Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 14, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2020 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Document Transition Report | false | |
Entity File Number | 001-15409 | |
Entity Registrant Name | PILLARSTONE CAPITAL REIT | |
Entity Central Index Key | 0000928953 | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 39-6594066 | |
Entity Address, Address Line One | 2600 South Gessner | |
Entity Address, Address Line Two | Suite 555 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77063 | |
City Area Code | 832 | |
Local Phone Number | 810-0100 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 405,169 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |||
Revenues | ||||||
Rental | $ 2,436 | $ 3,808 | [1] | $ 5,005 | [1] | $ 7,650 |
Transaction and other fees | 4 | 9 | 21 | 23 | ||
Total revenues | 2,440 | 3,817 | 5,026 | 7,673 | ||
Operating expenses | ||||||
Depreciation and amortization | 524 | 796 | 1,075 | 1,559 | ||
Operating and maintenance | 523 | 888 | 1,348 | 1,722 | ||
Real estate taxes | 433 | 645 | 850 | 1,295 | ||
General and administrative | 452 | 187 | 675 | 374 | ||
Management fees | 156 | 224 | 304 | 436 | ||
Total operating expenses | 2,088 | 2,740 | 4,252 | 5,386 | ||
Other expenses | ||||||
Interest expense, net | 210 | 520 | 406 | 1,045 | ||
Loss on disposal of assets | 1 | 4 | 66 | 8 | ||
Total other expenses | 211 | 524 | 472 | 1,053 | ||
Income before income taxes | 141 | 553 | 302 | 1,234 | ||
Provision for income taxes | 38 | (31) | 36 | (98) | ||
Net income | 179 | 522 | 338 | 1,136 | ||
Less: Noncontrolling interest in subsidiary | 393 | 491 | 611 | 1,059 | ||
Net income (loss) attributable to Common Shareholders | $ (214) | $ 31 | $ (273) | $ 77 | ||
Basic income (loss) per Common Share: | ||||||
Net income (loss) available to Common Shareholders (usd per share) | $ (0.53) | $ 0.08 | $ (0.67) | $ 0.19 | ||
Diluted income (loss) per Common Share: | ||||||
Net income (loss) available to Common Shareholders (usd per share) | $ (0.53) | $ 0.01 | $ (0.67) | $ 0.03 | ||
Weighted average number of Common Shares outstanding: | ||||||
Basic (shares) | 405,169 | 405,169 | 405,169 | 405,169 | ||
Diluted (shares) | 405,169 | 2,778,219 | 405,169 | 2,778,219 | ||
Rental | ||||||
Rental revenues | $ 2,185 | $ 3,254 | $ 4,522 | $ 6,519 | ||
Recoveries | 334 | 613 | 614 | 1,250 | ||
Bad debt | (83) | (59) | (131) | (119) | ||
Total rental | $ 2,436 | $ 3,808 | [1] | $ 5,005 | [1] | $ 7,650 |
[1] | Rental Rental revenues $2,185 $3,254 $4,522 $6,519; Recoveries 334 613 614 1,250; Bad debt (83) (59) (131) (119); Total rental $2,436 $3,808 $5,005 $7,650 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 | |
ASSETS | |||
Property | $ 56,205,000 | $ 55,861,000 | |
Accumulated depreciation | (6,331,000) | (5,522,000) | |
Total real estate assets | 49,874,000 | 50,339,000 | |
Cash and cash equivalents | 4,875,000 | 4,624,000 | |
Escrows and utility deposits | 957,000 | 566,000 | |
Accrued rents and accounts receivable, net of allowance for doubtful accounts | 1,426,000 | 1,421,000 | |
Receivable due from related party | 676,000 | 184,000 | |
Unamortized lease commissions and deferred legal cost, net | 585,000 | 685,000 | |
Prepaid expenses and other assets | 159,000 | 62,000 | [1] |
Total assets | 58,552,000 | 57,881,000 | |
Liabilities: | |||
Notes payable | 15,311,000 | 15,434,000 | |
Accounts payable and accrued expenses | 2,068,000 | 2,344,000 | [2] |
Payable due to related party | 1,039,000 | 346,000 | |
Convertible notes payable - related parties | 198,000 | 198,000 | |
Accrued interest payable | 155,000 | 148,000 | |
Tenants' security deposits | 877,000 | 881,000 | |
Total liabilities | 19,648,000 | 19,351,000 | |
Commitments and contingencies | 0 | 0 | |
Shareholders' Equity: | |||
Common Shares - $0.01 par value, 400,000,000 authorized: 443,299 shares issued and 405,169 outstanding at June 30, 2020 and December 31, 2019 | 4,000 | 4,000 | |
Additional paid-in capital | 28,239,000 | 28,203,000 | |
Accumulated deficit | (23,525,000) | (23,252,000) | |
Treasury stock, at cost, 38,130 shares | (801,000) | (801,000) | |
Total Pillarstone Capital REIT shareholders' equity | 3,922,000 | 4,159,000 | |
Noncontrolling interest in subsidiary | 34,982,000 | 34,371,000 | |
Total equity | 38,904,000 | 38,530,000 | |
Total liabilities and equity | 58,552,000 | 57,881,000 | |
Operating lease right of use assets | 14,000 | 7 | |
Operating lease liabilities | 14,000 | 7,000 | |
Preferred A Shares | |||
Shareholders' Equity: | |||
Preferred stock | 3,000 | 3,000 | |
Preferred C Shares | |||
Shareholders' Equity: | |||
Preferred stock | 2,000 | 2,000 | |
Variable Interest Entity | |||
ASSETS | |||
Property | 56,202,000 | 55,857,000 | |
Accumulated depreciation | (6,328,000) | (5,519,000) | |
Total real estate assets | 49,874,000 | 50,338,000 | |
Cash and cash equivalents | 3,778,000 | 3,331,000 | |
Escrows and utility deposits | 957,000 | 566,000 | |
Accrued rents and accounts receivable, net of allowance for doubtful accounts | 1,301,000 | 1,360,000 | |
Receivable due from related party | 672,000 | 184,000 | |
Unamortized lease commissions and deferred legal cost, net | 585,000 | 685,000 | |
Prepaid expenses and other assets | 143,000 | 35,000 | |
Total assets | 57,310,000 | 56,499,000 | |
Liabilities: | |||
Notes payable | 15,311,000 | 15,434,000 | |
Accounts payable and accrued expenses | 1,672,000 | 2,164,000 | |
Payable due to related party | 1,025,000 | 344,000 | |
Accrued interest payable | 64,000 | 67,000 | |
Tenants' security deposits | 877,000 | 881,000 | |
Total liabilities | $ 18,949,000 | $ 18,890,000 | |
[1] | Operating lease right of use assets (net) (related to adoption of Topic 842) | ||
[2] | Operating lease liabilities (related to adoption of Topic 842) |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 400,000,000 | 400,000,000 |
Common stock, issued (in shares) | 443,299 | 443,299 |
Common stock, outstanding (in shares) | 405,169 | 405,169 |
Treasury stock (in shares) | 38,130 | 38,130 |
Preferred A Shares | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 1,518,000 | 1,518,000 |
Preferred stock, issued (in shares) | 256,636 | 256,636 |
Preferred stock, outstanding (in shares) | 256,636 | 256,636 |
Preferred stock, liquidation preference (in dollars per share) | $ 10 | $ 10 |
Preferred C Shares | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 300,000 | 300,000 |
Preferred stock, issued (in shares) | 231,944 | 231,944 |
Preferred stock, outstanding (in shares) | 231,944 | 231,944 |
Preferred stock, liquidation preference (in dollars per share) | $ 10 | $ 10 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 338 | $ 1,136 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,075 | 1,559 |
Amortization of deferred loan costs | 14 | 50 |
Loss on disposal of assets | 66 | 8 |
Bad debt | 131 | 119 |
Share-based Compensation | 36 | 0 |
Changes in operating assets and liabilities: | ||
Accrued rents and accounts receivable | (136) | (402) |
Receivable due from related party | (492) | (31) |
Escrows and utility deposits | (391) | 482 |
Unamortized lease commissions and deferred legal cost | (47) | (132) |
Prepaid expenses and other assets | (97) | (130) |
Accounts payable and accrued expenses | (269) | (674) |
Payable due to related party | 693 | 225 |
Stock redemption payable - related party | 0 | (143) |
Tenants' security deposits | (4) | 77 |
Net cash provided by operating activities | 917 | 2,144 |
Cash flows from investing activities: | ||
Additions to real estate | (529) | (954) |
Net cash used in investing activities | (529) | (954) |
Cash flows from financing activities: | ||
Distributions paid to noncontrolling interest in subsidiary | 0 | (890) |
Repayments of notes payable | (137) | (570) |
Net cash used in financing activities | (137) | (1,460) |
Net change in cash and cash equivalents | 251 | (270) |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Roll Forward] | ||
Cash and cash equivalents at beginning of period | 4,624 | 2,010 |
Cash and cash equivalents at end of period | 4,875 | 1,740 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 399 | 984 |
Cash paid for taxes | 0 | 279 |
Non cash investing activities: | ||
Disposal of fully depreciated real estate | 52 | 19 |
Additions to real estate contributed by related party | $ 0 | $ 40 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes In Equity (Deficit) - USD ($) $ in Thousands | Total | Total Shareholders' Equity (Deficit) | Common Shares | Additional Paid-in Capital | Accumulated Deficit | Cost of Shares Held in Treasury | Noncontrolling Interest | Preferred A SharesPreferred Shares | Preferred C SharesPreferred Shares |
Beginning balance at Dec. 31, 2018 | $ 27,062 | $ 1,036 | $ 4 | $ 28,147 | $ (26,319) | $ (801) | $ 26,026 | $ 3 | $ 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Contributions to operating partnership | 40 | 40 | |||||||
Distributions to operating partnership limited partner | (302) | (302) | |||||||
Net income | 614 | 46 | 46 | 568 | |||||
Ending balance at Mar. 31, 2019 | 27,414 | 1,082 | 4 | 28,147 | (26,273) | (801) | 26,332 | 3 | 2 |
Beginning balance at Dec. 31, 2018 | 27,062 | 1,036 | 4 | 28,147 | (26,319) | (801) | 26,026 | 3 | 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net income | 1,136 | ||||||||
Ending balance at Jun. 30, 2019 | 27,348 | 1,113 | 4 | 28,147 | (26,242) | (801) | 26,235 | 3 | 2 |
Beginning balance at Mar. 31, 2019 | 27,414 | 1,082 | 4 | 28,147 | (26,273) | (801) | 26,332 | 3 | 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Distributions to operating partnership limited partner | (588) | (588) | |||||||
Net income | 522 | 31 | 31 | 491 | |||||
Ending balance at Jun. 30, 2019 | 27,348 | 1,113 | 4 | 28,147 | (26,242) | (801) | 26,235 | 3 | 2 |
Beginning balance at Dec. 31, 2019 | 38,530 | 4,159 | 4 | 28,203 | (23,252) | (801) | 34,371 | 3 | 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Share-based compensation | 13 | 13 | 13 | ||||||
Net income | 159 | (59) | (59) | 218 | |||||
Ending balance at Mar. 31, 2020 | 38,702 | 4,113 | 4 | 28,216 | (23,311) | (801) | 34,589 | 3 | 2 |
Beginning balance at Dec. 31, 2019 | 38,530 | 4,159 | 4 | 28,203 | (23,252) | (801) | 34,371 | 3 | 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net income | 338 | ||||||||
Ending balance at Jun. 30, 2020 | 38,904 | 3,922 | 4 | 28,239 | (23,525) | (801) | 34,982 | 3 | 2 |
Beginning balance at Mar. 31, 2020 | 38,702 | 4,113 | 4 | 28,216 | (23,311) | (801) | 34,589 | 3 | 2 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Share-based compensation | 23 | 23 | 23 | ||||||
Net income | 179 | (214) | (214) | 393 | |||||
Ending balance at Jun. 30, 2020 | $ 38,904 | $ 3,922 | $ 4 | $ 28,239 | $ (23,525) | $ (801) | $ 34,982 | $ 3 | $ 2 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting. Pillarstone Capital REIT's (the “Company,” “Pillarstone,” “we,” “our,” or “us”) financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred. Use of estimates. In order to conform with generally accepted accounting principles in the United States ("U.S. GAAP"), management, in preparation of our condensed consolidated financial statements, is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of June 30, 2020 and December 31, 2019, and the reported amounts of revenues and expenses for the three and six months ended June 30, 2020 and 2019. Actual results could differ from those estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business and markets, including the Company's operations and the operations of its tenants. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including revenues, expenses, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the pandemic, its severity in our markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents as of June 30, 2020 and December 31, 2019 consisted of demand deposits at commercial banks and brokerage accounts. We maintain our cash in bank accounts that are federally insured. Acquired Properties and Acquired Lease Intangibles. We allocate the purchase price of the acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values at the time of purchase. Identifiable intangibles include amounts allocated to acquired out-of-market leases, the value of in-place leases and customer relationship value, if any. We determine fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include an estimate of carrying costs during the expected lease-up periods considering market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Intangibles related to out-of-market leases and in-place lease value are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Premiums or discounts on acquired out-of-market debt are amortized to interest expense over the remaining term of such debt. Due to COVID-19, we are carefully evaluating acquisitions, development and redevelopment opportunities on an individual basis. Depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for improvements and buildings. Tenant improvements are depreciated using the straight-line method over the life of the improvement or remaining term of the lease, whichever is shorter. Impairment. 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. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. 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 June 30, 2020. Accrued Rents and Accounts Receivable. Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. 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. With the adoption of Accounting Standards Codification ("ASC") No. 842, " Leases" ("Topic 842") effective January 1, 2019, we recognize an adjustment to rental revenue if we deem it probable that the receivable will not be collected. Prior to the adoption of Topic 842, we recognized an allowance for doubtful accounts and bad debt expense of the specific rents receivable. Our review of collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue. As of June 30, 2020 and December 31, 2019, we had an allowance for uncollectible accounts of approximately $286,000 and $161,000, respectively. For the three and six months ended June 30, 2020, we recorded an adjustment to rental revenue in the amount of approximately $83,000 and $131,000, respectively . For the three and six months ended June 30, 2019, we recorded an adjustment to rental revenue in the amount of approximately $59,000 and $119,000, respectively . Included in the adjustment to rental revenue for the three and six months ending June 30, 2020 was an adjustment of approximately $20,000 and $33,000, respectively, related to credit loss for the conversion of approximately six and seven tenants, respectively, to cash basis revenue as a result of our COVID-19 collectability analysis. Unamortized Lease Commissions and Loan Costs. Leasing commissions are amortized using the straight-line method over the terms of the related lease agreements. Loan costs are amortized on the straight-line method over the terms of the loans, which approximates the interest method. Costs allocated to in-place leases whose terms differ from market terms related to acquired properties are amortized over the remaining life of the respective leases. Prepaids and Other assets . Prepaids and other assets include escrows established pursuant to certain mortgage financing arrangements for real estate taxes and insurance. Noncontrolling Interests. Noncontrolling interests are the portion of equity in a subsidiary not attributable to a parent. Accordingly, we have reported noncontrolling interest in equity on the condensed consolidated balance sheets but separate from Pillarstone’s equity. On the condensed consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to Pillarstone and noncontrolling interest. 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. For the three and six months ending June 30, 2020, we recognized a straight-line rent reserve adjustment decreasing rental revenue by approximately $50,000 for the conversion of four tenants to cash basis revenue as a result of COVID-19 collectibility analysis. 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. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent and recoveries into a single line item, Rental , within the condensed consolidated statements of operations. We recognize lease termination fees in the year that the lease is terminated and collection of the fee is reasonably assured. Additionally, we may have tenants who pay real estate taxes directly to the taxing authority. We exclude these costs paid directly by the tenant to third parties on our behalf from revenue recognized and the associated property operating expense. Stock-based compensation . The Company accounts for stock-based compensation in accordance with ASC No. 718, "Compensation - Stock Compensation," which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. ASC No.718 generally requires that these transactions be accounted for using a fair-value-based method. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. Income taxes . Because we have not elected to be taxed as a REIT for federal income tax purposes, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in provision for income taxes in the condensed consolidated statements of operations and has not been separately stated due to its insignificance. The Company evaluates potential uncertain tax positions on an annual basis in conjunction with the board of trustees and its tax accountants. Authoritative literature provides a two-step approach to recognize and measure tax benefits when realization of the benefits is uncertain. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. As of June 30, 2020, we had a net operating loss carry-forward of $326,000, and as of June 30, 2020 and December 31, 2019, we had net deferred tax liabilities of $101,000 and $96,000, respectively. Concentration of Risk. Substantially all of our revenues are obtained from office and warehouse locations in the Dallas and Houston metropolitan areas. We maintain cash accounts in major U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts sometimes exceed the federally insured limits, although no losses have been incurred in connection with these deposits. Recent accounting pronouncements . In April 2020, the Financial Accounting Standards Board ("FASB") issued guidance on the application of Topic 842, relating to concessions being made by lessors in response to the COVID-19 pandemic. The guidance notes that it would be acceptable for entities to make an election to account for lease concessions relating to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed, even if such enforceable rights and obligations are not explicitly contained in the lease contract. Thus, for concessions relating to COVID-19, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract, and would have the option to apply, or not to apply, the general lease modification guidance in Topic 842 as it stands. We have elected this option to account for lease concessions relating to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed. Therefore, such concessions are not accounted for as a lease modification under Topic 842. In February 2016, the FASB issued an accounting standard update ("ASU") that provided the principles for the recognition, measurement, presentation, and disclosure of leases. Additional guidance and targeted improvements to the February 2016 ASU were made through the issue of supplementary ASUs in July 2018, December 2018 and March 2019. Effective January 1, 2019, we adopted the new lease accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients permitted in Topic 842. Accordingly, we have accounted for our existing leases as operating leases under the new guidance, without reassessing (a) whether the contract contains a lease under Topic 842, (b) whether classification of the operating lease would be different in accordance with Topic 842, or (c) whether the unamortized initial direct costs before transition adjustments (as of December 31, 2018) would have met the definition of initial direct costs in Topic 842 at lease commencement. Additionally, as the lessee and lessor, we will use hindsight in determining the lease term and in assessing impairment of our right-of-use assets. As a result of the adoption of the new lease accounting guidance, as the lessee, we recognized on January 1, 2019 (a) a lease liability of approximately $21,000, which represents the present value of the remaining lease payments of approximately $22,000 discounted using our incremental borrowing rate of 4.5%, and (b) a right-of-use asset of approximately $21,000. Upon adoption of Topic 842, lessees and lessors are required to apply a modified retrospective transition approach. Reporting entities are permitted to choose one of two methods to recognize and measure leases within the scope of Topic 842: • Apply Topic 842 to each lease that existed at the beginning of the earliest comparative period presented in the financial statements as well as leases that commenced after that date. Under this method, prior comparative periods presented are adjusted. For leases that commenced prior to the beginning of the earliest comparative period presented, a cumulative-effect adjustment is recognized at that date. • Apply the guidance to each lease that had commenced as of the beginning of the reporting period in which the entity first applies the lease standard with a cumulative-effect adjustment as of that date. Prior comparative periods would not be adjusted under this method. We have elected an optional transition method that allows entities to initially apply Topic 842 at January 1, 2019, the date of adoption, and to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As the lessor, we have not assessed unamortized legal costs as part of the package of practical expedients, and we will not make any adjustment to retained earnings at the date of adoption to write off unamortized legal costs. We continued to amortize unamortized legal costs as of December 31, 2018 over the life of the respective leases. We did not have a cumulative-effect adjustment as of the adoption date. Additionally, the optional transition method does not allow us to apply the new standard (including disclosure requirements) to comparative periods presented. Those periods can continue to be presented in accordance with prior generally accepted accounting principles. Topic 842 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases and operating leases. Based on our election of the package of practical expedients, our existing commercial leases, where we are the lessor, continue to be accounted for as operating leases under the new standard. However, Topic 842 changed certain requirements regarding the classification of leases that could result in us recognizing certain long-term leases entered into or modified after January 1, 2019 as sales-type leases or finance leases, as opposed to operating leases. We will continue to monitor our leases following the adoption date to ensure that they are classified in accordance with the new lease standards. We elected a practical expedient which allows lessors to not separate non-lease components from the lease component when the timing and pattern of transfer for the lease components and non-lease components are the same and if the lease component is classified as an operating lease. As a result, we now present all rentals and reimbursements from tenants as a single line item, Rental, within the condensed consolidated statements of operations. For the three and six months ended June 30, 2020, we had rental revenues of approximately $2,185,000 and $4,522,000, respectively, and rental reimbursements of approximately $334,000 and $614,000, respectively, compared to rental revenues of approximately $3,254,000 and $6,519,000, respectively and rental reimbursements of approximately $613,000 and $1,250,000, respectively for the three and six months ended June 30, 2019. 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. Each tenant is included in one of several portfolios and an allowance is calculated using the calculation methodology for the respective portfolio. With the adoption of Topic 842, we recognize an adjustment to rental revenue if we deem it not probable that the receivable will be collected. Tenant portfolios will be converted to cash basis if collectability is of great concern. Prior to the adoption of Topic 842, we recognized an allowance for doubtful accounts and bad debt expense of the specific rents receivable. Our review on collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue. |
Accrued Rents and Accounts Rece
Accrued Rents and Accounts Receivable, Net | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Accrued Rents and Accounts Receivable, Net | ACCRUED RENTS AND ACCOUNTS RECEIVABLE, NET Accrued rents and accounts receivable, net consists of amounts accrued, billed and due from tenants, allowance for doubtful accounts and other receivables as follows (in thousands): June 30, 2020 December 31, 2019 Tenant receivables $ 567 $ 271 Accrued rents and other recoveries 1,145 1,311 Allowance for doubtful accounts (286) (161) Total $ 1,426 $ 1,421 |
Leases
Leases | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Leases | LEASES Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842. As a Lessor. All leases on our properties are classified as noncancelable 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. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental , within the condensed consolidated statements of operations. A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of June 30, 2020 is as follows (in thousands): Years Ended December 31, Minimum Future Rents (1) 2020 (remaining) $ 3,846 2021 5,941 2022 4,096 2023 2,846 2024 1,751 Thereafter 1,511 Total $ 19,991 (1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed. As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and six months ended June 30, 2020 was $3,633 and $9,808, respectively, compared to $3,597 and $7,194 for the three and six months ended June 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at June 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed on June 8, 2020 extending the term through June 30, 2021. The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of June 30, 2020 (in thousands): Years Ended December 31, Minimum Future Rents 2020 (remaining) $ 7 2021 7 Total undiscounted rental payments 14 Total lease liabilities (2) $ 14 (2) Imputed interest is immaterial and therefore not disclosed in the above table |
Leases | LEASES Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842. As a Lessor. All leases on our properties are classified as noncancelable 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. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental , within the condensed consolidated statements of operations. A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of June 30, 2020 is as follows (in thousands): Years Ended December 31, Minimum Future Rents (1) 2020 (remaining) $ 3,846 2021 5,941 2022 4,096 2023 2,846 2024 1,751 Thereafter 1,511 Total $ 19,991 (1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed. As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and six months ended June 30, 2020 was $3,633 and $9,808, respectively, compared to $3,597 and $7,194 for the three and six months ended June 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at June 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed on June 8, 2020 extending the term through June 30, 2021. The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of June 30, 2020 (in thousands): Years Ended December 31, Minimum Future Rents 2020 (remaining) $ 7 2021 7 Total undiscounted rental payments 14 Total lease liabilities (2) $ 14 (2) Imputed interest is immaterial and therefore not disclosed in the above table |
Unamortized Lease Commissions a
Unamortized Lease Commissions and Deferred Legal Cost, Net | 6 Months Ended |
Jun. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Unamortized Lease Commissions and Deferred Legal Cost, Net | UNAMORTIZED LEASE COMMISSIONS AND DEFERRED LEGAL COST, NET Costs which have been deferred consist of the following (in thousands): June 30, 2020 December 31, 2019 Leasing commissions $ 1,326 $ 1,377 Deferred legal cost 15 18 Total cost 1,341 1,395 Less: leasing commissions accumulated amortization (744) (698) Less: deferred legal cost accumulated amortization (12) (12) Total cost, net of accumulated amortization $ 585 $ 685 |
Variable Interest Entity
Variable Interest Entity | 6 Months Ended |
Jun. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Variable Interest Entity | VARIABLE INTEREST ENTITY On December 8, 2016, Pillarstone and Pillarstone OP, entered into a Contribution Agreement (the “Contribution Agreement”) with Whitestone REIT Operating Partnership, L.P. (“Whitestone OP”), a subsidiary and the operating partnership of Whitestone REIT (“Whitestone”), both of which are related parties to Pillarstone and Pillarstone OP. Pursuant to the terms of the Contribution Agreement, Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries (the “Subsidiaries”): Whitestone CP Woodland Ph. 2, LLC, a Delaware limited liability company; Whitestone Industrial-Office, LLC, a Texas limited liability company; Whitestone Offices, LLC, a Texas limited liability company; and Whitestone Uptown Tower, LLC, a Delaware limited liability company (“Uptown Tower”) that owned 14 real estate assets (the “Real Estate Assets” and, together with the Subsidiaries, the “Property”) for aggregate consideration of approximately $84 million, consisting of (1) approximately $18.1 million of Class A units representing limited partnership interests in Pillarstone OP (“OP Units”), issued at a price of $1.331 per OP Unit; and (2) the assumption of approximately $65.9 million of liabilities by Pillarstone OP. Pursuant to the Contribution Agreement, Pillarstone became the general partner of Pillarstone OP with an equity ownership interest in Pillarstone OP totaling approximately an 18.6% interest valued at $4.1 million as of the date of the Contribution Agreement. In connection with the Contribution Agreement, on December 8, 2016, the Company, as the general partner of Pillarstone OP, entered into an Amended and Restated Agreement of Limited Partnership of Pillarstone OP (as amended and restated, the “Amended and Restated Agreement of Limited Partnership”). Pursuant to the Amended and Restated Agreement of Limited Partnership, subject to certain protective rights of the limited partners described below, the general partner has full, exclusive and complete responsibility and discretion in the management and control of Pillarstone OP, including the ability to cause Pillarstone OP to enter into certain major transactions including a merger of Pillarstone OP or a sale of substantially all of the assets of Pillarstone OP. The limited partners have no power to remove the general partner without the general partner's consent. In addition, pursuant to the Amended and Restated Agreement of Limited Partnership, the general partner may not conduct any business without the consent of a majority of the limited partners other than in connection with certain actions described therein. The Company is deemed to exercise significant influence over Pillarstone OP as it has the power to direct the activities that most significantly impact Pillarstone OP's economic performance and the Company's right to receive benefits based on its ownership percentage in Pillarstone OP. Accordingly, the Company accounts for Pillarstone OP as a Variable Interest Entity. The Amended and Restated Agreement of Limited Partnership designates two classes of units of limited partnership interest in Pillarstone OP: the OP Units and LTIP units. In general, LTIP units are similar to the OP Units and will receive the same quarterly per-unit profit distributions as the OP Units. The rights, privileges, and obligations related to each series of LTIP units will be established at the time the LTIP units are issued. As profits interests, LTIP units initially will not have full parity, on a per-unit basis, with OP Units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP units can over time achieve full parity with the OP Units and therefore accrete to an economic value for the holder equivalent to OP Units. If such parity is achieved, vested LTIP units may be converted on a one-for-one basis into OP Units, which in turn are redeemable by the holder for cash or, at the Company’s election, exchangeable for Common Shares on a one-for-one basis. The carrying amounts and classification of certain assets and liabilities for Pillarstone OP in our condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 consists of the following (in thousands): June 30, 2020 December 31, 2019 (unaudited) Real estate assets, at cost Property $ 56,202 $ 55,857 Accumulated depreciation (6,328) (5,519) Total real estate assets 49,874 50,338 Cash and cash equivalents 3,778 3,331 Escrows and utility deposits 957 566 Accrued rents and accounts receivable, net of allowance for doubtful accounts 1,301 1,360 Receivable due from related party (1) 672 184 Unamortized lease commissions and deferred legal cost, net 585 685 Prepaid expenses and other assets 143 35 Total assets $ 57,310 $ 56,499 Liabilities Notes payable $ 15,311 $ 15,434 Accounts payable and accrued expenses 1,672 2,164 Payable due to related party 1,025 344 Accrued interest payable 64 67 Tenants' security deposits 877 881 Total liabilities $ 18,949 $ 18,890 (1) Excludes approximately $0.5 million in accounts receivable due from Pillarstone that was eliminated in consolidation as of June 30, 2020 and approximately $0.5 million as of December 31, 2019. |
Real Estate
Real Estate | 6 Months Ended |
Jun. 30, 2020 | |
Real Estate [Abstract] | |
Real Estate | REAL ESTATE As of June 30, 2020, Pillarstone OP owned eight Real Estate Assets in the Dallas and Houston areas comprised of approximately 0.9 million square feet of gross leasable area. On October 8, 2019, we completed the sale of Corporate Park West for $20.3 million, Corporate Park Woodland for $12.2 million and Plaza Park for $7.3 million (collectively, the "2019 Real Estate Assets Sold"), each located in Houston, Texas, and we reported a gain on sale of $6.9 million, $6.1 million, and $4.0 million, respectively. We have not included the 2019 Real Estate Assets Sold in discontinued operations as they did not meet the definition of discontinued operations. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | DEBT Mortgages and other notes payable consist of the following (in thousands): Description June 30, 2020 December 31, 2019 Fixed rate notes $16.5 million 4.97% Note, due September 26, 2023 $ 15,402 $ 15,539 Total notes payable principal 15,402 15,539 Less deferred financing costs, net of accumulated amortization (91) (105) Total notes payable $ 15,311 $ 15,434 Our mortgage debt was collateralized by one operating property as of June 30, 2020 and December 31, 2019 with a net book value of $22.2 million and $22.3 million, respectively. Our loan contains restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and is secured by a deed of trust on our property and the assignment of certain rents and leases associated with the property. Our loan is subject to customary covenants. As of June 30, 2020, we were in compliance with all loan covenants. Scheduled maturities of notes payable as of June 30, 2020 were as follows (in thousands): Year Amount Due 2020 (remaining) $ 138 2021 294 2022 311 2023 14,659 Total $ 15,402 |
Convertible Notes Payable - Rel
Convertible Notes Payable - Related Parties | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable - Related Parties | DEBT Mortgages and other notes payable consist of the following (in thousands): Description June 30, 2020 December 31, 2019 Fixed rate notes $16.5 million 4.97% Note, due September 26, 2023 $ 15,402 $ 15,539 Total notes payable principal 15,402 15,539 Less deferred financing costs, net of accumulated amortization (91) (105) Total notes payable $ 15,311 $ 15,434 Our mortgage debt was collateralized by one operating property as of June 30, 2020 and December 31, 2019 with a net book value of $22.2 million and $22.3 million, respectively. Our loan contains restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and is secured by a deed of trust on our property and the assignment of certain rents and leases associated with the property. Our loan is subject to customary covenants. As of June 30, 2020, we were in compliance with all loan covenants. Scheduled maturities of notes payable as of June 30, 2020 were as follows (in thousands): Year Amount Due 2020 (remaining) $ 138 2021 294 2022 311 2023 14,659 Total $ 15,402 |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | EARNINGS (LOSS) PER SHARE The Company applies the guidance of ASC 260, "Earnings Per Share," for all periods presented herein. Net earnings (loss) per weighted average Common Share outstanding, basic and diluted, is computed based on the weighted average number of Common Shares outstanding for the period. The following table shows the weighted average number of Common Shares outstanding and reconciles the numerator and denominator of earnings per Common Share calculations for the three and six month periods ended June 30, 2020 and 2019. For the three and six month periods ended June 30, 2020, Class A Cumulative Preferred Shares ("Preferred A Shares"), Class C Convertible Preferred Shares ("Preferred C Shares") and Restricted Common Shares awarded pursuant to the 2016 plan (defined in Note 11 below) were not included in net loss per weighted average number of Common Shares dilutive, because the effect of the conversion would be anti-dilutive. For the three and six month periods ended June 30, 2019, Class A Cumulative Preferred Shares ("Preferred A Shares"), Class C Convertible Preferred Shares ("Preferred C Shares") were included in net earnings per weighted average number of Common Shares. During the three and six month periods ended June 30, 2020 and 2019, the Company had $197,780 of convertible notes payable as discussed in Note 8. The convertible notes payable weighted average shares of 202,293 and 200,440 were not included in the computation of diluted loss per Common Share for the three and six months ended June 30, 2019, respectively, because the effect of the conversion would be anti-dilutive. The convertible notes payable weighted average shares of 217,193 and 215,341 were not included in the computation of diluted loss per Common Share for the three and six months ended June 30, 2020, respectively, because the effect of the conversion would be anti-dilutive. Three Months Ended June 30, Six Months Ended June 30, (in thousands, except share and per share data) 2020 2019 2020 2019 Numerator: Net income (loss) attributable to common shareholders $ (214) $ 31 $ (273) $ 77 Denominator: Weighted average number of common shares - basic 405,169 405,169 405,169 405,169 Effect of dilutive securities: Assumed conversion of Preferred A Shares — 53,610 — 53,610 Assumed conversion of Preferred C Shares — 2,319,440 — 2,319,440 Weighted average number of common shares - dilutive 405,169 2,778,219 405,169 2,778,219 Earnings (Loss) Per Share: Basic income (loss) per common share: Net income (loss) available to common shareholders $ (0.53) $ 0.08 $ (0.67) $ 0.19 Diluted income (loss) per common share: Net income (loss) available to common shareholders $ (0.53) $ 0.01 $ (0.67) $ 0.03 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS On December 8, 2016, the Company entered into the Contribution Agreement with Whitestone OP, a related party, resulting in the contribution of an equity ownership interest in Pillarstone OP by the Company valued at $4,121,312 and representing approximately 18.6% of the outstanding equity in Pillarstone OP. The terms of the Contribution Agreement were determined through arm's-length negotiations and were recommended to the board of trustees by a special committee of the board of trustees consisting solely of disinterested trustees of the Company and approved by the full board. Pursuant to the Contribution Agreement, the Company agreed to file with the Securities and Exchange Commission (the "SEC") on or prior to June 8, 2018, a shelf registration statement to register for sale under the Securities Act of 1933, as amended, the issuance of the common shares in the Company that may be issued upon redemption of the OP Units issued pursuant to the Contribution Agreement and the offer and resale of such common shares by the holders thereof. In addition, pursuant to the Contribution Agreement, in the event of a Change of Control (as defined therein) of Whitestone, Pillarstone OP shall have the right, but not the obligation, to repurchase the OP Units issued thereunder from Whitestone OP at their initial issue price of $1.331 per OP Unit. Pillarstone and Whitestone agreed to extend the filing of the shelf registration statement to the date that the Company closes a public equity offering. In connection with the Contribution Agreement, on December 8, 2016, the Company and Pillarstone OP entered into a Tax Protection Agreement (the “Tax Protection Agreement”) with Whitestone OP pursuant to which Pillarstone OP agreed to indemnify Whitestone OP for certain tax liabilities resulting from its recognition of income or gain prior to December 8, 2021 if such liabilities result from a transaction involving a direct or indirect taxable disposition of all or a portion of the Property or if Pillarstone OP fails to maintain and allocate to Whitestone OP for taxation purposes minimum levels of liabilities as specified in the Tax Protection Agreement, the result of which causes such recognition of income or gain and Whitestone incurs taxes that must be paid to maintain its REIT status for federal tax purposes. In December 2018, Pillarstone OP sold three of the Real Estate Assets, which did not create additional tax liabilities for Whitestone OP. In addition, the sale of the 2019 Real Estate Assets Sold did not create additional tax liabilities for Whitestone OP. During the ordinary course of business, we have transactions with Whitestone that include, but are not limited to, rental income, interest expense, general and administrative costs, commissions, management and asset management fees, and property expenses. In connection with the Contribution Agreement, on December 8, 2016, the Company entered into a Management Agreement (collectively, the “Management Agreements”) with Whitestone TRS, Inc., a subsidiary of Whitestone (“Whitestone TRS"). Pursuant to the Management Agreements with respect to each property, other than Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such properties in exchange for (1) a monthly property management fee equal to 5.0% of the monthly revenues of each property and (2) a monthly asset management fee equal to 0.125% of GAV (as defined in each Management Agreement as, generally, the purchase price of the respective property based upon the purchase price allocations determined pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such property. Pursuant to the Management Agreement with respect to Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services in exchange for (1) a monthly property management fee equal to 3.0% of the monthly revenues of Uptown Tower and (2) a monthly asset management fee equal to 0.125% of GAV of Uptown Tower. The following table presents the revenue and expenses with Whitestone included in our condensed consolidated statement of operations for the three and six months ended June 30, 2020 and 2019 (in thousands): Three Months Ended June 30, Six Months Ended June 30, Location of Revenue (Expense) 2020 2019 2020 2019 Rent Rental $ 220 $ 183 $ 481 $ 313 Property management fees Management fees (110) (175) (221) (342) Asset management fees Management fees (46) (49) (83) (94) Rent expense Office expenses (4) (4) (10) (7) Interest expense Interest expense — (53) — (109) Receivables due from and payables due to related parties consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands): Location of Receivable (Payable) June 30, 2020 December 31, 2019 Tenant receivables and other receivables Receivable due from related party $ 676 $ 184 Accrued interest due to related party Accrued interest payable (91) (81) Other payables due to related party Payable due to related party (1,039) (346) |
Incentive Equity Plan
Incentive Equity Plan | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Incentive Equity Plan | INCENTIVE EQUITY PLAN At the 2016 Annual Meeting of Shareholders, our shareholders approved the 2016 Equity Plan ("2016 Plan"). The 2016 Plan provides that awards may be made in Common Shares of the Company or units in the Company’s operating partnership, which may be converted into Common Shares. Subject to adjustment as provided by the terms of the 2016 Plan, the maximum aggregate number of Common Shares with respect to which awards may be granted under the 2016 Plan will be increased based on future issuances of Common Shares and units of the operating partnership, including issuances pursuant to the 2016 Plan, so that at any time the maximum number of shares that may be issued under the 2016 Plan shall equal 12.5% of the aggregate number of Common Shares and units of the operating partnership issued and outstanding (other than treasury shares and/or units issued to or held by the Company). The Management, Organization and Compensation Committee (the “Committee”) administers the 2016 Plan, except with respect to awards to non-employee trustees, for which the 2016 Plan is administered by the board of trustees. Subject to the terms of the 2016 Plan, the Committee is authorized to select participants, determine the type and number of awards to be granted, determine and later amend (subject to certain limitations) the terms and conditions of any award, interpret and specify the rules and regulations relating to the 2016 Plan, and make all other determinations which may be necessary or desirable for the administration of the 2016 Plan. The 2016 Plan includes the types of awards for grants and types of financial performance measures. On July 1, 2019, the Committee approved the grant of 45,031 Restricted Common Share Units (the "Units") subject to the restrictions, terms and conditions set forth in the Restricted Unit Award Agreement (the "Award"). These Units are time-based shares that vest each year over the next three years and will be fully vested on July 1, 2022. On July 1, 2019, the Committee approved the grant of 45,031 Units subject to the restrictions and terms and conditions set forth in the Award. These Units are performance-based shares linked to five specific goals set forth in the Award. If the Company does not attain the performance goals before July 1, 2022, the Units still subject to restriction will be forfeited to the Company. As of June 30, 2020, the maximum number of Common Shares or OP Units available to be granted is 2,248,507. During the six months ended June 30, 2020, the following shares were granted: Description Shares Weighted-Average Grant Date Fair Value (1) Non-vested at January 1, 2020 90,062 $ 2.18 Granted — — Non-vested at June 30, 2020 90,062 $ 2.18 Available for grant at June 30, 2020 2,248,507 (1) The fair value of the shares granted were determined based on the share activity from the date of the three property sales on December 27, 2018 until the grant date July 1, 2019. As of June 30, 2020, per the Award, the Company has determined that the time-based shares and the majority of the performance-based shares will vest by July 1, 2022. Time-based shares granted during the twelve months ended December 31, 2019 are amortized over their respective amortization periods. Performance-based shares granted during the twelve months ended December 31, 2019, with the exception of one of the performance based awards, that will be amortized over one year, will be amortized for three years. Performance-based shares that have not been achieved as of July 1, 2022 will be forfeited to the Company. The total value of the time-based and performance-based shares granted on July 1, 2019 is approximately $196,000. The Company recognized approximately $23,000 and $36,000 in stock-based compensation expense for the three and six months ended June 30, 2020, respectively, and did not recognize any stock-based compensation expense during the three and six months ended June 30, 2019 . |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS In December 2019, a novel strain of coronavirus ("COVID-19") was reported to have surfaced in China. The World Health Organization has declared COVID-19 to constitute a "Public Health Emergency of International Concern" and characterized COVID-19 as a pandemic. The U.S. government has also implemented enhanced screenings, quarantine requirements and travel restrictions in connection with the COVID-19 outbreak. The spread of this virus has caused business disruption to the Company beginning in 2020, because businesses in the United States were concerned about the impact of COVID-19 on their operations. Local governments in Texas, where all our properties are located, have mandated a stay in place order, closed non-essential businesses, and closed other types of service businesses, such as bars and restaurants, (though they can continue to provide take out and drive through services). As of the date of this Quarterly Report on Form 10-Q, businesses are open, but some businesses must continue to comply with limited occupancy in Texas. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and markets, including how it will impact the businesses of its tenants. The Company has put in place a temporary response team to address tenant concerns in light of the COVID-19 pandemic. The response team is in ongoing communication with the Company's tenants and is assisting tenants in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020. The Company has received a number of rent relief requests from tenants, most often in the form of rent deferral requests, as a result of the COVID-19 pandemic. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in lease concessions, nor is the Company forgoing its contractual rights under its lease agreements at this time. The Company is unable to predict the ongoing impact that the COVID-19 pandemic will have on its future financial condition, results of operations and cash flows due to numerous uncertainties including, but not limited to, the duration and spread of the pandemic, its severity in the Company's markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. As of the date of this Quarterly Report on Form 10-Q, as a result of the impact of the COVID-19 pandemic, we have received payments of approximately 95% of contractual base rent and common area maintenance reimbursable expenses billed for the second quarter. As is believed to be the case with landlords across the U.S., we have received a number of rent relief requests from tenants, most often in the form of rent deferral requests, which we are evaluating on a case-by-case basis. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting. Pillarstone Capital REIT's (the “Company,” “Pillarstone,” “we,” “our,” or “us”) financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred. |
Use of estimates | Use of estimates. In order to conform with generally accepted accounting principles in the United States ("U.S. GAAP"), management, in preparation of our condensed consolidated financial statements, is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of June 30, 2020 and December 31, 2019, and the reported amounts of revenues and expenses for the three and six months ended June 30, 2020 and 2019. Actual results could differ from those estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company's business and markets, including the Company's operations and the operations of its tenants. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including revenues, expenses, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the pandemic, its severity in our markets and elsewhere, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. |
Cash and cash equivalents | Cash and cash equivalents. We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents as of June 30, 2020 and December 31, 2019 consisted of demand deposits at commercial banks and brokerage accounts. We maintain our cash in bank accounts that are federally insured. |
Acquired Properties and Acquired Lease Intangibles | Acquired Properties and Acquired Lease Intangibles. We allocate the purchase price of the acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values at the time of purchase. Identifiable intangibles include amounts allocated to acquired out-of-market leases, the value of in-place leases and customer relationship value, if any. We determine fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include an estimate of carrying costs during the expected lease-up periods considering market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Intangibles related to out-of-market leases and in-place lease value are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Premiums or discounts on acquired out-of-market debt are amortized to interest expense over the remaining term of such debt. Due to COVID-19, we are carefully evaluating acquisitions, development and redevelopment opportunities on an individual basis. |
Depreciation | Depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for improvements and buildings. Tenant improvements are depreciated using the straight-line method over the life of the improvement or remaining term of the lease, whichever is shorter. |
Impairment | Impairment. 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. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. |
Accrued Rents and Accounts Receivable | Accrued Rents and Accounts Receivable. Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. 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. With the adoption of Accounting Standards Codification ("ASC") No. 842, " Leases" |
Unamortized Lease Commissions | Unamortized Lease Commissions and Loan Costs. Leasing commissions are amortized using the straight-line method over the terms of the related lease agreements. Loan costs are amortized on the straight-line method over the terms of the loans, which approximates the interest method. Costs allocated to in-place leases whose terms differ from market terms related to acquired properties are amortized over the remaining life of the respective leases. |
Prepaids and Other assets | Prepaids and Other assets . Prepaids and other assets include escrows established pursuant to certain mortgage financing arrangements for real estate taxes and insurance. |
Noncontrolling Interests | Noncontrolling Interests. Noncontrolling interests are the portion of equity in a subsidiary not attributable to a parent. Accordingly, we have reported noncontrolling interest in equity on the condensed consolidated balance sheets but separate from Pillarstone’s equity. On the condensed consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to Pillarstone and noncontrolling interest. |
Revenue recognition | 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. For the three and six months ending June 30, 2020, we recognized a straight-line rent reserve adjustment decreasing rental revenue by approximately $50,000 for the conversion of four tenants to cash basis revenue as a result of COVID-19 collectibility analysis. 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. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent and recoveries into a single line item, Rental , within the condensed consolidated statements of operations. We recognize lease termination fees in the year that the lease is terminated and collection of the fee is reasonably assured. Additionally, we may have tenants who pay real estate taxes directly to the taxing authority. We exclude these costs paid directly by the tenant to third parties on our behalf from revenue recognized and the associated property operating expense. |
Stock-based compensation | Stock-based compensation . The Company accounts for stock-based compensation in accordance with ASC No. 718, "Compensation - Stock Compensation," |
Income taxes | Income taxes . Because we have not elected to be taxed as a REIT for federal income tax purposes, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in provision for income taxes in the condensed consolidated statements of operations and has not been separately stated due to its insignificance. |
Concentration of Risk | Concentration of Risk. Substantially all of our revenues are obtained from office and warehouse locations in the Dallas and Houston metropolitan areas. We maintain cash accounts in major U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts sometimes exceed the federally insured limits, although no losses have been incurred in connection with these deposits. |
Recent accounting pronouncements | Recent accounting pronouncements. In April 2020, the Financial Accounting Standards Board ("FASB") issued guidance on the application of Topic 842, relating to concessions being made by lessors in response to the COVID-19 pandemic. The guidance notes that it would be acceptable for entities to make an election to account for lease concessions relating to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed, even if such enforceable rights and obligations are not explicitly contained in the lease contract. Thus, for concessions relating to COVID-19, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract, and would have the option to apply, or not to apply, the general lease modification guidance in Topic 842 as it stands. We have elected this option to account for lease concessions relating to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed. Therefore, such concessions are not accounted for as a lease modification under Topic 842. In February 2016, the FASB issued an accounting standard update ("ASU") that provided the principles for the recognition, measurement, presentation, and disclosure of leases. Additional guidance and targeted improvements to the February 2016 ASU were made through the issue of supplementary ASUs in July 2018, December 2018 and March 2019. Effective January 1, 2019, we adopted the new lease accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients permitted in Topic 842. Accordingly, we have accounted for our existing leases as operating leases under the new guidance, without reassessing (a) whether the contract contains a lease under Topic 842, (b) whether classification of the operating lease would be different in accordance with Topic 842, or (c) whether the unamortized initial direct costs before transition adjustments (as of December 31, 2018) would have met the definition of initial direct costs in Topic 842 at lease commencement. Additionally, as the lessee and lessor, we will use hindsight in determining the lease term and in assessing impairment of our right-of-use assets. As a result of the adoption of the new lease accounting guidance, as the lessee, we recognized on January 1, 2019 (a) a lease liability of approximately $21,000, which represents the present value of the remaining lease payments of approximately $22,000 discounted using our incremental borrowing rate of 4.5%, and (b) a right-of-use asset of approximately $21,000. Upon adoption of Topic 842, lessees and lessors are required to apply a modified retrospective transition approach. Reporting entities are permitted to choose one of two methods to recognize and measure leases within the scope of Topic 842: • Apply Topic 842 to each lease that existed at the beginning of the earliest comparative period presented in the financial statements as well as leases that commenced after that date. Under this method, prior comparative periods presented are adjusted. For leases that commenced prior to the beginning of the earliest comparative period presented, a cumulative-effect adjustment is recognized at that date. • Apply the guidance to each lease that had commenced as of the beginning of the reporting period in which the entity first applies the lease standard with a cumulative-effect adjustment as of that date. Prior comparative periods would not be adjusted under this method. We have elected an optional transition method that allows entities to initially apply Topic 842 at January 1, 2019, the date of adoption, and to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As the lessor, we have not assessed unamortized legal costs as part of the package of practical expedients, and we will not make any adjustment to retained earnings at the date of adoption to write off unamortized legal costs. We continued to amortize unamortized legal costs as of December 31, 2018 over the life of the respective leases. We did not have a cumulative-effect adjustment as of the adoption date. Additionally, the optional transition method does not allow us to apply the new standard (including disclosure requirements) to comparative periods presented. Those periods can continue to be presented in accordance with prior generally accepted accounting principles. Topic 842 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases and operating leases. Based on our election of the package of practical expedients, our existing commercial leases, where we are the lessor, continue to be accounted for as operating leases under the new standard. However, Topic 842 changed certain requirements regarding the classification of leases that could result in us recognizing certain long-term leases entered into or modified after January 1, 2019 as sales-type leases or finance leases, as opposed to operating leases. We will continue to monitor our leases following the adoption date to ensure that they are classified in accordance with the new lease standards. We elected a practical expedient which allows lessors to not separate non-lease components from the lease component when the timing and pattern of transfer for the lease components and non-lease components are the same and if the lease component is classified as an operating lease. As a result, we now present all rentals and reimbursements from tenants as a single line item, Rental, within the condensed consolidated statements of operations. For the three and six months ended June 30, 2020, we had rental revenues of approximately $2,185,000 and $4,522,000, respectively, and rental reimbursements of approximately $334,000 and $614,000, respectively, compared to rental revenues of approximately $3,254,000 and $6,519,000, respectively and rental reimbursements of approximately $613,000 and $1,250,000, respectively for the three and six months ended June 30, 2019. 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. Each tenant is included in one of several portfolios and an allowance is calculated using the calculation methodology for the respective portfolio. With the adoption of Topic 842, we recognize an adjustment to rental revenue if we deem it not probable that the receivable will be collected. Tenant portfolios will be converted to cash basis if collectability is of great concern. Prior to the adoption of Topic 842, we recognized an allowance for doubtful accounts and bad debt expense of the specific rents receivable. Our review on collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue. |
Accrued Rents and Accounts Re_2
Accrued Rents and Accounts Receivable, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Accrued Rents and Accounts Receivable, Net | Accrued rents and accounts receivable, net consists of amounts accrued, billed and due from tenants, allowance for doubtful accounts and other receivables as follows (in thousands): June 30, 2020 December 31, 2019 Tenant receivables $ 567 $ 271 Accrued rents and other recoveries 1,145 1,311 Allowance for doubtful accounts (286) (161) Total $ 1,426 $ 1,421 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of Minimum Future Rent Payments | A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of June 30, 2020 is as follows (in thousands): Years Ended December 31, Minimum Future Rents (1) 2020 (remaining) $ 3,846 2021 5,941 2022 4,096 2023 2,846 2024 1,751 Thereafter 1,511 Total $ 19,991 (1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed. |
Maturities of Operating Lease Liabilities | The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of June 30, 2020 (in thousands): Years Ended December 31, Minimum Future Rents 2020 (remaining) $ 7 2021 7 Total undiscounted rental payments 14 Total lease liabilities (2) $ 14 (2) Imputed interest is immaterial and therefore not disclosed in the above table |
Unamortized Lease Commissions_2
Unamortized Lease Commissions and Deferred Legal Cost, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Tablular Disclosure of Unamortized Lease Commissions | Costs which have been deferred consist of the following (in thousands): June 30, 2020 December 31, 2019 Leasing commissions $ 1,326 $ 1,377 Deferred legal cost 15 18 Total cost 1,341 1,395 Less: leasing commissions accumulated amortization (744) (698) Less: deferred legal cost accumulated amortization (12) (12) Total cost, net of accumulated amortization $ 585 $ 685 |
Variable Interest Entity (Table
Variable Interest Entity (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of Variable Interest Entities | The carrying amounts and classification of certain assets and liabilities for Pillarstone OP in our condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 consists of the following (in thousands): June 30, 2020 December 31, 2019 (unaudited) Real estate assets, at cost Property $ 56,202 $ 55,857 Accumulated depreciation (6,328) (5,519) Total real estate assets 49,874 50,338 Cash and cash equivalents 3,778 3,331 Escrows and utility deposits 957 566 Accrued rents and accounts receivable, net of allowance for doubtful accounts 1,301 1,360 Receivable due from related party (1) 672 184 Unamortized lease commissions and deferred legal cost, net 585 685 Prepaid expenses and other assets 143 35 Total assets $ 57,310 $ 56,499 Liabilities Notes payable $ 15,311 $ 15,434 Accounts payable and accrued expenses 1,672 2,164 Payable due to related party 1,025 344 Accrued interest payable 64 67 Tenants' security deposits 877 881 Total liabilities $ 18,949 $ 18,890 (1) Excludes approximately $0.5 million in accounts receivable due from Pillarstone that was eliminated in consolidation as of June 30, 2020 and approximately $0.5 million as of December 31, 2019. |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Mortgages and other notes payable consist of the following (in thousands): Description June 30, 2020 December 31, 2019 Fixed rate notes $16.5 million 4.97% Note, due September 26, 2023 $ 15,402 $ 15,539 Total notes payable principal 15,402 15,539 Less deferred financing costs, net of accumulated amortization (91) (105) Total notes payable $ 15,311 $ 15,434 |
Debt Maturity Schedule | Scheduled maturities of notes payable as of June 30, 2020 were as follows (in thousands): Year Amount Due 2020 (remaining) $ 138 2021 294 2022 311 2023 14,659 Total $ 15,402 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | Three Months Ended June 30, Six Months Ended June 30, (in thousands, except share and per share data) 2020 2019 2020 2019 Numerator: Net income (loss) attributable to common shareholders $ (214) $ 31 $ (273) $ 77 Denominator: Weighted average number of common shares - basic 405,169 405,169 405,169 405,169 Effect of dilutive securities: Assumed conversion of Preferred A Shares — 53,610 — 53,610 Assumed conversion of Preferred C Shares — 2,319,440 — 2,319,440 Weighted average number of common shares - dilutive 405,169 2,778,219 405,169 2,778,219 Earnings (Loss) Per Share: Basic income (loss) per common share: Net income (loss) available to common shareholders $ (0.53) $ 0.08 $ (0.67) $ 0.19 Diluted income (loss) per common share: Net income (loss) available to common shareholders $ (0.53) $ 0.01 $ (0.67) $ 0.03 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | The following table presents the revenue and expenses with Whitestone included in our condensed consolidated statement of operations for the three and six months ended June 30, 2020 and 2019 (in thousands): Three Months Ended June 30, Six Months Ended June 30, Location of Revenue (Expense) 2020 2019 2020 2019 Rent Rental $ 220 $ 183 $ 481 $ 313 Property management fees Management fees (110) (175) (221) (342) Asset management fees Management fees (46) (49) (83) (94) Rent expense Office expenses (4) (4) (10) (7) Interest expense Interest expense — (53) — (109) Receivables due from and payables due to related parties consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands): Location of Receivable (Payable) June 30, 2020 December 31, 2019 Tenant receivables and other receivables Receivable due from related party $ 676 $ 184 Accrued interest due to related party Accrued interest payable (91) (81) Other payables due to related party Payable due to related party (1,039) (346) |
Incentive Equity Plan (Tables)
Incentive Equity Plan (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Schedule of Share-Based Incentive Plan Activity | During the six months ended June 30, 2020, the following shares were granted: Description Shares Weighted-Average Grant Date Fair Value (1) Non-vested at January 1, 2020 90,062 $ 2.18 Granted — — Non-vested at June 30, 2020 90,062 $ 2.18 Available for grant at June 30, 2020 2,248,507 (1) The fair value of the shares granted were determined based on the share activity from the date of the three property sales on December 27, 2018 until the grant date July 1, 2019. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Jan. 01, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Impairment of real estate | $ 0 | |||||
Allowance for doubtful accounts | $ 286,000 | 286,000 | $ 161,000 | |||
Rental revenue adjustment | 83,000 | $ 59,000 | 131,000 | $ 119,000 | ||
Rental revenue adjustment due to COVID-19 | 20,000 | $ 33,000 | ||||
Uncertain tax position to be recognized based on maximum cumulative probability percentage | 50.00% | |||||
Operating loss carry-forwards | 326,000 | $ 326,000 | ||||
Deferred tax liabilities | 101,000 | 96,000 | 101,000 | 96,000 | ||
Total lease liabilities | 14,000 | 14,000 | 7,000 | |||
Operating lease payments | $ 14,000 | $ 14,000 | ||||
Operating lease, weighted average discount rate, percent | 4.50% | 4.50% | ||||
Operating lease right of use assets | $ 14,000 | $ 14,000 | $ 7 | |||
Rental revenues | 2,185,000 | 3,254,000 | 4,522,000 | 6,519,000 | ||
Recoveries | $ 334,000 | $ 613,000 | $ 614,000 | $ 1,250,000 | ||
Accounting Standards Update 2016-02 [Member] | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Total lease liabilities | $ 21,000 | |||||
Operating lease payments | $ 22,000 | |||||
Operating lease, weighted average discount rate, percent | 4.50% | |||||
Operating lease right of use assets | $ 21,000 | |||||
Building and Building Improvements [Member] | Minimum [Member] | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Estimated useful lives | 5 years | |||||
Building and Building Improvements [Member] | Maximum [Member] | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Estimated useful lives | 39 years |
Accrued Rents and Accounts Re_3
Accrued Rents and Accounts Receivable, Net (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Tenant receivables | $ 567 | $ 271 |
Accrued rents and other recoveries | 1,145 | 1,311 |
Allowance for doubtful accounts | (286) | (161) |
Total | $ 1,426 | $ 1,421 |
Leases - Minimum Future Rent Pa
Leases - Minimum Future Rent Payments (Details) $ in Thousands | Jun. 30, 2020USD ($) |
Leases [Abstract] | |
2020 (remaining) | $ 3,846 |
2021 | 5,941 |
2022 | 4,096 |
2023 | 2,846 |
2024 | 1,751 |
Thereafter | 1,511 |
Total | $ 19,991 |
Leases - Narrative (Details)
Leases - Narrative (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Feb. 01, 2017ft² | |
Lessee, Lease, Description [Line Items] | |||||
Operating lease cost | $ | $ 3,633 | $ 3,597 | $ 9,808 | $ 7,194 | |
Operating lease, weighted average discount rate, percent | 4.50% | 4.50% | |||
2600 S. Gessner Road, Suite 555 Houston, Texas 77063 [Member] | |||||
Lessee, Lease, Description [Line Items] | |||||
Lease term | 3 years 5 months | ||||
Gross leasable area (sqft.) | ft² | 678 |
Leases - Maturities of Operatin
Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
2020 (remaining) | $ 7 | |
2021 | 7 | |
Total undiscounted rental payments | 14 | |
Total lease liabilities | $ 14 | $ 7 |
Unamortized Lease Commissions_3
Unamortized Lease Commissions and Deferred Legal Cost, Net (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Leasing commissions | $ 1,326 | $ 1,377 |
Deferred legal cost | 15 | 18 |
Total cost | 1,341 | 1,395 |
Less: deferred legal cost accumulated amortization | (744) | (698) |
Less: deferred legal cost accumulated amortization | (12) | (12) |
Total cost, net of accumulated amortization | $ 585 | $ 685 |
Variable Interest Entity - Narr
Variable Interest Entity - Narrative (Details) $ / shares in Units, $ in Millions | Jun. 30, 2020 | Dec. 08, 2016USD ($)subsidiaryproperty$ / shares |
Pillarstone OP [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Conversion ratio, LTIP units to OP units (in shares) | 1 | |
Conversion ratio, OP units to common shares (in shares) | 1 | |
Whitestone [Member] | Variable Interest Entity | ||
Schedule of Equity Method Investments [Line Items] | ||
Number of wholly-owned subsidiaries contributed to variable interest entity | subsidiary | 4 | |
Number of non-core properties contributed to variable interest entity | property | 14 | |
Consideration amount | $ 84 | |
Consideration, limited partnership interest | $ 18.1 | |
Consideration, limited partnership interest (in dollars per share) | $ / shares | $ 1.331 | |
Liabilities assumed | $ 65.9 | |
Whitestone [Member] | Pillarstone OP [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 18.60% | |
Accrued rents and accounts receivable, net of allowance for doubtful accounts | $ 4.1 |
Variable Interest Entity - Sche
Variable Interest Entity - Schedules (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | |
Schedule of Equity Method Investments [Line Items] | |||
Property | $ 56,205 | $ 55,861 | |
Accumulated depreciation | (6,331) | (5,522) | |
Total real estate assets | 49,874 | 50,339 | |
Cash and cash equivalents | 4,875 | 4,624 | |
Escrows and utility deposits | 957 | 566 | |
Accrued rents and accounts receivable, net of allowance for doubtful accounts | 1,426 | 1,421 | |
Receivable due from related party | 676 | 184 | |
Unamortized lease commissions and deferred legal cost, net | 585 | 685 | |
Prepaid expenses and other assets | 159 | 62 | [1] |
Total assets | 58,552 | 57,881 | |
Notes payable | 15,311 | 15,434 | |
Accounts payable and accrued expenses | 2,068 | 2,344 | [2] |
Payable due to related party | 1,039 | 346 | |
Accrued interest payable | 155 | 148 | |
Tenants' security deposits | 877 | 881 | |
Total liabilities | 19,648 | 19,351 | |
Variable Interest Entity | |||
Schedule of Equity Method Investments [Line Items] | |||
Property | 56,202 | 55,857 | |
Accumulated depreciation | (6,328) | (5,519) | |
Total real estate assets | 49,874 | 50,338 | |
Cash and cash equivalents | 3,778 | 3,331 | |
Escrows and utility deposits | 957 | 566 | |
Accrued rents and accounts receivable, net of allowance for doubtful accounts | 1,301 | 1,360 | |
Receivable due from related party | 672 | 184 | |
Unamortized lease commissions and deferred legal cost, net | 585 | 685 | |
Prepaid expenses and other assets | 143 | 35 | |
Total assets | 57,310 | 56,499 | |
Notes payable | 15,311 | 15,434 | |
Accounts payable and accrued expenses | 1,672 | 2,164 | |
Payable due to related party | 1,025 | 344 | |
Accrued interest payable | 64 | 67 | |
Tenants' security deposits | 877 | 881 | |
Total liabilities | 18,949 | 18,890 | |
Accounts receivable related party | $ 500 | $ 500 | |
[1] | Operating lease right of use assets (net) (related to adoption of Topic 842) | ||
[2] | Operating lease liabilities (related to adoption of Topic 842) |
Real Estate (Details)
Real Estate (Details) ft² in Millions, $ in Millions | Oct. 08, 2019USD ($) | Jun. 30, 2020ft²property |
Pillarstone OP [Member] | ||
Real Estate [Line Items] | ||
Number of real estate properties | property | 8 | |
Gross leasable area (sqft.) | ft² | 0.9 | |
Corporate Park West [Member] | ||
Real Estate [Line Items] | ||
Proceeds from sale of real estate | $ 20.3 | |
Gain on sale of real estate | 6.9 | |
Corporate Park Woodland [Member] | ||
Real Estate [Line Items] | ||
Proceeds from sale of real estate | 12.2 | |
Gain on sale of real estate | 6.1 | |
Plaza Park [Member] | ||
Real Estate [Line Items] | ||
Proceeds from sale of real estate | 7.3 | |
Gain on sale of real estate | $ 4 |
Debt - Mortgages and Other Note
Debt - Mortgages and Other Notes Payable (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
$16.5 million 4.97% Note, due September 26, 2023 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, face amount | $ 16,500,000 | |
Stated interest rate | 4.97% | |
Notes Payable | ||
Debt Instrument [Line Items] | ||
Notes payable, gross | $ 15,402,000 | $ 15,539,000 |
Less deferred financing costs, net of accumulated amortization | (91,000) | (105,000) |
Total notes payable | 15,311,000 | 15,434,000 |
Notes Payable | $16.5 million 4.97% Note, due September 26, 2023 | ||
Debt Instrument [Line Items] | ||
Notes payable, gross | $ 15,402,000 | $ 15,539,000 |
Debt - Narrative (Details)
Debt - Narrative (Details) $ in Thousands | Jun. 30, 2020USD ($)property | Dec. 31, 2019USD ($)property |
Debt Instrument [Line Items] | ||
Property | $ 56,205 | $ 55,861 |
Mortgage debt | ||
Debt Instrument [Line Items] | ||
Number of real estate properties | property | 1 | 1 |
Property | $ 22,200 | $ 22,300 |
Debt - Maturity Schedule (Detai
Debt - Maturity Schedule (Details) - Notes Payable - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
2020 (remaining) | $ 138 | |
2021 | 294 | |
2022 | 311 | |
2023 | 14,659 | |
Total | $ 15,402 | $ 15,539 |
Convertible Notes Payable - R_2
Convertible Notes Payable - Related Parties (Details Narrative) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2019USD ($) | Nov. 20, 2015USD ($)trustee$ / shares |
Debt Instrument [Line Items] | ||||
Convertible notes payable - related parties | $ 197,780 | $ 197,780 | ||
Convertible Notes Payable [Member] | ||||
Debt Instrument [Line Items] | ||||
Number of trustees | trustee | 5 | |||
Convertible notes payable - related parties | $ 197,780 | |||
Interest rate | 10.00% | |||
Conversion price (in dollars per share) | $ / shares | $ 1.331 | |||
Accrued interest due to related party | $ 91,000 | $ 81,000 |
Earnings (Loss) Per Share - Nar
Earnings (Loss) Per Share - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Convertible notes payable - related parties | $ 197,780 | $ 197,780 | $ 197,780 | $ 197,780 |
Antidilutive securities excluded from computation of earnings per share, amount | 217,193 | 202,293 | 215,341 | 200,440 |
Earnings (Loss) Per Share - Sch
Earnings (Loss) Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Net income (loss) attributable to common shareholders | $ (214) | $ 31 | $ (273) | $ 77 |
Weighted average number of common shares - basic (shares) | 405,169 | 405,169 | 405,169 | 405,169 |
Weighted average number of common shares - dilutive (shares) | 405,169 | 2,778,219 | 405,169 | 2,778,219 |
Basic income (loss) per common share: | ||||
Net income (loss) available to common shareholders, basic (usd per share) | $ (0.53) | $ 0.08 | $ (0.67) | $ 0.19 |
Diluted income (loss) per common share: | ||||
Net income (loss) available to common shareholders, diluted (usd per share) | $ (0.53) | $ 0.01 | $ (0.67) | $ 0.03 |
Preferred A Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Incremental common shares attributable to dilutive effect of conversion of preferred stock (shares) | 0 | 53,610 | 0 | 53,610 |
Preferred C Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Incremental common shares attributable to dilutive effect of conversion of preferred stock (shares) | 0 | 2,319,440 | 0 | 2,319,440 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) - Whitestone [Member] | 1 Months Ended | 6 Months Ended | |
Dec. 31, 2018property | Jun. 30, 2020 | Dec. 08, 2016USD ($)$ / shares | |
Related Party Transaction [Line Items] | |||
Property management fee (percentage) | 5.00% | ||
Asset management fee (percentage) | 0.125% | ||
Uptown Tower | |||
Related Party Transaction [Line Items] | |||
Property management fee (percentage) | 3.00% | ||
Asset management fee (percentage) | 0.125% | ||
Pillarstone OP [Member] | |||
Related Party Transaction [Line Items] | |||
Accrued rents and accounts receivable, net of allowance for doubtful accounts | $ | $ 4,121,312 | ||
Ownership percentage | 18.60% | ||
Number of real estate properties sold | property | 3 | ||
Variable Interest Entity | |||
Related Party Transaction [Line Items] | |||
Consideration, limited partnership interest (in dollars per share) | $ / shares | $ 1.331 |
Related Party Transactions - In
Related Party Transactions - Income Statement (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Related Party Transaction [Line Items] | ||||
Asset management fees | $ (156,000) | $ (224,000) | $ (304,000) | $ (436,000) |
Rental | Whitestone [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent | 220,000 | 183,000 | 481,000 | 313,000 |
Management fees | Whitestone [Member] | ||||
Related Party Transaction [Line Items] | ||||
Property management fees | (110,000) | (175,000) | (221,000) | (342,000) |
Asset management fees | (46,000) | (49,000) | (83,000) | (94,000) |
Office expenses | Whitestone [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent expense | (4,000) | (4,000) | (10,000) | (7,000) |
Interest expense | Whitestone [Member] | ||||
Related Party Transaction [Line Items] | ||||
Interest expense | $ 0 | $ (53,000) | $ 0 | $ (109,000) |
Related Party Transactions - Ba
Related Party Transactions - Balance Sheet (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Related Party Transaction [Line Items] | ||
Other payables due to related party | $ (1,039) | $ (346) |
Receivable due from related party | ||
Related Party Transaction [Line Items] | ||
Tenant receivables and other receivables | 676 | 184 |
Accrued interest payable | ||
Related Party Transaction [Line Items] | ||
Accrued interest due to related party | (91) | (81) |
Payable due to related party | ||
Related Party Transaction [Line Items] | ||
Other payables due to related party | $ (1,039) | $ (346) |
Incentive Equity Plan - Narrati
Incentive Equity Plan - Narrative (Details) - USD ($) $ in Thousands | Jul. 01, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shared-based compensation | $ 23 | $ 0 | $ 36 | $ 0 | |
2016 Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Percent of total shares authorized | 12.50% | ||||
Number of shares available for grant (in shares) | 2,248,507 | 2,248,507 | |||
Restricted Common Shares and Restricted Share Units [Member] | Time-Based Vesting [Member] | 2016 Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Restricted stock granted (in shares) | 45,031 | ||||
Award vesting period | 3 years | ||||
Restricted Common Shares and Restricted Share Units [Member] | Time and Performance-Based Vesting [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shared-based compensation | $ 196 | ||||
Restricted Common Shares and Restricted Share Units [Member] | Performance Vesting [Member] | July 1, 2021 [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 1 year | ||||
Restricted Common Shares and Restricted Share Units [Member] | Performance Vesting [Member] | July 1, 2022 [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years |
Incentive Equity Plan - Schedul
Incentive Equity Plan - Schedule of Share-Based Incentive Plan Activity (Details) - 2016 Plan [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Shares | |
Non-vested, beginning balance (in shares) | 90,062 |
Granted (in shares) | 0 |
Non-vested, ending balance (in shares) | 90,062 |
Available for grant (in shares) | 2,248,507 |
Weighted-Average Grant Date Fair Value | |
Non-vested, beginning balance (in dollars per share) | $ / shares | $ 2,180 |
Granted (in dollars per share) | $ / shares | 0 |
Non-vested, ending balance (in dollars per share) | $ / shares | $ 2.18 |
Subsequent Events (Details)
Subsequent Events (Details) | Aug. 14, 2020 |
Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Base rent, percentage received | 95.00% |