WHITESTONE REIT Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited consolidated financial
statements and the notes thereto included in this Quarterly Report on Form 10-Q
(this "Report"), and the consolidated financial statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in our Annual Report on Form 10-K for the year ended
December 31, 2021. For more detailed information regarding the basis of
presentation for the following information, you should read the notes to the
unaudited consolidated financial statements included in this Report.

Forward-Looking Statement


This Report contains forward-looking statements within the meaning of the
federal securities laws, including discussion and analysis of our financial
condition, pending acquisitions and the impact of such acquisitions on our
financial condition and results of operations, anticipated capital expenditures
required to complete projects, amounts of anticipated cash distributions to our
shareholders in the future and other matters. These forward-looking statements
are not historical facts but are the intent, belief or current expectations of
our management based on its knowledge and understanding of our 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 our 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, which reflect our management's view only as of the
date of this Report. We undertake 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 Report include:


•the imposition of federal income taxes if we fail to qualify as a real estate
investment trust ("REIT") in any taxable year or forego an opportunity to ensure
REIT status;

•uncertainties related to the national economy, the real estate industry in
general and in our specific markets;

•legislative or regulatory changes, including changes to laws governing REITs;


•adverse economic or real estate developments or conditions in Texas or Arizona,
Houston and Phoenix in particular, including the potential impact of COVID-19 on
our tenants' ability to pay their rent, which could result in bad debt
allowances or straight-line rent reserve adjustments;

•increases in interest rates, operating costs or general and administrative
expenses;

•availability and terms of capital and financing, both to fund our operations
and to refinance our indebtedness as it matures;

•decreases in rental rates or increases in vacancy rates;

•litigation risks;

•lease-up risks, including leasing risks arising from exclusivity and consent
provisions in leases with significant tenants;

•our inability to renew tenant leases or obtain new tenant leases upon the
expiration of existing leases;

•our inability to generate sufficient cash flows due to market conditions,
competition, uninsured losses, changes in tax or other applicable laws;

•geopolitical conflicts, such as the ongoing conflict between Russia and
Ukraine;

•the need to fund tenant improvements or other capital expenditures out of
operating cash flow; and

•the risk that we are unable to raise capital for working capital, acquisitions
or other uses on attractive terms or at all.

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The forward-looking statements should be read in light of these factors and the
factors identified in the "Risk Factors" section of our Annual Report on Form
10-K for the year ended December 31, 2021, as previously filed with the
Securities and Exchange Commission ("SEC") and of this Report below.

Overview


We are a fully-integrated real estate company that owns and operates commercial
properties in culturally diverse markets in major metropolitan areas. Founded in
1998, we are internally managed with a portfolio of commercial properties in
Texas, Arizona and Illinois.

In October 2006, we adopted a strategic plan to acquire, redevelop, own and
operate Community Centered Properties®. We define Community Centered Properties®
as visibly located properties in established or developing culturally diverse
neighborhoods in our target markets. We market, lease and manage our centers to
match tenants with the shared needs of the surrounding neighborhood. Those needs
may include specialty retail, grocery, restaurants and medical, educational and
financial services. Our goal is for each property to become a Whitestone-branded
retail community that serves a neighboring five-mile radius around our
property. We employ and develop a diverse group of associates who understand the
needs of our multi-cultural communities and tenants.

We serve as the general partner of Whitestone REIT Operating Partnership, L.P.
(the "Operating Partnership"), which was formed on December 31, 1998 as a
Delaware limited partnership. We currently conduct substantially all of our
operations and activities through the Operating Partnership. As the general
partner of the Operating Partnership, we have the exclusive power to manage and
conduct the business of the Operating Partnership, subject to certain customary
exceptions.

As of March 31, 2022, we wholly owned 60 commercial properties consisting of:

Consolidated Operating Portfolio


•53 wholly owned properties that meet our Community Centered Properties®
strategy containing approximately 4.9 million square feet of gross leasable area
("GLA") and having a total carrying amount (net of accumulated depreciation) of
$901.7 million; and

Redevelopment, New Acquisitions Portfolio


•two wholly owned properties, Lakeside Market and Anderson Arbor, that meet our
Community Centered Properties® strategy containing approximately 0.2 and
0.1 million square feet of GLA and having a total carrying amount (net of
accumulated depreciation) of $52.8 and $28.0 million, respectively. Acquired
properties are categorized in the new acquisition portfolio until the earlier of
90% occupancy or 18 months of ownership; and

•five parcels of land held for future development that meet our Community
Centered Properties® strategy having a total carrying value of $20.0 million.



As of March 31, 2022, we had an aggregate of 1,560 tenants. We have a
diversified tenant base with our largest tenant comprising only 2.6% of our
annualized rental revenues for the three months ended March 31, 2022. Lease
terms for our properties range from less than one year for smaller tenants to
over 15 years for larger tenants. Our leases include minimum monthly lease
payments and generally provide for tenant reimbursements for payment of taxes,
insurance and maintenance. We completed 85 new and renewal leases during the
three months ended March 31, 2022, totaling 216,083 square feet and
approximately $23.0 million in total lease value. This compares to 94 new and
renewal leases totaling 225,225 square feet and approximately $30.8 million in
total lease value during the same period in 2021.

We employed 83 full-time employees as of March 31, 2022. As an internally
managed REIT, we bear our own expenses of operations, including the salaries,
benefits and other compensation of our employees, office expenses, legal,
accounting, and investor relations expenses and other overhead costs.

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Real Estate Partnership

As of March 31, 2022, we, through our investment in Pillarstone OP, owned a
majority interest in eight properties that do not meet our Community Centered
Property® strategy containing approximately 926,798 square feet of GLA (the
"Pillarstone Properties"). We own 81.4% of the total outstanding units of
Pillarstone OP, which we account for using the equity method. We also manage the
day-to-day operations of Pillarstone OP.

COVID-19


The global health crisis caused by COVID-19 and the related responses intended
to control its spread may continue to adversely affect business activity,
particularly relating to our retail tenants, across the markets in which we
operate. In light of the changing nature of the COVID-19 pandemic, we are unable
to predict the extent that its impact will have on our financial condition,
results of operations and cash flows.

Inflation


We anticipate that the majority of our leases will continue to be triple-net
leases or otherwise provide that tenants pay for increases in operating expenses
and will contain provisions that we believe will mitigate the effect of
inflation. In addition, many of our leases are for terms of less than five
years, which allows us to adjust rental rates to reflect inflation and other
changing market conditions when the leases expire. Consequently, increases due
to inflation, as well as ad valorem tax rate increases, generally do not have a
significant adverse effect upon our operating results.

How We Derive Our Revenue


Substantially all of our revenue is derived from rents received from leases at
our properties. We had total revenues of approximately $34.1 million and $29.0
million for the three months ended March 31, 2022 and 2021, respectively.

Rental Income


We expect our rental income to increase year-over-year due to the addition of
properties and rent increases on renewal leases. The amount of net rental income
generated by our properties depends principally on our ability to maintain the
occupancy rates of currently leased space and to lease currently available
space, newly acquired properties with vacant space, and space available from
unscheduled lease terminations. The amount of rental income we generate also
depends on our ability to maintain or increase rental rates in our submarkets.
Included in our adjustments to rental revenue for the conversion of 77 tenants
to cash basis revenue was a bad debt adjustment of $0.23 million and a
straight-line rent reserve adjustment of $0.4 million for the three months
ending March 31, 2022. We are unable to predict the impact that the COVID-19
pandemic will have on our rental income in the long term. The situation
surrounding the COVID-19 pandemic remains fluid, and we are actively managing
our response in collaboration with tenants, government officials and business
partners and assessing potential impacts to our and our tenants' financial
positions and operating results.

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Scheduled Lease Expirations

We tend to lease space to smaller businesses that desire shorter term leases. As
of March 31, 2022, approximately 24% of our GLA was subject to leases that
expire prior to December 31, 2023.  Over the last three calendar years, we have
renewed expiring leases with respect to approximately 73% of our GLA. We
routinely seek to renew leases with our existing tenants prior to their
expiration and typically begin discussions with tenants as early as 24 months
prior to the expiration date of the existing lease. Inasmuch as our early
renewal program and other leasing and marketing efforts target these expiring
leases, we work to re-lease most of that space prior to expiration of the
leases. In the markets in which we operate, we obtain and analyze market rental
rates through review of third-party publications, which provide market and
submarket rental rate data and through inquiry of property owners and property
management companies as to rental rates being quoted at properties that are
located in close proximity to our properties and we believe display similar
physical attributes as our nearby properties. We use this data to negotiate
leases with new tenants and renew leases with our existing tenants at rates we
believe to be competitive in the markets for our individual properties. Due to
the short term nature of our leases, and based upon our analysis of market
rental rates, we believe that, in the aggregate, our current leases are at
market rates. Market conditions, including new supply of properties, and
macroeconomic conditions in our markets and nationally affecting tenant income,
such as employment levels, business conditions, interest rates, tax rates, fuel
and energy costs and other matters, could adversely impact our renewal rate
and/or the rental rates we are able to negotiate. We continue to monitor our
tenants' operating performances as well as overall economic trends to evaluate
any future negative impact on our renewal rates and rental rates, which could
adversely affect our cash flow and ability to make distributions to our
shareholders.

Acquisitions


We seek to grow our GLA through the acquisition of additional properties, and we
are carefully evaluating development and redevelopment activities on a
case-by-case basis. We have extensive relationships with community banks,
attorneys, title companies, and others in the real estate industry, which we
believe enables us to take advantage of these market opportunities and maintain
an active acquisition pipeline.

Property Acquisitions, Dispositions and Development


We seek to acquire commercial properties in high-growth markets. Our acquisition
targets are properties that fit our Community Centered Properties® strategy. We
may acquire properties in other high-growth cities in the future.

On December 1, 2021 we acquired Anderson Arbor, a property that meets our
Community Centered Property® strategy, for $28.1 million in cash and net
prorations. Anderson Arbor, a 89,746 square foot property, was 89% leased at the
time of purchase and is located in Austin, Texas.

On July 8, 2021, we acquired Lakeside Market, a property that meets our
Community Centered Property® strategy, for $53.2 million in cash and net
prorations. Lakeside Market, a 162,649 square foot property, was 80.5% leased at
the time of purchase and is located in Plano, Texas.

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Leasing Activity

As of March 31, 2022, we owned 60 properties with 5,205,966 square feet of GLA
and our occupancy rate for all properties was approximately 91% and 89% occupied
as of March 31, 2022 and 2021, respectively. The following is a summary of the
Company's leasing activity for the three months ended March 31, 2022:

                                                                                                                                                       Prior Contractual         Straight-lined Basis
                                  Number of                                 Weighted Average         TI and Incentives        Contractual Rent         Rent Per Sq. Ft.           Increase (Decrease)
                                Leases Signed          GLA Signed            Lease Term (2)           per Sq. Ft. (3)         Per Sq. Ft. (4)                 (5)                   Over Prior Rent
Comparable (1)
  Renewal Leases                        52             163,415                        4.2            $         1.06          $         18.16          $          17.84                           9.6  %
  New Leases                            14              26,663                        7.5                     18.00                    24.72                     23.10                          12.7  %
  Total                                 66             190,078                        4.6            $         3.44          $         19.08          $          18.57                          10.1  %

                                  Number of                                 Weighted Average         TI and Incentives        Contractual Rent
                                Leases Signed          GLA Signed            Lease Term (2)           per Sq. Ft. (3)         Per Sq. Ft. (4)
Non-Comparable
  Renewal Leases                         4               8,965                        3.4            $         1.15          $         23.74
  New Leases                            15              17,040                        4.5                     15.90                    32.50
  Total                                 19              26,005                        4.1            $        10.82          $         29.48


(1) Comparable leases represent leases signed on spaces for which there was a
former tenant within the last twelve months and the new or renewal square
footage was within 25% of the expired square footage.

(2) Weighted average lease term is determined on the basis of square footage.

(3) Estimated amount per signed leases. Actual cost of construction may vary.
Does not include first generation costs for tenant improvements (“TI”) and
leasing commission costs needed for new acquisitions or redevelopment of a
property to bring to operating standards for its intended use.

(4) Contractual minimum rent under the new lease for the first month, excluding
concessions.

(5) Contractual minimum rent under the prior lease for the final month.

Critical Accounting Policies and Estimates


In preparing the consolidated financial statements, we have made estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenue and expenses during the reported
periods. Actual results may differ from these estimates. A summary of our
critical accounting policies is included in our Annual Report on Form 10-K for
the year ended December 31, 2021, under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." There have been no significant
changes to these policies during the three months ended March 31, 2022. For
disclosure regarding recent accounting pronouncements and the anticipated impact
they will have on our operations, please refer to Note 2 to the consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2021.

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021


The following table provides a general comparison of our results of operations
and other metrics for the three months ended March 31, 2022 and 2021 (dollars in
thousands, except per share and per OP unit amounts):

                                                                            

Three Months Ended March 31,

                                                                                 2022                   2021
Number of properties owned and operated                                               60                    58
Aggregate GLA (sq. ft.)(1)                                                     4,953,571             4,848,652
Ending occupancy rate - operating portfolio (1)                                       91   %                89  %
Ending occupancy rate                                                                 91   %                89  %

Total revenues                                                             $      34,123           $    29,045
Total operating expenses                                                          21,051                21,524
Total other expense                                                                6,062                 6,082

Income before equity investment in real estate partnership and
income tax

                                                                         7,010                 1,439
Equity in earnings of real estate partnership                                        280                    89
Provision for income tax                                                            (101)                  (87)

Net income                                                                         7,189                 1,441
Less: Net income attributable to noncontrolling interests                            111                    26
Net income attributable to Whitestone REIT                                 $       7,078           $     1,415

Funds from operations(2)                                                   $      15,466           $     8,825
Property net operating income(3)                                                  25,080                21,139
Distributions paid on common shares and OP units                                   5,351                 4,562
Distributions per common share and OP unit                                 $      0.1075           $    0.1058
Distributions paid as a percentage of funds from operations                           35   %                52  %



(1)   Excludes (i) new acquisitions, through the earlier of attainment of 90%
occupancy or 18 months of ownership, and (ii) properties that are undergoing
significant redevelopment or re-tenanting.

(2)   For an explanation and reconciliation of funds from operations, a Non-GAAP
metric, to net income, see "-Reconciliation of Non-GAAP Financial Measures-Funds
From Operations ("FFO")" below.

(3) For an explanation and reconciliation of property net operating income, a
non-GAAP metric, to net income, see “-Reconciliation of Non-GAAP Financial
Measures-Property Net Operating Income (“NOI”)” below.

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We define "Same Store" as properties that have been owned for the entire period
being compared. For purposes of comparing the three months ended March 31, 2022
to the three months ended March 31, 2021, Same Store includes properties owned
during the entire period from January 1, 2021 to March 31, 2022. We define
"Non-Same Store" as properties acquired since the beginning of the period being
compared and properties that have been sold, but not classified as discontinued
operations.

Revenues. The primary components of revenue are detailed in the table below (in
thousands, except percentages):

                                                     Three Months Ended March 31,
                 Revenue                                2022                  2021              Change                  % Change
Same Store
Rental revenues (1)                              $        23,510          $  21,626          $   1,884                               9  %
Recoveries (2)                                             8,869              7,598              1,271                              17  %
Bad debt (3)                                                (372)              (529)               157                             (30) %
Total rental                                              32,007             28,695              3,312                              12  %
Other revenues                                               176                210                (34)                            (16) %
Same Store Total                                          32,183             28,905              3,278                              11  %

Non-Same Store and Management Fees
Rental revenues (4)                                        1,334                  -              1,334                     Not meaningful
Recoveries (4)                                               468                  -                468                     Not meaningful
Bad debt (4)                                                  (1)                 -                 (1)                    Not meaningful
Total rental                                               1,801                  -              1,801                     Not meaningful
Other revenues (4)                                            (1)                 -                 (1)                    Not meaningful
Management fees                                              140                140                  -                               -  %
Non-Same Store and Management Fees Total                   1,940                140              1,800                           1,286  %

Total revenue                                    $        34,123          $  29,045          $   5,078                              17  %



(1)   The Same Store rental revenues increase of $1,884,000 resulted from a
increase of $751,000 from higher average leased square feet from 4,380,820 to
4,531,943, and an increase of $1,133,000 from higher average rent per leased
square foot from $19.75 to $20.75. Same Store rental revenues include
straight-line rent write offs for tenants converted to cash basis accounting of
$405,000 and $147,000 for the three months ended March 31, 2022 and March 31,
2021, respectively.

(2)   The Same Store recoveries revenue increase of $1,271,000 is primarily
attributable to related increases in Same Store operating expenses and real
estate taxes of $731,000. Operating expenses generally decreased as a result of
cost saving initiatives during the COVID-19 pandemic in 2021 and increased back
to normal levels in 2022. Our recovery revenue from tenants generally increases
as the related operating and real estate tax expenses increase. Real estate
taxes included $240,000 less in savings from favorable tax settlements than the
same period in 2021.

(3) Recoveries of bad debt decreased Same Store total rental revenue by
$373,000, including decreases from bad debt of $228,000 from cash basis
accounting, during the three months ended March 31, 2022, as compared to a
reduction $529,000, including $459,000 from cash basis accounting, during the
same period a year ago.

(4) Non-Same Store rental revenue includes Lakeside Market (acquired on July
8, 2021
) and Anderson Arbor (acquired on December 1, 2021).







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Operating expenses. The primary components of operating expenses for the three
months ended March 31, 2022 and 2021 are detailed in the table below (in
thousands, except percentages):

                                                         Three Months Ended March 31,
              Operating Expenses                            2022                  2021              Change                   % Change
Same Store
Operating and maintenance (1)                        $         5,336          $   4,619          $      717                              16  %
Real estate taxes                                              4,053              4,038                  15                               -  %
Same Store total                                               9,389              8,657                 732                               8  %

Non-Same Store and affiliated company rents
Operating and maintenance (2)                                    197                  -                 197                     Not meaningful
Real estate taxes (2)                                            314                  -                 314                     Not meaningful
Affiliated company rents (3)                                     192                220                 (28)                            (13) %
Non-Same Store and affiliated company rents
total                                                            703                220                 483                             220  %
Depreciation and amortization                                  7,910              7,013                 897                              13  %
General and administrative (4)                                 3,049              5,634              (2,585)                            (46) %
Total operating expenses                             $        21,051          $  21,524          $     (473)                             (2) %



(1)  The $717,000 Same Store operating and maintenance cost increase included
$183,000 in increased repair costs and $533,000 in increased labor and other
costs. Cost saving initiatives implemented by the Company in 2021 in response to
the COVID-19 pandemic generally lowered operating and maintenance costs during
three months ended March 31, 2021. Operating and maintenance costs were closer
to normal levels during the three months ended March 31, 2022.

(2) Non-Same Store rental expenses includes Lakeside Market (acquired on July
8, 2021
) and Anderson Arbor (acquired on December 1, 2021).

(3) Affiliated company rents are spaces that we lease from Pillarstone OP.


(4)  On January 18, 2022, the Board of Trustees terminated James Mastandrea,
with cause, from his position as Chief Executive Officer. Mr. Mastandrea was
also replaced as Chairman of the Board. Following his termination, the Board of
Trustees appointed Dave Holeman, previously our Chief Financial Officer, as
Chief Executive Officer. The Company also recently replaced its Chief Operating
Officer and Executive Vice President of Acquisitions and Asset Management. As a
result of these changes, we recognized a reduction of share-based compensation
of $2.2 million during the three months ended March 31, 2022 due to forfeitures.



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Other expenses (income). The primary components of other expenses (income) for
the three months ended March 31, 2022 and 2021 are detailed in the table below
(in thousands, except percentages):

                                                     Three Months Ended 

March 31,

         Other Expenses (Income)                       2022                  2021              Change                % Change

Interest expense                                 $        6,061          $   6,132          $      (71)                       (1) %

(Gain) loss on sale or disposal of assets,
net                                                          15                 (1)                 16                    (1,600) %
Interest, dividend and other investment
income                                                      (14)               (49)                 35                       (71) %
Total other expense                              $        6,062          $   6,082          $      (20)                        -  %



Equity in earnings of real estate partnership. Our equity in earnings of real
estate partnership, which is generated from our 81.4% ownership of Pillarstone
OP, increased $191,000 from $89,000 for the three months ended March 31, 2021 to
$280,000 for the three months ended March 31, 2022. Please refer to Note 6
(Investment in Real Estate Partnership) to the accompanying consolidated
financial statements for more information regarding our investment in
Pillarstone OP.


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Same Store
net operating income. The components of Same Store net operating
income is detailed in the table below (in thousands):

                                                       Three Months Ended March 31,               Increase              % Increase
                                                         2022                  2021              (Decrease)             (Decrease)
Same Store (53 properties, excluding
development land)
Property revenues
Rental                                            $        32,007          $   28,695          $     3,312                       12  %
Management, transaction and other fees                        176                 210                  (34)                     (16) %
Total property revenues                                    32,183              28,905                3,278                       11  %

Property expenses
Property operation and maintenance                          5,336               4,619                  717                       16  %
Real estate taxes                                           4,053               4,038                   15                        -  %
Total property expenses                                     9,389               8,657                  732                        8  %

Total property revenues less total property
expenses                                                   22,794              20,248                2,546                       13  %

Same Store straight-line rent adjustments                    (238)               (210)                 (28)                      13  %
Same Store amortization of above/below
market rents                                                 (229)               (201)                 (28)                      14  %
Same Store lease termination fees                              (9)                (76)                  67                      (88) %

Same Store NOI(1)                                 $        22,318          $   19,761          $     2,557                       13  %


(1) See below for a reconciliation of property net operating income to net
income.



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                                                                         Three Months Ended March 31,
PROPERTY NET OPERATING INCOME ("NOI")                                       2022              2021
Net income attributable to Whitestone REIT                              $   7,078          $  1,415
General and administrative expenses                                         3,049             5,634
Depreciation and amortization                                               7,910             7,013
Equity in earnings of real estate partnership                                (280)              (89)
Interest expense                                                            6,061             6,132
Interest, dividend and other investment income                                (14)              (49)
Provision for income taxes                                                    101                87

Management fee, net of related expenses                                        52                80
Loss on sale or disposal of assets, net                                        15                (1)
NOI of real estate partnership (pro rata)                                     997               891
Net income attributable to noncontrolling interests                           111                26
NOI                                                                     $  25,080          $ 21,139
Non-Same Store NOI (1)                                                     (1,289)                -
NOI of real estate partnership (pro rata)                                    (997)             (891)

NOI less Non-Same Store NOI and NOI of real estate partnership
(pro rata)

                                                                 22,794            20,248
Same Store straight-line rent adjustments                                    (238)             (210)
Same Store amortization of above/below market rents                          (229)             (201)
Same Store lease termination fees                                              (9)              (76)
Same Store NOI (2)                                                      $  22,318          $ 19,761



(1)  We define "Non-Same Store" as properties that have been acquired since the
beginning of the period being compared and properties that have been sold, but
not classified as discontinued operations. For purposes of comparing the three
months ended March 31, 2022 to the three months ended March 31, 2021, Non-Same
Store includes properties acquired between January 1, 2021 and March 31, 2022
and properties sold between January 1, 2021 and March 31, 2022, but not included
in discontinued operations.

(2)  We define "Same Store" as properties that have been owned during the entire
period being compared. For purposes of comparing the three months ended
March 31, 2022 to the three months ended March 31, 2021, Same Store includes
properties owned before January 1, 2021 and not sold before March 31, 2022.
Straight-line rent adjustments, above/below market rents, and lease termination
fees are excluded.




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Reconciliation of Non-GAAP Financial Measures

Funds From Operations (NAREIT) (“FFO”)


The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO
as net income available to Whitestone REIT (calculated in accordance with GAAP),
excluding depreciation and amortization related to real estate, gains or losses
from the sale of certain real estate assets, gains and losses from change in
control, and impairment write-downs of certain real estate assets and
investments in entities when the impairment is directly attributable to
decreases in the value of depreciable real estate held by the entity. We
calculate FFO in a manner consistent with the NAREIT definition and also include
adjustments for our unconsolidated real estate partnership.

Management uses FFO as a supplemental measure to conduct and evaluate our
business because there are certain limitations associated with using GAAP net
income alone as the primary measure of our operating performance.


Historical cost accounting for real estate assets in accordance with GAAP
implicitly assumes that the value of real estate assets diminishes predictably
over time. Because real estate values instead have historically risen or fallen
with market conditions, management believes that the presentation of operating
results for real estate companies that use historical cost accounting is
insufficient by itself. In addition, securities analysts, investors and other
interested parties use FFO as the primary metric for comparing the relative
performance of equity REITs.

FFO should not be considered as an alternative to net income or other
measurements under GAAP, as an indicator of our operating performance or to cash
flows from operating, investing or financing activities as a measure of
liquidity. FFO does not reflect working capital changes, cash expenditures for
capital improvements or principal payments on indebtedness. Although our
calculation of FFO is consistent with that of NAREIT, there can be no assurance
that FFO presented by us is comparable to similarly titled measures of other
REITs.

Below are the calculations of FFO and the reconciliations to net income, which
we believe is the most comparable U.S. GAAP financial measure (in thousands):

                                                                                Three Months Ended March 31,
FFO (NAREIT)                                                                       2022              2021
Net income attributable to Whitestone REIT                                  

$ 7,078 $ 1,415

 Adjustments to reconcile to FFO:(1)
Depreciation and amortization of real estate                                       7,868             6,980

Depreciation and amortization of real estate assets of real estate
partnership (pro rata)

                                                               394               405
(Gain) loss on sale or disposal of assets, net                                        15                (1)

Net income attributable to noncontrolling interests                                  111                26
FFO (NAREIT)                                                                   $  15,466          $  8,825


(1) Includes pro-rata share attributable to real estate partnership.

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Property Net Operating Income ("NOI")

Management believes that NOI is a useful measure of our property operating
performance. We define NOI as operating revenues (rental and other revenues)
less property and related expenses (property operation and maintenance and real
estate taxes). Other REITs may use different methodologies for calculating NOI
and, accordingly, our NOI may not be comparable to other REITs. Because NOI
excludes general and administrative expenses, depreciation and amortization,
equity in earnings of real estate partnership, interest expense, interest,
dividend and other investment income, provision for income taxes, management fee
(net of related expenses), gain or loss on sale or disposition of assets, and
our pro rata share of NOI of equity method investments, 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. We use NOI to evaluate our operating performance since NOI
allows us to evaluate the impact that factors such as occupancy levels, lease
structure, lease rates and tenant base have on our results, margins and returns.
In addition, management believes that NOI provides useful information to the
investment community about our 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 our overall financial performance since it does not
reflect general and administrative expenses, depreciation and amortization,
equity in earnings of real estate partnership, interest expense, interest,
dividend and other investment income, provision for income taxes, gain on sale
of property from discontinued operations, management fee (net of related
expenses) and gain or loss on sale or disposition of assets, the level of
capital expenditures and leasing costs necessary to maintain the operating
performance of our properties.

Below is the calculation of NOI and the reconciliations to net income, which we
believe is the most comparable U.S. GAAP financial measure (in thousands):


                                                                  Three 

Months Ended

                                                                      March 

31,

     PROPERTY NET OPERATING INCOME                                2022           2021
     Net income attributable to Whitestone REIT               $    7,078      $  1,415
     General and administrative expenses                           3,049         5,634
     Depreciation and amortization                                 7,910         7,013
     Equity in earnings of real estate partnership                  (280)          (89)
     Interest expense                                              6,061         6,132
     Interest, dividend and other investment income                  (14)          (49)
     Provision for income taxes                                      101            87

     Management fee, net of related expenses                          52            80
     (Gain) loss on sale or disposal of assets, net                   15            (1)
     NOI of real estate partnership (pro rata)                       997           891
     Net income attributable to noncontrolling interests             111            26
     NOI                                                      $   25,080      $ 21,139



Liquidity and Capital Resources


Our short-term liquidity requirements consist primarily of distributions to
holders of our common shares and OP units, including those required to maintain
our REIT status and satisfy our current quarterly distribution target of $0.1200
per common share and OP unit, recurring expenditures, such as repairs and
maintenance of our properties, non-recurring expenditures, such as capital
improvements and tenant improvements, debt service requirements, and,
potentially, acquisitions of additional properties.

 During the three months ended March 31, 2022, our cash provided by operating
activities was $4,915,000 and our total distributions were
$5,351,000. Therefore, we had distributions in excess of cash flow from
operations of approximately $436,000. We anticipate that cash flows from
operating activities and our borrowing capacity under our unsecured revolving
credit facility will provide adequate capital for our working capital
requirements, anticipated capital expenditures and scheduled debt payments in
the short term. We also believe that cash flows from operating activities and
our borrowing capacity will allow us to make all distributions required for us
to continue to qualify to be taxed as a REIT for federal income tax purposes.
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Our long-term capital requirements consist primarily of maturities under our
longer-term debt agreements, development and redevelopment costs, and potential
acquisitions. We expect to meet our long-term liquidity requirements with net
cash from operations, long-term indebtedness, sales of common shares, issuance
of OP units, sales of underperforming properties and non-core properties and
other financing opportunities, including debt financing. We believe we have
access to multiple sources of capital to fund our long-term liquidity
requirements, including the incurrence of additional debt and the issuance of
additional equity. On February 22, 2022, the Company announced an increase to
its quarterly distribution to $0.12 per common share and OP unit, equal to a
monthly distribution of $0.04, beginning with the April 2022 distribution. The
Board will regularly reassess the dividend, particularly as there is more
clarity on the duration and severity of the COVID-19 pandemic and as business
conditions improve. As of March 31, 2022, subject to any potential future
paydowns or increases in the borrowing base, we have $96.2 million
remaining availability under the revolving credit facility.

On February 7, 2022, the Company entered into the Second Amendment to Rights
Agreement (the "Second Amendment") with the Rights Agent. The Second Amendment
amends the First Amendment to the Rights Agreement by and between the Company
and the Rights Agent, solely to accelerate the expiration date of the rights
under the Rights Agreement from the close of business on May 13, 2022 to the
close of business on February 7, 2022. As a result of the Second Amendment,
effective as of the close of business on February 7, 2022, the Rights as defined
in the Rights Agreement have expired and cease to be outstanding.

Our ability to access the capital markets will be dependent on a number of
factors as well, including general market conditions for REITs and market
perceptions about our Company. In light of the dynamics in the capital markets
impacted by the COVID-19 pandemic and the economic slowdown, our access to
capital may be diminished. Despite these potential challenges, we believe we
have sufficient access to capital for the foreseeable future, but we can provide
no assurance that such capital will be available to us on attractive terms or at
all.

On May 15, 2019, our universal shelf registration statement on Form S-3 was
declared effective by the SEC, which registers the issuance and sale by us of up
to $750 million in securities from time to time, including common shares,
preferred shares, debt securities, depositary shares and subscription rights.


On May 31, 2019, we entered into nine equity distribution agreements for an
at-the-market equity distribution program (the "2019 equity distribution
agreements") providing for the issuance and sale of up to an aggregate of $100
million of the Company's common shares pursuant to our Registration Statement on
Form S-3 (File No. 333-225007). Actual sales will depend on a variety of factors
determined by us from time to time, including (among others) market conditions,
the trading price of our common shares, capital needs and our determinations of
the appropriate sources of funding for us, and were made in transactions that
will be deemed to be "at-the-market" offerings as defined in Rule 415 under the
Securities Act. We have no obligation to sell any of our common shares and can
at any time suspend offers under the 2019 equity distribution agreements or
terminate the 2019 equity distribution agreements. During the three months ended
March 31, 2022 and 2021, we did not sell shares under the 2019 equity
distribution agreements.

We have used and anticipate using net proceeds from common shares issued
pursuant to the 2019 equity distribution agreements for general corporate
purposes, which may include acquisitions of additional properties, the repayment
of outstanding indebtedness, capital expenditures, the expansion, redevelopment
and/or re-tenanting of properties in our portfolio, working capital and other
general purposes.

Our capital structure includes non-recourse mortgage debt that we have assumed
or originated on certain properties. We may hedge the future cash flows of
certain variable rate debt transactions principally through interest rate swaps
with major financial institutions. See Note 8 (Derivatives and Hedging
Activities) to the accompanying consolidated financial statements for a
description of our current cash flow hedges.

As discussed in Note 2 (Summary of Significant Accounting Policies) to the
accompanying consolidated financial statements, pursuant to the terms of our
$15.1 million 4.99% Note, due January 6, 2024 (see Note 7 (Debt) to the
accompanying consolidated financial statements), which is collateralized by our
Anthem Marketplace property, we were required by the lenders thereunder to
establish a cash management account controlled by the lenders to collect all
amounts generated by our Anthem Marketplace property in order to collateralize
such promissory note. Amounts in the cash management account are classified as
restricted cash.

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Cash, Cash Equivalents and Restricted Cash

We had cash, cash equivalents and restricted cash of approximately $11,256,000
as of March 31, 2022, as compared to $15,914,000 on December 31, 2021. The
decrease of $4,658,000 was primarily the result of the following:

Sources of Cash

•Cash flow from operations of $4,915,000 for the three months ended March 31,
2022
, compared to $4,103,000 for the three months ended March 31, 2021;

Uses of Cash

•Payment of distributions to common shareholders and OP unit holders of
$5,351,000 for the three months ended March 31, 2022, compared to $4,562,000 for
the three months ended March 31, 2021;

•Additions to real estate of $3,359,000 for the three months ended March 31,
2022
, compared to $1,528,000 for the three months ended March 31, 2021;

•Payments of notes payable of $863,000 for the three months ended March 31,
2022
, compared to $719,000 for the three months ended March 31, 2021.

We place all cash in short-term, highly liquid investments that we believe
provide appropriate safety of principal.

Debt

Debt consisted of the following as of the dates indicated (in thousands):


Description                                                     March 31, 2022           December 31, 2021

Fixed rate notes
$100.0 million, 1.73% plus 1.35% to 1.90% Note, due
October 30, 2022 (1)

                                          $       

100,000 $ 100,000
$165.0 million, 2.24% plus 1.35% to 1.90% Note, due
January 31, 2024 (2)

                                                  165,000                     165,000
$80.0 million, 3.72% Note, due June 1, 2027                            80,000                      80,000
$19.0 million 4.15% Note, due December 1, 2024                         18,272                      18,358
$20.2 million 4.28% Note, due June 6, 2023                             17,699                      17,808
$14.0 million 4.34% Note, due September 11, 2024                       12,910                      12,978
$14.3 million 4.34% Note, due September 11, 2024                       13,708                      13,773
$15.1 million 4.99% Note, due January 6, 2024                          13,838                      13,907
$2.6 million 5.46% Note, due October 1, 2023                            2,275                       2,289
$50.0 million, 5.09% Note, due March 22, 2029                          50,000                      50,000
$50.0 million, 5.17% Note, due March 22, 2029                          50,000                      50,000
$1.8 million 3.15% Note, due November 28, 2022                          1,394                           -

Floating rate notes
Unsecured line of credit, LIBOR plus 1.40% to 1.90%,
due January 31, 2023

                                                  119,500                     119,500
Total notes payable principal                                         644,596                     643,613
Less deferred financing costs, net of accumulated
amortization                                                             (720)                       (771)
Total notes payable                                           $       643,876          $          642,842


(1) Promissory note includes an interest rate swap that fixed the LIBOR portion
of Term Loan 3 at 1.73%.

(2) Promissory note includes an interest rate swap that fixed the LIBOR
portion of the interest rate at an average rate of 2.24% for the duration of the
term through January 31, 2024.

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Scheduled maturities of our outstanding debt as of March 31, 2022 were as
follows (in thousands):


Year                   Amount Due

2022 (remaining)      $  102,945
2023                     147,363
2024                     228,574
2025                      17,143
2026                      17,143
Thereafter               131,428
Total                 $  644,596



On January 31, 2019, we, through our Operating Partnership, entered into an
unsecured credit facility (the "2019 Facility") with the lenders party thereto,
Bank of Montreal, as administrative agent (the "Agent"), SunTrust Robinson
Humphrey, as syndication agent, and BMO Capital Markets Corp., U.S. Bank
National Association, SunTrust Robinson Humphrey and Regions Capital Markets, as
co-lead arrangers and joint book runners. The 2019 Facility amended and restated
the 2018 Facility (as defined below).

The 2019 Facility is comprised of the following three tranches:
•$250.0 million unsecured revolving credit facility with a maturity date of
January 1, 2023 (the “2019 Revolver”);

•$165.0 million unsecured term loan with a maturity date of January 31, 2024
(“Term Loan A”); and

•$100.0 million unsecured term loan with a maturity date of October 30, 2022
(“Term Loan B” and together with Term Loan A, the “2019 Term Loans”).


Borrowings under the 2019 Facility accrue interest (at the Operating
Partnership's option) at a Base Rate or an Adjusted LIBOR plus an applicable
margin based upon our then existing leverage. As of March 31, 2022, the interest
rate on the 2019 Revolver was 1.65%. The applicable margin for Adjusted LIBOR
borrowings ranges from 1.40% to 1.90% for the 2019 Revolver and 1.35% to 1.90%
for the 2019 Term Loans. Base Rate means the higher of: (a) the Agent's prime
commercial rate, (b) the sum of (i) the average rate quoted by the Agent by two
or more federal funds brokers selected by the Agent for sale to the Agent at
face value of federal funds in the secondary market in an amount equal or
comparable to the principal amount for which such rate is being determined, plus
(ii) 1/2 of 1.00%, and (c) the LIBOR rate for such day plus 1.00%. Adjusted
LIBOR means LIBOR divided by one minus the Eurodollar Reserve Percentage. The
Eurodollar Reserve Percentage means the maximum reserve percentage at which
reserves are imposed by the Board of Governors of the Federal Reserve System on
eurocurrency liabilities. Pursuant to the 2019 Facility, in the event of certain
circumstances that result in the unavailability of LIBOR, including but not
limited to LIBOR no longer being a widely recognized benchmark rate for newly
originated dollar loans in the U.S. market, the Operating Partnership and the
Agent will establish an alternate interest rate to LIBOR giving due
consideration to prevailing market conventions and will amend the 2019 Facility
to give effect to such alternate interest rate. LIBOR is expected to be
discontinued. A number of our current debt agreements have an interest rate tied
to LIBOR. Some of these agreements provide procedures for determining an
alternative base rate in the event that LIBOR is discontinued, but not all do
so. Regardless, there can be no assurances as to what alternative base rates may
be and whether such base rate will be more or less favorable than LIBOR and any
other unforeseen impacts of the discontinuation of LIBOR. The Company intends to
monitor the developments with respect to the phasing out of LIBOR and work with
its lenders to ensure any transition away from LIBOR will have minimal impact on
its financial condition, but can provide no assurances regarding the impact of
the discontinuation of LIBOR.

The 2019 Facility includes an accordion feature that will allow the Operating
Partnership to increase the borrowing capacity by $200.0 million, upon the
satisfaction of certain conditions. As of March 31, 2022, subject to any
potential future paydowns or increases in the borrowing base, we have $96.2
million remaining availability under the 2019 Revolver. As of March 31, 2022,
$384.5 million was drawn on the 2019 Facility and our unused borrowing capacity
was $130.0 million, assuming that we use the proceeds of the 2019 Facility to
acquire properties, or to repay debt on properties, that are eligible to be
included in the unsecured borrowing base. The Company used $446.2 million of
proceeds from the 2019 Facility to repay amounts outstanding under the 2018
Facility and intends to use the remaining proceeds from the 2019 Facility for
general
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corporate purposes, including property acquisitions, debt repayment, capital
expenditures, the expansion, redevelopment and re-tenanting of properties in its
portfolio and working capital.

The Company, each direct and indirect material subsidiary of the Operating
Partnership and any other subsidiary of the Operating Partnership that is a
guarantor under any unsecured ratable debt will serve as a guarantor for funds
borrowed by the Operating Partnership under the 2019 Facility. The 2019 Facility
contains customary terms and conditions, including, without limitation,
customary representations and warranties and affirmative and negative covenants
including, without limitation, information reporting requirements, limitations
on investments, acquisitions, loans and advances, mergers, consolidations and
sales, incurrence of liens, dividends and restricted payments. In addition, the
2019 Facility contains certain financial covenants including the following:

•maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

•maximum secured debt to total asset value ratio of 0.40 to 1.00;

•minimum EBITDA (earnings before interest, taxes, depreciation, amortization or
extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•maintenance of a minimum tangible net worth (adjusted for accumulated
depreciation and amortization) of $372 million plus 75% of the net proceeds from
additional equity offerings (as defined therein).


We serve as the guarantor for funds borrowed by the Operating Partnership under
the 2019 Facility. The 2019 Facility contains customary terms and conditions,
including, without limitation, affirmative and negative covenants such as
information reporting requirements, maximum secured indebtedness to total asset
value, minimum EBITDA (earnings before interest, taxes, depreciation,
amortization or extraordinary items) to fixed charges, and maintenance of a
minimum net worth. The 2019 Facility also contains customary events of default
with customary notice and cure, including, without limitation, nonpayment,
breach of covenant, misrepresentation of representations and warranties in a
material respect, cross-default to other major indebtedness, change of control,
bankruptcy and loss of REIT tax status.

On March 22, 2019, we, through our Operating Partnership, entered into a Note
Purchase and Guarantee Agreement (the "Note Agreement") together with certain
subsidiary guarantors as initial guarantor parties thereto (the "Subsidiary
Guarantors") and The Prudential Insurance Company of America and the various
other purchasers named therein (collectively, the "Purchasers") providing for
the issuance and sale of $100 million of senior unsecured notes of the Operating
Partnership, of which (i) $50 million are designated as 5.09% Series A Senior
Notes due March 22, 2029 (the "Series A Notes") and (ii) $50 million are
designated as 5.17% Series B Senior Notes due March 22, 2029 (the "Series B
Notes" and, together with the Series A Notes, the "Notes") pursuant to a private
placement that closed on March 22, 2019 (the "Private Placement"). Obligations
under the Notes are unconditionally guaranteed by the Company and by the
Subsidiary Guarantors.

The principal of the Series A Notes will begin to amortize on March 22, 2023
with annual principal payments of approximately $7.1 million. The principal of
the Series B Notes will begin to amortize on March 22, 2025 with annual
principal payments of $10.0 million. The Notes will pay interest quarterly on
the 22nd day of March, June, September and December in each year until maturity.

The Operating Partnership may prepay at any time all, or from time to time part
of, the Notes, in an amount not less than $1,000,000 in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus a make-whole
amount. The make-whole amount is equal to the excess, if any, of the discounted
value of the remaining scheduled payments with respect to the Notes being
prepaid over the aggregate principal amount of such Notes (as described in the
Note Agreement). In addition, in connection with a Change of Control (as defined
in the Note Purchase Agreement), the Operating Partnership is required to offer
to prepay the Notes at 100% of the principal amount plus accrued and unpaid
interest thereon.

The Note Agreement contains representations, warranties, covenants, terms and
conditions customary for transactions of this type and substantially similar to
the Operating Partnership's existing senior revolving credit facility, including
limitations on liens, incurrence of investments, acquisitions, loans and
advances and restrictions on dividends and certain other restricted payments. In
addition, the Note Agreement contains certain financial covenants substantially
similar to the Operating Partnership's existing senior revolving credit
facility, including the following:

•maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

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•maximum secured debt to total asset value ratio of 0.40 to 1.00;

•minimum EBITDA (earnings before interest, taxes, depreciation, amortization or
extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•maintenance of a minimum tangible net worth (adjusted for accumulated
depreciation and amortization) of $372 million plus 75% of the net proceeds from
additional equity offerings (as defined therein).


In addition, the Note Agreement contains a financial covenant requiring that
maximum unsecured debt not exceed the lesser of (i) an amount equal to 60% of
the aggregate unencumbered asset value and (ii) the debt service coverage amount
(as described in the Note Agreement). That covenant is substantially similar to
the borrowing base concept contained in the Operating Partnership's existing
senior revolving credit facility.

The Note Agreement also contains default provisions, including defaults for
non-payment, breach of representations and warranties, insolvency,
non-performance of covenants, cross-defaults with other indebtedness and
guarantor defaults. The occurrence of an event of default under the Note
Agreement could result in the Purchasers accelerating the payment of all
obligations under the Notes. The financial and restrictive covenants and default
provisions in the Note Agreement are substantially similar to those contained in
the Operating Partnership's existing credit facility.

Net proceeds from the Private Placement will be used to refinance existing
indebtedness. The Notes have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act. The Notes
were sold in reliance on the exemption from registration provided by Section
4(a)(2) of the Securities Act.

As of March 31, 2022, our $158.7 million in secured debt was collateralized by
seven properties with a carrying value of $245.9 million. Our loans contain
restrictions that would require the payment of prepayment penalties for the
acceleration of outstanding debt and are secured by deeds of trust on certain of
our properties and by assignment of the rents and leases associated with those
properties. As of March 31, 2022, we were in compliance with all loan covenants.

Refer to Note 7 (Debt) to the accompanying consolidated financial statements for
additional information regarding debt.

Capital Expenditures


We continually evaluate our properties' performance and value. We may determine
it is in our shareholders' best interest to invest capital in properties that we
believe have potential for increasing value. We also may have unexpected capital
expenditures or improvements for our existing assets. Additionally, we intend to
continue investing in similar properties outside of the markets on which we
focus in cities with exceptional demographics to diversify market risk, and we
may incur significant capital expenditures or make improvements in connection
with any properties we may acquire.

The following is a summary of the Company’s capital expenditures for the three
and three months ended March 31, 2022 and 2021 (in thousands):

                                                     Three Months Ended March 31,
                                                           2022                   2021
    Capital expenditures:
      Tenant improvements and allowances      $        2,592                    $   475
      Developments / redevelopments                      385                        452
      Leasing commissions and costs                      633                        799
      Maintenance capital expenditures                   382                        601
       Total capital expenditures             $        3,992                    $ 2,327


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Distributions

U.S. federal income tax law generally requires that a REIT distribute annually
to its shareholders at least 90% of its REIT taxable income, without regard to
the deduction for dividends paid and excluding net capital gains, and that it
pay tax at regular corporate rates on any taxable income that it does not
distribute. We currently, and intend to continue to, accrue distributions
quarterly and make distributions in three monthly installments following the end
of each quarter. For a discussion of our cash flow as compared to dividends, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

The timing and frequency of our distributions are authorized and declared by our
board of trustees in exercise of its business judgment based upon a number of
factors, including:

•our funds from operations;

•our debt service requirements;

•our capital expenditure requirements for our properties;

•our taxable income, combined with the annual distribution requirements
necessary to maintain REIT qualification;

•requirements of Maryland law;

•our overall financial condition; and

•other factors deemed relevant by our board of trustees.


Any distributions we make will be at the discretion of our board of trustees and
we cannot provide assurance that our distributions will be made or sustained in
the future.

On February 12, 2021, the Company announced an increase to its quarterly
distribution to $0.1075 per common share and OP unit, equal to a monthly
distribution of $0.035833, beginning with the March 2021 distribution.

On February 22, 2022, the Company announced an increase to its quarterly
distribution to $0.12 per common share and OP unit, equal to a monthly
distribution of $0.04, beginning with the April 2022 distribution. The Board
will continue to regularly reassess the dividend level.


During the three months ended March 31, 2022, we paid distributions to our
common shareholders and OP unit holders of $5.4 million, compared to $4.6
million in the three months ended March 31, 2021. Common shareholders and OP
unit holders receive monthly distributions. Payments of distributions are
declared quarterly and paid monthly. The following table summarizes the cash
distributions paid or payable to holders of our common shares and noncontrolling
OP units during each quarter of 2021 and the three months ended March 31, 2022
(in thousands, except per share data):

                                                           Common Shares                           Noncontrolling OP Unit Holders                 Total
                                              Distributions Per                               Distributions Per
             Quarter Paid                       Common Share              Amount Paid              OP Unit               Amount Paid           Amount Paid
2022

First Quarter                                $         0.1075          $       5,268          $       0.1075          $          83          $      5,351
Total                                        $         0.1075          $       5,268          $       0.1075          $          83          $      5,351

2021
Fourth Quarter                               $         0.1075          $       5,257          $       0.1075          $          83          $      5,340
Third Quarter                                          0.1075                  4,981                  0.1075                     83                 5,064
Second Quarter                                         0.1075                  4,602                  0.1075                     83                 4,685
First Quarter                                          0.1058                  4,480                  0.1058                     82                 4,562
Total                                        $         0.4283          $      19,320          $       0.4283          $         331          $     19,651



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Taxes

We elected to be taxed as a REIT under the Code beginning with our taxable year
ended December 31, 1999. As a REIT, we generally are not subject to federal
income tax on income that we distribute to our shareholders. If we fail to
qualify as a REIT in any taxable year, we will be subject to federal income tax
on our taxable income at regular corporate rates. We believe that we are
organized and operate in a manner to qualify and be taxed as a REIT, and we
intend to operate so as to remain qualified as a REIT for federal income tax
purposes.

Environmental Matters

Our properties are subject to environmental laws and regulations adopted by
various governmental authorities in the jurisdictions in which our operations
are conducted. From our inception, we have incurred no significant environmental
costs, accrued liabilities or expenditures to mitigate or eliminate future
environmental contamination.

Off-Balance Sheet Arrangements


Guarantees. We may guarantee the debt of a real estate partnership primarily
because it allows the real estate partnership to obtain funding at a lower cost
than could be obtained otherwise. This results in a higher return for the real
estate partnership on its investment, and a higher return on our investment in
the real estate partnership. We may receive a fee from the real estate
partnership for providing the guarantee. Additionally, when we issue a
guarantee, the terms of the real estate partnership's partnership agreement
typically provide that we may receive indemnification from the real estate
partnership or have the ability to increase our ownership interest. See Note 6
(Investment in Real Estate Partnership) to the accompanying consolidated
financial statements for information related to our guarantee of our real estate
partnership's debt.

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