Whitestone REIT Reports First Quarter 2024 Results

Whitestone REIT

HOUSTON, May 01, 2024 (GLOBE NEWSWIRE) -- Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) today announced its operating and financial results for the first quarter of 2024. 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.

“We delivered a very strong quarter on multiple fronts, with GAAP leasing spreads of 26% on new leases and 15% on renewal leases, portfolio annualized base rent per square foot increasing 7% from the 2023 first quarter to $23.83 and occupancy of 93.6%. Our performance is benefitting from a combination of strong organic growth and the success of our capital recycling program. We are reiterating our 2024 full year Core FFO per share guidance, which provides for 11% year-over-year growth at the midpoint. We are strategically positioned to grow shareholder value and with the majority of our debt maturities locked until 2027, we have clear visibility on continued earnings growth and our ability to achieve our leverage objectives. The leasing environment in our markets remains very strong and our leasing team continues to execute and drive shareholder value as shown by the 31% increase in leasing square footage signed in the quarter versus the first quarter of 2023.”

–    Dave Holeman, Chief Executive Officer

First Quarter 2024 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 $37.2 million versus $35.9 million for the first quarter of 2023.
  
  

• Net Income attributable to common shareholders of $9.3 million, or $0.18 per diluted share, versus $3.8 million, or $0.08 per diluted share for the first quarter of 2023. 
  
  

• Core Funds from Operations (“FFO”) of $12.3 million versus $12.1 million for the first quarter of 2023. 
  
  

• FFO per diluted share of $0.23 versus $0.24 for the first quarter of 2023. 
  
  

• Core FFO per diluted share was $0.24 for the first quarters of both 2023 and 2024.
  
  

• EBITDAre of $20.5 million versus $20.4 million for the first quarter of 2023.
  
  

• Same-Store Net Operating Income (“NOI”) grew 3.1% to $23.9 million versus $23.1 million for the first quarter of 2023. 
  
  

• Net Effective Annual Base Rental Revenue per leased square foot was up 7.2% to $23.83, compared to the prior year quarter.

Operating Results
For the three-month periods ending March 31, 2024 and 2023, the Company’s operating highlights were as follows:

	First Quarter 2024			First Quarter 2023
Occupancy:
Wholly Owned Properties – All		93.6	%		92.7	%
>10,000 Sq Ft Occupancy		96.9	%		96.7	%
≤ 10,000 Sq Ft Occupancy		91.6	%		90.5	%
Same Store Property Net Operating Income Change (1)		3.1	%		2.8	%
Rental Rate Growth - Total (GAAP Basis):		17.0	%		20.8	%
New Leases		25.9	%		9.5	%
Renewal Leases		15.0	%		23.0	%
Leasing Transactions:
Number of New Leases		24			19
New Leases - Lease Term Revenue (millions)	$	7.8		$	6.2
Number of Renewal Leases		46			32
Renewal Leases - Lease Term Revenue (millions)	$	10.7		$	9.0

Balance Sheet and Debt Metrics

• As of March 31, 2024, Whitestone had total debt of $645.3 million, along with capacity and availability of $81.0 million each under its $250 million revolving credit facility.
  
  

• As of March 31, 2024, 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 has updated its 2024 full-year guidance for net income attributable to Whitestone REIT, general and administrative expense and gain on sale of property to include the impact of the gain recognized on the sale of Mercado at Scottsdale Ranch and the impact expected proxy contest costs. The guidance update is as follows:

		2024 Revised Guidance	2024 Original Guidance
		(unaudited, amounts in thousands except per share and percentages)
Net income attributable to Whitestone REIT (1) (2)		$21,560 - $24,560	$16,600 - $19,600
Core FFO (3)		$50,985 - $53,985	$50,985 - $53,985
Net income attributable to Whitestone REIT per share		$0.42 - $0.48	$0.32 - $0.38
Core FFO per diluted share and OP Unit (3)		$0.98 - $1.04	$0.98 - $1.04
Key Drivers:
Same store net operating income growth (4)		2.5% - 4.0%	2.5% - 4.0%
Bad debt as a percentage of revenue		0.60% - 1.10%	0.60% - 1.10%
General and administrative expense (1)		$21,265 - $22,765	$19,700 - $21,200
Interest expense		$32,600 - $34,100	$32,600 - $34,100
Ending occupancy		93.8% - 94.8%	93.8% - 94.8%
Gain on sale of property (2)		$6,525	$0
Net Debt to EBITDAre Ratio (5)		7.0X - 6.6X	7.0X - 6.6X

(1)	2024 revised guidance includes estimated proxy contest costs of $1,565: $400 in Q1 and the remainder in the second quarter.
(2)	2024 revised guidance includes a gain on sale of property that occurred during the first quarter.
(3)	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.
(4)	Excludes straight-line rent, amortization of above/below market rates and lease termination fees.
(5)	Fourth quarter annualized EBITDAre. For EBITDAre and Debt/EBITDAre, non-GAAP financial measures, please see the respective reconciliation tables.

Portfolio Statistics

As of March 31, 2024, Whitestone wholly owned 55 Community-Centered Properties™ with 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 30 properties in Texas and 25 in Arizona. Whitestone’s Community-Centered Properties™ are located in the MSA's of Austin (5), Dallas-Fort Worth (9), Houston (13), Phoenix (25), 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 owned an 81.4% equity interest in eight properties containing 0.9 million square feet of GLA through its investment in Pillarstone OP. On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. As of March 31, 2024, our ownership in Pillarstone OP no longer represents a majority interest.

At the end of the first quarter, the Company’s diversified tenant base was comprised of 1,431 tenants, with the largest tenant accounting for only 2.1% of annualized base rental revenues. No single tenant exceeded 2.1% of total revenue. 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, May 2, 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, May 16, 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):	13742562

Supplemental Financial Information

The first 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, 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; 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 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, Core 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, deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of properties, and loss on 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, 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 that 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, our 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
ir@whitestonereit.com

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

		March 31, 2024				December 31, 2023
ASSETS
Real estate assets, at cost
Property		$	1,230,936			$	1,221,466
Accumulated depreciation			(232,867	)			(229,767	)
Total real estate assets			998,069				991,699
Investment in real estate partnership			—				31,671
Cash and cash equivalents			6,215				4,572
Restricted cash			—				68
Escrows and deposits			17,272				24,148
Accrued rents and accounts receivable, net of allowance for doubtful accounts (1)			31,055				30,592
Receivable from partnership redemption			31,643				—
Receivable due from related party			1,522				1,513
Unamortized lease commissions, legal fees and loan costs			14,200				13,783
Prepaid expenses and other assets(2)			11,302				4,765
Finance lease right-of-use assets			10,406				10,428
Total assets		$	1,121,684			$	1,113,239
LIABILITIES AND EQUITY
Liabilities:
Notes payable		$	644,981			$	640,172
Accounts payable and accrued expenses(3)			32,133				36,513
Payable due to related party			1,577				1,577
Tenants' security deposits			8,799				8,614
Dividends and distributions payable			6,215				6,025
Finance lease liabilities			716				721
Total liabilities			694,421				693,622
Commitments and contingencies:			—				—
Equity:
Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of March 31, 2024 and December 31, 2023			—				—
Common shares, $0.001 par value per share; 400,000,000 shares authorized; 49,958,896 and 49,610,831 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively			50				50
Additional paid-in capital			627,876				628,079
Accumulated deficit			(213,798	)			(216,963	)
Accumulated other comprehensive income			7,517				2,576
Total Whitestone REIT shareholders' equity			421,645				413,742
Noncontrolling interest in subsidiary			5,618				5,875
Total equity			427,263				419,617
Total liabilities and equity		$	1,121,684			$	1,113,239

Whitestone REIT and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands)

		March 31, 2024				December 31, 2023
(1) Accrued rents and accounts receivable, net of allowance for doubtful accounts
Tenant receivables		$	16,869			$	16,287
Accrued rents and other recoveries			27,126				26,751
Allowance for doubtful accounts			(13,919	)			(13,570	)
Other receivables			979				1,124
Total accrued rents and accounts receivable, net of allowance for doubtful accounts		$	31,055			$	30,592
(2) Operating lease right of use assets (net)		$	108			$	109
(3) Operating lease liabilities		$	112			$	112

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

		Three Months Ended March 31,
		2024				2023
Revenues
Rental(1)		$	36,741			$	35,497
Management, transaction, and other fees			423				354
Total revenues			37,164				35,851
Operating expenses
Depreciation and amortization			8,800				7,846
Operating and maintenance			6,349				6,086
Real estate taxes			4,238				4,708
General and administrative			6,180				5,084
Total operating expenses			25,567				23,724
Other expenses (income)
Interest expense			8,519				7,903
Gain on sale of properties			(6,525	)			—
Loss on disposal of assets			—				6
Interest, dividend and other investment income			(8	)			(20	)
Total other expenses			1,986				7,889
Income before equity investment in real estate partnership and income tax			9,611				4,238
Deficit in earnings of real estate partnership			(28	)			(218	)
Provision for income tax			(119	)			(119	)
Net Income			9,464				3,901
Less: Net income attributable to noncontrolling interests			124				54
Net income attributable to Whitestone REIT		$	9,340			$	3,847

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

		Three Months Ended March 31,
		2024				2023
Basic Earnings Per Share:
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares		$	0.19			$	0.08
Diluted Earnings Per Share:
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares		$	0.18			$	0.08
Weighted average number of common shares outstanding:
Basic			49,940				49,424
Diluted			51,112				50,160
Consolidated Statements of Comprehensive Income (Loss)
Net income		$	9,464			$	3,901
Other comprehensive income (loss)
Unrealized gain (loss) on cash flow hedging activities			5,007				(4,587	)
Comprehensive income (loss)			14,471				(686	)
Less: Net income attributable to noncontrolling interests			124				54
Less: Comprehensive income (loss) attributable to noncontrolling interests			66				(64	)
Comprehensive income (loss) attributable to Whitestone REIT		$	14,281			$	(676	)

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

		Three Months Ended March 31,
		2024				2023
(1) Rental
Rental revenues		$	26,864			$	25,740
Recoveries			10,477				10,081
Bad debt			(600	)			(324	)
Total rental		$	36,741			$	35,497

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

		Three Months Ended March 31,
		2024				2023
Cash flows from operating activities:
Net income		$	9,464			$	3,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			8,800				7,846
Amortization of deferred loan costs			265				277
Gain on sale of properties			(6,525	)			—
Loss on disposal of assets			—				6
Bad debt			600				324
Share-based compensation			861				755
Deficit in earnings of real estate partnership			28				218
Amortization of right-of-use assets - finance leases			22				29
Changes in operating assets and liabilities:
Escrows and deposits			6,876				2,796
Accrued rents and accounts receivable			(1,063	)			(1,646	)
Receivable due from related party			(9	)			(26	)
Unamortized lease commissions, legal fees and loan costs			(817	)			(521	)
Prepaid expenses and other assets			997				(1,117	)
Accounts payable and accrued expenses			(8,160	)			(7,843	)
Payable due to related party			—				1
Tenants' security deposits			185				(85	)
Net cash provided by operating activities			11,524				4,915
Cash flows from investing activities:
Acquisitions of real estate			(27,204	)			—
Additions to real estate			(3,041	)			(3,529	)
Proceeds from sales of properties			25,661				—
Net cash used in investing activities			(4,584	)			(3,529	)
Cash flows from financing activities:
Distributions paid to common shareholders			(5,969	)			(5,913	)
Distributions paid to OP unit holders			(80	)			(83	)
Net proceeds from credit facility			23,000				9,500
Repayments of notes payable			(20,869	)			(7,571	)
Repurchase of common shares			(1,442	)			—
Payment of finance lease liability			(5	)			(2	)
Net cash used in financing activities			(5,365	)			(4,069	)
Net increase (decrease) in cash, cash equivalents and restricted cash			1,575				(2,683	)
Cash, cash equivalents and restricted cash at beginning of period			4,640				6,355
Cash, cash equivalents and restricted cash at end of period (1)		$	6,215			$	3,672

(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)

		Three Months Ended March 31,
		2024				2023
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized		$	8,160			$	7,610
Non cash investing and financing activities:
Disposal of fully depreciated real estate		$	29			$	864
Financed insurance premiums		$	2,638			$	3,002
Value of shares issued under dividend reinvestment plan		$	23			$	17
Value of common shares exchanged for OP units		$	354			$	—
Change in fair value of cash flow hedge		$	5,007			$	(4,587	)
Accrued capital expenditures		$	1,962			$	—
Receivable from partnership redemption		$	31,643			$	—

		March 31,
		2024				2023
Cash, cash equivalents and restricted cash
Cash and cash equivalents		$	6,215			$	3,479
Restricted cash			—				193
Total cash, cash equivalents and restricted cash		$	6,215			$	3,672

Whitestone REIT and Subsidiaries

RECONCILIATION OF NON-GAAP MEASURES

(in thousands, except per share and per unit data)

		Three Months Ended March 31,
		2024				2023
FFO AND CORE FFO
Net income attributable to Whitestone REIT		$	9,340			$	3,847
Adjustments to reconcile to FFO:(1)
Depreciation and amortization of real estate assets			8,768				7,805
Depreciation and amortization of real estate assets of real estate partnership (pro rata) (2)			111				403
Loss on disposal of assets			—				6
Gain on sale of properties			(6,525	)			—
Net income attributable to noncontrolling interests			124				54
FFO		$	11,818			$	12,115
Adjustments to reconcile to Core FFO:
Proxy contest costs			438				—
Core FFO		$	12,256			$	12,115
FFO PER SHARE AND OP UNIT CALCULATION
Numerator:
FFO		$	11,818			$	12,115
Core FFO		$	12,256			$	12,115
Denominator:
Weighted average number of total common shares - basic			49,940				49,424
Weighted average number of total noncontrolling OP units - basic			664				694
Weighted average number of total common shares and noncontrolling OP units - basic			50,604				50,118
Effect of dilutive securities:
Unvested restricted shares			1,172				736
Weighted average number of total common shares and noncontrolling OP units - diluted			51,776				50,854
FFO per common share and OP unit - basic		$	0.23			$	0.24
FFO per common share and OP unit - diluted		$	0.23			$	0.24
Core FFO per common share and OP unit - basic		$	0.24			$	0.24
Core FFO per common share and OP unit - diluted		$	0.24			$	0.24

(1)	Includes pro-rata share attributable to real estate partnership for the three months ended March 31, 2023 and through January 25, 2024, the redemption date.
(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 March 31, 2024 and 2023 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 March 31,
		2024				2023
PROPERTY NET OPERATING INCOME
Net income attributable to Whitestone REIT		$	9,340			$	3,847
General and administrative expenses			6,180				5,084
Depreciation and amortization			8,800				7,846
Deficit in earnings of real estate partnership (1)			28				218
Interest expense			8,519				7,903
Interest, dividend and other investment income			(8	)			(20	)
Provision for income taxes			119				119
Gain on sale of properties			(6,525	)			—
Loss on disposal of assets			—				6
NOI of real estate partnership (pro rata)(1)			183				548
Net income attributable to noncontrolling interests			124				54
NOI		$	26,760			$	25,605
Non-Same Store NOI (2)			(1,162	)			(974	)
NOI of real estate partnership (pro rata) (1)			(183	)			(548	)
NOI less Non-Same Store NOI and NOI of real estate partnership (pro rata)			25,415				24,083
Same Store straight-line rent adjustments			(1,083	)			(519	)
Same Store amortization of above/below market rents			(209	)			(210	)
Same Store lease termination fees			(268	)			(214	)
Same Store NOI (3)		$	23,855			$	23,140

(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 March 31, 2024 and 2023 have not been made available to us, we have estimated 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 March 31, 2024 to the three months ended March 31, 2023, Non-Same Store includes properties acquired between January 1, 2023 and March 31, 2024 and properties sold between January 1, 2023 and March 31, 2024, 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 March 31, 2024 to the three months ended March 31, 2023, Same Store includes properties owned before January 1, 2023 and not sold before March 31, 2024. 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 March 31,
		2024				2023
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre)
Net income attributable to Whitestone REIT		$	9,340			$	3,847
Depreciation and amortization			8,800				7,846
Interest expense			8,519				7,903
Provision for income taxes			119				119
Net income attributable to noncontrolling interests			124				54
Deficit in earnings of real estate partnership (1)			28				218
EBITDAre adjustments for real estate partnership (1)			136				381
Gain on sale of properties			(6,525	)			—
Loss on disposal of assets			—				6
EBITDAre		$	20,541			$	20,374

(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 March 31, 2024 and 2023 have not been made available to us, we have estimated 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 & Revised Full Year Guidance for 2024

(in thousands, except per share and per unit data)

		Revised Range Full Year 2024 (1)								Projected Range Full Year 2024
		Low				High				Low			High
FFO and Core FFO per diluted share and OP unit
Net income attributable to Whitestone REIT		$	21,560			$	24,560			$	16,600		$	19,600
Adjustments to reconcile to FFO
Depreciation and amortization of real estate assets			34,252				34,252				34,252			34,252
Depreciation and amortization of real estate assets of real estate partnership (pro rata)			133				133				133			133
Gain on sale of properties			(6,525	)			(6,525	)			—			—
FFO		$	49,420			$	52,420			$	50,985		$	53,985
Adjustments to reconcile to Core FFO
Proxy contest costs			1,565				1,565				—			—
Core FFO		$	50,985			$	53,985			$	50,985		$	53,985
Denominator:
Diluted shares			51,262				51,262				51,262			51,262
OP Units			695				695				695			695
Diluted share and OP Units			51,957				51,957				51,957			51,957
Net income attributable to Whitestone REIT per diluted share		$	0.42			$	0.48			$	0.32		$	0.38
FFO per diluted share and OP Unit		$	0.95			$	1.01			$	0.98		$	1.04
Core FFO per diluted share and OP Unit		$	0.98			$	1.04			$	0.98		$	1.04

(1)	Includes a $6,525 gain on the sale of property in the first quarter of 2024 and $1,565 in proxy contest costs expected to be incurred in the first and second quarters of 2024 for both the low and high end of the range.

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