updated 2/28/2011 4:16:16 PM ET 2011-02-28T21:16:16

    Fourth Quarter and 2010 Highlights

    • Operating Portfolio Occupancy Rate Increases Year-Over-Year Four Hundred Basis Points to 86%
    • FFO-Core Year-Over-Year- Increased 17.6%; Net Income for 2010 was $1.6 million
    • Company Acquires Two Community Centers Below Replacement Cost
    • Acquisition Pipeline Remains in Excess of $300 Million

    HOUSTON, Feb. 28, 2011 (GLOBE NEWSWIRE) -- Whitestone REIT (NYSE-Amex:WSR) – ("Whitestone"), a fully integrated real estate company that owns, operates and re-develops Community Centered PropertiesTM, which are visibly located properties in established or developing culturally diverse neighborhoods, announced its financial results for fourth quarter and full year ended December 31, 2010.

    "Our Community Centered Property, small space business model continues to deliver, strong upwardly trending operating results," said James C. Mastandrea, Whitestone's Chairman and Chief Executive Officer. "Occupancy is increasing, revenues are growing, and the rent premium we receive on spaces that are less than 3,000 square feet continues to increase. Our focus on service-oriented tenants in multi-cultural communities distinguishes us in our industry. Our pipeline of acquisitions is expanding as we seek to replicate value-add deals similar to our two recent off-market acquisitions, which we acquired below replacement cost in the fall of 2010. Our 2011 growth initiatives, in addition to our focus on acquisitions that expand our geographic footprint, include adding tenants to create thriving business Communities within each of our centers and redevelopment projects that enhance the value of our core assets."

    Highlights: Fourth Quarter 2010 Compared to Fourth Quarter 2009*:

    *2010 and 2009 results, except Funds From Operations ("FFO")-Core, include in income a portion of an insurance settlement for damages to the Company's Houston communities from Hurricane Ike, which was $0.6 million, or $0.08 per diluted common share and operating partnership ("OP") unit, in 2010, and $1.2 million, or $0.24 per diluted common share and OP unit, in 2009.  

    • FFO-Core increased 17.6%, or approximately $0.3 million, to $2.0 million versus $1.7 million for the same period in 2009. FFO-Core per diluted common share and OP unit was $0.28, as compared to $0.33 per diluted common share and OP unit, for the same period in 2009. FFO-Core per diluted common share and OP unit was impacted in 2010 by the issuance of 2.2 million shares in August 2010 in connection with the Company's initial public offering ("IPO"), and by the subsequent use of IPO proceeds for acquisitions. FFO-Core excludes the insurance settlement referenced above. Acquisition costs of approximately $35,000 and $15,000 were also excluded from FFO-Core in 2010 and 2009, respectively.
    • FFO was $2.6 million, or $0.35 per diluted common share and OP unit, as compared to $2.9 million or $0.57 per diluted common share and OP unit for the same period in 2009. This includes the income recognized from the insurance settlement referenced above.
    • Property net operating income ("NOI") increased 4.3% to $4.9 million versus $4.7 million for the same period in 2009. The income recognized from the insurance settlement is not included in property NOI.
    • Net income attributable to Whitestone REIT was $0.5 million, or $0.10 per diluted common share, compared to $0.7 million or $0.21 per diluted common share for the same period in 2009.  This includes the income from the insurance settlement referenced above.
    • The Company declared a quarterly cash dividend of $0.285 per common share and OP unit, paid in three equal installments of $0.095 in January, February and March 2011. The dividend rate has remained the same since the dividend paid on July 8, 2010. The Company has consistently declared dividends for 18 consecutive quarters since Whitestone became internally managed in October 2006. (Subsequent to the fourth quarter, the Company also declared its second quarter cash dividend of $0.285 per common share and OP unit, paid in three equal installments of $0.095 in April, May and June 2011.)

    Highlights: Fiscal Year 2010

    Whitestone completed its IPO in August 2010, in which it sold 2.2 million Class B common shares for $12.00 per share. Net proceeds from the offering were approximately $23.0 million, which the Company is utilizing primarily to acquire value-add Community Centered PropertiesTM in its target markets.  

    FFO-Core per diluted common share and OP unit increased by 2.3% to $1.35 per diluted common share and OP unit in 2010. This compares to $1.32 per diluted common share and OP unit in the same period in 2009. FFO-Core excludes the insurance settlement referenced above which was $0.6 million, or $0.10 per diluted common share and OP unit in 2010, and $1.9 million, or $0.38 per diluted common share and OP unit, in 2009. Acquisition costs of approximately $46,000 and $75,000 were also excluded from FFO-Core in 2010 and 2009, respectively.
     

    Whitestone's FFO was $8.4 million, or $1.44 per diluted common share and OP unit, for 2010 as compared to $8.6 million, or $1.68 per diluted common share and OP unit, for the same period in 2009.  The Company's 2010 per share results were impacted by the additional shares issued at the time of the IPO and by the subsequent use of its proceeds for new acquisitions. The income from the insurance settlement referenced above was $0.6 million, or $0.10 per diluted common share and OP unit in 2010, and $1.9 million, or $0.38 per diluted common share and OP unit, in 2009. Acquisition costs of approximately $46,000 and $75,000 were also excluded from FFO in 2010 and 2009, respectively.
     

    Leasing Highlights: Fourth Quarter and Fiscal Year 2010

    The Company's Operating Portfolio Occupancy Rate at December 31, 2010 increased 400 basis points to 86% as compared to 82% at December 31, 2009. The Company defines Operating Portfolio Occupancy Rate as physical occupancy on all properties excluding new acquisitions and properties which are undergoing significant redevelopment or re-tenanting. Total physical property occupancy, which includes properties under re-development, undergoing significant re-tenanting and recent acquisitions, was 84% as of December 31, 2010.   

    As previously communicated, the Company signed 181,000 square feet in new and renewal leases during the quarter ended December 31, 2010, primarily with tenants that required less than 3,000 square feet in multi-cultural neighborhoods, which allows for premium rents.
     

    The Company experienced robust leasing activity in 2010 as represented by:
     

    • a 41% increase in total lease value of new and renewal leases signed: $31.9 million in 2010 versus $22.7 million in 2009;
    • an 18% increase in the number of new and renewal leases signed: 298 in 2010 versus 252 in 2009; and
    • a 12% growth in the square footage of new and renewal leases signed: 716,000 for 2010 versus 639,000 in 2009.

    Community Centered PropertiesTM Portfolio Statistics

    Whitestone currently owns 38 Community Centered PropertiesTM with approximately 3.2 million square feet of leasable space located in five of the top markets in the USA in terms of population growth: Houston, Dallas, San Antonio, Phoenix and Chicago. 

    The Company's strategic efforts target entrepreneurial tenants who provide services to their respective surrounding community. These tenants tend to occupy smaller spaces (less than 3,000 square feet), and as of December 31, 2010, provide a 57% premium rental rate compared to Whitestone's larger space tenants. The Company currently services 792 tenants.  No single tenant accounted for more than 2% of the Company's annualized revenue as of December 31, 2010. 
     

    Balance Sheet

    Whitestone maintains liquidity and financial flexibility in cash balances and unmortgaged properties. The Company had 15 unencumbered properties as of December 31, 2010, with an undepreciated costs basis of $55 million. Whitestone's total undepreciated value of real estate assets and indebtedness were $205 million and $101 million, respectively, as of December 31, 2010.  

    The Company has no real estate debt maturing prior to 2013, and as of December 31, 2010, 75% of the Company's total indebtedness was fixed-rate debt. The blended interest rate for our fixed and variable rate debt was 5.6% as of December 31, 2010. For the fourth quarter of 2010, the Company's interest coverage ratio (EBITDA/Interest Expense) was 2.5:1.

    Supplemental Financial Information

    Further details regarding Whitestone REIT's results of operations, communities and tenants can be accessed at the Company's website at www.whitestonereit.com.  

    Listen via Webcast

    Interested parties can listen to the earnings conference call which will be held today after the market closes, at 5:00 p.m. (Eastern Time) with management live on the internet through the Investor Relations section of the Company's website, www.whitestonereit.com, using the News/Events - Press Releases tab. The call is also accessible via telephone by dialing 1-(877) 407-9039 for domestic participants or 1-(201) 689-8470 for international participants and entering the passcode 366099. Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. Those dialing in should call in at least ten minutes prior to the start.  

    The conference call will be recorded and a telephone replay will be available through March 14, 2011, by dialing 1-(877) 870-5176 for domestic participants or 1-(858) 384-5517 for international participants and entering the passcode 366099. The replay of the call will be available on the Company's website.
     

    The earnings release and supplemental data package will be located in the Investor Relations section of the website on the News/Events - Press Releases tab. For those without internet access, the fourth quarter 2010 earnings release and supplemental financial package will be available by mail upon request. To receive a copy, please call the Company's Investor Relations line at (713) 435-2221. 
     

    About Whitestone REIT

    Whitestone REIT (NYSE-Amex:WSR) is a fully integrated real estate company that owns, operates and re-develops Community Centered PropertiesTM, which are visibly located properties in established or developing culturally diverse neighborhoods.  Whitestone focuses on value-creation in its Community Centers, as it markets, leases and manages its Centers to match tenants with the shared needs of surrounding neighborhoods.  Operations are structured for providing cost-effective service to local service-oriented smaller space tenants (less than 3,000 square feet). Whitestone has a diverse tenant base concentrated on service offerings including medical, education and casual dining. The largest of its 792 tenants comprises less than 2% of its rental revenues. Headquartered in Houston, Texas and founded in 1998, the Company is internally managed with a portfolio of commercial properties in Texas, Arizona and Illinois. For additional information about the Company, please visit www.whitestonereit.com. The Investor Relations section of the Company's website has links to SEC filings, news releases, financial reports and investor newsletters.

    The Whitestone REIT logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7293

    Forward-Looking Statements

    Statements included herein that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, which by their nature, involve known and unknown risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed or implied by these statements. Reference is made to the Company's regulatory filings with the Securities and Exchange Commission for information or factors that may impact the Company's performance.

     

    Whitestone REIT and Subsidiaries

    CONSOLIDATED BALANCE SHEETS

    ( in thousands, except share data)
         
      December 31,
      2010 2009
    ASSETS    
    Real estate assets, at cost:    
    Property  $204,954  $192,832
    Accumulated depreciation    (39,556) (34,434)
    Total real estate assets 165,398 158,398
    Cash and cash equivalents 17,591 6,275
    Escrows and acquisition deposits 4,385 8,155
    Accrued rent and accounts receivable, net of allowance for doubtful accounts 4,726 4,514
    Unamortized lease commissions and loan costs 3,598 3,973
    Prepaid expenses and other assets 747 685
    Total assets $196,445 $182,000
    LIABILITIES AND EQUITY    
    Liabilities:    
    Notes payable $100,941 $101,782
    Accounts payable and accrued expenses 7,292 9,954
    Tenants' security deposits 1,796 1,630
    Dividends and distributions payable 2,133 1,775
    Total liabilities 112,162 115,141
    Commitments and Contingencies:    
    Equity:    
    Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding at December 31, 2010 and December 31, 2009, respectively
    Class A common shares, $0.001 par value per share; 50,000,000 shares authorized; 3,471,187 and 3,445,769 issued and outstanding as of  December 31, 2010 and December 31, 2009, respectively 3 10
    Class B common shares, $0.001 par value per share; 350,000,000 shares authorized; 2,200,000 and 0 issued and outstanding as of December 31, 2010 and December 31, 2009, respectively 2
     Additional paid-in capital 93,357 69,952
     Accumulated deficit (30,654) (26,372)
     Total Whitestone REIT shareholders' equity 62,708 43,590
     Noncontrolling interest in subsidiary 21,575 23,269
     Total equity 84,283 66,859
     Total liabilities and equity $196,445 $182,000
    Whitestone REIT and Subsidiaries
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
    (in thousands, except per share data)
           
      Year Ended December 31,
       2010 2009 2008
    Property revenues      
    Rental revenues $25,901 $26,449 $24,999
    Other revenues 5,632 6,236 6,202
    Total property revenues 31,533 32,685 31,201
           
    Property expenses      
    Property operation and maintenance 8,358 8,519 8,862
    Real estate taxes 3,925 4,472 3,973
    Total property expenses 12,283 12,991 12,835
           
    Other expenses (income)      
    General and administrative 4,992 6,072 6,708
    Depreciation & amortization 7,225 6,958 6,859
    Involuntary conversion (558) (1,542) 358
    Interest expense 5,620 5,749 5,857
    Interest income (28) (36) (182)
    Total other expense 17,251 17,201 19,600
           
    Income (loss) from continuing operations before loss on disposal of assets

     and income taxes
    1,999 2,493 (1,234)
           
    Provision for income taxes (264) (222) (219)
    Loss on sale or disposal of assets (160) (196) (223)
    Income (loss) from continuing operations 1,575 2,075 (1,676)
           
    Loss from discontinued operations (188)
    Gain on sale of properties from discontinued operations 3,619
    Net income 1,575 2,075 1,755
           
    Less: Net income attributable to noncontrolling interests 470 733 621
           
    Net income attributable to Whitestone REIT $1,105 $1,342 $1,134
     
    Whitestone REIT and Subsidiaries
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
    (in thousands, except per share data)
           
      Year Ended December 31,
      2010 2009 2008
           
    Earnings per share - basic      
    Income (loss) from continuing operations attributable to Whitestone REIT  excluding amounts attributable to unvested restricted shares $0.27 $0.41 $(0.32)
    Income from discontinued operations attributable to Whitestone REIT 0.67
    Net income attributable to common shareholders excluding amounts      
    attributable to unvested restricted shares $0.27 $0.41 $0.35
           
    Earnings per share - diluted      
    Income (loss) from continuing operations attributable to Whitestone REIT      
    excluding amounts attributable to unvested restricted shares $0.27 $0.40 $(0.32)
    Income from discontinued operations attributable to Whitestone REIT 0.67
    Net income attributable to common shareholders excluding amounts attributable      
    to unvested restricted shares $0.27 $0.40 $0.35
           
    Weighted average number of common shares outstanding:      
    Basic 4,012 3,236 3,277
    Diluted 4,041 3,302 3,277
           
    Dividends declared per Class A common share $1.19 $1.35 $1.59
    Dividends declared per Class B common share (1) 0.57
           
    Condensed Consolidated Statements of Comprehensive Income      
           
    Net income $1,575 $2,075 $1,755
    Other comprehensive gain      
    Unrealized gain on cash flow hedging activities 368
    Comprehensive income 1,575 2,075 2,123
           
    Less: Comprehensive income attributable to noncontrolling interests 470 733 759
           
    Comprehensive income attributable to Whitestone REIT $1,105 $1,342 $1,364
           
    (1)  Dividend rate is the same as Class A, but represents a partial year for Class B common shares issued August 26, 2010.      
    Whitestone REIT and Subsidiaries
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
    (in thousands, except per share data)
             
      Three Months Ended December 31, Twelve Months Ended December 31,
      2010 2009 2010 2009
             
    Property revenues        
    Rental revenues $6,601 $6,422 $25,901 $26,449
    Other revenues 1,458 1,532 5,632 6,236
    Total property revenues 8,059 7,954 31,533 32,685
             
    Property expenses        
    Property operation and maintenance 2,285 1,977 8,358 8,519
    Real estate taxes 923 1,245 3,925 4,472
    Total property expenses 3,208 3,222 12,283 12,991
             
    Other expenses (income)        
    General and administrative 1,257 1,469 4,992 6,072
    Depreciation & amortization 1,902 1,799 7,225 6,958
    Involuntary conversion (558) (1,243) (558) (1,542)
    Interest expense 1,410 1,414 5,620 5,749
    Interest income (9) (6) (28) (36)
    Total other expense 4,002 3,433 17,251 17,201
             
    Income from continuing operations before loss on disposal        
    of assets and income taxes 849 1,299 1,999 2,493
             
    Provision for income taxes (51) (56) (264) (222)
    Loss on sale or disposal of assets (47) (138) (160) (196)
    Net income 751 1,105 1,575 2,075
             
    Less: Net income attributable to noncontrolling interests 206 390 470 733
             
    Net income attributable to Whitestone REIT $545 $715 $1,105 $1,342
    Whitestone REIT and Subsidiaries
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
    (in thousands, except per share data)
             
      Three Months

    Ended December 31,
    Twelve Months

    Ended December 31,
      2010 2009 2010 2009
             
    Earnings per share - basic        
    Net income attributable to common shareholders excluding        
    amounts attributable to unvested restricted shares (1) $0.10 $0.22 $0.27 $0.41
             
    Earnings per share - diluted        
    Net income attributable to common shareholders excluding        
    amounts attributable to unvested restricted shares (1) $0.10 $0.21 $0.27 $0.40
             
    Weighted average number of common shares outstanding:        
    Basic 5,479 3,236 4,012 3,236
    Diluted 5,499 3,301 4,041 3,302
             
    Dividends declared per Class A common share $0.2850 $0.3375 $1.1900 $1.3500
    Dividends declared per Class B common share (2) 0.2850 0.5700
             
    (1) The sum of individual quarterly basic and diluted earnings per share amounts may not agree with the year-to-date basic and diluted earning per share amounts as the result of each period's computation being based on the weighted average number of common shares outstanding during that period.



     
    (2)  Dividend rate is the same as Class A, but represents a partial year for Class B common shares issued August 26, 2010.
    Whitestone REIT and Subsidiaries

    RECONCILIATION OF NON-GAAP MEASURES

    (in thousands, except per share and per unit data)
             
      Three Months Ended December 31, Twelve Months Ended December 31,
      2010 2009 2010 2009
    FFO AND FFO-CORE        
    Net income attributable to Whitestone REIT $545 $715 $1,105 $1,342
    Depreciation and amortization of real estate assets 1,767 1,659 6,697 6,347
    Loss on disposal of assets 47 138 160 196
    Net income attributable to noncontrolling interests 206 390 470 733
    FFO $2,565 $2,902 $8,432 $8,618
             
    Acquisition costs $35 $15 $46 $75
    Gain on insurance claim settlement (1) (558) (1,243) (558) (1,934)
    FFO-Core $2,042 $1,674 $7,920 $6,759
             
    FFO PER SHARE AND OP UNIT CALCULATION:        
    Numerator:        
    FFO $2,565 $2,902 $8,432 $8,618
    Dividends paid on unvested restricted Class A common shares (6) (7) (27) (27)
    FFO excluding amounts attributable to unvested restricted        
    Class A common shares 2,559 2,895 8,405 8,591
    FFO-Core excluding amounts attributable to unvested restricted        
    Class A common shares 2,036 1,667 7,893 6,732
             
    Denominator:        
    Weighted average number of total common shares - basic 5,479 3,236 4,012 3,236
    Weighted average number of total noncontrolling        
    OP units - basic 1,815 1,815 1,815 1,815
    Weighted average number of total commons shares and        
    noncontrolling OP units - basic 7,294 5,051 5,827 5,051
             
    Effect of dilutive securities:        
    Unvested restricted shares 20 66 29 66
    Weighted average number of total common shares and        
    noncontrolling OP units - dilutive 7,314 5,117 5,856 5,117
             
    FFO per share and unit - basic $0.35 $0.57 $1.44 $1.70
    FFO per share and unit - diluted $0.35 $0.57 $1.44 $1.68
             
    FFO-Core per share and unit - basic $0.28 $0.33 $1.35 $1.33
    FFO-Core per share and unit - diluted $0.28 $0.33 $1.35 $1.32
             
    (1) $392 included in rental revenues for the twelve months ended December 31, 2009.

     
    Whitestone REIT and Subsidiaries

    RECONCILIATION OF NON-GAAP MEASURES

    (in thousands, except per share and per unit data)
             
      Three Months Ended December 31, Twelve Months Ended December 31,
      2010 2009 2010 2009
             
    PROPERTY NET OPERATING INCOME ("NOI")        
             
    Net income attributable to Whitestone REIT $545 $715 $1,105 $1,342
    General and administrative expenses 1,257 1,469 4,992 6,072
    Depreciation and amortization 1,902 1,799 7,225 6,958
    Involuntary conversion (558) (1,243) (558) (1,542)
    Interest expense 1,410 1,414 5,620 5,749
    Interest income (9) (6) (28) (36)
    Provision for income taxes 51 56 264 222
    Loss on disposal of assets 47 138 160 196
    Net income attributable to noncontrolling interests 206 390 470 733
    NOI $4,851 $4,732 $19,250 $19,694
             
    EARNINGS BEFORE INTEREST, TAX, DEPRECIATION        
    AND AMORTIZATION ("EBITDA")        
             
    Net income attributable to Whitestone REIT $545 $715 $1,105 $1,342
    Depreciation and amortization 1,902 1,799 7,225 6,958
    Involuntary conversion (558) (1,243) (558) (1,542)
    Interest expense 1,410 1,414 5,620 5,749
    Interest income (9) (6) (28) (36)
    Provision for income taxes 51 56 264 222
    Loss on disposal of assets 47 138 160 196
    Net income attributable to noncontrolling interests 206 390 470 733
    EBITDA $3,594 $3,263 $14,258 $13,622
      Three Months Ended
      December 31, September 30, June 30, March 31,
      2010 2010 2010 2010
    Net income attributable to Whitestone REIT $ 545 $ 177 $ 166 $ 217
    Depreciation and amortization 1,902 1,830 1,759 1,734
    Involuntary conversion (558) -- -- --
    Interest expense 1,410 1,401 1,402 1,407
    Interest income (9) (7) (5) (7)
    Provision for income taxes 51 57 102 54
    Loss on disposal of assets 47 72 8 33
    Net income attributable to noncontrolling interests 206 57 89 118
    EBITDA $ 3,594 $ 3,587 $ 3,521 $ 3,556

    Forward-Looking Statements

    Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology, such as "may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include, but are not limited to, the strength of the Company's leasing portfolio and lease renewal activities; the Company's anticipated net income, depreciation and amortization and FFO-Core. 

    The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements: the Company's ability to successfully identify and consummate suitable acquisitions; current adverse market and economic conditions; lease terminations or lease defaults; the impact of competition on the Company's efforts to renew existing leases; changes in the economies and other conditions of the specific markets in which the Company operates; economic and regulatory changes; the success of the Company's real estate strategies and investment objectives; the Company's ability to continue to qualify as a REIT under the Internal Revenue Code; and other factors detailed in our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q and other documents we file with the Securities and Exchange Commission.

    Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

    Non-GAAP Financial Measures

    This release contains the supplemental non-GAAP financial measures of FFO, FFO-Core and NOI. Following are definitions and reconciliations of these metrics to their most comparable GAAP metric.

    FFO: Management believes that FFO is a useful measure of the Company's operating performance. The Company computes FFO as defined by the National Association of Real Estate Investment Trusts, or NAREIT, which states FFO should represent net income (loss) before noncontrolling interest (computed in accordance with GAAP) plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures and excluding gains on the sale of property. Further, other REITs may use different methodologies for calculating FFO and, accordingly, the Company's FFO may not be comparable to other REITs. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented. Management considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, management believes that FFO provides a more meaningful and accurate indication of the Company's performance. In addition, management believes that FFO provides useful information to the investment community about the Company's financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.

    FFO-Core: Management believes that the computation of FFO in accordance with NAREIT's definition includes certain items that are not indicative of the results provided by the Company's operating portfolio and affect the comparability of the Company's period-over-period performance. These items include, but are not limited to, gains and losses on insurance claim settlements and acquisition costs.

    NOI: Management believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to other REITs. Because NOI excludes general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes and loss on sale or disposition of assets, 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. The Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, lease rates and tenant base have on the Company's results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company's property and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes and loss on sale or disposition of assets, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties.


    EBITDA: Management believes that EBITDA is an appropriate supplemental measure of operating performance to net income attributable to Whitestone REIT. The Company defines EBITDA as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes) and general and administrative expenses. Other REITs may use different methodologies for calculating EBITDA, and accordingly, the Company's EBITDA may not be comparable to other REITs. Management believes that EBITDA provides useful information to the investment community about the Company's operating performance when compared to other REITs since EBITDA is generally recognized as a standard measure. However, EBITDA should not be viewed as a measure of the Company's overall financial performance since it does not reflect depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes and loss on sale or disposition of assets, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties.

    CONTACT: Whitestone REIT:
             Anne Gregory, Vice President Marketing & Investor Relations
             (713) 435 2221    ir@whitestonereit.com

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