Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 11, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | PILLARSTONE CAPITAL REIT | |
Entity Central Index Key | 928,953 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 | |
Entity Common Stock, Shares Outstanding | 405,169 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and cash equivalents | $ 3,134 | $ 7,445 |
Marketable securities | 100 | 100 |
Equity investment in Pillarstone Capital REIT Operating Partnership LP | 37,941 | 14,776 |
Dividend receivable | 41,084 | 0 |
Other assets | 5,573 | 14,499 |
Total assets | 87,832 | 36,820 |
Liabilities: | ||
Accounts payable and accrued expenses | 162,124 | 27,541 |
Accounts payable - related party | 316,103 | 316,103 |
Convertible notes payable - related parties | 197,780 | 197,780 |
Accrued interest payable | 26,985 | 22,108 |
Total liabilities | 702,992 | 563,532 |
Commitments and contingencies | 0 | 0 |
Shareholders' Equity (Deficit): | ||
Common Shares - $0.01 par value, 400,000,000 authorized: 443,299 shares issued and 405,169 outstanding at March 31, 2017 and December 31, 2016 | 4,052 | 4,052 |
Additional paid-in capital | 28,146,986 | 28,146,986 |
Accumulated deficit | (27,970,474) | (27,882,026) |
Treasury shares, at cost, 38,130 shares | (800,735) | (800,735) |
Total Pillarstone Capital REIT shareholders' deficit | (615,160) | (526,712) |
Total liabilities and equity (deficit) | 87,832 | 36,820 |
Preferred A Shares | ||
Shareholders' Equity (Deficit): | ||
Preferred stock | 2,567 | 2,567 |
Preferred C Shares | ||
Shareholders' Equity (Deficit): | ||
Preferred stock | $ 2,444 | $ 2,444 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 400,000,000 | 400,000,000 |
Common stock, issued (in shares) | 443,299 | 443,226 |
Common stock, outstanding (in shares) | 405,169 | 405,096 |
Treasury stock (in shares) | 38,130 | 38,130 |
Preferred A Shares | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 1,518,000 | 1,518,000 |
Preferred stock, issued (in shares) | 256,636 | 258,236 |
Preferred stock, outstanding (in shares) | 256,636 | 258,236 |
Preferred stock, liquidation preference (in dollars per share) | $ 10 | $ 10 |
Preferred C Shares | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 300,000 | 300,000 |
Preferred stock, issued (in shares) | 244,444 | 244,444 |
Preferred stock, outstanding (in shares) | 244,444 | 244,444 |
Preferred stock, liquidation preference (in dollars per share) | $ 10 | $ 10 |
Consolidated Statements of Oper
Consolidated Statements of Operations (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Interest and dividend income | $ 0 | $ 0 |
Total revenues | 0 | 0 |
Expenses | ||
General and administrative | 147,821 | 35,100 |
Interest | 4,876 | 4,931 |
Total expenses | 152,697 | 40,031 |
Loss from operations | (152,697) | (40,031) |
Equity in income of Pillarstone Capital REIT Operating Partnership LP | 64,249 | 0 |
Net loss attributable to Common Shareholders | $ (88,448) | $ (40,031) |
Net loss attributable to Common Shareholders per Common Share: Basic and Diluted (in dollars per share) | $ (0.22) | $ (0.10) |
Weighted average number of Common Shares outstanding: Basic and Diluted (in shares) | 405,169 | 405,096 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (88,448) | $ (40,031) |
Adjustments to reconcile loss to net cash used in operating activities: | ||
Equity in income of Pillarstone Capital REIT Operating Partnership LP | (23,165) | 0 |
Changes in operating assets and liabilities: | ||
Dividend receivable | (41,084) | 0 |
Other assets | 8,926 | (589) |
Accounts payable and accrued expenses | 139,460 | 6,028 |
Net cash used in operations | (4,311) | (34,592) |
Cash flows from investing activities: | ||
Net cash provided by investing activities | 0 | 0 |
Cash flows from financing activities: | ||
Net cash provided by financing activities | 0 | 0 |
Net decrease in cash and cash equivalents | (4,311) | (34,592) |
Cash and cash equivalents at beginning of period | 7,445 | 174,283 |
Cash and cash equivalents at end of period | $ 3,134 | $ 139,691 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Introduction . The use of the words "we," "us," "our," "Company" or "Pillarstone" refers to Pillarstone Capital REIT and our consolidated subsidiaries, except where the context otherwise requires. Business. Pillarstone Capital REIT is a Maryland real estate investment trust ("REIT") engaged in investing in, owning and operating commercial properties. We serve as the general partner of Pillarstone Capital REIT Operating Partnership LP ("Pillarstone OP"), which was formed on September 23, 2016 as a Delaware limited partnership. We currently conduct substantially all operations and activities through Pillarstone OP. As the general partner of Pillarstone OP, we have the exclusive power to manage and conduct the business of Pillarstone OP, subject to certain customary exceptions. 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 a real estate operating company and (iii) joint venture investments. Basis of Presentation . The consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2016 are derived from our audited consolidated financial statements as of that date. The unaudited financial statements as of and for the period ended March 31, 2017 and 2016 have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information on a basis consistent with the annual audited consolidated financial statements and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, we believe that the included disclosures are adequate to make the information presented not misleading. The consolidated financial statements presented herein reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of Pillarstone and our subsidiaries as of March 31, 2017 , and the results of operations and cash flows for the three month periods ended March 31, 2017 and 2016. All of these adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results expected for a full year. The statements should be read in conjunction with the audited consolidated financial statements and the notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2016 , as filed with the SEC on March 22, 2017 (the “2016 Form 10-K”). Basis of consolidation. The Company presents its financial statements on a consolidated basis because it combines its accounts with a wholly-owned subsidiary that ceased operations in 2002. All significant intercompany transactions are eliminated in consolidation. Going concern. The financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continued operations as a public company and paying liabilities in the normal course of business. The Company, through Pillarstone OP, acquired 14 real estate assets in December 2016 and its receipt of cash distributions from Pillarstone OP are expected to be sufficient for the Company to continue as a going concern. |
Marketable Securities
Marketable Securities | 3 Months Ended |
Mar. 31, 2017 | |
Marketable Securities [Abstract] | |
Marketable Securities | MARKETABLE SECURITIES As of March 31, 2017 , our marketable securities had a fair market value of $100 . This value was determined using Level 1 inputs and is based on the amount of cash in an insured deposit account at the brokerage firm. During the three month period ended March 31, 2017 , there were no transfers to the operating account from the brokerage firm, and there was no interest income earned in the account at the brokerage firm. |
Equity Method Investment
Equity Method Investment | 3 Months Ended |
Mar. 31, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investment | EQUITY METHOD INVESTMENT 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, pursuant to which 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 14 real estate assets (the “Real Estate Assets” and, together with the Entities, the “Property”) for aggregate consideration of approximately $84 million , consisting of (i) 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 (ii) the assumption of approximately $65.9 million of liabilities by Pillarstone OP. Pillarstone is the general partner of Pillarstone OP and, as a result of the Contribution Agreement, has equity ownership interest in Pillarstone OP totaling approximately 18.6% valued at $4,121,312 as of the date of the agreement. In connection with the Contribution Agreement, on December 8, 2016, Pillarstone, as the general partner of Pillarstone OP, entered into an Amended and Restated Agreement of Limited Partnership of Pillarstone OP (as amended and restated, the “Limited Partnership Agreement”). Pursuant to the Limited Partnership Agreement, subject to certain protective rights of the limited partners described below, the general partner has full, exclusive and complete responsibility and discretion in the management and control of Pillarstone OP, including the ability to cause Pillarstone OP to enter into certain major transactions including a merger of Pillarstone OP or a sale of substantially all of the assets of Pillarstone OP. The limited partners have no power to remove the general partner without the general partner's consent. In addition, pursuant to the Limited Partnership Agreement, the general partner may not conduct any business other than in connection with the ownership, acquisition and disposition of Pillarstone OP's interest and management of its business without the consent of a majority of the limited partners other than in connection with certain actions described therein. As such, the Company is deemed to exercise significant influence but not complete control over Pillarstone OP. Additionally, we determined that we are not the primary beneficiary under the variable interest entity rules prescribed by GAAP, and thus the investment in Pillarstone OP qualifies for usage of the equity method of accounting. Pillarstone's investment in Pillarstone OP amounted to an 18.6% ownership interest and carrying values of $37,941 and $14,776 as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 , the $37,941 carrying value of our equity investment exceeded our equity in the underlying net assets of Pillarstone OP by approximately $383,000 and included equity in earnings of Pillarstone OP of $64,249 for the three month period then ended, offset by dividends declared and receivable totaling $41,084 . This difference arose due to the $4,121,312 distribution in kind we received during December 2016, and the difference between the carrying value attributed to the assets and liabilities transferred to Pillarstone OP under common control accounting rules and their fair values. We are amortizing the difference over 25 years based on the estimate of the remaining useful lives of the properties acquired. The combined results of operations and financial position of Pillarstone OP are summarized below (in thousands): Three Months Ended March 31, Condensed income statement information: 2017 2016 Property revenues $ 4,020 $ — Property expenses 2,068 — Other expenses 1,575 — Provision for income taxes 25 — Loss on sale or disposal of assets 6 — Net income $ 346 $ — Pillarstone's equity in earnings of Pillarstone OP $ 64 $ — Condensed balance sheet information: March 31, 2017 December 31, 2016 Real estate assets, net of accumulated depreciation $ 59,852 $ 59,805 Other assets 7,939 8,434 Total assets $ 67,791 $ 68,239 Notes payable $ 65,186 $ 65,474 Other liabilities 3,708 4,742 Total liabilities 68,894 70,216 Total equity (1,103 ) (1,977 ) Total liabilities and equity $ 67,791 $ 68,239 |
Convertible Notes Payable - Rel
Convertible Notes Payable - Related Parties | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable - Related Parties | CONVERTIBLE NOTES PAYABLE - RELATED PARTIES On November 20, 2015, five trustees on our board of trustees loaned $197,780 to the Company in exchange for convertible notes payable. The convertible notes payable accrue interest at 10% per annum and mature on November 20, 2018. The convertible notes payable can be converted by the noteholders into Common Shares at the rate of $1.331 per Common Share at any time. After six months, the Company can convert the notes payable into Common Shares. At maturity or when the Company chooses to convert the convertible notes payable into Common Shares, the noteholders have the option to receive cash plus accrued interest or convert the convertible notes payable into Common Shares. |
Loss Per Share
Loss Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Loss Per Share | LOSS PER SHARE Net loss per weighted average Common Share outstanding-basic and diluted is computed based on the weighted average number of Common Shares outstanding for the period. The weighted average number of Common Shares outstanding for the three month periods ended March 31, 2017 and 2016 were 405,169 and 405,096 , respectively. Common Share equivalents of 3,072,089 as of March 31, 2017 include outstanding Class A Cumulative Convertible Preferred Shares (the “Preferred Class A Shares”), Class C Cumulative Convertible Preferred Shares (the “Preferred Class C Shares”), and convertible notes payable. Common Share equivalents of 2,602,898 as of March 31, 2016 include outstanding Preferred Class A Shares, Preferred Class C Shares, and convertible notes payable. The Common Share equivalents are not included in net loss per weighted average Common Share outstanding-diluted as they would be anti-dilutive. |
Incentive Equity Plan
Incentive Equity Plan | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Incentive Equity Plan | 2016 EQUITY PLAN At the 2016 Annual Meeting of Shareholders, our shareholders approved the 2016 Equity Plan (“2016 Plan”). The 2016 Plan provides that awards may be made in Common Shares of the Company or units in Pillarstone OP, which may be converted into Common Shares. Subject to adjustment as provided by the terms of the 2016 Plan, the maximum aggregate number of Common Shares with respect to which awards may be granted under the 2016 Plan will be increased based on future issuances of Common Shares and units of Pillarstone OP, including issuances pursuant to the 2016 Plan, so that at any time the maximum number of shares that may be issued under the 2016 Plan shall equal 12.5% of the aggregate number of Common Shares and units of Pillarstone OP issued and outstanding (other than treasury shares or units issued to or held by the Company). The Management, Organization and Compensation Committee (the “Committee”) administers the 2016 Plan, except with respect to awards to non-employee trustees, for which the 2016 Plan is administered by the board of trustees. Subject to the terms of the 2016 Plan, the Committee is authorized to select participants, determine the type and number of awards to be granted, determine and later amend (subject to certain limitations) the terms and conditions of any award, interpret and specify the rules and regulations relating to the 2016 Plan, and make all other determinations which may be necessary or desirable for the administration of the 2016 Plan. The 2016 Plan includes the types of awards for grants and the types of financial performance measures. As of March 31, 2017 , the maximum number of Common Shares or OP Units available to be granted is 2,356,426 , and no grants have been issued under the 2016 Plan. |
Summary of Significant Accoun12
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation . The consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2016 are derived from our audited consolidated financial statements as of that date. The unaudited financial statements as of and for the period ended March 31, 2017 and 2016 have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information on a basis consistent with the annual audited consolidated financial statements and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, we believe that the included disclosures are adequate to make the information presented not misleading. The consolidated financial statements presented herein reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of Pillarstone and our subsidiaries as of March 31, 2017 , and the results of operations and cash flows for the three month periods ended March 31, 2017 and 2016. All of these adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results expected for a full year. The statements should be read in conjunction with the audited consolidated financial statements and the notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2016 , as filed with the SEC on March 22, 2017 (the “2016 Form 10-K”). |
Basis of consolidation | Basis of consolidation. The Company presents its financial statements on a consolidated basis because it combines its accounts with a wholly-owned subsidiary that ceased operations in 2002. All significant intercompany transactions are eliminated in consolidation. |
Equity Method Investment (Table
Equity Method Investment (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investment | The combined results of operations and financial position of Pillarstone OP are summarized below (in thousands): Three Months Ended March 31, Condensed income statement information: 2017 2016 Property revenues $ 4,020 $ — Property expenses 2,068 — Other expenses 1,575 — Provision for income taxes 25 — Loss on sale or disposal of assets 6 — Net income $ 346 $ — Pillarstone's equity in earnings of Pillarstone OP $ 64 $ — Condensed balance sheet information: March 31, 2017 December 31, 2016 Real estate assets, net of accumulated depreciation $ 59,852 $ 59,805 Other assets 7,939 8,434 Total assets $ 67,791 $ 68,239 Notes payable $ 65,186 $ 65,474 Other liabilities 3,708 4,742 Total liabilities 68,894 70,216 Total equity (1,103 ) (1,977 ) Total liabilities and equity $ 67,791 $ 68,239 |
Summary of Significant Accoun14
Summary of Significant Accounting Policies (Details Narrative) | 1 Months Ended |
Dec. 31, 2016property | |
Accounting Policies [Abstract] | |
Number of real estate assets acquired | 14 |
Marketable Securities (Details
Marketable Securities (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Marketable Securities [Abstract] | ||
Marketable securities | $ 100 | $ 100 |
Proceeds from the sale of marketable securities | 0 | |
Interest earned on cash | $ 0 |
Equity Method Investment (Detai
Equity Method Investment (Details) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | Dec. 08, 2016USD ($)propertysubsidiary$ / shares | |
Schedule of Equity Method Investments [Line Items] | ||||
Equity in income of Pillarstone Capital REIT Operating Partnership LP | $ 64,249 | $ 0 | ||
Equity investment in Pillarstone Capital REIT Operating Partnership LP | 37,941 | $ 14,776 | ||
Dividend receivable | $ 41,084 | 0 | ||
Pillarstone OP [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage | 18.60% | 18.60% | ||
Equity investment in Pillarstone Capital REIT Operating Partnership LP | $ 4,121,312 | |||
Difference between carrying value and underlying equity | $ 383,000 | |||
Remaining useful life | 25 years | |||
Whitestone [Member] | Pillarstone Variable Interest Entity [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Number of wholly-owned subsidiaries contributed to variable interest entity | subsidiary | 4 | |||
Number of non-core properties contributed to variable interest entity | property | 14 | |||
Consideration amount | $ 84,000,000 | |||
Consideration, limited partnership interest | $ 18,100,000 | |||
Consideration, limited partnership interest (in dollars per share) | $ / shares | $ 1.331 | |||
Liabilities assumed | $ 65,900,000 |
Equity Method Investment (Sched
Equity Method Investment (Schedules) (Details) - Pillarstone OP [Member] - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Condensed income statement information: | |||
Property revenues | $ 4,020 | $ 0 | |
Property expenses | 2,068 | 0 | |
Other expenses | 1,575 | 0 | |
Provision for income taxes | 25 | 0 | |
Loss on sale or disposal of assets | 6 | 0 | |
Net income | 346 | 0 | |
Pillarstone's equity in earnings of Pillarstone OP | 64 | $ 0 | |
Condensed balance sheet information: | |||
Real estate assets, net of accumulated depreciation | 59,852 | $ 59,805 | |
Other assets | 7,939 | 8,434 | |
Total assets | 67,791 | 68,239 | |
Notes payable | 65,186 | 65,474 | |
Other liabilities | 3,708 | 4,742 | |
Total liabilities | 68,894 | 70,216 | |
Total equity | (1,103) | (1,977) | |
Total liabilities and equity | $ 67,791 | $ 68,239 |
Convertible Notes Payable - R18
Convertible Notes Payable - Related Parties (Details Narrative) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Nov. 20, 2015USD ($)trustee$ / shares |
Debt Disclosure [Abstract] | |||
Number of trustees | trustee | 5 | ||
Convertible notes payable - related parties | $ | $ 197,780 | $ 197,780 | $ 197,780 |
Interest rate | 10.00% | ||
Conversion price (in dollars per share) | $ / shares | $ 1.331 |
Loss Per Share (Details Narrati
Loss Per Share (Details Narrative) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Weighted average number of Common Shares outstanding: Basic and Diluted (in shares) | 405,169 | 405,096 |
Antidilutive securities (in shares) | 3,072,089 | 2,602,898 |
2016 Equity Plan (Details)
2016 Equity Plan (Details) - 2016 Plan [Member] - shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percent of total shares authorized | 12.50% | |
Shares authorized (in shares) | 2,356,426 | |
Shares granted (in shares) | 0 |