WSR 10-Q Quarter ended March 31, 2020

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(1)	The Company acquired common shares held by employees who tendered owned common shares to satisfy the tax withholding on the lapse of certain restrictions on restricted common shares.

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(1)	For a reconciliation of cash, cash equivalents and restricted cash, see supplemental disclosures below.

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•	52 wholly-owned properties that meet our Community Centered Properties ® strategy;

•	one wholly-owned property that meets our Community Centered Properties ® strategy; and

•	five parcels of land held for future development.

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Apply Topic 842 to each lease that existed at the beginning of the earliest comparative period presented in the financial statements as well as leases that commenced after that date. Under this method, prior comparative periods presented are adjusted. For leases that commenced prior to the beginning of the earliest comparative period presented, a cumulative-effect adjustment is recognized at that date.

•	Apply the guidance to each lease that had commenced as of the beginning of the reporting period in which the entity first applies the leases standard with a cumulative-effect adjustment as of that date. Prior comparative periods would not be adjusted under this method.

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(1)	Promissory note includes an interest rate swap that fixed the interest rate at 3.55% for the duration of the term through September 24, 2018 and 4.85% beginning September 25, 2018 through September 24, 2020.

(2)	Promissory note includes an interest rate swap that fixed the LIBOR portion of the interest rate at 1.73% .

(3)	Promissory note includes an interest rate swap that fixed the LIBOR portion of the interest rate at an average rate of 2.24% for the duration of the term through January 31, 2024.

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•	maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

•	maximum secured debt to total asset value ratio of 0.40 to 1.00;

•	minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•	maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•	maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of $372 million plus 75% of the net proceeds from additional equity offerings (as defined therein).

•	$250.0 million unsecured revolving credit facility with a maturity date of January 1, 2023 (the “2019 Revolver”);

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•	$165.0 million unsecured term loan with a maturity date of January 31, 2024 (“Term Loan A”); and

•	$100.0 million unsecured term loan with a maturity date of October 30, 2022 (“Term Loan B” and together with Term Loan A, the “2019 Term Loans”).

•	maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

•	maximum secured debt to total asset value ratio of 0.40 to 1.00;

•	minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•	maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•	maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of $372 million plus 75% of the net proceeds from additional equity offerings (as defined therein).

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•	extended the maturity date of the $300 million unsecured revolving credit facility under the 2014 Facility (the “2018 Revolver”) to October 30, 2019 from November 7, 2018;

•	converted $100 million of outstanding borrowings under the Revolver to a new $100 million unsecured term loan under the 2014 Facility (“Term Loan 3”) with a maturity date of October 30, 2022;

•	extended the maturity date of the first $50 million unsecured term loan under the 2014 Facility (“Term Loan 1”) to October 30, 2020 from February 17, 2017; and

•	extended the maturity date of the second $50 million unsecured term loan under the 2014 Facility (“Term Loan 2” and together with Term Loan 1 and Term Loan 3, the “2018 Term Loans”) to January 29, 2021 from November 7, 2019.

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(1)	There was no ineffective portion of our interest rate swaps to recognize in earnings for the three months ended March 31, 2020 and 2019 .

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uncertainties related to the COVID-19 pandemic, including the unknown duration and economic, operational and financial impacts of the COVID-19 pandemic and the actions taken or contemplated by U.S. and local governmental authorities or others in response to the pandemic on our business, employees and tenants, including, among others, (a) changes in tenant demand for our properties, (b) financial challenges confronting major tenants, including as a result of decreased customers’ willingness to frequent, and mandated stay in place orders that have prevented customers from frequenting, some of our tenants’ businesses and the impact of these issues on our ability to collect rent from our tenants; (c) operational changes implemented by us, including remote working arrangements, which may put increased strain on our IT systems and create increased vulnerability to cybersecurity incidents, (d) significant reduction in our liquidity due to the lack of further availability under our 2019 Facility and limited ability to access the capital markets and other sources of financing on attractive terms or at all, and (e) prolonged measures to contain the spread of COVID-19 or the premature easing of government-imposed restrictions implemented to contain the spread of COVID-19;

•	the imposition of federal income taxes if we fail to qualify as a real estate investment trust (“REIT”) in any taxable year or forego an opportunity to ensure REIT status;

•	the risk of government investigation of the Paycheck Protection Program loan (the “PPP Loan”);

•	uncertainties related to the national economy, the real estate industry in general and in our specific markets;

•	legislative or regulatory changes, including changes to laws governing REITs and the impact of the legislation commonly known as the Tax Cuts and Jobs Act;

•	adverse economic or real estate developments or natural disasters in Texas, Arizona or Illinois;

•	increases in interest rates, operating costs or general and administrative expenses;

•	availability and terms of capital and financing, both to fund our operations and to refinance our indebtedness as it matures;

•	decreases in rental rates or increases in vacancy rates;

•	litigation risks;

•	lease-up risks, including leasing risks arising from exclusivity and consent provisions in leases with significant tenants;

•	our inability to renew tenant leases or obtain new tenant leases upon the expiration of existing leases;

•	our inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;

•	the need to fund tenant improvements or other capital expenditures out of operating cash flow;

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•	the risk that we are unable to raise capital for working capital, acquisitions or other uses on attractive terms or at all;

•	52 wholly-owned properties that meet our Community Centered Properties ® strategy containing approximately 4.9 million square feet of gross leasable area (“GLA”) and having a total carrying amount (net of accumulated depreciation) of $903.7 million ;

•	one wholly-owned property that meets our Community Centered Properties ® strategy containing approximately 0.1 million square feet of GLA and having a total carrying amount (net of accumulated depreciation) of $34.5 million ; and

•	five parcels of land held for future development that meet our Community Centered Properties ® strategy having a total carrying value of $18.6 million .

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•	As of the date of this Report, all of our properties are open and operating in compliance with federal, state and local COVID-19 guidelines and mandates.

•	Approximately 63% of our tenants (based on annualized base rent (“ABR”)) are open and operating.

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As of the date of this Quarterly Report on Form 10-Q, we have received payment of approximately 64% of contractual base rent and common area maintenance reimbursables billed for the month of April. As is believed to be the case with retail landlords across the U.S., we have received a number of rent relief requests from tenants, most often in the form of rent deferral requests, which we are evaluating on an individual basis. Collections and rent relief requests to-date may not be indicative of collections or requests in any future period. The impact of the COVID-19 pandemic on our rental revenue for the second quarter of 2020 and thereafter cannot be determined at present.

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To ensure adequate liquidity for a sustained period, we recently drew down $30 million of the availability of our revolving credit facility as a precautionary measure to preserve our financial flexibility. As of March 31, 2020 , subject to any potential future paydowns or increases in the borrowing base, we have $8.7 million remaining availability. We have cash, cash equivalents and restricted cash of approximately $36,879,000 as of March 31, 2020 .

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•	We have taken a prudent pause in acquisitions activity and are carefully evaluating development and redevelopment activities on an individual basis.

•	Our board of trustees has reduced our quarterly dividend resulting in over $30 million of annualized savings. The board of trustees will regularly reassess the dividend, particularly as there is more clarity on the duration and severity of the COVID-19 pandemic and as business conditions improve.

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We have put in place a temporary response team to address tenant concerns. The response team is in ongoing communication with our tenants and is assisting tenants in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020.

•	We are proactively implementing expense reductions at the property level to minimize cost pass-throughs to our tenants and at the corporate level to preserve profitability.

•	The health and safety of our employees and their families is a top priority. We have adapted our operations to protect employees, including by implementing a work from home policy.

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(1)	Comparable leases represent leases signed on spaces for which there was a former tenant within the last twelve months and the new or renewal square footage was within 25% of the expired square footage.

(2)	Weighted average lease term is determined on the basis of square footage.

(3)	Estimated amount per signed leases. Actual cost of construction may vary. Does not include first generation costs for tenant improvements (“TI”) and leasing commission costs needed for new acquisitions or redevelopment of a property to bring to operating standards for its intended use.

(4)	Contractual minimum rent under the new lease for the first month, excluding concessions.

(5)	Contractual minimum rent under the prior lease for the final month.

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(1)	Excludes (i) new acquisitions, through the earlier of attainment of 90% occupancy or 18 months of ownership, and (ii) properties that are undergoing significant redevelopment or re-tenanting.

(2)	For a reconciliation of funds from operations to net income, see “—Reconciliation of Non-GAAP Financial Measures—Funds From Operations (“FFO”)” below.

(3)	For a reconciliation of funds from operations core to net income, see “—Reconciliation of Non-GAAP Financial Measures—FFO Core” below.

(4)	For a reconciliation of property net operating income to net income, see “—Reconciliation of Non-GAAP Financial Measures—Property Net Operating Income (“NOI”)” below.

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(1)	The Same Store tenant rent decrease of $267,000 resulted from a decrease of $16,000 from the decrease in the average leased square feet to 4,367,956 from 4,372,560 , and a decrease of $251,000 from the average rent per leased square foot decreasing from $19.90 to $19.67 .

(2)	The Same Store recoveries revenue increase of $1,120,000 is primarily attributable to increases in Same Store recoverable operations and maintenance cost of $506,000 in repairs and maintenance, $337,000 in contract services, and $277,000 in other recoverable operations and maintenance cost.

(3)	Same Store rental revenues and bad debt include the impact of converting approximately 40 tenants to cash basis accounting for the three months ended March 31, 2020. The $853,000 decrease to revenue was comprised of straight line rent and uncollected accounts receivables of $491,000 and $362,000, respectively.

(4)	The decrease in Same Store other revenues is primarily comprised of decreased lease termination fees.

(5)	Non-Same Store total rental revenue increased due to the addition of Las Colinas Village on December 6, 2019.

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(1)	The $1,018,000 Same Store operating and maintenance cost increase was primarily comprised of $506,000 in repairs and maintenance, $337,000 in contract services, and $175,000 in other recoverable operations and maintenance cost.

(2)	Non-Same Store operating and maintenance and real estate tax expenses for the three months ended March 31, 2020 are due to the addition of Las Colinas Village on December 6, 2019.

(3)	Affiliated company rents are spaces that we lease from Pillarstone OP.

(4)

The general and administrative expense decrease was attributable to $625,000 in decreased share-based compensation expense, $230,000 in decreased legal expense, and $47,000 in decreased other general and administrative expenses. Please refer to Note 12 (Incentive Share Plan) and Note 17 (Commitments and Contingencies) to the accompanying consolidated financial statements for more information regarding share-based compensation expense and legal fees. Given the uncertainty regarding the impacts on our business resulting from the COVID-19 pandemic, we are focused on the proactive management of expenses. In future periods, we may incur additional selling, general and administrative expenses to support our responses to the COVID-19 pandemic.

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(1)	The increase in interest expense is primarily attributable to an increase in our average notes payable balance from $620.6 million for the three months ended March 31, 2019 to $660.1 million for the three months ended March 31, 2020 .

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(1)	See below for a reconciliation of property net operating income to net income.

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(1)

We define “Non-Same Store” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. For purposes of comparing the three months ended March 31, 2020 to the three months ended March 31, 2019 , Non-Same Store includes properties acquired between January 1, 2019 and March 31, 2020 and properties sold between January 1, 2019 and March 31, 2020 , but not included in discontinued operations.

(2)

We define “Same Store” as properties that have been owned during the entire period being compared. For purposes of comparing the three months ended March 31, 2020 to the three months ended March 31, 2019 , Same Store includes properties owned before January 1, 2019 and not sold before March 31, 2020 . Straight line rent adjustments, above/below market rents, and lease termination fees are excluded.

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(1)	Includes pro-rata share attributable to real estate partnership.

(2)	Included in equity in earnings of real estate partnership on the consolidated statements of operations and comprehensive loss.

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•	the potential reduction in the borrowing base under our 2019 Facility due to the potential reduction in real estate values and a reduction in our NOI as a result of our tenants’ inability or unwillingness to pay rent timely or at all and increased vacancy rates due to the risk of tenants closing their businesses and delays in leasing vacant space due to potential lack of demand for retail space;

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•	the price of our common shares being below our estimates of our net asset value, which would result in any offering of our common shares to be dilutive to our existing shareholders.

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To ensure adequate liquidity for a sustained period, we recently drew down $30 million of the availability of the revolving credit facility as a precautionary measure to preserve our financial flexibility. As of March 31, 2020 , subject to any potential future paydowns or increases in the borrowing base, we have $8.7 million remaining availability under the revolving credit facility. As of March 31, 2020 , we have cash, cash equivalents and restricted cash of approximately $36,879,000 .

•	We have taken a prudent pause in acquisitions activity and are carefully evaluating development and redevelopment activities on an individual basis.

•	Our board of trustees has reduced our quarterly dividend resulting in over $30 million of annualized savings. The board of trustees will regularly reassess the dividend, particularly as there is more clarity on the duration and severity of the COVID-19 pandemic and as business conditions improve.

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We have put in place a temporary response team to address tenant concerns. The response team is in ongoing communication with our tenants and is assisting tenants in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020.

•	We are proactively implementing expense reductions at the property level to minimize cost pass-throughs to our tenants and at the corporate level to preserve profitability.

•	The health and safety of our employees and their families is a top priority. We have adapted our operations to protect employees, including by implementing a work from home policy.

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•	Cash flow from operations of $5,213,000 for the three months ended March 31, 2020 ;

•	Net proceeds of $30,000,000 from the 2019 Facility;

•	Proceeds from issuance of common shares, net of offering costs of $2,209,000 ;

•	Payment of distributions to common shareholders and OP unit holders of $12,186,000 ;

•	Additions to real estate of $1,593,000 ;

•	Repurchase of common shares of $1,630,000 ; and

•	Payments of notes payable of $777,000 .

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(1)	Promissory note includes an interest rate swap that fixed the interest rate at 3.55% for the duration of the term through September 24, 2018 and 4.85% beginning September 25, 2018 through September 24, 2020.

(2)	Promissory note includes an interest rate swap that fixed the LIBOR portion at 1.73%.

(3)	Promissory note includes an interest rate swap that fixed the LIBOR portion of the interest rate at an average rate of 2.24% for the duration of the term through January 31, 2024.

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•	$250.0 million unsecured revolving credit facility with a maturity date of January 1, 2023 (the “2019 Revolver”);

•	$165.0 million unsecured term loan with a maturity date of January 31, 2024 (“Term Loan A”); and

•	$100.0 million unsecured term loan with a maturity date of October 30, 2022 (“Term Loan B” and together with Term Loan A, the “2019 Term Loans”).

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•	maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

•	maximum secured debt to total asset value ratio of 0.40 to 1.00;

•	minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•	maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•	maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of $372 million plus 75% of the net proceeds from additional equity offerings (as defined therein).

•	maximum total indebtedness to total asset value ratio of 0.60 to 1.00;

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•	maximum secured debt to total asset value ratio of 0.40 to 1.00;

•	minimum EBITDA (earnings before interest, taxes, depreciation, amortization or extraordinary items) to fixed charges ratio of 1.50 to 1.00;

•	maximum other recourse debt to total asset value ratio of 0.15 to 1.00; and

•	maintenance of a minimum tangible net worth (adjusted for accumulated depreciation and amortization) of $372 million plus 75% of the net proceeds from additional equity offerings (as defined therein).

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during the first quarter of 2020, we drew down $30 million of the availability of our revolving credit facility as a precautionary measure to preserve our financial flexibility, after which we have $8.7 million remaining availability. Difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants’ abilities to fund their business operations and meet their obligations to us;

•	in the first quarter of 2020, we reduced our quarterly dividends, and the financial impact of the COVID-19 pandemic could continue to negatively impact our ability to pay dividends to our stockholders;

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the financial impacts could negatively impact our future compliance with financial covenants of our 2019 Credit Facility and other debt agreements and could result in a default and potentially an acceleration of indebtedness, which non-compliance could also negatively impact our ability to make additional borrowings under our 2019 Credit Facility or otherwise pay dividends to our shareholders; the worsening of estimated future cash flows due to a change in our plans, policies, or views of market and economic conditions as it relates to one or more of our adversely impacted properties could result in the recognition of substantial impairment charges imposed on our assets;

•	the credit quality of our tenants could be negatively impacted and we may significantly decrease our revenues;

•	a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow our portfolio of properties, or to sell properties as part of our capital recycling strategy;

•	as a result of remote working arrangements we implemented in response to the COVID-19 pandemic, we may be subject to increased risk of an information or cyber-security incident, fraud, a failure to maintain the uninterrupted operation of our information systems due to, among other things, an increase in remote work; and

•	the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during a disruption.

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(a)	During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

(b)	Not applicable.

(c)	During the three months ended March 31, 2020 , certain of our employees tendered owned common shares to satisfy the tax withholding on the lapse of certain restrictions on restricted common shares issued under the 2018 Plan. The following table summarizes all of these repurchases during the three months ended March 31, 2020 .

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