The Shops at Starwood, Frisco, TX
The Living Room, Market Street at DC Ranch, Scottsdale, AZ
BLVD Place, Houston, TX
The Shops at Starwood, Frisco, TX
BLVD Place, Houston, TX Investor Presentation
April 2018
Forward Looking Statements
2
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information
about possible or assumed future events, including, among other things, discussion and analysis of acquisitions and the impact of such acquisitions on Whitestone REIT, or the Company, including
expected financing developments, capitalization rates and internal rates of return, the financial condition and results of operations of the Company, anticipated capital expenditures required to complete
projects, amounts of anticipated cash distributions to the Company’s shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or
current expectations of the Company’s management based on its knowledge and understanding of the Company’s business and industry. Forward-looking statements are typically identified by the use
of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and
similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other
factors, some of which are beyond the Company’s control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned not to place undue reliance on forward-looking statements. The Company
undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that
could cause actual results to differ materially from any forward-looking statements made in this presentation include the Company's ability to meet its long-term goals, its assumptions regarding its
earnings guidance, including its ability to execute effectively its acquisition and disposition strategy, to continue to execute its development pipeline on schedule and at the expected costs, and its ability
to grow its NOI as expected, which could be impacted by a number of factors, including, among other things, its ability to continue to renew leases or re-let space on attractive terms and to otherwise
address its leasing rollover; its ability to successfully identify, finance and consummate suitable acquisitions, and the impact of such acquisitions, including financing developments, capitalization rates
and internal rate of return; the Company’s ability to reduce or otherwise effectively manage its general and administrative expenses, including in connection with the recent proposed nomination of
trustees by a shareholder of the Company; the Company’s ability to fund from cash flows or otherwise distributions to its shareholders at current rates or at all; current adverse market and economic
conditions; lease terminations or lease defaults; the impact of competition on the Company's efforts to renew existing leases; changes in the economies and other conditions of the specific markets in
which the Company operates; economic, legislative and regulatory changes, including the impact of the Tax Cuts and Jobs Act of 2017; the success of the Company's real estate strategies and
investment objectives; and the Company's ability to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. The forward-looking statements should be read in light of
these factors and the factors identified in the “Risk Factors” included in the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and information
that it files with the Securities and Exchange Commission, or the SEC.
The Company obtained the industry, market and competitive position data used in this presentation from (i) its own internal estimates and research of third-party company websites and other sources,
(ii) industry and general publications and research or (iii) studies and surveys conducted by third parties. Such sources generally do not guarantee the accuracy or completeness of included
information. While the Company believes that the information included in this presentation from such publications, research, studies, surveys and websites is reliable, it has not independently verified
data from these third-party sources. While the Company believes its internal estimates and research are reliable, neither such estimates and research nor such definitions have been verified by any
independent source.
This presentation contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accounting principles, or GAAP, including EBITDA, FFO, FFO Core, and NOI.
These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to
GAAP measures is contained in the Appendix to this presentation.
Additional Information
Whitestone REIT, its trustees and certain of its executive officers and Innisfree M&A Incorporated on their behalf may be deemed to be participants in the solicitation of proxies from Company
shareholders in connection with the matters to be considered at the Company’s 2018 Annual Meeting. The Company has filed a definitive proxy statement on Schedule 14A and form of associated
WHITE proxy card with the SEC in connection with the solicitation of proxies from Company shareholders. COMPANY SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE
DEFINITIVE PROXY STATEMENT AND ACCOMPANYING WHITE PROXY CARD AS THEY CONTAIN IMPORTANT INFORMATION. Information regarding the ownership of the Company’s trustees
and executive officers in Company common shares and other securities is set forth in the definitive proxy statement. Details regarding the identity of potential participants, and their direct or indirect
interests, by security holdings or otherwise, is set forth in the definitive proxy statement and other materials to be filed with the SEC in connection with the Company’s 2018 Annual Meeting.
Shareholders will be able to obtain the definitive proxy statement, any amendments or supplements to the definitive proxy statement and other documents filed by the Company with the SEC for no
charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Company’s website at www.whitestonereit.com.
3
Discussion Agenda
PART I Executive Summary
PART II WSR’s Stock and Operating Performance - Creating Long-Term Shareholder Value and Providing Stable Income
PART III WSR’s E-Commerce Resistant Business Model and Strategy - Executing Consistently
PART IV Internal Management - Aligning Management Compensation with Shareholder Interests
PART V WSR’s Board - Guiding by Experience and Diverse Perspectives
PART VI KBS’s Poor Performance
PART VII KBS’s Trustee Nominees Lack Valuable Experience
PART VIII Conclusion
➢ Long-Term Growth and Value-Added Investment Opportunity
Maximizing Total Return to Shareholders with Significant Growth
➢ Community-Centered REIT With High Quality Properties in Affluent and High Growth Markets
Consistent E-Commerce Resistant Strategy Providing Service-Based Retail and Necessities
➢ Total Shareholder Return (TSR) has Outperformed Peers
WSR has ranked #1 of 17, #2 of 16, and #5 of 15 over 1-year, 3-year, and 5-year periods, respectively, of the Publicly-
Traded, US Shopping Center REITs (7)
➢ Solid Capital Structure Positions the Company for Growth
➢ Experienced Retail Real Estate Team Leading Internalized Management and Operations
Increasing Occupancies, Rents, and Scalable Processes and Infrastructure
➢ The Right Board in Place – Extensive Public Company Experience Coupled with Gender,
Ethnic, Age, Cognitive, and Professional Diversity Working Together with a Common Purpose
Real Estate * Law * Finance * Retail * Energy * Commodities * Government * Academia
➢ WSR’s Commitment to Corporate Governance and Transparency
Enhancing and Expanding Governance and Shareholder Engagement
73 properties (2)
6.6 million GLA (2)
1,664 tenants (2)
90.2% occupancy (3)
$18.82 ABR per sq. ft. (3)(4)
+2.6% SS NOI Growth (3)(5)
$581 million
(Equity Market Cap) (6)
$1.2 billion
(Enterprise Value) (8)
NYSE: WSR
IPO - August 2010
(1) As of Dec 31, 2017 except where indicated.
(2) Includes properties owned through Pillarstone Capital REIT Operating Partnership LP as of Dec 31, 2017.
(3) Excludes properties owned through Pillarstone Capital REIT Operating Partnership LP as of Dec 31, 2017.
(4) Calculated using Annualized Base Rent (“ABR”), represents monthly base rent as of Dec 31, 2017 multiplied by 12.
(5) Represents same store (“SS”) net operating income (“NOI”) growth for FY17 vs. FY16.
(6) WSR common shares and operating partnership units on December 29, 2017 of $14.41 per share.
(7) Whitestone REIT Total Shareholder Return as compared to its peers based on SNL data. All periods ending December 31, 2017. Total shareholder return is defined as share price change plus re-invested dividends. Peers include
Acadia Realty Trust, Brixmor Property Group Inc., Cedar Realty Trust Inc., DDR Corp., Federal Realty Investment Trust, Kimco Realty Corp., Kite Realty Group Trust, Ramco-Gershenson Properties Trust, Regency Centers Corp.,
Retail Opportunity Investments Corp., Retail Properties of America, Inc., Saul Centers Inc., Urban Edge Properties, Urstadt Biddle Properties Inc., Weingarten Realty Investors, and Wheeler REIT Inc., excluding any such peer which
was not a public company for the entirety of the applicable TSR period.
(8) Equity Market Cap plus Real Estate Debt.
Executive Summary: WSR - Unique Story and
Opportunity
4
Portfolio Fast Facts (1)
PART
I
Creating Value: WSR Financial Highlights
5
22% growth in Revenue
178% growth in Net Income
24% growth in NOI (1)
28% growth in FFO (2)
29% growth in FFO Core (2)
6% growth in FFO Core per Share(2)
(1) The Company defines NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). NOI is a non-GAAP measure. A
reconciliation of non-GAAP measures to GAAP measures is contained in the Appendix to this presentation.
(2) The Company defines FFO as defined by NAREIT, which states that FFO should represent net income available to common shareholders (computed in accordance with GAAP) excluding gains or losses from sales
of operating assets, impairment charges and extraordinary items, plus depreciation and amortization of operating properties, including the Company's share of unconsolidated real estate joint ventures and
partnerships. The Company defines FFO Core as FFO excluding certain non-cash and non-comparable items that affect the Company's period-over-period performance, including, but not limited to, legal
settlements, non-cash share-based compensation expense, rent support agreement payments received from sellers on acquired assets and acquisition costs. FFO and FFO Core are non-GAAP measures. A
reconciliation of non-GAAP measures to GAAP measures is contained in the Appendix to this presentation.
(3) Whitestone REIT Total Shareholder Return as compared to its peers based on SNL data. All periods ending December 31, 2017. Total shareholder return is defined as share price change plus re-invested
dividends. Peers include Acadia Realty Trust, Brixmor Property Group Inc., Cedar Realty Trust Inc., DDR Corp., Federal Realty Investment Trust, Kimco Realty Corp., Kite Realty Group Trust, Ramco-Gershenson
Properties Trust, Regency Centers Corp., Retail Opportunity Investments Corp., Retail Properties of America, Inc., Saul Centers Inc., Urban Edge Properties, Urstadt Biddle Properties Inc., Weingarten Realty
Investors, and Wheeler REIT Inc., excluding any such peer which was not a public company for the entirety of the applicable TSR period.
(4) Timeframe Jan 1, 2013 through Dec 31, 2017.
CAGR - Five Years Ended December 31, 2017(4)
#1 of 17 over 1 year
#2 of 16 over 3 years
#5 of 15 over 5 years
PART
Il
TSR Rank Amongst Public REIT Shopping Centers (3)
40
30
20
10
0
10
20
WS
R
R
EG
WR
I
ROI
C
C
D
R
FR
T
U
E
B
FS
RP
T
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B
A
RP
A
I
K
R
G
A
K
R
W
H
LR
B
R
X
KI
M
D
D
R
P
er
ce
n
ta
ge
R
et
u
rn
(%
)
WSR #1 in Total Shareholder Return % - 1 Year
60
40
20
0
20
40
ROI
C
WS
R
B
FS
R
EG
U
B
A
WR
I
FR
T
A
K
R
RP
T
RP
A
I
C
D
R
B
R
X
KI
M
K
R
G
D
D
R
W
H
LR
P
er
ce
n
ta
ge
R
et
u
rn
(%
)
WSR #2 in Total Shareholder
Return % - 3 Year
80
60
40
20
0
20
40
60
80
100
ROI
C
R
EG
B
FS
WR
I
WS
R
FR
T
RP
T
U
B
A
RP
A
I
C
D
R
A
K
R
KI
M
K
R
G
D
D
R
W
H
LR
P
er
ce
n
ta
ge
R
et
u
rn
(%
)
WSR #5 in Total Shareholder
Return % - 5 Year
6
PART
Il
Creating Value: Total Shareholder Return vs Peers (1)
Despite Retail REIT Industry Headwinds
(1) Whitestone REIT Total Shareholder Return as compared to its peers based on SNL data. All periods ending December 31, 2017. Total shareholder return is defined as share price change plus re-invested dividends. Peers include Acadia Realty Trust, Brixmor Property Group Inc., Cedar Realty
Trust Inc., DDR Corp., Federal Realty Investment Trust, Kimco Realty Corp., Kite Realty Group Trust, Ramco-Gershenson Properties Trust, Regency Centers Corp., Retail Opportunity Investments Corp., Retail Properties of America, Inc., Saul Centers Inc., Urban Edge Properties, Urstadt Biddle
Properties Inc., Weingarten Realty Investors, and Wheeler REIT Inc., excluding any such peer which was not a public company for the entirety of the applicable TSR period.
W
SR
W
SR
W
SR
17 Publicly-Traded US Shopping Center REITs
16 Publicly-Traded US Shopping Center REITs 15 Publicly-Traded US Shopping Center REITs
FFO Core
Executing Our Strategy: Stable and Predictable
Improvement of Dividend Payout Ratio
7
PART
III
$0
$10
$20
$30
$40
$50
2011 2012 2013 2014 2015 2016 3Q17(A)
Dividends
($ in millions)
Since 2011 WSR has Increased Dividends(1) and FFO Core while Improving
Dividend Payout Ratio
✓ Approximately $5 million of FFO Core in excess of dividends in 2017
✓ Dividend / FFO Core Payout Ratio of 89% in 2017
✓ Whitestone REIT has Paid a Consistent Dividend Per Share over 92 consecutive MONTHS since our IPO
2017
(1) Includes distributions to OP unit holders and to non-controlling interest in consolidated partnership.
Houston
30%
Dallas
12%
Austin &
San Antonio
15%
Phoenix
42%
Chicago 1%
0 2 4 6 8
Population in millions
Executing Our Strategy: Focused on Business-Friendly
States with High Growth Markets
27 Properties
45 Properties
6.6%
9.7%
8.6%
8.0%
9.7%Austin
Phoenix
San Antonio
Houston
Dallas-Fort Worth
8
Note: Portfolio includes 1 property in Chicago.
(1) Source: The Atlantic CityLab 2013 to 2014.
(2) Source: Claritas, as of April 2017.
(3) As a percentage of portfolio NOI as of December 31, 2017. Excludes 14 properties owned through Pillarstone Capital REIT Operating Partnership
LP.
2017E MSA Population (mm) (2)
% Growth ’17E - ’22E
Net Total Migration (1)
San
Antonio
Austin
+100,000
-100,000
+50,000
-50,000
+10,000
-10,000
PART
IlI
Houston
Geographic Exposure (3)
Executing Our Strategy: Focus on the Consumer
and the Disruption From E-Commerce
9
PART
IlI
Executing Our Strategy: Strong Household Income
Leads to Greater Consumer Discretionary Spending(2)
10
(1) Source: S&P Global Market Nov 2017.
(2) Retail portfolio only. Excludes properties owned through Pillarstone Capital REIT Operating Partnership LP.
$94,232
$81,910
$80,950
$72,950
$67,297
$63,931
$60,049
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
FRT WSR REG KIM DDR WRI BRX
M
ed
ia
n
H
o
u
seh
o
ld
In
co
m
e
(3
-m
ile
ra
d
iu
s)
(1
)
Peer Average: $74,474
PART
IlI
Executing Our Strategy: Strong Internal Growth
11
Attractive Same-Store NOI Growth:
Greater Consumer Spending on Services and Needs
Increasing Occupancy:
Entrepreneurial Tenants Locate Where Consumers Migrate
Growing Rent Levels:
From Shorter Term, Triple Net Rents with
2%-3% Annual Escalations
Total Occupancy (2) ABR per Sq. Ft. (2)
.
(1) For WSR, excludes properties owned through Pillarstone Capital REIT Operating Partnership LP. Source: Company filings.
(2) Occupancy and ABR per sq. ft. as of December 31, 2017. Excludes properties owned through Pillarstone Capital REIT Operating Partnership LP.
80.3%
90.2%
IPO - 3Q10 4Q17
$10.43
$18.82
IPO - 3Q10 4Q17
PART
IlI
5.4%
3.6% 3.4% 3.1% 2.9% 2.6% 2.6% 2.6% 2.4% 2.0% 1.7% 1.5% 1.3%
0.7%
0.1% 0.0%
(1.3%)
Peer Average 2.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
UE REG FRT ROIC KRG WSR BRX WRI RPT RPAI KIM UBA WHLR BFS AKR DDR CDR
SS NOI Growth Rate - 2017 YoY Growth Rates(1)
• Increasing cash flows from lease up of vacant spaces and rate increases
• Selectively disposing of properties, including our “highly levered” non-core portfolio through
Pillarstone Capital REIT Operating Partnership, L.P.
• Financing future acquisitions with a lower debt component
Executing Our Strategy: Long-Term Plan
LOWERING
DEBT
LEVERAGE
SCALING
G&A
PART
III
12
8.6x(1) 6x - 7x
CURRENT 5 YEAR GOAL
Debt / EBITDA
Ratio
19%(1) 8% - 10%
CURRENT 5 YEAR GOAL
G&A / Revenue
(1) As of December 31, 2017
• Reducing general and administrative expenses
• Increasing revenue through lease up of vacant spaces and rental rate increases
• Growing our asset base
13
Executing Our Strategy: Making Value-Add Opportunistic Investments
PART
IlI
➢ Embedded Value Through Future Development; Creating Favorable, Expected Unlevered IRR’s in the Mid-Teens(1)
Village Square Development | Mesa, Arizona
BLVD Development | Houston, Texas
Purchased 2017
➢ 1.4 Acres of Entitled
Development Land
➢ 137,000 Additional Square
Feet of GLA
➢ 4.7 Acres of Entitled
Development Land
➢ 200,000 Additional Square
Feet of GLA
Purchased 2013
(1) Estimates Projected Unlevered IRR over an eight year hold period,
assuming 6% exit capitalization rate
14
PART
IIIExecuting Our Strategy: Potential Expansion Opportunities
Potential Expansion Locations
Florida
Georgia
North Carolina
Tennessee
Colorado
Current Whitestone Markets
Texas
Arizona
Business-
Friendly
States
Rapidly Growing
and Attractive
Demographics
TN NC
GA
TX
AZ
FL
CO
TN
NC
GA
Z
15
PART
III
Executing Our Strategy: Long-Term Plans Include
Embracing Environmental & Social Issues
Diversity Highlights:
✓ Whitestone has 103 associates including native speakers of approximately
31 different languages/dialects
✓ Properties serve ethnic and multi-cultural groups in our communities
✓ Diversity is reflected on our Board of Trustees as we appointed three
independent Trustees in 2017 – Nandita Berry, Najeeb Khan and David Taylor
Diversity: A Key
Component of
our Success
Committed to
the Environment
Climate Change Initiatives:
✓ Installation of LED lighting, energy-efficient equipment, and air filtration
systems at redevelopment projects
✓ Evaluation and installation of re-charging stations for electric vehicles at
select properties
✓ Establishment of recycling programs at both the property and tenant levels
✓ Creation of walking and bicycle paths from adjacent communities to minimize
congestion and pollution from vehicle traffic
16
PART
IV
Source: Company filings, SNL Financial
Note: Analysis includes all publicly-traded US shopping center REITs below $10 billion in enterprise value (excl. WHLR)
(1) Includes joint-venture properties and tenant-owned anchor stores where applicable
(2) Represents weighted average lease term for new and renewal leases signed in 2017
OPER
A
TI
O
N
A
L
IN
TE
N
SI
TY
➢ Whitestone’s portfolio ranks near the smallest in terms of GLA of the publicly traded shopping center REITs
➢ However, employee headcount is comparable to shopping center REITs that manage significantly larger portfolios than Whitestone’s
➢ Whitestone’s strategy is more operationally intensive than other publicly traded shopping center REITs as it focuses on smaller, non-
traditional tenants and shorter term leases
➢ Whitestone has the smallest average square foot lease size per tenant among the publicly traded shopping center REITs
Whitestone’s Community-Centered Property
Strategy Is Operationally Intensive
51
73
76
103
118
120
122
147
220
281
447
UBA
ROIC
CDR
WSR
AKR
UE
RPT
KRG
RPAI
WRI
DDR
Employees
850
857
908
913
1,371
1,640
1,964
2,006
2,358
5,400
5,550
UBA
CDR
AKR
UE
RPT
WSR
ROIC
KRG
RPAI
WRI
DDR
Leases
5
7
9
10
11
14
17
21
23
41
92
UBA
WSR
CDR
ROIC
AKR
RPT
UE
RPAI
KRG
WRI
DDR
GLA (millions) (1)
18,275
16,607
11,599
11,595
10,513
10,419
8,974
7,644
5,976
5,346
3,997
UE
DDR
KRG
AKR
CDR
RPT
RPAI
WRI
UBA
ROIC
WSR
Average Lease Size
7.1
6.2
5.9
5.9
5.9
5.3
5.3
4.8
KRG
UBA
WRI
UE
DDR
ROIC
RPAI
RPT
AKR
CDR
WSR
‘17 Signed Leases: Avg Term (2)
N/A
N/A
N/A
8.0%
19.0%
13.5%
11.7%
9.9% 10.0%
8.0% 7.8% 7.7% 7.6% 7.5%
6.8%
6.1%
5.2% 5.0%
WSR AKR CDR RPT WSR BFS DDR UBA RPAI UE AAT KRG ROIC WRI
2017 GAAP G&A Expense (including Fair Value Accounting of Equity Awards)
as % of Revenue vs. Shopping Center Peers (%)
17
PART
IV
Source: Company filings, SNL Financial. GAAP G&A includes acquisition costs where applicable
Note: Includes all publicly-traded US shopping center REITs below $10 billion in enterprise value (excl. WHLR)
(1) DDR G&A excludes $17.9 million of employee separation charges associated with management transaction and restructuring activities in 2017
(2) UBA fiscal year ended October
(2)
Median:
7.7%
Whitestone’s G&A Reflects Its Operationally
Intensive Business Model
(1)
5-year goal
18
Executive Compensation Is Aligned with
Shareholder Interests
2017 NAMED EXECUTIVE OFFICER COMPENSATION CHANGES & UPDATES
PART
IV
Long-Term Equity
Incentive
Compensation
• Shareholder Approved Plan of approximately 8.5% of shares outstanding, down from 12.5%
previously
• Elimination of reload feature
• Reduced 2017 award fair values for the CEO and CFO by ~70% from the 2016 grant date fair value
• Adoption of relative Total Shareholder Return targets as the performance measure for certain 2017
grants (2017 – 2019 Relative TSR to Companies included in the SNL U.S. Shopping Center Index)
Cash
Compensation
• No base salary increases in 2017 for CEO and CFO for the 4th consecutive year
• In 2018 increasing CEO, CFO and other NEOs cash compensation from below market 25th
percentile to 50th percentile. All NEO salaries increased by 2.3% in 2017
• No bonus payouts for CEO and CFO for the 4th consecutive year
• Other NEOs each paid a minimal discretionary bonus of $5,000
Other Executive
Compensation Best
Practices
• Use of independent compensation consultant
• Shareholder engagement on compensation matters
• Share Ownership guidelines: 3-5x base salary for NEOs
• Share Ownership is included as a portion of all Whitestone employee compensation
Whitestone’s Compensation Policies are Aligned with Shareholders
4.1%
4.0%
3.5%
3.0% 2.9% 2.9%
2.4%
2.1%
1.9% 1.9% 1.8%
1.7%
1.5%
AKR UBA ROIC WSR RPT UE CDR KRG RPAI WRI DDR AAT BFS
Latest NEO Compensation (including Fair Value Accounting of Equity Awards)
as % of Revenue vs. Shopping Center Peers (%)
19
PART
VI
Source: Company filings, SNL Financial
Note: Includes all publicly-traded US shopping center REITs below $10 billion in enterprise value (excl. WHLR)
(1) UBA fiscal year ended October.
(2) RPT show 2016 NEO Compensation as % of 2016 Revenue. 2017 data not yet available.
(1)
Median:
2.4%
Key executives are aligned with other owners and have never sold shares except to cover taxes
NEO Compensation Has Been Reduced
Significantly and Falls In Line with Peers
(2)
20
Whitestone’s Board - Guided by Perspectives of an
Experienced and Diverse Board
PART
V
1. 6 of the 7 Trustees are Independent
2. Board regularly evaluates composition and rotates its leadership of Independent Trustee meetings
3. Board succession planning and provides industry experience, balance, and diversity
4. Board Committees are composed entirely of Independent Trustees
1. Trustees include current and former C-Level executives and Trustees of other public companies
2. All Trustees have previous Board experience and 4 of the 7 Trustees have served on other public
company boards
1. Trustees come from diverse professional backgrounds including Real Estate, Law, Finance, Retail,
Energy, Commodities, Government, Military, and Academia
2. Trustees have a strong balance of real estate and public company leadership experience
Board
Independence
Leadership
Experience
Diversity
&
Industry
Knowledge
Board has Strong Independence, Experience,
and Industry Knowledge
21
PART
V
Whitestone’s Board - Guided by Perspectives of an
Experienced and Diverse Board
Mr. James C. Mastandrea
• Chairman and CEO of WSR since Oct.
2006
• 35 years experience in the real estate
industry
• 19 years serving as Chairman and
CEO of publicly traded companies.
• Currently an Adjunct Professor at Rice
University
• Regularly lectures to MBA students at
the University of Chicago
• 2017 Recipient EY Entrepreneur of the
Year – Transformational CEO Award
Mr. Jack L. Mahaffey
• Former President and CEO of Shell
Mining Company (NYSE)
• Former Board Member of the
National Coal Association
• Former Board Member of the
National Coal Council
• Served as an Officer the United
States Air Force
Mr. Paul T. Lambert
• Since 1995, CEO of Lambert Capital
Corporation, a private real estate
investment company
• Co-Founded, Served on the Board of
Directors and was the COO of First
Industrial Realty Trust, Inc. (NYSE:
FR) from its IPO
• Since 1998, Trustee of Pillarstone
Capital REIT (OTC: PLRE)
Mr. Donald F. Keating
• Former CFO of Shell Mining
Company
• Provided Consulting Services from
1992-2002 to Shell Oil Company
(NYSE) following retirement
• Former Board Member of Billiton
Metals Company
• Former Board Member of R & F
Coal Company
• Former Board Member of
Marrowbone Coal Company
.
Ms. Nandita V. Berry
• Brings Governmental, Legal, and Academic Expertise
• Served as the 109th Texas Secretary of State from
January 2014 to February 2015.
• Previously served on the University of Houston System
Board of Regents
• Held Senior Counsel Position at Locke Lord LLP
• Previously served on the Board of the Houston Zoo, Inc.,
the South Asian Chamber of Commerce and the
Community Family Center of Houston
Mr. Najeeb A. Khan
• Brings Technology, Investment and Auditing Skills
• Founder, President and CEO of Interlogic Outsourcing, Inc.
(“IOI”)
• Served as Chairman and CEO of CNA UniSource from
1998 through 2001
• Currently a Director of 1st Source Bank as a member of
the audit committee and chair of the loan and fund
committee
Mr. David F. Taylor
• Brings Corporate and Securities Law Experience
• Currently Chair of Locke Lord LLP, Partner since 1996
• Serves on the Board of Directors of the Greater Houston
Partnership
• Former Chair of the Finance Committee and Chair of the
Capital Markets Section
Experienced Perspectives New Perspectives
22
WSR’s Trustee Nominees = Valuable Experience
PART
V
RE-ELECT YOUR WSR BOARD NOMINEES – WHO HAVE THE RIGHT EXPERIENCE AND QUALIFICATIONS
Ms. Nandita V. Berry
• Served as the 109th Texas Secretary of State from January 2014 to February
2015
• Inducted into the Texas Women’s Hall of Fame in 2014
• Recognized as one of Houston’s Most Influential Women by Houston Woman
Magazine
• Served on the University of Houston System Board of Regents
• Held Senior Counsel position at El Paso Energy Corporation
• Served on the Board of the Houston Zoo, Inc., the South Asian Chamber of
Commerce and the Community Family Center of Houston
Mr. James C. Mastandrea
• 38 years of experience as a leader in the real estate industry
• 20 years of experience in high level positions at public companies
• Critical to the oversight and execution of Whitestone’s strategic initiatives, growth and
financial and operational performance
• 2017 Recipient of EY Entrepreneur of the Year – Transformational CEO Award
Mr. Jack L. Mahaffey
• Former President and CEO of Shell Mining Company
• Former Board member of the National Coal Association and the National Coal Council
• Expertise in the REIT industry and investment management
• Served as an Officer in the United States Air Force
WHITESTONE
NOMINEE
WHITESTONE
NOMINEE
WHITESTONE
NOMINEE
➢ Share Ownership Guidelines for Executives and Trustees adopted in 2017
➢ Whitestone adopted annual frequency of “say-on-pay” vote beginning at the 2018
annual meeting
23
Whitestone’s Board - Guided by Perspectives of an
Experienced and Diverse Board
PART
V
Whitestone Employs a Proactive Approach to Enhancing its Board and Management Team
➢ Whitestone has been focused on enhancing its Board and management team to
continue to deliver value to shareholders
✓ Proactively reduced the average age of independent Trustees from 73 in December of 2016 to 68
in January of 2018(1)
✓ Proactively reduced the average tenure of independent Trustees from approximately 5 years, 8 months
in December of 2016 to approximately 3 years, 11 months in January of 2018(1)
➢ Whitestone’s Board evaluation and nomination processes regularly bring new
expertise, relevant skills and unconflicted perspectives to our Board
✓ 50% of our independent Trustees have been recently added in 2017
✓ New Trustees are strategically identified to add relevant skills, experience and fresh perspectives to the
Board as a whole
✓ Appointed new Chairs of our Compensation Committee and our Nominating and Corporate Governance
Committee
(1) – Date range from December 31, 2016 to January 31, 2018
24
PART
VIKBS’ Poor Performance: Who is KBS?
Source: Company filings, SNL Financial
Note: Total Return of KBS NTRs calculated as sum of (i) all distributions paid and (ii) current NAV or midpoint of current Liquidation Value (as relevant) less initial public offering price. Peer Index references SNL US
REIT Office for all KBS NTRs except KBS Legacy, where the SNL US REIT Multifamily is used. All periods ending December 31, 2017.
(1) Based on real estate carrying value, per December 31, 2017 10-Ks
➢ KBS Has Sponsored Office Property Focused
Non-Traded REITs That Underperform Publicly-
Listed REITs
KBS is a sponsor of several non-traded REITs, or “NTRs”,
with shareholder unfriendly, high cost external management
structures that tend to yield poor results, in part due to
misaligned incentives
KBS is the external advisor of KBS Strategic Opportunity
REIT, or “KBS SOR”; KBS principals Peter McMillan and
Keith Hall are officers and directors of KBS SOR (and
other KBS NTRs) as well as part-owners of KBS
All KBS-sponsored NTRs have underperformed publicly
traded investment alternatives and failed to achieve
sufficient returns to pay KBS any performance-based
incentive fees according to the terms disclosed in their
offering documents
KBS has little experience in retail real estate. Retail
represented approximately 1% of the asset value (by
carrying value) of all KBS NTRs as of December 31, 2017
KBS NTRs have invested primarily in office properties
with the exception of KBS Legacy Partners Apartment REIT, a
multifamily dedicated NTR for which KBS partnered with a
multifamily real estate firm, Legacy Partners
85%
8%
4%
2% 1%
KBS NTRs: Mix of Property Types (1)
Office Apartment
Other Hotel
Retail
(58%)
(102%)
vs Peer Index vs RMS
KBS SOR - Relative Total Return Since Launch
(56%)
(70%)
vs Peer Index vs RMS
All KBS NTR Vehicles - Relative Total Return Since Launch
Source: Company filings, SNL Financial
(1) Proxy filed Dec. 22, 2017
(2) Letter to shareholders dated December 13, 2017 25
PART
VI
Externally Advised
Governance and
Management
Structure
Poor incentives: fees paid to external advisor for transaction activity and grow with Assets Under Management (AUM),
irrespective of returns and underperformance vs. publicly traded peers and indices
Potential for conflicts of interest as KBS principals serve as officers and directors of KBS SOR and profit from their
ownership of the external advisor
Rather than seek liquidity by July 2019 deadline specified in offering documents, KBS sought shareholder approval to
convert KBS SOR into a perpetual life monthly NAV REIT, preserving fee streams
KBS also accelerated an incentive payment in connection with converting to a monthly NAV REIT (1)
Entanglement with
Other KBS NTRs
Only one of five KBS SOR directors has no involvement with other KBS NTRs; two directors are principals of KBS and 2
directors are also directors of KBS Strategic Opportunity REIT II, another NTR externally advised by KBS
Executives oversee other KBS NTRs
Minimal Executive
Stock Ownership
As of 2017, board members and executives together owned less than 1.5% of the company’s stock (1)
Related Party
Transactions
In November 2017, KBS SOR sold an $804mm portfolio to the newly-formed Singapore REIT, Keppel-KBS REIT
(externally managed by an affiliate of KBS)
The KBS affiliate will receive ongoing management, acquisition, and disposition fees from the Singapore REIT; KBS also
received a disposition fee from the shareholders of KBS SOR in connection with the transaction; the Singapore REIT's
advisor is 50% owned by a JV between Peter McMillan, Keith Hall and other KBS principals
Despite selling over $800mm of assets, KBS shareholders received minimal liquidity: KBS SOR paid a special dividend of
$3.61 per share limited to 20% cash in January 2018 (2)
KBS Strategic Opportunity REIT Exemplifies Poor Corporate Governance
Don’t Put Your Investment at Risk
For KBS NTRs, Poor Corporate Governance
Goes Hand in Hand With Poor Performance
26
PART
VIKBS’s Fundraising Has Declined Significantly
➢ KBS Holds Onto Its NTRs For As Long As it Can
No KBS NTR has experienced a liquidity event such as a listing on a national securities exchange or merger with a publicly traded REIT
KBS REIT I and KBS Legacy Partners Apartment REIT both liquidated assets over time; further, KBS REIT I’s liquidation extended to Dec 2017, long
beyond its liquidity deadline Nov 2012 as set forth in its IPO prospectus
Although KBS REIT II has formed a special committee to evaluate strategic alternatives, the vehicle has exceeded the liquidity deadline March 2018
as set forth in its IPO prospectus and has not announced a liquidity event
KBS has received over $700 million in fees from its NTRs(1), partly by advising the above NTRs past their liquidity deadlines
‒ KBS’s NTR fundraising has declined significantly; after raising nearly $1.2 billion in 2008 and an average of $579 million per year between 2009 and 2015,
KBS raised only $70 million for its NTRs last year (1)
➢Why Are We Engaged In A Proxy Contest With KBS?
KBS’s motivations are unclear; proxy materials only state “Early last year … market conditions were favorable for us to make a major investment in
Whitestone.”
KBS has not articulated a business plan for Whitestone and has not disagreed with management on its strategy
We believe that KBS and its trustee nominees do not add value to Whitestone: they lack experience in retail and lack connectivity with Whitestone’s target
markets; KBS’s nominees have ties to KBS and are not independent
$1,181
$594
$873
$414
$589
$442
$577 $561
$96 $70
$0
$2,000
$4,000
$6,000
$8,000
$0
$400
$800
$1,200
$1,600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
T
o
ta
l A
s
s
e
ts
u
n
d
e
r
M
a
n
a
g
e
m
e
n
t
($
m
m
)
Ca
p
it
a
l Ra
is
e
d
(
$
m
m
) KBS: NTR Capital Raised Vs. Total Assets Under Management
Capital Raised Total Assets Under Management
Don’t Put Your Investment at Risk
Source: Company filings
(1) Annual 10-Ks for KBS REITs I, II & III, KBS SOR I & II, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT
27
PART
VII
WSR Trustee Nominees KBS Trustee Nominees
Credentials James Mastandrea Jack Mahaffey Nandita Berry Kenneth Fearn David Snyder
Knowledge of Retail Real Estate ✓ ✓
Connectivity with Whitestone’s
Markets ✓ ✓ ✓
Independent? (not affiliated w/
WSR or any KBS entity) ✓ ✓
Public Company Leadership (C-
level role) ✓ ✓ ✓
KBS’s Trustee Nominees Lack Valuable
Experience
Don’t Put Your Investment at Risk
KBS’s Trustee Nominees Lack Experience in Retail
and in Whitestone’s Markets
28
PART
VII
Whitestone Trustee Nominees KBS Trustee Nominees
Strategy
▪ Actively engaged in overseeing the Company’s successful
community-centered properties investment strategy and related
growth
▪ Significant experience and oversight to ensure the Company
continues executing on its goals
▪ No articulated business or operating strategy
Knowledge of Retail Real
Estate
▪ James Mastandrea: over 38 years of real estate experience
including roles at Whitestone and First Union Real Estate
Investments, both retail oriented firms
▪ Jack Mahaffey: Trustee of Whitestone since 2000
▪ Neither of the KBS nominees possesses comparable retail real
estate experience
Connectivity with
Whitestone’s Markets
▪ All long-time Texas residents
▪ James Mastandrea: Adjunct Professor in Management - Real Estate
Finance at Rice University; 2017 EY Entrepreneur of the Year for the
Gulf Coast Region
▪ Nandita Berry: Valuable connectivity throughout Texas markets
given previous role as Texas Secretary of State
▪ Neither of the KBS nominees lives in nor has day-to-day familiarity
with Whitestone’s target markets
▪ Neither of the KBS nominees has operated nor invested in retail real
estate in Whitestone’s markets
Independent? (not
affiliated w/ WSR or any
KBS entity)
▪ 2 of 3 Whitestone nominees are independent
▪ Kenneth Fearn has no affiliation with KBS SOR; however, serves as
Managing Director of Integrated Capital LLC, which is the asset
manager for a KBS SOR II property held in a JV between the two
▪ David Snyder is CEO and CIO of KBS-Keppel US REIT, a REIT
externally advised by an affiliate of KBS
Extensive Public Company
Leadership (C- level role)
▪ James Mastandrea: 20 years of high level experience leading
publicly traded companies
▪ Jack Mahaffey: 8 years of experience as a Trustee of Whitestone
since its IPO in 2010; Served as President and CEO of Shell Mining
Company (NYSE)
▪ Kenneth Fearn: ~18 months as a director of Ashford Hospitality
Prime (NYSE:AHP), an externally advised REIT
AHP has delivered -33% returns to shareholders since Mr. Fearn
was elected (vs. +19% for AHP’s proxy peers)(1)
▪ David Snyder: 3 months as CEO and CIO of KBS-Keppel US REIT, a
publicly traded REIT listed in Singapore
Previously served as CFO of KBS registered but unlisted
companies
KBS’s Trustee Nominees Lack Valuable
Experience
(1) As of December 31, 2017. Don’t Put Your Investment at Risk
Conclusion
29
PART
VIII
WSR’s STRATEGY HAS DELIVERED LONG-TERM GROWTH AND
INDUSTRY-LEADING RETURNS
WSR’s BOARD OFFERS THE RIGHT BALANCE OF EXPERIENCE,
DIVERSITY, SKILLS AND PERSPECTIVES
WSR HAS A STRONG BALANCE SHEET AND CAPITAL STRUCTURE
TO CAPTURE GROWTH AND FUTURE MARKET OPPORTUNITIES
Appendix
30
Executing Our Strategy: Business-Friendly, Attractive Demographics
31
AUSTIN
#1 Next Biggest
Boom Town (1)
#1 Fastest Growing City in the U.S.
for the 4th Consecutive Year (2)
DALLAS
#1 Top Real Estate Market for
Investment in 2017(3)
#1 Most Business Friendly City
in America(4)
#1 Great Cities for Starting a Business(5)
PHOENIX
#3 Largest Labor Pool in the West(6)
#5 Fastest Growing Tech Market(7)
HOUSTON
#1 in the world in GDP
per capita(8)
#1 Highest Starting Salaries in the
US(9)
The “Energy Capital of the
World” also boasts The
Largest Medical Center in
the World(10)
SAN ANTONIO
Top 10 Fastest Growing City(11)
#8 Best Economic Climate(12)
APPENDIX:
PART
IIl
(1) Source: HFF Market Overview, Forbes, 4Q17 (2) Source: HFF, Forbes, 4Q17
(3) Source: HFF, PwC, ULI, 4Q17 (4) Source: HFF, MarketWatch, 4Q17
(5) Source: HFF, Kiplinger, 4Q17 (6) Source: HFF, BLS January, 2018
(7) Source: HFF, Fortune November 2016 (8) Source: HFF, A.T. Kearney, January 2018 Forbes 2018
(9) Source: HFF, WalletHub 2018 (10) Source: HFF, Texas Medical Center 2018
(11) Source: HFF, Forbes 2018 (12) Source: HFF, Forbes 2018
$81
$108
$131 $132
$150
$73
$205
$-
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
$220
2011 2012 2013 2014 2015 2016 2017
Annual Acquisition Volumes (in milllions)
Creating Value: Acquisition Activity Robust with Well Timed Capital
➢ Whitestone continues to make acquisitions in its core markets
➢ Expanding footprint yielding cost synergies at the corporate level
➢ Market share gains driving pricing power at the leasing level
APPENDIX:
PART
IIl
32
33
APPENDIX:
PART
IlI
Executing Our Strategy: Long-Term Plan Includes Growth of
the Communities, Tenants, Shareholders, and WSR Employees
GO FOR GROWTH
COMMUNITY BY DESIGN
THRIVING COMMUNITIES
LOCAL CONNECTION AND COMMERCE
PLATFORM OF GROWTH FOR TENANTS
PROVIDE AN OPPORTUNITY FOR GROWTH AND
SUCCESS FOR OUR ENTREPRENEURIAL TENANTS
GROWTH FOR OUR TEAM MEMBERS
THE FOUNDATION OF STRATEGIC ADAPTABILITY
VALUE FOR OUR SHAREHOLDERS
VALUE-CREATING GROWTH PLANS
OUR TENANTS
WE SEE THE VALUE IN
NURTURING
ENTREPRENEURIAL
BUSINESSES
STIMULATE ECONOMIC
GROWTH BY PROVIDING
EMPLOYMENT
OPPORTUNITIES
OUR
SHAREHOLDERS
COMMITTED TO
DELIVERING VALUE TO
OUR SHAREHOLDERS
TEAM MEMBERS ARE
COMMITTED TO SHARE
OWNERSHIP
OUR TEAM
MEMBERS
PURPOSE IN THE WORK
WE DO AND THE
COMMUNITIES WE
CREATE
IN-HOUSE TRAINING
PROGRAM AND FOCUS
ON CONTINUED
EDUCATION
OUR
COMMUNITIES
DESIGNED TO REFLECT
THE SURROUNDING
LIFESTYLES AND
CULTURES
UNIQUE APPROACH TO
LOCAL TASTE
Executing Our Strategy: Relative to Retail Peers, WSR has Limited Exposure
to Retail Power Centers Disrupted by E-Commerce(1)
34
Source: Green Street Advisors (Nov 2017) and Company filings.
(1) Percentages shown represent percentage of total properties. WSR total properties include properties owned through Pillarstone Capital REIT Operating Partnership LP as of
December 31, 2017.
1%
23%
44%
45% 46%
51%
86%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
WSR REG FRT WRI BRX KIM DDR
P
e
rc
e
n
t
o
f
P
o
w
e
r Cen
te
rs
Power Center Exposure: 49%
APPENDIX:
PART
IlI
Expected Future Competitive Advantage
➢ Strategic Focus on Consumer, Not on National Retail Tenant Power Centers - Repositioning and Re-tenanting will be a costly drag on our peers for
the foreseeable future.
➢ Minimal Exposure to Leases with Co-Tenancy Provisions – Strategically prevent clauses in tenant leases that transfer control of the real estate to the
tenant, and restrict the owner from future growth.
Executing Our Strategy: Identified Disruption in the Retail
Landscape
BOOMERS
➢ Time Constrained Consumers = Demand Greater Convenience
➢ Spending Growth on Services
➢ Downsizing Living Space Flows through to Downsizing in Retail
MILLENNIALS
➢ Lifestyle Revolves Around Mobility and Flexibility
➢ Comfortable with the Sharing/Smaller Space Economy
➢ Need for Connection is Stronger
➢ Changing the Demand for Purchasing Soft and Hard Goods
DUAL INCOME HOUSEHOLDS
➢ More Profound Impact on Household Spending
➢ Entertaining More Outside the Smaller Home
➢ Experiential Dynamic of Consumption has Increased
AMAZON
➢ Dominates the Purchase and Delivery of Hard and Soft Goods
➢ Expanding their Delivery of Need-Based Items with the Purchase of Whole Foods
APPENDIX:
PART
IlI
35
(1) Assumes 8 year hold period; leases in place; 2-3% annual increases in rent and expenses; and improvement of 50-100bps in exit cap rates from initial cap rate.
(2) The 19 properties include: Heritage Trace Plaza, The Strand at Huebner Oaks, The Promenade at Fulton Ranch, Fulton Ranch Towne Center, Fulton Ranch TC Hard Corner, Williams
Trace Plaza, The Shops at Williams Trace, Dana Park Pad, City View Village, Davenport Village, Parkside Village South, Parkside Village North, Gilbert Hard Corner, Quinlan Crossing,
Keller Place, La Mirada, Scottsdale Seville, BLVD Place and Eldorado Plaza
Executing Our Strategy: Selectively Acquired Targeted Properties
19
Closed
Unlevered Expected Project Internal Rate of Return of 15%(1)
1,626
Transactions
Pass Initial Triage
• Business-friendly
states
• Local
• Community-centered
• Service-focused
271
Underwritten
• Dense populated
Sunbelt
• Generally 50k – 200k
RSF, sometimes
larger
43
Offers Made
• Attractive price
• Value-add
opportunities
(excess land /new
pads)
• Potential for service-
based tenant mix
• Potential for lease
normalization
• Target unlevered IRR
above cost of capital
• Acquired 19
properties from
2014 to 2017(2)
• Total Purchase
Price $560M
• Total GLA of 1.8m
square feet
APPENDIX:
PART
IlI
36
Services &
Entertainment…
Dining
22%
Specialty
Retail
17%
Health &
Wellness
16%
Grocery
11%
Education
6%
Executing Our Strategy: Capitalized on the Disruption in the
Retail Industry - Focused on Local Services & Experiences
Complemented by Brands You Know & Trust
85%
SERVICE-BASED AND
OPTIMIZED TENANT
COMPOSITION
15
13%
2
5%
32%
23%
Only two
tenants with
more than
2% ABR
Safeway (2.5%)
Whole Foods (2.1%)
Diverse, E-Commerce Resistant Tenant Base (1)
(1) As of December 31, 2017. Excludes properties owned through Pillarstone Capital REIT Operating Partnership LP.
APPENDIX:
PART
IlI
37
Executing Our Strategy: Attractive
Demographic Drivers vs. Peers
Source: Bank of America Research May 2016.
Highly Educated Workforce. High Household Income. Strong Population Growth.
APPENDIX:
PART
IlI
38
WSR
Leasing Activity and Spreads (1) (Sq. Ft. in 000’s) Upcoming Lease Expirations (Sq. Ft. in 000’s)
Executing Our Strategy: Strong Leasing Activity
.
(1) Annual leasing spread represents the year-over-year percentage increase in contractual rent per square foot for lease renewals and new leases executed during the
trailing twelve months for the respective period.
(2) Includes properties owned through Pillarstone Capital REIT Operating Partnership LP.
+2.1% +9.4%+2.0% +7.9% +8.2%
(1)
(1)
− Weighted Average Remaining Lease Term: 3.9 Years
− Potential to capture growth from below market leases
Executed Leases – Sq. Ft. (New and Renewal) (2) Expiring Leases – Sq. Ft. (2)
+7.0%
APPENDIX:
PART
IlI
39
685
835 862
966
1,121
991
2012 2013 2014 2015 2016 2017
1,145
760
984
631
736
308
416
148 164
201
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Executing Our Strategy: Proven Track Record
of Increasing Yield on Cost
Acquisitions from 2010 to 2013 have improved yields by 168bps on average
Potential to improve yields on more recent acquisitions (2014 – 2017)
Number of
GLA
Sq. Ft. in Yield on Total Cost
Acquisitions (000's) Initial(1) Current(2) Change (bps)
2010/2011 10 596 7.1% 9.6% +253 bps
2012 5 675 7.2% 9.2% +202 bps
2013 6 690 7.2% 7.7% +53 bps
'10-'13 Total / W.A.(3) 21 1,961 7.2% 8.7% +157 bps
Number of
GLA
Sq. Ft. in
Yield on Total Cost
Acquisitions (000's) Initial(1) Current(2) Change (bps)
2014 8 631 7.5% 7.8% +22 bps
2015 7 482 6.7% 6.6% - 12 bps
'14-'17 Total / W.A.(3) 19 1,789 6.8% 7.3% +46bps
2016/2017 4 676 6.5% 7.4% +90 bps
Source: Company management.
(1) Initial yield calculated using NOI for an 8 year hold period; leases in place; 2-3% annual increases in rent and expenses; and an improvement of 50-100bps in exit cap rate from initial cap rate.
(2) Current yield defined as Q4 ‘17 property-level NOI annualized divided by gross book value of real estate assets, undepreciated as of December 31, 2017.
(3) Weighted average calculated based on gross invested capital (purchase price plus additional investment).
APPENDIX:
PART
IlI
40
24%
19%
39%
16%
1%
33%
3%
53%
11%
Equity - Retail Investors Equity - Institutional Investors Unsecured Debt Mortgage Debt Non-Controlling Interest
16
30%
5
$191.4M
ENTERPRISE
VALUE
$1.2B
ENTERPRISE
VALUE
IPO 2010 CURRENT(1)
18%
(1) As of December 31, 2017
APPENDIX:
PART
IlI
EXECUTING OUR STRATEGY
Optimizing Our Capital Structure
• EV +6x
• More Stable
Capital
Structure
• Institutional
Quality
Balance
Sheet
41
42
Whitestone’s Board - Guided by Perspectives of an
Experienced and Diverse Board
APPENDIX:
PART
V
Recent Board Refreshment Offers New Perspectives
Ms. Nandita V. Berry
• Served as the 109th Texas Secretary of State from January 2014 to February 2015
• Inducted into the Texas Women’s Hall of Fame in 2014
• Recognized as one of Houston’s Most Influential Women by Houston Woman Magazine
• Previously served on the University of Houston System Board of Regents
• Held Senior Counsel position at El Paso Energy Corporation
• Previously served on the Board of the Houston Zoo, Inc., the South Asian Chamber of
Commerce and the Community Family Center of Houston
Mr. David F. Taylor
• Chair of Locke Lord LLP, Partner since 1996
• Served as a corporate and securities attorney at Locke Lord LLP since 1989
• Former Managing Partner of the Houston office
• Former Chair of the Finance Committee and Chair of the Capital Markets Section
• Serves on the Board of Directors of the Greater Houston Partnership
• Member and Past Chair of the Board of the Theatre Under The Stars
Mr. Najeeb A. Khan
• Founder, President and CEO of Interlogic Outsourcing, Inc. (“IOI”)
• Served as Vice President of Commercial Services for Midwest Commerce Data
Corporation
• Served as Chairman and CEO of CNA UniSource from 1998 through 2001
• Currently a Director of 1st Source Bank, serves as a member of the audit committee and
chair of the loan and fund committee
• Previously a Trustee of Memorial Health Foundation, the Community Foundation of
St. Joseph County, WNIT public television and Studebaker Museum
NEWLY
APPOINTED
2017
NEWLY
APPOINTED
2017
NEWLY
APPOINTED
2017
Appendix: FFO (1) And FFO CORE (2) Reconciliation
(1) FFO: Management believes that FFO is a useful measure of the Company's operating performance. The Company computes FFO as defined by NAREIT, which states that FFO should represent net income
available to common shareholders (computed in accordance with GAAP) excluding gains or losses from sales of operating assets, impairment charges and extraordinary items, plus depreciation and
amortization of operating properties, including the Company's share of unconsolidated real estate joint ventures and partnerships. FFO does not represent cash flows from operating activities determined in
accordance with GAAP and should not be considered an alternative to net income as an indication of the Company's performance or to cash flow from operations as a measure of liquidity or ability to make
distributions and service debt. Management considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties
without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen
with market conditions, management believes that FFO provides a more meaningful and accurate indication of the Company's performance and useful information for the investment community to compare
Whitestone to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs. Other REITs may use different methodologies for calculating FFO, and
accordingly, the Company's FFO may not be comparable to other REITs. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the
outstanding OP units for the periods presented.
(2) FFO Core: Management believes that the computation of FFO in accordance with NAREIT's definition includes certain non-cash and non-comparable items that affect the Company's period-over-period
performance. These items include, but are not limited to, legal settlements, non-cash share-based compensation expense, rent support agreement payments received from sellers on acquired assets and
acquisition costs. In addition, the Company believes that FFO Core is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as many REITs provide
some form of adjusted or modified FFO. However, other REITs may use different adjustments, and the Company's FFO Core may not be comparable to the adjusted or modified FFO of other REITs.
(In Millions)
43
2010 2011 2012 2013 2014 2015 2016 2017
Net income attributable to Whitestone REIT $ 1.1 $ 1.1 $ 0.1 $ 3.8 $ 7.5 $ 6.7 $ 7.9
$
8.3
Depreciation and amortization of real estate
assets 6.7 7.6 10.1 13.3 16.0 19.7 22.2 26.3
(Gain) loss on sale or disposal of assets and
properties 0.1 (0.2) 0.1 0.1 (1.8) 0.2 (3.3) 0.2
Net income attributable to nonconrolling interests 0.5 0.2 - 0.1 0.2 0.1 0.2 0.2
FFO $ 8.4 $ 8.7 $ 10.3 $ 17.3 $ 21.9 $ 26.7 $ 27.0
$
35.0
Rent support agreement - - - 0.2 0.2 - - -
Relocation agreement - - 2.2 - - - - -
Gain on insurance company settlement (0.6) - - - - - - -
Non cash share-based compensation - - - 2.3 4.7 7.4 10.2 10.4
Legal settlement - 0.2 (0.2) - - - - -
Acquisition costs 0.1 0.7 0.7 1.0 1.4 1.7 2.1 1.6
FFO Core $ 7.9 $ 9.6 $ 13.0 $ 20.8 $ 28.2 $ 35.8 $ 39.4
$
47.0
2010 2011 2012 2013 2014 2015 2016 2017
Net income attributable to Whitestone REIT $ 1.1 $ 1.1 $ 0.1 $ 3.9 $ 7.6 $ 6.7 $ 7.9 $ 8.3
General and Administrative Expenses 5.0 6.7 7.6 10.9 15.3 20.3 23.9 23.9
Depreciation and amortization 6.8 7.8 10.2 13.1 15.7 19.8 22.5 27.2
Involuntary Conversion (0.6) - - - - - - -
Executive Relocation Expense - - 2.2 - - - - -
Interest expense 6.0 6.4 8.7 10.0 10.6 14.9 19.2 23.7
Interest, dividend and other investment income - (0.5) (0.3) (0.2) (0.1) (0.3) (0.4) (0.4)
Provision for income taxes 0.3 0.2 0.3 0.3 0.3 0.4 0.3 0.4
(Gain) loss on sale or disposal of assets and properties 0.2 (0.3) 0.1 - 0.1 0.2 (3.3) 0.2
Income from discontinued operations - - - (0.3) (0.5) - - -
Gain on sale of property from discontinued
operations - - - - (1.9) - - -
Net income attributable to nonconrolling interests 0.5 0.2 - 0.1 0.1 0.1 0.2 0.5
NOI $ 19.3 $ 21.6 $ 28.9 $ 37.8 $ 47.2 $ 62.1 $ 70.3 $ 83.8
Appendix: NOI Reconciliation (1)
(1) NOI: Management believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as operating revenues (rental and other revenues) less property and related expenses (property
operation and maintenance, insurance and real estate taxes). Because NOI excludes general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for
income taxes, gain or loss on sale or disposition of assets and capital expenditures and leasing costs, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated
with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The
Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results,
margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company's property and operating performance when compared to other REITs since NOI is
generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and
administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, gain or loss on sale or disposition of assets, and the level of capital expenditures and
leasing costs necessary to maintain the operating performance of the Company's properties. Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to that of
other REITs.
(In Millions)
44
Appendix: EBITDA (1) Reconciliation
(1) EBITDA: Management believes that EBITDA is an appropriate supplemental measure of operating performance to net income attributable to the Company. The Company defines EBITDA as operating revenues (rental and other
revenues) less property and related expenses (property operation and maintenance, insurance and real estate taxes) and general and administrative expenses. Management believes that EBITDA provides useful information to the
investment community about the Company's operating performance when compared to other REITs since EBITDA is generally recognized as a standard measure. However, EBITDA should not be viewed as a measure of the
Company's overall financial performance since it does not reflect depreciation and amortization, involuntary conversion, interest expense, provision for income taxes, gain or loss on sale or disposition of assets, and the level of
capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties. Other REITs may use different methodologies for calculating EBITDA and, accordingly, the Company's EBITDA
may not be comparable to other REITs.
(In Millions)
45
2010 2011 2012 2013 2014 2015 2016 2017
Net income attributable to Whitestone REIT $ 1.1 $ 1.1 $ 0.1 $ 3.8 $ 7.6 $ 6.7 $ 7.9
$
8.3
Depreciation and amortization 6.8 7.8 10.2 13.4 16.0 19.8 22.5 27.2
Involuntary Conversion (0.6) - - - - - - -
Executive Relocation Expense - - 2.2 - - - - -
Interest expense 6.0 6.4 8.7 10.2 10.6 14.9 19.2 23.7
Provision for income taxes 0.3 0.2 0.3 0.3 0.3 0.4 0.3 0.4
(Gain) loss on sale or disposal of assets and
properties 0.2 0.1 0.1 0.1 (1.8) 0.2 (3.3) 0.2
Net income attributable to nonconrolling interests 0.5 0.2 - 0.1 0.2 0.1 0.2 0.5
EBITDA $ 14.3 $ 15.8 $ 21.6 $ 27.9 $ 32.9 $ 42.1 $ 46.8
$
60.3