Filed Pursuant to Rule 433
Issuer Free Writing Prospectus dated August 4, 2010
Relating to Preliminary Prospectus dated August 3, 2010
Registration No. 333-162859
Creating Communities in our Properties™
& Value for Our Shareholders
NYSE-AMEX: WSR
August 2010
The issuer has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“Commission”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the Commission for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the Commission’s website at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free 1-866-789-7348.
Strictly Private & Confidential
Forward Looking Statements
This presentation contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are not historical facts. You can identify forward-looking statements by their use of forward-looking words, such as “may,” “will,” “anticipates,” “expect,” “believe,” “intend,” “plan,” “should,” “seek” or comparable terms, or the negative use of those words, but the absence of these words does not necessarily mean that a statement is not forward-looking.
These forward-looking statements are made based on our expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations are disclosed under the caption “Risk Factors” and elsewhere in the prospectus that is included in our registration statement on Form S-11.
We do not undertake any responsibility to update or revise these forward-looking statements or to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this presentation.
Strictly Private & Confidential
- 1 -
WHITES TONE REIT
Creating Communities in our Properties™
Transaction Summary
Issuer / Issue Type
Whitestone REIT / Listing & Concurrent Offering
Common Stock Offered
3.4 million shares
Offering Range
$14 – $16
Offering Size / Pro Forma Market Cap
$50 million / $129 million
Over-allotment Option
15%
Annual Dividend / Yield
$1.14 per share / 7.6%
Use of Proceeds
Acquisitions of distressed properties in target markets
Ticker
NYSE-AMEX: WSR
Bookrunners
Wunderlich Securities; Ladenburg Thalmann & Co. Inc.
Co-managers
J.J.B. Hilliard, W.L. Lyons, LLC; Maxim Group LLC;
National Securities Corporation; Southwest Securities, Inc
Expected Pricing Date
Week of August 23rd, 2010
Strictly Private & Confidential
- 2 -
WHITES TONE REIT
Creating Communities in our Properties™
Investment Highlights
Target Rapidly Growing, but Underserved Market Opportunities
Focus on key growth markets in the West and Southwest including Houston, Dallas, Phoenix, Chicago and San Antonio
Target fast growing but underserved Asian and Hispanic populations
Operational Strategy Built to Effectively Serve Target Markets
Experienced management team, recognized board & established properties
Whitestone Community Centered Properties™ serve local businesses & nearby areas
Internal property management and leasing allows greater market familiarity
Consistent Track Record of Improving Financial Results from Managed Portfolios
Competitive operating metrics
In midst of economic downturn, outperformed publicly-traded peers
Significant Potential to Accelerate Growth
Existing properties are stable with upside potential
Capital structure with limited leverage and few near-term maturities
Pipeline of $300+ million in stressed asset opportunities
Strictly Private & Confidential
- 3 -
WHITES TONE REIT
Creating Communities in our Properties™
Operations Structured to Effectively Serve High Growth Target Markets
Strictly Private & Confidential
Stable Operations Located in High Growth Cities
City
Dallas
Houston
Phoenix
Chicago
San Antonio
Growth Rank
1st
2nd
7th
8th
16th
SFT Owned (1000’s)
379.9
2,367.1
33.4
41.4
192.5
Properties
2
31
1
1
1
(1) MSA Rank in Growth 7/08 -7/09
Source: US Census Bureau
Community Centered Properties
Retail Community Stats(1)
18 properties
1,181,000 leaseable SF
82% occupied
Annualized base rent: $9.9M
Avg. Base Rent/SF: $10.26
Office Community Stats(1)
7 properties
631,841 leaseable SF
76% occupied
Annualized base rent: $7.7M
Avg. Base Rent/SF: $16.04
Office/Flex Community Stats(1)
11 properties
1,201,672 leaseable SF
85% occupied
Annualized base rent: $8.3M
Avg. Base Rent/SF: $8.12
(1) As of June 30, 2010.
Strictly Private & Confidential
- 5 -
WHITES TONE REIT
Creating Communities in our Properties™
We Serve Fast Growing Consumers
% Change in Population by Ethnicity 2005-2008
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Chicago
Houston
Dallas
San Antonio
Phoenix
Caucasian
African American
East / South Asian
Hispanic
Source: US Census Bureau
Strictly Private & Confidential
- 6 -
WHITES TONE REIT
Creating Communities in our Properties™
Operations Structured For Cost-Effective Service
Develop Whitestone Branded Community Centered PropertiesTM
Visibly located properties in established or developing, culturally diverse neighborhoods
Acquire Stressed Retail & Office Properties in Established Fast Growing Urban Areas at Reduced Valuation
Limited competition from public REITs
Apply modestly priced renovations & improvements to enhance cash flow
Management has a long successful history of renovating / developing properties
“Right-Size” Lease Spaces to Fit Locally-oriented Tenant Needs
Accelerates new leasing in target areas & rents at higher $/SFT rates vs. anchors
42% premium per SFT on smaller (<3,000 SFT) spaces versus larger (> 3,000 SFT) spaces. 72% of tenants are smaller space tenants
Reduces concentration risk
Internal Leasing and Property Management
Smaller, local tenants receive pro-active, “high touch” service
Strictly Private & Confidential
- 7 -
WHITES TONE REIT
Creating Communities in our Properties™
Experienced Real Estate Management Team
Experience & Commitment
Highly experienced and committed team of 52 people
Industry knowledge and experience at public REITs and capital markets
History of real estate development / redevelopment people success
Significant ownership stake
Name
James C. Mastandrea
John J. Dee
David K. Holeman
Valarie L. King
Daniel E. Nixon, Jr.
Samuel Demissie
Title
Chairman and CEO
COO
CFO
Sr. Vice President of Property Management
Sr. Vice President of Leasing and Redevelopment
Vice President of Acquisitions & Asset Management
Industry Experience
30+
30+
4, 20+ Public Companies
20+
30+
3, 20+ Public Companies
Joined Whitestone
Oct. 2006
Oct. 2006
Nov. 2006
Oct. 2006
Jul. 2007
Jan. 2007
Strictly Private & Confidential
- 8 -
WHITES TONE REIT
Creating Communities in our Properties™
Board of Trustees
Trustees
James C. Mastandrea
Chairman and CEO of Whitestone REIT
President, CEO and Chairman of Paragon Real Estate Equity and Investment Trust
Former CEO and Chairman of First Union Real Estate Investments (NYSE) and MDC Realty Corp
Daryl J. Carter
Founder, Chairman and CEO of Avanath Capital Partners and Capri Capital
Executive Managing Director, & Head of Real Estate Group of Centerline Capital Group, (NYSE)
Trustee of other companies and sits on the board of numerous industry organizations
Daniel G. DeVos
Chairman of the Board and Chief Executive Officer of DP Fox Ventures, majority owner of Grand Rapids Rampage (AFL) and part owner of Orlando Magic (NBA)
Trustee of First Union Real Estate Investments (NYSE) from 1994-1998, Paragon Real Estate Equity and Investment Trust since 2003, and Alticor, Inc, parent of Amway Corporation
Donald F. Keating
Former CFO of Shell Mining Company
Former board member of Billiton Metals Company, R & F Coal Company and Marrowbone Coal Company
Jack L. Mahaffey
Former President and CEO of Shell Mining Company
Former board member of the National Coal Association and the National Coal Counsel
Corporate Governance
4 out of 5 Trustees independent
Our board is staggered, with:
2 Trustees subject to annual election
Trustees subject to election every 3 years
Board Trustees have investment in the Company
Independent Trustees & Committees meet SEC and traded exchange requirements
Strictly Private & Confidential
- 9 -
WHITES TONE REIT
Creating Communities in our Properties™
Focus on Local Community-Oriented Tenants
MEDICAL
SERVICES
EDUCATION
DINING
Authentic Chinese Dance & Ballet
Strictly Private & Confidential
- 10 -
WHITES TONE REIT
Creating Communities in our Properties™
Significant Revenue & Tenant Diversification
Tenant Diversification
Tenant Name
US Census
Sports Authority
Brockette Davis Drake, Inc.
Compass Insurance
Air Liquide America, LP
River Oaks L-M, Inc.
Kroger
Petsmart
X-Ray X-Press Corporation
Marshall’s
Other
% of Annualized Base Rental Revenue
2.7%
1.7%
1.4%
1.4%
1.4%
1.1%
1.0%
1.0%
1.0%
1.0%
86.3%
Year Expiring
2010
2015
2011
2011
2013
2011
2011
2013
2019
2013
Various
Industry Diversification
INDUSTRY
EATING PLACES
VARIETY STORES
LEGAL SERVICES
SPORTING GOODS & BICYCLE SHOPS
GROCERY STORES
CHURCHES
CLOTHING RETAIL
GENERAL WAREHOUSING AND STORAGE
MEDICAL AND HOSPITAL EQUIPMENT
BEAUTY SALONS
ENGINEERING SERVICES
X-RAY LABORATORIES-MEDICAL
BUSINESS CALL CENTER SERVICES
FREIGHT TRANSPORTATION
INSURANCE AGENTS & BROKERS
OIL & GAS DRILL WELLS
PET SUPPLIES & FOODS - RETAIL
FURNITURE STORES
NATURAL GAS DISTRIBUTION
OIL, GAS, EXPLORATION SERVICES
CRAFT SUPPLIES
SURETY INSURANCE
BARS
OIL /GAS SERVICE COMPANIES
HOME HEALTH CARE SERVICES
DENTISTS
% OF OCCUPIED SF
4.9%
3.2%
2.8%
2.6%
2.5%
2.3%
2.2%
2.0%
1.8%
1.6%
1.5%
1.4%
1.2%
1.2%
1.2%
1.1%
1.1%
1.0%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.9%
0.8%
Strictly Private & Confidential
- 11 -
WHITES TONE REIT
Creating Communities in our Properties™
Case Study: Providence Plaza
Repositioned Big Box
Property Description
Providence Plaza is located at the gateway to Sugar Land and Fort Bend County - one of the fastest growing counties in the nation
90,000 SFT community center with excellent visibility
Over 40,250 vehicles per day pass by the center
Challenge
99 Cent Only announced plans to exit the Texas market in September 2008
24,000 SFT vacancy by July 2009 dropping occupancy to 63% Opportunity
Further define Providence as a community center by redeveloping and remerchandising the big box and creating smaller spaces
Transformation
The space was divided into two smaller spaces — one measured 16,000 SFT and the other was 8,000 SFT.
Results
Leasing team retenanted the space by December 2009 with Dollar Tree and Tuesday Morning
SFT Occupied
Occupancy
Base Rent / Month
NOI / Month
July 2009
56,908
63%
$48,680
$44,144
Dec. 2009
82,039
91%
$61,125
$57,299
% Increase
44.2%
25.6%
29.9%
Strictly Private & Confidential
- 12 -
WHITES TONE REIT
Creating Communities in our Properties™
Case Study: Webster Pointe
Distressed Asset Turnaround
Property Description
Located at Highway 3 and NASA Road in Webster, Texas
Growing Asian Indian population
44,000 vehicles pass per day via NASA Road
Challenge
Road construction project created a large overpass in front of the property
Property was hampered by poor visibility
Traffic flow into the center decreased and property occupancy declined to 74% by January 2009
Transformation
Whitestone’s in-house Maintenance Department transformed the property
Reduced operating expenses by 12%
Enhanced signage
Repainted exterior of building
Worked with Webster Chamber of Commerce and directed marketing efforts to appeal to local Asian Indian businesses
Results
Upscale Indian restaurant, Bombay Tadka, was signed on as a new tenant, attracting like-minded cultural business establishments
Indian grocer and an Indian-owned tax service
Webster Pointe is now 100% occupied with 3 to 5 year NNN leases
SFT Occupied
Occupancy
Base Rent / Month
NOI / Month
Jan. 2009
19,310
74%
$18,329
$15,357
Dec. 2009
26,060
100%
$23,728
$21,835
% Increase
35.0%
29.5%
42.2%
Strictly Private & Confidential
- 13 -
WHITES TONE REIT
Creating Communities in our Properties™
Case Study: Westchase Plaza
Redeveloped Property
Property Description
Located in Westchase District in Houston, Texas
Exclusive Deed-restricted neighborhood in West Houston
70,000 vehicles pass per day via Gessner near Westpark Tollway
Challenge
Blighted retail center with 1980’s exterior
Large vacant corner space (previously a nightclub)
Pad site restaurant visually separated
Transformation
Created mixed-use by adding new 5,000 SFT GLA of new office space and 1,659 SFT of retail space
Added a second floor in former nightclub corner space
Designed expansive glass entry with open reception area
New façade in modern colors with stone columns
Stand-alone pad building visually tied to rest of center community
Resurfaced parking lot adding spaces and improving traffic flow for mixed-use office space
New signage, landscaping and enhanced lighting for street appeal
Results
Total SFT
Base Rent / Year
Rent, per SFT
Before
42,924
$308,000
$11
Pro Forma
49,573
$713,000
$15 to $17
% Increase
15.5%
131.5%
35 to 55%
Before
After
Strictly Private & Confidential
- 14 -
WHITES TONE REIT
Creating Communities in our Properties™
Our Strategy Has Produced Strong Operating and Financial Results
Strictly Private & Confidential
Attractive Results From Our Operating Strategy
Total SFT / Total Tenants
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2005
2006
2007
2008
2009
LTM 6/09
LTM 6/10
Revenue / Average SFT
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$-
2005
2006
2007
2008
2009
LTM 6/09
LTM 6/10
NOI / Average SFT
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$-
2005
2006
2007
2008
2009
LTM 6/09
LTM 6/10
Real Estate Yield(1)
10.00%
8.00%
6.00%
4.00%
2.00%
0.0%
2005
2006
2007
2008
2009
LTM 6/09
LTM 6/10
(1) Real estate yield represents Net Operating Income from Properties (property revenue less property expenses) divided by gross real estate assets on ending balance sheet with the SEC.
Source: Company filings with SEC
Strictly Private & Confidential
- 16 -
WHITES TONE REIT
Creating Communities in our Properties™
Attractive Performance vs. Public Traded REITs(1)
LTM Revenue Growth
10.0%
5.0%
0.0%
(5.0%)
(10.0%)
(15.0%)
(20.0%)
(25.0%)
6.6%
4.9%
4.6%
3.6%
2.7%
2.3%
1.6%
(0.2%)
(2.0%)
(5.4%)
(10.5%)
(20.9%)
FPO ADC CDR AKR WSR BFS GOOD PKY UBA RPT IRC KRG
LTM Normalized FFO Growth(2)
40.0%
20.0%
0.0%
(20.0%)
(40.0%)
(60.0%)
(80.0%)
18.9%
14.2%
8.4%
6.0%
0.0%
(5.9%)
(8.8%)
(9.1%)
(21.4%)
(29.8%)
(34.1%)
(73.3%)
FPO ADC CDR AKR WSR BFS GOOD PKY UBA RPT IRC KRG
LTM NOI Growth
10.0%
5.0%
0.0%
(5.0%)
(10.0%)
(15.0%)
(20.0%)
5.8% 5.3% 2.9% 1.5% 1.5% 0.4% (0.2%) (1.8%) (3.2%) (7.3%) (11.2%) (17.8%)
FPO ADC CDR AKR WSR BFS GOOD PKY UBA RPT IRC KRG
LTM Real Estate Yield(3)
12%
10%
8%
6%
4%
2%
0%
10.8% 10.6% 10.6% 10.1% 9.7% 9.6% 8.4% 8.2% 8.2% 7.9% 7.3% 5,7%
FPO ADC CDR AKR WSR BFS GOOD PKY UBA RPT IRC KRG
(1) Data for graphs taken from companies’ 10-K and 10-Q filings. “LTM” represents reported results for the latest twelve months ended 3/31/2010, except for UBA which covers 12 months ending 4/30/2010
(2) Pro forma for the removal of and $1.5 million in legal expenses in 2008, and $0.4 million (expense) and $1.5 million (income) from involuntary conversion in 2008 and 2009, respectively. For LTM 3/10 and LTM 3/09, pro forma for the removal of $1.8 million (income) and $0.6 million (expense), respectively
(3) Real estate yield represents Net Operating Income from Properties (property revenue less property expenses) divided by gross real estate assets on ending balance sheet with the SEC
Strictly Private & Confidential
- 17—
WHITESTONE REIT
Creating Communities in our Properties™
Consistent Occupancy in Difficult Environment
2009 Contribution to Occupancy
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
84%
16%
8%
13%
10%
82%
Total: (24%)
Total: 22%
12/31/2008 Occupancy
Expiring Leases
Unplanned Vacancies
Renewals
New Leases
12/31/2009 Occupancy
Strictly Private & Confidential
- 18—
WHITESTONE REIT
Creating Communities in our Properties™
2010 Occupancy Has Been Stable
2010 YTD Contribution to Occupancy
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
82%
5%
2%
3%
4%
82%
Total: (7%)
Total: 7%
12/31/2009 Occupancy
Expiring Leases
Unplanned Vacancies
Renewals
New Leases
12/31/2010 Occupancy
Strictly Private & Confidential
- 19—
WHITESTONE REIT
Creating Communities in our Properties™
Lease Expirations
Lease Expirations
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2010
2011
2012
2013
2014
2015
2016
2017
Therafer
Note: As of June 30 2010
Source: Company filings with SEC
Strictly Private & Confidential
- 20—
WHITESTONE REIT
Creating Communities in our Properties™
Financial Summary
Property Revenues
Normalized FFO(1)
($ in thousands)
($ in thousands)
Average Rent / SFT
Property NOI
($ in thousands)
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2005 2006 2007 2008 2009 LTM 6/09 LTM 6/10
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2005 2006 2007 2008 2009 LTM 6/09 LTM 6/10
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
2005 2006 2007 2008 2009 LTM 6/09 LTM 6/10
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2005 2006 2007 2008 2009 LTM 6/09 LTMS 6/10
Pro forma for the removal of $2.2 and $1.5 million in legal expenses in 2007 and 2008, respectively, $0.4 million (expense) and $1.5 million (income) from involuntary conversion in 2008 and 2009, respectively. For LTM 6/10 and LTM 6/09, includes the removal of $1.7M (income) and $0.5M (expense), respectively
Source: Company filings with SEC
Strictly Private & Confidential
- 21—
WHITESTONE REIT
Creating Communities in our Properties™
2009 Revenue Bridge
2009 Revenue Bridge
($ in thousands)
Total: $(1,618)
Total: $3,102
$33,000
$31,000
$29,000
$27,000
$25,000
$23,000
$21,000
$19,000
$17,000
$15,000
2008 Revenue Occupancy Decrease Other Rate / SFT Acquired Property 2009 Revenue
$970 $32,685
$31,201 $1,492 $2,132
$126
Total: $(1,618) Total: $3,102
Strictly Private & Confidential
- 22—
WHITESTONE REIT
Creating Communities in our Properties™
2009 YTD NOI Bridge
2009 NOI Bridge
($ in thousands)
Total: $(1,492)
Total: $2,820
20000
17000
14000
11000
8000
5000
2008 NOI Occupancy Decrease Rate / SFT Acquired Property Other 2009 NOI
$93
$596 $19,694
$18,366
$1,492
$2,131
Total: $(1,492) Total: $2,820
Strictly Private & Confidential
- 23—
WHITESTONE REIT
Creating Communities in our Properties™
Limited Leverage & Few Near-Term Maturities
Pro Forma Market Capitalization(1)
($ in thousands)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Debt $100, 837 43.9%
Equity $129,000 56.1%
2010- 2014 Debt Maturities
($ in thousands)
80000
60000
40000
20000
0
2010 2011 2012 2013 2014 Thereafter
$66,418
$1,398 $2,410 $2,543 $17,799 $10,269
(1) Based on outstanding shares and OP units of 8.6 million and assumed offering price of $15.00 per share Source: Company filings with SEC
Strictly Private & Confidential
- 24—
WHITESTONE REIT
Creating Communities in our Properties™
Financial Metrics vs. Public Traded REITs(1)
2009 Dividend Payout as a % of FFO
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
39.7% 43.8% 44.4% 58.6% 61.0% 63.8% 65.6% 69.3% 71.9% 79.9% 83.1% 95.0%
CDR RPT PKY AKR FPO BFS IRC KRG ADC WSR UBA GOOD
Cost Basis per SFT
$160
$140
$120
$100
$80
$60
$40
$20
$
$52 $62 $64 $90 $93 $121 $121 $129 $131 $134 $137 $141
RPT GOOD WSR ADC FPO AKR IRC CDR PKY BFS UBA KRG
LTM Interest Coverage Ratio(2)
8.0x
7.0x
6.0x
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
6.7x 6.0x 3.1x 2.8x 2.5x 2.5x 2.2x 2.2x 2.2x 2.1x 2.0x 1.9x
UBA ADC BFS IRC AKR PKY FPO KRG RPT WSR GOOD CDR
(1) Data for graphs taken from companies’ 10-K and 10-Q filings. “LTM” represents reported results for the latest twelve months ended 3/31/2010, except for UBA which covers 12 months ending 4/30/2010 (2) Defined as EBITDA / Interest Expense
Strictly Private & Confidential
- 25—
WHITESTONE REIT
Creating Communities in our Properties™
Significant Potential to Accelerate Growth Through Acquisitions
Strictly Private & Confidential
Significant Potential to Accelerate Growth
Management and infrastructure in place to support larger scale of operations
Limited leverage with few near-term maturities
Market conditions provide acquisition opportunities
Purchase properties at historically attractive prices with upside potential
Active search process targeting $300+ million pipeline
Strictly Private & Confidential
- 27 -
WHITES TONE REIT
Creating Communities in our Properties™
Illustrative Acquisition Opportunities
“Stressed” Class A Office Development Project
New Class A Office Bldg
Owner: Regional Bank
Location: Top 10 growth market in the Southwest
Foreclosure due to Owner/Developer inability to obtain capital to complete cost of build out and necessary TI cost to attract tenants
No active tenant marketing
Metrics
Leasable SFT
Acquisition cost per SFT
Cost to complete build out and stabilize
Total investment per SFT
87,700
$80
$34
$114
Vacancy @ acquisition
Rent per SFT
Time to stabilize
Stabilized cap rate
IRR
80%
$20-$27 (Gross)
5 Yrs
12%
18%
Retail Center – Pending Loan Maturity “Stress”
7 Yr old class B retail center
Owner: Individual
Location: “In fill” location in top 10 growth market in the Southwest
Stress due to pending loan maturity and inability to refinance with same leverage Minimal tenant marketing due to lack of capital
Metrics
Leasable SFT
Acquisition cost per SFT
Cost to stabilize
Total investment per SFT
48,623
$90
$14
$104
Vacancy @ acquisition
Rent per SFT
Time to stabilize
Stabilized cap rate
IRR
34%
$12+ (NNN)
1 Yr
12%
15%
Strictly Private & Confidential
- 28 -
WHITES TONE REIT
Creating Communities in our Properties™
Investment Highlights
Target Rapidly Growing, but Underserved Market Opportunities
Focus on key growth markets in the West and Southwest including Houston, Dallas, Phoenix, Chicago and San Antonio
Target fast growing but underserved Asian and Hispanic populations
Operational Strategy Built to Effectively Serve Target Markets
Experienced management team, recognized board & established properties
Whitestone Community Centered Properties™ serve local businesses & nearby areas
Internal property management and leasing allows greater market familiarity
Consistent Track Record of Improving Financial Results from Managed Portfolios
Competitive operating metrics
In midst of economic downturn, outperformed publicly-traded peers
Significant Potential to Accelerate Growth
Existing properties are stable with upside potential
Capital structure with limited leverage and few near-term maturities
Pipeline of $300+ million in stressed asset opportunities
Strictly Private & Confidential
- 29 -
WHITES TONE REIT
Creating Communities in our Properties™
Regulation G Reconciliation of Non-GAAP Financial Measures
Year Ended December 31, Twelve Months Ended
2009 2008 2007 2006 2005 June 30, 2010 June 30, 2009
FUNDS FROM OPERATIONS ("FFO") (2)
Net income attributable to Whitestone REIT $ 1,342 $ 1,134 $ (77) $ 1,781 $ 2,448 $ 1,699 $ (303)
Depreciation and amortization of real estate assets (1) 6,347 5,877 6,108 6,341 5,512 6,480 5,956
Loss on sale or disposal of assets (1) 196 16(3,396)(197) 184 176
Net income attributable to noncontrolling interests 733 621(46) 1,068 1,891 926(203)
FFO $ 8,618 $ 4,236 $ 6,001 $ 8,993 $ 9,851 $ 9,289 $ 5,626
(1) Including amounts for discontinued operations
Year Ended December 31, Twelve Months Ended
2009 2008 2007 2006 2005 June 30, 2010 June 30, 2009
PROPERTY NET OPERATING INCOME ("NOI") (3)
Net income attributable to Whitestone REIT $ 1,342 $ 1,134 $ (77) $ 1,781 $ 2,448 $ 1,699 $(303)
General and administrative expense 6,072 6,708 6,721 2,299 567 5,490 5,629
Property and other asset management fees to an affiliate 1,482 1,319
Depreciation and amortization 6,958 6,859 6,048 6,181 5,733 7,033 6,930
Involuntary conversion(1,542) 358 (1,732) 548
Interest expense 5,749 5,857 5,402 5,296 3,770 5,660 5,928
Interest income(36)(182)(577)(386)(301)(26) (80)
Other expense (income) 30(30)
Provision for income taxes 222 219 217 267 220
Loss (gain) on disposal of assets 196 223 9(197) 184 176
Less: net loss (income) from discontinued operations (3,431)(589)(554) (561)
Net income attributable to noncontrolling interests 733 621(46) 1,068 1,891 926 (202)
NOI $ 19,694 $ 18,366 $ 17,138 $ 16,940 $ 14,866 $ 19,501 $ 18,846
2 Funds From Operations ("FFO")—The National Association of Real Estate Investment Trusts, Inc. ("NAREIT") defines FFO (April 2002 White Paper) as net income (computed in accordance with generally accepted accounting principles ("GAAP")) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. FFO is a non-GAAP measure and does not replace net income as a measure of performance or net cash provided by operating activities as a measure of liquidity. We consider FFO to be a standard supplemental measure for equity real estate investment trusts ("REITs") because it (1) is the most common metric used by securities analysts, investors and other interested parties in comparing the relative performances of equity REITs, and (2) facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs.
3 Net Operating Income ("NOI"), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. We provide NOI as a supplement to net income calculated in accordance with GAAP, and it should not be considered an alternative to net income as an indication of our operating performance. It is the primary performance measure we use to assess the results of our operations at the property level. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including gains on sale, if any), plus interest expense, depreciation and amortization, and general and administrative expenses.
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WHITES TONE REIT
Creating Communities in our Properties™