Whitestone REIT's Q3 Net Income Soars 140% on Strong Rentals, Property Sales

TL;DR

**WSR is crushing it with rental income and property sales, but keep an eye on that Pillarstone bankruptcy claim – it's a wild card.**

AI Summary

Whitestone REIT reported a significant increase in net income attributable to shareholders, reaching $18.33 million for the three months ended September 30, 2025, a substantial rise from $7.62 million in the same period of 2024. For the nine months ended September 30, 2025, net income attributable to Whitestone REIT was $27.09 million, up from $19.56 million in 2024. Total revenues for the quarter increased to $41.05 million from $38.63 million year-over-year, driven by a rise in rental revenues to $40.83 million from $38.11 million. The company also reported a substantial gain on the sale of properties, totaling $13.97 million for the quarter and $14.17 million for the nine-month period, significantly contributing to profitability. Operating expenses saw a modest increase to $26.93 million for the quarter from $25.94 million. A key business change involves the ongoing Chapter 11 bankruptcy of Pillarstone Capital REIT, where Whitestone has filed a claim for its redemption of equity investment, with a receivable from partnership redemption of $31.64 million as of September 30, 2025. The company's strategic outlook includes pursuing collection from Pillarstone OP and focusing on its 50 wholly-owned Community Centered Properties.

Why It Matters

Whitestone REIT's impressive 140% surge in Q3 net income, driven by robust rental growth and strategic property sales, signals strong operational execution in a competitive real estate market. This performance could attract investors seeking stable dividend income from REITs, especially given the company's focus on 'Community Centered Properties' which tend to be resilient. The ongoing Pillarstone Capital REIT bankruptcy, however, introduces a notable risk, as the recovery of a $31.64 million receivable remains uncertain, potentially impacting future liquidity and investor confidence. Competitively, Whitestone's ability to generate significant gains from property sales suggests adept portfolio management, setting it apart from peers struggling with asset dispositions.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant outstanding receivable of $31.64 million from the Pillarstone Capital REIT Operating Partnership, which is currently in Chapter 11 bankruptcy. While Whitestone believes the amount collected will exceed the current carrying value, the bankruptcy process introduces uncertainty and potential delays in recovery, as evidenced by the lack of consideration received since January 25, 2024.

Analyst Insight

Investors should consider Whitestone REIT's strong operational performance, particularly its increased rental revenues and significant gains from property sales. However, they should closely monitor developments regarding the Pillarstone Capital REIT bankruptcy and the recovery of the $31.64 million receivable, as this could impact future financial results. A 'wait and see' approach on the Pillarstone situation is prudent before making significant investment decisions.

Financial Highlights

debt To Equity

1.60

revenue

$41.05M

operating Margin

34.37%

total Assets

$1,146.35M

total Debt

$641.63M

net Income

$18.33M

eps

$0.36

gross Margin

79.63%

cash Position

$6.85M

revenue Growth

+6.3%

Revenue Breakdown

Key Numbers

• $18.33M — Net Income Attributable to Whitestone REIT (Q3 2025) (Increased from $7.62M in Q3 2024, a 140% increase.)
• $41.05M — Total Revenues (Q3 2025) (Up from $38.63M in Q3 2024, indicating revenue growth.)
• $13.97M — Gain on Sale of Properties (Q3 2025) (Significant contribution to net income, up from $3.76M in Q3 2024.)
• $31.64M — Receivable from Partnership Redemption (Outstanding amount from Pillarstone OP, subject to bankruptcy proceedings.)
• 51,020,124 — Common Shares Outstanding (As of October 27, 2025, reflecting slight increase from 50,690,163 at Dec 31, 2024.)
• $0.36 — Basic Earnings Per Share (Q3 2025) (Increased from $0.15 in Q3 2024, reflecting higher profitability.)
• $641.63M — Notes Payable (Increased from $631.52M at December 31, 2024, indicating higher debt.)
• $6.85M — Cash and Cash Equivalents (As of September 30, 2025, up from $5.22M at December 31, 2024.)

Key Players & Entities

• Whitestone REIT (company) — Registrant and general partner of Operating Partnership
• Pillarstone Capital REIT (company) — Company in Chapter 11 bankruptcy, owes Whitestone REIT $31.64 million
• New York Stock Exchange (regulator) — Exchange where WSR common shares are registered
• $18.33 million (dollar_amount) — Net income attributable to Whitestone REIT for Q3 2025
• $7.62 million (dollar_amount) — Net income attributable to Whitestone REIT for Q3 2024
• $41.05 million (dollar_amount) — Total revenues for Q3 2025
• $38.63 million (dollar_amount) — Total revenues for Q3 2024
• $13.97 million (dollar_amount) — Gain on sale of properties for Q3 2025
• $31.64 million (dollar_amount) — Receivable from partnership redemption as of September 30, 2025
• September 30, 2025 (date) — End of the reporting period for the 10-Q filing

FAQ

Risk Factors

• Pillarstone Capital REIT Bankruptcy [high — legal]: Whitestone has a significant receivable of $31.64 million from Pillarstone OP, which is undergoing Chapter 11 bankruptcy. The collection of this amount is uncertain and subject to the bankruptcy proceedings, posing a material risk to the company's financial recovery.
• Increased Indebtedness [medium — financial]: Notes payable increased to $641.63 million as of September 30, 2025, from $631.52 million at December 31, 2024. This rise in debt, coupled with potential interest rate fluctuations, could impact profitability and financial flexibility.
• Property Management and Operating Expenses [medium — operational]: Operating expenses increased to $26.93 million for Q3 2025 from $25.94 million in Q3 2024. While modest, continued increases in operating costs without corresponding revenue growth could pressure margins.
• Real Estate Market Fluctuations [medium — market]: As a REIT, Whitestone is exposed to the cyclical nature of the real estate market. Changes in economic conditions, interest rates, and tenant demand can impact rental income, property values, and the ability to dispose of assets favorably.

Industry Context

The REIT sector, particularly those focused on retail and mixed-use properties, is navigating a dynamic environment. Trends include a continued focus on experiential retail, the integration of services, and the importance of community-centric locations. Companies are also managing rising interest rates and evolving tenant demands, emphasizing operational efficiency and strategic portfolio management.

Regulatory Implications

As a publicly traded REIT, Whitestone is subject to SEC regulations and accounting standards (U.S. GAAP). The ongoing bankruptcy of a related entity (Pillarstone) introduces legal and disclosure complexities. Compliance with tax regulations specific to REITs is also critical for maintaining its tax-advantaged status.

What Investors Should Do

1. Monitor Pillarstone OP Bankruptcy Proceedings
2. Analyze Operating Expense Trends
3. Evaluate Debt Levels and Servicing Capacity
4. Assess Contribution of Property Sales to Earnings

Key Dates

• 2025-09-30: Quarter End — Reporting period for Q3 2025 results, showing significant net income growth and a substantial gain on property sales.
• 2025-10-27: Common Shares Outstanding Date — Indicates 51,020,124 common shares outstanding, a slight increase from year-end 2024, impacting EPS calculations.
• 2024-12-31: Previous Fiscal Year End — Baseline for year-over-year comparisons of financial statements, including total assets, liabilities, and equity.
• 2024-01-25: Cessation of Equity Method for Pillarstone OP — Marks the point after which Whitestone ceased using the equity method for its Pillarstone OP investment due to redemption exercise, preceding the current receivable.

Glossary

REIT

Real Estate Investment Trust. A company that owns, operates, or finances income-generating real estate. (Whitestone REIT is structured as a REIT, which has specific tax and operational implications.)

Chapter 11 Bankruptcy

A chapter of the United States Bankruptcy Code that permits a debtor to reorganize its debts and business. (Pillarstone Capital REIT is undergoing Chapter 11, impacting Whitestone's receivable from it.)

Receivable from Partnership Redemption

An amount owed to Whitestone resulting from the redemption of its equity investment in a partnership (Pillarstone OP). (Represents a significant asset ($31.64M) currently tied up in bankruptcy proceedings.)

Community Centered Properties

Whitestone's strategic focus on properties that serve as essential hubs for local communities. (Highlights the company's core business strategy and portfolio focus.)

Section 1031 Like-Kind Exchange

A provision in the U.S. Internal Revenue Code allowing for the deferral of capital gains taxes on the sale of investment property if it is exchanged for a like-kind property. (Explains the use of escrowed funds for property acquisitions in the prior year.)

Noncontrolling Interest

The portion of equity in a subsidiary that is not attributable to the parent company. (Represents minority ownership in Whitestone's Operating Partnership.)

Year-Over-Year Comparison

Whitestone REIT demonstrates strong year-over-year performance in its Q3 2025 filings compared to Q3 2024. Total revenues increased by 6.3% to $41.05 million, primarily driven by a 7.1% rise in rental income. Net income attributable to shareholders saw a dramatic surge of 140%, reaching $18.33 million, significantly boosted by a $13.97 million gain on property sales, compared to $3.76 million in the prior year period. Basic EPS also more than doubled to $0.36. However, total liabilities have increased, with notes payable rising to $641.63 million, and the company faces ongoing uncertainty regarding a $31.64 million receivable from the Pillarstone OP bankruptcy.

Key Financial Figures

• $0.001 — hares of Beneficial Interest, par value $0.001 per share WSR New York Stock Exchan

Filing Documents

• wstr20250930_10q.htm (10-Q) — 2426KB
• ex_856171.htm (EX-31.1) — 15KB
• ex_856172.htm (EX-31.2) — 16KB
• ex_856173.htm (EX-32.1) — 6KB
• ex_856174.htm (EX-32.2) — 6KB
• 0001437749-25-032581.txt ( ) — 9810KB
• wstr-20250930.xsd (EX-101.SCH) — 81KB
• wstr-20250930_cal.xml (EX-101.CAL) — 68KB
• wstr-20250930_def.xml (EX-101.DEF) — 625KB
• wstr-20250930_lab.xml (EX-101.LAB) — 519KB
• wstr-20250930_pre.xml (EX-101.PRE) — 658KB
• wstr20250930_10q_htm.xml (XML) — 1336KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements . 1 Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024 1 Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024 3 Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024 6 Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2025 and 2024 8

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 10 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations . 35 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk . 61 Item 4.

Controls and Procedures

Controls and Procedures . 61

- OTHER INFORMATION

PART II - OTHER INFORMATION Item 1. Legal Proceedings . 62 Item 1A. Risk Factors . 62 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . 63 Item 3. Defaults Upon Senior Securities . 63 Item 4. Mine Safety Disclosures . 63 Item 5. Other Information . 63 Item 6. Exhibits . 63 Exhibit Index 64

Signatures

Signatures 65 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Whitestone REIT and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) September 30, 2025 December 31, 2024 (unaudited) ASSETS Real estate assets, at cost Property $ 1,295,374 $ 1,248,223 Accumulated depreciation ( 259,530 ) ( 246,534 ) Total real estate assets 1,035,844 1,001,689 Cash and cash equivalents 6,848 5,224 Restricted cash — 10,146 Escrows and deposits 4,293 4,006 Accrued rents and accounts receivable, net of allowance for doubtful accounts 34,090 33,820 Receivable from partnership redemption 31,643 31,643 Receivable due from related party 1,327 15,186 Unamortized lease commissions, legal fees and loan costs 17,282 14,693 Prepaid expenses and other assets (1) 4,678 7,805 Finance lease right-of-use assets 10,341 10,427 Total assets $ 1,146,346 $ 1,134,639 LIABILITIES AND EQUITY Liabilities: Notes payable $ 641,626 $ 631,518 Accounts payable and accrued expenses (2) 40,871 40,703 Payable due to related party 1,535 1,577 Tenants' security deposits 9,469 9,295 Dividends and distributions payable 6,974 6,931 Finance lease liabilities 751 781 Total liabilities 701,226 690,805 Commitments and contingencies: — — Equity: Preferred shares, $ 0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding as of September 30, 2025 and December 31, 2024 — — Common shares, $ 0.001 par value per share; 400,000,000 shares authorized; 51,019,286 and 50,690,163 issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 51 51 Additional paid-in capital 639,101 637,946 Accumulated deficit ( 199,141 ) ( 205,557 ) Accumulated other comprehensive income (loss) ( 520 ) 5,713 Total Whitestone REIT shareholders' equity 439,491 438,153 Noncontrolling interest in subsidiary 5,629 5,681 Total equity 445,120 443,834 Total liabilities and equity $ 1,146,346 $ 1,134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) The use of the words "we," "us," "our," "Company" or "Whitestone" refers to Whitestone REIT and our consolidated subsidiaries, except where the context otherwise requires. 1. INTERIM FINANCIAL STATEMENTS The consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2024 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of and for the period ended September 30, 2025 have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information on a basis consistent with the annual audited consolidated financial statements and with the instructions to this Quarterly Report on Form 10 -Q. The consolidated financial statements presented herein reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of Whitestone and our subsidiaries as of September 30, 2025 and December 31, 2024 , and the results of operations for the three and nine month periods ended September 30, 2025 and 2024 , the consolidated statements of changes in equity for the three and nine months ended September 30, 2025 and 2024 and cash flows for the nine months ended September 30, 2025 and 2024 . All of these adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results expected for a full year. The statements should be read in conjunction with the audited consolidated financial statements and the notes thereto which are included in our Annual Report on Form 10 -K for the year ended December 31, 2024 . Business . Whitestone was formed as a real estate investment trust ("REIT") pursuant to the Texas Real Estate Investment Trust Act on August 20, 1998. In

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation. We are the sole general partner of the Operating Partnership and possess full legal control and authority over the operations of the Operating Partnership. As of September 30, 2025 and December 31, 2024 , we owned a majority of the partnership interests in the Operating Partnership. Consequently, the accompanying consolidated financial statements include the accounts of the Operating Partnership. Noncontrolling interest in the accompanying consolidated financial statements represents the share of equity and earnings of the Operating Partnership allocable to holders of partnership interests other than us. Net income or loss is allocated to noncontrolling interests based on the weighted-average percentage ownership of the Operating Partnership during the period. Issuance of additional common shares of beneficial interest in Whitestone (the "common shares") and units of limited partnership interest in the Operating Partnership that are convertible into cash or, at our option, common shares on a one -for- one basis (the "OP units") changes the percentage of ownership interests of both the noncontrolling interests and Whitestone. Estimates regarding Pillarstone OP' s financial condition and results of operations. We relied on the reports furnished by our third -party partners for financial information regarding the Company's investment in Pillarstone OP. As of September 30, 2024, Pillarstone OP's financial statements were unavailable. We estimated its financial condition for the first 25 days of 2024 using the best data available at the time. Equity Method. In compliance 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 previously accounted for its investment in P

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025 (Unaudited) Restricted Cash. During the year ended December 31, 2024 , the Company sold Providence as part of a like-kind exchange under Section 1031 of the Internal Revenue Code. In accordance with exchange requirements, the proceeds were deposited into an escrow account with a Qualified Intermediary ("QI") and were restricted for the acquisition of a replacement property. On December 12, 2024 and May 5, 2025, the escrowed funds held in connection with the Section 1031 like-kind exchange were utilized to acquire Village Shops at Dana Park and San Clemente, respectively, which qualified as replacement properties under the exchange provisions. As of September 30, 2025 , we had no restricted cash. Derivative Instruments and Hedging Activities. We utilize derivative financial instruments, principally interest rate swaps, to manage our exposure to fluctuations in interest rates. We have established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. We recognize our interest rate swaps as cash flow hedges with the effective portion of the changes in fair value recorded in comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Any ineffective portion of a cash flow hedges' change in fair value is recorded immediately into earnings. Our cash flow hedges are determined using Level 2 inputs under ASC 820, " Fair Value Measurements and Disclosures. " 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 in which significant inputs and significant value drivers are observable. A

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