Whitestone REIT Reports Fourth Quarter and Full Year 2022 Results

Whitestone REIT

HOUSTON, Feb. 28, 2023 (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 2022. Whitestone creates neighborhood center communities in its high-quality open-air shopping centers that it acquires, owns, manages, develops, and redevelops primarily in the largest, fastest-growing, high-household-income markets in the Sunbelt.

“2022 was an outstanding year of achievement for Whitestone.  We grew occupancy by 240 basis points to a record 93.7%.  Same store NOI was up 7.9%.  We grew FFO/share by nearly 20% and reduced our debt/EBITDAre by 1.3x, down to 7.8x. We amended and extended our credit facility and subsequently received an investment grade credit rating.  Our tenants and our centers continue to thrive, and we are eager to build on this momentum in 2023. We remain focused on maximizing shareholder value through disciplined organic growth, prudent capital allocation, balance sheet strengthening and judicious expense management.”

–    Dave Holeman, Chief Executive Officer

Fourth Quarter 2022 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, NOI and EBITDAre are included herein.

• Revenues of $34.9 million versus $33.3 million for the fourth quarter of 2021.

• Net Income attributable to common shareholders of $19.9 million, or $0.40 per diluted share, versus $2.6 million, or $0.05 per diluted share for the fourth quarter of 2021.

• Funds from Operations (“FFO”) per diluted share of $0.23 versus $0.21 for the fourth quarter of 2021.

• EBITDAre of $20.3 million versus $17.0 million for the fourth quarter of 2021.

• Same-Store Net Operating Income (“NOI”) grew 7.1% to $23.4 million versus $21.8 million for the fourth quarter of 2021.

• Net Effective Annual Base Rental Revenue per leased square foot was up 4.3% to $21.99, compared to the prior year quarter.
  

Full Year 2022 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 $139.4 million versus $125.4 million for 2021.

• Net income attributable to common shareholders of $35.3 million, or $0.71 per diluted share, versus $12.0 million, or $0.26 per diluted share for 2021.
  

• Funds from Operations (“FFO”) per diluted share of $1.03 versus $0.86 for 2021.

• EBITDAre of $80.8 million versus $66.6 million for 2021.

• Same-Store Net Operating Income (“NOI”) grew 7.9% to $86.7 million versus $80.4 million for 2021.

Operating Results
For the three-month periods ending December 31, 2022 and 2021 the Company’s operating highlights were as follows:

		Fourth Quarter 2022	Fourth Quarter 2021
Occupancy:
Wholly Owned Properties – All		93.7%	91.3%
>10,000 Sq Ft Occupancy		98.0%	95.5%
≤ 10,000 Sq Ft Occupancy		91.2%	88.9%
Same Store Property Net Operating Income Change (1)		7.1%	12.8%
Rental Rate Growth - Total (GAAP Basis):		23.5%	14.9%
New Leases		24.3%	11.2%
Renewal Leases		23.2%	15.7%
Leasing Transactions:
Number of New Leases		22	46
New Leases - Lease Term Revenue (millions)		$27.5	$17.5
Number of Renewal Leases		38	65
Renewal Leases - Lease Term Revenue (millions)		$9.7	$20.7

Balance Sheet and Debt Metrics

• As of December 31, 2022, Whitestone had total debt of $626.0 million, along with capacity and availability of $146.4 million each under its $250 million revolving credit facility.

• As of December 31, 2022, the Company has undepreciated real estate assets of $1.2 billion.

Dividend

On December 15, 2022, the Company declared a quarterly cash distribution of $0.12 per common share and OP unit for the first quarter of 2023, to be paid in three equal installments of $0.04 in January, February and March of 2023. The fourth quarter dividend represents an 11.6% increase from the fourth quarter of 2021.

2023 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 $0.29 to $0.33 per diluted share, and FFO will be within the range of $0.95 to $0.99 per diluted share and OP Unit.

		Initial 2023 Guidance	2022 Actual
		(unaudited, amounts in thousands except per share and percentages)
Net income attributable to Whitestone REIT		$14,400 - $16,500		$35,270
FFO (1)		$48,300 - $50,400		$52,193
Net income attributable to Whitestone REIT per share		$0.29 - $0.33		$0.71
FFO per diluted share and OP Unit (1)		$0.95 - $0.99		$1.03
Key Drivers:
Same store net operating income growth (2)		2.5% – 4.5%		7.9%
Bad debt as a percentage of revenue		0.75% – 1.50%		0.83%
General and administrative expense		$19,200 - $19,700		$18,066(4)
Interest expense		$31,700 - $33,200		$27,193
Ending occupancy		93.5% - 94.5%		93.7%
Net Debt to EBITDAre Ratio (3)		7.3X - 6.9X		7.7X

(1) For the reconciliation of forward-looking non-GAAP financial measure to the comparable GAAP financial measure, see the “FFO per diluted share and OP unit” reconciliation table.

(2) Excludes straight-line rent, amortization of above/below market rates and lease termination fees for both periods.

(3) Fourth quarter annualized EBITDAre. 

(4) Includes $2.2 million of reduced expenses from stock forfeitures related to the termination of former executives.

Portfolio Statistics

As of December 31, 2022, Whitestone wholly owned 57 Community-Centered Properties™ with 5.1 million square feet of gross leasable area (“GLA“). Five of the 57 Community-Centered Properties™ are land parcels held for future development. The portfolio is comprised of 31 properties in Texas, 25 in Arizona and 1 in Illinois. Whitestone’s Community-Centered Properties™ are located in the MSA's of Austin (5), Chicago (1), Dallas-Fort Worth (9), Houston (14), 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 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 1,477 tenants, with the largest tenant accounting for only 2.2% of annualized base rental revenues. No single tenant exceeded 2.2% 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 Wednesday, March 1, 2023, at 8:00 A.M Eastern Time / 7:00 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 Wednesday, March 15, 2023. 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):		13734723

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, pending acquisitions and the impact of such acquisitions on our financial condition and results of operations, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our shareholders in the future 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 COVID-19 on our tenants’ ability to pay their rent, which could result in bad debt allowances or straight-line rent reserve adjustments; inflation and increases in interest rates, operating costs or general and administrative expenses; 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; 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; 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.

Normalized Funds from Operations (“Normalized FFO”) is a non-GAAP measure. We define Normalized FFO as FFO excluding extinguishment of debt costs.

Management uses FFO and Normalized 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 Normalized FFO as the primary metric for comparing the relative performance of equity REITs. FFO and Normalized 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 Normalized FFO does 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 Normalized 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 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)

		December 31, 2022				December 31, 2021
ASSETS
Real estate assets, at cost
Property		$	1,199,041			$	1,196,919
Accumulated depreciation			(208,286	)			(190,333	)
Total real estate assets			990,755				1,006,586
Investment in real estate partnership			34,826				34,588
Cash and cash equivalents			6,166				15,721
Restricted cash			189				193
Escrows and acquisition deposits			12,827				11,323
Accrued rents and accounts receivable, net of allowance for doubtful accounts (1)			25,570				22,395
Receivable due from related party			1,377				847
Unamortized lease commissions, legal fees and loan costs			12,697				8,442
Prepaid expenses and other assets(2)			7,838				1,995
Finance lease right-of-use assets			10,522				—
Total assets		$	1,102,767			$	1,102,090
LIABILITIES AND EQUITY
Liabilities:
Notes payable		$	625,427			$	642,842
Accounts payable and accrued expenses(3)			36,154				45,777
Payable due to related party			1,561				997
Tenants' security deposits			8,428				8,070
Dividends and distributions payable			6,008				5,366
Finance lease liabilities			735				—
Total liabilities			678,313				703,052
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, 2022 and December 31, 2021			—				—
Common shares, $0.001 par value per share; 400,000,000 shares authorized; 49,422,716 and 49,144,153 issued and outstanding as of December 31, 2022 and December 31, 2021, respectively			49				48
Additional paid-in capital			624,785				623,462
Accumulated deficit			(212,366	)			(223,973	)
Accumulated other comprehensive income (loss)			5,980				(6,754	)
Total Whitestone REIT shareholders' equity			418,448				392,783
Noncontrolling interest in subsidiary			6,006				6,255
Total equity			424,454				399,038
Total liabilities and equity		$	1,102,767			$	1,102,090

Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)

		December 31, 2022				December 31, 2021
(1) Accrued rents and accounts receivable, net of allowance for doubtful accounts
Tenant receivables		$	19,236			$	18,410
Accrued rents and other recoveries			22,103				18,681
Allowance for doubtful accounts			(16,230	)			(14,896	)
Other receivables			461				200
Total accrued rents and accounts receivable, net of allowance for doubtful accounts		$	25,570			$	22,395
(2) Operating lease right of use assets (net)		$	124			$	222
(3) Operating lease liabilities		$	129			$	231

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

		Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Revenues
Rental(1)		$	34,700			$	32,961			$	138,200			$	123,877
Management, transaction, and other fees			218				297				1,221				1,488
Total revenues			34,918				33,258				139,421				125,365
Operating expenses
Depreciation and amortization			8,046				7,492				31,707				28,950
Operating and maintenance			6,435				6,488				25,688				22,560
Real estate taxes			3,740				3,975				17,607				16,762
General and administrative			5,003				6,589				18,066				22,625
Total operating expenses			23,224				24,544				93,068				90,897
Other expenses (income)
Interest expense			8,082				6,147				27,193				24,564
Gain on sale of properties, net			(16,950	)			—				(16,950	)			(266	)
Loss on disposal of assets, net			180				1				192				90
Interest, dividend and other investment income			(22	)			(13	)			(65	)			(116	)
Total other expenses (income)			(8,710	)			6,135				10,370				24,272
Income before equity investment in real estate partnership and income tax			20,404				2,579				35,983				10,196
Equity in earnings of real estate partnership			(65	)			180				239				609
Provision for income tax			(109	)			(111	)			(422	)			(385	)
Income from continuing operations			20,230				2,648				35,800				10,420
Gain on sale of property from discontinued operations			—				—				—				1,833
Income from discontinued operations			—				—				—				1,833
Net Income			20,230				2,648				35,800				12,253
Less: Net income attributable to noncontrolling interests			291				40				530				205
Net income attributable to Whitestone REIT		$	19,939			$	2,608			$	35,270			$	12,048

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

		Three Months Ended December 31,						Year Ended December 31,
		2022			2021			2022			2021
Basic Earnings Per Share:
Income from continuing operations attributable to Whitestone REIT, excluding amounts attributable to unvested restricted shares		$	0.40		$	0.05		$	0.72		$	0.23
Income from discontinued operations attributable to Whitestone REIT			—			—			—			0.03
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares		$	0.40		$	0.05		$	0.72		$	0.26
Diluted Earnings Per Share:
Income from continuing operations attributable to Whitestone REIT, excluding amounts attributable to unvested restricted shares		$	0.40		$	0.05		$	0.71		$	0.22
Income from discontinued operations attributable to Whitestone REIT			—			—			—			0.04
Net income attributable to common shareholders, excluding amounts attributable to unvested restricted shares		$	0.40		$	0.05		$	0.71		$	0.26
Weighted average number of common shares outstanding:
Basic			49,384			49,102			49,256			45,486
Diluted			50,126			49,981			49,950			46,336
Consolidated Statements of Comprehensive Income
Net income		$	20,230		$	2,648		$	35,800		$	12,253
Other comprehensive income
Unrealized gain on cash flow hedging activities			(1,698	)		3,020			12,925			7,803
Comprehensive income			18,532			5,668			48,725			20,056
Less: Net income attributable to noncontrolling interests			291			40			530			205
Less: Comprehensive income attributable to noncontrolling interests			(24	)		48			191			130
Comprehensive income attributable to Whitestone REIT		$	18,265		$	5,580		$	48,004		$	19,721

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

		Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
(1) Rental
Rental revenues		$	26,090			$	23,818			$	101,113			$	90,859
Recoveries			9,151				8,553				38,243				32,928
Bad debt			(541	)			590				(1,156	)			90
Total rental		$	34,700			$	32,961			$	138,200			$	123,877

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

		Year Ended December 31,
		2022				2021
Cash flows from operating activities:
Net income from continuing operations		$	35,800			$	10,420
Net income from discontinued operations			—				1,833
Net income			35,800				12,253
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			31,707				28,950
Amortization of deferred loan costs			1,100				1,096
Gain on sale of properties, net			(16,950	)			(266	)
Loss on disposal of assets, net			192				90
Bad debt			1,156				(90	)
Share-based compensation			1,511				5,913
Equity in earnings of real estate partnership			(239	)			(609	)
Changes in operating assets and liabilities:
Escrows and acquisition deposits			(1,504	)			(2,049	)
Accrued rents and accounts receivable			(4,331	)			704
Receivable due from related party			(530	)			(512	)
Unamortized lease commissions, legal fees and loan costs			(3,386	)			(3,259	)
Prepaid expenses and other assets			1,749				1,963
Accounts payable and accrued expenses			(2,766	)			2,663
Payable due to related party			564				872
Tenants' security deposits			358				1,154
Net cash provided by operating activities			44,431				47,040
Cash flows from investing activities:
Acquisitions of real estate			(16,992	)			(81,588	)
Acquisition of ground lease			(9,786	)			—
Additions to real estate			(13,659	)			(9,642	)
Proceeds from sales of properties			33,723				—
Net cash used in investing activities			(6,714	)			(91,230	)
Net cash provided by investing activities of discontinued operations			—				1,833
Cash flows from financing activities:
Distributions paid to common shareholders			(22,958	)			(19,320	)
Distributions paid to OP unit holders			(346	)			(331	)
Proceeds from issuance of common shares, net of offering costs			—				55,981
Payments of exchange offer costs			(335	)			(63	)
Net payments of credit facility			(16,000	)			—
Repayments of notes payable			(3,468	)			(3,261	)
Payment of loan origination costs			(3,632	)			—
Repurchase of common shares			(537	)			(691	)
Net cash provided by (used in) financing activities			(47,276	)			32,315
Net decrease in cash, cash equivalents and restricted cash			(9,559	)			(10,042	)
Cash, cash equivalents and restricted cash at beginning of period			15,914				25,956
Cash, cash equivalents and restricted cash at end of period (1)		$	6,355			$	15,914

(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,
		2022				2021
Supplemental disclosure of cash flow information:
Cash paid for interest		$	26,493			$	23,685
Cash paid for taxes		$	366			$	364
Non cash investing and financing activities:
Disposal of fully depreciated real estate		$	454			$	297
Financed insurance premiums		$	1,846			$	1,712
Value of shares issued under dividend reinvestment plan		$	67			$	60
Value of common shares exchanged for OP units		$	618			$	18
Change in fair value of cash flow hedge		$	12,925			$	7,803
Reallocation of ownership percentage between parent and subsidiary		$	—			$	(27	)
Recognition of finance lease liabilities		$	735			$	—

		December 31, 2022
		2022				2021
Cash, cash equivalents and restricted cash
Cash and cash equivalents		$	6,166			$	15,721
Restricted cash			189				193
Total cash, cash equivalents and restricted cash		$	6,355			$	15,914

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,
		2022				2021				2022				2021
FFO (NAREIT) AND NORMALIZED FFO
Net income attributable to Whitestone REIT		$	19,939			$	2,608			$	35,270			$	12,048
Adjustments to reconcile to FFO:(1)
Depreciation and amortization of real estate assets			8,004				7,453				31,538				28,806
Depreciation and amortization of real estate assets of real estate partnership (pro rata)(2)			404				420				1,613				1,674
Loss on disposal of assets, net			180				1				192				90
Gain on sale of properties from continuing operations, net			(16,950	)			—				(16,950	)			(266	)
Gain on sale of property from discontinued operations			—				—				—				(1,833	)
Gain on sale or disposal of properties or assets of real estate partnership (pro rata)			—				—				—				(19	)
Net income attributable to noncontrolling interests			291				40				530				205
FFO (NAREIT)			11,868				10,522				52,193				40,705
Adjustments to reconcile to Normalized FFO:
Early debt extinguishment costs			—				—				147				—
Normalized FFO		$	11,868			$	10,522			$	52,340			$	40,705
FFO PER SHARE AND OP UNIT CALCULATION
Numerator:
FFO		$	11,868			$	10,522			$	52,193			$	40,705
Normalized FFO		$	11,868			$	10,522			$	52,340			$	40,705
Denominator:
Weighted average number of total common shares - basic			49,384				49,102				49,256				45,486
Weighted average number of total noncontrolling OP units - basic			695				771				738				772
Weighted average number of total common shares and noncontrolling OP units - basic			50,079				49,873				49,994				46,258
Effect of dilutive securities:
Unvested restricted shares			742				879				694				850
Weighted average number of total common shares and noncontrolling OP units - diluted			50,821				50,752				50,688				47,108
FFO per common share and OP unit - basic		$	0.24			$	0.21			$	1.04			$	0.88
FFO per common share and OP unit - diluted		$	0.23			$	0.21			$	1.03			$	0.86
Normalized FFO per common share and OP unit - basic		$	0.24			$	0.21			$	1.05			$	0.88
Normalized FFO per common share and OP unit - diluted		$	0.23			$	0.21			$	1.03			$	0.86

(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, 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,
		2022				2021				2022				2021
PROPERTY NET OPERATING INCOME
Net income attributable to Whitestone REIT		$	19,939			$	2,608			$	35,270			$	12,048
General and administrative expenses			5,003				6,589				18,066				22,625
Depreciation and amortization			8,046				7,492				31,707				28,950
Equity in earnings of real estate partnership(1)			65				(180	)			(239	)			(609	)
Interest expense			8,082				6,147				27,193				24,564
Interest, dividend and other investment income			(22	)			(13	)			(65	)			(116	)
Provision for income taxes			109				111				422				385
Gain on sale of properties from continuing operations, net			(16,950	)			—				(16,950	)			(266	)
Gain on sale of property from discontinued operations			—				—				—				(1,833	)
Management fee, net of related expenses			—				85				112				331
Loss on disposal of assets, net			180				1				192				90
NOI of real estate partnership (pro rata)			594				987				3,023				3,833
Net income attributable to noncontrolling interests			291				40				530				205
NOI		$	25,337			$	23,867			$	99,261			$	90,207
Non-Same Store NOI (2)			(727	)			(623	)			(7,244	)			(3,513	)
NOI of real estate partnership (pro rata)(1)			(594	)			(987	)			(3,023	)			(3,833	)
NOI less Non-Same Store NOI and NOI of real estate partnership (pro rata)			24,016				22,257				88,994				82,861
Same Store straight-line rent adjustments			(378	)			(238	)			(1,181	)			(1,371	)
Same Store amortization of above/below market rents			(264	)			(198	)			(949	)			(832	)
Same Store lease termination fees			(21	)			(14	)			(135	)			(280	)
Same Store NOI (3)		$	23,353			$	21,807			$	86,729			$	80,378

(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, 2022 have not been made available to us, we have estimated equity 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, 2022 to the three months ended December 31, 2021, Non-Same Store includes properties acquired between October 1, 2021 and December 31, 2022 and properties sold between October 1, 2021 and December 31, 2022, but not included in discontinued operations. For purposes of comparing the twelve months ended December 31, 2022 to the twelve months ended December 31, 2021, Non-Same Store includes properties acquired between January 1, 2021 and December 31, 2022 and properties sold between January 1, 2021 and December 31, 2022, 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, 2022 to the three months ended December 31, 2021, Same Store includes properties owned before October 1, 2021 and not sold before December 31, 2022.  For purposes of comparing the twelve months ended December 31, 2022 to the twelve months ended December 31, 2021, Same Store includes properties owned before January 1, 2021 and not sold before December 31, 2022.

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

		Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre)
Net income attributable to Whitestone REIT		$	19,939			$	2,608			$	35,270			$	12,048
Depreciation and amortization			8,046				7,492				31,707				28,950
Interest expense			8,082				6,147				27,193				24,564
Provision for income taxes			109				111				422				385
Net income attributable to noncontrolling interests			291				40				530				205
Equity in earnings of real estate partnership(1)			65				(180	)			(239	)			(609	)
EBITDAre adjustments for real estate partnership(1)			533				813				2,626				3,071
Gain on sale of properties from continuing operations, net			(16,950	)			—				(16,950	)			(266	)
Gain on sale of property from discontinued operations			—				—				—				(1,833	)
Loss on disposal of assets, net			180				1				192				90
EBITDAre		$	20,295			$	17,032			$	80,751			$	66,605

(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, 2022 have not been made available to us, we have estimated equity 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 2023
(in thousands, except per share and per unit data)

		Projected Range Full Year 2023
		Low				High
FFO per diluted share and OP unit
Net income attributable to Whitestone REIT		$	14,400			$	16,500
Depreciation and amortization of real estate assets			32,228				32,228
Depreciation and amortization of real estate assets of real estate partnership (pro rata)			1,672				1,672
FFO		$	48,300			$	50,400
Dilutive shares			50,327				50,327
OP Units			738				738
Dilutive share and OP Units			51,065				51,065
Net income attributable to Whitestone REIT per diluted share		$	0.29			$	0.33
FFO per diluted share and OP Unit		$	0.95			$	0.99