Note 2 - Pillarstone Capital REIT Operating Partnership LP's Bankruptcy and Deconsolidation

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Reorganization under Chapter 11 of US Bankruptcy Code Disclosure [Text Block]

2.	Pillarstone Capital REIT Operating Partnership LP’s Bankruptcy and Deconsolidation

On March 4, 2024, bankruptcy cases were filed by Pillarstone OP, as well as Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC, the subsidiaries owning our Real Estate Assets other than Uptown Tower, which were consolidated into the jointly administered bankruptcy cases styled In re: Whitestone Industrial-Office, LLC, et. al., Case No. 24-30653-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

As required under U.S. GAAP, we deconsolidated Pillarstone OP and its subsidiaries from our consolidated financial statements effective March 4, 2024, the date of the bankruptcy filings. As such, Pillarstone OP and its subsidiaries’ financial condition and results of operations are no longer presented in our consolidated financial statements after this date.

In the first quarter of 2025, we recognized a receivable of $4.05 million representing the estimated fair value of our interest in Pillarstone OP and its subsidiaries and an associated gain on deconsolidation of $864 thousand. In December 2025, we received $4.05 million as part of the settlement in the jointly administered bankruptcies of Pillarstone OP, Whitestone CP Woodland Ph. 2, LLC, Whitestone Industrial-Office, LLC and Whitestone Offices, LLC.

The following table summarizes the effects of the deconsolidation of Pillarstone OP and its subsidiaries on the consolidated balance sheets:

Real estate assets, at cost		$	(25,868	)
Cash and cash equivalents			(1,759	)
Escrows and utility deposits			(14	)
Accrued rents and accounts receivable, net of allowance for doubtful accounts			(273	)
Receivable due from related party			(888	)
Unamortized lease commissions and deferred legal cost, net			(118	)
Prepaid expenses and other assets			(15	)
Reduction of total assets		$	(28,935	)
Accounts payable and accrued expenses		$	(1,754	)
Tenants' security deposits			(496	)
Noncontrolling interest in subsidiary			(26,685	)
Reduction in total liabilities and equity		$	(28,935	)

Pillarstone OP and its subsidiaries’ financial condition and results of operations for periods presented before its deconsolidation are presented as discontinued operations in our consolidated financial statements. The following is a summary of the carrying amounts of major classes of assets and liabilities presented as discontinued operations in the consolidated balance sheets as of December 31, 2023:

		December 31,
		2023

Assets:
Real estate assets, at cost		$	26,032
Cash and cash equivalents			1,189
Escrows and utility deposits			14
Accrued rents and accounts receivable, net of allowance for doubtful accounts			315
Receivable due from related party			2,795
Unamortized lease commissions and deferred legal cost, net			130
Prepaid expenses and other assets			91
Total assets of discontinued operations		$	30,566

Liabilities:
Accounts payable and accrued expenses		$	1,534
Tenants' security deposits			488
Total liabilities of discontinued operations		$	2,022

The following is a summary of the major classes of line items constituting loss on discontinued operations shown in the consolidated statements of operations:

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues:
Rental		$	-			$	2,113			$	851			$	4,232
Transaction and other fees			-				9				1				14
Total revenues			-				2,122				852				4,246

Operating expenses:
Depreciation and amortization			-				499				142				985
Operating and maintenance			-				837				371				1,474
Real estate taxes			-				367				202				792
General and administrative			-				814				-				1,331
Management fees			-				607				56				979
Total operating expenses			-				3,124				771				5,561

Other expenses-
Interest expense, net			-				151				-				409

Income (loss) before income taxes			-				(1,153	)			81				(1,724	)
Provision for income taxes			-				32				-				47

Income (loss) from discontinued operations, net of income taxes		$	-			$	(1,121	)		$	81			$	(1,677	)