Pillarstone Capital REIT (OTCMKTS:PRLE) Files An 8-K Change in Shell Company Status
Item 5.06 and the information required under Item 2.01(f) and to
provide the financial statements and pro forma information
required by Item 9.01 of Form 8-K, and should be read in
conjunction with the Original 8-K. After reasonable inquiry, the
Company is not aware of any other material factors relating to
the Property that would cause the reported financial information
not to be necessarily indicative of future operating results.
Unless otherwise indicated in this Current Report on Form 8-K,
this Amendment continues to describe conditions as of the date of
the Original 8-K, and the disclosures herein have not been
updated to reflect events, results or developments that have
occurred after the Original 8-K, or to modify or update those
disclosures affected by subsequent events.
this Amendment continues to describe conditions as of the date of
the Original 8-K, and the disclosures herein have not been
updated to reflect events, results or developments that have
occurred after the Original 8-K, or to modify or update those
disclosures affected by subsequent events.
Item 2.01. Completion of Acquisition or Disposition of Assets.
FORM 10 Disclosure
Item 2.01(f) of Form 8-K states that if the registrant was a
shell company, like the Company, the registrant must disclose the
information that would be required if the registrant were filing
a general form for registration of securities on Form 10.
Accordingly, the Company is providing below the information that
would be included in a Form 10 if it were to file a Form 10.
shell company, like the Company, the registrant must disclose the
information that would be required if the registrant were filing
a general form for registration of securities on Form 10.
Accordingly, the Company is providing below the information that
would be included in a Form 10 if it were to file a Form 10.
Item 1. Business.
Company Overview
Pillarstone Capital REIT (the Company, Pillarstone, we, our or us)
is a Maryland real estate investment trust engaged in investing in,
owning and operating commercial properties. Future real estate
investments may include (i) acquisition and development of retail,
office, office warehouse, industrial, multifamily, hotel, and other
commercial properties, (ii) acquisition of or merger with a real
estate investment trust (REIT) or a real estate operating company
and (iii) joint venture investments. Excess funds can be invested
in cash equivalents depending on market conditions.
is a Maryland real estate investment trust engaged in investing in,
owning and operating commercial properties. Future real estate
investments may include (i) acquisition and development of retail,
office, office warehouse, industrial, multifamily, hotel, and other
commercial properties, (ii) acquisition of or merger with a real
estate investment trust (REIT) or a real estate operating company
and (iii) joint venture investments. Excess funds can be invested
in cash equivalents depending on market conditions.
The Company was formed on March 15, 1994 as a Maryland REIT. The
Company operated as a traditional real estate investment trust by
buying, selling, owning and operating commercial and residential
properties through December 31, 1999. In 2000, the Company
purchased a software technology company, resulting in the Company
no longer meeting qualifications to be a REIT under the Internal
Revenue Code of 1986, as amended (the Code). In 2002, the Company
discontinued the operations of the technology segment.
Company operated as a traditional real estate investment trust by
buying, selling, owning and operating commercial and residential
properties through December 31, 1999. In 2000, the Company
purchased a software technology company, resulting in the Company
no longer meeting qualifications to be a REIT under the Internal
Revenue Code of 1986, as amended (the Code). In 2002, the Company
discontinued the operations of the technology segment.
From 2003 through 2006, we pursued a value-added business plan
primarily focused on acquiring well located, under-performing
multi-family residential properties, including affordable housing
communities, and repositioning them through renovation, leasing,
improved management and branding. In 2006, the Company did not
complete a public offering for a portfolio acquisition due to
market conditions and, consequently, was not able to meet the
listing requirements of the former American Stock Exchange
(Amex). Accordingly, Pillarstones common shares were delisted
from the Amex and commenced being quoted on the Over-The-Counter
Bulletin Board (OTC Bulletin Board) and on the pink sheets under
the symbol PRLE.
primarily focused on acquiring well located, under-performing
multi-family residential properties, including affordable housing
communities, and repositioning them through renovation, leasing,
improved management and branding. In 2006, the Company did not
complete a public offering for a portfolio acquisition due to
market conditions and, consequently, was not able to meet the
listing requirements of the former American Stock Exchange
(Amex). Accordingly, Pillarstones common shares were delisted
from the Amex and commenced being quoted on the Over-The-Counter
Bulletin Board (OTC Bulletin Board) and on the pink sheets under
the symbol PRLE.
From 2006 until December 2016, the Company continued its
existence as a corporate shell filing its quarterly and annual
reports with the Securities and Exchange Commission (“SEC”) so
that it could be used for future real estate transactions. During
this time, the Company was funded by the trustees who contributed
$500,000 in exchange for 125,000 Class C Convertible Preferred
Shares and $197,780 in exchange for convertible notes payable. In
2016, the shareholders of Pillarstone approved changing the
Company’s name from Paragon Real Estate Equity and Investment
Trust to Pillarstone Capital REIT.
existence as a corporate shell filing its quarterly and annual
reports with the Securities and Exchange Commission (“SEC”) so
that it could be used for future real estate transactions. During
this time, the Company was funded by the trustees who contributed
$500,000 in exchange for 125,000 Class C Convertible Preferred
Shares and $197,780 in exchange for convertible notes payable. In
2016, the shareholders of Pillarstone approved changing the
Company’s name from Paragon Real Estate Equity and Investment
Trust to Pillarstone Capital REIT.
Substantially all of our business is conducted through
Pillarstone OP, a Delaware limited partnership organized in 2016.
We are the sole general partner of Pillarstone OP. As of December
31, 2016, we owned 18.6% of the outstanding equity in Pillarstone
OP.
Pillarstone OP, a Delaware limited partnership organized in 2016.
We are the sole general partner of Pillarstone OP. As of December
31, 2016, we owned 18.6% of the outstanding equity in Pillarstone
OP.
On December 8, 2016, Pillarstone and Pillarstone OP entered into
a Contribution Agreement (the Contribution Agreement) with
Whitestone REIT Operating Partnership, L.P. (Whitestone OP), a
subsidiary and the operating partnership of Whitestone REIT
(Whitestone), both of which are related parties to Pillarstone
and Pillarstone OP. to the terms of the Contribution Agreement,
Whitestone OP contributed to Pillarstone OP all of the equity
interests in four of its wholly-owned subsidiaries: Whitestone CP
Woodland Ph. 2, LLC, a Delaware limited liability company (CP
Woodland); Whitestone Industrial-Office, LLC, a Texas limited
liability company (Industrial-Office); Whitestone Offices, LLC, a
Texas limited liability company (Whitestone Offices); and
Whitestone Uptown Tower, LLC, a Delaware limited liability
company (Uptown Tower, and together with CP Woodland,
Industrial-Office and Whitestone Offices, the Entities) that own
fourteen real estate assets (the Real Estate Assets and, together
with the Entities, the Property) for aggregate consideration of
approximately $84 million, consisting of (1) approximately $18.1
million of Class A units representing limited partnership
interests in Pillarstone OP (OP Units), issued at a price of
$1.331 per OP Unit; and (2) the assumption of approximately $65.9
million of liabilities by Pillarstone OP, consisting of (a)
approximately $15.5 million of Whitestone OPs liability under
that certain Amended and Restated Credit Agreement, dated as of
November 7, 2014, as amended, among the Bank of Montreal, as
Administrative Agent (the Agent), the lenders party thereto, BMO
Capital Markets, Wells Fargo Securities, LLC, Merrill Lynch,
Pierce, Fenner Smith Incorporated, and U.S. Bank, National
Association, Whitestone OP, as borrower, and Whitestone and
certain subsidiaries of Whitestone OP, as guarantors (as amended,
the Whitestone Credit Facility); (b) an approximately $16.3
million promissory note (the Whitestone Uptown Tower Promissory
Note) of Uptown Tower issued under that certain Loan Agreement,
dated as of September 26, 2013, (as amended, the Whitestone
Uptown Tower Loan Agreement and, together with the Whitestone
Uptown Tower Promissory Note, the Whitestone Uptown Tower Loan
Documents) between Uptown Tower, as borrower, and U.S. Bank
National Association, as successor to Morgan Stanley Mortgage
Capital Holdings LLC, as lender, and (c) an approximately $34.1
million promissory note (the Whitestone Industrial-Office
Promissory Note) of Industrial-Office issued under that certain
Loan Agreement, dated as of November 26, 2013 (the Whitestone
Industrial-Office Loan Agreement and, together with the
Whitestone Industrial-Office Promissory Note, the Whitestone
Industrial-Office Loan Documents), between Industrial-Office, as
borrower, and Jackson National Life Insurance Company, as lender
(collectively, the Acquisition).
a Contribution Agreement (the Contribution Agreement) with
Whitestone REIT Operating Partnership, L.P. (Whitestone OP), a
subsidiary and the operating partnership of Whitestone REIT
(Whitestone), both of which are related parties to Pillarstone
and Pillarstone OP. to the terms of the Contribution Agreement,
Whitestone OP contributed to Pillarstone OP all of the equity
interests in four of its wholly-owned subsidiaries: Whitestone CP
Woodland Ph. 2, LLC, a Delaware limited liability company (CP
Woodland); Whitestone Industrial-Office, LLC, a Texas limited
liability company (Industrial-Office); Whitestone Offices, LLC, a
Texas limited liability company (Whitestone Offices); and
Whitestone Uptown Tower, LLC, a Delaware limited liability
company (Uptown Tower, and together with CP Woodland,
Industrial-Office and Whitestone Offices, the Entities) that own
fourteen real estate assets (the Real Estate Assets and, together
with the Entities, the Property) for aggregate consideration of
approximately $84 million, consisting of (1) approximately $18.1
million of Class A units representing limited partnership
interests in Pillarstone OP (OP Units), issued at a price of
$1.331 per OP Unit; and (2) the assumption of approximately $65.9
million of liabilities by Pillarstone OP, consisting of (a)
approximately $15.5 million of Whitestone OPs liability under
that certain Amended and Restated Credit Agreement, dated as of
November 7, 2014, as amended, among the Bank of Montreal, as
Administrative Agent (the Agent), the lenders party thereto, BMO
Capital Markets, Wells Fargo Securities, LLC, Merrill Lynch,
Pierce, Fenner Smith Incorporated, and U.S. Bank, National
Association, Whitestone OP, as borrower, and Whitestone and
certain subsidiaries of Whitestone OP, as guarantors (as amended,
the Whitestone Credit Facility); (b) an approximately $16.3
million promissory note (the Whitestone Uptown Tower Promissory
Note) of Uptown Tower issued under that certain Loan Agreement,
dated as of September 26, 2013, (as amended, the Whitestone
Uptown Tower Loan Agreement and, together with the Whitestone
Uptown Tower Promissory Note, the Whitestone Uptown Tower Loan
Documents) between Uptown Tower, as borrower, and U.S. Bank
National Association, as successor to Morgan Stanley Mortgage
Capital Holdings LLC, as lender, and (c) an approximately $34.1
million promissory note (the Whitestone Industrial-Office
Promissory Note) of Industrial-Office issued under that certain
Loan Agreement, dated as of November 26, 2013 (the Whitestone
Industrial-Office Loan Agreement and, together with the
Whitestone Industrial-Office Promissory Note, the Whitestone
Industrial-Office Loan Documents), between Industrial-Office, as
borrower, and Jackson National Life Insurance Company, as lender
(collectively, the Acquisition).
to the Contribution Agreement, Pillarstone has agreed to file
with the SEC on or prior to June 8, 2018, a shelf registration
statement to register for sale under the Securities Act of 1933,
as amended (the Securities Act), the issuance of the common
shares of beneficial interest in Pillarstone (the Common Shares)
that may be issued upon redemption of the OP Units issued to each
of the Contribution Agreement and the OP Unit Purchase Agreement
(as defined below) and the offer and resale of such common shares
by the holders thereof. In addition, to the Contribution
Agreement, in the event of a Change of Control (as defined
therein) of Whitestone, Pillarstone OP shall have the right, but
not the obligation, to repurchase the OP Units issued thereunder
from Whitestone OP at their initial issue price of $1.331 per OP
Unit.
with the SEC on or prior to June 8, 2018, a shelf registration
statement to register for sale under the Securities Act of 1933,
as amended (the Securities Act), the issuance of the common
shares of beneficial interest in Pillarstone (the Common Shares)
that may be issued upon redemption of the OP Units issued to each
of the Contribution Agreement and the OP Unit Purchase Agreement
(as defined below) and the offer and resale of such common shares
by the holders thereof. In addition, to the Contribution
Agreement, in the event of a Change of Control (as defined
therein) of Whitestone, Pillarstone OP shall have the right, but
not the obligation, to repurchase the OP Units issued thereunder
from Whitestone OP at their initial issue price of $1.331 per OP
Unit.
In connection with the Acquisition, (1) with respect to each
Real Estate Asset (other than the Real Property Asset owned by
Uptown Tower), Whitestone TRS, Inc. (Whitestone TRS), a
subsidiary of Whitestone, entered into a Management Agreement
with the Entity that owns such Real Estate Asset and (2) with
respect to Uptown Tower, Whitestone TRS entered into a
Management Agreement with Pillarstone OP (collectively, the
Management Agreements). to the Management Agreements with
respect to each Real Estate Asset (other than Uptown Tower),
Whitestone TRS agreed to provide certain property management,
leasing and day-to-day advisory and administrative services to
such Real Estate Asset in exchange for (x) a monthly property
management fee equal to 5.0% of the monthly revenues of such
Real Estate Asset and (y) a monthly asset management fee equal
to 0.125% of GAV (as defined in each Management Agreement as,
generally, the purchase price of the respective Real Estate
Asset based upon the purchase price allocations determined to
the Contribution Agreement, excluding all indebtedness,
liabilities or claims of any nature) of such Real Estate Asset.
to the Management Agreement with respect to Uptown Tower,
Whitestone TRS agreed to provide certain property management,
leasing and day-to-day advisory and administrative services to
Pillarstone OP in exchange for (x) a monthly property
management fee equal to 3.0% of the monthly revenues of Uptown
Tower and (y) a monthly asset management fee equal to 0.125% of
GAV of Uptown Tower.
Real Estate Asset (other than the Real Property Asset owned by
Uptown Tower), Whitestone TRS, Inc. (Whitestone TRS), a
subsidiary of Whitestone, entered into a Management Agreement
with the Entity that owns such Real Estate Asset and (2) with
respect to Uptown Tower, Whitestone TRS entered into a
Management Agreement with Pillarstone OP (collectively, the
Management Agreements). to the Management Agreements with
respect to each Real Estate Asset (other than Uptown Tower),
Whitestone TRS agreed to provide certain property management,
leasing and day-to-day advisory and administrative services to
such Real Estate Asset in exchange for (x) a monthly property
management fee equal to 5.0% of the monthly revenues of such
Real Estate Asset and (y) a monthly asset management fee equal
to 0.125% of GAV (as defined in each Management Agreement as,
generally, the purchase price of the respective Real Estate
Asset based upon the purchase price allocations determined to
the Contribution Agreement, excluding all indebtedness,
liabilities or claims of any nature) of such Real Estate Asset.
to the Management Agreement with respect to Uptown Tower,
Whitestone TRS agreed to provide certain property management,
leasing and day-to-day advisory and administrative services to
Pillarstone OP in exchange for (x) a monthly property
management fee equal to 3.0% of the monthly revenues of Uptown
Tower and (y) a monthly asset management fee equal to 0.125% of
GAV of Uptown Tower.
As a result of the Acquisition, Whitestone OP owns
approximately 81.4% of the outstanding equity in Pillarstone
OP. We account for Pillarstone OP on our financial statements
using the equity method.
approximately 81.4% of the outstanding equity in Pillarstone
OP. We account for Pillarstone OP on our financial statements
using the equity method.
>Competition
We compete for the acquisition of properties with many
entities, including, among others, publicly traded REITs, life
insurance companies, pension funds, partnerships and individual
investors. Many competitors have substantially greater
financial resources than us. In addition, certain competitors
may be willing to accept lower returns on their investments. If
competitors prevent us from buying properties that may be
targeted for acquisition, our capital appreciation and
valuation may be impacted.
entities, including, among others, publicly traded REITs, life
insurance companies, pension funds, partnerships and individual
investors. Many competitors have substantially greater
financial resources than us. In addition, certain competitors
may be willing to accept lower returns on their investments. If
competitors prevent us from buying properties that may be
targeted for acquisition, our capital appreciation and
valuation may be impacted.
Employees
As of March 1, 2017, the Company has two part-time employees.
Reports to Security Holders
We file or furnish with the SEC to Section 13(a), 15(d) or
16(a) of the Securities Exchange Act of 1934, as amended (the
Exchange Act) our Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports, proxy statements with respect to meetings of our
shareholders, as well as Reports on Forms 3, 4 and 5 regarding
our officers, trustees or 10% beneficial owners. You may read
and copy any materials we file with the SEC at the SECs Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549.
Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC as we do. The website
address is http://www.sec.gov. Copies of our Audit Committee
Charter, Management, Organization and Compensation Committee
Charter, Nominating Committee Charter, and Code of Conduct and
Ethics are available free of charge through our website
(www.pillarstone-capital.com). In the event of any changes to
these documents, revised copies will also be made available on
our website. Materials on our website are not part of our
Annual Report on Form 10-K. The contents of these websites are
not incorporated into this filing.
16(a) of the Securities Exchange Act of 1934, as amended (the
Exchange Act) our Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports, proxy statements with respect to meetings of our
shareholders, as well as Reports on Forms 3, 4 and 5 regarding
our officers, trustees or 10% beneficial owners. You may read
and copy any materials we file with the SEC at the SECs Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549.
Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC as we do. The website
address is http://www.sec.gov. Copies of our Audit Committee
Charter, Management, Organization and Compensation Committee
Charter, Nominating Committee Charter, and Code of Conduct and
Ethics are available free of charge through our website
(www.pillarstone-capital.com). In the event of any changes to
these documents, revised copies will also be made available on
our website. Materials on our website are not part of our
Annual Report on Form 10-K. The contents of these websites are
not incorporated into this filing.
Item 1A. Risk Factors.
Not applicable.
Item 2. Financial Information.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
and Results of Operations
Overview
The Company is a Maryland real estate investment trust
engaged in investing in, owning and operating commercial
properties. Future real estate investments may include (i)
acquisition and development of retail, office, office
warehouse, industrial, multifamily, hotel and other
commercial properties, (ii) acquisition of or merger with a
REIT or real estate operating company, and (iii) joint
venture investments. Substantially all of our business is
conducted through Pillarstone OP, a Delaware limited
partnership organized in 2016. We are the sole general
partner of Pillarstone OP. As of December 31, 2016, we owned
approximately 18.6% of the outstanding equity in Pillarstone
OP and Whitestone OP owned approximately 81.4% of the
outstanding equity in Pillarstone OP. We account for
Pillarstone OP on our financial statements using the equity
method.
engaged in investing in, owning and operating commercial
properties. Future real estate investments may include (i)
acquisition and development of retail, office, office
warehouse, industrial, multifamily, hotel and other
commercial properties, (ii) acquisition of or merger with a
REIT or real estate operating company, and (iii) joint
venture investments. Substantially all of our business is
conducted through Pillarstone OP, a Delaware limited
partnership organized in 2016. We are the sole general
partner of Pillarstone OP. As of December 31, 2016, we owned
approximately 18.6% of the outstanding equity in Pillarstone
OP and Whitestone OP owned approximately 81.4% of the
outstanding equity in Pillarstone OP. We account for
Pillarstone OP on our financial statements using the equity
method.
As of December 31, 2016, the Company is a smaller reporting
company that may make future real estate investments. There
can be no assurance that we will be able to close additional
transactions. Even if our management is successful in closing
additional transactions, investors may not value the
transactions or the Company in the same manner as we do, and
investors may not value the transactions as they would value
other transactions or alternatives. Failure to obtain
additional sources of capital will materially and adversely
affect the Companys ability to continue operations, as well
as its liquidity and financial results.
company that may make future real estate investments. There
can be no assurance that we will be able to close additional
transactions. Even if our management is successful in closing
additional transactions, investors may not value the
transactions or the Company in the same manner as we do, and
investors may not value the transactions as they would value
other transactions or alternatives. Failure to obtain
additional sources of capital will materially and adversely
affect the Companys ability to continue operations, as well
as its liquidity and financial results.
Brief History
Pillarstone was formed on March 15, 1994 as a Maryland REIT.
The Company operated as a traditional real estate investment
trust by buying, selling, owning and operating commercial and
residential properties through December 31, 1999. In 2000,
the Company purchased a software technology company,
resulting in the Company not meeting the qualifications to be
a REIT under the Code. In 2002, the Company discontinued the
operations of the technology segment, and from 2003 through
2006, pursued a value-added business plan primarily focused
on acquiring well located, under-performing multi-family
residential properties, including affordable housing
communities, and repositioning them through renovation,
leasing, improved management and branding.
The Company operated as a traditional real estate investment
trust by buying, selling, owning and operating commercial and
residential properties through December 31, 1999. In 2000,
the Company purchased a software technology company,
resulting in the Company not meeting the qualifications to be
a REIT under the Code. In 2002, the Company discontinued the
operations of the technology segment, and from 2003 through
2006, pursued a value-added business plan primarily focused
on acquiring well located, under-performing multi-family
residential properties, including affordable housing
communities, and repositioning them through renovation,
leasing, improved management and branding.
Recent Developments and Executive Overview
During most of 2016, the Company existed as a corporate shell
current in its SEC filings.
current in its SEC filings.
On December 8, 2016, Pillarstone and Pillarstone OP entered
into the Contribution Agreement with Whitestone OP, a
subsidiary and the operating partnership of Whitestone, both
of which are related parties to Pillarstone and Pillarstone
OP, to which Whitestone OP contributed to Pillarstone OP all
of the equity interests in four of its wholly-owned
subsidiaries: CP Woodland; Industrial-Office; Whitestone
Offices; and Uptown Tower that own the Real Estate Assets for
aggregate consideration of approximately $84 million,
consisting of (1) approximately $18.1 million of Class A
units representing limited partnership interests in
Pillarstone OP issued at a price of $1.331 per OP Unit; and
(2) the assumption of approximately $65.9 million of
liabilities by Pillarstone OP.
into the Contribution Agreement with Whitestone OP, a
subsidiary and the operating partnership of Whitestone, both
of which are related parties to Pillarstone and Pillarstone
OP, to which Whitestone OP contributed to Pillarstone OP all
of the equity interests in four of its wholly-owned
subsidiaries: CP Woodland; Industrial-Office; Whitestone
Offices; and Uptown Tower that own the Real Estate Assets for
aggregate consideration of approximately $84 million,
consisting of (1) approximately $18.1 million of Class A
units representing limited partnership interests in
Pillarstone OP issued at a price of $1.331 per OP Unit; and
(2) the assumption of approximately $65.9 million of
liabilities by Pillarstone OP.
As a result of the Acquisition, Whitestone OP owns
approximately 81.4% of the outstanding equity in Pillarstone
OP. We account for Pillarstone OP on our financial statements
using the equity method.
approximately 81.4% of the outstanding equity in Pillarstone
OP. We account for Pillarstone OP on our financial statements
using the equity method.
Results of Operations
The following is a discussion of our results of operations
for the years ended December 31, 2016 and 2015 and financial
condition, including:
for the years ended December 31, 2016 and 2015 and financial
condition, including:
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Explanation of changes in the results of operations in
the Consolidated Statements of Operations for the year ended December 31, 2016 compared to the year ended December 31, 2015. |
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Our critical accounting policies and estimates that
require our subjective judgment and are important to the presentation of our financial condition and results of operations. |
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Our primary sources and uses of cash for the year ended
December 31, 2016, and how we intend to generate cash for long-term capital needs. |
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Our current income tax status.
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Comparison of the years ended December 31, 2016 and 2015
Revenues from Operations
Total revenues remained flat at $0 for the year ended
December 31, 2016 and 2015. During 2015, the Company
existed as a shell corporation with no revenue producing
activities. Historically, the Company’s only revenues
consisted of interest income from equity securities. As of
December 31, 2016 and 2015, we held no equity securities,
and our decision to invest in equity securities on a
temporary basis in 2017 is dependent on market conditions
and the availability of cash to invest. Accordingly, we
anticipate nominal revenue in 2017.
December 31, 2016 and 2015. During 2015, the Company
existed as a shell corporation with no revenue producing
activities. Historically, the Company’s only revenues
consisted of interest income from equity securities. As of
December 31, 2016 and 2015, we held no equity securities,
and our decision to invest in equity securities on a
temporary basis in 2017 is dependent on market conditions
and the availability of cash to invest. Accordingly, we
anticipate nominal revenue in 2017.
Expenses from Operations
Total expenses, comprised mostly of general and
administrative expenses, increased $444,486, from $67,271
for the year ended December 31, 2015 to $511,757 for the
year ended December 31, 2016. This net increase is due to
increases in legal fees of $369,323, accounting fees of
$2,765, other professional fees of $57,040, miscellaneous
fees of $1,555 and interest expense of $17,556 offset by
decreased SEC filing charges and transfer agent fees of
$3,753. The aforementioned increases in expenses occurred
primarily as a result of the preparation and execution of
the Contribution Agreement and other transaction documents
executed in connection with the Acquisition.
administrative expenses, increased $444,486, from $67,271
for the year ended December 31, 2015 to $511,757 for the
year ended December 31, 2016. This net increase is due to
increases in legal fees of $369,323, accounting fees of
$2,765, other professional fees of $57,040, miscellaneous
fees of $1,555 and interest expense of $17,556 offset by
decreased SEC filing charges and transfer agent fees of
$3,753. The aforementioned increases in expenses occurred
primarily as a result of the preparation and execution of
the Contribution Agreement and other transaction documents
executed in connection with the Acquisition.
Loss from operations
As a result of the above, the loss from operations
increased $444,486 from $67,271 for the year ended December
31, 2015 to $511,757 for the year ended December 31, 2016.
increased $444,486 from $67,271 for the year ended December
31, 2015 to $511,757 for the year ended December 31, 2016.
Equity in income of Pillarstone OP
The increase of $14,776 in equity in income of Pillarstone
OP occurred as a result of the Contribution Agreement
entered into on December 8, 2016 whereby Pillarstone
purchased an 18.6% interest in Pillarstone OP. As
Pillarstone accounts for this interest purchased as an
equity method investment, Pillarstone recognizes a portion
of Pillarstone OP’s income and loss in its financial
statements. There was no comparable equity method
investment held by Pillarstone in the year ended December
31, 2015.
OP occurred as a result of the Contribution Agreement
entered into on December 8, 2016 whereby Pillarstone
purchased an 18.6% interest in Pillarstone OP. As
Pillarstone accounts for this interest purchased as an
equity method investment, Pillarstone recognizes a portion
of Pillarstone OP’s income and loss in its financial
statements. There was no comparable equity method
investment held by Pillarstone in the year ended December
31, 2015.
Net loss attributable to Common Shareholders
Based on the above, the net loss attributable to common
shareholders increased $429,710 from $67,271 for the year
ended December 31, 2015 to $496,981 for the year ended
December 31, 2016.
shareholders increased $429,710 from $67,271 for the year
ended December 31, 2015 to $496,981 for the year ended
December 31, 2016.
Liquidity and Capital Resources
Cash provided by operations, equity transactions, and
borrowings from affiliates and lending institutions have
generally provided the primary sources of liquidity to the
Company. Historically, the Company has used these sources
to fund operating expenses, satisfy its debt service
obligations and fund distributions to shareholders. During
2015 and 2016, we were dependent on cash provided by loans
in 2015 of $197,780 from five trustees on our board of
trustees in exchange for convertible notes payable. The
funds were utilized for due diligence costs incurred in
connection with the development and execution of the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition as well as
maintaining the Company’s status as a smaller reporting
company current in its quarterly and annual financial
statement filings with the SEC. We have kept the public
entity available for value-added real estate opportunities,
including (i) acquisition and development of retail,
office, office warehouse, industrial, multifamily, hotel,
and other commercial properties, (ii) acquisition of or
merger with a REIT or real estate operating company, and
(iii) joint venture investments. Excess funds can be
invested in cash equivalents depending on market
conditions.
borrowings from affiliates and lending institutions have
generally provided the primary sources of liquidity to the
Company. Historically, the Company has used these sources
to fund operating expenses, satisfy its debt service
obligations and fund distributions to shareholders. During
2015 and 2016, we were dependent on cash provided by loans
in 2015 of $197,780 from five trustees on our board of
trustees in exchange for convertible notes payable. The
funds were utilized for due diligence costs incurred in
connection with the development and execution of the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition as well as
maintaining the Company’s status as a smaller reporting
company current in its quarterly and annual financial
statement filings with the SEC. We have kept the public
entity available for value-added real estate opportunities,
including (i) acquisition and development of retail,
office, office warehouse, industrial, multifamily, hotel,
and other commercial properties, (ii) acquisition of or
merger with a REIT or real estate operating company, and
(iii) joint venture investments. Excess funds can be
invested in cash equivalents depending on market
conditions.
Cash Flows
As of December 31, 2016, our unrestricted cash resources
were $7,445. During 2016, we were dependent on cash loaned
during 2015 by five trustees on our board of trustees in
exchange for convertible notes payable, to meet our
liquidity needs because we did not have cash from
operations to meet our operating requirements. During 2017
and future years, we will be dependent on cash
distributions from Pillarstone OP generated through
Pillarstone OP’s ownership of the Real Estate Assets
acquired in the Acquisition to meet our liquidity needs.
were $7,445. During 2016, we were dependent on cash loaned
during 2015 by five trustees on our board of trustees in
exchange for convertible notes payable, to meet our
liquidity needs because we did not have cash from
operations to meet our operating requirements. During 2017
and future years, we will be dependent on cash
distributions from Pillarstone OP generated through
Pillarstone OP’s ownership of the Real Estate Assets
acquired in the Acquisition to meet our liquidity needs.
During the year ended December 31, 2016, the Company’s
cash balance decreased by $166,838 from $174,283 at
December 31, 2015 to $7,445 at December 31, 2016. During
2016, we had no cash investing or financing activities.
Cash of $166,838 was used primarily for due diligence
expenses in connection with preparing and executing the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition.
cash balance decreased by $166,838 from $174,283 at
December 31, 2015 to $7,445 at December 31, 2016. During
2016, we had no cash investing or financing activities.
Cash of $166,838 was used primarily for due diligence
expenses in connection with preparing and executing the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition.
Cash used for continuing operations included general and
administrative costs, primarily for legal and
professional costs associated with consummating the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition, and for
keeping Pillarstone current in its SEC filings so that it
may be used for additional real estate transactions or
sold to another company.
administrative costs, primarily for legal and
professional costs associated with consummating the
Contribution Agreement and other transaction documents
executed in connection with the Acquisition, and for
keeping Pillarstone current in its SEC filings so that it
may be used for additional real estate transactions or
sold to another company.
Future Obligations
The Company does not directly participate in any revenue
generating activities, and as such, we currently have no
cash from operations and have reduced our day-to-day
overhead expenses and material future obligations.
However, during December 2016, the Company, through the
Contribution Agreement and its resulting 18.6% equity
investment in Pillarstone OP, became a party to income
generating activities. Until the time that this
investment results in cash distributions to the Company,
we maintain reduced overhead expenses by issuing shares
for our CEOs salary and trustee fees, retaining the only
other employee on a part-time unpaid basis, and not
replacing employees who have left. We have also reduced
the use of outside consultants, and negotiated discounts
on or eliminated other expenses wherever possible.
generating activities, and as such, we currently have no
cash from operations and have reduced our day-to-day
overhead expenses and material future obligations.
However, during December 2016, the Company, through the
Contribution Agreement and its resulting 18.6% equity
investment in Pillarstone OP, became a party to income
generating activities. Until the time that this
investment results in cash distributions to the Company,
we maintain reduced overhead expenses by issuing shares
for our CEOs salary and trustee fees, retaining the only
other employee on a part-time unpaid basis, and not
replacing employees who have left. We have also reduced
the use of outside consultants, and negotiated discounts
on or eliminated other expenses wherever possible.
Long Term Liquidity and Operating Strategies
Historically, we have financed our long term capital
needs, including acquisitions, as follows:
needs, including acquisitions, as follows:
|
|
borrowings from new loans;
|
|
|
additional equity issuances of our common and
preferred shares; and |
|
|
proceeds from the sales of our real estate, a
technology segment, and marketable securities. |
From 2006 until December 2016, the Company continued its
existence as a corporate shell filing its quarterly and
annual reports with the SEC so that it could be used for
future real estate transactions or sold to another
company. During this time, the Company was funded by the
trustees who contributed $500,000 in exchange for 125,000
Class C Convertible Preferred Shares and $197,780 in
exchange for convertible notes payable.
existence as a corporate shell filing its quarterly and
annual reports with the SEC so that it could be used for
future real estate transactions or sold to another
company. During this time, the Company was funded by the
trustees who contributed $500,000 in exchange for 125,000
Class C Convertible Preferred Shares and $197,780 in
exchange for convertible notes payable.
Subsequent to the Acquisition through which Pillarstone
OP acquired the Real Estate Assets, Pillarstone intends
to develop strategies for the properties in order to
create value for the enterprise and our shareholders. As
part of the Acquisition, Pillarstone OP and Whitestone OP
have agreed that Pillarstone OP may require Whitestone OP
to purchase up to an aggregate of $3.0 million of
additional OP Units from Pillarstone OP at $1.331 per
unit over a two year period. To implement the strategy to
create value with the Real Estate Assets, additional
capital will need to be raised.
OP acquired the Real Estate Assets, Pillarstone intends
to develop strategies for the properties in order to
create value for the enterprise and our shareholders. As
part of the Acquisition, Pillarstone OP and Whitestone OP
have agreed that Pillarstone OP may require Whitestone OP
to purchase up to an aggregate of $3.0 million of
additional OP Units from Pillarstone OP at $1.331 per
unit over a two year period. To implement the strategy to
create value with the Real Estate Assets, additional
capital will need to be raised.
Current Tax Status
At December 31, 2016, we have net operating loss
carryforwards of $2,670,000. While these losses created a
deferred tax asset, a valuation allowance was applied
against the asset because of the uncertainty as to
whether we will be able to use these loss carryforwards,
which will expire in varying amounts through the year
2036. In the event of a change of ownership of the
Company, our ability (or the ability of any company that
acquires or merges with us) to use our net operating loss
carryforwards will be limited by federal tax regulations.
carryforwards of $2,670,000. While these losses created a
deferred tax asset, a valuation allowance was applied
against the asset because of the uncertainty as to
whether we will be able to use these loss carryforwards,
which will expire in varying amounts through the year
2036. In the event of a change of ownership of the
Company, our ability (or the ability of any company that
acquires or merges with us) to use our net operating loss
carryforwards will be limited by federal tax regulations.
We, and our subsidiary, are also subject to certain state
and local income, excise and franchise taxes. The
provision for state and local taxes has been reflected in
general and administrative expense in the consolidated
statements of operations and has not been separately
stated due to its insignificance.
and local income, excise and franchise taxes. The
provision for state and local taxes has been reflected in
general and administrative expense in the consolidated
statements of operations and has not been separately
stated due to its insignificance.
|
|
|
Interest Rates and Inflation
Interest rates fell during 2008 as the Federal Reserve
Bank lowered the discount rate which remained low through
2016. Due to record low interest rates, capital markets
were generally not accessible by small real estate
companies like Pillarstone from 2009 through 2011, and
debt financing was only available to larger creditworthy
companies. Financial institutions tightened financial
covenant tests, decreased loan-to-value ratios, and
charged higher fees for loans, which has reduced the
number of real estate transactions. While credit markets
have been more active since 2013, Pillarstone has not
participated in any transactions to raise capital.
Bank lowered the discount rate which remained low through
2016. Due to record low interest rates, capital markets
were generally not accessible by small real estate
companies like Pillarstone from 2009 through 2011, and
debt financing was only available to larger creditworthy
companies. Financial institutions tightened financial
covenant tests, decreased loan-to-value ratios, and
charged higher fees for loans, which has reduced the
number of real estate transactions. While credit markets
have been more active since 2013, Pillarstone has not
participated in any transactions to raise capital.
The Company was not significantly affected by inflation
during the periods presented in this report due
primarily to the relative low nationwide inflation
rates and the Company being a corporate shell with
minimal expenses.
during the periods presented in this report due
primarily to the relative low nationwide inflation
rates and the Company being a corporate shell with
minimal expenses.
|
|
|
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or
are likely to have, a current or future material effect
on our financial condition, changes in financial
condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
are likely to have, a current or future material effect
on our financial condition, changes in financial
condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
Application of Critical Accounting Estimates
Our consolidated financial statements are prepared in
accordance with generally accepted accounting
principles in the United States (GAAP), which require
us to make certain estimates and assumptions. The
following section is a summary of certain estimates
that both require our most subjective judgment and are
most important to the presentation of our financial
condition and results of operations. It is possible
that the use of different estimates or assumptions in
making these judgments could result in materially
different amounts being reported in our consolidated
financial statements.
accordance with generally accepted accounting
principles in the United States (GAAP), which require
us to make certain estimates and assumptions. The
following section is a summary of certain estimates
that both require our most subjective judgment and are
most important to the presentation of our financial
condition and results of operations. It is possible
that the use of different estimates or assumptions in
making these judgments could result in materially
different amounts being reported in our consolidated
financial statements.
Valuation Allowance of Deferred Tax Asset
|
|
|
We account for income taxes using the liability method
under which deferred tax assets and liabilities are
determined based on differences between the financial
reporting and tax bases of assets and liabilities using
enacted tax rates in effect for the period in which the
differences are expected to affect taxable income. At
December 31, 2016, we had net operating loss
carryforwards totaling $2,670,000.
under which deferred tax assets and liabilities are
determined based on differences between the financial
reporting and tax bases of assets and liabilities using
enacted tax rates in effect for the period in which the
differences are expected to affect taxable income. At
December 31, 2016, we had net operating loss
carryforwards totaling $2,670,000.
While these losses created a deferred tax asset of
$915,000, a valuation allowance of $915,000 was applied
against this asset because of the uncertainty of
whether we will be able to use these loss
carryforwards, which will expire in varying amounts
through the year 2036. to current Code regulations, we
will be limited to using $724,000 of the prior net
operating losses of $11,406,000, and these same
regulations also limit the amount of loss used in any
one year. Additionally, use of our net operating loss
carryforwards will be limited in the event of a change
in ownership of the Company.
$915,000, a valuation allowance of $915,000 was applied
against this asset because of the uncertainty of
whether we will be able to use these loss
carryforwards, which will expire in varying amounts
through the year 2036. to current Code regulations, we
will be limited to using $724,000 of the prior net
operating losses of $11,406,000, and these same
regulations also limit the amount of loss used in any
one year. Additionally, use of our net operating loss
carryforwards will be limited in the event of a change
in ownership of the Company.
Item 3. Properties.
General Physical and Economic Attributes
to the Contribution Agreement, Pillarstone, through
Pillarstone OP, acquired an investment portfolio
consisting of the Real Estate Assets as described
above. The following table sets forth certain
information relating to each of our properties owned as
of December 31, 2016.
Pillarstone OP, acquired an investment portfolio
consisting of the Real Estate Assets as described
above. The following table sets forth certain
information relating to each of our properties owned as
of December 31, 2016.
|
Pillarstone Capital REIT
|
||||||||||||||||||||||
|
Real Estate Assets
|
||||||||||||||||||||||
|
As of December 31, 2016
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Community Name
|
|
Location
|
|
Year Built/
Renovated
|
|
GLA
|
|
Percent
Occupied at
12/31/2016
|
|
Annualized Base
Rental Revenue
(in thousands)
(1) |
|
Average
Base Rental
Revenue Per
Sq. Ft.
(2) |
|
Average Net Effective Annual Base Rent Per
Leased Sq. Ft.(3) |
||||||||
|
9101 LBJ Freeway
|
|
Dallas
|
|
|
|
125,874
|
|
|
|
%
|
|
$
|
1,445
|
|
|
$
|
13.67
|
|
|
$
|
12.90
|
|
|
Corporate Park Northwest
|
|
Houston
|
|
|
|
174,359
|
|
|
|
%
|
|
1,656
|
|
|
11.58
|
|
|
11.66
|
|
|||
|
Corporate Park West
|
|
Houston
|
|
|
|
175,665
|
|
|
|
%
|
|
1,561
|
|
|
10.84
|
|
|
10.59
|
|
|||
|
Corporate Park Woodland
|
|
Houston
|
|
|
|
99,937
|
|
|
|
%
|
|
|
|
|
10.18
|
|
|
10.49
|
|
|||
|
Corporate Park Woodland II
|
|
Houston
|
|
|
|
16,220
|
|
|
|
%
|
|
|
|
|
14.73
|
|
|
14.34
|
|
|||
|
Dairy Ashford
|
|
Houston
|
|
|
|
42,902
|
|
|
|
%
|
|
|
|
|
8.20
|
|
|
8.28
|
|
|||
|
Holly Hall Industrial Park
|
|
Houston
|
|
|
|
90,000
|
|
|
|
%
|
|
|
|
|
9.02
|
|
|
8.30
|
|
|||
|
Holly Knight
|
|
Houston
|
|
|
|
20,015
|
|
|
|
%
|
|
|
|
|
19.51
|
|
|
18.93
|
|
|||
|
Interstate 10 Warehouse
|
|
Houston
|
|
|
|
151,000
|
|
|
|
%
|
|
|
|
|
4.30
|
|
|
4.46
|
|
|||
|
Main Park
|
|
Houston
|
|
|
|
113,410
|
|
|
|
%
|
|
|
|
|
7.51
|
|
|
7.39
|
|
|||
|
Plaza Park
|
|
Houston
|
|
|
|
105,530
|
|
|
|
%
|
|
|
|
|
8.40
|
|
|
8.54
|
|
|||
|
Uptown Tower
|
|
Dallas
|
|
|
|
253,981
|
|
|
|
%
|
|
3,088
|
|
|
15.79
|
|
|
17.48
|
|
|||
|
Westbelt Plaza
|
|
Houston
|
|
|
|
65,619
|
|
|
|
%
|
|
|
|
|
8.87
|
|
|
9.09
|
|
|||
|
Westgate Service Center
|
|
Houston
|
|
|
|
97,225
|
|
|
|
%
|
|
|
|
|
7.00
|
|
|
7.39
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Total / Weighted Average
|
|
|
|
|
|
1,531,737
|
|
|
|
%
|
|
$
|
12,969
|
|
|
$
|
10.45
|
|
|
$
|
10.64
|
|
|
(1) |
Calculated as the tenant’s actual December 31,
2016 base rent (defined as cash base rents including abatements) multiplied by 12. Excludes vacant space as of December 31, 2016. Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with GAAP, historical results differ from the annualized amounts. Total abatements for leases in effect as of December 31, 2016 equaled approximately $53,000 for the month ended December 31, 2016. |
|
(2) |
Calculated as annualized base rent divided by
gross leasable area (GLA) leased as of December 31, 2016. Excludes vacant space as of December 31, 2016. |
|
(3) |
Represents (i) the contractual base rent for
leases in place as of December 31, 2016, adjusted to a straight-line basis to reflect changes in rental rates throughout the lease term and amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases of December 31, 2016. |
Item 4. Security Ownership of Certain Beneficial
Owners and Management and Related Shareholder
Matters.
Owners and Management and Related Shareholder
Matters.
The following table includes certain information with
respect to the beneficial ownership of our shares by:
(i) each person known by us to own more than 5% in
interest of the outstanding shares; (ii) each of the
trustees; (iii) each of our executive officers; and
(iv) all of the trustees and executive officers as a
group. Except as otherwise noted, the person or
entity named has sole voting and investment power
over the shares indicated.
respect to the beneficial ownership of our shares by:
(i) each person known by us to own more than 5% in
interest of the outstanding shares; (ii) each of the
trustees; (iii) each of our executive officers; and
(iv) all of the trustees and executive officers as a
group. Except as otherwise noted, the person or
entity named has sole voting and investment power
over the shares indicated.
|
|
|
Common Shares(1)
|
|
Preferred A Shares(2)
|
|
Preferred C Shares(3)
|
|
Total Common Shares and Preferred
Shares(4) |
||||||||||||||||
|
Name
|
|
Number
|
|
Percent(5)
|
|
Number
|
|
Percent(5)
|
|
Number
|
|
Percent
|
|
Number
|
|
Percent(5)
|
||||||||
|
James C. Mastandrea
|
|
219,420
|
|
(6) |
48.8
|
%
|
|
161,410
|
|
(16) |
62.9
|
%
|
|
56,944
|
|
|
23.3
|
%
|
|
838,090
|
|
(18) |
78.4
|
%
|
|
Paul T. Lambert
|
|
87,086
|
|
(7) |
19.4
|
%
|
|
|
|
|
|
%
|
|
62,500
|
|
|
25.6
|
%
|
|
712,086
|
|
(19) |
66.3
|
%
|
|
John J. Dee
|
|
19,177
|
|
(8) |
4.6
|
%
|
|
|
|
(17) |
|
%
|
|
12,500
|
|
|
5.1
|
%
|
|
144,177
|
|
(20) |
26.4
|
%
|
|
Daryl J. Carter
|
|
26,665
|
|
(9) |
6.2
|
%
|
|
|
|
|
|
%
|
|
37,500
|
|
|
15.3
|
%
|
|
401,665
|
|
(21) |
49.9
|
%
|
|
Daniel G. DeVos
|
|
42,795
|
|
(10) |
9.6
|
%
|
|
|
|
|
|
%
|
|
62,500
|
|
|
25.6
|
%
|
|
667,795
|
|
(22) |
62.4
|
%
|
|
All trustees and current executive
officers as a group(11) |
|
395,143
|
|
(12) |
68.8
|
%
|
|
161,410
|
|
|
62.9
|
%
|
|
231,944
|
|
|
94.9
|
%
|
|
2,763,813
|
|
(23) |
93.9
|
%
|
|
Paragon Real Estate Development, LLC
|
|
163,117
|
|
(13) |
40.3
|
%
|
|
161,410
|
|
(16) |
62.9
|
%
|
|
|
|
|
|
%
|
|
212,347
|
|
(24) |
46.7
|
%
|
|
Timothy D. O’Donnell
|
|
32,207
|
|
(14) |
8.0
|
%
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
32,207
|
|
|
1.0
|
%
|
|
Mark Schurgin
|
|
80,598
|
|
(15) |
19.9
|
%
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
80,598
|
|
|
2.6
|
%
|
|
(1) |
Percentages based on 405,103 common shares
outstanding, not including 38,130 shares held in treasury. For each individual trustee and executive officer, also includes common shares he has the right to acquire through share options and convertible notes payable. The options that are currently exercisable for all named persons is 667, and the common shares issuable upon conversion of notes payable for all named persons is 168,867. Percentages also include 6,667 restricted shares issuable to an independent third party that Mr. Mastandrea has the right to vote. |
|
(2) |
Percentages based on 256,636 Preferred A
Shares outstanding, which convert to 53,610 common shares as follows: 161,410 Preferred A Shares are each convertible into 0.305 common shares and 95,226 Preferred A Shares are each convertible into 0.046 common shares. |
|
(3) |
Percentages based on 244,444 Preferred C
Shares outstanding, which convert to 2,444,440 common shares. Each Preferred C Share is convertible into 10 common shares. |
|
(4) |
Percentages based on 405,103 common shares
outstanding, not including 38,130 shares held in treasury, and including 256,636 Preferred A Shares which convert to 53,610 common shares, 244,444 Preferred C Shares which convert to 2,444,440 common shares, and notes payable which are convertible into 168,867 common shares. For each individual trustee and executive officer, also includes common shares he has the right to acquire through share options that are currently exercisable and shares that are issuable upon conversion of notes payable. Mr. Mastandreas percentage is calculated using a denominator that includes (i) 405,103 common shares, not including 38,130 shares held in treasury; (ii) 56,944 Preferred C Shares that convert to 569,440 common shares; and (iii) 161,410 Preferred A Shares that convert to 49,230 common shares; (iv) 6,667 restricted common shares issuable to an independent third party that Mr. Mastandrea has the right to vote; and (v) 44,590 common shares issuable upon conversion of notes payable due to Mr. Mastandrea. |
|
(5) |
The ownership percentages total more than 50%
due to more than one person or entity being considered the beneficial owner of the same shares, in accordance with SEC regulations for this table. |
|
(6) |
Includes: (i) 6,667 restricted common shares
issuable to an independent third party that Mr. Mastandrea has the right to vote; (ii) 163,117 common shares held by Paragon Real Estate Development, LLC, of which Mr. Mastandrea is the managing member; (iii) 2,000 common shares; (iv) 2,000 restricted common shares; (v) 1,046 common shares and (vi) 44,590 common shares issuable upon conversion of notes payable. |
|
(7) |
Includes: (i) 667 options; (ii) 5,929 common
shares held by Lambert Equities II, LLC, of which Mr. Lambert is the controlling majority member and sole manager; (iii) 36,850 common shares; and (iv) 43,640 common shares issuable upon conversion of notes payable. |
|
(8) |
Includes: (i) 2,000 common shares (ii) 2,000
restricted commons shares and (iii) 15,177 common shares issuable upon conversion of notes payable. Does not include 163,117 common shares held by Paragon Real Estate Development, LLC, of which Mr. Dee is a member. |
|
(9) |
Includes: (i) 2,000 common shares and (ii)
24,665 common shares issuable upon conversion of notes payable. |
|
(10) |
Includes: (i) 2,000 common shares and (ii)
40,795 common shares issuable upon conversion of notes payable. |
|
(11) |
Includes five named persons who are trustees
of Pillarstone. |
|
(12) |
Includes: (i) 6,667 restricted common shares
issuable to an independent third party that Mr. Mastandrea has the right to vote; (ii) 163,117 common shares held by Paragon Real Estate Development, LLC, of which Mr. Mastandrea is the managing member; (iii) 4,000 common shares; (iv) 4,000 restricted common shares; (v) 667 options; (vi) 47,825 common shares; and (vii) 168,867 common shares issuable upon conversion of notes payable. |
|
(13) |
Mr. Mastandrea is the managing member of
Paragon Real Estate Development, LLC and these shares are also included in Mr. Mastandreas common shares. |
|
(14) |
Based solely on a Schedule 13G filed by Mr.
ODonnell on February 2, 2016, which states that Mr. ODonnell has sole voting and dispositive power with respect to 25,860 common shares and shared voting and dispositive power with respect to 6,347 common shares. The 6,347 common shares are owned by Mr. ODonnells spouse, as to which he disclaims beneficial ownership. |
|
(15) |
Includes: 80,598 common shares. Based
solely on information on the Form 4 filed on January 19, 2017 with the SEC by Mr. Schurgin. |
|
(16) |
Represents shares held by Paragon Real
Estate Development, LLC, of which Mr. Mastandrea is the managing member. Each Preferred A Share is convertible into 0.305 common shares. |
|
(17) |
Does not include 161,410 Preferred A Shares
held by Paragon Real Estate Development, LLC, of which Mr. Dee is a member. |
|
(18) |
Includes: (i) 6,667 restricted common
shares issuable to an independent third party that Mr. Mastandrea has the right to vote; (ii) 163,117 common shares held by Paragon Real Estate Development, LLC, of which Mr. Mastandrea is the managing member; (iii) 2,000 common shares; (iv) 2,000 restricted common shares; (v) 49,230 common shares issuable upon conversion of 161,410 Preferred A Shares held by Paragon Real Estate Development, LLC; (vi) 569,440 common shares issuable upon conversion of 56,944 Preferred C Shares; (vii) 44,590 common shares issuable upon conversion of notes payable; and (viii) 1,046 common shares. |
|
(19) |
Includes: (i) 667 options; (ii) 625,000
common shares issuable upon conversion of 62,500 Preferred C Shares; (iii) 43,640 common shares issuable upon conversion of notes payable; and (iv) 42,779 common shares. |
|
(20) |
Includes: (i) 2,000 common shares (ii)
2,000 restricted common shares; (iii) 125,000 common shares issuable upon conversion of 12,500 Preferred C Shares; and (iv) 15,177 common shares issuable upon conversion of notes payable. Does not include 163,117 common shares or 161,410 Preferred A Shares held by Paragon Real Estate Development, LLC, of which Mr. Dee is a member. |
|
(21) |
Includes: (i) 2,000 common shares; (ii)
375,000 common shares issuable upon conversion of 37,500 Preferred C Shares; and (iii) 24,665 common shares issuable upon conversion of notes payable. |
|
(22) |
Includes: (1) 2,000 common shares; (ii)
625,000 common shares issuable upon conversion of 62,500 Preferred C Shares; and (iii) 40,795 common shares issuable upon conversion of notes payable. |
|
(23) |
Includes: (i) 6,667 restricted common
shares issuable to an independent third party that Mr. Mastandrea has the right to vote; (ii) 163,117 common shares held by Paragon Real Estate Development, LLC, of which Mr. Mastandrea is the managing member; (iii) 4,000 common shares; (iv) 4,000 restricted common shares; (v) 667 options; (vi) 49,230 common shares issuable upon conversion of 161,410 Preferred A Shares held by Paragon Real Estate Development, LLC; (vii) 2,319,440 common shares issuable upon conversion of 231,944 Preferred C Shares; (viii) 168,867 common shares issuable upon conversion of notes payable and (ix) 47,825 common shares. |
|
(24) |
Includes (i) 163,117 common shares and (ii)
49,230 common shares issuable upon conversion of 161,410 Preferred A Shares. These shares are also included in Mr. Mastandreas total shares. |
Item 5. Directors and Executive Officers.
The following individuals have been appointed to
serve as our executive officers:
serve as our executive officers:
|
Name
|
|
Age
|
|
Position
|
|
James C. Mastandrea
|
|
|
|
President, Chief Executive Officer and
Chairman of Board of Trustees |
|
John J. Dee
|
|
|
|
Senior Vice President, Chief Financial
Officer and Trustee |
James C. Mastandrea>has been our Chairman,
President and Chief Executive Officer since
2003. Mr. Mastandrea has over 40 years of
experience in the real estate industry and 19
years serving in high level positions of
publicly traded companies. Since 2006, he has
also served as the President, Chief Executive
Officer and Chairman of the Board of Trustees
of Whitestone REIT, a real estate investment
trust publicly listed on the New York Stock
Exchange (NYSE). In addition, since 1978, Mr.
Mastandrea has served as the Chief Executive
Officer/Founder of MDC Realty Corporation, a
privately held residential and commercial real
estate development company. From 1994 to 1998,
Mr. Mastandrea served as Chairman and Chief
Executive Officer of First Union Real Estate
Investments (NYSE), a publicly traded real
estate investment trust. Mr. Mastandrea also
served in the U.S. Army as a Military Police
Officer. Mr. Mastandrea is a director of
Cleveland State University Foundation Board and
a member of the investment committee. He
regularly lectures to MBA students at the
University of Chicago and instructs as an
Adjunct Professor in the MBA program at Rice
University in Houston, Texas, and also presents
to institutional investors in the U.S. and
Europe. Mr. Mastandreas significant experience
in the commercial and residential real estate
business, capital markets, and private and
public companies as a real estate expert allows
him to provide insight into various aspects of
the economy and commercial real estate, which
is of significant value to our Board.
President and Chief Executive Officer since
2003. Mr. Mastandrea has over 40 years of
experience in the real estate industry and 19
years serving in high level positions of
publicly traded companies. Since 2006, he has
also served as the President, Chief Executive
Officer and Chairman of the Board of Trustees
of Whitestone REIT, a real estate investment
trust publicly listed on the New York Stock
Exchange (NYSE). In addition, since 1978, Mr.
Mastandrea has served as the Chief Executive
Officer/Founder of MDC Realty Corporation, a
privately held residential and commercial real
estate development company. From 1994 to 1998,
Mr. Mastandrea served as Chairman and Chief
Executive Officer of First Union Real Estate
Investments (NYSE), a publicly traded real
estate investment trust. Mr. Mastandrea also
served in the U.S. Army as a Military Police
Officer. Mr. Mastandrea is a director of
Cleveland State University Foundation Board and
a member of the investment committee. He
regularly lectures to MBA students at the
University of Chicago and instructs as an
Adjunct Professor in the MBA program at Rice
University in Houston, Texas, and also presents
to institutional investors in the U.S. and
Europe. Mr. Mastandreas significant experience
in the commercial and residential real estate
business, capital markets, and private and
public companies as a real estate expert allows
him to provide insight into various aspects of
the economy and commercial real estate, which
is of significant value to our Board.
John J. Dee>has served as our Senior Vice
President and Chief Financial Officer and a
trustee since 2003. Since October 2006, Mr. Dee
has also been Chief Operating Officer,
Executive Vice President, and Corporate
Secretary at Whitestone REIT (NYSE). Prior to
Mr. Dees joining Pillarstone, from 2002 to
2003, he was Senior Vice President and Chief
Financial Officer of MDC Realty Corporation,
Cleveland, Ohio, an affiliate of MDC Realty
Corporation, Chicago, Illinois, a privately
held residential and commercial real estate
development company. From 2000 to 2002, Mr. Dee
was Director of Finance and Administration for
a Cleveland, Ohio law firm. From 1978 to 2000,
Mr. Dee held various management positions with
First Union Real Estate Investments (NYSE),
including Senior Vice President and Chief
Accounting Officer from 1996 to 2000. Mr. Dee
is licensed as a CPA (non-practicing) in the
State of Ohio. Mr. Dee has a significant number
of years of experience with publicly listed
real estate investment trusts and adds
exceptional experience and skills of value to
our management team and Board.
President and Chief Financial Officer and a
trustee since 2003. Since October 2006, Mr. Dee
has also been Chief Operating Officer,
Executive Vice President, and Corporate
Secretary at Whitestone REIT (NYSE). Prior to
Mr. Dees joining Pillarstone, from 2002 to
2003, he was Senior Vice President and Chief
Financial Officer of MDC Realty Corporation,
Cleveland, Ohio, an affiliate of MDC Realty
Corporation, Chicago, Illinois, a privately
held residential and commercial real estate
development company. From 2000 to 2002, Mr. Dee
was Director of Finance and Administration for
a Cleveland, Ohio law firm. From 1978 to 2000,
Mr. Dee held various management positions with
First Union Real Estate Investments (NYSE),
including Senior Vice President and Chief
Accounting Officer from 1996 to 2000. Mr. Dee
is licensed as a CPA (non-practicing) in the
State of Ohio. Mr. Dee has a significant number
of years of experience with publicly listed
real estate investment trusts and adds
exceptional experience and skills of value to
our management team and Board.
Board of Trustees and Committees of the Board
The following individuals have been appointed
to serve as our non-employee trustees:
to serve as our non-employee trustees:
|
Name
|
|
Age
|
|
Daryl J. Carter
|
|
|
|
Dennis H. Chookaszian
|
|
|
|
Daniel G. DeVos
|
|
|
|
Paul T. Lambert
|
|
|
Daryl J. Carter>has served as a trustee
since June 2003. Mr. Carter founded and since
2007 has served as Chairman and Chief Executive
Officer of Avanath Capital Management, LLC, an
investment firm focused on urban-themed real
estate and mortgage investments. He is also a
Managing Partner of McKinley-Avanath, a
property management company focused on the
affordable apartment sector. From 2005 to 2007,
Mr. Carter was an Executive Managing Director
of Centerline Capital Group (Centerline), a
subsidiary of Centerline Holding Company and
head of the Commercial Real Estate Group. From
2005 to 2007, he was also the President of
American Mortgage Acceptance Corporation, a
then publicly-held, commercial mortgage lender
that was externally managed by Centerline. Mr.
Carter became part of Centerline when his
company, Capri Capital Finance (CCF) was
acquired by Centerline in 2005 and stayed with
Centerline until 2006. Mr. Carter co-founded
and served as Co-Chairman of both CCF and Capri
Capital Advisors ( Capri) in 1992. He was
instrumental in building Capri into a
diversified real estate firm with $8 billion in
real estate equity and debt investments under
management. Prior to Capri, Mr. Carter was
Regional Vice President at Westinghouse Credit
Corporation in Irvine and a Second Vice
President at Continental Bank in Chicago. Since
2009, Mr. Carter has served as a trustee of
Whitestone REIT (NYSE), a publicly traded real
estate investment trust (REIT) focused on
Community Centered Properties. He has also
served as a director of Silver Bay Realty Trust
Corp. (NYSE) since July 2013, a trustee of the
Urban Land Institute, Executive Committee
Member and Chairman of the National Multifamily
Housing Council, and on the Visiting Committee
of the M.I.T. Sloan School of Management. He is
also a past Chairman of the Mortgage Bankers
Association. Mr. Carter brings to our Board
significant management experience and
demonstrated leadership skills with financial
and real estate entities.
since June 2003. Mr. Carter founded and since
2007 has served as Chairman and Chief Executive
Officer of Avanath Capital Management, LLC, an
investment firm focused on urban-themed real
estate and mortgage investments. He is also a
Managing Partner of McKinley-Avanath, a
property management company focused on the
affordable apartment sector. From 2005 to 2007,
Mr. Carter was an Executive Managing Director
of Centerline Capital Group (Centerline), a
subsidiary of Centerline Holding Company and
head of the Commercial Real Estate Group. From
2005 to 2007, he was also the President of
American Mortgage Acceptance Corporation, a
then publicly-held, commercial mortgage lender
that was externally managed by Centerline. Mr.
Carter became part of Centerline when his
company, Capri Capital Finance (CCF) was
acquired by Centerline in 2005 and stayed with
Centerline until 2006. Mr. Carter co-founded
and served as Co-Chairman of both CCF and Capri
Capital Advisors ( Capri) in 1992. He was
instrumental in building Capri into a
diversified real estate firm with $8 billion in
real estate equity and debt investments under
management. Prior to Capri, Mr. Carter was
Regional Vice President at Westinghouse Credit
Corporation in Irvine and a Second Vice
President at Continental Bank in Chicago. Since
2009, Mr. Carter has served as a trustee of
Whitestone REIT (NYSE), a publicly traded real
estate investment trust (REIT) focused on
Community Centered Properties. He has also
served as a director of Silver Bay Realty Trust
Corp. (NYSE) since July 2013, a trustee of the
Urban Land Institute, Executive Committee
Member and Chairman of the National Multifamily
Housing Council, and on the Visiting Committee
of the M.I.T. Sloan School of Management. He is
also a past Chairman of the Mortgage Bankers
Association. Mr. Carter brings to our Board
significant management experience and
demonstrated leadership skills with financial
and real estate entities.
Dennis H. Chookaszian>has served as a
trustee since June 2016. Mr. Chookaszian
served as Chairman of the Financial
Accounting Standards Advisory Council, which
advises the Financial Accounting Standards
Board, from January 2007 to December 2011.
During his 27-year career with CNA Financial
Corporation (CNA), Mr. Chookaszian held
several management positions at CNAs business
unit and corporate levels. Mr. Chookaszian
joined CNA in 1975 as Chief Financial Officer
until 1990 when he became President. In 1992,
he was named Chairman and Chief Executive
Officer of CNA Insurance Companies, and in
1999 he became Chairman of CNAs executive
committee until he retired in 2001. Mr.
Chookaszian currently serves on the boards of
publicly-held CME Group Inc. (NASDQ: CME,
formerly known as Chicago Mercantile Exchange
Holdings Inc.), a U.S. financial exchange,
since 2004; Career Education Corporation
(NASDAQ: CECO), a postsecondary education
provider, since 2002; Prism Technologies
Group, Inc. (NASDAQ: PRZM), a firm that
licenses and enforces patents, since 2003;
and MacDonald Dettwiler and Associates Ltd.
(TSX: MDA.TO), a global communications and
information company, since 2005. Mr.
Chookaszian is an adjunct Professor at
University of Chicago Booth School of
Business and teaches courses in corporate
governance. He also teaches a course in
international corporate governance at Cheung
Kong University (China), at Shanghai Advance
Institute of Finance (China), and at Indian
Institute of Planning and Management (India).
Mr. Chookaszian has a Bachelor of Science in
chemical engineering from Northwestern
University, a Master of Business
Administration in finance from University of
Chicago, and a Master degree in economics
from London School of Economics. He is a
Certified Public Accountant, Chartered Global
Management Accountant, Certified Management
Consultant, and Chartered Property Casualty
Underwriter. Mr. Chookaszian has significant
business, audit committee and teaching
experience that adds significantly to the
oversight and governance of the Company.
trustee since June 2016. Mr. Chookaszian
served as Chairman of the Financial
Accounting Standards Advisory Council, which
advises the Financial Accounting Standards
Board, from January 2007 to December 2011.
During his 27-year career with CNA Financial
Corporation (CNA), Mr. Chookaszian held
several management positions at CNAs business
unit and corporate levels. Mr. Chookaszian
joined CNA in 1975 as Chief Financial Officer
until 1990 when he became President. In 1992,
he was named Chairman and Chief Executive
Officer of CNA Insurance Companies, and in
1999 he became Chairman of CNAs executive
committee until he retired in 2001. Mr.
Chookaszian currently serves on the boards of
publicly-held CME Group Inc. (NASDQ: CME,
formerly known as Chicago Mercantile Exchange
Holdings Inc.), a U.S. financial exchange,
since 2004; Career Education Corporation
(NASDAQ: CECO), a postsecondary education
provider, since 2002; Prism Technologies
Group, Inc. (NASDAQ: PRZM), a firm that
licenses and enforces patents, since 2003;
and MacDonald Dettwiler and Associates Ltd.
(TSX: MDA.TO), a global communications and
information company, since 2005. Mr.
Chookaszian is an adjunct Professor at
University of Chicago Booth School of
Business and teaches courses in corporate
governance. He also teaches a course in
international corporate governance at Cheung
Kong University (China), at Shanghai Advance
Institute of Finance (China), and at Indian
Institute of Planning and Management (India).
Mr. Chookaszian has a Bachelor of Science in
chemical engineering from Northwestern
University, a Master of Business
Administration in finance from University of
Chicago, and a Master degree in economics
from London School of Economics. He is a
Certified Public Accountant, Chartered Global
Management Accountant, Certified Management
Consultant, and Chartered Property Casualty
Underwriter. Mr. Chookaszian has significant
business, audit committee and teaching
experience that adds significantly to the
oversight and governance of the Company.
Daniel G. DeVos>has served as a trustee
since March 2003. Since 1993, Mr. DeVos has
served as Chairman of the Board and Chief
Executive Officer of DP Fox Ventures, LLC, a
diversified management enterprise with
investments in real estate, transportation,
fashion, sports, and entertainment. Since
1999, Mr. DeVos has served as the President
and Chief Executive Officer of Fox Motors,
based in Grand Rapids, Michigan. He is the
majority owner of the Grand Rapids Griffins
(AHL), has been a board member since 1991 and
Chairman since 2011 of RDV Sports, Inc., the
parent company of the Orlando Magic (NBA),
and is a partner in CWD Real Estate
Investments. Since 2004, he has served as a
director and currently serves on the Audit
Committee of Alticor, Inc., the parent of
Amway Corporation, located in Ada, Michigan.
From 2009 to 2013, Mr. DeVos served as a
trustee of Whitestone REIT (NYSE) and in May
2013 became trustee emeritus. From 1994 to
1998, he served as a trustee of First Union
Real Estate Investments (NYSE). Mr. DeVos has
extensive and diverse business experience
within and outside the real estate industry
and possesses exceptional leadership skills
in business and non-profit management.
since March 2003. Since 1993, Mr. DeVos has
served as Chairman of the Board and Chief
Executive Officer of DP Fox Ventures, LLC, a
diversified management enterprise with
investments in real estate, transportation,
fashion, sports, and entertainment. Since
1999, Mr. DeVos has served as the President
and Chief Executive Officer of Fox Motors,
based in Grand Rapids, Michigan. He is the
majority owner of the Grand Rapids Griffins
(AHL), has been a board member since 1991 and
Chairman since 2011 of RDV Sports, Inc., the
parent company of the Orlando Magic (NBA),
and is a partner in CWD Real Estate
Investments. Since 2004, he has served as a
director and currently serves on the Audit
Committee of Alticor, Inc., the parent of
Amway Corporation, located in Ada, Michigan.
From 2009 to 2013, Mr. DeVos served as a
trustee of Whitestone REIT (NYSE) and in May
2013 became trustee emeritus. From 1994 to
1998, he served as a trustee of First Union
Real Estate Investments (NYSE). Mr. DeVos has
extensive and diverse business experience
within and outside the real estate industry
and possesses exceptional leadership skills
in business and non-profit management.
Paul T. Lambert>has served as a trustee
since November 1998. Mr. Lambert serves as
the Chief Executive Officer of Lambert
Capital Corporation. He served on the Board
of Directors and was the Chief Operating
Officer of First Industrial Realty Trust,
Inc. (NYSE) ( First Industrial) from its
initial public offering in October 1994
through December 1995. Mr. Lambert was one of
the largest contributors to the formation of
First Industrial and one of its founding
shareholders. Prior to forming First
Industrial, Mr. Lambert was managing partner
for The Shidler Group, a national private
real estate investment company. Prior to
joining The Shidler Group, Mr. Lambert was a
commercial real estate developer with
Dillingham Corporation and, prior to that,
was a consultant with The Boston Consulting
Group. Mr. Lambert has served as a trustee of
Whitestone REIT (NYSE) since March 2013. Mr.
Lambert is an entrepreneur with significant
experience in commercial real estate and
financing of development projects providing
the Board with his leadership skills to
perform oversight functions as a trustee and
member of several committees.
since November 1998. Mr. Lambert serves as
the Chief Executive Officer of Lambert
Capital Corporation. He served on the Board
of Directors and was the Chief Operating
Officer of First Industrial Realty Trust,
Inc. (NYSE) ( First Industrial) from its
initial public offering in October 1994
through December 1995. Mr. Lambert was one of
the largest contributors to the formation of
First Industrial and one of its founding
shareholders. Prior to forming First
Industrial, Mr. Lambert was managing partner
for The Shidler Group, a national private
real estate investment company. Prior to
joining The Shidler Group, Mr. Lambert was a
commercial real estate developer with
Dillingham Corporation and, prior to that,
was a consultant with The Boston Consulting
Group. Mr. Lambert has served as a trustee of
Whitestone REIT (NYSE) since March 2013. Mr.
Lambert is an entrepreneur with significant
experience in commercial real estate and
financing of development projects providing
the Board with his leadership skills to
perform oversight functions as a trustee and
member of several committees.
Audit Committee
The Audit Committee consists of Mr.
Chookaszian, who serves as Chairman, and
Messrs. Carter, DeVos and Lambert. Mr.
Chookaszian also serves as the audit
committee financial expert, as defined by the
SEC. Each member of the Audit Committee
satisfies the independence standards and
financial literacy requirements set forth
under NYSE MKT listing standards and the
applicable rules of the SEC. The Audit
Committee is directly responsible for
engaging and reviewing the performance of our
independent public auditors, oversees our
accounting and financial reporting processes,
considers and approves the range of audit and
non-audit fees, reviews the adequacy of our
internal accounting controls and procedures
and resolves disagreements between management
and our independent public auditors.
Chookaszian, who serves as Chairman, and
Messrs. Carter, DeVos and Lambert. Mr.
Chookaszian also serves as the audit
committee financial expert, as defined by the
SEC. Each member of the Audit Committee
satisfies the independence standards and
financial literacy requirements set forth
under NYSE MKT listing standards and the
applicable rules of the SEC. The Audit
Committee is directly responsible for
engaging and reviewing the performance of our
independent public auditors, oversees our
accounting and financial reporting processes,
considers and approves the range of audit and
non-audit fees, reviews the adequacy of our
internal accounting controls and procedures
and resolves disagreements between management
and our independent public auditors.
Management, Organization and Compensation
Committee
Committee
Our Management, Organization and Compensation
Committee consists of Mr. Carter, who serves
as Chairman, and Messrs. DeVos, and Lambert.
The Management, Organization and Compensation
Committee makes recommendations and exercises
all powers of the Board in connection with
certain compensation matters, including
incentive compensation and benefit plans.
Committee consists of Mr. Carter, who serves
as Chairman, and Messrs. DeVos, and Lambert.
The Management, Organization and Compensation
Committee makes recommendations and exercises
all powers of the Board in connection with
certain compensation matters, including
incentive compensation and benefit plans.
Nominating Committee
Our Nominating Committee consists of Mr.
DeVos, who serves as Chairman, and Mr.
Lambert. The Nominating Committee is
responsible for identifying individuals
qualified to become trustees and for
evaluating potential or suggested trustee
nominees. In order for an individual to
qualify for nomination or election as a
trustee, an individual, at the time of
nomination, must have substantial
expertise, experience or relationships
relevant to the real estate business, which
may include:
DeVos, who serves as Chairman, and Mr.
Lambert. The Nominating Committee is
responsible for identifying individuals
qualified to become trustees and for
evaluating potential or suggested trustee
nominees. In order for an individual to
qualify for nomination or election as a
trustee, an individual, at the time of
nomination, must have substantial
expertise, experience or relationships
relevant to the real estate business, which
may include:
|
|
commercial real estate experience;
|
|
|
an in-depth knowledge of and working
experience in finance or marketing; |
|
|
capital markets or public company
experience; |
|
|
university teaching experience in a
Master of Business Administration or similar program; |
|
|
experience as a chief executive
officer, chief operating officer or chief financial officer of a public or private company; or |
|
|
public or private company board
experience. |
Additionally, an individual shall not have
been convicted of a felony or sanctioned or
fined for a securities law violation of any
nature. The Nominating Committee in its
sole discretion will determine whether a
nominee satisfies the foregoing
qualifications or possesses such other
characteristics as deemed necessary by the
Nominating Committee. Though we have no
formal policy addressing diversity, the
Nominating Committee will seek to recommend
nominees to the Board that represent a
diversity of experience, gender, race,
ethnicity and age. Any individual who does
not satisfy the qualifications above is not
eligible for nomination or election as a
trustee.
been convicted of a felony or sanctioned or
fined for a securities law violation of any
nature. The Nominating Committee in its
sole discretion will determine whether a
nominee satisfies the foregoing
qualifications or possesses such other
characteristics as deemed necessary by the
Nominating Committee. Though we have no
formal policy addressing diversity, the
Nominating Committee will seek to recommend
nominees to the Board that represent a
diversity of experience, gender, race,
ethnicity and age. Any individual who does
not satisfy the qualifications above is not
eligible for nomination or election as a
trustee.
The Nominating Committee performs a
preliminary evaluation of potential
candidates primarily based on the need to
fill any vacancies on our Board, the need
to expand the size of our Board and the
need to obtain representation in key
disciplines and/or market areas. The
Nominating Committee will seek to identify
trustee candidates based on input provided
by a number of sources, including the
Nominating Committee members and other
members of our Board. The Nominating
Committee also has the authority to consult
with or retain advisors to carry out its
duties, though it has not used a third
party to locate or evaluate potential
candidates for trustee. Once a potential
candidate is identified as one who fulfills
a specific need, the Nominating Committee
performs a full evaluation of the potential
candidate. This evaluation includes
reviewing the potential candidates
background information, relevant
experience, willingness to serve,
independence and integrity. In connection
with this evaluation, the Nominating
Committee may interview the candidate in
person or by telephone. After completing
its evaluation, the Nominating Committee
makes a recommendation to the full Board as
to the individuals who should be nominated
by our Board. Our Board elects nominees
recommended by the Nominating Committee to
fill vacancies on our Board and nominates
the nominees for election by shareholders
after considering the recommendations and a
report of the Nominating Committee. In
addition to the above process, as part of
an agreement approved by shareholders in
June 2003, Mr. Mastandrea can appoint five
trustees to the Board provided he remains
as our Chairman and Chief Executive
Officer. Mr. Mastandrea has not exercised
this right.
preliminary evaluation of potential
candidates primarily based on the need to
fill any vacancies on our Board, the need
to expand the size of our Board and the
need to obtain representation in key
disciplines and/or market areas. The
Nominating Committee will seek to identify
trustee candidates based on input provided
by a number of sources, including the
Nominating Committee members and other
members of our Board. The Nominating
Committee also has the authority to consult
with or retain advisors to carry out its
duties, though it has not used a third
party to locate or evaluate potential
candidates for trustee. Once a potential
candidate is identified as one who fulfills
a specific need, the Nominating Committee
performs a full evaluation of the potential
candidate. This evaluation includes
reviewing the potential candidates
background information, relevant
experience, willingness to serve,
independence and integrity. In connection
with this evaluation, the Nominating
Committee may interview the candidate in
person or by telephone. After completing
its evaluation, the Nominating Committee
makes a recommendation to the full Board as
to the individuals who should be nominated
by our Board. Our Board elects nominees
recommended by the Nominating Committee to
fill vacancies on our Board and nominates
the nominees for election by shareholders
after considering the recommendations and a
report of the Nominating Committee. In
addition to the above process, as part of
an agreement approved by shareholders in
June 2003, Mr. Mastandrea can appoint five
trustees to the Board provided he remains
as our Chairman and Chief Executive
Officer. Mr. Mastandrea has not exercised
this right.
Item 6. Executive Compensation.
Because the Company has not had substantial
operations, James C. Mastandrea did not
receive any cash compensation for serving
as our Chief Executive Officer, President
and Chairman during the years ended
December 31, 2016 and December 31, 2015.
John J. Dee did not receive any cash
compensation for serving as our Senior Vice
President and Chief Financial Officer
during the years ended December 31, 2016
and December 31, 2015. There were no other
officers or employees of the Company in the
past two fiscal years.
operations, James C. Mastandrea did not
receive any cash compensation for serving
as our Chief Executive Officer, President
and Chairman during the years ended
December 31, 2016 and December 31, 2015.
John J. Dee did not receive any cash
compensation for serving as our Senior Vice
President and Chief Financial Officer
during the years ended December 31, 2016
and December 31, 2015. There were no other
officers or employees of the Company in the
past two fiscal years.
Outstanding Equity Awards at Fiscal Year
End
End
The following table sets forth the status
of equity awards as of December 31, 2016:
of equity awards as of December 31, 2016:
|
|
|
Option Awards
|
|
Stock Awards
|
||||||||||||||||||
|
|
|
Number of Securities Underlying
Unexercised Options |
|
Number of Securities Underlying
Unexercised Options |
|
Option Exercise Price
|
|
Option Expiration Date
|
|
Number of Shares or Units of
Stock That Have Not Vested(1) |
|
Market Value of Shares or Units
of Stock That Have Not Vested |
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested |
||||||||
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
|
|
|
|
|||||||||||||
|
James C. Mastandrea
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
$
|
2,800
|
|
|
|
|
|
John J. Dee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
$
|
2,800
|
|
|
|
|
|
(1) |
Represents restricted common shares
issued January 2, 2004. Half of the restricted shares vested on the fifth anniversary of the issuance date. The remaining half will vest when funds from operations has doubled or when Pillarstones share price is 50% higher compared to the average trading price for the five days preceding the grant date. |
Employment Agreements
On April 3, 2006, the Board authorized
modifications to the employment agreement
of Mr. Mastandrea. The modification
agreement allows Mr. Mastandrea to devote
time to other business and personal
investments while performing his duties
for Pillarstone. The original employment
agreement with Mr. Mastandrea provides
for an annual salary of $60,000 effective
as of March 4, 2003. The initial term of
Mr. Mastandreas employment is for two
years and may be extended for terms of
one year. Mr. Mastandreas base annual
salary may be adjusted from time to time,
except that the adjustment may not be
lower than the preceding years base
salary. The employment agreement provides
that Mr. Mastandrea will be entitled to
base salary and bonus at the rate in
effect before any termination for a
period of three years in the event that
his employment is terminated without
cause by us or for good reason by Mr.
Mastandrea. Effective September 29, 2006,
in lieu of an annual salary of $100,000,
Mr. Mastandrea received 44,444 Preferred
C Shares for his service as an officer of
Pillarstone through September 29, 2008.
The shares were fully amortized by the
original date in 2008.
modifications to the employment agreement
of Mr. Mastandrea. The modification
agreement allows Mr. Mastandrea to devote
time to other business and personal
investments while performing his duties
for Pillarstone. The original employment
agreement with Mr. Mastandrea provides
for an annual salary of $60,000 effective
as of March 4, 2003. The initial term of
Mr. Mastandreas employment is for two
years and may be extended for terms of
one year. Mr. Mastandreas base annual
salary may be adjusted from time to time,
except that the adjustment may not be
lower than the preceding years base
salary. The employment agreement provides
that Mr. Mastandrea will be entitled to
base salary and bonus at the rate in
effect before any termination for a
period of three years in the event that
his employment is terminated without
cause by us or for good reason by Mr.
Mastandrea. Effective September 29, 2006,
in lieu of an annual salary of $100,000,
Mr. Mastandrea received 44,444 Preferred
C Shares for his service as an officer of
Pillarstone through September 29, 2008.
The shares were fully amortized by the
original date in 2008.
Effective June 30, 2003, we issued
696,078 preferred shares valued at
approximately $2.4 million to Messrs.
Mastandrea and Dee to separate restricted
share agreements. On June 30, 2003,
534,668 preferred shares were converted
at a factor of 0.305 into 163,116 common
shares. Under the restricted share
agreement for each of Mr. Mastandrea and
Mr. Dee, the restricted shares vest upon
the later of the following dates:
696,078 preferred shares valued at
approximately $2.4 million to Messrs.
Mastandrea and Dee to separate restricted
share agreements. On June 30, 2003,
534,668 preferred shares were converted
at a factor of 0.305 into 163,116 common
shares. Under the restricted share
agreement for each of Mr. Mastandrea and
Mr. Dee, the restricted shares vest upon
the later of the following dates:
|
|
the date our gross assets exceed
$50.0 million, or |
|
|
50% of the restricted shares on
March 4, 2004; 25% of the shares on March 4, 2005; and the remaining 25% of the shares on March 4, 2006. |
The number of common shares and the
conversion factor have been revised to
reflect the 1-for-75 reverse split of the
common shares that occurred in July 2006.
conversion factor have been revised to
reflect the 1-for-75 reverse split of the
common shares that occurred in July 2006.
Compensation of Trustees
During the year ended December 31, 2016,
trustees were not paid any cash
compensation.
trustees were not paid any cash
compensation.
In lieu of cash payments for trustee
fees, effective September 29, 2006, each
trustee of the Company serving at that
time received 12,500 Preferred C Shares
for service as a trustee until September
29, 2008. The shares are restricted until
the latest to occur of: (a) a public
offering by the Company sufficient to
liquidate the shares, (b) an exchange of
the Companys existing shares for new
shares, and (c) September 29, 2008. The
shares were fully amortized by the
original date in 2008.
fees, effective September 29, 2006, each
trustee of the Company serving at that
time received 12,500 Preferred C Shares
for service as a trustee until September
29, 2008. The shares are restricted until
the latest to occur of: (a) a public
offering by the Company sufficient to
liquidate the shares, (b) an exchange of
the Companys existing shares for new
shares, and (c) September 29, 2008. The
shares were fully amortized by the
original date in 2008.
In June 2003, our shareholders approved
an agreement to issue additional common
shares to Paragon Real Estate
Development, LLC of which Mr.
Mastandrea is the managing member and
Mr. Dee is a member. In September
2006,>Pillarstone amended this
agreement to include each of the
trustees so that if a trustee brings a
new transaction to Pillarstone, he
would receive additional common shares
of Pillarstone in accordance with a
formula in the agreement. In January
2016, the non-employee trustees and Mr.
Mastandrea agreed to make this
agreement for only non-employee
trustees. The agreement is intended to
serve as an incentive for our trustees
to increase the asset base, net
operating income, funds from
operations, and share value of
Pillarstone. The exact number of common
shares that would be issued will be
calculated in accordance with a formula
in the agreement based on future
acquisition, development or
redevelopment transactions. Any of
these transactions would be subject to
approval by the members of our Board
who are not receiving the additional
common shares. We would issue our
common shares only upon the closing of
a transaction. The maximum number of
common shares to be issued under the
agreement is limited to a total value
of $26 million based on the average
closing price of our common shares for
30 calendar days preceding the closing
of any transaction. The common shares
will be restricted until we achieve the
five-year pro forma income target for
the acquisition, as approved by the
Board, and an increase of 5% in
Pillarstones net operating income and
funds from operations. The restricted
shares would vest immediately upon any
shift in ownership, as defined in the
agreement.
an agreement to issue additional common
shares to Paragon Real Estate
Development, LLC of which Mr.
Mastandrea is the managing member and
Mr. Dee is a member. In September
2006,>Pillarstone amended this
agreement to include each of the
trustees so that if a trustee brings a
new transaction to Pillarstone, he
would receive additional common shares
of Pillarstone in accordance with a
formula in the agreement. In January
2016, the non-employee trustees and Mr.
Mastandrea agreed to make this
agreement for only non-employee
trustees. The agreement is intended to
serve as an incentive for our trustees
to increase the asset base, net
operating income, funds from
operations, and share value of
Pillarstone. The exact number of common
shares that would be issued will be
calculated in accordance with a formula
in the agreement based on future
acquisition, development or
redevelopment transactions. Any of
these transactions would be subject to
approval by the members of our Board
who are not receiving the additional
common shares. We would issue our
common shares only upon the closing of
a transaction. The maximum number of
common shares to be issued under the
agreement is limited to a total value
of $26 million based on the average
closing price of our common shares for
30 calendar days preceding the closing
of any transaction. The common shares
will be restricted until we achieve the
five-year pro forma income target for
the acquisition, as approved by the
Board, and an increase of 5% in
Pillarstones net operating income and
funds from operations. The restricted
shares would vest immediately upon any
shift in ownership, as defined in the
agreement.
Item 7. Certain Relationships and
Related Transactions, and Director
Independence.
Related Transactions, and Director
Independence.
Under SEC rules, a related person
transaction is any transaction or any
currently proposed transaction in which
the Company was or is to be a
participant, the amount involved
exceeds the lesser of (i) $120,000 or
(ii) one percent of the average of the
Companys total assets at year end for
the last two completed fiscal years,
and in which any related person had or
will have a direct or indirect material
interest. A related person is a
director, officer, nominee for director
or a more than 5% shareholder since the
beginning of our last completed fiscal
year, and their immediate family
members.
transaction is any transaction or any
currently proposed transaction in which
the Company was or is to be a
participant, the amount involved
exceeds the lesser of (i) $120,000 or
(ii) one percent of the average of the
Companys total assets at year end for
the last two completed fiscal years,
and in which any related person had or
will have a direct or indirect material
interest. A related person is a
director, officer, nominee for director
or a more than 5% shareholder since the
beginning of our last completed fiscal
year, and their immediate family
members.
Under our Declaration of Trust, we may
enter into any contract or transaction
with our Trustees, officers, employees
or agents (or any affiliated person),
provided that in the case of any
contract or transaction in which any of
our Trustees, officers, employees or
agents (or any affiliated person) have
a material financial interest (i) the
fact of the interest is disclosed or
known to the following: (a) the Board,
and the Board shall approve or ratify
the contract or transaction by the
affirmative vote of a majority of
disinterested trustees, even if the
disinterested trustees constitute less
than a quorum, or (b) the shareholders
entitled to vote, and the contract or
transaction is authorized, approved or
ratified by a majority of the votes
cast by the shareholders entitled to
vote other than the votes of shares
owned of record or beneficially by the
interested party; or (ii) the contract
or transaction is fair and reasonable
to us. In addition, our Nominating
Committee manages risks associated with
the independence of the Board and
potential conflicts of interest.
enter into any contract or transaction
with our Trustees, officers, employees
or agents (or any affiliated person),
provided that in the case of any
contract or transaction in which any of
our Trustees, officers, employees or
agents (or any affiliated person) have
a material financial interest (i) the
fact of the interest is disclosed or
known to the following: (a) the Board,
and the Board shall approve or ratify
the contract or transaction by the
affirmative vote of a majority of
disinterested trustees, even if the
disinterested trustees constitute less
than a quorum, or (b) the shareholders
entitled to vote, and the contract or
transaction is authorized, approved or
ratified by a majority of the votes
cast by the shareholders entitled to
vote other than the votes of shares
owned of record or beneficially by the
interested party; or (ii) the contract
or transaction is fair and reasonable
to us. In addition, our Nominating
Committee manages risks associated with
the independence of the Board and
potential conflicts of interest.
Issuance of Convertible Notes to
Trustees
Trustees
In November 2015, five Trustees of
Pillarstone loaned funds to
Pillarstone, each to a Convertible Note
Purchase Agreement. Each trustee loaned
the following face amounts that accrue
interest at 10% per annum, which can be
converted into common shares of
Pillarstone as follows:
Pillarstone loaned funds to
Pillarstone, each to a Convertible Note
Purchase Agreement. Each trustee loaned
the following face amounts that accrue
interest at 10% per annum, which can be
converted into common shares of
Pillarstone as follows:
|
Trustee
|
|
Face Amount
|
|
Accrued Interest
|
|
Total
|
|
Convertible into Common
Shares |
|||||||
|
Daryl J. Carter
|
|
$
|
28,888
|
|
|
$
|
3,941
|
|
|
$
|
32,829
|
|
|
24,665
|
|
|
Daniel G. DeVos
|
|
47,780
|
|
|
6,519
|
|
|
54,299
|
|
|
40,795
|
|
|||
|
Paul T. Lambert
|
|
51,112
|
|
|
6,974
|
|
|
58,086
|
|
|
43,640
|
|
|||
|
James C. Mastandrea
|
|
52,224
|
|
|
7,125
|
|
|
59,349
|
|
|
44,590
|
|
|||
|
John J. Dee
|
|
17,776
|
|
|
2,425
|
|
|
20,201
|
|
|
15,177
|
|
|||
|
Total
|
|
$
|
197,780
|
|
|
$
|
26,984
|
|
|
$
|
224,764
|
|
|
168,867
|
|
The convertible notes were issued
effective November 20, 2015 and have a
maturity date of three years.
effective November 20, 2015 and have a
maturity date of three years.
The convertible notes can be called by
Pillarstone after six months, at which
time the noteholder can choose to
receive either the amount of the note
plus any accrued but unpaid interest or
the number of common shares determined
by dividing the amount of the note plus
any accrued but unpaid interest by the
conversion price of $1.331. The
noteholder has the option at any time
to convert the note plus any accrued
but unpaid interest into common shares
based on the conversion price of
$1.331.
Pillarstone after six months, at which
time the noteholder can choose to
receive either the amount of the note
plus any accrued but unpaid interest or
the number of common shares determined
by dividing the amount of the note plus
any accrued but unpaid interest by the
conversion price of $1.331. The
noteholder has the option at any time
to convert the note plus any accrued
but unpaid interest into common shares
based on the conversion price of
$1.331.
Whitestone OP Transaction
As noted in Item 1 above, on December
8, 2016, Pillarstone and Pillarstone
OP entered into the Contribution
Agreement with Whitestone OP and
Whitestone, both of which are related
parties to Pillarstone and
Pillarstone OP. Mr. Mastandrea, our
Chairman and CEO, also serves as the
Chairman and Chief Executive Officer
of Whitestone. Mr. Dee, our Senior
Vice President, Secretary and Chief
Financial Officer, also serves as the
Chief Operating Officer and Corporate
Secretary of Whitestone. In addition,
Messrs. Carter and Lambert, two of
our trustees, also serve as trustees
of Whitestone. The terms of the
Contribution Agreement, the OP Unit
Purchase Agreement, the Tax
Protection Agreement, the Management
Agreements, and the Acquisition were
determined through arms-length
negotiations. The transactions
contemplated by the Contribution
Agreement, the OP Unit Purchase
Agreement, the Tax Protection
Agreement and the Management
Agreements, including the
Acquisition, were recommended by a
special committee of the Board,
consisting solely of disinterested
trustees, and approved by the full
Board.
8, 2016, Pillarstone and Pillarstone
OP entered into the Contribution
Agreement with Whitestone OP and
Whitestone, both of which are related
parties to Pillarstone and
Pillarstone OP. Mr. Mastandrea, our
Chairman and CEO, also serves as the
Chairman and Chief Executive Officer
of Whitestone. Mr. Dee, our Senior
Vice President, Secretary and Chief
Financial Officer, also serves as the
Chief Operating Officer and Corporate
Secretary of Whitestone. In addition,
Messrs. Carter and Lambert, two of
our trustees, also serve as trustees
of Whitestone. The terms of the
Contribution Agreement, the OP Unit
Purchase Agreement, the Tax
Protection Agreement, the Management
Agreements, and the Acquisition were
determined through arms-length
negotiations. The transactions
contemplated by the Contribution
Agreement, the OP Unit Purchase
Agreement, the Tax Protection
Agreement and the Management
Agreements, including the
Acquisition, were recommended by a
special committee of the Board,
consisting solely of disinterested
trustees, and approved by the full
Board.
Item 8. Legal Proceedings.
We may from time to time become a
party to legal proceedings and claims
that arise in the ordinary course of
our business. These matters are
generally covered by insurance. While
the frequency and resolutions of any
such matters cannot be predicted with
certainty, we believe that occurrence
and outcomes of these matters will
not have a material effect on our
financial position, results of
operations or cash flows.
party to legal proceedings and claims
that arise in the ordinary course of
our business. These matters are
generally covered by insurance. While
the frequency and resolutions of any
such matters cannot be predicted with
certainty, we believe that occurrence
and outcomes of these matters will
not have a material effect on our
financial position, results of
operations or cash flows.
Item 9. Market Price of and Dividends
on the Registrant’s Common Equity
and Related Stockholder Matters.
on the Registrant’s Common Equity
and Related Stockholder Matters.
Market Information
Common Shares
Our common shares are quoted on the
OTC Bulletin Board and on the pink
sheets with the symbol “PRLE”. The
number of holders of record of our
common shares was 107 as of March 15,
2017, and we estimate we have
approximately 300 beneficial holders
of common shares as of that date. As
of March 15, 2017, we had 405,169
common shares of beneficial interest
outstanding.
OTC Bulletin Board and on the pink
sheets with the symbol “PRLE”. The
number of holders of record of our
common shares was 107 as of March 15,
2017, and we estimate we have
approximately 300 beneficial holders
of common shares as of that date. As
of March 15, 2017, we had 405,169
common shares of beneficial interest
outstanding.
Our Class A Cumulative Convertible
Preferred Shares (“Class A Preferred
Shares”) are quoted on the OTC
Bulletin Board with the symbol
“PRLEP”. The number of holders of
record of our Class A Preferred
shares is two. Class A Preferred
shareholders have the right to
convert their shares into common
shares, as follows: 95,226 Class A
Preferred Shares are each convertible
into 0.046 common shares and 161,410
Class A Preferred Shares are each
convertible into 0.305 common shares.
Preferred Shares (“Class A Preferred
Shares”) are quoted on the OTC
Bulletin Board with the symbol
“PRLEP”. The number of holders of
record of our Class A Preferred
shares is two. Class A Preferred
shareholders have the right to
convert their shares into common
shares, as follows: 95,226 Class A
Preferred Shares are each convertible
into 0.046 common shares and 161,410
Class A Preferred Shares are each
convertible into 0.305 common shares.
Our Class C Convertible Preferred
Shares were issued effective
September 29, 2006 to the trustees of
the Company who contributed cash
and/or services for these shares. The
Class C Convertible Preferred Shares
are not quoted on an exchange or the
OTC Bulletin Board.
Shares were issued effective
September 29, 2006 to the trustees of
the Company who contributed cash
and/or services for these shares. The
Class C Convertible Preferred Shares
are not quoted on an exchange or the
OTC Bulletin Board.
The following table sets forth the
quarterly high and low sale prices
per share of our common shares for
the years ended December 31, 2016 and
2015 as reported on the OTC Bulletin
Board. The quotations shown represent
inter-dealer prices without
adjustment for retail markups,
markdowns or commissions, and may not
reflect actual transactions.
quarterly high and low sale prices
per share of our common shares for
the years ended December 31, 2016 and
2015 as reported on the OTC Bulletin
Board. The quotations shown represent
inter-dealer prices without
adjustment for retail markups,
markdowns or commissions, and may not
reflect actual transactions.
|
For the Year Ended
December 31, 2016 |
|
High
|
|
Low
|
|
||||
|
|
|
|
|
|
|
||||
|
First Quarter
|
|
$
|
3.00
|
|
|
$
|
1.40
|
|
|
|
Second Quarter
|
|
$
|
3.00
|
|
|
$
|
1.76
|
|
|
|
Third Quarter
|
|
$
|
2.50
|
|
|
$
|
2.00
|
|
|
|
Fourth Quarter
|
|
$
|
5.25
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
||||
|
For the Year Ended
December 31, 2015 |
|
High
|
|
Low
|
|
||||
|
|
|
|
|
|
|
||||
|
First Quarter
|
|
$
|
2.00
|
|
|
$
|
1.25
|
|
|
|
Second Quarter
|
|
$
|
1.85
|
|
|
$
|
1.50
|
|
|
|
Third Quarter
|
|
$
|
1.80
|
|
|
$
|
1.60
|
|
|
|
Fourth Quarter
|
|
$
|
1.70
|
|
|
$
|
1.01
|
|
|
On March 15, 2017, the closing
price of our common shares reported
on the OTC Bulletin Board was $4.05
per share.
price of our common shares reported
on the OTC Bulletin Board was $4.05
per share.
Dividend Policy
We have not declared or paid
dividends on our common shares
since 1999, and we do not
anticipate paying dividends on our
common shares in the foreseeable
future. Declaration or payment of
dividends, if any, in the future,
will be at the discretion of the
board of trustees and will depend
on our then current financial
condition, results of operations,
capital requirements and other
factors deemed relevant by the
board of trustees.
dividends on our common shares
since 1999, and we do not
anticipate paying dividends on our
common shares in the foreseeable
future. Declaration or payment of
dividends, if any, in the future,
will be at the discretion of the
board of trustees and will depend
on our then current financial
condition, results of operations,
capital requirements and other
factors deemed relevant by the
board of trustees.
Preferred Share Conversions
During 2016, 1,600 Preferred Class
A Shares were converted into 73
common shares.
A Shares were converted into 73
common shares.
Issuer Purchases of Equity
Securities
Securities
The Company did not purchase any of
its equity securities in 2016.
its equity securities in 2016.
Item 10. Recent Sales of
Unregistered Securities.
Unregistered Securities.
The information required by Item 10
of Form 10 is incorporated herein
by reference to such information as
set forth in the Companys Original
8-K filed with the SEC on December
13, 2016.
of Form 10 is incorporated herein
by reference to such information as
set forth in the Companys Original
8-K filed with the SEC on December
13, 2016.
Item 11. Description of
Registrant’s Securities to be
Registered.
Registrant’s Securities to be
Registered.
The information required by Item 11
of Form 10 is incorporated herein
by reference to such information as
set forth in the Companys Original
8-K filed with the SEC on December
13, 2016.
of Form 10 is incorporated herein
by reference to such information as
set forth in the Companys Original
8-K filed with the SEC on December
13, 2016.
Item 12. Indemnification of
Directors and Officers.
Directors and Officers.
To the maximum extent permitted
by Maryland law in effect from
time to time, the Company shall
indemnify and, without requiring
a preliminary determination of
the ultimate entitlement to
indemnification, shall pay or
reimburse reasonable expenses in
advance of final disposition of a
proceeding to (a) any individual
who is a present or former
Trustee or officer of the Company
and who is made or threatened to
be made a party to the proceeding
by reason of his or her service
in that capacity or (b) any
individual who, while a Trustee
or officer of the Company and at
the request of the Company,
serves or has served as a
trustee, officer, partner or
trustee of another corporation,
real estate investment trust,
partnership, joint venture,
trust, employee benefit plan or
other enterprise and who is made
or threatened to be made a party
to the proceeding by reason of
his or her service in that
capacity. The rights to
indemnification and advance of
expenses provided by the
Declaration of Trust and our
Bylaws, as amended, shall vest
immediately upon election of a
Trustee or officer. The Company
may, with the approval of its
Board of Trustees, provide such
indemnification and advance for
expenses to an individual who
served a predecessor of the
Company in any of the capacities
described in (a) or (b) above and
to any employee or agent of the
Company or a predecessor of the
Company. The indemnification and
payment or reimbursement of
expenses provided in these Bylaws
shall not be deemed exclusive of
or limit in any way other rights
to which any person seeking
indemnification or payment or
reimbursement of expenses may be
or may become entitled under any
bylaw, regulation, insurance,
agreement or otherwise.
by Maryland law in effect from
time to time, the Company shall
indemnify and, without requiring
a preliminary determination of
the ultimate entitlement to
indemnification, shall pay or
reimburse reasonable expenses in
advance of final disposition of a
proceeding to (a) any individual
who is a present or former
Trustee or officer of the Company
and who is made or threatened to
be made a party to the proceeding
by reason of his or her service
in that capacity or (b) any
individual who, while a Trustee
or officer of the Company and at
the request of the Company,
serves or has served as a
trustee, officer, partner or
trustee of another corporation,
real estate investment trust,
partnership, joint venture,
trust, employee benefit plan or
other enterprise and who is made
or threatened to be made a party
to the proceeding by reason of
his or her service in that
capacity. The rights to
indemnification and advance of
expenses provided by the
Declaration of Trust and our
Bylaws, as amended, shall vest
immediately upon election of a
Trustee or officer. The Company
may, with the approval of its
Board of Trustees, provide such
indemnification and advance for
expenses to an individual who
served a predecessor of the
Company in any of the capacities
described in (a) or (b) above and
to any employee or agent of the
Company or a predecessor of the
Company. The indemnification and
payment or reimbursement of
expenses provided in these Bylaws
shall not be deemed exclusive of
or limit in any way other rights
to which any person seeking
indemnification or payment or
reimbursement of expenses may be
or may become entitled under any
bylaw, regulation, insurance,
agreement or otherwise.
Neither the amendment nor repeal
of the preceding paragraph, nor
the adoption or amendment of any
other provision of the Bylaws, as
amended, or the Declaration of
Trust inconsistent with the
preceding paragraph, shall apply
to or affect in any respect the
applicability of the preceding
paragraph with respect to any act
or failure to act which occurred
prior to such amendment, repeal
or adoption.
of the preceding paragraph, nor
the adoption or amendment of any
other provision of the Bylaws, as
amended, or the Declaration of
Trust inconsistent with the
preceding paragraph, shall apply
to or affect in any respect the
applicability of the preceding
paragraph with respect to any act
or failure to act which occurred
prior to such amendment, repeal
or adoption.
Item 13. Financial Statements and
Supplementary Data.
Supplementary Data.
The information provided below in
Item 9.01 of this Current Report
on Form 8-K is incorporated by
reference into this Item 13.
Item 9.01 of this Current Report
on Form 8-K is incorporated by
reference into this Item 13.
Item 5.06. Change in Shell
Company Status.
Company Status.
As a result of the Acquisition
described above and in Item 2.01
of the Original 8-K, we are no
longer a shell company as that
term is defined in Rule 405 of
the Securities Act of 1933, as
amended, and Rule 12b-2 of the
Exchange Act of 1934, as amended.
The disclosures in Item 2.01 of
the Original 8-K and this
Amendment are incorporated by
reference into this Item 5.06.
described above and in Item 2.01
of the Original 8-K, we are no
longer a shell company as that
term is defined in Rule 405 of
the Securities Act of 1933, as
amended, and Rule 12b-2 of the
Exchange Act of 1934, as amended.
The disclosures in Item 2.01 of
the Original 8-K and this
Amendment are incorporated by
reference into this Item 5.06.
Item 9.01. Financial Statements
and Exhibits.
and Exhibits.
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(d)
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Exhibits
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99.1
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Financial Statements of
business acquired for the years ended December 31, 2016 and 2015. |
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99.2
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Pro Forma financial
information for the year ended December 31, 2016. |
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About Pillarstone Capital REIT (OTCMKTS:PRLE)
Pillarstone Capital REIT, formerly Paragon Real Estate Equity and Investment Trust, is a shell company. The Company is a real estate investment trust (REIT). The Company focuses on maintaining its trust existence and Securities and Exchange Commission (SEC) reporting history to enable it in the future to raise additional capital and make real estate investments. The Company focuses on making real estate investments, which include acquisition and development of retail, office, office warehouse, industrial, multifamily, hotel, and other commercial properties; acquisition of or merger with a REIT or a real estate operating company, and joint venture investments. The Company focuses on investing its excess funds in marketable securities of other real estate companies. The Company has not generated any revenues. Pillarstone Capital REIT (OTCMKTS:PRLE) Recent Trading Information
Pillarstone Capital REIT (OTCMKTS:PRLE) closed its last trading session 00.00 at 4.05 with 143 shares trading hands.