Whitestone REIT Reports Fourth Quarter and Full Year 2023 Results

HOUSTON, March 06, 2024 (GLOBE NEWSWIRE) — Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) today announced its operating and financial results for the fourth quarter and full year of 2023. Whitestone creates neighborhood center communities in its high-quality open-air shopping centers that it acquires, owns, manages, develops, and redevelops primarily in some of the largest, fastest-growing, high-household-income markets in the Sunbelt.

“I am proud of the work and dedication of the Whitestone team in executing our strategic priorities and steadfastly serving our tenants and our neighborhood communities. We finished the year on a very strong note: hitting record occupancy of 94.2%, GAAP leasing spreads of nearly 22% and achieving a year-over-year revenue increase in excess of 5%. We initiated 2024 Core FFO per share guidance of $0.98 – $1.04 and were pleased to grow the dividend by 3% as announced yesterday. I am fully confident that our stellar financial performance and actions will position Whitestone to deliver attractive profitable growth and drive substantial value for all of our stakeholders in the years ahead.”

– Dave Holeman, Chief Executive Officer

Fourth Quarter 2023 Operating and Financial Results

All per share amounts are on a diluted per common share and operating partnership (OP) unit basis unless stated otherwise.
Reconciliations of Net Income Attributable to Whitestone REIT to FFO, Core FFO, NOI and EBITDAre are included herein.

  • Revenues of $37.5 million versus $34.9 million for the fourth quarter of 2022.
  • Net Income attributable to common shareholders of $1.5 million, or $0.03 per diluted share, versus $19.9 million, or $0.40 per diluted share for the fourth quarter of 2022. 
  • Funds from Operations (“FFO”) per diluted share of $0.21 versus $0.23 for the fourth quarter of 2022. 
  • Core FFO per diluted share of $0.24 versus $0.23 for the fourth quarter of 2022.
  • EBITDAre of $21.0 million versus $20.3 million for the fourth quarter of 2022.
  • Same-Store Net Operating Income (“NOI”) grew 2.4% to $24.0 million versus $23.4 million for the fourth quarter of 2022. 
  • Net Effective Annual Base Rental Revenue per leased square foot was up 6.2% to $23.35, compared to the prior year quarter.

Full Year 2023 Operating and Financial Results

  • All per share amounts are on a diluted per common share and operating partnership (“OP”) unit basis unless stated otherwise.
  • Revenues of $147.0 million versus $139.4 million for 2022.
  • Net Income attributable to common shareholders of $19.2 million, or $0.38 per diluted share, versus $35.3 million, or $0.71 per diluted share for 2022.
  • Funds from Operations (“FFO”) per diluted share of $0.88 versus $1.03 for 2022. 
  • Core FFO per diluted share of $0.91 versus $1.03 for 2022.
  • EBITDAre of $81.0 million versus $80.8 million for 2022.
  • Same-Store Net Operating Income (“NOI”) grew 2.7% to $92.8 million versus $90.4 million for 2022.

Operating Results

For the three-month periods ending December 31, 2023 and 2022, the Company’s operating highlights were as follows:

  Fourth Quarter 2023 Fourth Quarter 2022
Occupancy:    
Wholly Owned Properties – All 94.2% 93.7%
>10,000 Sq Ft Occupancy 97.5% 98.0%
≤ 10,000 Sq Ft Occupancy 92.1% 91.2%
Same Store Property Net Operating Income Change (1) 2.4% 7.1%
Rental Rate Growth – Total (GAAP Basis): 21.8% 23.5%
New Leases 37.3% 24.3%
Renewal Leases 15.3% 23.2%
Leasing Transactions:    
Number of New Leases 44 22
New Leases – Lease Term Revenue (millions) $26.7 $27.5
Number of Renewal Leases 32 38
Renewal Leases – Lease Term Revenue (millions) $23.6 $9.7


Balance Sheet and Debt Metrics

  • As of December 31, 2023, Whitestone had total debt of $640.5 million, along with capacity and availability of $104.0 million each under its $250 million revolving credit facility
  • As of December 31, 2023, the Company has undepreciated real estate assets of $1.2 billion.

Dividend

On March 5, 2024, the Company declared a quarterly cash distribution of $0.12375 per common share and OP unit for the second quarter of 2024, to be paid in three equal installments of $0.04125 in April, May, and June of 2024. The second quarter dividend represents a 3.13% increase from the first quarter of 2024. 

2024 Full Year Guidance

The Company currently estimates that U.S. generally accepted accounting principles (“GAAP”) net income available to common shareholders will be within the range of $0.32 to $0.38 per diluted share, and Core FFO will be within the range of $0.98 to $1.04 per diluted share and OP Unit. 

  Initial 2024 Guidance 2023 Actual
  (unaudited, amounts in thousands except per share and percentages)
Net income attributable to Whitestone REIT $16,600 – $19,600 $19,180
Core FFO (1) $50,985 – $53,985 $46,765
     
Net income attributable to Whitestone REIT per share $0.32 – $0.38 $0.38
Core FFO per diluted share and OP Unit (1) $0.98 – $1.04 $0.91
     
Key Drivers:    
Same store net operating income growth (2) 2.5% – 4.0% 2.7%
Bad debt as a percentage of revenue 0.60% – 1.10% 0.65%
General and administrative expense $19,700 – $21,200 $20,653
Interest expense $32,600 – $34,100 $32,866
Ending occupancy 93.8% – 94.8% 94.20%
Net Debt to EBITDAre Ratio (3) 7.0X – 6.6X 7.5X
     
(1) For the reconciliation of forward-looking non-GAAP financial measure to the comparable GAAP financial measure, see the “Core FFO per diluted share and OP unit” reconciliation table. Core Funds from Operations (“Core FFO”) is a non-GAAP measure.
     
(2) Excludes straight-line rent, amortization of above/below market rates and lease termination fees for both periods.
 
(3) Fourth quarter annualized EBITDAre. For the reconciliation of Net Debt to EBITDAre Ratio, a non-GAAP financial measure, to the comparable GAAP financial measure, see the “Earnings Before Interest, Tax, Depreciation and Amortization for Real Estate (EBITDAre)” reconciliation table.


Portfolio Statistics

As of December 31, 2023, Whitestone wholly owned 55 Community-Centered Properties™ with approximately 5.0 million square feet of gross leasable area (“GLA”). Five of the 55 Community-Centered Properties™ are land parcels held for future development. The portfolio is comprised of 29 properties in Texas and 26 in Arizona. Whitestone’s Community-Centered Properties™ are located in the MSA’s of Austin (5), Dallas-Fort Worth (9), Houston (12), Phoenix (26), and San Antonio (3). The Company’s properties in these markets are generally in high-traffic locations, surrounded by high-household-income communities. The Company also owns an 81.4% equity interest in eight properties containing 0.9 million square feet of GLA through its investment in Pillarstone OP.

At the end of the fourth quarter, the Company’s diversified tenant base was comprised of 1,453 tenants, with the largest tenant accounting for only 2.1% of annualized base rental revenues. No single tenant exceeded 2.1% of total revenues. Lease terms range from less than one year for smaller tenants to more than 15 years for larger tenants. Whitestone’s leases generally include minimum monthly lease payments and tenant reimbursements for payment of taxes, insurance and maintenance, and typically exclude restrictive lease clauses.

Conference Call Information

In conjunction with the issuance of its financial results, the Company invites you to listen to its earnings release conference call to be broadcast live on Thursday, March 7, 2024, at 8:30 A.M Eastern Time / 7:30 A.M. Central Time. The call will be led by Dave Holeman, Chief Executive Officer. Conference call access information is as follows:

To listen to a 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.

Dial-in number for domestic participants: 1-877-407-0784
Dial-in number for international participants: 1-201-689-8560

The conference call will be recorded, and a telephone replay will be available through Thursday, March 21, 2024. Replay access information is as follows:

Replay number for domestic participants: 1-844-512-2921
Replay number for international participants: 1-412-317-6671
Passcode (for all participants): 13742561


Supplemental Financial Information

The fourth quarter earnings release and supplemental data package will be located in the “News and Events” and “Financial Reporting” tabs of the Investor Relations section of the Company’s website at www.whitestonereit.com. The earnings release and supplemental data package will also be available by mail upon request. To receive a copy, please call Investor Relations at (713) 435-2219.

About Whitestone REIT

Whitestone REIT (NYSE: WSR) is a community-centered real estate investment trust (REIT) that acquires, owns, operates, and develops open-air, retail centers located in some of the fastest growing markets in the country: Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio.

Our centers are convenience focused: merchandised with a mix of service-oriented tenants providing food (restaurants and grocers), self-care (health and fitness), services (financial and logistics), education and entertainment to the surrounding communities. The Company believes its strong community connections and deep tenant relationships are key to the success of its current centers and its acquisition strategy. For additional information, please visit www.whitestonereit.com.

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition and results of operations, statements related to our expectations regarding the performance of our business, and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. 

Factors that could cause actual results to differ materially from any forward-looking statements made in this Report include: the imposition of federal income taxes if we fail to qualify as a real estate investment trust (“REIT”) in any taxable year or forego an opportunity to ensure REIT status; uncertainties related to the national economy, the real estate industry in general and in our specific markets; legislative or regulatory changes, including changes to laws governing REITs; adverse economic or real estate developments or conditions in Texas or Arizona, Houston and Phoenix in particular, including the potential impact of public health emergencies, such as COVID-19, on our tenants’ ability to pay their rent, which could result in bad debt allowances or straight-line rent reserve adjustments; increases in interest rates, including as a result of inflation operating costs or general and administrative expenses; our current geographic concentration in the Houston and Phoenix metropolitan area makes us susceptible to local economic downturns and natural disasters, such as floods and hurricanes, which may increase as a result of climate change, increasing focus by stakeholders on environmental, social, and governance matters, financial institution disruption; availability and terms of capital and financing, both to fund our operations and to refinance our indebtedness as it matures; decreases in rental rates or increases in vacancy rates; harm to our reputation, ability to do business and results of operations as a result of improper conduct by our employees, agents or business partners; litigation risks; lease-up risks, including leasing risks arising from exclusivity and consent provisions in leases with significant tenants; our inability to renew tenant leases or obtain new tenant leases upon the expiration of existing leases; risks related to generative artificial intelligence tools and language models, along with the potential interpretations and conclusions they might make regarding our business and prospects, particularly concerning the spread of misinformation; our inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws; geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine, the conflict in the Gaza Strip and unrest in the Middle East; the need to fund tenant improvements or other capital expenditures out of operating cash flow; the extent to which our estimates regarding Pillarstone REIT Operating Partnership LP’s financial condition and results of operations differ from actual results; and the risk that we are unable to raise capital for working capital, acquisitions or other uses on attractive terms or at all 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.

Non-GAAP Financial Measures

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

EBITDAre: The National Association of Real Estate Investment Trusts (“NAREIT”) defines EBITDAre as net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization and impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus or minus losses and gains on the disposition of depreciable property, including losses/gains on change in control and adjustments to reflect the entity’s share of EBITDAre of the unconsolidated affiliates and consolidated affiliates with non-controlling interests. The Company calculates EBITDAre in a manner consistent with the NAREIT definition. Management believes that EBITDAre represents a supplemental non-GAAP performance measure that provides investors with a relevant basis for comparing REITs. There can be no assurance the EBITDAre as presented by the Company is comparable to similarly titled measures of other REITs. EBITDAre should not be considered as an alternative to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. EBITDAre does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

FFO: Funds From Operations: The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (calculated 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. We calculate FFO in a manner consistent with the NAREIT definition and also include adjustments for our unconsolidated real estate partnership.

Core Funds from Operations (“Core FFO”) is a non-GAAP measure. From time to time, we report or provide guidance with respect to “Core FFO” which removes the impact of certain non-recurring and non-operating transactions or other items we do not consider to be representative of our core operating results including, without limitation, default interest on debt of real estate partnership, extinguishment of debt cost, gains or losses associated with litigation involving the Company that is not in the normal course of business, and proxy contest professional fees.

Management uses FFO and Core FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income (loss) alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Because real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself. In addition, securities analysts, investors and other interested parties use FFO and Core FFO as the primary metric for comparing the relative performance of equity REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP, as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity. FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness. Although our calculation of FFO is consistent with that of NAREIT, there can be no assurance that FFO and Core FFO presented by us is comparable to similarly titled measures of other REITs.

NOI: Net Operating Income: Management believes that NOI is a useful measure of our property operating performance. We define NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Other REITs may use different methodologies for calculating NOI and, accordingly, our NOI may not be comparable to other REITs. Because NOI excludes general and administrative expenses, depreciation and amortization, equity or deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of property from discontinued operations, management fee (net of related expenses) and gain or loss on sale or disposition of assets, and includes NOI of real estate partnership (pro rata) and net income attributable to noncontrolling interest, 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. We use NOI to evaluate our operating performance since NOI allows us to evaluate the impact that factors such as occupancy levels, lease structure, lease rates and tenant base have on our results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about our 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 our overall financial performance since it does not reflect the level of capital expenditure and leasing costs necessary to maintain the operating performance of our properties, including general and administrative expenses, depreciation and amortization, equity or deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of property from discontinued operations, management fee (net of related expenses) and gain or loss on sale or disposition of assets.

Same Store NOI: Management believes that Same Store NOI is a useful measure of the Company’s property operating performance because it includes only the properties that have been owned for the entire period being compared, and it is frequently used by the investment community. Same Store NOI assists in eliminating differences in NOI due to the acquisition or disposition of properties during the period being presented, providing a more consistent measure of the Company’s performance. The Company defines Same Store NOI as operating revenues (rental and other revenues, excluding straight-line rent adjustments, amortization of above/below market rents, and lease termination fees) less property and related expenses (property operation and maintenance and real estate taxes), Non-Same Store NOI, and NOI of our investment in Pillarstone OP (pro rata). We define “Non-Same Stores” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company’s Same Store NOI may not be comparable to that of other REITs.

Net debt: We present net debt, which we define as total debt net of insurance financing less cash plus our proportional share of net debt of real estate partnership, and net debt to pro forma EBITDAre, which we define as net debt divided by EBITDAre because we believe they are helpful as supplemental measures in assessing our ability to service our financing obligations and in evaluating balance sheet leverage against that of other REITs. However, net debt and net debt to pro forma EBITDAre should not be viewed as a stand-alone measure of our overall liquidity and leverage. In addition, other REITs may use different methodologies for calculating net debt and net debt to pro forma EBITDAre, and accordingly our net debt and net debt to pro forma EBITDAre may not be comparable to that of other REITs.

Investor and Media Relations:
David Mordy
Director, Investor Relations
Whitestone REIT
(713) 435-2219
[email protected]

 
Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
    December 31, 2023     December 31, 2022  
                 
ASSETS  
Real estate assets, at cost                
Property   $ 1,221,466     $ 1,199,041  
Accumulated depreciation     (229,767 )     (208,286 )
Total real estate assets     991,699       990,755  
Investment in real estate partnership     31,671       34,826  
Cash and cash equivalents     4,572       6,166  
Restricted cash     68       189  
Escrows and deposits     24,148       12,827  
Accrued rents and accounts receivable, net of allowance for doubtful accounts (1)     30,592       25,570  
Receivable due from related party     1,513       1,377  
Unamortized lease commissions, legal fees and loan costs     13,783       12,697  
Prepaid expenses and other assets(2)     4,765       7,838  
Finance lease right-of-use assets     10,428       10,522  
Total assets   $ 1,113,239     $ 1,102,767  
                 
LIABILITIES AND EQUITY  
Liabilities:                
Notes payable   $ 640,172     $ 625,427  
Accounts payable and accrued expenses(3)     36,513       36,154  
Payable due to related party     1,577       1,561  
Tenants’ security deposits     8,614       8,428  
Dividends and distributions payable     6,025       6,008  
Finance lease liabilities     721       735  
Total liabilities     693,622       678,313  
Commitments and contingencies:            
Equity:                
Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of December 31, 2023 and December 31, 2022            
Common shares, $0.001 par value per share; 400,000,000 shares authorized; 49,610,831 and 49,422,716 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively     50       49  
Additional paid-in capital     628,079       624,785  
Accumulated deficit     (216,963 )     (212,366 )
Accumulated other comprehensive income     2,576       5,980  
Total Whitestone REIT shareholders’ equity     413,742       418,448  
Noncontrolling interest in subsidiary     5,875       6,006  
Total equity     419,617       424,454  
Total liabilities and equity   $ 1,113,239     $ 1,102,767  
Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    December 31, 2023     December 31, 2022  
(1) Accrued rents and accounts receivable, net of allowance for doubtful accounts                
Tenant receivables   $ 16,287     $ 16,828  
Accrued rents and other recoveries     26,751       22,103  
Allowance for doubtful accounts     (13,570 )     (13,822 )
Other receivables     1,124       461  
Total accrued rents and accounts receivable, net of allowance for doubtful accounts   $ 30,592     $ 25,570  
                 
(2) Operating lease right of use assets (net)   $ 109     $ 124  
(3) Operating lease liabilities   $ 112     $ 129  
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
Revenues                                
Rental(1)   $ 37,247     $ 34,700     $ 145,652     $ 138,200  
Management, transaction, and other fees     277       218       1,317       1,221  
Total revenues     37,524       34,918       146,969       139,421  
                                 
Operating expenses                                
Depreciation and amortization     8,428       8,046       32,966       31,707  
Operating and maintenance     8,101       6,435       27,948       25,688  
Real estate taxes     3,848       3,740       18,016       17,607  
General and administrative     5,002       5,003       20,653       18,066  
Total operating expenses     25,379       23,224       99,583       93,068  
                                 
Other expenses (income)                                
Interest expense     8,303       8,082       32,866       27,193  
(Gain) loss on sale of properties, net     620       (16,950 )     (9,006 )     (16,950 )
Loss on disposal of assets, net     22       180       522       192  
Interest, dividend and other investment income     (2 )     (22 )     (51 )     (65 )
Total other expenses     8,943       (8,710 )     24,331       10,370  
                                 
Income before equity investment in real estate partnership and income tax     3,202       20,404       23,055       35,983  
                                 
Equity (deficit) in earnings of real estate partnership     (1,528 )     (65 )     (3,155 )     239  
Provision for income tax     (111 )     (109 )     (450 )     (422 )
Net Income     1,563       20,230       19,450       35,800  
                                 
Less: Net income attributable to noncontrolling interests     22       291       270       530  
                                 
Net income attributable to Whitestone REIT   $ 1,541     $ 19,939     $ 19,180     $ 35,270  
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
Basic Earnings Per Share:                                
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares   $ 0.03     $ 0.40     $ 0.39     $ 0.72  
Diluted Earnings Per Share:                                
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares   $ 0.03     $ 0.40     $ 0.38     $ 0.71  
                                 
Weighted average number of common shares outstanding:                                
Basic     49,586       49,384       49,501       49,256  
Diluted     51,064       50,126       50,813       49,950  
                                 
Consolidated Statements of Comprehensive Income (Loss)                                
                                 
Net income   $ 1,563     $ 20,230     $ 19,450     $ 35,800  
                                 
Other comprehensive income (loss)                                
                                 
Unrealized gain (loss) on cash flow hedging activities     (10,054 )     (1,698 )     (3,452 )     12,925  
                                 
Comprehensive income     (8,491 )     18,532       15,998       48,725  
                                 
Less: Net income attributable to noncontrolling interests     22       291       270       530  
Less: Comprehensive income (loss) attributable to noncontrolling interests     (139 )     (24 )     (48 )     191  
                                 
Comprehensive income attributable to Whitestone REIT   $ (8,374 )   $ 18,265     $ 15,776     $ 48,004  
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
(1) Rental                                
Rental revenues   $ 26,714     $ 26,090     $ 105,494     $ 101,113  
Recoveries     10,538       9,151       41,109       38,243  
Bad debt     (5 )     (541 )     (951 )     (1,156 )
Total rental   $ 37,247     $ 34,700     $ 145,652     $ 138,200  
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
    Year Ended December 31,  
    2023     2022  
Cash flows from operating activities:                
Net income   $ 19,450     $ 35,800  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     32,966       31,707  
Amortization of deferred loan costs     1,089       1,100  
Gain on sale of properties     (9,006 )     (16,950 )
Loss on disposal of assets     522       192  
Bad debt     951       1,156  
Share-based compensation     3,727       1,511  
(Equity) deficit in earnings of real estate partnership     3,155       (239 )
Amortization of right-of-use assets – finance leases     94        
Changes in operating assets and liabilities:                
Escrows and deposits     2,312       (1,504 )
Accrued rents and accounts receivable     (5,973 )     (4,331 )
Receivable due from related party     (136 )     (530 )
Unamortized lease commissions, legal fees and loan costs     (4,592 )     (3,386 )
Prepaid expenses and other assets     2,484       1,749  
Accounts payable and accrued expenses     355       (2,766 )
Payable due to related party     16       564  
Tenants’ security deposits     186       358  
Net cash provided by operating activities     47,600       44,431  
Cash flows from investing activities:                
Acquisitions of real estate     (25,474 )     (16,992 )
Acquisition of ground lease           (9,786 )
Additions to real estate     (17,055 )     (13,659 )
Proceeds from sales of properties     19,847       33,723  
Escrowed loan repayment on behalf of real estate partnership     (13,633 )      
Net cash used in investing activities     (36,315 )     (6,714 )
Cash flows from financing activities:                
Distributions paid to common shareholders     (23,684 )     (22,958 )
Distributions paid to OP unit holders     (332 )     (346 )
Payments of exchange offer costs           (335 )
Net proceeds from (payments of) credit facility     42,500       (16,000 )
Repayments of notes payable     (30,945 )     (3,468 )
Payments of loan origination costs           (3,632 )
Repurchase of common shares     (525 )     (537 )
Payment of finance lease liability     (14 )      
Net cash used in financing activities     (13,000 )     (47,276 )
Net decrease in cash, cash equivalents and restricted cash     (1,715 )     (9,559 )
Cash, cash equivalents and restricted cash at beginning of period     6,355       15,914  
Cash, cash equivalents and restricted cash at end of period (1)   $ 4,640     $ 6,355  
 
(1) For a reconciliation of cash, cash equivalents and restricted cash, see supplemental disclosures below.
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental Disclosures
(in thousands)
 
    Year Ended December 31,  
    2023     2022  
Supplemental disclosure of cash flow information:                
Cash paid for interest   $ 31,136     $ 26,493  
Cash paid for taxes   $ 435     $ 366  
Non cash investing and financing activities:                
Disposal of fully depreciated real estate   $ 976     $ 454  
Financed insurance premiums   $ 3,002     $ 1,846  
Value of shares issued under dividend reinvestment plan   $ 75     $ 67  
Value of common shares exchanged for OP units   $ 17     $ 618  
Change in fair value of cash flow hedge   $ (3,452 )   $ 12,925  
Recognition of finance lease liabilities   $     $ 735  
    December 31,  
    2023     2022  
Cash, cash equivalents and restricted cash                
Cash and cash equivalents   $ 4,572     $ 6,166  
Restricted cash     68       189  
Total cash, cash equivalents and restricted cash   $ 4,640     $ 6,355  
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
FFO (NAREIT) AND CORE FFO                                
Net income attributable to Whitestone REIT   $ 1,541     $ 19,939     $ 19,180     $ 35,270  
Adjustments to reconcile to FFO:(1)                                
Depreciation and amortization of real estate assets     8,394       8,004       32,811       31,538  
Depreciation and amortization of real estate assets of real estate partnership (pro rata) (2)     404       404       1,613       1,613  
Loss on disposal of assets, net     22       180       522       192  
(Gain) loss on sale of properties, net     620       (16,950 )     (9,006 )     (16,950 )
Net income attributable to noncontrolling interests     22       291       270       530  
FFO (NAREIT)   $ 11,003     $ 11,868     $ 45,390     $ 52,193  
Adjustments to reconcile to Core FFO:                                
Early debt extinguishment costs                       147  
Default interest on debt of real estate partnership (1)(2)     1,375             1,375        
Core FFO   $ 12,378     $ 11,868     $ 46,765     $ 52,340  
                                 
FFO PER SHARE AND OP UNIT CALCULATION                                
Numerator:                                
FFO   $ 11,003     $ 11,868     $ 45,390     $ 52,193  
Core FFO   $ 12,378     $ 11,868     $ 46,765     $ 52,340  
Denominator:                                
Weighted average number of total common shares – basic     49,586       49,384       49,501       49,256  
Weighted average number of total noncontrolling OP units – basic     693       695       694       738  
Weighted average number of total common shares and noncontrolling OP units – basic     50,279       50,079       50,195       49,994  
                                 
Effect of dilutive securities:                                
Unvested restricted shares     1,478       742       1,312       694  
Weighted average number of total common shares and noncontrolling OP units – diluted     51,757       50,821       51,507       50,688  
                                 
FFO per common share and OP unit – basic   $ 0.22     $ 0.24     $ 0.90     $ 1.04  
FFO per common share and OP unit – diluted   $ 0.21     $ 0.23     $ 0.88     $ 1.03  
                                 
Core FFO per common share and OP unit – basic   $ 0.25     $ 0.24     $ 0.93     $ 1.05  
Core FFO per common share and OP unit – diluted   $ 0.24     $ 0.23     $ 0.91     $ 1.03  
 
(1) Includes pro-rata share attributable to real estate partnership.
 
(2) We rely on reporting provided to us by our third party partners for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 and 2022 have not been made available to us, we have estimated depreciation and amortization of real estate assets based on the information available to us at the time of this Report.
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(continued)
(in thousands)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
PROPERTY NET OPERATING INCOME                                
Net income attributable to Whitestone REIT   $ 1,541     $ 19,939     $ 19,180     $ 35,270  
General and administrative expenses     5,002       5,003       20,653       18,066  
Depreciation and amortization     8,428       8,046       32,966       31,707  
(Equity) deficit in earnings of real estate partnership (1)     1,528       65       3,155       (239 )
Interest expense     8,303       8,082       32,866       27,193  
Interest, dividend and other investment income     (2 )     (22 )     (51 )     (65 )
Provision for income taxes     111       109       450       422  
(Gain) loss on sale of properties, net     620       (16,950 )     (9,006 )     (16,950 )
Management fee, net of related expenses                 16       112  
Loss on disposal of assets, net     22       180       522       192  
NOI of real estate partnership (pro rata)(1)     670       594       2,553       3,023  
Net income attributable to noncontrolling interests     22       291       270       530  
NOI   $ 26,245     $ 25,337     $ 103,574     $ 99,261  
Non-Same Store NOI (2)     (1,214 )     (651 )     (4,370 )     (3,322 )
NOI of real estate partnership (pro rata) (1)     (670 )     (594 )     (2,553 )     (3,023 )
NOI less Non-Same Store NOI and NOI of real estate partnership (pro rata)     24,361       24,092       96,651       92,916  
Same Store straight-line rent adjustments     (97 )     (424 )     (2,284 )     (1,466 )
Same Store amortization of above/below market rents     (214 )     (256 )     (862 )     (933 )
Same Store lease termination fees     (98 )     (21 )     (698 )     (135 )
Same Store NOI (3)   $ 23,952     $ 23,391     $ 92,807     $ 90,382  
 
(1) We rely on reporting provided to us by our third party partners for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 and 2022 have not been made available to us, we have estimated (equity) deficit in earnings and pro rata share of NOI of real estate partnership based on the information available to us at the time of this Report.
 
(2) We define “Non-Same Store” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. For purposes of comparing the three months ended December 31, 2023 to the three months ended December 31, 2022, Non-Same Store includes properties acquired between October 1, 2022 and December 31, 2023 and properties sold between October 1, 2022 and December 31,2023, but not included in discontinued operations. For purposes of comparing the twelve months ended December 31, 2023 to the twelve months ended December 31, 2022, Non-Same Store includes properties acquired between January 1, 2022 and December 31, 2023, and properties sold between January 1, 2022 and December 31, 2023, but not included in discontinued operations.
 
(3) We define “Same Store” as properties that have been owned during the entire period being compared. For purposes of comparing the three months ended December 31, 2023 to the three months ended December 31, 2022, Same Store includes properties owned before October 1, 2022 and not sold before December 31, 2023. For purposes of comparing the twelve months ended December 31, 2023 to the twelve months ended December 31, 2022, Same Store includes properties owned before January 1, 2022 and not sold before December 31, 2023. Straight line rent adjustments, above/below market rents, and lease termination fees are excluded.
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(continued)
(in thousands)
 
    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre)                  
                                 
Net income attributable to Whitestone REIT   $ 1,541     $ 19,939     $ 19,180     $ 35,270  
Depreciation and amortization     8,428       8,046       32,966       31,707  
Interest expense     8,303       8,082       32,866       27,193  
Provision for income taxes     111       109       450       422  
Net income attributable to noncontrolling interests     22       291       270       530  
(Equity) deficit in earnings of real estate partnership (1)     1,528       65       3,155       (239 )
EBITDAre adjustments for real estate partnership (1)     448       533       617       2,626  
(Gain) loss on sale of properties, net     620       (16,950 )     (9,006 )     (16,950 )
Loss on disposal of assets, net     22       180       522       192  
EBITDAre   $ 21,023     $ 20,295     $ 81,020     $ 80,751  
 
(1) We rely on reporting provided to us by our third party partners for financial information regarding the Company’s investment in Pillarstone OP. Because Pillarstone OP financial statements as of December 31, 2023 and 2022 have not been made available to us, we have estimated (equity) deficit in earnings and EBITDAre adjustments for real estate partnership based on the information available to us at the time of this Report.
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
Initial Full Year Guidance for 2024
(in thousands, except per share and per unit data)
 
    Projected Range Full Year 2024  
    Low     High  
FFO (NAREIT) and Core FFO per diluted share and OP unit                
                 
Net income attributable to Whitestone REIT   $ 16,600     $ 19,600  
Adjustments to reconcile to FFO (NAREIT)                
Depreciation and amortization of real estate assets     34,252       34,252  
Depreciation and amortization of real estate assets of real estate partnership (pro rata)     133       133  
FFO (NAREIT)   $ 50,985     $ 53,985  
Adjustments to reconcile to Core FFO                
Adjustments            
Core FFO   $ 50,985     $ 53,985  
                 
Dilutive shares     51,262       51,262  
OP Units     695       695  
Dilutive share and OP Units     51,957       51,957  
                 
Net income attributable to Whitestone REIT per diluted share   $ 0.32     $ 0.38  
FFO (NAREIT) per diluted share and OP Unit   $ 0.98     $ 1.04  
                 
Net income attributable to Whitestone REIT per diluted share   $ 0.32     $ 0.38  
Core FFO per diluted share and OP Unit   $ 0.98     $ 1.04  
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
Initial Full Year Guidance for 2024
(in thousands)
 
    Projected Range Fourth Quarter 2024  
    Low     High  
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre)  
                 
Net income attributable to Whitestone REIT   $ 6,161     $ 5,311  
Depreciation and amortization     8,746       8,746  
Interest expense     8,013       8,013  
Provision for income taxes     134       134  
Net income attributable to noncontrolling interests     89       89  
EBITDAre   $ 23,143     $ 22,293  
Annualized EBITDAre   $ 92,572     $ 89,172  
                 
Outstanding debt, net of insurance financing     616,290       624,290  
Less: Cash     (3,000 )     (3,000 )
Add: Proportional share on net debt of unconsolidated real estate partnership            
Total net debt   $ 613,290     $ 621,290  
                 
Ratio of Net Debt to EBITDAre     6.6       7.0  


Bay Street News