tenant base and a higher value real estate portfolio [10] Market Data and Key Metrics Changes - Total occupancy at year-end was 90.3%, remaining relatively flat compared to the previous quarter and the year-ago quarter [20] - The company signed 208 renewal leases and 109 new leases in 2019, representing 953,000 square feet at a weighted average lease term of 4.1 years [20] Company Strategy and Development Direction - Whitestone plans to invest approximately $230 million in its current portfolio over the next several years, aiming to add incremental value of $175 million and generate an additional $24 million in annual NOI [13] - The company has a strategy focused on off-market acquisitions and has identified opportunities for growth in demographic spreads similar to its current market [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to improve occupancy and rental rates, particularly with the recent acquisition of Las Colinas Village [36][37] - The 2020 guidance anticipates net income per share in the range of $0.20 to $0.24 and FFO core per share in the range of $1.05 to $1.09, reflecting management's view of current market conditions [30] Other Important Information - The company completed the off-market acquisition of Las Colinas Village, a 105,000 square foot center, funded through a combination of proceeds from dispositions, debt, and equity [28] - General and administrative expenses as a percentage of revenue improved to 15.9% in Q4, down from 16.6% for the full year [21] Q&A Session Summary Question: Can you tell us how you sourced the Las Colinas acquisition and what the initial cap rate is expected to be? - The implied NOI at the time of acquisition represented about a 7% unlevered yield on investment costs, with the asset being 86% occupied [33] Question: What is the immediate plan for the Las Colinas property? - The immediate plan is to push up occupancy, with a focus on integrating the property into operations over the next 18 to 24 months [36] Question: Regarding guidance, are there any dispositions currently being marketed? - Guidance is based on the current portfolio, and while opportunities for recycling value are being explored, timing is difficult to predict [40] Question: What is driving the increase in share counts for the year? - The increase is largely driven by the full impact of the ATM program, with $12.6 million sold under the program in Q4 2019 [43] Question: Any comments on the recent acquisition and the company's growth strategy? - Management expressed excitement about the acquisition, marking a return to a growth strategy after addressing previous challenges with activist investors [45]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Maryland 76-0594970 (State or Other Jurisdiction of Incorporation or Organization) 2600 South Gessner, Suite 500 Houston, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 001-34855 WHITESTONE REIT (Exact Name of Registrant as Specified in Its Charter) Maryland 76-0594970 (S ...