Note 7 - Debt |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
Mortgages and other notes payable consist of the following (in thousands):
The mortgage debt was an obligation of Whitestone Uptown Tower, LLC as borrower, collateralized by the Uptown Tower property and guaranteed by Whitestone OP. As of September 30, 2023, we were not in compliance with loan covenants. The mortgage loan matured on October 1, 2023. The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. However, on October 19, 2023, Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.
On October 24, 2023, the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (1) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (2) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter 64, Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice of foreclosure sale regarding the planned foreclosure sale of Uptown Tower on December 5, 2023.
On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition, in November 2023, representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT’s board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower’s knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. No Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we were informed that the agreement was not consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.
In June 2024, Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.
The plan of reorganization in the Uptown Tower bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in July 2024. We sold Uptown Tower in July 2025 for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and reimbursements to the seller, and paid off the American Bank, N.A. indebtedness. |
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