Pillarstone Capital REIT (OTCMKTS:PRLE) Files An 8-K Completion of Acquisition or Disposition of Assets
Item 2.01 Completion of Acquisition or Disposition of Assets.
On December 27, 2018, Pillarstone Capital REIT (the “Company”, “we”, “our” or “us”), through an indirect wholly owned subsidiary, Whitestone Industrial-Office, LLC, a Texas limited liability company, sold a portfolio of three properties in Houston, Texas consisting of Main Park located at 11205 S. Main Street, Dairy Ashford Business Park located at 12654-12674 Goar Road, and Westbelt Plaza located at 1450 W. Sam Houston Parkway North (collectively, the “Portfolio”) to HMC Fuller Main Park, LLC, HMC Filler Dairy Ashford, LLC and HMC Fuller Westbelt, LLC, respectively, (collectively, the “Buyer”) for $15.8 million in the aggregate (the “Disposition”). The Buyer is an unaffiliated third party. The Company does not have a material relationship with the Buyer, and the Disposition was not an affiliated transaction.
Net proceeds, after customary closing deductions, were used to pay off mortgage debt on the Portfolio, and after the Disposition, the Company repaid $8.0 million of the Company’s $14.5 million loan from Whitestone REIT Operating Partnership, a company affiliated with certain members of Company’s management team and Board of Trustees.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information
Set forth in this Item 9.01(b) are the following unaudited pro forma consolidated financial statements illustrating the estimated effect of the Disposition described in Item 2.01 above as if the Disposition had previously occurred on the dates specified below:
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The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of September30, 2018 has been prepared as if the Disposition had occurred as of that date. |
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The accompanying Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended September30, 2018 and the year ended December31, 2017 have been prepared as if the Disposition occurred as of January1, 2017. |
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Pillarstone Capital REIT and Subsidiaries |
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET |
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As of September 30, 2018 |
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(in thousands, except per share data) |
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Pillarstone Capital REIT and Subsidiaries(a) |
Pro Forma Adjustments(b) |
Pro Forma Total |
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ASSETS |
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Real estate assets, at cost |
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|
Property |
$ |
85,309 |
$ |
(7,454 |
) |
$ |
77,855 |
|
|
Accumulated depreciation |
(5,205 |
) |
(4,615 |
) |
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Total real estate assets |
80,104 |
(6,864 |
) |
73,240 |
||||
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Cash and cash equivalents |
7,436 |
8,424 |
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Escrows and utility deposits |
2,549 |
2,549 |
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Accrued rents and accounts receivable, net of allowance for doubtful accounts |
1,469 |
(216 |
) |
1,253 |
||||
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Receivable due from related party |
1,276 |
1,276 |
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Unamortized lease commissions and deferred legal costs, net |
1,341 |
(151 |
) |
1,190 |
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Prepaid expenses and other assets |
(10 |
) |
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Total assets |
$ |
87,844 |
$ |
$ |
88,039 |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Notes payable |
$ |
62,412 |
$ |
(6,227 |
) |
(c) |
$ |
56,185 |
|
Accounts payable and accrued expenses |
3,322 |
(448 |
) |
2,874 |
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Payable due to related party |
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Convertible notes payable – related parties |
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Accrued interest payable |
(17 |
) |
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Tenants’ security deposits |
1,410 |
(248 |
) |
1,162 |
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Total liabilities |
67,865 |
(6,940 |
) |
60,925 |
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Commitments and contingencies |
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Shareholders’ Equity: |
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Preferred A Shares – $0.01 par value, 1,518,000 authorized: 256,636 Class A cumulative convertible shares issued and outstanding at September 30, 2018 and December 31, 2017, $10.00 per share liquidation preference |
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Preferred C Shares – $0.01 par value, 300,000 authorized: 244,444 Class C cumulative convertible shares issued and outstanding, $10.00 per share liquidation preference at September 30, 2018 and December 31, 2017 |
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Common Shares – $0.01 par value, 400,000,000 authorized: 443,299 shares issued and 405,169 outstanding at September 30, 2018 and December 31, 2017 |
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Additional paid-in capital |
28,147 |
28,147 |
||||||
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Accumulated deficit |
(27,574 |
) |
1,324 |
(26,250 |
) |
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Treasury stock, at cost, 38,130 shares |
(801 |
) |
(801 |
) |
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Total Pillarstone Capital REIT shareholders’ (deficit) equity |
(219 |
) |
1,324 |
1,105 |
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Noncontrolling interest in subsidiary |
20,198 |
5,811 |
26,009 |
|||||
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Total equity |
19,979 |
7,135 |
27,114 |
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Total liabilities and equity |
$ |
87,844 |
$ |
$ |
88,039 |
Pillarstone Capital REIT and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2018
(a)Historical financial information derived from the Company’s Form 10-Q as of September 30, 2018.
(b)Represents adjustments to reflect the disposition of the Portfolio. The sales price of the Portfolio was $15.8 million.
(c)Represents the reduction of debt from paying down $6.2 million of mortgage debt.
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Pillarstone Capital REIT and Subsidiaries |
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS |
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For the Nine Months Ended September 30, 2018 |
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(in thousands, except share and per share data) |
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Pillarstone Capital REIT and Subsidiaries(a) |
Pro Forma Adjustments(b) |
Pro Forma Total |
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Property revenues |
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Rental revenues |
$ |
10,768 |
$ |
(1,143 |
) |
$ |
9,625 |
|
Other revenues |
2,223 |
(318 |
) |
1,905 |
|||
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Total property revenues |
12,991 |
(1,461 |
) |
11,530 |
|||
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Property expenses |
|||||||
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Property operation and maintenance |
3,630 |
(433 |
) |
3,197 |
|||
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Real estate taxes |
2,135 |
(289 |
) |
1,846 |
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Total property expenses |
5,765 |
(722 |
) |
5,043 |
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Other expenses |
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General and administrative |
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Depreciation and amortization |
2,612 |
(287 |
) |
2,325 |
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Interest expense |
2,051 |
(176 |
) |
(c) |
1,875 |
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Total other expense |
5,241 |
(463 |
) |
4,778 |
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Income before loss on disposal of assets and income taxes |
1,985 |
(276 |
) |
1,709 |
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Loss on disposal of assets |
(12 |
) |
(12 |
) |
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Provision for income taxes |
(67 |
) |
(58 |
) |
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Net income |
1,906 |
(267 |
) |
1,639 |
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Less: Non-controlling interest in subsidiary |
1,842 |
(218 |
) |
1,624 |
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Net income attributable to Common Shareholders |
$ |
$ |
(49 |
) |
$ |
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Earnings Per Share: |
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Basic income per Common Share: |
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Net income available to Common Shareholders |
$ |
0.16 |
$ |
0.04 |
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Diluted income per Common Share: |
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Net income available to Common Shareholders |
$ |
0.02 |
$ |
0.01 |
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Weighted average number of Common Shares outstanding: |
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Basic: |
405,169 |
405,169 |
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Diluted: |
2,903,219 |
2,903,219 |
Pillarstone Capital REIT and Subsidiaries
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2018
(a)Historical financial information derived from the Company’s Form 10-Q for the nine months ended September 30, 2018.
(b)Amounts represent the historical operations of the Portfolio as reflected in the historical statement of operations of the Company for the nine months ended September 30, 2018.
(c)Represents the reduction of interest expense from paying down $6.2 million of mortgage debt.
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Pillarstone Capital REIT and Subsidiaries |
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS |
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For the Year Ended December 31, 2017 |
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(in thousands, except share and per share data) |
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Pillarstone Capital REIT and Subsidiaries(a) |
Pro Forma Adjustments(b) |
Pro Forma Total |
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Property revenues |
|||||||
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Rental revenues |
$ |
14,218 |
$ |
(1,250 |
) |
$ |
12,968 |
|
Other revenues |
2,550 |
(364 |
) |
2,186 |
|||
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Total property revenues |
16,768 |
(1,614 |
) |
15,154 |
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Property expenses |
|||||||
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Property operation and maintenance |
5,029 |
(487 |
) |
4,542 |
|||
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Real estate taxes |
2,672 |
(349 |
) |
2,323 |
|||
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Total property expenses |
7,701 |
(836 |
) |
6,865 |
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Other expenses |
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General and administrative |
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Depreciation and amortization |
3,268 |
(382 |
) |
2,886 |
|||
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Interest expense |
2,725 |
(234 |
) |
(c) |
2,491 |
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Total other expense |
6,501 |
(616 |
) |
5,885 |
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Income before loss on disposal of assets and income taxes |
2,566 |
(162 |
) |
2,404 |
|||
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Loss on disposal of assets |
(31 |
) |
(22 |
) |
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Provision for income taxes |
(88 |
) |
(80 |
) |
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Net income |
2,447 |
(145 |
) |
2,302 |
|||
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Less: Non-controlling interest in subsidiary |
2,232 |
(118 |
) |
2,114 |
|||
|
Net income attributable to Common Shareholders |
$ |
$ |
(27 |
) |
$ |
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Earnings Per Share: |
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Basic income per Common Share: |
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|
Net income available to Common Shareholders |
$ |
0.53 |
$ |
0.46 |
|||
|
Diluted income per Common Share: |
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|
Net income available to Common Shareholders |
$ |
0.07 |
$ |
0.06 |
|||
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Weighted average number of Common Shares outstanding: |
|||||||
|
Basic: |
405,169 |
405,169 |
|||||
|
Diluted: |
2,903,219 |
2,903,219 |
Pillarstone Capital REIT and Subsidiaries
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2017
(a)Historical financial information derived from the Company’s Form 10-K for the year ended December 31,2017.
(b)Amounts represent the historical operations of the Portfolio as reflected in the historical statement of operations of the Company for the year ended December 31, 2017.
(c)Represents the reduction of interest expense from paying down $6.2 million of mortgage debt.
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.