Whitestone REIT Reports Second Quarter 2019 Results
-Increase in Net Income Attributable to Whitestone of 70% From Prior Year Quarter to $3.3 Million-
-Anthem Marketplace Pad Site Development Completed-
-Affirms 2019 Full Year Guidance-


HOUSTON, July 31, 2019 - Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) today announced operating and financial results for the second quarter ended June 30, 2019. Whitestone is 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. 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.

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.
Second Quarter 2019 Compared to Second Quarter 2018:
Net Income attributable to Whitestone REIT was $3.33 million, or $0.08 per share, compared to $1.95 million, or $0.05
per share
Annualized Base Rent per leased squared foot grew 4.0% to $19.53
Funds from Operations (“FFO”) grew to $10.0 million or $0.24 per share, compared to $9.0 million or $0.21 per share
Grew rental rates 7.5% (on a GAAP basis) on new and renewal leases signed for the trailing twelve month period

Jim Mastandrea, Chairman and Chief Executive Officer of Whitestone REIT commented, “Our team continues to perform on all fronts as evidenced by our quarterly leasing activity, value-add pad development completion, and progress toward our long term goals.” Mr. Mastandrea added, “Looking ahead, we remain focused on building on these results to maximize long term shareholder value.”

Financial Results
Reconciliations of Net Income to FFO and FFO Core are included herein.
Net Income attributable to Whitestone REIT was $3.33 million, or $0.08 per share, for the second quarter of 2019, compared to $1.95 million, or $0.05 per share, for the same period in 2018. FFO was $10.0 million, or $0.24 per share, for the second quarter of 2019, compared to $9.0 million, or $0.21 per share, for the same period in 2018. FFO Core was $11.1 million, or $0.27 per share, in the second quarter of 2019, compared to $12.4 million, or $0.30 per share, in the same period of 2018.

Operating Results
For the period ending June 30, 2019, the Company’s operating highlights were as follows:
 
2Q-2019
 
YTD 2019
 
 
 
 
Ending Occupancy - Wholly Owned Properties
89.4%
 
89.4%
Same Store Property NOI Growth from 2018 Period
(0.2)%
 
1.1%
Rental Rate Growth (1):
 
 
 
Total Leases
5.6%
 
6.3%
New Leases
5.3%
 
6.4%
Renewal Leases
5.7%
 
6.3%
 
 
 
 
Leasing Transactions:
 
 
 
Number of New Leases
35
 
62
New Leases - Lease Term Revenue (millions)
$10.7
 
 $14.2
Number of Renewal Leases
57
 
111
Renewal Leases - Lease Term Revenue (millions)
$15.4
 
$27.7

(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.

1



Real Estate Portfolio Update

Community Centered PropertiesTM Portfolio Statistics:

As of June 30, 2019, Whitestone wholly owned 57 Community Centered PropertiesTM with 4.9 million square feet of gross leasable area ("GLA"). The portfolio is comprised of 29 properties in Texas, 27 in Arizona and one in Illinois. Whitestone’s Retail Community Centered PropertiesTM 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 second quarter, the Company's diversified tenant base was comprised of approximately 1,345 tenants, with the largest tenant accounting for only 3.0% 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 second quarter of 2019, the leasing team signed 92 leases totaling 283,777 square feet in new, expansion and renewal leases, compared to 65 leases totaling 179,274 square feet in the second quarter of 2018. The total lease value was $26.1 million compared to $16.7 million during the same period last year.

The Company's total portfolio occupancy stood at 89.4% at quarter end compared to 91.3% at the end the second quarter 2018.

Development:
We had completed construction at our Anthem Marketplace pad site development property. The 6,853 square foot Community Centered Property® was 58% occupied and is located in Phoenix, Arizona, and adjacent to Anthem Marketplace.


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 June 30, 2019 and June 30, 2018, respectively.

Liquidity, Debt and Credit Facility:

At June 30, 2019, 49 of the Company’s wholly-owned 57 properties were unencumbered by mortgage debt, with an undepreciated cost basis of $761.6 million. At June 30, 2019, the Company had total real estate debt of $623.0 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 second quarter was 4.08% and the weighted average remaining term was 5.8 years.

At quarter end, Whitestone had $5.4 million of cash available on its balance sheet and $164.0 million of available capacity under its credit facility.

Dividend

On May 15, 2019, the Company declared a quarterly cash distribution of $0.285 per common share and OP unit for the third quarter of 2019, to be paid in three equal installments of $0.095 in July, August, and September of 2019.

(1) Source: Claritas, as of April 2017.



2


2019 Guidance

The Company affirms its previously released guidance for 2019 and expects net income per share to be in the range of $0.21 - $0.25, FFO, as defined by NAREIT, per share to be in the range of $0.90 - $0.94 and FFO Core (as defined by the Company) to be in the range of $1.06 - $1.10.

Conference Call Information

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, August 1, 2019 at 10:00 A.M. Central Time. The call will be led by James C. Mastandrea, Chairman and Chief Executive Officer, and David K. Holeman, Chief Financial Officer. Conference call access information is as follows:

Dial-in number for domestic participants:         (800) 239-9838
Dial-in number for international participants:     (323) 794-2551

The conference call will be recorded and a telephone replay will be available through Thursday, August 15, 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):            5418806

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 second 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.

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

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.

3


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, including risks associated with a recently filed purported class action lawsuit; 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.

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.


4


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



5




Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)


 
 
June 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
ASSETS
Real estate assets, at cost
 
 
 
 
Property
 
$
1,058,387

 
$
1,052,238

Accumulated depreciation
 
(125,257
)
 
(113,300
)
Total real estate assets
 
933,130

 
938,938

Investment in real estate partnership
 
26,014

 
26,236

Cash and cash equivalents
 
5,425

 
13,658

Restricted cash
 
99

 
128

Escrows and acquisition deposits
 
6,623

 
8,211

Accrued rents and accounts receivable, net of allowance for doubtful accounts
 
22,179

 
21,642

Receivable due from related party
 
650

 
394

Financed receivable due from related party
 
5,661

 
5,661

Unamortized lease commissions, legal fees and loan costs
 
9,079

 
6,698

Prepaid expenses and other assets(1)
 
4,328

 
7,306

Total assets
 
$
1,013,188

 
$
1,028,872

 
 
 
 
 
LIABILITIES AND EQUITY
Liabilities:
 
 
 
 
Notes payable
 
$
622,333

 
$
618,205

Accounts payable and accrued expenses(2)
 
34,194

 
33,729

Payable due to related party
 
89

 
58

Tenants' security deposits
 
6,387

 
6,130

Dividends and distributions payable
 
11,710

 
11,600

Total liabilities
 
674,713

 
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 June 30, 2019 and December 31, 2018, respectively
 

 

Common shares, $0.001 par value per share; 400,000,000 shares authorized; 40,136,683 and 39,778,029 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
 
40

 
39

Additional paid-in capital
 
533,583

 
527,662

Accumulated deficit
 
(198,056
)
 
(181,361
)
Accumulated other comprehensive gain (loss)
 
(5,172
)
 
4,116

Total Whitestone REIT shareholders' equity
 
330,395

 
350,456

Noncontrolling interest in subsidiary
 
8,080

 
8,694

Total equity
 
338,475

 
359,150

Total liabilities and equity
 
$
1,013,188

 
$
1,028,872



6



Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)


 
 
June 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
(1) Operating lease right of use assets (net) (related to adoption of Topic 842)
 
$
861

 
N/A

(2) Operating lease liabilities (related to adoption of Topic 842)
 
$
863

 
N/A


7



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


 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
 
Rental(1)
 
$
29,126

 
$
28,827

 
$
58,159

 
$
58,126

Management, transaction, and other fees
 
452

 
646

 
1,113

 
1,132

Total revenues
 
29,578

 
29,473


59,272

 
59,258

 
 
 
 
 
 
 
 
 
Property expenses
 
 
 
 
 
 
 
 
Depreciation and amortization
 
6,612

 
6,293

 
13,076

 
12,567

Operating and maintenance
 
5,214

 
5,017

 
9,642

 
9,873

Real estate taxes
 
4,019

 
3,905

 
8,064

 
7,881

General and administrative(2)
 
4,915

 
6,678

 
10,917

 
13,005

Total operating expenses
 
20,760

 
21,893

 
41,699

 
43,326

 
 
 
 
 
 
 
 
 
Other expenses (income)
 
 
 
 
 
 
 
 
Interest expense
 
6,526

 
6,313

 
13,059

 
12,286

Gain on sale of properties
 

 

 

 
(249
)
Loss on sale or disposal of assets
 
113

 
73

 
115

 
253

Interest, dividend and other investment income
 
(164
)
 
(284
)
 
(409
)
 
(541
)
Total other expense
 
6,475

 
6,102

 
12,765

 
11,749

 
 
 
 
 
 
 
 
 
Income before equity investments in real estate partnerships and income tax
 
2,343

 
1,478

 
4,808

 
4,183

 
 
 
 
 
 
 
 
 
Equity in earnings of real estate partnership
 
464

 
586

 
956

 
1,260

Provision for income tax
 
(104
)
 
(59
)
 
(222
)
 
(169
)
Income from continuing operations
 
2,703

 
2,005

 
5,542

 
5,274

 
 
 
 
 
 
 
 
 
Gain on sale of property from discontinued operations
 
701

 

 
701

 

Income from discontinued operations
 
701

 

 
701

 

 
 
 
 
 
 
 
 
 
Net income
 
3,404

 
2,005

 
6,243

 
5,274

 
 
 
 
 
 
 
 
 
Less: Net income attributable to noncontrolling interests
 
77

 
51

 
142

 
138

 
 
 
 
 
 
 
 
 
Net income attributable to Whitestone REIT
 
$
3,327

 
$
1,954

 
$
6,101

 
$
5,136




8



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

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Basic Earnings Per Share:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Whitestone REIT excluding amounts attributable to unvested restricted shares
 
$
0.06

 
$
0.05

 
$
0.13

 
$
0.13

Income from discontinued operations attributable to Whitestone REIT
 
0.02

 
0.00

 
0.02

 
0.00

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares
 
$
0.08

 
$
0.05

 
$
0.15

 
$
0.13

Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Whitestone REIT excluding amounts attributable to unvested restricted shares
 
$
0.06

 
$
0.05

 
$
0.13

 
$
0.12

Income from discontinued operations attributable to Whitestone REIT
 
0.02

 
0.00

 
0.02

 
0.00

Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares
 
$
0.08

 
$
0.05

 
$
0.15

 
$
0.12

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
39,886

 
39,204

 
39,768

 
39,136

Diluted
 
40,839

 
40,679

 
40,853

 
40,519

 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
3,404

 
$
2,005

 
$
6,243

 
$
5,274

 
 
 
 
 
 
 
 
 
Other comprehensive gain (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on cash flow hedging activities
 
(6,035
)
 
913

 
(9,505
)
 
3,558

Unrealized gain on available-for-sale marketable securities
 

 

 

 
18

 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
(2,631
)
 
2,918

 
(3,262
)
 
8,850

 
 
 
 
 
 
 
 
 
Less: Net income attributable to noncontrolling interests
 
77

 
51

 
142

 
138

Less: Comprehensive gain (loss) attributable to noncontrolling interests
 
(137
)
 
23

 
(217
)
 
94

 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Whitestone REIT
 
$
(2,571
)
 
$
2,844

 
$
(3,187
)
 
$
8,618



9



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


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
    (1) Rental
 
 
 
 
 
 
 
 
Rental revenues
 
$
21,378

 
$
21,382

 
$
43,129

 
$
43,054

Recoveries
 
7,907

 
7,445

 
15,461

 
15,072

Bad debt
 
(159
)
 
N/A

 
(431
)
 
N/A

Total rental
 
$
29,126

 
$
28,827

 
$
58,159

 
$
58,126


(2) Bad debt included in general and administrative expenses prior to adoption of Topic 842
 
N/A
 
$
216

 
N/A
 
$
662



10



Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
Six Months Ended
 
 
June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income from continuing operations
 
$
5,542

 
$
5,274

Net income from discontinued operations
 
701

 

Net income
 
6,243

 
5,274

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
13,076

 
12,567

Amortization of deferred loan costs
 
534

 
603

Loss on sale of marketable securities
 

 
20

Loss on sale or disposal of assets and properties
 
115

 
4

Bad debt
 
431

 
662

Share-based compensation
 
2,908

 
3,246

Equity in earnings of real estate partnership
 
(956
)
 
(1,260
)
Changes in operating assets and liabilities:
 
 
 
 
Escrows and acquisition deposits
 
1,587

 
1,401

Accrued rents and accounts receivable
 
(968
)
 
14

Receivable due from related party
 
(256
)
 
232

Distributions from real estate partnership
 
889

 
505

Unamortized lease commissions, legal fees and loan costs
 
386

 
(852
)
Prepaid expenses and other assets
 
(5,426
)
 
506

Accounts payable and accrued expenses
 
465

 
(6,410
)
Payable due to related party
 
31

 
(612
)
Tenants' security deposits
 
257

 
75

Net cash provided by operating activities
 
18,615

 
15,975

Cash flows from investing activities:
 
 
 
 
Additions to real estate
 
(6,228
)
 
(5,897
)
Proceeds from sales of properties
 

 
4,433

Proceeds from sales of marketable securities
 

 
30

Net cash used in investing activities
 
(6,228
)
 
(1,434
)
Net cash provided by investing activities of discontinued operations
 
701

 

Cash flows from financing activities:
 
 
 
 
Distributions paid to common shareholders
 
(22,617
)
 
(22,348
)
Distributions paid to OP unit holders
 
(529
)
 
(604
)
Proceeds from issuance of common shares, net of offering costs
 
3,716

 

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
 
(6,851
)
 
(1,274
)
Payments of loan origination costs
 
(4,088
)
 

Repurchase of common shares
 
(776
)
 
(1,059
)
Net cash used in financing activities
 
(21,350
)
 
(16,413
)
Net decrease in cash, cash equivalents and restricted cash
 
(8,262
)
 
(1,872
)
Cash, cash equivalents and restricted cash at beginning of period
 
13,786

 
5,210

Cash, cash equivalents and restricted cash at end of period
 
$
5,524

 
$
3,338



11



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

 
 
Six Months Ended
 
 
June 30,
 
 
2019
 
2018
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest
 
$
12,615

 
$
11,355

Cash paid for taxes
 
$
396

 
$
304

Non cash investing and financing activities:
 
 
 
 
Disposal of fully depreciated real estate
 
$
195

 
$
904

Financed insurance premiums
 
$
1,238

 
$
1,273

Value of shares issued under dividend reinvestment plan
 
$
69

 
$
66

Value of common shares exchanged for OP units
 
$
10

 
$
752

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

 
$
18

Change in fair value of cash flow hedge
 
$
(9,505
)
 
$
3,558

Reallocation of ownership percentage between parent and subsidiary
 
$

 
$
12



12



Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
FFO (NAREIT) AND FFO CORE
 
2019
 
2018
 
2019
 
2018
Net income attributable to Whitestone REIT
 
$
3,327

 
$
1,954

 
$
6,101

 
$
5,136

  Adjustments to reconcile to FFO:
 
 
 
 
 
 
 
 
Depreciation and amortization of real estate
 
6,544

 
6,224

 
12,939

 
12,431

Depreciation and amortization of real estate assets of real estate partnership (pro rata)
 
649

 
730

 
1,270

 
1,425

Loss on disposal of assets and properties of continuing operations, net
 
113

 
73

 
115

 
4

Gain on sale of assets and properties of discontinued operations, net
 
(701
)
 

 
(701
)
 

Loss on sale or disposal of properties or assets of real estate partnership (pro rata)
 
4

 

 
7

 

Net income attributable to noncontrolling interests
 
77

 
51

 
142

 
138

FFO (NAREIT)
 
10,013

 
9,032

 
19,873

 
19,134

  Adjustments to reconcile to FFO Core:
 
 
 
 
 
 
 
 
Share-based compensation expense
 
1,100

 
1,489

 
3,051

 
3,397

Proxy contest professional fees
 

 
1,854

 

 
2,534

FFO Core
 
$
11,113

 
$
12,375

 
$
22,924

 
$
25,065

 
 
 
 
 
 
 
 
 
FFO PER SHARE AND OP UNIT CALCULATION
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
FFO
 
$
10,013

 
$
9,032

 
$
19,873

 
$
19,134

Distributions paid on unvested restricted common shares
 

 
(67
)
 
(41
)
 
(108
)
FFO excluding amounts attributable to unvested restricted common shares
 
$
10,013

 
$
8,965

 
$
19,832

 
$
19,026

FFO Core excluding amounts attributable to unvested restricted common shares
 
$
11,113

 
$
12,308

 
$
22,883

 
$
24,957

Denominator:
 
 
 
 
 
 
 
 
Weighted average number of total common shares - basic
 
39,886

 
39,204

 
39,768

 
39,136

Weighted average number of total noncontrolling OP units - basic
 
928

 
1,033

 
928

 
1,058

Weighted average number of total common shares and noncontrolling OP units - basic
 
40,814

 
40,237

 
40,696

 
40,194

 
 
 
 
 
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
Unvested restricted shares
 
953

 
1,475

 
1,085

 
1,383

Weighted average number of total common shares and noncontrolling OP units - diluted
 
41,767

 
41,712

 
41,781

 
41,577

 
 
 
 
 
 
 
 
 
FFO per common share and OP unit - basic
 
$
0.25

 
$
0.22

 
$
0.49

 
$
0.47

FFO per common share and OP unit - diluted
 
$
0.24

 
$
0.21

 
$
0.47

 
$
0.46

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

 
$
0.31

 
$
0.56

 
$
0.62

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

 
$
0.30

 
$
0.55

 
$
0.60




13




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

 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
PROPERTY NET OPERATING INCOME
 
2019
 
2018
 
2019
 
2018
Net income attributable to Whitestone REIT
 
$
3,327

 
$
1,954

 
$
6,101

 
$
5,136

General and administrative expenses
 
4,915

 
6,678

 
10,917

 
13,005

Depreciation and amortization
 
6,612

 
6,293

 
13,076

 
12,567

Equity in earnings of real estate partnership
 
(464
)
 
(586
)
 
(956
)
 
(1,260
)
Interest expense
 
6,526

 
6,313

 
13,059

 
12,286

Interest, dividend and other investment income
 
(164
)
 
(284
)
 
(409
)
 
(541
)
Provision for income taxes
 
104

 
59

 
222

 
169

Gain on sale of assets and properties of continuing operations, net
 

 

 

 
(249
)
Gain on sale of assets and properties of discontinued operations, net
 
(701
)
 

 
(701
)
 

Management fee, net of related expenses
 
(42
)
 
(48
)
 
(50
)
 
(101
)
Loss on disposal of assets and properties of continuing operations, net
 
113

 
73

 
115

 
253

NOI of real estate partnership (pro rata)
 
1,679

 
1,978

 
3,438

 
4,010

Net income attributable to noncontrolling interests
 
77

 
51

 
142

 
138

NOI
 
$
21,982

 
$
22,481

 
$
44,954

 
$
45,413



 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net income attributable to Whitestone REIT
 
$
3,327

 
$
1,954

 
$
6,101

 
$
5,136

Depreciation and amortization
 
6,612

 
6,293

 
13,076

 
12,567

Equity in earnings of real estate partnership
 
(464
)
 
(586
)
 
(956
)
 
(1,260
)
Interest expense
 
6,526

 
6,313

 
13,059

 
12,286

Provision for income taxes
 
104

 
59

 
222

 
169

Gain on sale of assets and properties of continuing operations, net
 

 

 

 
(249
)
Gain on sale of assets and properties of discontinued operations, net
 
(701
)
 

 
(701
)
 

Loss on disposal of assets and properties of continuing operations, net
 
113

 
73

 
115

 
253

Management fee, net of related expenses
 
(42
)
 
(48
)
 
(50
)
 
(101
)
EBITDA adjustments for real estate partnership
 
1,578

 
1,924

 
3,249

 
3,880

Net income attributable to noncontrolling interests
 
77

 
51

 
142

 
138

EBITDA
 
$
17,130

 
$
16,033

 
$
34,257

 
$
32,819




14

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