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What changed in Whitestone REIT's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Whitestone REIT's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+239 added−240 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in Whitestone REIT's 2023 10-K

239 paragraphs added · 240 removed · 193 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

19 edited+4 added−1 removed43 unchanged
Biggest changeThe SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC as we do. The website address is http://www.sec.gov. Materials on our website are not part of our Annual Report on Form 10-K.
Biggest changeWe also use our website as a means of disclosing additional information, including for complying with our disclosure obligations under the SEC's Regulation FD (Fair Disclosure). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC as we do. The website address is http://www.sec.gov.
Generally, there are other neighborhood and community retail centers within relatively close proximity to each of our properties. There is, however, no dominant competitor in the Austin, Chicago, Dallas-Fort Worth, Houston, Phoenix and San Antonio metropolitan areas. Our retail tenants also face increasing competition from outlet malls, internet retailers, catalog companies, direct mail and telemarketing.
Generally, there are other neighborhood and community retail centers within relatively close proximity to each of our properties. There is, however, no dominant competitor in the Austin, Dallas-Fort Worth, Houston, Phoenix and San Antonio metropolitan areas. Our retail tenants also face increasing competition from outlet malls, internet retailers, catalog companies, direct mail and telemarketing.
We seek to strategically acquire commercial properties in high-growth markets. Our acquisition targets are located in densely populated, culturally diverse neighborhoods, primarily in and around Austin, Chicago, Dallas-Fort Worth, Houston, Phoenix and San Antonio. ◦ Diversifying Geographically. Our current portfolio is concentrated in Houston and Phoenix.
We seek to strategically acquire commercial properties in high-growth markets. Our acquisition targets are located in densely populated, culturally diverse neighborhoods, primarily in and around Austin, Dallas-Fort Worth, Houston, Phoenix and San Antonio. ◦ Diversifying Geographically. Our current portfolio is concentrated in Houston and Phoenix.
Further, as of December 31, 2022, we, through our equity-method investment in Pillarstone Capital REIT Operating Partnership LP (“Pillarstone” or “Pillarstone OP”), owned a majority interest in eight properties that do not meet our Community Centered Property® strategy containing approximately 0.9 million square feet of GLA (the “Pillarstone Properties”).
Further, as of December 31, 2023, we, through our equity-method investment in Pillarstone Capital REIT Operating Partnership LP (“Pillarstone” or “Pillarstone OP”), owned a majority interest in eight properties that do not meet our Community Centered Property® strategy containing approximately 0.9 million square feet of GLA (the “Pillarstone Properties”).
Some of our properties that we own (the “non-core properties”) may not fit our Community Centered Property® strategy, and we may look for opportunities to dispose of these properties as we continue to execute our strategy. • Prudent Management of Capital Structure. Of our 57 properties, we currently have 50 properties that are unencumbered.
Some of our properties that we own (the “non-core properties”) may not fit our Community Centered Property® strategy, and we may look for opportunities to dispose of these properties as we continue to execute our strategy. • Prudent Management of Capital Structure. Of our 55 properties, we currently have 50 properties that are unencumbered.
Our Structure Substantially all of our business is conducted through Whitestone REIT Operating Partnership, L.P., a Delaware limited partnership organized in 1998 (the “Operating Partnership”). We are the sole general partner of the Operating Partnership. As of December 31, 2022, we owned a 98.6% interest in the Operating Partnership.
Our Structure Substantially all of our business is conducted through Whitestone REIT Operating Partnership, L.P., a Delaware limited partnership organized in 1998 (the “Operating Partnership”). We are the sole general partner of the Operating Partnership. As of December 31, 2023, we owned a 98.6% interest in the Operating Partnership.
As of December 31, 2022, our ratio of debt, net of cash, to undepreciated book value of real estate assets was 50%. • Investing in People. We believe that our people are the heart of our culture, philosophy and strategy.
As of December 31, 2023, our ratio of debt, net of cash, to undepreciated book value of real estate assets was 50%. • Investing in People. We believe that our people are the heart of our culture, philosophy and strategy.
Substantially all of our revenues consist of base rents received under varying term leases. For the year ended December 31, 2022, our total revenues were approximately $139.4 million. Additionally, we, through our equity-method investment in Pillarstone, owned a majority interest in eight properties located in Dallas and Houston, Texas.
Substantially all of our revenues consist of base rents received under varying term leases. For the year ended December 31, 2023, our total revenues were approximately $147 million. Additionally, we, through our equity-method investment in Pillarstone, owned a majority interest in eight properties located in Dallas and Houston, Texas.
As of December 31, 2022, we wholly-owned a real estate portfolio consisting of 57 properties located in three states. The aggregate occupancy rate of our portfolio was 94% based on GLA as of December 31, 2022. We are hands-on owners who directly manage the operations and leasing of our properties.
As of December 31, 2023, we wholly-owned a real estate portfolio consisting of 55 properties located in two states. The aggregate occupancy rate of our portfolio was 94% based on GLA as of December 31, 2023. We are hands-on owners who directly manage the operations and leasing of our properties.
Our consolidated property portfolio has a gross book value of approximately $1.2 billion and book equity, including noncontrolling interests, of approximately $424 million as of December 31, 2022.
Our consolidated property portfolio has a gross book value of approximately $1.2 billion and book equity, including noncontrolling interests, of approximately $420 million as of December 31, 2023.
BLVD also accounted for 16.0% of our consolidated real estate assets, net of accumulated depreciation, as of the year ended December 31, 2022. 2 Table of Contents Competition All of our properties are located in areas that include competing properties.
BLVD also accounted for 15.9% of our consolidated real estate assets, net of accumulated depreciation, as of the year ended December 31, 2023. 2 Table of Contents Competition All of our properties are located in areas that include competing properties.
We are internally managed and, as of December 31, 2022, we wholly-owned a real estate portfolio of 57 properties that meet our Community Centered Property® strategy containing approximately 5.1 million square feet of gross leasable area (“GLA”), located in Texas, Arizona and Illinois.
We are internally managed and, as of December 31, 2023, we wholly-owned a real estate portfolio of 55 properties that meet our Community Centered Property® strategy containing approximately 5.0 million square feet of gross leasable area (“GLA”), located in Texas and Arizona.
We believe that continued geographic diversification in markets where we have substantial knowledge and experience will help offset the economic risk from a single market concentration. We intend to continue to focus our expansion efforts on the Austin, Chicago, Dallas-Fort Worth, Houston, Phoenix and San Antonio markets.
We believe that continued geographic diversification in markets where we have substantial knowledge and experience will help offset the economic risk from a single market concentration. We intend to continue to focus our expansion efforts on the Austin, Dallas-Fort Worth, Houston, Phoenix and San Antonio markets. We believe our management infrastructure and capacity can accommodate substantial growth in those markets.
The aggregate occupancy rate of the Pillarstone properties was approximately 56% based on GLA as of December 31, 2022. Our largest property, BLVD Place (“BLVD”), a retail community purchased on May 26, 2017 and located in Houston, Texas, accounted for 11.0% of our total revenues for the year ended December 31, 2022.
The aggregate occupancy rate of the Pillarstone properties was approximately 54% based on GLA as of December 31, 2023. Our largest property, BLVD Place (“BLVD”), a retail community purchased on May 26, 2017 and located in Houston, Texas, accounted for 10.5% of our total revenues for the year ended December 31, 2023.
Employee engagement is critical to our long term success, so employees’ performance are reviewed annually. Key employees are provided with equity incentives to align their interests with those of our shareholders. Every Whitestone associate is encouraged to be an owner. As of December 31, 2022, we had 75 full-time employees.
Employee engagement is critical to our long term success, so employees’ performances are reviewed annually. Key employees are provided with equity incentives to align their interests with those of our shareholders. Every Whitestone associate is encouraged to be an owner. As of December 31, 2023, we had 79 employees, including 2 on leave.
The contents of these websites are not incorporated into this filing. 4 Table of Contents Financial Information Additional financial information related to the Company is included in Item 8 “Financial Statements and Supplementary Data.” 5 Table of Contents
Materials on our website are not part of our Annual Report on Form 10-K. The contents of these websites are not incorporated into this filing. 4 Table of Contents Financial Information Additional financial information related to the Company is included in Item 8 “Financial Statements and Supplementary Data.” 5 Table of Contents
We have also made available on our website copies of our Environmental, Social, and Governance ("ESG") Report, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter, Corporate Governance Guidelines, Insider Trading Compliance Policy, and Code of Business Conduct and Ethics Policy.
We have also made available on our website copies of our ESG Report, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter, Corporate Governance Guidelines, Insider Trading Compliance Policy, and Code of Business Conduct and Ethics Policy. In the event of any changes to these documents, revised copies will also be made available on our website.
As of December 31, 2022, we wholly-owned 14 properties in Houston, nine properties in Dallas-Fort Worth, three properties in San Antonio, five properties in Austin, 25 properties in the Scottsdale and Phoenix, Arizona metropolitan areas, and one property in Buffalo Grove, Illinois, a suburb of Chicago.
As of December 31, 2023, we wholly-owned 12 properties in Houston, nine properties in Dallas-Fort Worth, three properties in San Antonio, five properties in Austin and 26 properties in the Scottsdale and Phoenix, Arizona metropolitan areas.
We believe our management infrastructure and capacity can accommodate substantial growth in those markets. We may also pursue opportunities in other regions that are consistent with our Community Centered Property® strategy.
We may also pursue opportunities in other regions that are consistent with our Community Centered Property® strategy.
Removed
In the event of any changes to these documents, revised copies will also be made available on our website. We also use our website as a means of disclosing additional information, including for complying with our disclosure obligations under the SEC's Regulation FD (Fair Disclosure).
Added
Environmental, Sustainability and Governance We believe that managing our environmental, sustainability and governance (“ESG”) responsibilities is critical to creating and sustaining long-term value for our stakeholders. As part of our ESG initiatives, we have established an ESG Steering Committee, adopted a Sustainability Statement along with certain Environmental Policies, and prepared our 2023 ESG report.
Added
Our ESG efforts are supported by our ESG Steering Committee which helps us by setting our general ESG strategies, developing and implementing initiatives and policies, and monitoring and assessing developments related to improving our understanding of ESG matters.
Added
We seek to provide sustainable, high quality rental spaces with credit-worthy tenants, invest in our people to ensure we can attract and retain the talent we need to remain successful, and operate to the highest possible standards of ethics and transparency.
Added
Certain initiatives we have taken include installing electric vehicle charging stations at select centers, implementing green leases with our tenants, and onboarding software that allows us to track resource consumption and greenhouse gas emissions.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+17 added−17 removed189 unchanged
Biggest changeBecause Pillarstone REIT seeks to use the Pillarstone Rights Agreement to prevent Whitestone OP from exercising its contractual Redemption Right, on July 12, 2022, Whitestone OP filed suit against Pillarstone REIT in the Court of Chancery of the State of Delaware challenging the Pillarstone Rights Agreement due to Pillarstone REIT’s alleged (i) breach of the Pillarstone Partnership Agreement, (ii) breach of its fiduciary duty as general partner of Pillarstone OP to Whitestone OP, and (iii) breach of the implied covenant of good faith and fair dealing under the Pillarstone Partnership Agreement.
Biggest changeBecause Pillarstone REIT sought to use the Pillarstone Rights Agreement to prevent Whitestone OP from exercising its contractual Redemption Right, on July 12, 2022, Whitestone OP filed suit against Pillarstone REIT in the Court of Chancery of the State of Delaware challenging the Pillarstone Rights Agreement.
Finally, our declaration of trust authorizes our Company to obligate itself, and our bylaws obligate us, to indemnify and advance expenses to our trustees and officers to the maximum extent permitted by Maryland law. 17 Table of Contents The terms of our employment agreements with our executive officers and severance arrangements with other employees and the terms of certain equity awards granted to our employees may deter others from seeking to acquire us or reduce the price of any such acquisition.
Finally, our declaration of trust authorizes our Company to obligate itself, and our bylaws obligate us, to indemnify and advance expenses to our trustees and officers to the maximum extent permitted by Maryland law. 16 Table of Contents The terms of our employment agreements with our executive officers and severance arrangements with other employees and the terms of certain equity awards granted to our employees may deter others from seeking to acquire us or reduce the price of any such acquisition.
If we were to fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to shareholders when computing our taxable income; • we would be subject to federal income tax on our taxable income at regular corporate rates; 14 Table of Contents • we would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • our cash available for distributions to shareholders would be reduced; and • we may be required to borrow additional funds or sell some of our assets in order to pay corporate tax obligations that we may incur as a result of our disqualification.
If we were to fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to shareholders when computing our taxable income; • we would be subject to federal income tax on our taxable income at regular corporate rates; • we would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • our cash available for distributions to shareholders would be reduced; and • we may be required to borrow additional funds or sell some of our assets in order to pay corporate tax obligations that we may incur as a result of our disqualification.
In addition, losses in taxable REIT subsidiaries will generally not provide any tax benefit, except for being carried forward against future taxable income in the taxable REIT subsidiaries. 16 Table of Contents Changes to the U.S. federal income tax laws, including the enactment of certain tax reform measures, could have an adverse impact on our business and financial results.
In addition, losses in taxable REIT subsidiaries will generally not provide any tax benefit, except for being carried forward against future taxable income in the taxable REIT subsidiaries. 15 Table of Contents Changes to the U.S. federal income tax laws, including the enactment of certain tax reform measures, could have an adverse impact on our business and financial results.
In addition, the imposition of a corporate tax on our Operating Partnership would reduce our amount of cash available for payment of distributions by us to our shareholders. 15 Table of Contents Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
In addition, the imposition of a corporate tax on our Operating Partnership would reduce our amount of cash available for payment of distributions by us to our shareholders. 14 Table of Contents Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
These types of health crises may impact our business in the following ways: • closures of, or other operational issues at, our properties resulting from government or tenant action; • changes in consumer behavior in favor of e-commerce, which could result in reduced economic brick-and-mortar retail activity impacting our tenants' ability to meet their rental and other obligations to us in full or at all; • the ability of our tenants who have been granted rent deferrals to timely pay deferred rent; • any inability to renew leases or lease vacant space on favorable terms, or at all; • tenant bankruptcies; • liquidity issues resulting from reduced cash flows from operations; • negative impacts to the credit and/or capital markets making it difficult to access capital on favorable terms or at all; • impairment in value of our tangible or intangible assets; • a general decline in business activity and demand for real estate transactions adversely affecting our ability to grow our portfolio of properties, dispose of non-core properties and service our indebtedness; • supply chain disruptions adversely affecting our tenants' operations, as well as general labor shortages; and • impacts on the health of our personnel and a disruption in the continuity of our business.
These events may affect our business in the following manners: • closures of, or other operational issues at, our properties resulting from government or tenant action; • changes in consumer behavior in favor of e-commerce, which could result in reduced economic brick-and-mortar retail activity impacting our tenants' ability to meet their rental and other obligations to us in full or at all; • the ability of our tenants who have been granted rent deferrals to timely pay deferred rent; • any inability to renew leases or lease vacant space on favorable terms, or at all; • tenant bankruptcies; • liquidity issues resulting from reduced cash flows from operations; • negative impacts to the credit and/or capital markets making it difficult to access capital on favorable terms or at all; • impairment in value of our tangible or intangible assets; • a general decline in business activity and demand for real estate transactions adversely affecting our ability to grow our portfolio of properties, dispose of non-core properties and service our indebtedness; • supply chain disruptions adversely affecting our tenants' operations, as well as general labor shortages; and • impacts on the health of our personnel and a disruption in the continuity of our business.
Our properties are subject to property taxes that may increase as property tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the properties, we are ultimately responsible for payment of the taxes to the government.
Our properties are subject to property taxes that may increase as property tax rates change and as the properties are assessed or reassessed by taxing authorities. While we require our tenants to pay taxes, as the owner of the properties, we are ultimately responsible for payment of the taxes to the government.
Our Community Centered Property® business model produces shorter term leases to smaller, non-national tenants, and substantially all of our revenues consist of base rents received under these leases. As of December 31, 2022, approximately 30% of the aggregate GLA of our properties is subject to leases that expire prior to December 31, 2024.
Our Community Centered Property® business model produces shorter term leases to smaller, non-national tenants, and substantially all of our revenues consist of base rents received under these leases. As of December 31, 2023, approximately 33% of the aggregate GLA of our properties is subject to leases that expire prior to December 31, 2025.
Our current geographic concentration in the Houston metropolitan area potentially increases the risk of damage to our portfolio due to hurricanes. Insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims.
Our current geographic concentration in the Houston metropolitan area exposes us to physical risks from climate change and potentially increases the risk of damage to our portfolio due to hurricanes. Insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims.
As of December 31, 2022, we had fixed rate hedges on $265 million of our variable rate unsecured credit facility. We may enter into additional interest rate swap agreements for our variable rate debt not currently subject to hedges, which totaled $103.5 million as of December 31, 2022. Hedging may reduce the overall returns on our investments.
As of December 31, 2023, we had fixed rate hedges on $315 million of our variable rate unsecured credit facility. We may enter into additional interest rate swap agreements for our variable rate debt not currently subject to hedges, which totaled $96 million as of December 31, 2023. Hedging may reduce the overall returns on our investments.
Although the negative impact of the COVID-19 pandemic appears to be much improved, with most tenant businesses operating at pre-pandemic levels, for certain categories of our tenants, such as dry cleaners and fitness tenants, the negative impact of COVID-19 was more severe and the recovery is still in progress.
Although most tenant businesses have returned to operating at pre-pandemic levels, for certain categories of our tenants, such as dry cleaners and fitness tenants, the negative impact of COVID-19 was more severe and the recovery is still in progress.
Any deficiencies or material weaknesses could result in significant time and expense to remediate, which could have a material adverse effect on our financial condition, results of operations and ability to make distributions to our shareholders.
Any deficiencies or material weaknesses could result in significant time and expense to remediate, which could have a material adverse effect on our financial condition, results of operations and ability to make distributions to our shareholders. Item 1B. Unresolved Staff Comments. None.
The following factors may affect income from properties and yields from investments in properties and are generally outside of our control: • conditions in financial markets; • continuing deterioration of the brick-and-mortar retail industry; • over-building in our markets; • a reduction in rental income as the result of the inability to maintain occupancy levels; 18 Table of Contents • adverse changes in applicable tax, real estate, environmental or zoning laws; • changes in general economic conditions or economic conditions in our markets; • a taking of any of our properties by eminent domain; • adverse local conditions (such as changes in real estate zoning laws that may reduce the desirability of real estate in the area); • acts of God, such as hurricanes, earthquakes or floods, health and safety epidemics, and other uninsured losses; • changes in supply of or demand for similar or competing properties in an area; • changes in interest rates and availability of permanent debt capital, which may render the sale of a property difficult or unattractive; and • periods of high interest rates, inflation or tight money supply.
The following factors may affect income from properties and yields from investments in properties and are generally outside of our control: • conditions in financial markets; • continuing deterioration of the brick-and-mortar retail industry; • over-building in our markets; • a reduction in rental income as the result of the inability to maintain occupancy levels; 17 Table of Contents • adverse changes in applicable tax, real estate, environmental or zoning laws; • changes in general economic conditions or economic conditions in our markets; • a taking of any of our properties by eminent domain; • adverse local conditions (such as changes in real estate zoning laws that may reduce the desirability of real estate in the area); • acts of God, such as hurricanes, earthquakes or floods, health and safety epidemics, and other uninsured losses, some of which may increase due to climate change; • geopolitical instability, including the ongoing conflict between Russia and Ukraine, the conflict in the Gaza Strip and unrest in the Middle East; • changes in supply of or demand for similar or competing properties in an area; • changes in interest rates and availability of permanent debt capital, which may render the sale of a property difficult or unattractive; and • periods of high interest rates, inflation or tight money supply.
Such cyber-attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. We have experienced cyber-attacks, and while to date none of these incidents have been material to our operations, we expect to continue to face such threats in the future.
Such cyber-attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats including advance hacking tools and techniques such as artificial intelligence. We have experienced cyber-attacks, and while to date none of these incidents have been material to our operations, we expect to continue to face such threats in the future.
As of December 31, 2022, 24% and 45% of our GLA was located in Houston and Phoenix, respectively. Our results of operations are directly affected by our ability to attract financially sound commercial tenants.
As of December 31, 2023, 22% and 47% of our GLA was located in Houston and Phoenix, respectively. Our results of operations are directly affected by our ability to attract financially sound commercial tenants.
As of December 31, 2022, we had approximately $157.5 million of mortgage debt secured by seven of our properties. If there is a shortfall in cash flow, however, the amount available for distributions to shareholders may be affected.
As of December 31, 2023, we had approximately $136.7 million of mortgage debt secured by five of our properties. If there is a shortfall in cash flow, however, the amount available for distributions to shareholders may be affected.
A cyber-attack or our ability or perceived inability to comply with regulations related to cybersecurity and/or data protection and privacy could materially and adversely affect the efficiency of our business operations, which in turn could have a material adverse effect on our reputation, competitiveness and results of operations.
A cyber-attack or our ability or perceived inability to comply with regulations related to cybersecurity and/or data protection and privacy could materially and adversely affect the efficiency of our business operations, which in turn could have a material adverse effect on our reputation, competitiveness and results of operations. Please refer to Item 1C of this 10-K for additional information.
Consequently, because of the geographic concentration among our current assets, if either the Houston or Phoenix metropolitan area were to experience an economic downturn, our operations and ability to make distributions to our shareholders could be adversely impacted. 7 Table of Contents The COVID-19 pandemic has in the past and may continue to materially and adversely impact and disrupt our business, financial condition, results of operations and cash flows.
Consequently, because of the geographic concentration among our current assets, if either the Houston or Phoenix metropolitan area were to experience an economic downturn, our operations and ability to make distributions to our shareholders could be adversely impacted. 7 Table of Contents Pandemics, epidemics, or other health crises could materially and adversely impact and disrupt our business, financial condition, results of operations and cash flows.
There are many factors that can affect the availability and timing of cash distributions to shareholders. Distributions are based upon our funds from operations, financial condition, cash flows and liquidity, debt service requirements, capital expenditure requirements for our properties and other matters our board of trustees may deem relevant from time to time.
Distributions are based upon our funds from operations, financial condition, cash flows and liquidity, debt service requirements, capital expenditure requirements for our properties and other matters our board of trustees may deem relevant from time to time.
We cannot assure that we will have funds available to correct those defects or to make those improvements, which may impede our ability to sell a property.
There can be no assurance that we will have funds available to correct those defects or to make those improvements, which may impede our ability to sell a property.
As of December 31, 2022, we had outstanding indebtedness, net of cash, of $619.8 million, including, through our Operating Partnership, $100.0 million aggregate principal amount of the Notes (as defined below) and $368.5 million drawn on the 2022 Facility (as defined below). As of December 31, 2022, our unused borrowing capacity under our 2022 Facility was $146.4 million.
As of December 31, 2023, we had outstanding indebtedness, net of cash, of $636.0 million, including, through our Operating Partnership, $92.9 million aggregate principal amount of the Notes (as defined below) and $411.0 million drawn on the 2022 Facility (as defined below). As of December 31, 2023, our unused borrowing capacity under our 2022 Facility was $104.0 million.
Although we believe qualified replacement could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common shares. 10 Table of Contents The Pillarstone REIT shareholder rights plan could adversely impact the value of our investment in Pillarstone OP.
Although we believe qualified replacement could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common shares. 10 Table of Contents Risk related to the redemption of our partnership units in Pillarstone Capital REIT Operating Partnership.
However, upon receipt of a redemption notice, Pillarstone OP has the option to pay the applicable redemption price in cash, based on the market value of Pillarstone REIT common shares, or in Pillarstone REIT common shares.
However, upon receipt of a redemption notice, Pillarstone OP has the option to pay the applicable redemption price in cash, based on the market value of Pillarstone REIT common shares, or in Pillarstone REIT common shares. On December 26, 2021, the Board of Trustees of Pillarstone REIT adopted a new shareholder rights agreement (the “Pillarstone Rights Agreement”).
A number of our tenants operate service and retail businesses that require in-person interactions with their customers to generate revenues, and the COVID-19 pandemic affected customers’ willingness to frequent some of our tenants’ businesses, which has impacted and may continue to impact their ability to fulfill their obligations to us in the event of a resurgence of COVID-19 or the rise of a variant of the virus.
Public health emergencies such as the COVID-19 pandemic have affected customers’ willingness to frequent some of our tenants’ businesses, which has impacted and may continue to impact their ability to fulfill their obligations to us in the event of a resurgence of COVID-19 or the rise of a variant of the virus.
The determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT.
Qualification as a REIT involves the application of highly technical and complex rules for which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT.
The ability of our tenants to fulfill their obligations under our leases may depend, in part, upon the overall profitability of their operations.
The ability of our tenants to fulfill their obligations under our leases may depend, in part, upon the overall profitability of their operations. A number of our tenants operate service and retail businesses that require in-person interactions with their customers to generate revenues.
Our failure to successfully oversee our current portfolio of properties or any future acquisitions or developments could have a material adverse effect on our results of operations and financial condition and our ability to make distributions. 19 Table of Contents There can be no assurance that we will be able to pay or maintain cash distributions or that distributions will increase over time.
Our failure to successfully oversee our current portfolio of properties or any future acquisitions or developments could have a material adverse effect on our results of operations and financial condition and our ability to make distributions. 18 Table of Contents Shareholder activism efforts or unsolicited offers from a third-party could cause a material disruption to our business and financial results.
Such an agreement would prevent us from selling those properties, even if market conditions made such a sale favorable to us. 13 Table of Contents The discontinuation and replacement of LIBOR with an alternative reference rate, may adversely affect our interest expense.
Such an agreement would prevent us from selling those properties, even if market conditions made such a sale favorable to us. 13 Table of Contents Risks Associated with Income Tax Laws If we fail to qualify as a REIT, our operations and distributions to shareholders would be adversely impacted.
The continued impact of COVID-19, including any resurgences or the rise of any variants of the virus, future pandemics or other health crises may heighten other risks discussed herein, which could adversely affect our business, financial condition, results of operations, cash flows and market value.
The potential resurgence of COVID-19, emergence of new variants, or future pandemics or health crises may intensify other risks outlined herein, potentially leading to adverse effects on our business, financial position, operational results, cash flows, and market value.
Risks Associated with Income Tax Laws If we fail to qualify as a REIT, our operations and distributions to shareholders would be adversely impacted. We intend to continue to be organized and to operate so as to qualify as a REIT under the Code.
We intend to continue to be organized and to operate so as to qualify as a REIT under the Code. A REIT generally is not taxed at the corporate level on income it currently distributes to its shareholders.
Removed
Any future outbreak of any COVID-19 variants or any other highly infectious or contagious disease could have a similar impact.
Added
On January 25, 2024, the Delaware Court of Chancery: held that Pillarstone breached the implied covenant of good faith and fair dealing when it adopted the Pillarstone Rights Agreement that thwarted Whitestone OP from exercising the unfettered contractual redemption right it obtained in connection with its investment in the partnership; and the Court held that the Rights Plan was unenforceable as to the limited partner and allowed Whitestone OP to exercise its redemption right; allowed Pillarstone to determine the current value of the Partnership’s assets; and, as necessary, later enter a monetary judgment against Pillarstone for the difference between the amount Whitestone would have received in or around December 2021 and the current value.
Removed
A worsening of the COVID-19 pandemic or outbreaks of other highly infectious diseases could materially and adversely affect us, particularly if business conditions, the regulatory environment or the public health situation returns to that experienced during the height of the COVID-19 pandemic.
Added
On January 25, 2024, the Company exercised its notice of redemption for substantially all of its investment in Pillarstone OP. On March 4, 2024, Pillarstone REIT authorized and filed the Chapter 11 bankruptcy of itself, Pillarstone OP, and the remainder of its special purpose entities in the United States Bankruptcy Court for the Northern District of Texas.
Removed
On December 26, 2021, the Board of Trustees of Pillarstone REIT adopted a new rights agreement (the “Pillarstone Rights Agreement”), pursuant to which each holder of Pillarstone REIT common stock received one preferred share purchase right (a “Right”) per common share held as of the applicable record date.
Added
As of the date of this filing, Whitestone has not received consideration for its redemption of its equity investment in Pillarstone OP as required by the partnership agreement.
Removed
Each Right entitles the registered holder to purchase from Pillarstone REIT one one-thousandth (a “Unit”) of a series D preferred share of Pillarstone at a purchase price (“Purchase Price”) of $7.00 per Unit, subject to adjustment.
Added
We intend to pursue collection of amounts due from Pillarstone OP through all means, including further litigation if necessary and while we do not know the ultimate amount to be collected, we believe the amount will be in excess of the current carrying value of our equity investment in Pillarstone OP.
Removed
The Rights are exercisable upon the occurrence of certain events as described in the Pillarstone Rights Agreement, including the acquisition by certain holders of 5% or more of the common shares of Pillarstone REIT (an “Acquiring Person”).
Added
Risk of Litigation We assess the likelihood of any adverse judgments or outcomes to our cases, as well as potential ranges of probable losses, in a manner consistent with FASB ASC 450, Contingencies.
Removed
Upon the acquisition of Pillarstone REIT common shares by an Acquiring Person, each holder of a Right (other than an Acquiring Person), will have the right to receive upon exercise a number of Pillarstone REIT common shares having a market value of two times the Purchase Price.
Added
However, it is possible that our financial position, cash flow, or results of operations could be negatively affected in any particular period by the resolution of one or more proceedings. We establish reserves for specific legal matters when we determine that the likelihood of loss is probable and the amount of loss can be reasonably estimated.
Removed
To the extent we seek to have our partnership units in Pillarstone OP redeemed and Pillarstone OP elects to pay the applicable redemption price in Pillarstone REIT common shares (and such shares represent 5% or more of the outstanding common shares of Pillarstone REIT), the Rights could become exercisable.
Added
These reserves are reevaluated periodically and adjusted as necessary to reflect changes in circumstances. Due to the uncertainty surrounding litigation, actual losses may differ from these estimates.
Removed
To the extent the Rights are exercised as a result of our Pillarstone OP units being redeemed for Pillarstone REIT common shares, our ownership interest in Pillarstone REIT would be significantly diluted, which could adversely impact the value of our investment in Pillarstone OP.
Added
Litigation is subject to inherent uncertainties, and there can be no assurance that the resolution of any particular legal proceeding will not have a material adverse impact on our business, financial condition, or results of operations.
Removed
The lawsuit seeks rescission and voiding of the Pillarstone Rights Agreement; a declaration that the Pillarstone Rights Agreement is unenforceable, invalid, and of no force and effect; an order permanently enjoining enforcement of the Pillarstone Rights Agreement; an award of monetary damages; and broad restrictions on Pillarstone REIT’s ability to conduct its business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions.
Added
Depending on the nature and timing of any such disputes and their resolutions, litigation could lead to charges that may be material to our financial statements in any given reporting period. Shareholders and potential investors are cautioned to consider the risks and uncertainties associated with legal proceedings, as detailed herein, when making investment decisions regarding the Company’s securities.
Removed
On September 8, 2022, the Company’s Motion to Preserve the Status Quo was granted by the Court, limiting Pillarstone from engaging in any acts outside the ordinary course of business and otherwise imposing restrictions on Pillarstone to ensure that Whitestone’s right of redemption is not impaired while the underlying dispute is being considered by the Court.
Added
Risk associated with the Kroger acquisition of Albertsons. On October 14, 2022, Kroger Co. ("Kroger") announced its intention to acquire Albertsons Companies, Inc. ("Albertsons"). In connection with obtaining the regulatory clearance necessary to close the transaction, C&S Wholesale Grocers has entered into a definitive agreement to purchase Albertsons' 413 stores.
Removed
While we do not believe the overall impact of the Pillarstone Rights Agreement on the carrying value of our investment in Pillarstone OP is material, we cannot reasonably estimate a range of possible loss at this time. Risk associated with the Kroger acquisition of Albertsons. On October 14, 2022, Kroger Co. ("Kroger") announced its intention to acquire Albertsons Companies, Inc.
Added
As of December 31, 2023, Whitestone REIT had 5 grocers owned by Albertsons. It does not appear that any of the Albertsons' stores currently leasing from Whitestone REIT are likely to be purchased by C&S Wholesale Grocers.
Removed
("Albertsons"). In connection with obtaining the regulatory clearance necessary to close the transaction, Albertsons company is prepared to establish a subsidiary to be spun off to Albertsons' shareholders. The subsidiary is anticipated by Kroger to comprise 100 to 375 stores. As of December 31, 2022, Whitestone REIT had 5 grocers owned by Albertsons.
Added
Kroger has stated that they anticipate the closing will occur by August of 2024 and that they are in active and ongoing dialogue with the Federal Trade Commission and individual state Attorneys General regarding the proposed merger and divestiture plan.
Removed
Whitestone REIT has no knowledge as to whether any of the Albertsons' stores currently leasing from Whitestone REIT will be part of Albertsons' subsidiary or if spinoff and the merger will clear the necessary regulatory hurdles in order to close.
Added
We may be subject to various legal and business challenges due to actions instituted by shareholder activists or unsolicited third-party offers.
Removed
In September 2022, we, through our Operating Partnership, amended and restated our unsecured credit facility (the “2022 Facility”) to include, among other things, a replacement rate for LIBOR.
Added
Perceived uncertainties as to our future direction as a result of shareholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with vendors, prospective and existing tenants, prospective and current employees and others.
Removed
These changes could result in interest obligations that are slightly more than or do not otherwise correlate exactly over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form and there can be no assurances as to what other alternative base rates may be and whether SOFR or any other such base rate will be more or less favorable than LIBOR or if there will be any other unforeseen impacts of the discontinuation of LIBOR.
Added
Proposed or future laws and regulations may increase the chance we become the target of shareholder activist campaigns, including ESG-related actions.
Removed
The Company is monitoring the developments with respect to the phasing out of LIBOR after 2021 and working with its lenders to ensure the transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR on its financial condition.
Added
If shareholder activist campaigns are initiated against us, our response to such actions could be costly and time-consuming, which could divert the attention and resources of the Board, Chief Executive Officer and senior management from the pursuit of our business strategies, which could harm our business, negatively impact our stock price, and have an adverse effect on our business and financial results.
Removed
A REIT generally is not taxed at the corporate level on income it currently distributes to its shareholders. Qualification as a REIT involves the application of highly technical and complex rules for which there are only limited judicial or administrative interpretations.
Added
There can be no assurance that we will be able to pay or maintain cash distributions or that distributions will increase over time. There are many factors that can affect the availability and timing of cash distributions to shareholders.

Item 2. Properties

Properties — owned and leased real estate

37 edited+0 added−2 removed10 unchanged
Biggest change(3) Whitestone Properties: Ahwatukee Plaza Phoenix 1979 72,650 81 % $ 816 $ 13.87 $ 17.28 Anderson Arbor Austin 2001 89,746 99 % 2,007 22.59 24.83 Anthem Marketplace Phoenix 2000 113,293 89 % 1,597 15.84 15.78 Anthem Marketplace Phase II Phoenix 2019 6,853 100 % 241 35.17 33.85 BLVD Place Houston 2014 216,944 97 % 9,124 43.36 44.03 The Citadel Phoenix 2013 28,547 94 % 514 19.15 19.01 City View Village San Antonio 2005 17,870 100 % 573 32.06 31.28 Dana Park Pad Phoenix 2002 12,000 100 % 321 26.75 28.92 Davenport Village Austin 1999 128,934 99 % 3,653 28.62 27.99 Eldorado Plaza Dallas 2004 219,287 100 % 3,524 16.07 16.18 Fountain Hills Phoenix 2009 111,289 94 % 1,708 16.33 16.24 Fountain Square Phoenix 1986 118,209 91 % 1,913 17.78 17.45 Fulton Ranch Towne Center Phoenix 2005 120,575 97 % 2,257 19.30 19.05 Gilbert Tuscany Village Phoenix 2009 49,415 100 % 1,053 21.31 20.84 Heritage Dallas 2006 70,431 96 % 1,639 24.24 24.20 HQ Village Dallas 2009 89,134 97 % 2,656 30.72 30.79 Keller Place Dallas 2001 93,541 95 % 1,031 11.60 11.48 Kempwood Plaza Houston 1974 91,302 95 % 1,303 15.02 16.05 La Mirada Phoenix 1997 147,209 92 % 3,368 24.87 25.09 Lakeside Market Dallas 2000 162,649 91 % 3,773 25.49 26.38 Las Colinas Dallas 2000 104,919 96 % 2,914 28.93 29.52 Lion Square Houston 1980 117,592 98 % 1,951 16.93 19.74 The MarketPlace at Central Phoenix 2012 111,130 99 % 1,153 10.48 9.99 Market Street at DC Ranch Phoenix 2003 244,888 99 % 5,684 23.45 25.30 Mercado at Scottsdale Ranch Phoenix 1987 118,730 94 % 1,828 16.38 16.46 Paradise Plaza Phoenix 1983 125,898 92 % 1,566 13.52 13.58 Parkside Village North Austin 2005 27,045 100 % 879 32.50 31.76 Parkside Village South Austin 2012 90,101 100 % 2,571 28.53 28.90 Pinnacle of Scottsdale Phoenix 1991 113,108 97 % 2,591 23.62 23.08 Pinnacle Phase II Phoenix 2017 27,063 100 % 859 31.74 30.41 The Promenade at Fulton Ranch Phoenix 2007 98,792 79 % 1,167 14.95 13.94 Providence Houston 1980 90,327 96 % 1,161 13.39 13.24 Quinlan Crossing Austin 2012 109,892 95 % 2,604 24.94 26.03 Seville Phoenix 1990 90,042 93 % 2,806 33.51 33.39 Shaver Houston 1978 21,926 94 % 356 17.27 17.22 Shops at Pecos Ranch Phoenix 2009 78,767 100 % 1,948 24.73 25.20 Shops at Starwood Dallas 2006 55,385 100 % 1,818 32.82 33.46 The Shops at Williams Trace Houston 1985 132,991 95 % 2,257 17.86 19.70 Spoerlein Commons Chicago 1987 41,455 98 % 736 18.12 19.20 Starwood Phase II Dallas 2016 35,351 90 % 1,215 38.19 35.86 The Strand at Huebner Oaks San Antonio 2000 73,920 100 % 1,808 24.46 24.30 SugarPark Plaza Houston 1974 95,032 97 % 1,324 14.36 14.93 Sunridge Houston 1979 49,359 73 % 600 16.65 16.76 Sunset at Pinnacle Peak Phoenix 2000 41,530 96 % 809 20.29 20.22 Terravita Marketplace Phoenix 1997 102,733 99 % 1,454 14.30 13.94 Town Park Houston 1978 43,526 96 % 1,005 24.05 24.77 22 Table of Contents Whitestone REIT and Subsidiaries Property Details As of December 31, 2022 Village Square at Dana Park Phoenix 2009 323,026 85 % 6,410 23.35 24.72 Westchase Houston 1978 44,398 87 % 621 16.08 16.21 Williams Trace Plaza Houston 1983 129,222 91 % 2,539 21.59 22.14 Windsor Park San Antonio 2012 196,458 97 % 2,005 10.52 10.82 Woodlake Plaza Houston 1974 106,169 60 % 1,049 16.47 15.92 Total/Weighted Average - Whitestone Properties 5,000,653 94 % 100,759 21.44 21.89 Development Properties: Lake Woodlands Crossing Houston 2018 60,246 89 % 1,614 30.10 32.45 Total/Weighted Average - Development Properties 60,246 89 % 1,614 30.10 32.45 Land Held for Development: BLVD Phase II-B Houston N/A — — — — — Dana Park Development Phoenix N/A — — — — — Eldorado Plaza Development Dallas N/A — — — — — Fountain Hills Phoenix N/A — — — — — Market Street at DC Ranch Phoenix N/A — — — — — Total/Weighted Average - Land Held For Development (4) — — — — — Grand Total/Weighted Average - Whitestone Properties 5,060,899 94 % $ 102,373 21.52 21.99 (1) Calculated as the tenant’s actual December 31, 2022 base rent (defined as cash base rents including abatements) multiplied by 12.
Biggest change(3) Whitestone Properties: Ahwatukee Plaza Phoenix 1979 72,650 81 % $ 844 $ 14.34 $ 18.13 Anderson Arbor Austin 2001 89,746 97 % 1,956 22.47 23.03 Anthem Marketplace Phoenix 2000 113,293 96 % 1,688 15.52 16.74 Anthem Marketplace Phase II Phoenix 2019 6,853 100 % 248 36.19 33.85 Arcadia Towne Center Phoenix 1966 69,503 100 % 1,771 25.48 26.93 BLVD Place Houston 2014 216,944 99 % 9,646 44.91 45.19 The Citadel Phoenix 2013 28,547 94 % 560 20.87 20.61 City View Village San Antonio 2005 17,870 100 % 591 33.07 33.02 Dana Park Pad Phoenix 2002 12,000 100 % 326 27.17 29.00 Davenport Village Austin 1999 128,934 95 % 3,589 29.30 29.15 Eldorado Plaza Dallas 2004 219,287 100 % 3,657 16.68 16.97 Fountain Hills Phoenix 2009 111,289 93 % 1,723 16.65 16.66 Fountain Square Phoenix 1986 118,209 92 % 2,020 18.57 18.02 Fulton Ranch Towne Center Phoenix 2005 120,575 92 % 2,411 21.73 21.90 Gilbert Tuscany Village Phoenix 2009 49,415 100 % 1,042 21.09 22.26 Heritage Dallas 2006 70,431 100 % 1,766 25.07 24.52 HQ Village Dallas 2009 89,134 94 % 2,652 31.65 31.44 Keller Place Dallas 2001 93,541 96 % 1,118 12.45 13.79 Kempwood Plaza Houston 1974 91,302 100 % 1,403 15.37 15.24 La Mirada Phoenix 1997 147,209 98 % 3,775 26.17 25.55 Lake Woodlands Crossing Houston 2018 60,246 100 % 1,974 32.77 40.88 Lakeside Market Dallas 2000 162,649 91 % 4,064 27.46 28.51 Las Colinas Dallas 2000 104,919 96 % 3,022 30.00 31.65 Lion Square Houston 1980 117,592 96 % 1,978 17.52 17.57 The MarketPlace at Central Phoenix 2012 111,130 99 % 1,175 10.68 10.23 Market Street at DC Ranch Phoenix 2003 244,888 99 % 6,090 25.12 24.90 Mercado at Scottsdale Ranch Phoenix 1987 118,730 95 % 2,047 18.15 17.49 Paradise Plaza Phoenix 1983 125,898 89 % 1,681 15.00 14.64 Parkside Village North Austin 2005 27,045 100 % 921 34.05 33.31 Parkside Village South Austin 2012 90,101 96 % 2,501 28.91 29.06 Pinnacle of Scottsdale Phoenix 1991 113,108 99 % 2,746 24.52 24.00 Pinnacle Phase II Phoenix 2017 27,063 100 % 880 32.52 30.41 The Promenade at Fulton Ranch Phoenix 2007 98,792 90 % 1,498 16.85 18.10 Providence Houston 1980 90,327 94 % 1,125 13.25 13.78 Quinlan Crossing Austin 2012 109,892 94 % 2,655 25.70 26.09 Seville Phoenix 1990 90,042 91 % 2,926 35.71 34.38 Shaver Houston 1978 21,926 100 % 383 17.47 17.19 Shops at Pecos Ranch Phoenix 2009 78,767 100 % 2,087 26.50 28.51 Shops at Starwood Dallas 2006 55,385 100 % 1,919 34.65 35.21 The Shops at Williams Trace Houston 1985 132,991 98 % 2,366 18.15 19.20 Starwood Phase II Dallas 2016 35,351 92 % 1,266 38.93 35.85 The Strand at Huebner Oaks San Antonio 2000 73,920 97 % 1,868 26.05 25.44 SugarPark Plaza Houston 1974 95,032 98 % 1,464 15.72 15.27 Sunset at Pinnacle Peak Phoenix 2000 41,530 98 % 890 21.87 22.68 Terravita Marketplace Phoenix 1997 102,733 97 % 1,539 15.44 15.26 Town Park Houston 1978 43,526 100 % 1,107 25.43 26.01 21 Table of Contents Whitestone REIT and Subsidiaries Property Details As of December 31, 2023 Village Square at Dana Park Phoenix 2009 323,026 88 % 6,662 23.44 23.57 Williams Trace Plaza Houston 1983 129,222 89 % 2,514 21.86 31.80 Windsor Park San Antonio 2012 196,458 85 % 1,739 10.41 10.98 Woodlake Plaza Houston 1974 106,169 58 % 1,101 17.88 18.74 Total/Weighted Average - Whitestone Properties 4,995,190 94 % 106,974 22.78 23.35 Development Properties: Total/Weighted Average - Development Properties — — — — — Land Held for Development: BLVD Phase II-B Houston N/A — — — — — Dana Park Development Phoenix N/A — — — — — Eldorado Plaza Development Dallas N/A — — — — — Fountain Hills Phoenix N/A — — — — — Market Street at DC Ranch Phoenix N/A — — — — — Total/Weighted Average - Land Held For Development (4) — — — — — Grand Total/Weighted Average - Whitestone Properties 4,995,190 94 % $ 106,974 $ 22.78 $ 23.35 (1) Calculated as the tenant’s actual December 31, 2023 base rent (defined as cash base rents including abatements) multiplied by 12.
Annualized Rental Percentage of Total Revenue Annualized Base Rental Tenant Name Location (in thousands) Revenues (1) Initial Lease Date Year Expiring Whole Foods Market Houston $ 2,247 2.2 % 9/3/2014 2035 Albertsons Companies, Inc.
Annualized Rental Percentage of Total Revenue Annualized Base Rental Tenant Name Location (in thousands) Revenues (1) Initial Lease Date Year Expiring Whole Foods Market Houston $ 2,247 2.1 % 9/3/2014 2035 Albertsons Companies, Inc.
The annualized rental revenue for the lease that commenced on April 1, 2009, and is scheduled to expire in 2029, was $729,000, which represents approximately 0.7% of our total annualized base rental revenue (4) As of December 31, 2022, we had four leases with the same tenant occupying space at properties located in Phoenix and Houston.
The annualized rental revenue for the lease that commenced on April 1, 2009, and is scheduled to expire in 2029, was $729,000, which represents approximately 0.7% of our total annualized base rental revenue (4) As of December 31, 2023, we had four leases with the same tenant occupying space at properties located in Phoenix and Houston.
(3) Represents (i) the contractual base rent for leases in place as of December 31, 2022, adjusted to a straight-line basis to reflect changes in rental rates throughout the lease term and amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases of December 31, 2022.
(3) Represents (i) the contractual base rent for leases in place as of December 31, 2023, adjusted to a straight-line basis to reflect changes in rental rates throughout the lease term and amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases of December 31, 2023.
Whitestone REIT and Subsidiaries Property Details As of December 31, 2022 Average Percent Annualized Base Base Rental Average Net Effective Year Built/ Gross Leasable Occupied at Rental Revenue Revenue Per Annual Base Rent Per Community Name Location Renovated Square Feet 12/31/2022 (in thousands) (1) Sq. Ft. (2) Leased Sq. Ft.
Whitestone REIT and Subsidiaries Property Details As of December 31, 2023 Average Percent Annualized Base Base Rental Average Net Effective Year Built/ Gross Leasable Occupied at Rental Revenue Revenue Per Annual Base Rent Per Community Name Location Renovated Square Feet 12/31/2023 (in thousands) (1) Sq. Ft. (2) Leased Sq. Ft.
Dec National (1) 3.5 % 3.7 % 3.5 % 3.7 % 3.6 % 3.5 % Houston (2) 4.8 % 4.6 % 4.2 % 4.1 % 4.0 % 3.9 % (P) Phoenix (2) 3.3 % 3.4 % 3.5 % 3.5 % 3.0 % 2.7 % (P) (1) Seasonally adjusted. (2) Not seasonally adjusted. (P) Represents preliminary estimates.
Dec National (1) 3.5 % 3.8 % 3.8 % 3.8 % 3.7 % 3.7 % Houston (2) 4.8 % 4.9 % 4.4 % 4.1 % 3.8 % 3.8 % (P) Phoenix (2) 4.2 % 4.0 % 3.8 % 3.9 % 3.5 % 3.4 % (P) (1) Seasonally adjusted. (2) Not seasonally adjusted. (P) Represents preliminary estimates.
(2) As of December 31, 2022, we had five leases with the same tenant occupying space at properties located in Phoenix, Houston and Austin. The annualized rental revenue for the lease that commenced on April 1, 2014, and is scheduled to expire in 2034, was $1,047,000, which represents approximately 1.0% of our total annualized base rental revenue.
(2) As of December 31, 2023, we had five leases with the same tenant occupying space at properties located in Phoenix and Austin. The annualized rental revenue for the lease that commenced on April 1, 2014, and is scheduled to expire in 2034, was $1,047,000, which represents approximately 1.0% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on August 16, 1994, and is scheduled to expire in 2038, was $23,000, which represents less than 0.1% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on August 16, 1994, and is scheduled to expire in 2038, was $24,000, which represents less than 0.1% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on June 29, 2001, and is scheduled to expire in 2026, was $175,000, which represents approximately 0.2% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on June 29, 2001, and is scheduled to expire in 2026, was $181,000, which represents approximately 0.2% of our total annualized base rental revenue.
The following table summarizes certain information relating to our properties as of December 31, 2022: Average Average Annualized Base Annualized Base Occupancy as of Rental Revenue Rental Revenue Commercial Properties GLA 12/31/2022 (in thousands) (1) Per Sq. Ft.
The following table summarizes certain information relating to our properties as of December 31, 2023: Average Average Annualized Base Annualized Base Occupancy as of Rental Revenue Rental Revenue Commercial Properties GLA 12/31/2023 (in thousands) (1) Per Sq. Ft.
The annualized rental revenue for the lease that commenced on November 3, 1996, and is scheduled to expire in 2049, was $279,000, which represents approximately 0.3% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on November 3, 1996, and is scheduled to expire in 2056, was $279,000, which represents approximately 0.3% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on November 2, 1987, and is scheduled to expire in 2027, was $189,000, which represents approximately 0.2% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on November 2, 1987, and is scheduled to expire in 2027, was $188,000, which represents approximately 0.2% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on October 19, 2016, and is scheduled to expire in 2025, was $425,000, which represents approximately 0.4% of our total annualized base rental revenue. 24 Table of Contents (3) As of December 31, 2022, we had two leases with the same tenant occupying space at properties located in Phoenix.
The annualized rental revenue for the lease that commenced on October 19, 2016, and is scheduled to expire in 2025, was $425,000, which represents approximately 0.4% of our total annualized base rental revenue. 23 Table of Contents (3) As of December 31, 2023, we had two leases with the same tenant occupying space at properties located in Phoenix.
The following table sets forth information about the unemployment rate in Houston, Phoenix and nationally during the last six months of 2022. July Aug. Sept. Oct. Nov.
The following table sets forth information about the unemployment rate in Houston, Phoenix and nationally during the last six months of 2023. July Aug. Sept. Oct. Nov.
(3) Phoenix 1,010 1.0 % 10/9/2004 and 4/1/2009 2024 and 2029 Fitness Alliance, LLC Houston 971 1.0 % 11/29/2022 2038 Walgreens & Co.
(3) Phoenix 1,010 0.9 % 10/9/2004 and 4/1/2009 2024 and 2029 Fitness Alliance, LLC Houston 971 0.9 % 11/29/2022 2039 Walgreens & Co.
Excludes vacant space as of December 31, 2022. Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with generally accepted accounting principles, historical results differ from the annualized amounts. Total abatements for leases in effect as of December 31, 2022 equaled approximately $249,000 for the month ended December 31, 2022.
Excludes vacant space as of December 31, 2023. Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with generally accepted accounting principles, historical results differ from the annualized amounts. Total abatements for leases in effect as of December 31, 2023 equaled approximately $361,000 for the month ended December 31, 2023.
The annualized rental revenue for the lease that commenced on August 10, 1999, and is scheduled to expire in 2025, was $88,000, which represents less than 0.1% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on August 10, 1999, and is scheduled to expire in 2025, was $88,000, which represents approximately 0.1% of our total annualized base rental revenue.
Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with Generally Accepted Accounting Principles ("GAAP"), historical results differ from the annualized amounts. Total abatements for leases in effect as of December 31, 2022 equaled approximately $249,000 for the month ended December 31, 2022.
Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with Generally Accepted Accounting Principles ("GAAP"), historical results differ from the annualized amounts. Total abatements for leases in effect as of December 31, 2023 equaled approximately $361,000 for the month ended December 31, 2023.
(4) As of December 31, 2022, these parcels of land were held for development and, therefore, had no gross leasable area. 23 Table of Contents Significant Tenants The following table sets forth information about our 15 largest tenants as of December 31, 2022, based upon consolidated annualized rental revenues at December 31, 2022.
(4) As of December 31, 2023, these parcels of land were held for development and, therefore, had no gross leasable area. 22 Table of Contents Significant Tenants The following table sets forth information about our 15 largest tenants as of December 31, 2023, based upon consolidated annualized rental revenues at December 31, 2023.
The annualized rental revenue for the lease that commenced on May 1, 2014, and is scheduled to expire in 2024, was $749,000, which represents approximately 0.7% of our total annualized rental revenue. (5) As of December 31, 2022, we had four leases with the same tenant occupying space at properties located in Phoenix and Houston.
The annualized rental revenue for the lease that commenced on May 1, 2014, and is scheduled to expire in 2024, was $749,000, which represents approximately 0.7% of our total annualized rental revenue. (6) As of December 31, 2023, we had four leases with the same tenant occupying space at properties in Houston and Phoenix.
The annualized rental revenue for the lease that commenced on August 24, 1996, and is scheduled to expire in 2056, was $298,000, which represents approximately 0.3% of our total annualized rental revenue. (6) As of December 31, 2022, we had four leases with the same tenant occupying space at properties in Houston and Phoenix.
The annualized rental revenue for the lease that commenced on August 24, 1996, and is scheduled to expire in 2056, was $298,000, which represents approximately 0.3% of our total annualized rental revenue. (5) As of December 31, 2023, we had four leases with the same tenant occupying space at properties located in Phoenix and Houston.
(2) Calculated as annualized base rent divided by gross leasable area leased as of December 31, 2022. Excludes vacant space as of December 31, 2022.
(2) Calculated as annualized base rent divided by gross leasable area leased as of December 31, 2023. Excludes vacant space as of December 31, 2023.
The annualized rental revenue for the lease that commenced on January 27, 2006, and is scheduled to expire in 2023, was $138,000, which represents approximately 0.1% of our total annualized base rental revenue.
The annualized rental revenue for the lease that commenced on January 27, 2006, and is scheduled to expire in 2028, was $140,000, which represents approximately 0.1% of our total annualized base rental revenue.
(2) Calculated as annualized base rent divided by GLA leased as of December 31, 2022. Excludes vacant space as of December 31, 2022. Our largest property, BLVD Place, a retail community purchased on May 26, 2017 and located in Houston, Texas, accounted for 11.0% of our total revenues for the year ended December 31, 2022.
(2) Calculated as annualized base rent divided by GLA leased as of December 31, 2023. Excludes vacant space as of December 31, 2023. Our largest property, BLVD Place, a retail community purchased on May 26, 2017 and located in Houston, Texas, accounted for 10.5% of our total revenues for the year ended December 31, 2023.
Our tenants consist of national, regional and local businesses. Our properties generally attract a mix of tenants who provide basic staples, convenience items and services tailored to the specific cultures, needs and preferences of the surrounding community. These types of tenants are the core of our strategy of creating Whitestone-branded Community Centered Properties®.
Our properties generally attract a mix of tenants who provide basic staples, convenience items and services tailored to the specific cultures, needs and preferences of the surrounding community. These types of tenants are the core of our strategy of creating Whitestone-branded Community Centered Properties®.
Source: Bureau of Labor Statistics 21 Table of Contents General Physical and Economic Attributes The following table sets forth certain information relating to each of our properties owned as of December 31, 2022.
Source: Bureau of Labor Statistics 20 Table of Contents General Physical and Economic Attributes The following table sets forth certain information relating to each of our properties owned as of December 31, 2023.
We also believe daily sales of basic items are less sensitive to fluctuations in the business cycle than higher priced retail items. Our largest tenant represented only 2.2% of our total revenues for the year ended December 31, 2022.
We also believe daily sales of basic items are less sensitive to fluctuations in the business cycle than higher priced retail items. Our largest tenant represented only 2.1% of our total revenues for the year ended December 31, 2023, and no single tenant exceeded 2.1%.
(5) Houston and Phoenix 955 0.9 % 11/14/1982, 11/2/1987, 8/24/1996 and 11/3/1996 2027, 2027, 2049 and 2056 Verizon Wireless (4) Houston and Phoenix 949 0.9 % 8/16/1994, 2/1/2004, 1/27/2006 and 5/1/2014 2023, 2024, 2024 and 2038 Alamo Drafthouse Cinema Austin 740 0.7 % 2/1/2012 2031 Wells Fargo & Company (7) Phoenix 625 0.6 % 10/24/1996 and 4/16/1999 2023 and 2027 Dollar Tree (6) Houston and Phoenix 537 0.5 % 8/10/1999, 6/29/2001, 11/8/2009, and 12/17/2009 2025, 2025, 2026 and 2027 Total Wine Houston 512 0.5 % 11/27/2018 2029 Paul's Ace Hardware Phoenix 490 0.5 % 3/1/2008 2033 Kroger Co.
(4) Houston and Phoenix 955 0.9 % 11/14/1982, 11/2/1987, 8/24/1996 and 11/3/1996 2027, 2027, 2056 and 2056 Verizon Wireless (5) Houston and Phoenix 952 0.9 % 8/16/1994, 2/1/2004, 1/27/2006 and 5/1/2014 2024, 2024, 2028 and 2038 Alamo Drafthouse Cinema Austin 740 0.7 % 2/1/2012 2031 Total Wine Houston 564 0.5 % 11/27/2018 2029 Dollar Tree (6) Houston and Phoenix 543 0.5 % 8/10/1999, 6/29/2001, 11/8/2009, and 12/17/2009 2025, 2025, 2026 and 2027 Paul's Ace Hardware Phoenix 490 0.5 % 3/1/2008 2033 Kroger Co.
An additional 25 of our wholly-owned properties are located in the greater Phoenix metropolitan statistical area and represent 41% of our revenue for the year ended December 31, 2022. According to the United States Census Bureau, Houston and Phoenix ranked fifth and tenth, respectively, in the largest United States metropolitan statistical areas as of December 31, 2021.
An additional 26 of our wholly-owned properties are located in the greater Phoenix metropolitan statistical area and represent 42% of our revenue for the year ended December 31, 2023. According to the United States Census Bureau, Houston and Phoenix ranked fifth and twelfth, respectively, in the largest United States metropolitan statistical areas as of December 31, 2023.
(2) Austin, Houston and Phoenix 2,214 2.2 % 5/8/1991, 7/1/2000, 4/1/2014, 4/1/2014 and 10/19/16 2024, 2025, 2025, 2026 and 2034 Frost Bank Houston 2,027 2.0 % 7/1/2014 2024 Newmark Real Estate of Houston LLC Houston 1,285 1.3 % 10/1/2015 2026 Bashas' Inc.
(2) Austin and Phoenix 2,214 2.1 % 5/8/1991, 7/1/2000, 4/1/2014, 4/1/2014 and 10/19/16 2024, 2025, 2025, 2026 and 2034 Frost Bank Houston 2,067 1.9 % 7/1/2014 2029 Newmark Real Estate of Houston LLC Houston 1,311 1.2 % 10/1/2015 2026 Bashas' Inc.
Location of Properties Of our 57 wholly-owned properties, 14 are located in the greater Houston metropolitan statistical area. These properties represent 24% of our revenue for the year ended December 31, 2022.
Location of Properties Of our 55 wholly-owned properties, 12 are located in the greater Houston metropolitan statistical area. These properties represent 25% of our revenue for the year ended December 31, 2023.
The annualized rental revenue for the lease that commenced on April 16, 1999, and is scheduled to expire in 2023, was $474,000, which represents approximately 0.5% of our total annualized base rental revenue. 25 Table of Contents Lease Expirations The following table lists, on an aggregate basis, all of our consolidated scheduled lease expirations over the next 10 years.
The annualized rental revenue for the lease that commenced on November 8, 2009, and is scheduled to expire in 2027, was $156,000, which represents approximately 0.1% of our total annualized base rental revenue. 24 Table of Contents Lease Expirations The following table lists, on an aggregate basis, all of our consolidated scheduled lease expirations over the next 10 years.
Dallas 483 0.5 % 12/15/2000 2027 Regus Corporation Houston 469 0.5 % 5/23/2014 2025 $ 15,514 15.3 % (1) Annualized Base Rental Revenues represents the monthly base rent as of December 31, 2022 for each applicable tenant multiplied by 12.
Dallas 483 0.5 % 12/15/2000 2027 Regus Corporation Houston 479 0.4 % 5/23/2014 2025 Capital Area Multispecialty Providers Austin 451 0.4 % 5/23/2014 2026 $ 15,477 14.4 % (1) Annualized Base Rental Revenues represents the monthly base rent as of December 31, 2023 for each applicable tenant multiplied by 12.
BLVD also accounted for 16.0% of our real estate assets, net of accumulated depreciation, for the year ended December 31, 2022. As of December 31, 2022, approximately $157.5 million of our total debt of $626.0 million was secured by seven of our properties with a combined net book value of $243.1 million.
BLVD also accounted for 15.9% of our real estate assets, net of accumulated depreciation, for the year ended December 31, 2023. As of December 31, 2023, approximately $136.7 million of our total debt of $640.5 million was secured by five of our properties with a combined net book value of $212.3 million.
(2) Whitestone 5,060,899 94 % $ 102,373 $ 21.52 (1) Calculated as the tenant’s actual December 31, 2022 base rent (defined as cash base rents including abatements) multiplied by 12. Excludes vacant space as of December 31, 2022.
(2) Whitestone 4,995,190 94 % $ 106,974 $ 22.78 (1) Calculated as the tenant’s actual December 31, 2023 base rent (defined as cash base rents including abatements) multiplied by 12. Excludes vacant space as of December 31, 2023.
Item 2. Properties. General As of December 31, 2022, we wholly-owned 57 commercial properties, including 14 properties in Houston, nine properties in Dallas-Fort Worth, three properties in San Antonio, five properties in Austin, 25 properties in the Scottsdale and Phoenix, Arizona metropolitan areas, and one property in Buffalo Grove, Illinois, a suburb of Chicago.
Item 2. Properties. General As of December 31, 2023, we wholly-owned 55 commercial properties, including 12 properties in Houston, nine properties in Dallas-Fort Worth, three properties in San Antonio, five properties in Austin, and 26 properties in the Scottsdale and Phoenix, Arizona metropolitan areas. Our tenants consist of national, regional and local businesses.
Annualized Base Rent GLA as of December 31, 2022 Number of Approximate Percent of Amount Percent of Year Leases Square Feet Total (in thousands) Total 2023 444 724,986 14.3 % $ 14,920,771 14.6 % 2024 223 796,603 15.7 % 17,128,443 16.7 % 2025 230 833,840 16.5 % 16,407,861 16.0 % 2026 156 526,397 10.4 % 11,763,934 11.5 % 2027 175 585,685 11.6 % 13,087,078 12.8 % 2028 87 359,257 7.1 % 7,674,148 7.5 % 2029 44 243,194 4.8 % 5,113,615 5.0 % 2030 30 90,498 1.8 % 2,821,942 2.8 % 2031 25 127,524 2.5 % 3,458,066 3.4 % 2032 27 119,566 2.4 % 2,743,398 2.7 % Total 1,441 4,407,550 87.1 % $ 95,119,256 93.0 % Insurance We believe that we have property and liability insurance with reputable, commercially rated companies.
Annualized Base Rent GLA as of December 31, 2023 Number of Approximate Percent of Amount Percent of Year Leases Square Feet Total (in thousands) Total 2024 460 818,659 16.4 % $ 17,586,663 16.4 % 2025 231 821,892 16.5 % 16,906,175 15.8 % 2026 187 605,398 12.1 % 13,445,391 12.6 % 2027 172 601,031 12.0 % 14,308,142 13.4 % 2028 165 570,799 11.4 % 13,634,675 12.7 % 2029 79 444,024 8.9 % 9,715,921 9.1 % 2030 38 113,300 2.3 % 3,695,021 3.5 % 2031 31 140,975 2.8 % 3,959,087 3.7 % 2032 30 143,183 2.9 % 3,555,790 3.3 % 2033 22 135,856 2.7 % 2,860,072 2.7 % Total 1,415 4,395,117 88.0 % $ 99,666,937 93.2 % Insurance We believe that we have property and liability insurance with reputable, commercially rated companies.
Removed
The annualized rental revenue for the lease that commenced on November 8, 2009, and is scheduled to expire in 2027, was $156,000, which represents approximately 0.2% of our total annualized base rental revenue. (7) As of December 31, 2022, we had two leases with the same tenant occupying space at properties located in Phoenix.
Removed
The annualized rental revenue for the lease that commenced on October 24, 1996, and is scheduled to expire in 2027, was $151,000, which represents approximately 0.1% of our total annualized base rental revenue.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−0 removed1 unchanged
Biggest changeWhile the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity. See Note 16 Commitments and Contingencies to the accompanying consolidated financial statements for more information.
Biggest changeWhile the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity. See Note 16 Commitments and Contingencies to the accompanying consolidated financial statements for more information. Item 4. Mine Safety Disclosures.
Added
Not applicable. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn March 1, 2023 , the closing price of our common shares reported on the NYSE was $ 9.37 per share.
Biggest changeOn March 1, 2024, the closing price of our common shares reported on the NYSE was $12.22 per share. Our current quarterly distribution is $0.12 per share. On March 5, 2024, we announced an increase in our quarterly distribution to $0.12375 per share and OP unit, beginning with the April 2024 distribution.
The performance graph and related information shall not be deemed “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent the Company specifically incorporates it by reference into such filing. 27 Table of Contents Item 6. Reserved
The performance graph and related information shall not be deemed “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent the Company specifically incorporates it by reference into such filing. 26 Table of Contents Item 6. Reserved
The graph assumes that the value of the investment in our common shares and in the S&P 500 Index, the FTSE NAREIT Equity REITs Index and the FTSE NAREIT Equity Shopping Centers Index was $100 at December 31, 2017, and all dividends were reinvested.
The graph assumes that the value of the investment in our common shares and in the S&P 500 Index, the FTSE NAREIT Equity REITs Index and the FTSE NAREIT Equity Shopping Centers Index was $100 at December 31, 2018, and all dividends were reinvested.
Performance Graph The following graph compares the total shareholder returns of the Company's common shares to the Standard & Poor's 500 Index (“S&P 500 Index”), the Financial Times Stock Exchange (“FTSE”) National Association of Real Estate Investment Trusts (“NAREIT”) Equity REITs Index (“FTSE NAREIT Equity REITs Index”), and to the FTSE NAREIT Equity Shopping Centers Index from December 31, 2017 to December 31, 2022.
Performance Graph The following graph compares the total shareholder returns of the Company's common shares to the Standard & Poor's 500 Index (“S&P 500 Index”), the Financial Times Stock Exchange (“FTSE”) National Association of Real Estate Investment Trusts (“NAREIT”) Equity REITs Index (“FTSE NAREIT Equity REITs Index”), and to the FTSE NAREIT Equity Shopping Centers Index from December 31, 2018 to December 31, 2023.
Item 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information Common Shares Our common shares are traded on the NYSE under the ticker symbol “WSR.” As of March 1, 2023, we had 49,424,019 common shares of beneficial interest outstanding held by a total of 812 shareholders of record.
Item 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information Common Shares Our common shares are traded on the NYSE under the ticker symbol “WSR.” As of March 1, 2024, we had 49,958,381 common shares of beneficial interest outstanding held by a total of 762 shareholders of record.
Our current quarterly distribution target is $0.12 per share, however, our future payment of distributions, if any, will be at the discretion of our board of trustees and will depend upon numerous factors, including our cash flow, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code, the terms and conditions of our Note Agreement, and other factors that our board of trustees deems relevant.
Our future payment of distributions, if any, will be at the discretion of our board of trustees and will depend upon numerous factors, including our cash flow, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code, the terms and conditions of our Note Agreement, and other factors that our board of trustees deems relevant.
The closing price of our common shares on December 30, 2017 (on which the graph is based) was $14.41. The past shareholder return shown on the following graph is not necessarily indicative of future performance.
The closing price of our common shares on December 31, 2018 (on which the graph is based) was $12.26. The past shareholder return shown on the following graph is not necessarily indicative of future performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

94 edited+24 added−27 removed109 unchanged
Biggest changeWe have used and anticipate using net proceeds from common shares issued pursuant to the 2022 equity distribution agreements for general corporate purposes, which may include acquisitions of additional properties, the repayment of outstanding indebtedness, capital expenditures, the expansion, redevelopment and/or re-tenanting of properties in our portfolio, working capital and other general purposes. 33 Table of Contents Debt Debt consisted of the following as of the dates indicated (in thousands): December 31, Description 2022 2021 Fixed rate notes $100.0 million, 1.73% plus 1.35% to 1.90% Note (1) $ — $ 100,000 $165.0 million, 2.24% plus 1.35% to 1.90% Note (1) — 165,000 $265.0 million, 3.18% plus 1.45% to 2.10% Note, due January 31, 2028 (2) 265,000 — $80.0 million, 3.72% Note, due June 1, 2027 80,000 80,000 $19.0 million 4.15% Note, due December 1, 2024 18,016 18,358 $20.2 million 4.28% Note, due June 6, 2023 17,375 17,808 $14.0 million 4.34% Note, due September 11, 2024 12,709 12,978 $14.3 million 4.34% Note, due September 11, 2024 13,520 13,773 $15.1 million 4.99% Note, due January 6, 2024 13,635 13,907 $2.6 million 5.46% Note, due October 1, 2023 2,236 2,289 $50.0 million, 5.09% Note, due March 22, 2029 50,000 50,000 $50.0 million, 5.17% Note, due March 22, 2029 50,000 50,000 Floating rate notes Unsecured line of credit, LIBOR plus 1.40% to 1.90% (3) — 119,500 Unsecured line of credit, SOFR plus 1.50% to 2.10%, due September 16, 2026 103,500 — Total notes payable principal 625,991 643,613 Less deferred financing costs, net of accumulated amortization (564 ) (771 ) Total notes payable $ 625,427 $ 642,842 (1) Loan was fully paid off on September 16, 2022.
Biggest changeThe decrease of $1,715,000 was primarily the result of the following: Sources of Cash • Net proceeds from sale of properties of $19,847,000 for the year ended December 31, 2023 compared to $33,723,000 for the year ended December 31, 2022; • Cash flow from operations of $47,600,000 for the year ended December 31, 2023 compared to cash flow from operations of $44,431,000 for the year ended December 31, 2022; Uses of Cash • Acquisition of real estate of $25,474,000 compared to $16,992,000; • Acquisition of ground lease of $0 compared to $9,786,000; • Additions to real estate of $17,055,000 compared to $13,659,000; • Escrowed loan repayment on behalf of real estate partnership of $13,633,000 compared to $0. • Payment of dividends and distributions to common shareholders and OP unit holders of $24,016,000 compared to $23,304,000; • Payments of notes payable of $30,945,000 compared to $3,468,000; • Repurchase of common shares of $525,000 compared to $537,000; • Net (proceeds from) payment of credit facility of ($42,500,000) compared to $16,000,000; • Payment of loan originations cost of $0 compared to $3,632,000; • Payment of exchange offering cost of $0 compared to $335,000; and • Payment of finance lease liability of $14,000 compared to $0; We place all cash in short-term, highly liquid investments that we believe provide appropriate safety of principal. 32 Table of Contents Debt Debt consisted of the following as of the dates indicated (in thousands): Description December 31, 2023 December 31, 2022 Fixed rate notes $265.0 million, 3.18% plus 1.45% to 2.10% Note, due January 31, 2028 (1) $ 265,000 $ 265,000 $80.0 million, 3.72% Note, due June 1, 2027 80,000 80,000 $19.0 million 4.15% Note, due December 1, 2024 17,658 18,016 $20.2 million 4.28% Note, due June 6, 2023 — 17,375 $14.0 million 4.34% Note, due September 11, 2024 12,427 12,709 $14.3 million 4.34% Note, due September 11, 2024 13,257 13,520 $15.1 million 4.99% Note, due January 6, 2024 13,350 13,635 $2.6 million 5.46% Note, due October 1, 2023 — 2,236 $50.0 million, 5.09% Note, due March 22, 2029 42,857 50,000 $50.0 million, 5.17% Note, due March 22, 2029 50,000 50,000 $50.0 million, 3.71% plus 1.50% to 2.10% Note, due September 16, 2026 (2) 50,000 — Floating rate notes Unsecured line of credit, SOFR plus 1.50% to 2.10%, due September 16, 2026 96,000 103,500 Total notes payable principal 640,549 625,991 Less deferred financing costs, net of accumulated amortization (377 ) (564 ) Total notes payable $ 640,172 $ 625,427 (1) Promissory note includes an interest rate swap that fixed the SOFR portion of the term loan at an interest rate of 2.16% through October 28, 2022, 2.76% from October 29, 2022 through January 31, 2024, and 3.32% beginning February 1, 2024 through January 31, 2028.
Founded in 1998, we are internally managed with a portfolio of commercial properties in Texas, Arizona and Illinois. In October 2006, we adopted a strategic plan to acquire, redevelop, own and operate Community Centered Properties®. We define Community Centered Properties® as visibly located properties in established or developing culturally diverse neighborhoods in our target markets.
Founded in 1998, we are internally managed with a portfolio of commercial properties in Texas and Arizona. In October 2006, we adopted a strategic plan to acquire, redevelop, own and operate Community Centered Properties®. We define Community Centered Properties® as visibly located properties in established or developing culturally diverse neighborhoods in our target markets.
Because NOI adjusts for general and administrative expenses, depreciation and amortization, equity in earnings of real estate partnership, interest expense, interest dividend and other investment income, provision for income taxes, gain or loss on sale of property from discontinued operations, management fee, net of related expenses, gain or loss on sale or disposal of assets, gain on loan forgiveness, our pro rata share of NOI of equity method investments and net income attributable to noncontrolling interests, 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.
Because NOI adjusts for general and administrative expenses, depreciation and amortization, equity in earnings of real estate partnership, interest expense, interest dividend and other investment income, provision for income taxes, gain or loss on sale of property from discontinued operations, management fee, net of related expenses, gain or loss on sale or disposal of assets, our pro rata share of NOI of equity method investments and net income attributable to noncontrolling interests, 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.
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.
Because Pillarstone OP financial statements as of December 31, 2023 and 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.
We recorded a gain on sale of $5.1 million. On November 14, 2022, we completed the sale of Gilbert Tuscany Village Hard Corner, located in Scottsdale, Arizona, for $2.5 million. We recorded a gain on sale of $0.8 million. On November 10, 2022, we completed the sale of South Richey, located in Houston, Texas, for $13.1 million.
On November 14, 2022, we completed the sale of Gilbert Tuscany Village Hard Corner, located in Scottsdale, Arizona, for $2.5 million. We recorded a gain on sale of $0.8 million. On November 10, 2022, we completed the sale of South Richey, located in Houston, Texas, for $13.1 million. We recorded a gain on sale of $9.9 million.
Our acquisition targets are properties that fit our Community Centered Properties® strategy, primarily in and around Phoenix, Chicago, Dallas-Fort Worth, San Antonio and Houston. We may acquire properties in other high growth cities in the future.
Our acquisition targets are properties that fit our Community Centered Properties® strategy, primarily in and around Phoenix, Dallas-Fort Worth, San Antonio and Houston. We may acquire properties in other high growth cities in the future.
The 2022 Facility is comprised of the following two tranches: • $250.0 million unsecured revolving credit facility with a maturity date of September 16, 2026 (the “2022 Revolver”); • $265.0 million unsecured term loan with a maturity date of January 31, 2028 (“Term Loan”). 35 Table of Contents Borrowings under the 2022 Facility accrue interest (at the Operating Partnership's option) at a Base Rate or an Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based upon our then existing leverage.
The 2022 Facility is comprised of the following two tranches: • $250.0 million unsecured revolving credit facility with a maturity date of September 16, 2026 (the “2022 Revolver”); • $265.0 million unsecured term loan with a maturity date of January 31, 2028 (“Term Loan”). 34 Table of Contents Borrowings under the 2022 Facility accrue interest (at the Operating Partnership's option) at a Base Rate or an Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based upon our then existing leverage.
As discussed in Note 2 to the accompanying consolidated financial statements, pursuant to the term of our $15.1 million 4.99% Note, due January 6, 2024 (see Note 8 to the accompanying consolidated financial statements), which is collateralized by our Anthem Marketplace property, we were required by the lenders thereunder to establish a cash management account controlled by the lenders to collect all amounts generated by our Anthem Marketplace property in order to collateralize such promissory note.
As discussed in Note 2 to the accompanying consolidated financial statements, pursuant to the terms of our $15.1 million 4.99% Note, due January 6, 2024 (see Note 8 to the accompanying consolidated financial statements), which is collateralized by our Anthem Marketplace property, we were required by the lenders thereunder to establish a cash management account controlled by the lenders to collect all amounts generated by our Anthem Marketplace property in order to collateralize such promissory note.
Any distributions we make will be at the discretion of our board of trustees and we cannot provide assurance that our distributions will be made or sustained in the future. 38 Table of Contents On February 10, 2021, the Company announced an increase to its quarterly distribution to $0.1075 per common share and OP units, equal to a monthly distribution of $0.035833, beginning with the March 2021 distribution.
Any distributions we make will be at the discretion of our board of trustees and we cannot provide assurance that our distributions will be made or sustained in the future. 37 Table of Contents On February 10, 2021, the Company announced an increase to its quarterly distribution to $0.1075 per common share and OP units, equal to a monthly distribution of $0.035833, beginning with the March 2021 distribution.
We exclude these costs paid directly by the tenant to third parties on our behalf from revenue recognized and the associated property operating expense. 39 Table of Contents Other property income primarily includes amounts recorded in connection with management fees and lease termination fees. Pillarstone OP paid us management fees for property management, leasing and day-to-day advisory and administrative services.
We exclude these costs paid directly by the tenant to third parties on our behalf from revenue recognized and the associated property operating expense. 38 Table of Contents Other property income primarily includes amounts recorded in connection with management fees and lease termination fees. Pillarstone OP paid us management fees for property management, leasing and day-to-day advisory and administrative services.
We continue to monitor our tenants’ operating performances as well as overall economic trends to evaluate any future negative impact on our renewal rates and rental rates, which could adversely affect our cash flow and ability to make distributions to our shareholders. 29 Table of Contents Property Acquisitions and Dispositions We seek to acquire commercial properties in high-growth markets.
We continue to monitor our tenants’ operating performances as well as overall economic trends to evaluate any future negative impact on our renewal rates and rental rates, which could adversely affect our cash flow and ability to make distributions to our shareholders. 28 Table of Contents Property Acquisitions and Dispositions We seek to acquire commercial properties in high-growth markets.
Our loans contain restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and are secured by deeds of trust on certain of our properties and by assignment of the rents and leases associated with those properties. As of December 31, 2022, we were in compliance with all loan covenants.
Our loans contain restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and are secured by deeds of trust on certain of our properties and by assignment of the rents and leases associated with those properties. As of December 31, 2023, we were in compliance with all loan covenants.
All leases on our properties are classified as operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable.
Revenue Recognition. All leases on our properties are classified as operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable.
Additionally, we recognize lease termination fees in the year that the lease is terminated and collection of the fee is probable. Amounts recorded within other property income are accounted for at the point in time when control of the goods or services transfers to the customer and our performance obligation is satisfied. Equity Method.
Additionally, we recognize lease termination fees in the year that the lease is terminated and collection of the fee is probable. Amounts recorded within other property income are accounted for at the point in time when control of the goods or services transfers to the customer and our performance obligation is satisfied.
If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of December 31, 2022. Accrued Rents and Accounts Receivable.
If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there has been no impairment in the carrying value of our real estate assets as of December 31, 2023. Accrued Rents and Accounts Receivable.
Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2022, and current estimates of fair value may differ significantly from the amounts presented herein. Derivative Instruments and Hedging Activities.
Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2023, and current estimates of fair value may differ significantly from the amounts presented herein. Derivative Instruments and Hedging Activities.
Real Estate Partnership As of December 31, 2022, we, through our investment in Pillarstone OP, owned a majority interest in eight properties that do not meet our Community Centered Property® strategy containing approximately 0.9 million square feet of GLA (the “Pillarstone Properties”).
Real Estate Partnership As of December 31, 2023, we, through our investment in Pillarstone OP, owned a majority interest in eight properties that do not meet our Community Centered Property® strategy containing approximately 0.9 million square feet of GLA (the “Pillarstone Properties”).
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.
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.
(3) For an explanation and reconciliation of property net operating income, a non-GAAP metric, to net income, see “Property Net Operating Income” below. 43 Table of Contents We define “Same Stores” as properties that have been owned for the entire period being compared.
(3) For an explanation and reconciliation of property net operating income, a non-GAAP metric, to net income, see “Property Net Operating Income” below. 41 Table of Contents We define “Same Stores” as properties that have been owned for the entire period being compared.
(3) We define “Same Stores” as properties that have been owned during the entire period being compared. For purposes of comparing the twelve months ended December 31, 2022 to the twelve months ended December 31, 2021, Same Stores include properties owned before January 1, 2021 and not sold before December 31, 2022.
(3) We define “Same Stores” as properties that have been owned during the entire period being compared. For purposes of comparing the twelve months ended December 31, 2023 to the twelve months ended December 31, 2022, Same Stores include properties owned before January 1, 2022 and not sold before December 31, 2023.
The following is a summary of the Company’s leasing activity for the year ended December 31, 2022: Number of Leases Signed GLA Signed Weighted Average Lease Term (2) TI and Incentives per Sq. Ft. (3) Contractual Rent Per Sq. Ft. (4) Prior Contractual Rent Per Sq. Ft.
The following is a summary of the Company’s leasing activity for the year ended December 31, 2023: Number of Leases Signed GLA Signed Weighted Average Lease Term (2) TI and Incentives per Sq. Ft. (3) Contractual Rent Per Sq. Ft. (4) Prior Contractual Rent Per Sq. Ft.
We recorded a gain on sale of $0.8 million. On November 16, 2022, we completed the sale of Desert Canyon, located in Scottsdale, Arizona, for $9.3 million. We recorded a gain on sale of $5.1 million. On November 21, 2022, we completed the sale of Spoerlein Commons Pad, located in Buffalo Grove, Illinois, for $2.2 million.
On November 21, 2022, we completed the sale of Spoerlein Commons Pad, located in Buffalo Grove, Illinois, for $2.2 million. We recorded a gain on sale of $0.7 million. On November 16, 2022, we completed the sale of Desert Canyon, located in Scottsdale, Arizona, for $9.3 million. We recorded a gain on sale of $5.1 million.
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 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.
For purposes of comparing the twelve months ended December 31, 2022 to the twelve months ended December 31, 2021, Non-Same Stores include 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.
For purposes of comparing the twelve months ended December 31, 2023 to the twelve months ended December 31, 2022, Non-Same Stores include 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.
For a better understanding of our accounting policies, you should read Note 2 to our accompanying consolidated financial statements in conjunction with this “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations .” We have described below the critical accounting policies that we believe could impact our consolidated financial statements most significantly. Revenue Recognition.
For a better understanding of our accounting policies, you should read Note 2 to our accompanying consolidated financial statements in conjunction with this “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations .” We have described below the critical accounting policies and estimates that we believe could impact our consolidated financial statements most significantly.
In accordance with Accounting Standards Update (“ASU”) 2014-09 (“Topic 606”) and ASC 610, “ Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets ,” the Company recognizes its investment in Pillarstone OP under the equity method. Development Properties. Land, buildings and improvements are recorded at cost.
In accordance with Accounting Standards Update (“ASU”) 2014-09 (“Topic 606”) and Accounting Standards Codification (“ASC”) 610, “ Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets ,” the Company recognizes its investment in Pillarstone OP under the equity method. Development Properties. Land, buildings and improvements are recorded at cost.
Bank National Association, as co-lead arrangers and joint book runners. 34 Table of Contents The principal of the Series A Notes will begin to amortize on March 22, 2023 with annual principal payments of approximately $7.1 million. The principal of the Series B Notes will begin to amortize on March 22, 2025 with annual principal payments of $10.0 million.
Bank National Association, as co-lead arrangers and joint book runners. 33 Table of Contents The principal of the Series A Notes began to amortize on March 22, 2023 with annual principal payments of approximately $7.1 million. The principal of the Series B Notes will begin to amortize on March 22, 2025 with annual principal payments of $10.0 million.
See Note 4 to the accompanying consolidated financial statements for information related to our guarantees of our real estate partnership’s debt as of December 31, 2022 and 2021.
See Note 4 to the accompanying consolidated financial statements for information related to our guarantees of our real estate partnership’s debt as of December 31, 2023 and 2022.
For purposes of comparing the year ended December 31, 2022 to the year ended December 31, 2021, Same Stores include properties owned during the entire period from January 1, 2021 to December 31, 2022.
For purposes of comparing the year ended December 31, 2023 to the year ended December 31, 2022, Same Stores include properties owned during the entire period from January 1, 2022 to December 31, 2023.
As of December 31, 2022, we owned approximately 81.4% of the total outstanding Pillarstone OP Units, which we account for under the equity method.
As of December 31, 2023, we owned approximately 81.4% of the total outstanding Pillarstone OP Units, which we account for under the equity method.
We review our properties for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The first step of the impairment test is to determine whether an indicator of impairment is present.
We review our properties and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The first step of the impairment test is to determine whether an indicator of impairment is present.
As of December 31, 2022, we had an aggregate of 1,477 tenants. We have a diversified tenant base with our largest tenant comprising only 2.2% of our total revenues for the year ended December 31, 2022. Lease terms for our properties range from less than one year for smaller tenants to more than 15 years for larger tenants.
As of December 31, 2023, we had an aggregate of 1,453 tenants. We have a diversified tenant base with our largest tenant comprising only 2.1% of our total revenues for the year ended December 31, 2023. Lease terms for our properties range from less than one year for smaller tenants to more than 15 years for larger tenants.
The variable interest rate payments are based on SOFR plus 1.60% and a 10 basis point spread adjustment which reflects our new interest rates under our 2022 Facility. The information in the table above reflects our projected interest rate obligations for the floating rate payments based on one-month SOFR as of December 31, 2022, of 4.31%.
The variable interest rate payments are based on SOFR plus 1.60% and a 10 basis point spread adjustment which reflects our new interest rates under our 2022 Facility. The information in the table above reflects our projected interest rate obligations for the floating rate payments based on one-month SOFR as of December 31, 2023, of 5.40%.
Straight line rent adjustments, above/below market rents, and lease termination fees are excluded. 48 Table of Contents Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 For a discussion and comparison of the results of our operations for the year ended December 31, 2021 with the year ended December 31, 2020, refer to “Management's Discussion and Analysis of Financial Conditions and Results of Operations” in our Form 10-K for the year ended December 31, 2021 filed with the SEC on March 11, 2022. 49 Table of Contents Reconciliation of Non-GAAP Financial Measures Funds From Operations (NAREIT) ( “ FFO ” ) and Normalized FFO The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) available to common shareholders computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
Straight line rent adjustments, above/below market rents, and lease termination fees are excluded. 46 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 For a discussion and comparison of the results of our operations for the year ended December 31, 2022 with the year ended December 31, 2021, refer to “Management's Discussion and Analysis of Financial Conditions and Results of Operations” in our Form 10-K for the year ended December 31, 2022 filed with the SEC on March 8, 2023. 47 Table of Contents Reconciliation of Non-GAAP Financial Measures Funds From Operations (NAREIT) ( “ FFO ” ) and Core FFO The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) available to common shareholders computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains or losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
Because Pillarstone OP financial statements as of December 31, 2022 have not been made available to us, we have estimated depreciation and amortization and loss (gain) on sale or disposal of properties or assets of real estate partnership based on the information available to us at the time of this report.
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, loss (gain) on sale or disposal of properties or assets of real estate partnership, and default interest on debt of real estate partnership based on the information available to us at the time of this report.
FFO and Normalized FFO does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.
FFO and Core FFO does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.
As of December 31, 2022, the interest rate on the 2022 Revolver was 5.79%. Based on our current leverage ratio, the revolver has initial interest rate of SOFR plus 1.60% and a 10 basis point credit spread adjustment. In addition, we entered into interest rate swaps to fix the interest rates on the Term Loan.
As of December 31, 2023, the interest rate on the 2022 Revolver was 7.05%. Based on our current leverage ratio, the revolver has initial interest rate of SOFR plus 1.60% and a 10 basis point credit spread adjustment. In addition, we entered into interest rate swaps to fix the interest rates on the Term Loan.
The fair value of the loan guarantee is $0.1 million and $0.1 million as compared to the book value of approximately $0.1 million and $0.1 million a s of December 31, 2022 and 2021, respectively. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2022 and 2021.
The fair value of the loan guarantee is $0 and $0.1 million as compared to the book value of approximately $0 and $0.1 million as of December 31, 2023 and 2022, respectively. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2023 and 2022.
(3) Affiliated company rents are spaces that we lease from Pillarstone OP. Eight lease agreements were terminated on August 23, 2022, and the two remaining leases are scheduled to expire on January 31, 2023 and February 28, 2023.
(3) Affiliated company rents are spaces that we lease from Pillarstone OP. Eight lease agreements were terminated on August 23, 2022, and the two remaining leases expired on January 31, 2023 and February 28, 2023.
As of December 31, 2022, subject to any potential future paydowns or increases in the borrowing base, we have $146.4 million remaining availability under the revolving credit facility. 31 Table of Contents Our ability to access the capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about our Company.
As of December 31, 2023, subject to any potential future paydowns or increases in the borrowing base, we have $104.0 million remaining availability under the revolving credit facility. 30 Table of Contents Our ability to access the capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about our Company.
As of December 31, 2022 and 2021, we had an allowance for uncollectible accounts of $13.8 million and $14.9 million, respectively. For the years ending December 31, 2022, 2021 and 2020, we recorded an adjustment to rental revenue in the amount of $1.2 million, $(0.1) million and $5.6 million, respectively.
As of December 31, 2023 and 2022, we had an allowance for uncollectible accounts of $13.6 million and $13.8 million, respectively. For the years ending December 31, 2023, 2022 and 2021, we recorded an adjustment to rental revenue in the amount of $1.0 million, $1.2 million and $(0.1) million, respectively.
We review the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located including the impact of the COVID-19 pandemic on tenants’ businesses and financial condition.
We review the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located.
The capitalization of such costs ceases when the property, or any completed portion, becomes available for occupancy. For the year ended December 31, 2022, approximately $ 455,000 and $ 281,000 in interest expense and real estate taxes, respectively, were capitalized.
The capitalization of such costs ceases when the property, or any completed portion, becomes available for occupancy. For the year ended December 31, 2023, approximately $ 552,000 and $ 262,000 in interest expense and real estate taxes, respectively, were capitalized.
As of December 31, 2022, subject to any potential future paydowns or increases in the borrowing base, we have $146.4 million remaining availability under the 2022 Revolver.
As of December 31, 2023, subject to any potential future paydowns or increases in the borrowing base, we have $104.0 million remaining availability under the 2022 Revolver.
Included in the average rent per leased square feet mentioned above are Same Store rental revenue decreases of $281,000 and $865,000 from straight-line rent write offs during the years ended December 31, 2022 and December 31, 2021 , respectively, as a result of converting 80 and 59 tenants, respectively, to cash basis accounting.
Included in the average rent per leased square feet mentioned above are Same Store rental revenue increase of $2,000 and decrease of $281,000 from straight-line rent write offs during the years ended December 31, 2023 and December 31, 2022, respectively, as a result of converting 20 and 80 tenants, respectively, to cash basis accounting.
Included in our adjustments to rental revenue for the years ending December 31, 2022 and 2021, were bad debt adjustments of $0.6 million and $0.1 million, respectively, and a straight-line rent reserve adjustments of $0.3 million and $0.9 million, respectively, related to credit loss for the conversion of 80 and 59 tenants, respectively, to cash basis revenue as a result of COVID-19 collectability analysis.
Included in our adjustments to rental revenue for the years ending December 31, 2023 and 2022, were bad debt adjustments of $0.3 million and $0.6 million, respectively, and a straight-line rent reserve adjustments of $(0.002) million and $0.3 million, respectively, related to credit loss for the conversion of 20 and 80 tenants, respectively, to cash basis revenue as a result of collectability analysis.
Although the Texas Margin Tax is not an income tax, FASB ASC 740, “ Income Taxes ” (“ASC 740”) applies to the Texas Margin Tax. As of December 31, 2022, 2021 and 2020, we recorded a margin tax provision of $0.4 million, $0.4 million and $0.4 million, respectively. Fair Value of Financial Instruments.
Although the Texas Margin Tax is not an income tax, Financial Accounting Standards Board (“FASB”) ASC 740, “ Income Taxes ” (“ASC 740”) applies to the Texas Margin Tax. As of December 31, 2023, 2022 and 2021, we recorded a margin tax provision of $0.5 million, $0.4 million and $0.4 million, respectively. Fair Value of Financial Instruments.
Scheduled Lease Expirations We tend to lease space to smaller businesses that desire shorter term leases. As of December 31, 2022, approximately 30% of our GLA was subject to leases that expire prior to December 31, 2024. Over the last three years, we have renewed expiring leases with respect to approximately 70% of our GLA.
Scheduled Lease Expirations We tend to lease space to smaller businesses that desire shorter term leases. As of December 31, 2023, approximately 33% of our GLA was subject to leases that expire prior to December 31, 2025. Over the last three years, we have renewed expiring leases with respect to approximately 68% of our GLA.
The fair value of our long-term debt, consisting of fixed rate secured notes, variable rate secured notes and an unsecured revolving credit facility aggregate to approximately $579.7 million and $643.6 million as compared to the book value of approximately $626.0 million and $643.6 million as of December 31, 2022 and 2021, respectively.
The fair value of our long-term debt, consisting of fixed rate secured notes, variable rate secured notes and an unsecured revolving credit facility aggregate to approximately $612.4 million and $579.7 million as compared to the book value of approximately $640.5 million and $626.0 million as of December 31, 2023 and 2022, respectively.
As of December 31, 2022, $368.5 million was drawn on the 2022 Facility and our unused borrowing capacity was $146.4 million, assuming that we use the proceeds of the 2022 Facility to acquire properties, or to repay debt on properties, that are eligible to be included in the unsecured borrowing base.
As of December 31, 2023, $411.0 million was drawn on the 2022 Facility and our unused borrowing capacity was $104.0 million, assuming that we use the proceeds of the 2022 Facility to acquire properties, or to repay debt on properties, that are eligible to be included in the unsecured borrowing base.
For the year ended December 31, 2021, approximately $414,000 and $291,000 in interest expense and real estate taxes, respectively, were capitalized. For the year ended December 31, 2020, approximately $481,000 and $306,000 in interest expense and real estate taxes, respectively, were capitalized. Acquired Properties and Acquired Lease Intangibles.
For the year ended December 31, 2022, approximately $455,000 and $281,000 in interest expense and real estate taxes, respectively, were capitalized. For the year ended December 31, 2021, approximately $414,000 and $291,000 in interest expense and real estate taxes, respectively, were capitalized. Acquired Properties and Acquired Lease Intangibles.
During the year ended December 31, 2022, our cash provided from operating activities was $44.4 million and our total dividends and distributions paid were $23.3 million. Therefore, we had cash flow from operations in excess of distributions of approximately $21.1 million. The 2022 Facility included a $250 million unsecured borrowing capacity under a revolving credit facility.
During the year ended December 31, 2023, our cash provided from operating activities was $47.6 million and our total dividends and distributions paid were $24.0 million. Therefore, we had cash flow from operations in excess of distributions of approximately $23.6 million. The 2022 Facility included a $250 million unsecured borrowing capacity under a revolving credit facility.
See Note 4 Investment in Real Estate Partnership to the accompanying consolidated financial statements for more information on our accounting treatment of our investment in Pillarstone OP. 30 Table of Contents Leasing Activity As of December 31, 2022, we wholly-owned 57 properties with 5,060,899 square feet of GLA, which were approximately 94% occupied.
See Note 4 Investment in Real Estate Partnership to the accompanying consolidated financial statements for more information on our accounting treatment of our investment in Pillarstone OP. 29 Table of Contents Leasing Activity As of December 31, 2023, we wholly-owned 55 properties with 4,995,190 square feet of GLA, which were approximately 94% occupied.
Amounts in the cash management account are classified as restricted cash. 32 Table of Contents Cash and Cash Equivalents We had cash and cash equivalents and restricted cash of approximately $6,355,000 at December 31, 2022, as compared to $15,914,000 at December 31, 2021.
Amounts in the cash management account are classified as restricted cash. 31 Table of Contents Cash and Cash Equivalents We had cash and cash equivalents and restricted cash of approximately $4,640,000 at December 31, 2023, as compared to $6,355,000 at December 31, 2022.
We recorded a gain on sale of $0.7 million. On November 30, 2022, we completed the sale of Pima Norte, located in Carefree, Arizona, for $3.3 million. We recorded a loss on sale of $4.0 million.
On June 30, 2023, we completed the sale of Westchase, located in Houston, Texas, for $7.8 million. We recorded a gain on sale of $4.6 million. On November 30, 2022, we completed the sale of Pima Norte, located in Carefree, Arizona, for $3.3 million. We recorded a loss on sale of $4.0 million.
If an event of default occurs and is continuing under the 2022 Facility, the lenders may, among other things, terminate their commitments under the 2022 Facility and require the immediate payment of all amounts owed thereunder. 36 Table of Contents As of December 31, 2022, our $157.5 million in secured debt was collateralized by seven properties with a carrying value of $243.1 million.
If an event of default occurs and is continuing under the 2022 Facility, the lenders may, among other things, terminate their commitments under the 2022 Facility and require the immediate payment of all amounts owed thereunder. 35 Table of Contents As of December 31, 2023, our $136.7 million in secured debt was collateralized by five properties with a carrying value of $212.3 million.
However, NOI should not be viewed as a measure of our overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, interest expense, interest income, provision for income taxes and gain or loss on sale or disposition of assets, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties. 51 Table of Contents Below is the calculation of NOI and the reconciliation to net income, which we believe is the most comparable GAAP financial measure (in thousands): Year Ended December 31, PROPERTY NET OPERATING INCOME (“NOI”) 2022 2021 2020 Net income attributable to Whitestone REIT $ 35,270 $ 12,048 $ 6,034 General and administrative expenses 18,066 22,625 21,303 Depreciation and amortization 31,707 28,950 28,303 Equity in earnings of real estate partnership (1) (239 ) (609 ) (921 ) Interest expense 27,193 24,564 25,770 Interest, dividend and other investment income (65 ) (116 ) (278 ) Provision for income taxes 422 385 379 Gain on sale of property from continuing operations (16,950 ) (266 ) (178 ) Gain on sale of property from discontinued operations — (1,833 ) — Management fee, net of related expenses 112 331 334 Loss on disposal of assets, net 192 90 542 Gain on loan forgiveness — — (1,734 ) NOI of real estate partnership (pro rata) (1) 3,023 3,833 4,232 Net income attributable to noncontrolling interests 530 205 117 NOI $ 99,261 $ 90,207 $ 83,903 (1) We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP.
However, NOI should not be viewed as a measure of our overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, interest expense, interest income, provision for income taxes and gain or loss on sale or disposition of assets, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties. 49 Table of Contents Below is the calculation of NOI and the reconciliation to net income, which we believe is the most comparable GAAP financial measure (in thousands): Year Ended December 31, PROPERTY NET OPERATING INCOME (“NOI”) 2023 2022 2021 Net income attributable to Whitestone REIT $ 19,180 $ 35,270 $ 12,048 General and administrative expenses 20,653 18,066 22,625 Depreciation and amortization 32,966 31,707 28,950 (Equity) deficit in earnings of real estate partnership (1) 3,155 (239 ) (609 ) Interest expense 32,866 27,193 24,564 Interest, dividend and other investment income (51 ) (65 ) (116 ) Provision for income taxes 450 422 385 Gain on sale of properties, net (9,006 ) (16,950 ) (266 ) Gain on sale of property from discontinued operations — — (1,833 ) Management fee, net of related expenses 16 112 331 Loss on disposal of assets, net 522 192 90 NOI of real estate partnership (pro rata) (1) 2,553 3,023 3,833 Net income attributable to noncontrolling interests 270 530 205 NOI $ 103,574 $ 99,261 $ 90,207 (1) We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP.
Included in the adjustment to rental revenue for the years ending December 31, 2022 and 2021, was a bad debt adjustment of $0.6 million and $0.1 million, respectively, and a straight-line rent reserve adjustment of $0.3 million and $0.9 million, respectively, related to credit loss for the conversion of 80 and 59 tenants, respectively, to cash basis revenue as a result of COVID-19 collectability analysis. 40 Table of Contents Unamortized Lease Commissions and Loan Costs.
Included in the adjustment to rental revenue for the years ending December 31, 2023, 2022 and 2021, was a bad debt adjustment of $0.3 million, $0.6 million, and $0.1 million, respectively, and a straight-line rent reserve adjustment of $(0.002) million, $0.3 million, and $0.9 million, respectively, related to credit loss for the conversion of 20, 80, and 59 tenants, respectively. 39 Table of Contents Unamortized Lease Commissions and Loan Costs.
The information in the table above reflects our projected obligations for our unsecured credit facility based on our December 31, 2022 balance of $368.5 million.
The information in the table above reflects our projected obligations for our unsecured credit facility based on our December 31, 2023 balance of $411.0 million.
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. 50 Table of Contents Below are the calculations of FFO and Normalized FFO and the reconciliations to net income, which we believe is the most comparable GAAP financial measure (in thousands): Year Ended December 31, FFO (NAREIT) AND NORMALIZED FFO 2022 2021 2020 Net income attributable to Whitestone REIT $ 35,270 $ 12,048 $ 6,034 Adjustments to reconcile to FFO: (1) Depreciation and amortization of real estate assets 31,538 28,806 28,096 Depreciation and amortization of real estate assets of real estate partnership (pro rata) (2) 1,613 1,674 1,673 Loss on disposal of assets, net 192 90 542 Gain on sale of property from continuing operations, net (16,950 ) (266 ) (178 ) Gain on sale of property from discontinued operations — (1,833 ) — Loss (gain) on sale or disposal of properties or assets of real estate partnership (pro rata) (2) — (19 ) 91 Net income attributable to noncontrolling interests 530 205 117 FFO (NAREIT) $ 52,193 $ 40,705 $ 36,375 Early debt extinguishment costs 147 — — Gain on loan forgiveness — — (1,734 ) Normalized FFO $ 52,340 $ 40,705 $ 34,641 (1) Includes pro-rata share attributable to real estate partnership.
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. 48 Table of Contents Below are the calculations of FFO and Core FFO and the reconciliations to net income, which we believe is the most comparable GAAP financial measure (in thousands): Year Ended December 31, FFO (NAREIT) AND CORE FFO 2023 2022 2021 Net income attributable to Whitestone REIT $ 19,180 $ 35,270 $ 12,048 Adjustments to reconcile to FFO: (1) Depreciation and amortization of real estate assets 32,811 31,538 28,806 Depreciation and amortization of real estate assets of real estate partnership (pro rata) (2) 1,613 1,613 1,674 Loss on disposal of assets, net 522 192 90 Gain on sale of properties, net (9,006 ) (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) (2) — — (19 ) Net income attributable to noncontrolling interests 270 530 205 FFO (NAREIT) $ 45,390 $ 52,193 $ 40,705 Early debt extinguishment costs — 147 — Default interest on debt of real estate partnership (pro rata) (1)(2) 1,375 — — Core FFO $ 46,765 $ 52,340 $ 40,705 (1) Includes pro-rata share attributable to real estate partnership.
There was no material impact on the Company's consolidated financial statement as a result of adopting this guidance. 42 Table of Contents Results of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table provides a general comparison of our results of operations for the years ended December 31, 2022 and 2021 (dollars in thousands, except per share data): Year Ended December 31, 2022 2021 Number of properties owned and operated 57 60 Aggregate GLA (sq. ft.) (1) 5,000,653 5,205,966 Ending occupancy rate - operating portfolio (1) 94 % 92 % Ending occupancy rate 94 % 91 % Total revenues $ 139,421 $ 125,365 Total operating expenses 93,068 90,897 Total other expense 10,370 24,272 Income before equity investment in real estate partnership and income tax 35,983 10,196 Equity in earnings of real estate partnership 239 609 Provision for income tax (422 ) (385 ) Income from continuing operations 35,800 10,420 Gain on sale of property from discontinued operations — 1,833 Net income 35,800 12,253 Less: Net income attributable to noncontrolling interests 530 205 Net income attributable to Whitestone REIT $ 35,270 $ 12,048 Funds from operations (2) $ 52,193 $ 40,705 Property net operating income (3) 99,261 90,207 Distributions paid on common shares and OP units 23,304 19,651 Distributions per common share and OP unit $ 0.4675 $ 0.4283 Distributions paid as a percentage of funds from operations 45 % 48 % (1) Excludes (i) new acquisitions, through the earlier of attainment of 90% occupancy or 18 months of ownership, and (ii) properties that are undergoing significant redevelopment or re-tenanting.
There was no material impact on the Company's consolidated financial statement as a result of adopting this guidance. 40 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table provides a general comparison of our results of operations for the years ended December 31, 2023 and 2022 (dollars in thousands, except per share data): Year Ended December 31, 2023 2022 Number of properties owned and operated 55 57 Aggregate GLA (sq. ft.) (1) 4,995,190 5,000,653 Ending occupancy rate - operating portfolio (1) 94 % 94 % Ending occupancy rate 94 % 94 % Total revenues $ 146,969 $ 139,421 Total operating expenses 99,583 93,068 Total other expense 24,331 10,370 Income before equity investment in real estate partnership and income tax 23,055 35,983 Equity (deficit) in earnings of real estate partnership (3,155 ) 239 Provision for income tax (450 ) (422 ) Net income 19,450 35,800 Less: Net income attributable to noncontrolling interests 270 530 Net income attributable to Whitestone REIT $ 19,180 $ 35,270 Funds from operations (2) $ 45,390 $ 52,193 Property net operating income (3) 103,574 99,261 Distributions paid on common shares and OP units 24,016 23,304 Distributions per common share and OP unit $ 0.4800 $ 0.4675 Distributions paid as a percentage of funds from operations 53 % 45 % (1) Excludes (i) new acquisitions, through the earlier of attainment of 90% occupancy or 18 months of ownership, and (ii) properties that are undergoing significant redevelopment or re-tenanting.
Our estimated equity in earnings of real estate partnership, which is generated from our 81.4% ownership of Pillarstone OP, decreased $370,000 from $609,000 for the year ended December 31, 2021 to $239,000 for the year ended December 31, 2022.
Our estimated equity in earnings of real estate partnership, which is generated from our 81.4% ownership of Pillarstone OP, decreased $3,394,000 from an equity position of $239,000 for the year ended December 31, 2022 to a deficit of $3,155,000 for the year ended December 31, 2023.
We recorded a loss on sale of $4.0 million. On November 21, 2022, we completed the sale of Spoerlein Commons Pad, located in Buffalo Grove, Illinois, for $2.2 million. We recorded a gain on sale of $0.7 million. On November 16, 2022, we completed the sale of Desert Canyon, located in Scottsdale, Arizona, for $9.3 million.
We recorded a gain on sale of $5.0 million. On November 30, 2022, we completed the sale of Pima Norte, located in Carefree, Arizona, for $3.3 million. We recorded a loss on sale of $4.0 million. On November 21, 2022, we completed the sale of Spoerlein Commons Pad, located in Buffalo Grove, Illinois, for $2.2 million.
On February 22, 2022, the Company announced an increase to its quarterly distribution to 0.12 per commons share and OP unit, equal to a monthly distribution of $0.04, beginning with the April 2022 distribution. During 2022, we paid distributions to our common shareholders and OP unit holders of $23.3 million, compared to $19.7 million in 2021.
On March 5, 2024, the Company announced an increase to its quarterly distribution to $0.12375 per common share and OP unit, equal to a monthly distribution of $0.04125, beginning with the April 2024 distribution. During 2023, we paid distributions to our common shareholders and OP unit holders of $24.0 million, compared to $23.3 million in 2022.
The distributions paid to common shareholders and OP unit holders were as follows (in thousands, except per share data) for the years ended December 31, 2022 and 2021: Common Shares Noncontrolling OP Unit Holders Total Quarter Paid Distributions Per Common Share Amount Paid Distributions Per OP Unit Amount Paid Amount Paid 2022 Fourth Quarter $ 0.1200 $ 5,909 $ 0.1200 $ 83 $ 5,992 Third Quarter 0.1200 5,901 0.1200 88 5,989 Second Quarter 0.1200 5,880 0.1200 92 5,972 First Quarter 0.1075 5,268 0.1075 83 5,351 Total $ 0.4675 $ 22,958 $ 0.4675 $ 346 $ 23,304 2021 Fourth Quarter $ 0.1075 $ 5,257 $ 0.1075 $ 83 $ 5,340 Third Quarter 0.1075 4,981 0.1075 83 5,064 Second Quarter 0.1075 4,602 0.1075 83 4,685 First Quarter 0.1058 4,480 0.1058 82 4,562 Total $ 0.4283 $ 19,320 $ 0.4283 $ 331 $ 19,651 Summary of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements.
The distributions paid to common shareholders and OP unit holders were as follows (in thousands, except per share data) for the years ended December 31, 2023 and 2022: Common Shares Noncontrolling OP Unit Holders Total Quarter Paid Distributions Per Common Share Amount Paid Distributions Per OP Unit Amount Paid Amount Paid 2023 Fourth Quarter $ 0.1200 $ 5,930 $ 0.1200 $ 83 $ 6,013 Third Quarter 0.1200 5,928 0.1200 83 6,011 Second Quarter 0.1200 5,913 0.1200 83 5,996 First Quarter 0.1200 5,913 0.1200 83 5,996 Total $ 0.4800 $ 23,684 $ 0.4800 $ 332 $ 24,016 2022 Fourth Quarter $ 0.1200 $ 5,909 $ 0.1200 $ 83 $ 5,992 Third Quarter 0.1200 5,901 0.1200 88 5,989 Second Quarter 0.1200 5,880 0.1200 92 5,972 First Quarter 0.1075 5,268 0.1075 83 5,351 Total $ 0.4675 $ 22,958 $ 0.4675 $ 346 $ 23,304 Summary of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements.
Our cash flow hedges are determined using Level 2 inputs under ASC 820. Level 2 inputs represent quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; and model-derived valuations whose inputs are observable.
Our cash flow hedges are determined using Level 2 inputs under ASC 820. Level 2 inputs represent quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; and model-derived valuations whose inputs are observable. As of December 31, 2023, we consider our cash flow hedges to be highly effective. Recent Accounting Pronouncements.
Scheduled maturities of our outstanding debt as of December 31, 2022 were as follows (in thousands): Year Amount Due 2023 $ 28,204 2024 63,573 2025 17,143 2026 120,643 2027 97,143 Thereafter 299,285 Total $ 625,991 Capital Expenditures We continually evaluate our properties’ performance and value.
Scheduled maturities of our outstanding debt as of December 31, 2023 were as follows (in thousands): Year Amount Due 2024 $ 63,834 2025 17,143 2026 163,143 2027 97,143 2028 282,143 Thereafter 17,143 Total $ 640,549 Capital Expenditures We continually evaluate our properties’ performance and value.
As of December 31, 2022, we wholly-owned 57 commercial properties consisting of: Consolidated Operating Portfolio • 51 properties that meet our Community Centered Properties® strategy; and containing approximately 5.0 million square feet of GLA and having a total carrying amount (net of accumulated depreciation) of $958.5 million; and Redevelopment, New Acquisitions Portfolio • one wholly owned property, Lake Woodlands Crossing, that meets our Community Centered Properties® strategy containing approximately 0.1 million square feet of GLA and having a total carrying amount (net of accumulated depreciation) of $11.7 million. • five parcels of land held for future development that meet our Community Centered Properties® strategy having a total carrying amount of $ 20.5 million.
As of December 31, 2023, we wholly-owned 55 commercial properties consisting of: Consolidated Operating Portfolio • 50 properties that meet our Community Centered Properties® strategy; and containing approximately 5.0 million square feet of GLA and having a total carrying amount (net of accumulated depreciation) of $970.3 million; and Redevelopment, New Acquisitions Portfolio • five parcels of land held for future development that meet our Community Centered Properties® strategy having a total carrying amount of $21.4 million.
(4) Non-Same Store rental revenue includes Lakeside Market (acquired on July 8, 2021), Anderson Arbor (acquired on December 1, 2021), Dana Park Pad (acquired on December 2, 2022), Lake Woodlands Crossing (acquired on December 21. 2022), Bissonnet/Beltway (sold on October 31, 2022), South Richey (sold on November 10, 2022), Desert Canyon (sold on November 16, 2022), Gilbert Tuscany Village Hard Corner (sold on November 14, 2022), and Pima Norte (sold on November 30, 2022). 44 Table of Contents Operating expenses.
(4) Non-Same Store rental revenue includes Spoerlein Commons (sold on December 20, 2023), Westchase (sold on June 30, 2023), Sunridge (sold on June 30, 2023), Arcadia Towne Center (acquired on June 12, 2023), Lake Woodlands Crossing (acquired on December 21. 2022), Dana Park Pad (acquired on December 2, 2022), Pima Norte (sold on November 30, 2022), Desert Canyon (sold on November 16, 2022), Gilbert Tuscany Village Hard Corner (sold on November 14, 2022), South Richey (sold on November 10, 2022), and Bissonnet/Beltway (sold on October 31, 2022). 42 Table of Contents Operating expenses.
We recorded a gain on sale of $4.4 million. On November 10, 2022, we completed the sale of South Richey, located in Houston, Texas, for $13.1 million. We recorded a gain on sale of $9.9 million. On November 14, 2022, we completed the sale of Gilbert Tuscany Village Hard Corner, located in Scottsdale, Arizona, for $2.5 million.
We recorded a gain on sale of $0.7 million. On November 16, 2022, we completed the sale of Desert Canyon, located in Scottsdale, Arizona, for $9.3 million. We recorded a gain on sale of $5.1 million. On November 14, 2022, we completed the sale of Gilbert Tuscany Village Hard Corner, located in Scottsdale, Arizona, for $2.5 million.
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 and gain on loan forgiveness.
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.
Some of our properties that we own (the “non-core properties”) may not fit our Community Centered Property® strategy, and we may look for opportunities to dispose of these properties as we continue to execute our strategy. On November 30, 2022, we completed the sale of Pima Norte, located in Carefree, Arizona, for $3.3 million.
Some of our properties that we own (the “non-core properties”) may not fit our Community Centered Property® strategy, and we may look for opportunities to dispose of these properties as we continue to execute our strategy. On December 20, 2023 we completed the sale of Spoerlein Commons, located in Buffalo Grove, Illinois, for $7.4 million.
Our leases generally include minimum monthly lease payments and tenant reimbursements for taxes, insurance and maintenance. We completed 321 new and renewal leases during 2022, totaling 932,529square feet and $118.3 million in total lease value. We employed 75 full-time employees as of December 31, 2022.
Our leases generally include minimum monthly lease payments and tenant reimbursements for taxes, insurance and maintenance. We completed 299 new and renewal leases during 2023, totaling 976,767 square feet and $118.9 million in total lease value. We had 79 employees as of December 31, 2023.
We recorded a gain on sale of $9.9 million. On October 31, 2022, we completed the sale of Bissonnet Beltway Plaza, located in Houston, Texas, for $5.4 million. We recorded a gain on sale of $4.4 million. We have not included 2022 sold properties in discontinued operations as they did not meet the definition of discontinued operations.
We recorded a gain on sale of $4.4 million. We have not included 2023 and 2022 sold properties in discontinued operations as they did not meet the definition of discontinued operations.
We based our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Our results may differ from these estimates. Currently, we believe that our accounting policies do not require us to make estimates using assumptions about matters that are highly uncertain.
We based our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Our results may differ from these estimates.
Please refer to Note 4 (Investment in Real Estate Partnership) to the accompanying consolidated financial statements for more information regarding our investment in Pillarstone OP. Gain on sale of property from discontinued operations.
Please refer to Note 4 (Investment in Real Estate Partnership) to the accompanying consolidated financial statements for more information regarding our investment in Pillarstone OP. 44 Table of Contents Same Store net operating income.
(2) Non-Same Store operating and maintenance and real estate taxes includes Lakeside Market (acquired on July 8, 2021), Anderson Arbor (acquired on December 1, 2021), Dana Park Pad (acquired on December 2, 2022), Lake Woodlands Crossing (acquired on December 21. 2022), Bissonnet/Beltway (sold on October 31, 2022), South Richey (sold on November 10, 2022), Desert Canyon (sold on November 16, 2022), Gilbert Tuscany Village Hard Corner (sold on November 14, 2022), and Pima Norte (sold on November 30, 2022).
(2) Non-Same Store rental revenue includes Spoerlein Commons (sold on December 20, 2023), Westchase (sold on June 30, 2023), Sunridge (sold on June 30, 2023), Arcadia Towne Center (acquired on June 12, 2023), Lake Woodlands Crossing (acquired on December 21. 2022), Dana Park Pad (acquired on December 2, 2022), Pima Norte (sold on November 30, 2022), Desert Canyon (sold on November 16, 2022), Gilbert Tuscany Village Hard Corner (sold on November 14, 2022), South Richey (sold on November 10, 2022), and Bissonnet/Beltway (sold on October 31, 2022).
Inflation We anticipate that the majority of our leases will continue to be triple-net leases or otherwise provide that tenants pay for increases in operating expenses and will contain provisions that we believe will mitigate the effect of inflation.
We also managed the day-to-day operations of Pillarstone OP pursuant to a management agreement, which was terminated on August 18, 2022. 27 Table of Contents Market Conditions Inflation We anticipate that the majority of our leases will continue to be triple-net leases or otherwise provide that tenants pay for increases in operating expenses and will contain provisions that we believe will mitigate the effect of inflation.
Our recovery revenue from tenants generally increases as the related operating and real estate tax expenses increase. (3) During the year ended December 30, 2022 and 2021, Same Store bad debt includes an adjustment of $570,000 and $142,000, respectively, from cash basis accounting.
(3) During the year ended December 30, 2023 and 2022, Same Store bad debt includes an adjustment of $340,000 and $570,000, respectively, from cash basis accounting.
The primary components of other expenses (income) for the year ended December 31, 2022 and 2021 are detailed in the table below (in thousands, except percentages): Year Ended December 31, Other Expenses (Income) 2022 2021 Change % Change Interest expense (1) $ 27,193 $ 24,564 $ 2,629 11 % Gain on sale of properties, net (2) (16,950 ) (266 ) (16,684 ) 6272 % Loss on disposal of assets, net 192 90 102 113 % Interest, dividend and other investment income (65 ) (116 ) 51 (44 )% Total other expense $ 10,370 $ 24,272 $ (13,902 ) (57 )% (1) The $2,629,000 increase in interest expense is attributable to a increase in our effective interest rate to 4.07% for the year ended December 31, 2022 as compared to 3.71% for the year ended December 31, 2021, resulting in a $2,319,000 increase in interest expense, and an increase in our average outstanding notes payable balance of $4,389,000 that resulted in $163,000 in increased interest expense.
The primary components of other expenses (income) for the year ended December 31, 2023 and 2022 are detailed in the table below (in thousands, except percentages): Year Ended December 31, Other Expenses (Income) 2023 2022 Change % Change Interest expense (1) $ 32,866 $ 27,193 $ 5,673 21 % Gain on sale of properties, net (2) (9,006 ) $ (16,950 ) 7,944 (47) % Loss on disposal of assets, net 522 $ 192 330 172 % Interest, dividend and other investment income (51 ) (65 ) 14 (22 )% Total other expense $ 24,331 $ 10,370 $ 13,961 135 % (1) The $5,673,000 increase in interest expense is attributable to rising interest rates, which led to an increase in our effective interest rate to 5.00% for the year ended 2023 as compared to 4.07% for the year ended 2022 resulting in an increase of $5,900,000 in interest expense and a decrease in our average outstanding notes payable balance of $1,702,000, resulting in a $69,000 decrease in interest expense and $147,000 of extinguishment of debt costs for 2022 offset the increase in interest expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAll of our financial instruments were entered into for other than trading purposes. 52 Table of Contents Fixed Interest Rate Debt As of December 31, 2022, $522.5 million, or approximately 83%, of our outstanding debt was subject to fixed interest rates, which limit the risk of fluctuating interest rates.
Biggest changeAll of our financial instruments were entered into for other than trading purposes. 50 Table of Contents Fixed Interest Rate Debt As of December 31, 2023, $544.5 million, or approximately 85%, of our outstanding debt was subject to fixed interest rates, which limit the risk of fluctuating interest rates.
Holding other variables constant, a 1% increase or decrease in interest rates would cause an$18.9 million decline or increase in the fair value for our fixed rate debt.
Holding other variables constant, a 1% increase or decrease in interest rates would cause an $15.1 million decline or increase in the fair value for our fixed rate debt.
The impact of a 1% increase or decrease in interest rates on our floating rate debt would result in a decrease or increase, respectively, of annual net income of approximately $1.0 m illion.
The impact of a 1% increase or decrease in interest rates on our floating rate debt would result in a decrease or increase, respectively, of annual net income of approximately $1.0 million.
Our total outstanding fixed interest rate debt has an average effective interest rate as of December 31, 2022 of approximately 5.12% per annum with expirations ranging from 2022 to 2029 (see Note 8 to our accompanying consolidated financial statements for further detail).
Our total outstanding fixed interest rate debt has an average effective interest rate as of December 31, 2023 of approximately 4.70% per annum with expirations ranging from 2024 to 2029 (see Note 8 to our accompanying consolidated financial statements for further detail).
Variable Interest Rate Debt As of December 31, 2022, $103.5 million, or approximately 17%, of our outstanding debt was subject to floating interest rates of SOFR plus 1.50% to 2.10% and not currently subject to a hedge.
Variable Interest Rate Debt As of December 31, 2023, $96.0 million, or approximately 15%, of our outstanding debt was subject to floating interest rates of SOFR plus 1.50% to 2.10% and not currently subject to a hedge.

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