# EDGAR Filing Document

**Accession Number:** 0000928953
**File Stem:** 0001437749-25-024163
**Filing Date:** 2025-7
**Character Count:** 544893
**Document Hash:** e0eb7fddb4432a73f49cd77fc68457d9
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-25-024163.hdr.sgml**: 20250731

**ACCESSION NUMBER**: 0001437749-25-024163

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 80

**CONFORMED PERIOD OF REPORT**: 20220930

**FILED AS OF DATE**: 20250731

**DATE AS OF CHANGE**: 20250731

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PILLARSTONE CAPITAL REIT
- **CENTRAL INDEX KEY:** 0000928953
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **ORGANIZATION NAME:** 05 Real Estate & Construction
- **EIN:** 396594066
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-15409
- **FILM NUMBER:** 251171247

**BUSINESS ADDRESS:**
- **STREET 1:** 2600 S. GESSNER RD - SUITE 555
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77063
- **BUSINESS PHONE:** 8328100100

**MAIL ADDRESS:**
- **STREET 1:** 2600 S. GESSNER RD - SUITE 555
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77063

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST
- **DATE OF NAME CHANGE:** 20030711

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** STONEHAVEN REALTY TRUST
- **DATE OF NAME CHANGE:** 20000321

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** WELLINGTON PROPERTIES TRUST
- **DATE OF NAME CHANGE:** 19940829

?xml version='1.0' encoding='ASCII'? pscr20220930c_10q.htm

[**Table of Contents**](#toc)

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended September 30, 2022**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from** ____________ **to** ____________

**Commission File Number 001-15409**

**PILLARSTONE CAPITAL REIT**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Maryland** | **39-6594066** |
| (State or other jurisdiction of | (IRS Employer |
| incorporation or organization) | Identification No.) |

---

**19407 Park Row, Suite 140**

**Houston, Texas 77084**

(Address of principal executive offices)

**(281) 747-9997**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |  |  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The Registrant had 657,084 Common Shares, par value $0.01 per share, outstanding as of July 21, 2025.

------

[**Table of Contents**](#toc)

**FORM 10-Q**

**INDEX**

---

| | |
|:---|:---|
| [**PART I. Financial Information**](#part1) | [**PART I. Financial Information**](#part1) |
| [Item 1. Financial Statements](#part1) | [1](#part1) |
| [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](#mdna) | [31](#mdna) |
| [Item 3. Quantitative and Qualitative Disclosures about Market Risk](#quanandqual) | [45](#quanandqual) |
| [Item 4. Controls and Procedures](#controls) | [45](#controls) |
| [**Part II. Other Information**](#part2) | [**Part II. Other Information**](#part2) |
| [Item 1. Legal Proceedings](#legalproc) | [48](#legalproc) |
| [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](#unregistered) | [52](#unregistered) |
| [Item 3. Defaults upon Senior Securities](#defaults) | [52](#defaults) |
| [Item 4. Mine Safety Disclosures](#minesafety) | [54](#minesafety) |
| [Item 5. Other Information](#otherinfo) | [54](#otherinfo) |
| [Item 6. Exhibits](#exhibits) | [55](#exhibits) |
| [Signatures](#sig) | [56](#sig) |

---

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[**Table of Contents**](#toc)

**PART 1. FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**Pillarstone Capital REIT and Subsidiaries**

**Consolidated Balance Sheets**

**(in thousands, except share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
|  | **(unaudited)** |  |
| ***ASSETS <sup>(a)</sup>*** |  |  |
| Real estate assets, at cost |  |  |
| Property | $57281 | $57027 |
| Accumulated depreciation | (9797) | (8754) |
| Total real estate assets | 47484 | 48273 |
| Cash and cash equivalents | 5302 | 5206 |
| Escrows and utility deposits | 1928 | 1243 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | 950 | 1260 |
| Receivable due from related party | 264 | 1011 |
| Unamortized lease commissions and deferred legal cost, net | 368 | 464 |
| Prepaid expenses and other assets | 133 | 126 |
| Total assets | $56429 | $57583 |
| ***LIABILITIES AND EQUITY <sup>(b)</sup>*** |  |  |
| Liabilities: |  |  |
| Notes payable | $14757 | $14920 |
| Accounts payable and accrued expenses | 2472 | 1691 |
| Payable due to related party |  | 846 |
| Convertible notes payable | 198 | 198 |
| Accrued interest payable | 136 | 185 |
| Tenants' security deposits | 779 | 827 |
| Total liabilities | 18342 | 18667 |
| Commitments and contingencies: |  |  |
| Equity: |  |  |
| Preferred A Shares - $0.01 par value, 1,518,000 authorized: 256,636 Class A cumulative convertible shares issued and outstanding at September 30, 2022 and December 31, 2021, $10.00 per share liquidation preference | 3 | 3 |
| Preferred C Shares - $0.01 par value, 300,000 authorized: 231,944 Class C cumulative convertible shares issued and outstanding at September 30, 2022 and December 31, 2021, $10.00 per share liquidation preference | 2 | 2 |
| Common Shares - $0.01 par value, 400,000,000 authorized: 695,214 shares issued and 657,084 outstanding at September 30, 2022 and December 31, 2021 | 7 | 7 |
| Additional paid-in capital | 28493 | 28493 |
| Accumulated deficit | (23328) | (23882) |
| Treasury stock, at cost, 38,130 shares | (801) | (801) |
| Total Pillarstone Capital REIT shareholders' equity | 4376 | 3822 |
| Noncontrolling interest in subsidiary | 33711 | 35094 |
| Total equity | 38087 | 38916 |
| Total liabilities and equity | $56429 | $57583 |

---

The accompanying notes are an integral part of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1

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[**Table of Contents**](#toc)

**Pillarstone Capital REIT and Subsidiaries**

**Consolidated Balance Sheets - Continued**

**(in thousands)**

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,**<br> **2021** |
|  | **(unaudited)** |  |
| ***(a) Assets of consolidated Variable Interest Entity included in the total assets above:*** |  |  |
| Real estate assets, at cost |  |  |
| Property | $57278 | $57023 |
| Accumulated depreciation | (9794) | (8751) |
| Total real estate assets | 47484 | 48272 |
| Cash and cash equivalents | 5079 | 4900 |
| Escrows and utility deposits | 1928 | 1243 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | 952 | 1104 |
| Receivable due from related party | 263 | 1011 |
| Unamortized lease commissions and deferred legal cost, net | 368 | 464 |
| Prepaid expenses and other assets | 129 | 33 |
| Total assets | $56203 | $57027 |
| ***(b) Liabilities of consolidated Variable Interest Entity included in the total liabilities above:*** |  |  |
| Notes payable | $14757 | $14920 |
| Accounts payable and accrued expenses | 1794 | 1483 |
| Payable due to related party |  | 827 |
| Accrued interest payable |  | 64 |
| Tenants' security deposits | 779 | 827 |
| Total liabilities | $17330 | $18121 |

---

The accompanying notes are an integral part of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2

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[**Table of Contents**](#toc)

**Pillarstone Capital REIT and Subsidiaries**

**Consolidated Statements of Operations**

**(unaudited)**

**(in thousands, except share and per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Revenues** |  |  |  |  |
| Rental | $1989 | $2371 | $6560 | $6810 |
| Transaction and other fees | 15 | 10 | 48 | 33 |
| Total revenues | 2004 | 2381 | 6608 | 6843 |
| **Operating expenses** |  |  |  |  |
| Depreciation and amortization | 514 | 541 | 1504 | 1540 |
| Operating and maintenance | 808 | 759 | 2431 | 2213 |
| Real estate taxes | 445 | 430 | 1186 | 1232 |
| General and administrative | 770 | 167 | 1142 | 550 |
| Management fees | 139 | 143 | 422 | 427 |
| Total operating expenses | 2676 | 2040 | 6685 | 5962 |
| **Other expenses (income)** |  |  |  |  |
| Interest expense, net | 199 | 200 | 598 | 607 |
| Loss on disposal of assets | 8 | 1 | 8 | 1 |
| Other income | (21) |  | (21) | (24) |
| Total other expenses | 186 | 201 | 585 | 584 |
| **Income (loss) before income taxes** | (858) | 140 | (662) | 297 |
| Provision for income taxes | (172) |  | (167) | 12 |
| **Net income (loss)** | (1030) | 140 | (829) | 309 |
| Less: Noncontrolling interest in subsidiary | (1676) | 196 | (1383) | 510 |
| **Net income (loss) attributable to Common Shareholders** | $646 | $(56) | $554 | $(201) |
| **Net income (loss) per Common Share:** |  |  |  |  |
| Basic | $1.31 | $(0.13) | $1.12 | $(0.46) |
| Diluted | $0.21 | $(0.13) | $0.18 | $(0.46) |

---

The accompanying notes are an integral part of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3

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[**Table of Contents**](#toc)

**Pillarstone Capital REIT and Subsidiaries**

**Consolidated Statements of Changes in Equity** 

**(unaudited)**

**(in thousands)**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Class A** <br> **Preferred** <br> **Shares**  | **Class C** <br> **Preferred** <br> **Shares**  | **Common** <br> **Shares**  | **Additional** <br> **Paid-in** <br> **Capital**  | **Accumulated** <br> **Deficit**  | **Treasury** <br> **Stock, at** <br> **Cost**  | **Total** <br> **Shareholders'**<br> **Equity**  | **Noncontrolling**<br> **Interest**  | **Total** <br> **Equity**  |
| Balance at December 31, 2021 | $3 | $2 | $7 | $28493 | $(23882) | $(801) | $3822 | $35094 | $38916 |
| Net income (loss) |  |  |  |  | (17) |  | (17) | 229 | 212 |
| Balance at March 31, 2022 | 3 | 2 | 7 | 28493 | (23899) | (801) | 3805 | 35323 | 39128 |
| Net income (loss) |  |  |  |  | (75) |  | (75) | 64 | (11) |
| Balance at June 30, 2022 | 3 | 2 | 7 | 28493 | (23974) | (801) | 3730 | 35387 | 39117 |
| Net income (loss) |  |  |  |  | 646 |  | 646 | (1676) | (1030) |
| Balance at September 30, 2022 | $3 | $2 | $7 | $28493 | $(23328) | $(801) | $4376 | $33711 | $38087 |
| Balance at December 31, 2020 | $3 | $2 | $6 | $28494 | $(23623) | $(801) | $4081 | $34361 | $38442 |
| Share-based compensation |  |  |  | 15 |  |  | 15 |  | 15 |
| Net income (loss) |  |  |  |  | (85) |  | (85) | 109 | 24 |
| Balance at March 31, 2021 | 3 | 2 | 6 | 28509 | (23708) | (801) | 4011 | 34470 | 38481 |
| Share-based compensation |  |  |  | 2 |  |  | 2 |  | 2 |
| Net income (loss) |  |  |  |  | (60) |  | (60) | 205 | 145 |
| Balance at June 30, 2021 | 3 | 2 | 6 | 28511 | (23768) | (801) | 3953 | 34675 | 38628 |
| Repurchase of common shares |  |  |  | (10) |  | *-* | (10) |  | (10) |
| Share-based compensation |  |  |  | 9 |  |  | 9 |  | 9 |
| Net income (loss) |  |  |  |  | (56) |  | (56) | 196 | 140 |
| Balance at September 30, 2021 | $3 | $2 | $6 | $28510 | $(23824) | $(801) | $3896 | $34871 | $38767 |

---

The accompanying notes are an integral part of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4

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[**Table of Contents**](#toc)

**Pillarstone Capital REIT and Subsidiaries**

**Consolidated Statements of Cash Flows**

**(unaudited)**

**(in thousands)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities:** |  |  |
| Net income (loss) | $(829) | $309 |
| Adjustments to reconcile net income (loss) to net cash from operating activities: |  |  |
| Depreciation and amortization | 1504 | 1540 |
| Amortization of deferred loan costs | 21 | 14 |
| Bad debt | 121 | 48 |
| Loss on disposal of assets | 8 | 1 |
| Share-based compensation |  | 16 |
| Deferred tax expense (benefit) | 148 | (48) |
| Changes in operating assets and liabilities: |  |  |
| Accrued rents and accounts receivable | 189 | 93 |
| Receivable due from related party | 747 | (403) |
| Escrows and utility deposits | (685) | (159) |
| Unamortized lease commissions and deferred legal cost | (38) | (131) |
| Prepaid expenses and other assets | 447 | (26) |
| Accounts payable and accrued expenses | 584 | (459) |
| Payable due to related party | (846) | 315 |
| Tenants' security deposits | (48) | (16) |
| Net cash from operating activities | 1323 | 1094 |
| **Cash flows from investing activities:** |  |  |
| Additions to real estate | (1406) | (839) |
| Insurance proceeds received for capital loss | 817 |  |
| Net cash from investing activities | (589) | (839) |
| **Cash flows from financing activities:** |  |  |
| Repayments of notes payable | (638) | (218) |
| Net cash from financing activities | (638) | (218) |
| Net change in cash and cash equivalents | 96 | 37 |
| Cash and cash equivalents at beginning of period | 5206 | 5109 |
| Cash and cash equivalents at end of period | $5302 | $5146 |
| Supplemental disclosure of cash flow information: |  |  |
| Cash paid for interest | $627 | $595 |
| Cash paid for taxes | 44 | 51 |
| Non cash investing activities: |  |  |
| Disposal of fully depreciated real estate | 326 | 233 |
| Financed insurance premium | 454 |  |

---

The accompanying notes are an integral part of the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5

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[**Table of Contents**](#toc)

**Pillarstone Capital REIT**

**Notes to Consolidated Financial Statements**

**(unaudited)**

***1.*** **Organization and Summary of Significant Accounting Policies**

Pillarstone Capital REIT (the "Company," "Pillarstone," "we," "our," or "us") is a Maryland real estate investment trust ("REIT") engaged in investing in, owning and operating commercial properties. We own 18.6% of Pillarstone Capital REIT Operating Partnership LP ("Pillarstone OP") and serve as its general partner. Substantially all of our operations and activities are conducted for the benefit of and 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. Pillarstone OP owns two office buildings in the Dallas metropolitan area and six office/warehouse and retail locations in the Houston metropolitan area having approximately 927 thousand square feet of gross leasable area.

On *December 8, 2016,* we 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, both of which were related parties to Pillarstone and Pillarstone OP. Pursuant 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 (the "Subsidiaries"): Whitestone CP Woodland Ph. *2,* LLC, a Delaware limited liability company; Whitestone Industrial-Office, LLC, a Texas limited liability company; Whitestone Offices, LLC, a Texas limited liability company; and Whitestone Uptown Tower, LLC, a Delaware limited liability company ("Uptown Tower") that owned 14 real estate assets (the "Real Estate Assets" and, together with the Subsidiaries (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. Pursuant to the Contribution Agreement, Pillarstone became the general partner of Pillarstone OP with an equity ownership interest in Pillarstone OP totaling approximately 18.6% valued at $4.1 million as of the date of the Contribution Agreement.

Pursuant to the Contribution Agreement, Pillarstone 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 issuance of the common shares in the Company that *may* be issued upon redemption of the OP Units issued pursuant to the Contribution Agreement and the offer and resale of such common shares by the holders thereof. In addition, pursuant to the Contribution Agreement, in the event of a Change of Control (as defined therein), 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. Pillarstone and Whitestone agreed to extend the filing of the shelf registration statement to the date that the Company closes a public equity offering.

In connection with the Contribution Agreement, (*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 Pillarstone OP who 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"). Pursuant 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 gross asset value ("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 pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such Real Estate Asset. Pursuant 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. These activities were conducted by Whitestone TRS and Whitestone REIT using their own employees, processes, and systems and in some cases, *third*-party providers for services they sub-contracted to perform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *6*

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[**Table of Contents**](#toc)

As a result of the Contribution Agreement, Whitestone OP owns approximately 81.4% and Pillarstone owns approximately 18.6% of the outstanding equity in Pillarstone OP, which is fully consolidated on Pillarstone's financial statements.

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

*Liquidity and Financial Resources*.

On *July 19, 2022,* we received written notice that Whitestone TRS, Inc. confirmed termination of the management agreements for our Real Estate Assets. We had previously communicated to Whitestone our plan to internalize the management of the Real Estate Assets, but we had *not* made efforts to terminate the management agreements. However, Whitestone TRS stated in its notice letter that while it had *not* received written notice of the termination of the management agreements, it "confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from" *July 19, 2022.* The management agreements provided that "Unless otherwise terminated pursuant to the provisions hereof, the term of this Agreement shall automatically renew on a month to month basis at the end of the term unless either of the Parties has notified the other in writing *not* less than *thirty* (30) days prior to the expiration of the term, as the same *may* be extended."

Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe. The management agreements provided for Whitestone TRS to provide such services, or in certain cases contracting with other providers to perform such services, as:

● providing management, leasing, and maintenance personnel to operate the Real Estate Assets;

● maintaining the Real Estate Assets;

● maintaining connected utility services at the Real Estate Assets;

● invoice and collect the monthly rent from the tenants; default and pursue collection for delinquent tenants;

● pay monthly invoices to vendors, including loan payments to lenders;

● maintain monthly accounting records and provide monthly operating statements for each Real Estate Asset;

● perform an annual audit of the financial statements, prepare workpapers for the annual audit, and assist the auditors to complete the annual audit;

● assist in the preparation of the annual tax returns for Pillarstone, Pillarstone OP and the owners of the Real Estate Assets; and

● assist in the preparation of the Pillarstone SEC financial reports and other filings.

We worked diligently to restore normal operations and leasing activities following Whitestone's unanticipated termination of its managerial services. Many of Pillarstone's actions were affected by a lack of usable information being made available to it by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owns 81.4% of Pillarstone OP as a non-controlling limited partner.

During this 30-day notice period, Whitestone did *not* provide the operation and financial database of our information, nor did Whitestone cooperate to provide for an orderly transition of its contracted responsibilities. The services under the management agreements were extensive and material to the operation of Pillarstone's business and our accounting and financial reporting. The management functions, as operated by Whitestone, were deeply co-mingled with Whitestone's management functions for its own business and have been difficult, expensive and time-consuming to separate. As a result, Pillarstone was materially and adversely affected by Whitestone's abrupt termination of the management agreements, incomplete and inadequate delivery of books and records and other materials required to be delivered under the Management Agreements, and the failure to provide for an appropriate transition. We had *no* way to continue our accounting and financial reporting responsibilities as a public company. Further, for several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts as an independent, internally managed company. In addition, several vendor service contracts were tied to Whitestone and the pricing of services was based on the combination of Pillarstone and Whitestone. The transition caused us to obtain separate services, which caused disruption to our business and higher costs. In other cases, Whitestone obligated us to long-term contracts for essential services that we cannot easily replace.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *7*

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On *July 12, 2022,* we were named as a defendant in a lawsuit by Whitestone OP in a lawsuit styled Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT, C.A. *No. 2022*-*0607*-LWW, in the Court of Chancery of the State of Delaware. The suit challenges our rights agreement, dated as of *December 27, 2021 (*as the same *may* be amended from time to time, the "Rights Agreement"), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claims that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

Based upon various issues, including those discussed in this report, we filed a lawsuit on *September 16, 2022,* in district court in Harris County, Texas, against Whitestone and related parties alleging, among other things, breach of the Pillarstone OP Amended and Restated Agreement of Limited Partnership and fiduciary duty and breach of the management agreements.

On *July 21, 2022,* Whitestone OP filed a Motion to Preserve the Status Quo in the Delaware lawsuit requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevents Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argues that Whitestone's material breaches of contract and fiduciary duty operate to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in *August 2022* with representatives of Whitestone's board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was *not* open to settling these matters at that time or the other various times since *August 2022* we attempted to initiate discussions to resolve these matters.

Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intends to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we *may not* have the cash available to pay such amounts and *may* be required to sell *one* or more of our Real Estate Assets to satisfy this obligation, which *may* cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We have stated that a redemption request would *not* trigger the Rights Agreement, and our board of trustees has the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to *not* exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

Based on Whitestone's performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did *not* believe that Whitestone's actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall *not* be liable for monetary or other losses sustained, liabilities incurred or benefits *not* derived by the limited partners in connection therewith.

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone REIT's unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone REIT's management. Our efforts to address these matters have in some cases been stymied by Whitestone REIT's litigation against us in Delaware where the court has limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees have increased substantially as we address the internalization of management and the litigation matters discussed in this report.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *8*

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On *July 17, 2023* and *July 18, 2023,* trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on *October 18, 2023.* Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on *August 28, 2023.* On *January 25, 2024,* the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. We disagree with the Delaware court's ruling and are considering our options for appeal, subject to a final order being entered in the case, the outcome of various proceedings in the jointly administered bankruptcy cases described below and the decision of the plan agent in the bankruptcy cases to pursue an appeal.

The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP's redemption obligation and determine what value to attribute to Pillarstone OP's assets. The Delaware court declared that any further relief must await future proceedings.

On *January 25, 2024,* Whitestone OP delivered its notice of redemption for all but *one* of its OP Units.

On *September 16, 2022,* we filed a lawsuit styled Pillarstone Capital REIT and Pillarstone Capital REIT Operating Partnership LP v. Whitestone TRS, Inc., Whitestone REIT, Whitestone REIT Operating Partnership, L.P., Cause *No. 2022*-*59478,* in the District Court, Harris County, Texas, *189th* Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. A portion of the claims in this case were also brought as an adversary proceeding by Whitestone Uptown Tower, LLC in the Uptown Tower bankruptcy case described in "—Uptown Tower" below.

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

The joint plan of liquidation in the bankruptcy case providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in *November 2024.* Those Real Estate Assets were sold between *October 2024* and *July 2025.* The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent's administration of the claims *may* include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

The plan agent is *not* a trustee and does *not* participate in the management or operations of the debtors' businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors' business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party's good-faith objection and the bankruptcy court's final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor's funds (even if held by Pillarstone OP), which *may* include sales proceeds.

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The plan agent is entitled to receive compensation as a flat fee the amount of $10,000.00 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than *fifteen* (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650.00 per hour for each additional hour of services.

Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owned the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt was guaranteed by Whitestone OP. This mortgage was an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

As of *September 30, 2022,* the borrower was *not* in compliance with loan covenants requiring timely filing of financial information to the lender for the mortgage loan.

In *July 2023,* Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did *not* have an alternate source of funds for the operation of Uptown Tower.

On *August 3, 2023,* we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in *2016.* The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in *August 2022.*

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and *not* Whitestone REIT.

As the *2016* alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the *2022* default through its unilateral termination of the management agreement for Uptown Tower, we are *not* in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they *may* have on the borrower or the Uptown Tower property.

The borrower had requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in *August 2023* and *September 2023,* but Rialto Capital Advisors, LLC did *not* release the funds and indicated that it did *not* intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on *October 1, 2023.* The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall *not* (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on *September 22, 2023.* On *October 19, 2023,* Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

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On *October 24, 2023,* the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (*1*) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (*2*) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter *64,* Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on *December 5, 2023.*

On *December 1, 2023,* Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter *11* of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership, Case *No. 23*-*32832*-mvl-*11,* in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in *November 2023,* representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT's board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. *No* Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was *not* consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

On *January 3, 2024,* Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of *December 4, 2023.* The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On *January 31, 2024,* the lender sued Whitestone OP to enforce Whitestone OP's guaranty of the mortgage loan.

In *June 2024,* Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

The plan of reorganization in the bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in *July 2024.* We sold Uptown Tower in *July 2025* for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and paid off the American Bank, N.A. indebtedness. We are holding approximately $13.6 million of the sale proceeds representing funds Whitestone OP mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so on Whitestone Uptown Tower, LLC's behalf. We are currently disputing the treatment and timing of repayment of the $13.6 million to Whitestone OP in the Whitestone Uptown Tower bankruptcy case.

This litigation has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. The registrant believes that the allegations in the Delaware lawsuit are without merit and intends to continue to vigorously defend against them. In addition, we intend to vigorously pursue the Texas action to seek damages from Whitestone due to its violations of the management agreements and fiduciary duties and to protect our shareholders from the further harms that Whitestone has indicated it intends to inflict on us and our shareholders. However, the outcomes of these lawsuits, including the timing of the final disposition of the lawsuits, is unpredictable and could result in substantial costs to us. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on the registrant's business, results of operations or financial condition.

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Following the period covered by this report, we sold Real Estate Assets under the Whitestone Uptown Tower, LLC plan of reorganization and the plan of liquidation for the other Pillarstone entities.

In *October 2024,* we sold *9101* LBJ Freeway for a purchase price of $5,753,000, or approximately $5.1 million after deductions, closing costs and commissions.

In *October 2024,* we sold Interstate *10* Warehouse for a purchase price of $8,400,000, or approximately $8.1 million after deductions, closing costs and commissions.

In *February 2025,* we sold Corporate Park Woodland II for a purchase price of $1,650,000, or approximately $1.56 million after deductions, closing costs and commissions.

In *July 2025,* we sold Uptown Tower for a purchase price of $20,000,000, or approximately $17.3 million after deductions, closing costs and commissions.

In *July 2025,* in a series of related transactions, we sold:

• Corporate Park Northwest for a purchase price of $8,500,000, or approximately $7.8 million after deductions, closing costs and commissions;

• Holly Hall Industrial Park for a for a purchase price of $7,650,000, or approximately $7.2 million after deductions, closing costs and commissions;

• Holly Knight for a purchase price of $4,750,000, or approximately $4.5 million after deductions, closing costs and commissions; and

• Westgate Service Center for a purchase price of $9,100,000, or approximately $8.6 million after deductions, closing costs and commissions.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. In addition to the events described above, we have incurred significant losses since the year ended *December 31, 2020* and have an accumulated deficit of approximately $23.3 million as of *September 30, 2022* and need to raise substantial amounts of additional funds to meet our obligations and afford us time to implement our business plan and resume profitable operations.

We worked diligently to restore normal operations and leasing activities following Whitestone's unanticipated termination of its managerial services. Many of Pillarstone's actions were affected by a lack of usable information being made available to us by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owns 81.4% of Pillarstone OP as a non-controlling limited partner. We believe the management functions as operated by Whitestone were deeply integrated with Whitestone's management functions for its own business and have been difficult, expensive, and time-consuming to separate, causing material adverse effects on our business, income, cash flow, results of operations, financial condition, liquidity and prospects. As a result, Whitestone did significant damage to us by its intentional actions. In addition, our litigation with Whitestone has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on our business, results of operations or financial condition.

We were dependent on cash generated by our ownership of the eight Real Estate Assets to meet our liquidity needs. Historically, we have financed our long-term capital needs, including acquisitions, as follows:

● borrowings from new loans;

● additional equity issuances of our common and preferred shares and operating partnership units; and

● proceeds from the sales of our Real Estate Assets.

Our ability to access the capital markets will be dependent on a number of factors, including general market conditions and market perceptions about our Company. There can be *no* assurance that we will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern, if at all. The consolidated financial statements included in this report do *not* include any adjustments that might result from the outcome of this uncertainty.

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At *September 31, 2022,* the reported net equity in Whitestone Uptown Tower, LLC was $4.9 million.

In addition to the mortgage loan, we have approximately $198,000 of convertible notes payable and corresponding accrued interest of approximately $128,000. 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. At maturity or when the Company chooses to call the convertible notes payable, the noteholders have the option to receive cash plus accrued interest or convert the convertible notes payable into common shares at $1.331 per common share. The commencement of our bankruptcy case constituted an event of default under the notes, pursuant to which all principal and accrued interest became automatically and immediately due and payable. Any repayment of the convertible notes will be determined under our plan of liquidation and bankruptcy court proceedings.

*Basis of presentation*. These consolidated financial statements present the Company's consolidated financial condition and results of operations including those of a wholly owned subsidiary, operations of which were discontinued in *2002,* and variable interest entities ("VIEs") for which we are the primary beneficiary.

Noncontrolling interest in the accompanying consolidated financial statements represents the share of equity and earnings of Pillarstone OP allocable to holders of partnership interests other than us.

*Interim financial statements.* These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, they do *not* include all disclosures required U.S. GAAP. The unaudited consolidated financial statements include all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods presented. These interim financial statements should be read together with the consolidated financial statements and notes thereto included in our audited financial statements for the year ended *December 31, 2021.*

*Use of estimates.* The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the estimated fair value of properties acquired, allowance for doubtful accounts, impairment, the estimated useful lives for depreciable and amortizable assets and costs, and deferred taxes and the related valuation allowance for deferred taxes.

*Revenue recognition*. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and non-lease components in lease contracts, which includes combining base rent and recoveries into a single line item, Rental, within the consolidated statements of operations. We recognize lease termination fees in the year that the lease is terminated, and collection of the fee is reasonably assured.

*Cash and cash equivalents.* We consider all highly liquid investments purchased with an original maturity of *three* months or less to be cash equivalents.

*Real estate.* Land, buildings and improvements are recorded at cost. Expenditures related to the development of real estate are carried at cost.

*Depreciation*. Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for improvements and buildings. Tenant improvements are depreciated using the straight-line method over the life of the improvement or remaining term of the lease, whichever is shorter.

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*Impairment.* We review our properties for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, *may not* be recoverable through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. There was no impairment of our Real Estate Assets during the periods presented.

*Accrued Rents and Accounts Receivable.* Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. We review the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. We recognize an adjustment to rental revenue if we deem it probable that the receivable will *not* be collected. Our review of collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue.

*Unamortized Lease Commissions and Deferred Legal Cost.* Leasing commissions and deferred legal cost are amortized using the straight-line method over the terms of the related lease agreements. Costs allocated to in-place leases whose terms differ from market terms related to acquired properties are amortized over the remaining life of the respective leases.

*Prepaid expenses and other assets*. Prepaid expenses and other assets include escrows established pursuant to certain mortgage financing arrangements for real estate taxes and property improvements.

*Stock-based compensation*. We account for employee stock-based compensation using the fair value method. Compensation cost for equity incentive awards is based on the fair value of the equity instrument generally on the date of grant and is recognized over the requisite service period. Forfeitures are recognized as they occur. The Company uses the Black-Scholes option pricing model to estimate the fair value of option awards. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company's common stock, the risk-free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes in these subjective input assumptions can materially affect the estimated fair value of the option awards.

*Income taxes*. We have *not* elected to be taxed as a REIT for federal income tax purposes. As such, we account for income taxes using the asset and 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in the provision for income taxes in the consolidated statements of operations and has *not* been separately stated due to its insignificance.

We file tax returns federally and in the state of Texas. Our returns for periods prior to 2018 are *no* longer subject to examination by tax authorities in these jurisdictions. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than *not* sustain the position following an audit. If a tax position meets the "more likely than *not"* recognition criteria, accounting guidance requires the tax position be measured at the largest amount of benefit greater than *50%* likely of being realized upon ultimate settlement. We record income tax related interest and penalties, if any, as a component in the provision for income tax expense.

*Earnings (loss) per share* – Basic earnings (loss) per share amounts are calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share amounts are calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares and common stock equivalents outstanding which are *not* antidilutive. Common stock equivalents represent shares issuable upon the assumed conversion of outstanding convertible notes and preferred shares and the assumed exercise of outstanding options.

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*Fair Value Measurements.* We measure the fair value of financial instruments based on assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level *1* assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level *2* assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets or on other "observable" market inputs, and Level *3* assets/liabilities are valued based significantly on "unobservable" market inputs.

Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts and notes payable. The carrying value of cash, cash equivalents, accounts receivable and accounts payable are representative of their respective fair values due to their short-term nature. The fair value of our long-term debt instrument, consisting of a fixed rate secured note, approximated its carrying amounts due to the near-term maturity of the instrument.

*Concentration of Risk.* Substantially all of our revenues are obtained from office and warehouse locations in the Dallas and Houston metropolitan areas.

We maintain cash accounts in major U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts sometimes exceed the federally insured limits, although *no* losses have been incurred in connection with these deposits.

*Segment information.* Our management historically has *not* differentiated by property types and therefore does *not* present segment information.

*Recent accounting pronouncements*. In *April 2020,* the Financial Accounting Standards Board ("FASB") issued guidance on the application of Topic *842,* relating to concessions being made by lessors in response to the COVID-*19* pandemic. The guidance notes that it would be acceptable for entities to make an election to account for lease concessions relating to the effects of the COVID-*19* pandemic consistent with how those concessions would be accounted for under Topic *842* as though enforceable rights and obligations for those concessions existed, even if such enforceable rights and obligations are *not* explicitly contained in the lease contract. Thus, for concessions relating to COVID-*19,* an entity would *not* have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract, and would have the option to apply, or *not* to apply, the general lease modification guidance in Topic *842* as it stands. We have elected this option to account for lease concessions relating to the effects of the COVID-*19* pandemic consistent with how those concessions would be accounted for under Topic *842* as though enforceable rights and obligations for those concessions existed. Therefore, such concessions are *not* accounted for as a lease modification under Topic *842.* We did *not* make any significant concessions in response to COVID-*19* during the *three* or *nine* months ended *September 30, 2022* or *2021.*

***2.*** **Revenues**

Our revenues are disaggregated below:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Rental revenues | $1995 | $2136 | $6000 | $6215 |
| Recoveries | 76 | 254 | 681 | 643 |
| Bad debt | (82) | (19) | (121) | (48) |
| Total rental | 1989 | 2371 | 6560 | 6810 |
| Transaction and other fees | 15 | 10 | 48 | 33 |
| Total revenues | $2004 | $2381 | $6608 | $6843 |

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***3.*** **Accrued Rents and Accounts Receivable, Net**

Accrued rents and accounts receivable, net consists of amounts accrued, billed and due from tenants, allowance for doubtful accounts and other receivables as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
| Tenant receivables | $755 | $733 |
| Accrued rents and other recoveries | 854 | 1065 |
| Allowance for doubtful accounts | (659) | (538) |
| Total | $950 | $1260 |

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The following presents activity in the allowance for doubtful accounts:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Balance at** <br> **beginning of** <br> **period** | **Adjustments** <br> **to rental** <br> **revenue** | **Net Charge-**<br> **offs** | **Balance at end**<br> **of period** |
| Three months ended September 30, 2021 | $429 | $19 | $- | $448 |
| Three months ended September 30, 2022 | 577 | 82 |  | 659 |
| Nine months ended September 30, 2021 | $398 | $48 | $2 | $448 |
| Nine months ended September 30, 2022 | 538 | 121 |  | 659 |

---

***4.*** **Leases**

*As a Lessor.* At *September 30, 2022,* minimum lease payments owed to us for each of the *five* succeeding years under noncancelable operating leases, are as follows (in thousands):

---

| | |
|:---|:---|
| **Years Ended December 31,** | **Minimum** <br> **Future** <br> **Rents<sup>(1)</sup>** |
| 2022 (remaining) | $2143291 |
| 2023 | 7412149 |
| 2024 | 5161795 |
| 2025 | 3355027 |
| 2026 | 2280450 |
| 2027 | 1428247 |
| Thereafter | 260457 |
| Total | $22041416 |

---

<sup>(</sup>*<sup>*1*</sup>*<sup>)</sup> These amounts do *not* reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are *not* fixed.

*As a Lessee.* In periods before *August 2022,* we leased office space under leases from 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.

Total rent expense for the *three* and *nine* months ended *September 30, 2022* was $0 and $11 thousand, respectively. Total rent expense for the *three* and *nine* months ended *September 30, 2021* was ($6) thousand and $11 thousand, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *16*

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***5.*** **Unamortized Lease Commissions and Deferred Legal Cost, Net**

Costs which have been deferred consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
| Leasing commissions | $2104 | $1364 |
| Deferred legal cost | 12 | 12 |
| Total cost | 2116 | 1376 |
| Less: leasing commissions accumulated amortization | (1736) | (901) |
| Less: deferred legal cost accumulated amortization | (12) | (11) |
| Total cost, net of accumulated amortization | $368 | $464 |

---

A summary of expected future amortization of deferred costs is as follows (in thousands):

---

| | |
|:---|:---|
| **Years Ended December 31,** | **Leasing** <br> **Commissions** |
| 2022 (remaining) | $73 |
| 2023 | 118 |
| 2024 | 82 |
| 2025 | 51 |
| 2026 | 34 |
| 2027 | 9 |
| Thereafter | 1 |
| Total | $368 |

---

***6.*** **Variable Interest Entity**

Pillarstone became the general partner of Pillarstone OP with an equity ownership interest in Pillarstone OP totaling approximately 18.6% pursuant to the Contribution Agreement. Pursuant 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 that owned *14* real estate assets at that time. In connection with the Contribution Agreement, the Company, as the general partner of Pillarstone OP, entered into an Amended and Restated Agreement of Limited Partnership. Pursuant to the Amended and Restated Agreement of Limited Partnership, 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 Amended and Restated Agreement of Limited Partnership, the general partner *may not* conduct any business without the consent of a majority of the limited partners other than in connection with certain actions described therein. The Company is deemed to exercise significant influence over Pillarstone OP as it has the power to direct the activities that most significantly impact Pillarstone OP's economic performance and the Company's right to receive benefits based on its ownership percentage in Pillarstone OP. Accordingly, the Company accounts for Pillarstone OP as a Variable Interest Entity.

The Amended and Restated Agreement of Limited Partnership designates *two* classes of units of limited partnership interest in Pillarstone OP: the OP Units and LTIP units. In general, LTIP units are similar to the OP Units and will receive the same quarterly per-unit profit distributions as the OP Units. The rights, privileges, and obligations related to each series of LTIP units will be established at the time the LTIP units are issued. As profits interests, LTIP units initially will *not* have full parity, on a per-unit basis, with OP Units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP units can over time achieve full parity with the OP Units and therefore accrete to an economic value for the holder equivalent to OP Units. If such parity is achieved, vested LTIP units *may* be converted on a one-for-*one* basis into OP Units, which in turn are redeemable by the holder for cash or, at the Company's election, exchangeable for Common Shares on a one-for-*one* basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *17*

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The carrying amounts and classification of certain assets and liabilities for Pillarstone OP in our consolidated balance sheets consists of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
|  | **(unaudited)** |  |
| Real estate assets, at cost |  |  |
| Property | $57278 | $57023 |
| Accumulated depreciation | (9794) | (8751) |
| Total real estate assets | 47484 | 48272 |
| Cash and cash equivalents | 5079 | 4900 |
| Escrows and utility deposits | 1928 | 1243 |
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | 952 | 1104 |
| Receivable due from related party | 263 | 1011 |
| Unamortized lease commissions and deferred legal cost, net | 368 | 464 |
| Prepaid expenses and other assets | 129 | 33 |
| Total assets | $56203 | $57027 |
| Liabilities |  |  |
| Notes payable | $14757 | $14920 |
| Accounts payable and accrued expenses | 1794 | 1483 |
| Payable due to related party |  | 827 |
| Accrued interest payable |  | 64 |
| Tenants' security deposits | 779 | 827 |
| Total liabilities | $17330 | $18121 |

---

***7.*** **Debt**

Mortgages and other notes payable consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
| Fixed rate notes |  |  |
| Mortgage debt, 4.97% rate, due October 1, 2023 | $14713 | $14968 |
| Financed insurance premium, 5.59% rate, due December 19, 2022 | 74 |  |
| Total notes payable principal | 14787 | 14968 |
| Less deferred financing costs, net of accumulated amortization | (30) | (48) |
| Total notes payable | $14757 | $14920 |

---

The mortgage debt is an obligation of Whitestone Uptown Tower, LLC as borrower and is collateralized by the Uptown Tower property. The mortgage debt is guaranteed by Whitestone OP. This mortgage is an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in these consolidated financial statements. Neither Pillarstone nor Pillarstone OP has any obligation or guarantee of this indebtedness nor do any other of our properties collateralize this indebtedness. The mortgage debt contains restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt and is secured by a deed of trust on our property and the assignment of certain rents and leases associated with the property. The loan is also subject to customary covenants.

On *August 3, 2023,* we received a notice of default and demand for payment of the mortgage debt. In the letter, the lender and specialty servicer stated that the *December 8, 2016* transaction with Whitestone OP pursuant to the Contribution Agreement resulted in a change in control which did *not* meet the terms of the consent letter obtained at the time of the transaction. As such, the lender and specialty servicer consider that terms of the mortgage debt were breached effective *December 8, 2016* and that an event of default has occurred since that date resulting in accrued interest at the default rate totaling approximately $6.5 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *18*

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At *September 30, 2022,* the reported net equity in Whitestone Uptown Tower, LLC was $4.9 million.

As of *September 30, 2022,* the borrower was *not* in compliance with loan covenants requiring timely filing of financial information to the lender for mortgage loan.

Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owns the Uptown Tower office building, is the borrower under a loan agreement. The Uptown Tower office building is subject to a mortgage under the loan agreement. Whitestone OP is the guarantor of this mortgage loan This mortgage is an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP has any obligation or guarantee of this indebtedness nor do any of our other properties collateralize this indebtedness.

As of *September 30, 2022,* the borrower was *not* in compliance with loan covenants requiring timely filing of financial information to the lender for mortgage loan.

In *July 2023,* Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We do *not* have an alternate source of funds for the operation of Uptown Tower. However, when Whitestone learned of our negotiations with the special servicer to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall *not* (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on *September 22, 2023.* As of *December 31, 2023,* Rialto Capital Advisors, LLC held approximately $969 thousand under the cash sweep. The borrower had requested disbursements of capital and operating expenditures from the special servicer under the terms of the loan agreement in *August 2023* and *September 2023,* but Rialto Capital Advisors, LLC did *not* release the funds and indicated that it did *not* intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

On *August 3, 2023,* we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in *2016.* The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in *August 2022.*

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and *not* Whitestone REIT.

As the *2016* alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the *2022* default through its unilateral termination of the management agreement for Uptown Tower, we are *not* in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they *may* have on the borrower or the Uptown Tower property.

The mortgage loan matured on *October 1, 2023.* The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. However, on *October 19, 2023,* Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *19*

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On *October 24, 2023,* the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (*1*) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (*2*) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter *64,* Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on *December 5, 2023.*

On *January 3, 2024,* Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of *December 4, 2023.* The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes.

On *December 1, 2023,* Whitestone Uptown Tower, LLC, an indirect subsidiary of the registrant, filed a voluntary petition for relief under Chapter *11* of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in *November 2023,* representatives of our board of trustees attempted to initiate discussions with Whitestone REIT to address these matters with representatives of Whitestone REIT's board of trustees to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer, including the application of the trapped cash, escrows and reserves to the indebtedness. *No* Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was *not* consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC.

Scheduled maturities of notes payable as of *September 30, 2022* were as follows (in thousands):

---

| | |
|:---|:---|
| **Years Ended December 31,** | **Amount Due** |
| 2022 (remaining) | $74 |
| 2023 | 14713 |
| Total | $14787 |

---

***8.*** **Convertible Notes Payable** 

On *November 20, 2015,* five trustees on our board of trustees, *one* of whom is *no* longer affiliated with the Company, loaned $198 thousand to the Company in exchange for convertible notes payable. The convertible notes payable accrue interest at 10% per annum and originally matured 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. At maturity or when the Company chooses to call the convertible notes payable, the noteholders have the option to receive cash plus accrued interest or convert the convertible notes payable into common shares at $1.331 per common share. Accrued interest on these related convertible notes was approximately $128 thousand as of *September 30, 2022* and $121 thousand as of *December 31, 2021.*

***9.*** **Shareholders**' **Equity**

*Operating partnership units.* Substantially all of our business is conducted through Pillarstone OP, and we are the sole general partner. We own an 18.6% interest in Pillarstone OP. At any time, limited partners in Pillarstone OP holding OP Units have the right to convert their OP Units for cash, or at our option, common shares of Pillarstone. As of *September 30, 2022,* there were 16,688,167 OP Units outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *20*

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*Pillarstone equity.* We have authority to issue up to 450,000,000 shares of beneficial interest, $0.01 par value per share, of which 400,000,000 are classified as common shares of beneficial interest, $0.01 par value per share and 50,000,000 are classified as preferred shares of beneficial interest, $0.01 par value per share. Of the 50,000,000 preferred shares of beneficial interest, 1,518,000 shares are designated as Class A Cumulative Preferred Shares ("Class A Preferred Shares") and 300,000 shares are designated as Preferred Class C Convertible Preferred shares ("Class C Preferred Shares").

On *December 26, 2021,* the board authorized a dividend of one preferred share purchase right (a "Right") for each outstanding common share of the Company, payable on *December 27, 2021.* The description and terms of the Rights are set forth in a rights agreement, dated as of *December 27, 2021 (*as the same *may* be amended from time to time, the "Rights Agreement"), between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (the "Rights Agent").

Each Right entitles the registered holder to purchase from the Company one one-thousandth (a "Unit") of a Series D Preferred Share, par value $0.01 per share, of the Company at a purchase price ("Purchase Price") of $7.00 per Unit, subject to adjustment. The Rights initially trade with the common shares and will generally only become exercisable on the 10th business day after a person or entity has become the owner of 5% or more of the common shares (20% or more with respect to certain passive institutional investors) or the commencement of a tender or exchange offer which would result in any person becoming an owner of 5% or more of the common shares, except in certain situations specified in the Rights Agreement (such person an "Acquiring Person"), with proper provision (i) to provide each holder of certain units of Pillarstone OP with the number of Rights as would be issued to the applicable holder as if the holder had exercised its applicable redemption rights relating to such units immediately prior to the distribution date under the Rights Agreement, and the Company had elected to satisfy the redemption rights by paying the holder in shares in accordance with Pillarstone OP's partnership agreement, and (ii) to provide each holder (other than the Company) of Class C Convertible Preferred Shares of beneficial interest, $0.01 par value per share, of the Company with the number of Rights, evidenced by Rights Certificates, as would be issued to such holder as if such holder had converted all of its Class C Preferred Shares into common shares immediately prior to the distribution date.

If any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right (other than Rights beneficially owned by an Acquiring Person, affiliates and associates of an Acquiring Person and certain transferees thereof, which Rights will thereupon become null and void) will thereafter have the right to receive upon exercise of a Right that number of common shares having a market value of two times the Purchase Price. If, after any person or group of affiliated or associated persons has become an Acquiring Person, the Company is acquired in a merger, consolidation or combination or 50% or more of its consolidated assets, cash flow or earning power are transferred, proper provisions will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, affiliates and associates of an Acquiring Person and certain transferees thereof, which Rights will have become null and void) will thereafter have the right to receive upon the exercise of a Right that number of common shares of the person (or its parent) with whom the Company has engaged in the foregoing transaction having a market value of two times the Purchase Price. At any time after any person or group of affiliated or associated persons becomes an Acquiring Person and prior to the earlier of *one* of the events described in the previous paragraph or the acquisition by an Acquiring Person of 50% or more of the outstanding common shares, the Board *may* exchange the Rights (other than Rights owned by an Acquiring Person, affiliates and associates of an Acquiring Person and certain transferees thereof, which Rights will have become null and void), in whole or in part, for common shares at an exchange ratio of one common share per Right.

The Rights will expire on the earliest of (i) the close of business on *December 27, 2024, (*ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the closing of any merger or other acquisition transaction involving the Company that has been approved by the Board, at which time the Rights are terminated, (iv) the business day immediately following the Company's *2022* annual meeting of shareholders (including any adjournment thereof) if the Rights Agreement shall *not* have been approved, on or before such date, by the affirmative vote of the holders of a majority of the voting power present, in person or by proxy, and entitled to vote at a meeting of the Company's shareholders duly held in accordance with the Articles of Amendment and Restatement of the Declaration of Trust of the Company, the Company's bylaws and Maryland law, and (v) the time at which the Rights are exchanged pursuant to the Rights Agreement. The Rights are in all respects subject to and governed by the provisions of the Rights Agreement.

*Preferred shares*. The Company has outstanding 256,636 Class A Preferred Shares of which 95,226 Class A Preferred Shares were issued to the public. The Class A Preferred Shares bear a liquidation value of $10.00 per share. We have the right to redeem the Class A Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *21*

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Effective *June 30, 2003,* we issued 696,078 Class A Preferred Shares valued at approximately $2.4 million to James C. Mastandrea, our Chairman and previous Chief Executive Officer and President, and John J. Dee, our previous Chief Financial Officer and Senior Vice President, pursuant to separate restricted share agreements. Under each restricted share agreement, the restricted shares vest upon the later of the following dates:

● the date our gross assets exceed $50 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.*

None of the restricted shares have vested. While the Company's gross assets exceed $50 million, when considering its 18.6% ownership of Pillarstone OP, its effective ownership of gross assets is less than $50 million.

In conjunction with a *one*-time incentive exchange offer for Class A Preferred shareholders, Messrs. Mastandrea and Dee exchanged 534,668 of these restricted Class A Preferred Shares into 163,116 restricted common shares. The restrictions described above are also applicable to their common shares. The 161,410 restricted Class A Preferred Shares continuing to be held by Messrs. Mastandrea and Dee can each be converted into 0.305 restricted common shares.

Holders of the remaining 95,226 Class A Preferred Shares did *not* participate in the *one*-time exchange offer above and, as a result, these Class A Preferred Shares are convertible into 0.046 common shares, subject to certain formulas.

Effective *September 29, 2006,* Pillarstone filed articles supplementary to its Declaration of Trust, as amended, restated and supplemented with the State Department of Assessment and Taxation of Maryland designating 300,000 Class C Preferred Shares. The Class C Preferred Shares have voting rights equal to the number of common shares into which they are convertible. Each Class C Preferred Share is convertible into common shares by dividing the sum of $10.00 and any accrued but unpaid dividends on the Class C Preferred Shares by the conversion price of $1.00. The Class C Preferred Shares have a liquidation preference of $10.00 per share, plus any accrued but unpaid dividends, and can be redeemed by the board of trustees at any time, with notice, at the same price per share.

*Restricted Common Shares*. The following table summarizes the activity of our unvested restricted common shares:

---

| | | |
|:---|:---|:---|
|  | Unvested Restricted Common Shares | Unvested Restricted Common Shares |
|  |  | Weighted-Average |
|  | *Number of* | *Grant-Date* |
|  | *Shares* | *Fair Value* |
| Unvested at December 31, 2020 | 168449 | $11.44 |
| Vested |  |  |
| Unvested at December 31, 2021 | 168449 | $11.44 |
| Vested |  |  |
| Unvested at September 30, 2022 | 168449 | $11.44 |

---

In the above table, 163,116 restricted shares vest upon meeting performance goals as discussed under "Preferred Shares." Since the grant date, we have determined that meeting these performance goals is *not* probable, and no compensation expense has been recognized related to this grant. The grant date fair value of $1.8 million would be recognized at the point we deem it probable that we would meet the performance goals. The balance of 5,333 restricted shares had grant date fair values totaling $79 thousand, which was recognized in prior periods though the restrictions remain on the shares.

During the quarter ended *September 30, 2021,* the Company acquired common shares held by an employee who tendered owned common shares to satisfy the tax withholding on the lapse of certain restrictions on restricted shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *22*

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***10.*** **Stock-Based Compensation**

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 the Company's operating partnership, 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 the operating partnership, 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 the operating partnership issued and outstanding (other than treasury shares and/or units issued to or held by the Company). There were 2,086,655 shares available for grant under the *2016* Plan at *September 30, 2022.*

The Company did not recognize any stock-based compensation expense for trustee compensation or employee stock-based compensation in the *three* and *nine* months ended *September 30, 2022.*

For the *three* and *nine* months ended *September 30, 2021,* the Company recognized $9 thousand and $26 thousand for employee stock-based compensation, respectively. These awards were subsequently forfeited in *2021.* The Company did not recognize any stock-based compensation expense for trustee compensation in the *three* and *nine* months ended *September 30, 2022.*

*Options*. The Company has a single option award outstanding for 667 shares of our Common Stock for $33.75. This award is fully vested and remains effective until 90 days after the term ends of the individual trustee. The awards have no intrinsic value as they were out-of-the-money at *September 30, 2022.* No compensation expense was recognized for these awards in the *nine* months ended *September 30, 2022* or *2021* as the awards became fully vested in previous years.

***11.*** **Earnings (Loss) per Share**

The following is the computation of earnings (loss) per basic and diluted share:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
| *(in thousands, except share and per share data)* | **2022** | **2021** | **2022** | **2021** |
| **Numerator:** |  |  |  |  |
| Net earnings (loss) attributable to common shareholders | $646 | $(56) | $554 | $(201) |
| Add: After tax effect of convertible notes interest | 4 |  | 12 |  |
| Net earnings (loss) attributable for dilutive securities | $650 | $(56) | $566 | $(201) |
| **Denominator:** |  |  |  |  |
| Weighted average number of common shares - basic | 493968 | 441525 | 493968 | 435133 |
| Dilutive effect of: |  |  |  |  |
| Shares issuable upon conversion of convertible notes payable | 250656 |  | 250656 |  |
| Shares issuable upon conversion of 95,226 Class A Preferred Shares | 4380 |  | 4380 |  |
| Shares issuable upon conversion of 231,944 Class C Preferred Shares | 2319440 |  | 2319440 |  |
| Weighted average number of common shares - dilutive | 3068444 | 441525 | 3068444 | 435133 |
| **Basic earnings (loss) per common share:** |  |  |  |  |
| Net earnings (loss) available to common shareholders | $1.31 | $(0.13) | $1.12 | $(0.46) |
| **Diluted earnings (loss) per common share:** |  |  |  |  |
| Net earnings (loss) available to common shareholders | $0.21 | $(0.13) | $0.18 | $(0.46) |

---

In periods when we incur a net loss, the computation of diluted loss per share excludes shares issuable upon conversion of the Company's Class A Preferred Shares, Class C Preferred Shares and convertible notes payable because the effect of the conversions would be anti-dilutive. Similarly, outstanding options and restricted Common Shares were *not* included computation of diluted earnings per share for each of the periods above because they would be anti-dilutive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *23*

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***12.*** **Income Taxes**

Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impacts of discrete items are recognized in the period these occur.

Our effective tax rate for the *three* months ended *September 30, 2022* and *September 30, 2021* was 20% and 0%, respectively. Our effective tax rate for the *nine* months ended *September 30, 2022* and *2021* was 25% and 4%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes and permanent differences for non-deductible expenses.

***13.*** **Related Party Transactions**

*Managerial Agreements.* From *December 8, 2016* through *August 18, 2022,* we contracted with Whitestone TRS for managerial services. Pursuant to the Management Agreements with respect to each property, other than Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such properties in exchange for (*1*) a monthly property management fee equal to 5.0% of the monthly revenues of each property and (*2*) 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 property based upon the purchase price allocations determined pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such property. Pursuant 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 in exchange for (*1*) a monthly property management fee equal to 3.0% of the monthly revenues of Uptown Tower and (*2*) a monthly asset management fee equal to 0.125% of GAV of Uptown Tower.

On *July 19, 2022,* Pillarstone received written notice that Whitestone TRS confirmed termination of the Management Agreements for the Pillarstone OP Real Estate Assets. Pillarstone had previously communicated to Whitestone its plan to internalize the management of the Real Estate Assets, but Pillarstone had *not* made efforts to terminate the management agreements. However, Whitestone TRS stated in its notice letter that while it had *not* received written notice of the termination of the management agreements, it "confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from" *July 19, 2022.*

On *August 18, 2022,* Whitestone TRS ceased all managerial services without providing any transition services. Pillarstone has worked since that time to internalize the management of its Real Estate Assets and to continue to pursue its business without the management services provided by Whitestone TRS.

*Expense Reimbursements.* Under the Amended and Restated Agreement of Limited Partnership dated *December 8, 2016,* Pillarstone OP is responsible for administrative and operating costs and expenses incurred by the Company as General Partner of Pillarstone OP, including, without limitation, all expenses relating to the General Partner's (i) continued existence and subsidiary operations, (ii) offerings and registration of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of the Partnership; provided, however, that such costs and expenses shall *not* include any administrative or operating costs of the General Partner attributable to assets owned by the General Partner directly and *not* through Pillarstone OP or its Subsidiaries.

Indemnification provisions within the Amended and Restated Agreement of Limited Partnership also provide for reimbursement of all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys fees and other legal fees and expenses), judgments, fines, settlements and other amounts, arising from or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, relating to Pillarstone OP or the General Partner or the operation of, or the ownership of property.

These reimbursement provisions provide the Company with critical sources of cash and liquidity to maintain our operations. Following Whitestone's abrupt termination of managerial services to Pillarstone OP, we have incurred significant costs to internalize management, and to select and implement an enterprise-wide system of our own. We have also incurred substantial legal costs in our litigation with Whitestone.

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The Company has *no* assets, activities or operations other than those related to Pillarstone OP. Hence, all of our costs and expenses are reimbursable under the applicable provisions of the Amended and Restated Agreement of Limited Partnership.

We determined that Whitestone, as operational manager until *August 2022* was *not* making appropriate reimbursement of the Company's operating and administrative expenses from Pillarstone OP. During the *first* quarter of *2022,* we recorded $1.8 million as reimbursement of expenses for the years ended *2017* through *2021.* We recorded reimbursements from Pillarstone OP totaling $216 thousand and $487 thousand during the *three* and *nine* months ended *September 30, 2022,* respectively, for operating and administrative expenses incurred in *2022.*

The reimbursements initially reported in our Quarterly Reports on Forms *10*-Q for the periods ended *March 31, 2022* and *June 30, 2022* were offset by reserves totaling $1.8 million because the amounts were disputed by Whitestone. As the manager responsible for all day-to-day operations, Whitestone maintained financial records and access to all cash balances of the Company. The reserves were necessary then in recognition that significant efforts, including litigation, *may* have been necessary to collect these amounts.

Following Whitestone's termination of managerial services in *August 2022,* we internalized management of the Company. This includes maintenance of the Company's financial records and direct access to all cash balances of the Company. Based on this and our rights to the full reimbursement as provided by the Amended and Restated Agreement of Limited Partnership, we reversed the reserves in *August 2022.*

Whitestone has notified us that they will contest some or all of these reimbursements. We intend to vigorously defend these reimbursements as they are permitted under provisions of the Amended and Restated Agreement of Limited Partnership dated *December 8, 2016.*

For financial reporting purposes, Pillarstone REIT and Pillarstone OP report on a consolidated basis, therefore, the reimbursement of our expenses does *not* change net income but only the allocations between controlling and noncontrolling interests.

*Whitestone Claim for Expenses.* After we notified Whitestone of the $1.8 million reimbursement required from Pillarstone OP, Whitestone and Whitestone OP made a claim to Pillarstone and Pillarstone OP to be reimbursed for construction and lease commission expenditures of $1.4 million paid by Whitestone OP on behalf of Pillarstone OP during *2017* and *2018.* Pillarstone requested additional information for the $1.4 million expenditures to determine if any of the items claimed should have been prorated between Pillarstone OP and Whitestone OP in our transaction with Whitestone and Whitestone OP on *December 8, 2016* for the initial acquisition of the Real Estate Assets. These expenditures were recorded on Pillarstone OP in *2017* and *2018* as an increase in the Whitestone OP limited partner investment account and as assets of Pillarstone OP that have been depreciated and amortized to expense over their useful lives. The amount due Whitestone OP for these expenditures, if any, has *not* been determined. If Pillarstone OP reimburses any amounts to Whitestone OP, the payment would reduce the Whitestone OP limited partner investment account.

*Summary.* The following table presents the revenue and expenses with related parties included in our consolidated statement of operations (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **Location of Revenue (Expense)** | **2022** | **2021** | **2022** | **2021** |
| Rent revenue from Whitestone | *Rental* | $95 | $225 | $461 | $676 |
| Property management fees to Whitestone | *Management fees* | (51) | (97) | (245) | (291) |
| Asset management fees to Whitestone | *Management fees* | (24) | (45) | (114) | (135) |
| Rent expense to Whitestone | *Office expenses* |  | 6 | (11) | (11) |
| Interest expense on convertible notes to active trustees | *Interest expense, net* | (4) | (4) | (11) | (11) |

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Receivables due from and payables due to related parties consisted of the following (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Location of Receivable (Payable)** | **September 30,** <br> **2022** | **December 31,** <br> **2021** |
| Tenant receivables and other receivables | *Receivable due from related party* | $264 | $1011 |
| Convertible notes payable | *Convertible notes payable - related parties* | (150) | (150) |
| Accrued interest on convertible notes | *Accrued interest payable* | (103) | (92) |
| Other payables due to related party | *Payable due to related party* |  | (846) |

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***14.*** **Commitments and Contingencies**

The Company is involved with on-going lawsuits filed by Whitestone OP as discussed in Notes *1* and *15* to these consolidated financial statements. The Company is vigorously defending itself in these matters. It is reasonably possible that such litigation could result in large monetary awards, especially if compensatory and/or punitive damages are awarded. Such damages *may* include a partial or complete loss of the value of interest in Pillarstone OP. Management, with the consultation of the Company's legal counsel, is *not* able to conclude whether these lawsuits will be resolved without a material adverse effect on our financial position, earnings, or cash flows.

***15.*** **Subsequent Events**

In *April 2023,* the Company financed approximately $508 thousand of the premium for the renewal of its insurance coverages. The financed premium is being paid in eight monthly installments beginning in *April 2023* and bears interest at 6.94% per annum.

On *July 12, 2022,* we were named as a defendant in a lawsuit by Whitestone OP in a lawsuit styled *Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT,* C.A. *No. 2022*-*0607*-LWW, in the Court of Chancery of the State of Delaware. The suit challenges our rights agreement, dated as of *December 27, 2021 (*as the same *may* be amended from time to time, the "Rights Agreement"), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claims that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

Based upon various issues, including those discussed in this report, we filed a lawsuit on *September 16, 2022,* in district court in Harris County, Texas, against Whitestone and related parties alleging, among other things, breach of the Pillarstone OP Amended and Restated Agreement of Limited Partnership and fiduciary duty and breach of the management agreements.

On *July 21, 2022,* Whitestone OP filed a Motion to Preserve the Status Quo in the Delaware lawsuit requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevents Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argues that Whitestone's material breaches of contract and fiduciary duty operate to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in *August 2022* with representatives of Whitestone's board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was *not* open to settling these matters at that time or the other various times since *August 2022* we attempted to initiate discussions to resolve these matters.

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Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intends to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we *may not* have the cash available to pay such amounts and *may* be required to sell *one* or more of our Real Estate Assets to satisfy this obligation, which *may* cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We have stated that a redemption request would *not* trigger the Rights Agreement, and our board of trustees has the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to *not* exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

Based on Whitestone's performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did *not* believe that Whitestone's actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall *not* be liable for monetary or other losses sustained, liabilities incurred or benefits *not* derived by the limited partners in connection therewith.

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone REIT's unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone REIT's management. Our efforts to address these matters have in some cases been stymied by Whitestone REIT's litigation against us in Delaware where the court has limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees have increased substantially as we address the internalization of management and the litigation matters discussed in this report.

On *July 17, 2023* and *July 18, 2023,* trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on *October 18, 2023.* Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on *August 28, 2023.* On *January 25, 2024,* the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. We disagree with the Delaware court's ruling and are considering our options for appeal, subject to a final order being entered in the case, the outcome of various proceedings in the jointly administered bankruptcy cases described below and the decision of the plan agent in the bankruptcy cases to pursue an appeal.

The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP's redemption obligation and determine what value to attribute to Pillarstone OP's assets. The Delaware court declared that any further relief must await future proceedings.

On *January 25, 2024,* Whitestone OP delivered its notice of redemption for all but *one* of its OP Units.

On *September 16, 2022,* we filed a lawsuit styled *Pillarstone Capital REIT and Pillarstone Capital REIT Operating Partnership LP v. Whitestone TRS, Inc., Whitestone REIT, Whitestone REIT Operating Partnership, L.P.,* Cause *No. 2022*-*59478,* in the District Court, Harris County, Texas, *189th* Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. A portion of the claims in this case were also brought as an adversary proceeding by Whitestone Uptown Tower, LLC in the Uptown Tower bankruptcy case described in "—Uptown Tower" below.

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

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The joint plan of liquidation in the bankruptcy case providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in *November 2024.* Those Real Estate Assets were sold between *October 2024* and *July 2025.* The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent's administration of the claims *may* include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

The plan agent is *not* a trustee and does *not* participate in the management or operations of the debtors' businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors' business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party's good-faith objection and the bankruptcy court's final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor's funds (even if held by Pillarstone OP), which *may* include sales proceeds.

The plan agent is entitled to receive compensation as a flat fee the amount of $10,000.00 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than *fifteen* (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650.00 per hour for each additional hour of services.

Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owned the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt was guaranteed by Whitestone OP. This mortgage was an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

As of *September 30, 2022,* the borrower was *not* in compliance with loan covenants requiring timely filing of financial information to the lender for mortgage loan.

In *July 2023,* Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did *not* have an alternate source of funds for the operation of Uptown Tower.

On *August 3, 2023,* we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in *2016.* The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in *August 2022.*

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and *not* Whitestone REIT.

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As the *2016* alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the *2022* default through its unilateral termination of the management agreement for Uptown Tower, we are *not* in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they *may* have on the borrower or the Uptown Tower property.

The borrower had requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in *August 2023* and *September 2023,* but Rialto Capital Advisors, LLC did *not* release the funds and indicated that it did *not* intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on *October 1, 2023.* The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall *not* (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on *September 22, 2023.* On *October 19, 2023,* Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

On *October 24, 2023,* the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (*1*) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (*2*) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter *64,* Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on *December 5, 2023.*

On *December 1, 2023,* Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter *11* of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled *In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership*, Case *No. 23*-*32832*-mvl-*11,* in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in *November 2023,* representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT's board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. *No* Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was *not* consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

On *January 3, 2024,* Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of *December 4, 2023.* The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On *January 31, 2024,* the lender sued Whitestone OP to enforce Whitestone OP's guaranty of the mortgage loan.

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In *June 2024,* Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

The plan of reorganization in the bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in *July 2024.* We sold Uptown Tower in *July 2025* for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and paid off the American Bank, N.A. indebtedness. We are holding approximately $13.6 million of the sale proceeds representing funds Whitestone OP mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so on Whitestone Uptown Tower, LLC's behalf. We are currently disputing the treatment and timing of repayment of the $13.6 million to Whitestone OP in the Whitestone Uptown Tower bankruptcy case.

This litigation has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. The registrant believes that the allegations in the Delaware lawsuit are without merit and intends to continue to vigorously defend against them. In addition, we intend to vigorously pursue the Texas action to seek damages from Whitestone due to its violations of the management agreements and fiduciary duties and to protect our shareholders from the further harms that Whitestone has indicated it intends to inflict on us and our shareholders. However, the outcomes of these lawsuits, including the timing of the final disposition of the lawsuits, are unpredictable and could result in substantial costs to us. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on the registrant's business, results of operations or financial condition.

Following the period covered by this report, we sold Real Estate Assets under the Whitestone Uptown Tower, LLC plan of reorganization and the plan of liquidation for the other Pillarstone entities.

In *October 2024,* we sold *9101* LBJ Freeway for a purchase price of $5,753,000, or approximately $5.1 million after deductions, closing costs and commissions.

In *October 2024,* we sold Interstate *10* Warehouse for a purchase price of $8,400,000, or approximately $8.1 million after deductions, closing costs and commissions.

In *February 2025,* we sold Corporate Park Woodland II for a purchase price of $1,650,000, or approximately $1.56 million after deductions, closing costs and commissions.

In *July 2025,* we sold Uptown Tower for a purchase price of $20,000,000, or approximately $17.3 million after deductions, closing costs and commissions.

In *July 2025,* in a series of related transactions, we sold:

• Corporate Park Northwest for a purchase price of $8,500,000, or approximately $7.8 million after deductions, closing costs and commissions;

• Holly Hall Industrial Park for a for a purchase price of $7,650,000, or approximately $7.2 million after deductions, closing costs and commissions;

• Holly Knight for a purchase price of $4,750,000, or approximately $4.5 million after deductions, closing costs and commissions; and

• Westgate Service Center for a purchase price of $9,100,000, or approximately $8.6 million after deductions, closing costs and commissions.

*\* \* \* \* \**

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**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

***Unless the context otherwise requires, all references in this report to the*** "***Company,***" ****"***we,***" ****"***us***" ***or*** "***our***" ***are to Pillarstone Capital REIT and its consolidated subsidiaries.***

**Forward-Looking Statements**

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as "may," "will," "should," "potential," "predicts," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned not to place undue reliance on forward-looking statements, which reflect our management's view only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

Factors that could cause actual results to differ materially from any forward-looking statements made in this Report include:

• our ability to continue as a going concern, which may require us to manage costs and expenses and to obtain financing or sell assets to obtain funds to implement our business plan;

• our ability to successfully consummate the sale of our properties and obtain an adequate price in our bankruptcy proceedings;

• our ability to successfully complete our and our subsidiaries' plans of liquidation and reorganization under Chapter 11 and emerge from bankruptcy;

• the effects of the bankruptcy cases on us and on the interests of various constituents;

• bankruptcy court rulings in our and our subsidiaries' bankruptcy cases and the outcome of the bankruptcy cases in general;

• the effects of our ongoing litigation with Whitestone REIT, Whitestone REIT Operating Partnership, L.P., and Whitestone TRS, Inc., including proceedings in the bankruptcy cases;

• our ability to internalize management of our assets and business, including the rebuilding of our accounting and financial reporting system;

• changes in national and local economic conditions, the real estate industry, and the commercial real estate markets in which we operate (including supply and demand changes), particularly in Dallas and Houston, including the impact of high unemployment, volatility in the public equity and debt markets, and international economic and other conditions;

• the impact of a public health crisis and the governmental and third-party response to such a crisis, which may affect our key personnel, our tenants, and the costs of operating our assets;

• changes in the needs of our tenants brought about by the desire for co-working arrangements, trends toward utilizing less office space per employee, and the effect of employees working remotely;

• sociopolitical unrest such as political instability, civil unrest, armed hostilities, or political activism, which may result in a disruption of day-to-day building operations;

• increases in interest rates and operating costs;

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• availability and terms of capital and financing, both to fund our operations and to refinance any indebtedness as it matures, in each case, on terms favorable to us;

• decreases in rental rates or increases in vacancy rates;

• litigation risks, including the restrictions on our operations by the Status Quo Order issued by court in the lawsuit in which we are a defendant in the Court of Chancery of the State of Delaware;

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

• volatility in interest rates and insurance rates;

• inflation and continuing increases in the inflation rate;

• the risks associated with real estate developments (such as zoning approval, receipt of required permits, construction delays, cost overruns, and leasing risk);

• changes in senior management, changes in the Board of Trustees, and the loss of key personnel;

• the potential liability for uninsured losses, condemnation, or environmental issues;

• the potential liability for a failure to meet regulatory requirements;

• any failure to comply with debt covenants under credit agreements;

• potential changes to state, local, or federal regulations applicable to our business;

• cybersecurity attacks, loss of confidential information and other business disruptions;

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

• any adverse change in the financial condition of one or more of our tenants; and

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

In addition, an investment in the Company involves numerous risks that potential investors should consider carefully, including, without limitation:

• our cash resources are limited;

• we have a history of losses;

• we have not raised funds through a public equity offering;

• our trustees control a significant percentage of our voting shares;

• shareholders could experience possible future dilution through the issuance of additional shares;

• we are dependent on a small number of key senior professionals; and

• we currently do not plan to distribute dividends to the holders of our shares.

**Overview**

The Company is a Maryland real estate investment trust ("REIT") engaged in investing in, owning and operating commercial properties. We own approximately 18.6% of Pillarstone Capital REIT Operating Partnership LP (the "Operating Partnership" or "Pillarstone OP") and serve as its general partner. Substantially all of our operations and activities are conducted for the benefit of and 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. Pillarstone OP owns two office buildings in the Dallas metropolitan area and six warehouse locations in the Houston metropolitan area having approximately 927 thousand square feet of gross leasable area.

Future real estate opportunities 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, (iii) sales of existing properties, (iv) redevelopment of existing properties, and (v) joint venture 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 Company's ability to continue operations, as well as its liquidity and financial results.

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***History***

Pillarstone was formed on March 15, 1994 as a Maryland REIT. We operated as a traditional REIT by buying, selling, owning and operating commercial and residential properties through December 31, 1999. In 2000, we purchased a software technology company, resulting in our not meeting the qualifications to be a REIT under the Code. In 2002, we 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 multifamily residential properties, including affordable housing communities, and repositioning them through renovation, leasing, improved management and branding. From 2006 until December 2016, we continued our existence as a corporate shell current in our 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 REIT, both of which were related parties to us and Pillarstone OP, pursuant to which Whitestone OP contributed to Pillarstone OP all of the equity interests in four of its wholly-owned subsidiaries that owned 14 real estate assets (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 (collectively, the "Acquisition"). Whitestone OP is the 81.4% limited partner of Pillarstone OP.

In connection with the Contribution Agreement, on December 8, 2016, we entered into management agreements with Whitestone TRS, Inc., a subsidiary of Whitestone ("Whitestone TRS"). Pursuant to the management agreements with respect to each property, other than Uptown Tower, Whitestone TRS agreed to provide certain property management, leasing and day-to-day advisory and administrative services to such properties in exchange for (1) a monthly property management fee equal to 5.0% of the monthly revenues of each property and (2) 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 property based upon the purchase price allocations determined pursuant to the Contribution Agreement, excluding all indebtedness, liabilities or claims of any nature) of such property. Pursuant 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 in exchange for (1) a monthly property management fee equal to 3.0% of the monthly revenues of Uptown Tower and (2) a monthly asset management fee equal to 0.125% of GAV of Uptown Tower.

On July 19, 2022, we received written notice that Whitestone TRS confirmed termination of the management agreements for the Real Estate Assets. We had previously communicated to Whitestone our plan to internalize the management of the Real Estate Assets, but we had not made efforts to terminate the management agreements. However, Whitestone TRS stated in its notice letter that while it had not received written notice of the termination of the management agreements, it "confirms receipt of your intent to terminate, and hereby confirms termination of the Agreements effective 30 days from" July 19, 2022. The management agreements provided that "Unless otherwise terminated pursuant to the provisions hereof, the term of this Agreement shall automatically renew on a month to month basis at the end of the term unless either of the Parties has notified the other in writing not less than thirty (30) days prior to the expiration of the term, as the same may be extended."

Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe. The management agreements provided for Whitestone TRS to provide such services, or in certain cases contracting with other providers to perform such services, as:

• providing management, leasing, and maintenance personnel to operate the Real Estate Assets;

• maintaining the Real Estate Assets;

• maintaining connected utility services at the Real Estate Assets;

• invoice and collect the monthly rent from the tenants; default and pursue collection for delinquent tenants;

• pay monthly invoices to vendors, including loan payments to lenders;

• maintain monthly accounting records and provide monthly operating statements for each Real Estate Asset;

• perform an annual audit of the financial statements, prepare workpapers for the annual audit, and assist the auditors to complete the annual audit;

• assist in the preparation of the annual tax returns for Pillarstone, Pillarstone OP and the owners of the Real Estate Assets; and

• assist in the preparation of the Pillarstone SEC financial reports and other filings.

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We worked diligently to restore normal operations and leasing activities following Whitestone's unanticipated termination of its managerial services. Many of Pillarstone's actions were affected by a lack of usable information being made available to us by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owns 81.4% of Pillarstone OP as a non-controlling limited partner.

This 30-day notice period was insufficient because Whitestone did not provide the operation and financial database of our information, nor did Whitestone cooperate to provide for an orderly transition of its contracted responsibilities. The services under the management agreements were extensive and material to the operation of Pillarstone's business and our accounting and financial reporting. The management functions, as operated by Whitestone, were deeply co-mingled with Whitestone's management functions for its own business and have been difficult, expensive and time-consuming to separate. As a result, Pillarstone was materially and adversely affected by Whitestone's abrupt termination of the management agreements, incomplete and inadequate delivery of books and records and other materials required to be delivered under the Management Agreements, and the failure to provide for an appropriate transition. We had no way to continue our accounting and financial reporting responsibilities as a public company. Further, for several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts as an independent, internally managed company. In addition, several vendor service contracts were tied to Whitestone and the pricing of services was based on the combination of Pillarstone and Whitestone. The transition caused us to obtain separate services, which caused disruption to our business and higher costs. In other cases, Whitestone obligated us to long-term contracts for essential services that we cannot easily replace.

Specifically, Whitestone:

• removed our access to all operations, accounting, and financial reporting systems intentionally causing harm to landlord-tenant relations at all of our properties. They immediately ceased daily accounting responsibilities and exported our general ledger history into disparate and unorganized Microsoft Excel files;

• copied more than 27,000 files into poorly organized and incomplete electronic folders containing Adobe PDF, Microsoft Excel and other file formats not easily available, and in some situations not readable by industry standard software, as source documents or historical filings and accounting records;

• ceased daily managerial responsibilities without documentation of key processes and communicating the status of incomplete items;

• neglected routine proper maintenance of the Real Estate Assets while under their management; and

• left the Real Estate Assets with numerous tenant life and health safety concerns requiring our immediate attention to correct; specifically, infestations, long ignored roof leaks causing property and mold damage, and electrical, water and security systems neglect.

Within days after the termination of the management agreements by Whitestone, we internalized management and began to manage our Real Estate Assets and our business without an external management company. Our board of trustees immediately hired an experienced executive management team with prior experience working with our property portfolio and our leadership team quickly began:

• recruiting and engaging consultants and employees for maintenance and leasing of our Real Estate Assets;

• evaluating the life safety and deferred maintenance issues that arose and were inadequately addressed, if at all, by Whitestone during the term of the management agreements;

• communicating with tenants and vendors regarding the change in management. The abrupt termination of the management agreements caused some confusion among tenants and vendors regarding payment issues and responsibility to take actions. We learned that many tenants were not pleased with the services they received from Whitestone during the term of the management agreements and have tried to assure the tenants that the internalization of management will lead to improvements for them. In addition, we began transitioning vendor relationships from entangled transactions with Whitestone properties arising from arrangements and contracts Whitestone entered into during the term of the management agreements. For example, on August 19, 2022, Whitestone dropped our properties from their insurance, and we have obtained a separate insurance and risk management package; and

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• evaluating the redevelopment plans available to us that were developed but left dormant during the term of the management agreements. Whitestone has neglected to provide us with all of the redevelopment plans for our property portfolio.

In addition, the internalization process has involved selecting an enterprise resource planning, or ERP, system of our own. Our newly assembled leadership team quickly engaged consultants (a) to assist us in implementing the newly selected ERP system, (b) to analyze, reconcile and transform historical data obtained from Whitestone into a usable format for our new system and (c) to design procedures for regular accounting closes and preparation of accurate and reliable financial statements for our shareholders and other stakeholders. While this process has been underway, we have been directing the maintenance and operations of the Real Estate Assets and taking steps available to us to address the significant deferred maintenance and neglect of our assets which occurred while under Whitestone's management.

As a result of Whitestone's unwillingness to have a collaborative and planned transition, we were unable to timely file our annual and quarterly reports with the SEC. We are continuing to rebuild our accounting and financial reporting system and intend as soon as possible to resume timely filing of our current, quarterly and annual reports under the Exchange Act and to file any delinquent reports. We cannot provide assurance at this time as to if or when we will be able to complete such filings.

***Lawsuit, Termination of Management Agreements and Bankruptcy Proceedings***

On July 12, 2022, we were named as a defendant in a lawsuit filed in the Court of Chancery of the State of Delaware by Whitestone OP. The suit challenges our rights agreement, dated as of December 27, 2021 (as the same may be amended from time to time, the "Rights Agreement"), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claims that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

Based upon various issues, including those discussed in this report, we filed a lawsuit on September 16, 2022, in district court in Harris County, Texas, against Whitestone and related parties alleging, among other things, breach of the Pillarstone OP Amended and Restated Agreement of Limited Partnership and fiduciary duty and breach of the management agreements.

On July 21, 2022, Whitestone OP filed a Motion to Preserve the Status Quo requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevents Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argues that Whitestone's material breaches of contract and fiduciary duty operate to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in August 2022 with representatives of Whitestone's board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was not open to settling these matters at that time or the other various times since August 2022 we attempted to initiate discussions to resolve these matters.

Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intends to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we may not have the cash available to pay such amounts and may be required to sell one or more of our Real Estate Assets to satisfy this obligation, which may cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We have stated that a redemption request would not trigger the Rights Agreement, and our board of trustees has the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to not exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

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Based on Whitestone's performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did not believe that Whitestone's actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall not be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the limited partners in connection therewith.

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone REIT's unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone REIT's management. Our efforts to address these matters have in some cases been stymied by Whitestone REIT's litigation against us in Delaware where the court has limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees have increased substantially as we address the internalization of management and the litigation matters discussed in this report.

On July 17, 2023 and July 18, 2023, trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on October 18, 2023. Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on August 28, 2023. On January 25, 2024, the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. We disagree with the Delaware court's ruling and are considering our options for appeal, subject to a final order being entered in the case, the outcome of various proceedings in the jointly administered bankruptcy cases described below and the decision of the plan agent in the bankruptcy cases to pursue an appeal.

The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP's redemption obligation and determine what value to attribute to Pillarstone OP's assets. The Delaware court declared that any further relief must await future proceedings.

On January 25, 2024, Whitestone OP delivered its notice of redemption for all but one of its OP Units.

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

The joint plan of liquidation in the bankruptcy case providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in November 2024. Those Real Estate Assets were sold between October 2024 and July 2025. The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent's administration of the claims may include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

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The plan agent is not a trustee and does not participate in the management or operations of the debtors' businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors' business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party's good-faith objection and the bankruptcy court's final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor's funds (even if held by Pillarstone OP), which may include sales proceeds.

The plan agent is entitled to receive compensation as a flat fee the amount of $10,000.00 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than fifteen (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650.00 per hour for each additional hour of services.

We believe that the allegations in the Delaware lawsuit are without merit and intends to continue to vigorously defend against them. In addition, we intend to vigorously pursue the Texas action to seek damages from Whitestone due to its violations of the management agreements and fiduciary duties and to protect our shareholders from the further harms that Whitestone has indicated it intends to inflict on us and our shareholders. However, the outcomes of these lawsuits, including the timing of the final disposition of the lawsuits, are unpredictable, subject to the outcome of proceedings in the bankruptcy cases and the determination of the plan agent to pursue and defend claims, and could result in substantial costs to us. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on the registrant's business, results of operations or financial condition.

Following the period covered by this report, we have sold all of our Real Estate Assets. We are considering our strategic plans based on the outcome of the proceedings in the bankruptcy cases.

**Results of Operations**

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report.

***Comparison of the Three Months Ended September 30, 2022 and 2021***

The following provides a comparison of our results of operations (dollars in thousands):

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| | | |
|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** |
|  | **2022** | **2021** |
| Number of properties | 8 | 8 |
| Aggregate GLA (sq. ft.) | 926798 | 926798 |
| Ending occupancy rate | 54% | 59% |
| Total revenues | $2004 | $2381 |
| Total operating expenses | 2676 | 2040 |
| Total other expenses | 186 | 201 |
| Provision for income tax expense (benefit) | 172 |  |
| Net income (loss) | (1030) | 140 |
| Less: Non-controlling interest in subsidiary | (1676) | 196 |
| Net income (loss) attributable to Common Shareholders | $646 | $(56) |

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*Revenues.* Total revenues for the three months ended September 30, 2022 were $2.0 million as compared with $2.4 million for the same period of 2021. The decrease of $377 thousand or 16% was principally caused by a decline in occupancy rates from 58% at December 31, 2021 to 54% at September 30, 2022. T This decline was most notable at our two office buildings in the Dallas metropolitan areas. Leasing activity was adversely affected by Whitestone's efforts in early-2022. In response, we began soliciting leasing assistance from independent brokers. Whitestone's unexpected termination of their managerial services in August 2022 further impaired our leasing activities.

In addition, in July 2022, Whitestone terminated leases with us for approximately 30,000 square feet at four Real Estate Assets that it maintained as it acted as manager of the Real Estate Assets. This impact was particularly notable at our Uptown Tower property where Whitestone leased approximately 1,800 square feet of office space and an additional 15,822 square feet for its Cubexec executive office business. Whitestone's lease terminations also included 8,231 square feet of space at the LBJ building for its Cubexec executive office business. As Whitestone vacated the terminated leased properties, it removed critical items needed for the Cubexec customers while requesting that we take over its agreements with those customers. We have subsequently restored the executive office offering at Uptown Tower and LBJ and worked to restore normal operations across our portfolio since Whitestone's abrupt termination of leases and management services. We also believe that Whitestone used other portions of our Holly Hall and Corporate Park Northwest properties for their storage and for other Whitestone purposes without paying rent or maintaining those areas in suitable condition for third party tenants, also impacting our occupancy before and after the termination of Whitestone's management services.

*Expenses.* Our operating expenses were $2.7 million for the three months ended September 30, 2022 compared to $2.0 million for the same period of 2021, an increase of $636 thousand or 31%. The overall increase was primarily due to legal expenses incurred for the lawsuits with Whitestone and contract accounting services as we began internalizing management after Whitestone's unexpected termination of managerial services. The primary components of operating expenses are detailed in the table below (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** |  |  |
|  | **2022** | **2021** | **Change** | **% Change** |
| Depreciation and amortization | $514 | $541 | $(27) | -5% |
| Operating and maintenance | 808 | 759 | 49 | 6% |
| Real estate taxes | 445 | 430 | 15 | 3% |
| General and administrative | 770 | 167 | 603 | 361% |
| Management fees | 139 | 143 | (4) | -3% |
| Total operating expenses | $2676 | $2040 | $636 | 31% |

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Other expenses principally include interest expense on our indebtedness. We made scheduled payments of principal and interest on our mortgage for Uptown Tower. We recognized a loss on disposal of fixed assets of $8 thousand in the 2022 period as compared with $1 thousand in the 2021 period, which is included in other expenses. We expect our operating and other expenses to increase significantly as a result of the internalization of management and lack of significant cooperation in these efforts from Whitestone, the expenses of the ongoing litigation with Whitestone, and our addressing significant life safety and deferred maintenance issues at the Real Estate Assets that occurred during Whitestone's management of the Real Estate Assets through Whitestone's termination of its management activities for the Real Estate Assets in August 2022.

Our effective tax rate for the three months ended September 30, 2022 and September 30, 2021 was 20% and 0%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes and permanent differences for non-deductible expenses.

Noncontrolling interest in subsidiary represents the share earnings of Pillarstone OP allocable to holders of partnership interests other than us.

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**Comparison of the Nine Months Ended September 30, 2022 and 2021**

The following provides a general comparison of our results of operations (dollars in thousands):

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| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** |
| Number of properties | 8 | 8 |
| Aggregate GLA (sq. ft.) | 926798 | 926798 |
| Ending occupancy rate | 54% | 59% |
| Total revenues | $6608 | $6843 |
| Total operating expenses | 6685 | 5962 |
| Total other expenses | 585 | 584 |
| Provision for income tax expense (benefit) | 167 | (12) |
| Net income (loss) | (829) | 309 |
| Less: Non-controlling interest in subsidiary | (1383) | 510 |
| Net income (loss) attributable to Common Shareholders | $554 | $(201) |

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*Revenues.* We had total revenues for the nine months ended September 30, 2022 and 2021 of $6.6 million and $6.8 million, respectively, a decrease of $235 thousand, or 3%. The decrease was principally caused by a decline in average occupancy rates in the nine months ended September 30, 2022. This decline was most notable at our two office buildings in the Dallas metropolitan areas. Leasing activity was adversely affected by Whitestone's efforts in early-2022. In response, we began soliciting leasing assistance from independent brokers. Whitestone's unexpected termination of their managerial services in August 2022 further impaired our leasing activities.

In addition, in July 2022, Whitestone terminated leases with us for approximately 30,000 square feet at four Real Estate Assets that it maintained as it acted as manager of the Real Estate Assets. This impact was particularly notable at our Uptown Tower property where Whitestone leased approximately 1,800 square feet of office space and an additional 15,822 square feet for its Cubexec executive office business. Whitestone's lease terminations also included 8,231 square feet of space at the LBJ building for its Cubexec executive office business. As Whitestone vacated the terminated leased properties, it removed critical items needed for the Cubexec customers while requesting that we take over its agreements with those customers. We have subsequently restored the executive office offering at Uptown Tower and LBJ and worked to restore normal operations across our portfolio since Whitestone's abrupt termination of leases and management services. We also believe that Whitestone used other portions of our Holly Hall and Corporate Park Northwest properties for their storage and for other Whitestone purposes without paying rent or maintaining those areas in suitable condition for third party tenants, also impacting our occupancy before and after the termination of Whitestone's management services.

*Expenses.* Our operating expenses were approximately $6.7 million for the nine months ended September 30, 2022 compared to $6.0 million the same period of 2021, an increase of approximately $723 thousand, or 12%. The overall increase was primarily due to legal expenses incurred for the lawsuits with Whitestone and contract accounting services and other costs as we began internalizing management after Whitestone's unexpected termination of managerial services. The primary components of operating expenses are detailed in the table below (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |  |  |
|  | **2022** | **2021** | **Change** | **% Change** |
| Depreciation and amortization | $1504 | $1540 | $(36) | -2% |
| Operating and maintenance | 2431 | 2213 | 218 | 10% |
| Real estate taxes | 1186 | 1232 | (46) | -4% |
| General and administrative | 1142 | 550 | 592 | 108% |
| Management fees | 422 | 427 | (5) | -1% |
| Total operating expenses | $6685 | $5962 | $723 | 12% |

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Other expenses principally include interest expense on our indebtedness. We made scheduled payments of principal and interest on our mortgage for Uptown Tower. We recognized a loss on disposal of fixed assets of $8 thousand in the 2022 period as compared with $1 thousand in the 2021 period. We expect our operating and other expenses to increase significantly as a result of the internalization of management and lack of significant cooperation in these efforts from Whitestone, the expenses of the ongoing litigation with Whitestone, and our addressing significant life safety and deferred maintenance issues at the Real Estate Assets that occurred during Whitestone's management of the Real Estate Assets through Whitestone's termination of its management activities for the Real Estate Assets in August 2022.

Our effective tax rate for the nine months ended September 30, 2022 and 2021 was 25% and 4%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes and permanent differences for non-deductible expenses.

Noncontrolling interest in subsidiary represents the share earnings of Pillarstone OP allocable to holders of partnership interests other than us.

**Liquidity and Capital Resources** 

As of September 30, 2022, our unrestricted cash resources were $5.3 million.

*Significant sources and uses of cash during the nine months ended September 30, 2022.*

Sources of cash:

● Cash from operating activities was $1.3 million, which included $349 thousand from the primary components of our working capital (receivables, prepaid expenses, accounts payable, security deposits).

● We received $817 thousand of insured loss reimbursements for elevator damage at Uptown Tower.

Uses of cash:

● Capital expenditures were $1.4 million principally for elevator repairs at Uptown Tower and other health and safety needs at our properties.

● We made repayments of notes payable totaling $638 thousand.

We expect our cash needs to increase significantly during the rest of 2022 and 2023 as a result of the internalization of management and lack of significant cooperation in these efforts from Whitestone, the expenses of the ongoing litigation with Whitestone, and our addressing significant life safety and deferred maintenance issues at the Real Estate Assets that occurred during Whitestone's management of the Real Estate Assets through Whitestone's termination of its management activities for the Real Estate Assets in August 2022.

*Expense Reimbursements.* Under the Pillarstone OP Amended and Restated Agreement of Limited Partnership, Pillarstone OP is responsible for all expenses relating to its organization, the ownership of its assets and its operations. It is also responsible for the administrative and operating costs and expenses incurred by Pillarstone Capital REIT as its General Partner, including, without limitation, all expenses relating to the General Partner's (i) continued existence and subsidiary operations, (ii) offerings and registration of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of Pillarstone OP; provided, however, that such costs and expenses shall not include any administrative or operating costs of the General Partner attributable to assets owned by the General Partner directly and not through Pillarstone OP or its subsidiaries. We have no assets, activities or operations other than those related to Pillarstone OP.

Indemnification provisions within the Pillarstone OP Amended and Restated Agreement of Limited Partnership also provide for indemnification by Pillarstone of all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys fees and other legal fees and expenses), judgments, fines, settlements and other amounts, arising from or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, relating to Pillarstone OP or the General Partner or the operation of, or the ownership of property in which an indemnitee may be involved, or is threatened to be involved, unless a court of competent jurisdiction establishes that indemnification is not permitted under the circumstances described in the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

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These reimbursement provisions have provided us with critical sources of cash and liquidity to maintain our operations. Following Whitestone's abrupt termination of managerial services to Pillarstone OP, we have incurred significant costs to internalize management, and to select and implement an enterprise-wide system of our own. We have also incurred substantial legal costs in our litigation with Whitestone.

We determined that Whitestone, under the property management agreements in effect until August 2022, was not making appropriate reimbursement of the General Partner's operating and administrative expenses from Pillarstone OP. During the first quarter of 2022, we recorded $1.8 million as reimbursement of expenses for the years ended 2017 through 2021. We recorded reimbursements from Pillarstone OP totaling $487 thousand during the nine months ended September 30, 2022 for operating and administrative expenses incurred in 2022.

The reimbursements initially reported in our Quarterly Reports on Forms 10-Q for the periods ended March 31, 2023 and June 30, 2023 were substantially offset by reserves totaling $1.9 million because the amounts were disputed by Whitestone. In addition, while in control of the bank accounts, Whitestone refused to transfer the reimbursements as directed by the General Partner. As the manager responsible for all of our day-to-day operations prior to August 2022, Whitestone maintained financial records and access to all of our cash balances. The reserves were necessary then in recognition that significant efforts, including litigation, may have been necessary to collect these amounts.

Following Whitestone's termination of the management agreements in August 2022, we internalized management of the Real Estate Assets. This includes maintenance of our financial records and direct access to all of our cash balances. Based on this and our rights to the full reimbursement as provided by the Pillarstone OP Amended and Restated Agreement of Limited Partnership, we reversed the reserves in August 2022.

Whitestone has notified us that they will contest some or all of these reimbursements. We intend to vigorously defend these reimbursements as they are permitted under provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

For financial reporting purposes, Pillarstone REIT and Pillarstone OP report on a consolidated basis, therefore, the reimbursement of our expenses does not change net income but only the allocations between controlling and noncontrolling interests.

*Whitestone Claim for Expenses.* After we notified Whitestone of the $1.8 million reimbursement required from Pillarstone OP, Whitestone and Whitestone OP made a claim to Pillarstone and Pillarstone OP to be reimbursed for construction and lease commission expenditures of $1.4 million paid by Whitestone OP on behalf of Pillarstone OP during 2017 and 2018. Pillarstone requested additional information for the $1.4 million expenditures to determine if any of the items claimed should have been prorated between Pillarstone OP and Whitestone OP in our transaction with Whitestone and Whitestone OP on December 8, 2016 for the initial acquisition of the Real Estate Assets. These expenditures were recorded on Pillarstone OP in 2017 and 2018 as an increase in the Whitestone OP limited partner investment account and as assets of Pillarstone OP that have been depreciated and amortized to expense over their useful lives. The amount due Whitestone OP for these expenditures, if any, has not been determined. If Pillarstone OP reimburses any amounts to Whitestone OP, the payment would reduce the Whitestone OP limited partner investment account.

*Indebtedness.* The Company's indebtedness at September 30, 2022 is presented in Item 8, "Financial Statements – Note 7 – Debt" and our lease obligations are presented in Item 8, "Financial Statements—Note 4 – Leases."

At September 30, 2022, Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owns the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt is guaranteed by Whitestone OP. This mortgage is an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

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As of September 30, 2022, the borrower was not in compliance with loan covenants requiring timely filing of financial information to the lender for mortgage loan.

In July 2023, Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did not have an alternate source of funds for the operation of Uptown Tower.

On August 3, 2023, we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in 2016. The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in August 2022.

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and not Whitestone REIT.

As the 2016 alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the 2022 default through its unilateral termination of the management agreement for Uptown Tower, we are not in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they may have on the borrower or the Uptown Tower property.

The borrower had requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in August 2023 and September 2023, but Rialto Capital Advisors, LLC did not release the funds and indicated that it did not intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on October 1, 2023. The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall not (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on September 22, 2023. On October 19, 2023, Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

On October 24, 2023, the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (1) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (2) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter 64, Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on December 5, 2023.

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On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in November 2023, representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT's board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. No Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was not consummated but that Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

On January 3, 2024, Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of December 4, 2023. The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On January 31, 2024, the lender sued Whitestone OP to enforce Whitestone OP's guaranty of the mortgage loan.

In June 2024, Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

The plan of reorganization in the bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in July 2024. We sold Uptown Tower in July 2025 for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and paid off the American Bank, N.A. indebtedness. We are holding approximately $13.6 million of the sale proceeds representing funds Whitestone OP mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so on Whitestone Uptown Tower, LLC's behalf. We are currently disputing the treatment and timing of repayment of the $13.6 million to Whitestone OP in the Whitestone Uptown Tower bankruptcy case.

In addition to the mortgage loan, we have approximately $198,000 of convertible notes payable and corresponding accrued interest of approximately $128,000 as of September 30, 2022. 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. At maturity or when the Company chooses to call the convertible notes payable, the noteholders have the option to receive cash plus accrued interest or convert the convertible notes payable into Common Shares at $1.331 per Common Share. The commencement of our bankruptcy case constituted an event of default under the notes, pursuant to which all principal and accrued interest became automatically and immediately due and payable. Any repayment of the convertible notes will be determined under our plan of liquidation and bankruptcy court proceedings.

At September 30, 2022, the reported net equity in Whitestone Uptown Tower, LLC was $4.9 million.

*Long Term Liquidity and Operating Strategies.* 

The accompanying financial statements have been prepared assuming that we will continue as a going concern. We have incurred significant losses since the year ended September 30, 2020 and have an accumulated deficit of approximately $23.4 million as of September 30, 2022 and need to raise substantial amounts of additional funds to meet our obligations and afford us time to implement our business plan and resume profitable operations.

We worked diligently to restore normal operations and leasing activities following Whitestone's unanticipated termination of its managerial services. Many of Pillarstone's actions were affected by a lack of usable information being made available to it by Whitestone on a timely basis. Prior to receiving the termination notice, we had anticipated an orderly transition of the management of the Real Estate Assets over an appropriate timeframe, particularly as Whitestone OP owns 81.4% of Pillarstone OP as a non-controlling limited partner. We believe the management functions as operated by Whitestone were deeply integrated with Whitestone's management functions for its own business and have been difficult, expensive, and time-consuming to separate, causing material adverse effects on our business, income, cash flow, results of operations, financial condition, liquidity and prospects. As a result, Whitestone did significant damage to us by its intentional actions. In addition, our litigation with Whitestone has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on our business, results of operations or financial condition.

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We are dependent on cash generated by our ownership of the eight Real Estate Assets to meet our liquidity needs. Historically, we have financed our long-term capital needs, including acquisitions, as follows:

• borrowings from new loans;

• additional equity issuances of our common and preferred shares and operating partnership units; and

• proceeds from the sales of our Real Estate Assets.

We have been developing strategies for the Real Estate Assets in order to create value for the enterprise and our shareholders and selling assets to pay off some of our debt. To implement the strategy to create value with the Real Estate Assets, additional capital will need to be raised. Our ability to access the capital markets will be dependent on a number of factors, including general market conditions and market perceptions about our Company. There can be no assurance that we will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern, if at all. The consolidated financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

**Interest Rates and Inflation**

We were not significantly affected by rising interest rates during the periods presented in this report due primarily to having 100% of our debt with a fixed rate as of September 30, 2022. Any new indebtedness may be at higher rates than the 4.97% base rate of interest under the loan agreement, plus the default rate of interest, which is 5% above the interest rate under the loan agreement. For example, the mortgage loan with American Bank, N.A. that replaced the prior loan for Uptown Tower bears interest at the WSJ Prime Rate (as defined in the loan agreement) plus 7.5%. If we are not able to incur indebtedness on favorable terms to us, our business, financial condition, results of operations, or cash flows could be materially adversely affected.

We anticipate that the majority of our leases will continue to be triple-net leases or otherwise provide that tenants pay for increases in operating expenses and will contain provisions that we believe will mitigate the effect of inflation. In addition, many of our leases are for terms of less than five years, which allows us to adjust rental rates to reflect inflation and other changing market conditions when the leases expire. Leases of longer-term durations or which include renewal options that specify a maximum rate increase may result in below-market lease rates over time if we do not accurately estimate inflation or market lease rates. Provisions of our leases designed to mitigate the risk of inflation and unexpected increases in market lease rates, such as periodic rental increases, may not adequately protect us from the impact of inflation or unexpected increases in market lease rates. If we are subject to below-market lease rates on a significant number of our properties pursuant to long-term leases and our operating and other expenses increase faster than anticipated, our business, financial condition, results of operations, or cash flows could be materially adversely affected.

**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.

**Critical Accounting Estimates**

Our consolidated financial statements are prepared in accordance with 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.

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*Revenue recognition*. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and non-lease components in lease contracts, which includes combining base rent and recoveries into a single line item, Rental, within the consolidated statements of operations. We recognize lease termination fees in the year that the lease is terminated, and collection of the fee is reasonably assured.

*Impairment.* We review our properties for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. There was no impairment of our Real Estate Assets during the periods presented in this Quarterly Report.

*Accrued Rents and Accounts Receivable.* Included in accrued rent and accounts receivable are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. We review the collectability of charges under our tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. We recognize an adjustment to rental revenue if we deem it probable that the receivable will not be collected. Our review of collectability under our operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue.

*Income taxes*. We have not elected to be taxed as a REIT for federal income tax purposes. As such, we account for income taxes using the asset and 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in the provision for income taxes in the consolidated statements of operations and has not been separately stated due to its insignificance.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not applicable.

**ITEM 4. CONTROLS AND PROCEDURES**

***Evaluation of Disclosure Controls and Procedures*** 

Our management, under the supervision and with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such information is accumulated and communicated to its management, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were not effective as of September 30, 2022 (the end of the period covered by this Quarterly Report).

*Material Weaknesses.* We have identified the following material weaknesses:

● we did not design and implement logical access controls for certain financially relevant systems. Business processes, both automated and manual, that are dependent upon the information derived from those financially relevant systems were also determined to be ineffective as a result of such deficiency; and

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● business process controls across our financial reporting processes were not effectively designed and implemented to properly address the risk of material misstatement, including controls without proper segregation of duties between preparer and reviewer and key management review controls.

Management has concluded that our internal control over financial reporting was not effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

We believe that the circumstances leading to this conclusion is a result of the lack of an orderly transition of the management services provided by Whitestone prior to its abrupt termination of our management agreements in August 2022.

The services provided by Whitestone under the management agreements were extensive and material to the operation of our business and our accounting and financial reporting. The management functions, as operated by Whitestone, were deeply co-mingled with Whitestone's management functions for its own business and have been difficult, expensive and time-consuming to separate. As a result, we were materially and adversely affected by Whitestone's abrupt termination of the management agreements, incomplete and inadequate delivery of books and records and other materials required to be delivered under the management agreements, and the failure to provide for an appropriate transition. We had no way to continue our accounting and financial reporting responsibilities as a public company. Further, for several months following the abrupt termination of services by Whitestone, we were unable to systematically invoice our tenants and pursue collection of delinquent accounts as an independent, internally managed company. In addition, several vendor service contracts were tied to Whitestone and the pricing of services was based on the combination of Pillarstone and Whitestone. The transition caused us to obtain separate services, which caused disruption to our business and higher costs. In other cases, Whitestone obligated us to long-term contracts for essential services that we cannot easily replace.

Specifically, Whitestone:

• removed our access to all operations, accounting, and financial reporting systems intentionally causing harm to landlord-tenant relations at all of our properties. They immediately ceased daily accounting responsibilities and exported our general ledger history into disparate and unorganized Microsoft Excel files;

• copied more than 27,000 files into poorly organized and incomplete electronic folders containing Adobe PDF, Microsoft Excel and other file formats not easily available, and in some situations not readable by industry standard software, as source documents or historical filings and accounting records;

• ceased daily managerial responsibilities without documentation of key processes and communicating the status of incomplete items;

• neglected routine proper maintenance of the Real Estate Assets while under their management; and

• left the Real Estate Assets with numerous tenant life and health safety concerns requiring our immediate attention to correct; specifically, infestations, long ignored roof leaks causing property and mold damage, and electrical, water and security systems neglect.

As a result of Whitestone's unwillingness to have a collaborative and planned transition, we were unable to timely file our annual and quarterly reports with the SEC.

This conclusion does not relate to periods prior to Whitestone's termination of its management functions under the management agreements.

*Remediation Plans.* These material weaknesses arose in large part because of Whitestone's abrupt termination in August 2022 of managerial services they provided. At the date their managerial services ceased, we did not have our own personnel, processes or systems needed for proper accounting and financial reporting. While we immediately began to address these needs after Whitestone's termination, we were unable to complete the design and implementation of appropriate internal control over financial reporting before September 30, 2022. These material weaknesses did not result in a material misstatement of our consolidated financial statements for the periods presented.

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We have been working diligently on the process of designing and implementing effective internal control measures to remediate the reported material weaknesses. Our efforts include implementing a new enterprise-wide system that will help us in reducing reliance on manual processes and spreadsheets supporting the financial statements. This implementation was completed in 2023. We are using contract personnel for specialized accounting and financial reporting roles.

While we believe that these efforts will improve our internal control over financial reporting, our remediation efforts are ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting.

***Changes in Internal Control Over Financial Reporting***

We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. The Company's efforts to internalize management, establish new accounting and financial reporting processes and implement new systems have resulted in changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Except as otherwise described herein, there were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**ITEM 1. 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 ordinary course matters cannot be predicted with certainty, we believe that occurrence and outcomes of these ordinary course matters will not have a material effect on our financial position, results of operations or cash flows. Other legal matters are discussed below.

**Delaware Case**

On July 12, 2022, we were named as a defendant in a lawsuit by Whitestone OP in a lawsuit styled *Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT,* C.A. No. 2022-0607-LWW, in the Court of Chancery of the State of Delaware. The suit challenges our rights agreement, dated as of December 27, 2021 (as the same may be amended from time to time, the "Rights Agreement"), between us and American Stock Transfer & Trust Company, LLC, as rights agent, and claims that our adoption of the Rights Agreement breached the Pillarstone OP Amended and Restated Agreement of Limited Partnership, and that we breached our fiduciary duties as general partner of Pillarstone OP to Whitestone OP and breached the implied covenant of good faith and fair dealing under the Amended and Restated Agreement of Limited Partnership.

Based upon various issues, including those discussed in this report, we filed a lawsuit on September 16, 2022, in district court in Harris County, Texas, against Whitestone and related parties alleging, among other things, breach of the Pillarstone OP Amended and Restated Agreement of Limited Partnership and fiduciary duty and breach of the management agreements.

On July 21, 2022, Whitestone OP filed a Motion to Preserve the Status Quo in the Delaware lawsuit requesting broad restrictions on our ability to conduct our business, including buying properties, enforcing the Rights Agreement, incurring expenses, or engaging in transactions. The Status Quo Order also prevents Whitestone OP from exercising its right under the Pillarstone OP Amended and Restated Agreement of Limited Partnership to require Pillarstone OP to redeem its OP Units. Our amended petition in the Texas lawsuit argues that Whitestone's material breaches of contract and fiduciary duty operate to discharge and/or excuse any obligation to perform under the redemption provisions of the Pillarstone OP Amended and Restated Agreement of Limited Partnership.

Representatives of our board of trustees attempted to initiate discussions to settle these matters in August 2022 with representatives of Whitestone's board of trustees to avoid a prolonged, expensive legal fight. However, Whitestone was not open to settling these matters at that time or the other various times since August 2022 we attempted to initiate discussions to resolve these matters.

Whitestone indicated to us its intent to cause Whitestone OP to exercise its redemption right and stated publicly that it intends to monetize its investment in Pillarstone OP. We believed that if Whitestone were to be permitted to exercise its redemption right for cash amounts, we may not have the cash available to pay such amounts and may be required to sell one or more of our Real Estate Assets to satisfy this obligation, which may cause us to sell some or all of our Real Estate Assets at below fair market value and otherwise have a material adverse effect on our liquidity and financial condition and our ability to operate and improve our Real Estate Assets. We have stated that a redemption request would not trigger the Rights Agreement, and our board of trustees has the sole discretion to interpret the Rights Agreement. However, Whitestone OP indicated that the Rights Agreement caused them to not exercise their redemption rights and claimed damages based on the alleged decline in the value of the Real Estate Assets following their failure to exercise the redemption rights.

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Based on Whitestone's performance under the management agreements and their public statements regarding their intentions for their interest in Pillarstone, we did not believe that Whitestone's actions in connection with the exercise of the redemption rights would respect the rights of the holders of our common shares. The Pillarstone OP Amended and Restated Agreement of Limited Partnership expressly provides that in the event of a conflict between the interests of the limited partners (Whitestone OP as the sole limited partner) and our shareholders, we shall act in the interests of our shareholders, and we shall not be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the limited partners in connection therewith.

Our executive management team worked to restore normal operations and leasing activities quickly after Whitestone REIT's unanticipated termination of their managerial services. Many of our actions were affected by a lack of usable information being made available to us on a timely basis.

We discovered significant deferred maintenance and neglect of our assets had occurred under Whitestone REIT's management. Our efforts to address these matters have in some cases been stymied by Whitestone REIT's litigation against us in Delaware where the court has limited our ability to incur expenses above low threshold amounts for the types of expenses a company in our industry could expect to incur in the ordinary course of business. Our legal and professional fees have increased substantially as we address the internalization of management and the litigation matters discussed in this report.

On July 17, 2023 and July 18, 2023, trial was held in the Delaware lawsuit. Post-trial argument in the lawsuit was held on October 18, 2023. Whitestone has asked the Delaware court to award damages of approximately $51,200,600 and post-judgement interest of $6,820,000 in the filing of its post-trial opening brief on August 28, 2023. On January 25, 2024, the Delaware court issued its opinion and determined that we breached the implied covenant of good faith and fair dealing without resolving the breach of contract or breach of fiduciary duty claims. Although Whitestone asked for monetary damages of $51,200,600 plus interest, the Delaware court declined to award damages. We disagree with the Delaware court's ruling and are considering our options for appeal, subject to a final order being entered in the case, the outcome of various proceedings in the jointly administered bankruptcy cases described below and the decision of the plan agent in the bankruptcy cases to pursue an appeal.

The Delaware court declared the Rights Agreement unenforceable against Whitestone, permitted Whitestone OP to tender a notice of redemption for its OP Units and determined that the Pillarstone OP limited partnership agreement should be followed whereby we would decide whether to assume Pillarstone OP's redemption obligation and determine what value to attribute to Pillarstone OP's assets. The Delaware court declared that any further relief must await future proceedings.

On January 25, 2024, Whitestone OP delivered its notice of redemption for all but one of its OP Units.

**Houston Case**

On September 16, 2022, we filed a lawsuit styled *Pillarstone Capital REIT and Pillarstone Capital REIT Operating Partnership LP v. Whitestone TRS, Inc., Whitestone REIT, Whitestone REIT Operating Partnership, L.P.,* Cause No. 2022-59478, in the District Court, Harris County, Texas, 189th Judicial District alleging, among other things, breach of the Pillarstone OP limited partnership agreement and the management agreements for the Real Estate Assets by the Whitestone defendants and breach of fiduciary duties relating to Pillarstone OP by Whitestone OP going outside the role of limited partner and harming us and Pillarstone OP. A portion of the claims in this case were also brought as an adversary proceeding by Whitestone Uptown Tower, LLC in the Uptown Tower bankruptcy case described in "—Uptown Tower" below.

**Jointly Administered Bankruptcy Cases**

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

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The joint plan of liquidation in the bankruptcy case providing for the sale of the Real Estate Assets other than Uptown Tower and treatment of claims was confirmed in November 2024. Those Real Estate Assets were sold between October 2024 and July 2025. The plan provided for a plan agent, and Frances A. Smith was appointed plan agent in the jointly administered bankruptcy cases. The plan agent was appointed for the purposes of administering all claims in the bankruptcy cases and making distributions to holders of allowed claims and equity interests under the plan of liquidation. The plan agent's administration of the claims may include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the claims.

The plan agent is not a trustee and does not participate in the management or operations of the debtors' businesses, assets or financial affairs or the review and approval of the day-to-day operational expenses of the debtors' business post-confirmation, unless the bankruptcy court determines cause exists for the plan agent to do so after notice and hearing.

The plan agent has the sole and exclusive authority to administer the claims, including the determination to compromise a claim involving Whitestone OP, any debtor or their affiliates or professionals, subject to notice and hearing and a party's good-faith objection and the bankruptcy court's final adjudication of the matter. The plan agent also has the authority to make demand on the debtors for funds necessary to satisfy allowed claims asserted against a debtor from that debtor's funds (even if held by Pillarstone OP), which may include sales proceeds.

The plan agent is entitled to receive compensation as a flat fee the amount of $10,000.00 per month, plus reimbursement of actual, necessary expenses. If during any month the plan agent spends more than fifteen (15) hours in the performance of her duties, she will be entitled to compensation at a rate of $650.00 per hour for each additional hour of services.

**Uptown Tower**

Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owned the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt was guaranteed by Whitestone OP. This mortgage was an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

In July 2023, Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did not have an alternate source of funds for the operation of Uptown Tower.

On August 3, 2023, we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in 2016. The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in August 2022.

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and not Whitestone REIT.

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As the 2016 alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the 2022 default through its unilateral termination of the management agreement for Uptown Tower, we are not in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they may have on the borrower or the Uptown Tower property.

The borrower had requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in August 2023 and September 2023, but Rialto Capital Advisors, LLC did not release the funds and indicated that it did not intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on October 1, 2023. The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall not (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on September 22, 2023. On October 19, 2023, Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

On October 24, 2023, the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (1) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (2) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter 64, Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on December 5, 2023.

On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled *In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership*, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in November 2023, representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT's board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. No Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was not consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

On January 3, 2024, Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of December 4, 2023. The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On January 31, 2024, the lender sued Whitestone OP to enforce Whitestone OP's guaranty of the mortgage loan.

In June 2024, Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

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The plan of reorganization in the bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in July 2024. We sold Uptown Tower in July 2025 for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and paid off the American Bank, N.A. indebtedness. We are holding approximately $13.6 million of the sale proceeds representing funds Whitestone OP mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so on Whitestone Uptown Tower, LLC's behalf. We are currently disputing the treatment and timing of repayment of the $13.6 million to Whitestone OP in the Whitestone Uptown Tower bankruptcy case.

This litigation has been and is expected to continue to be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of these proceedings are difficult to predict. The registrant believes that the allegations in the Delaware lawsuit are without merit and intends to continue to vigorously defend against them. In addition, we intend to vigorously pursue the Texas action to seek damages from Whitestone due to its violations of the management agreements and fiduciary duties and to protect our shareholders from the further harms that Whitestone has indicated it intends to inflict on us and our shareholders. However, the outcomes of these lawsuits, including the timing of the final disposition of the lawsuits, are unpredictable and could result in substantial costs to us. As a result, future adverse rulings, settlements, or unfavorable developments could result in charges that could have a material adverse effect on the registrant's business, results of operations or financial condition.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

**Uptown Tower**

Whitestone Uptown Tower, LLC, Pillarstone OP's subsidiary that owned the Uptown Tower office building, was the borrower under a loan agreement. The Uptown Tower office building was subject to a mortgage under the loan agreement. The mortgage debt was guaranteed by Whitestone OP. This mortgage was an obligation of Whitestone Uptown Tower, LLC, a subsidiary included in our consolidated financial statements. Neither Pillarstone Capital REIT nor Pillarstone OP had any obligation or guarantee of this indebtedness nor did any of our other properties collateralize this indebtedness.

In July 2023, Rialto Capital Advisors, LLC, the special servicer for the mortgage loan, implemented a cash sweep and began to seize the funds from the operations of the Uptown Tower property under the cash management agreement relating to the mortgage loan. Prior to Rialto Capital Advisors, LLC's seizing the funds from those operations, those funds had been used for the operation and maintenance of the Uptown Tower property, with excess funds used for the operations of Pillarstone OP and the General Partner. We did not have an alternate source of funds for the operation of Uptown Tower.

On August 3, 2023, we received a notice of the default of the mortgage loan from counsel for the lender and Rialto Capital Advisors, LLC. The default notice asserted non-monetary defaults resulting from Whitestone's failure to comply with the loan agreement in connection with the Contribution Agreement in 2016. The default notice also alleged a non-monetary default caused by Whitestone's termination of its management agreement for Uptown Tower in August 2022.

In the default notice, the lender and special servicer noted that the borrower, prior to the Contribution Agreement and while it was controlled by Whitestone OP, represented, warranted, and covenanted that "[F]following the Transfer, Sponsor [Whitestone REIT] through its ownership of Guarantor [Whitestone OP] [. . .] shall continue to Control Borrower [Whitestone Uptown Tower, LLC], and shall continue to control the day-to-day operation of the Property." The lender and special servicer contend that this representation was false because Pillarstone OP and the borrower are controlled by the general partner (Pillarstone Capital REIT, the sole general partner of Pillarstone OP) and not Whitestone REIT.

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As the 2016 alleged defaults occurred while Whitestone was in control of all loan parties and we believe Whitestone caused the 2022 default through its unilateral termination of the management agreement for Uptown Tower, we are not in a position to agree with or dispute the determination of the alleged defaults or Whitestone OP's liability under its guaranty, or any further effect they may have on the borrower or the Uptown Tower property.

The borrower had requested disbursements of capital and operating expenditures from Rialto Capital Advisors, LLC under the terms of the loan agreement in August 2023 and September 2023, but Rialto Capital Advisors, LLC did not release the funds and indicated that it did not intend to release funds or reverse the cash sweep to permit the funding of the operations and leasing of Uptown Tower.

The mortgage loan matured on October 1, 2023. The registrant and the borrower had been working to extend the maturity date and to find new financing or a buyer for the Uptown Tower property. When Whitestone learned of our negotiations with Rialto Capital Advisors, LLC to attempt to resolve this issue and believing we were intending to abandon the building, it filed a motion with the Delaware Court of Chancery asking the court for an order declaring that we shall not (a) stop managing the Uptown Tower, (b) "hand the keys" to Uptown Tower to the lender, or (c) otherwise abandon the Uptown Tower, which the court granted on a temporary basis on September 22, 2023. On October 19, 2023, Whitestone objected to a proposed sale of the Uptown Tower property under the Status Quo Order issued by the court in the previously disclosed lawsuit Whitestone OP instituted against us in the Delaware Court of Chancery.

On October 24, 2023, the lender delivered a notice of foreclosure sale to the borrower providing notice that, among other things, as of the maturity date, the borrower failed to repay all amounts due under the note, and making a demand on (1) the borrower and all persons and entities obligated on the promissory note evidencing the mortgage loan (except to the extent that the obligation is expressly limited by written contract or applicable law) for payment in full of the entire indebtedness, and on (2) the borrower for payment of rents and proceeds of any rents to which the lender is entitled under the mortgage loan documents and Texas Property Code chapter 64, Assignment of Rents to Lienholder. The notice of foreclosure sale also included a notice regarding the planned foreclosure sale of Uptown Tower on December 5, 2023.

On December 1, 2023, Whitestone Uptown Tower, LLC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in the case styled *In re: Whitestone Uptown Tower, LLC a/a/ Pillarstone Capital REIT Operating Partnership*, Case No. 23-32832-mvl-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The filing of the petition constituted an event of default under the mortgage loan. Prior to the filing of the bankruptcy petition in November 2023, representatives of our board of trustees attempted to initiate discussions with representatives of Whitestone REIT's board of trustees to address these matters and to approach Rialto Capital Advisors, LLC jointly. However, without the borrower's knowledge or consent, Whitestone attempted to pay off the loan and grant broad releases to the lender and special servicer on behalf of the borrower, including the application of the trapped cash, escrows and reserves to the indebtedness. No Whitestone REIT entity had the authority to make such agreements on behalf of the borrower, and we have been informed that the agreement was not consummated, but Whitestone did send approximately $13.6 million to Rialto Capital Advisors, LLC pursuant to this arrangement.

On January 3, 2024, Rialto Capital Advisors, LLC provided a preliminary estimate of the payoff amounts for the Uptown Loan as of December 4, 2023. The estimated total amount due was listed as approximately $21.5 million, which included an outstanding principal balance of approximately $14.4 million, note interest of approximately $242,000 and default interest of approximately $6.6 million. In addition, Rialto was also holding approximately $2.6 million of trapped cash, escrows and reserves under the mortgage loan, which the borrower needed to operate the Uptown Tower property and pay its obligations, including then-upcoming property taxes. On January 31, 2024, the lender sued Whitestone OP to enforce Whitestone OP's guaranty of the mortgage loan.

In June 2024, Whitestone Uptown Tower, LLC and Whitestone OP each settled with the lender. Whitestone Uptown Tower entered into a loan agreement with American Bank, N.A. for a loan amount of up to $1,500,000, secured by Uptown Tower and all of the other assets of Whitestone Uptown Tower. Whitestone Uptown Tower paid approximately $1.1 million to the prior lender, and the prior lender retained approximately $2.2 million of trapped cash and escrows from the cash sweep and the approximately $13.6 million mistakenly sent to it by Whitestone OP in satisfaction of the prior mortgage loan.

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The plan of reorganization in the bankruptcy case, providing for the sale of Uptown Tower and treatment of claims, was confirmed in July 2024. We sold Uptown Tower in July 2025 for a purchase price of $20 million, or $17.3 million after deductions, closing costs and commissions and paid off the American Bank, N.A. indebtedness. We are holding approximately $13.6 million of the sale proceeds representing funds Whitestone OP mistakenly paid to the prior mortgage lender for Uptown Tower when it attempted to pay off the mortgage loan without informing us and without authority to do so on Whitestone Uptown Tower, LLC's behalf. We are currently disputing the treatment and timing of repayment of the $13.6 million to Whitestone OP in the Whitestone Uptown Tower bankruptcy case.

**Issuance of Convertible Notes to Trustees**

In November 2015, five trustees serving on the Board of Pillarstone Capital at that time loaned funds to us, each pursuant to a Convertible Note Purchase Agreement (the "Agreement"). Pursuant to an Assignment and Assumption Agreement dated as of March 29, 2019 by and between Dennis Chookaszian Revocable Trust ("Mr. Chookaszian") and a former trustee, and a Stock Purchase Agreement dated as of March 29, 2019 by and between Mr. Chookaszian and the same former trustee, Mr. Chookaszian acquired the Agreement and assumed the rights under the Note. Another former trustee, Mr. DeVos, was a trustee in November 2015 but did not stand for re-election in 2019 and continues to own his note payable as shown in the schedule below.

The following individuals loaned the following face amounts that accrue interest at 10% per annum, which can be converted into common shares of Pillarstone Capital as of September 30, 2022, as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Trustee** | **Face Amount** | **Accrued** <br> **Interest** | **Convertible into** <br> **common shares** |
| Dennis H. Chookaszian | $28888 | $19842 | 30641 |
| Daniel G. DeVos | $47780 | $32818 | 60554 |
| Paul T. Lambert | $51112 | $35106 | 64777 |
| James C. Mastandrea | $52224 | $35870 | 66186 |
| John J. Dee | $17776 | $12209 | 22528 |
| **Totals** | $**197780** | $**135845** | **244686** |

---

The convertible notes can be called by us 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.

The convertible notes were issued effective November 20, 2015, had a maturity date of three years and had been extended several times. The commencement of our bankruptcy case constituted an event of default under the notes, pursuant to which all principal and accrued interest became automatically and immediately due and payable. Any repayment of the convertible notes will be determined under our plan of liquidation and bankruptcy court proceedings.

**ITEM 4. MINE SAFETY DISCLOSURES.**

Not applicable.

**ITEM *5.* OTHER INFORMATION**

None.

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**ITEM 6. EXHIBITS**

---

| | |
|:---|:---|
| **Exhibit** <br> **Number** | **Exhibit Description** |
| 2.1 | [Whitestone Uptown Tower, LLC Second Amended Plan of Reorganization](ex_845329.htm) |
| 2.2 | [Pillarstone Capital REIT, Pillarstone Capital REIT Operating Partnership LP, Whitestone Industrial-Office, LLC, Whitestone Offices, LLC and Whitestone CP Woodland Ph 2, LLC Fifth Amended Joint Plan of Liquidation](ex_845330.htm) |
| 3.1 | [<u>Articles of Amendment and Restatement of the Declaration of Trust of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 29, 2016 and incorporated herein by reference)</u>](http://www.sec.gov/Archives/edgar/data/928953/000149315216008330/ex3-1.htm) |
| 3.2 | [<u>Third Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on December 13, 2016 and incorporated herein by reference)</u>](http://www.sec.gov/Archives/edgar/data/928953/000092895316000005/exhibit31amendedandrestate.htm) |
| 10.1 | [Executive Compensation Agreement, dated as of January 31, 2025, by and between Pillarstone Capital REIT, Pillarstone Capital REIT Operating Partnership LP and Bradford D. Johnson](ex_845331.htm) |
| 10.2 | [Loan Agreement, dated as of June 7, 2024, by and between American Bank, N.A. and Whitestone Uptown Tower, LLC](ex_845742.htm) |
| 10.3 | [First Amendment to Loan, dated as of March 7, 2025, by and between American Bank, N.A. and Whitestone Uptown Tower, LLC](ex_845743.htm) |
| 10.4 | [Second Amendment to Loan, dated as of June 7, 2025, by and between American Bank, N.A. and Whitestone Uptown Tower, LLC](ex_845744.htm) |
| 10.5 | [Deed of Trust, dated as of June 7, 2024, by Whitestone Uptown Tower, LLC in favor of American Bank, N.A.](ex_845745.htm) |
| 10.6 | [Promissory Note, dated as of June 7, 2024, by Whitestone Uptown Tower, LLC in favor of American Bank, N.A.](ex_845746.htm) |
| 10.7 | [Form of Plan Agent Agreement by and among Pillarstone Capital REIT, Pillarstone Capital REIT Operating Partnership LP, Whitestone Industrial-Office, LLC, Whitestone Offices, LLC and Whitestone CP Woodland Ph 2, LLC, Whitestone REIT Operating Partnership, L.P. and Frances A. Smith](ex_845747.htm) |
| 31.1 | [Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 - Chief Executive Officer.](ex_845105.htm) |
| 31.2 | [Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 - Chief Financial Officer.](ex_845111.htm) |
| 32.1 | [CEO/CFO Certification under Section 906 of Sarbanes-Oxley Act of 2002.](ex_845106.htm) |
| 101 | The following financial information of the Registrant for the quarter ended September 30, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited), (iii) Condensed Consolidated Statements of Shareholders' Equity (Deficit) for the three months ended March 31 and September 30, 2022 and 2021 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited) and (iv) Notes to Condensed Consolidated Financial Statements (unaudited). |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | | |
|:---|:---|:---|:---|
|  |  | PILLARSTONE CAPITAL REIT | PILLARSTONE CAPITAL REIT |
|  |  | By: | */s/ Bradford D. Johnson* |
| Date: | July 31, 2025 |  | Bradford D. Johnson<br> *Chief Executive Officer*<br> (Principal executive officer) |

---

---

| | | | |
|:---|:---|:---|:---|
|  |  | PILLARSTONE CAPITAL REIT | PILLARSTONE CAPITAL REIT |
|  |  | By: | */s/ Daniel P. Kovacevic* |
| Date: | July 31, 2025 |  | Daniel P. Kovacevic<br> *Chief Financial Officer*<br> (Principal financial and accounting officer) |

---

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## Exhibit 2.1

**Exhibit 2.1**

Joyce W. Lindauer

State Bar No. 21555700

Joyce W. Lindauer Attorney, PLLC

1412 Main Street, Suite 500

Dallas, Texas 75202

Telephone: (972) 503-4033

Facsimile: (972) 503-4034

ATTORNEYS FOR DEBTOR

**IN THE UNITED STATES BANKRUPTCY COURT**

**FOR THE NORTHERN DISTRICT OF TEXAS**

**DALLAS DIVISION**

---

| | | |
|:---|:---|:---|
| **IN RE:** | **§** |  |
|  | **§** |  |
| **WHITESTONE UPTOWN TOWER, LLC,** | **§** | **CASE NO. 23-32832-mvl-11** |
| **a/k/a Pillarstone Capital REIT Operating** | **§** | **Chapter 11** |
| **Partnership,** | **§** |  |
|  | **§** |  |
| **Debtor.** | **§** |  |

---

**<u>DEBTOR</u>**<u>'</u>**<u>S SECOND AMENDED PLAN OF REORGANIZATION</u>**

**COMES NOW** Whitestone Uptown Tower, LLC, a/k/a Pillarstone Capital REIT Operating Partnership, the Chapter 11 Debtor in the above styled and referenced bankruptcy case (the "Debtor"), and files this its Second Amended Plan of Reorganization (the "Plan"). The Debtor is the owner and operator of a twelve-story, 253,000 square-foot office tower located at 4144 North Central Expressway in Dallas, Texas.

The sources and uses of income to fund the Plan are described in more detail in the Disclosure Statement accompanying this Plan. Periodic financial reports will be filed with the Court, as required by the Bankruptcy Code, covering the profitability, projections of cash receipts and disbursements for a reasonable period. These reports shall be available on the Court's PACER site using the Debtor's name and/or case number as referenced above or can also be obtained from Debtor's counsel by written request.

Debtor's Second Amended Plan of Reorganization

------

**<u>**TABLE OF CONTENTS**</u>**

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| | |
|:---|:---|
| ARTICLE I - DEFINITIONS AND USE OF TERMS | 3.0 |
| ARTICLE II - CONCEPT OF THE PLAN | 6.0 |
| ARTICLE III - GENERAL TERMS AND CONDITIONS | 6.0 |
| ARTICLE IV - DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS | 7.0 |
| ARTICLE V- PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS | 7.0 |
| ARTICLE VI - MEANS FOR IMPLEMENTATION OF PLAN | 10.0 |
| ARTICLE VII - TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES | 11.0 |
| ARTICLE VIII - ENFORCEMENT, SETTLEMENT, OR ADJUSTMENT OF CLAIMS | 11.0 |
| ARTICLE IX - EFFECT OF CONFIRMATION | 12.0 |
| ARTICLE X - MISCELLANEOUS PROVISIONS | 13.0 |
| ARTICLE XI - MODIFICATION OF THE PLAN | 15.0 |
| ARTICLE XII - RETENTION OF JURISDICTION | 15.0 |

---

Debtor's Second Amended Plan of Reorganization

------

**ARTICLE I**

**<u>DEFINITIONS AND USE OF TERMS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.01** <u>**Defined Terms**</u>. Unless the context otherwise requires, capitalized terms shall have the meanings set forth in this section 1.01.

"**Administrative Expense Claim**" means an administrative expense or claim described in Bankruptcy Code § 503 and entitled to administrative priority pursuant to Bankruptcy Code § 507(a)(1), including, but not limited to, Fee Claims.

"**Allowed Amount**" means the amount of any Allowed Claim.

"**Allowed Claim**" means a Claim against the Debtor allowable under the Bankruptcy Code to the extent that: (i) a Proof of Claim or request for payment was timely filed, or, with leave of the Bankruptcy Court, late filed, and as to which no objection has been timely filed with the Bankruptcy Court, or, if filed, is allowed by a Final Order, unless otherwise provided in this Plan; (ii) the Claim is scheduled and not listed as disputed, contingent, or unliquidated, and no objection has been timely filed or, if filed, is allowed by a Final Order; or (iii) with respect to an Administrative Expense Claim or Fee Claim, the Administrative Expense Claim or Fee Claim has been approved by a Final Order upon notice and application to the Bankruptcy Court.

"**Assets**" means property of the Estate.

"**Avoidance Actions**" means any and all rights, claims, and causes of action which a trustee, Debtor, or other appropriate party in interest would be able to assert on behalf of the Estate under applicable state statutes or the avoidance provisions of chapter 5 of the Bankruptcy Code, including actions under one or more of the provisions of Bankruptcy Code §§ 506, 542-551, and 553.

"**Ballot**" means the written ballot to be distributed to Creditors for voting on whether to approve this Plan of reorganization.

"**Bankruptcy Case**" or "**Case**" means this bankruptcy case pending before the Bankruptcy Court.

"**Bankruptcy Code**" or "**Code**" means the United States Bankruptcy Code, 11 U.S.C. §§ 101, *et seq.*, as amended.

"**Bankruptcy Court**" or "**Court**" means the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, or other such court that may have jurisdiction with respect to the reorganization of the Debtor pursuant to Chapter 11 of the Bankruptcy Code.

"**Bankruptcy Rules**" means the Federal Rules of Bankruptcy Procedure.

Debtor's Second Amended Plan of Reorganization

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"**Bar Date**" means April 9, 2024, the deadline established by the Bankruptcy Court pursuant to Bankruptcy Rule 3003(c)(3), after which any Proof of Claim may not be timely filed, except Claims held by governmental agencies.

"**Business Day**" shall mean any day that is not a Saturday, Sunday, or one of the legal holidays listed in Bankruptcy Rule 9006(a).

"**Claim**" shall have the meaning set forth in Bankruptcy Code § 101(5).

"**Claimant**" or "**Creditor**" means the holder of a Claim.

"**Class**" means any class into which Claims are classified pursuant to the Plan. Each subclass of a class shall be treated as a separate class.

"**Collateral**" means the real or personal property securing a Secured Claim.

"**Confirmation**" means the Bankruptcy Court's entry of the Confirmation Order.

"**Confirmation Date**" means the date on which the Order confirming this Plan is entered.

"**Confirmation Hearing**" means the hearing or hearings held before the Bankruptcy Court in which the Debtor will seek Confirmation of this Plan.

"**Confirmation Order**" means the Order confirming this Plan.

"**Contested**" when used with respect to a Claim, means a Claim against the Debtor: (i) that is listed in the Debtor's Schedules of Assets and Liabilities as disputed, contingent, or unliquidated; (ii) that is listed in the Debtor's Schedules of Assets and Liabilities as undisputed, liquidated, and not contingent and as to which a Proof of Claim has been filed with the Bankruptcy Court, to the extent the Proof of Claim amount exceeds the scheduled amount; (iii) that is the subject of a pending action in a forum other than the Bankruptcy Court unless such Claim has been determined by Final Order in such other forum and Allowed by Final Order of the Bankruptcy Court; or (iv) as to which an objection has been or may be timely filed and has not been denied by Final Order. To the extent an objection relates to the allowance of only a part of a Claim, such Claim shall be a Contested Claim only to the extent of the objection.

"**Debtor**" means Whitestone Uptown Tower, LLC, a/k/a Pillarstone Capital REIT Operating Partnership, the Debtor herein. Where the context so requires, "Debtor" shall also include the Reorganized Debtor.

"**Disputed**" with respect to a Claim means either: (i) a Claim which has been objected to by the Debtor; or (ii) a Claim that is listed on the Debtor's bankruptcy schedules as "disputed, contingent or unliquidated" and for which such Creditor or Interest holder has not filed a Proof of Claim.

"**Effective Date**" means the thirtieth (30<sup>th</sup>) day after the Confirmation Date.

Debtor's Second Amended Plan of Reorganization

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"**Estate**" means the bankruptcy estate of the Debtor in this Case.

"**Fee Claim**" means a Claim under Bankruptcy Code §§ 330 or 503 for allowance of compensation and reimbursement of expenses to professionals in this Bankruptcy Case.

"**Fee Application**" means an application filed with the Bankruptcy Court for allowance of a Fee Claim.

"**Final Order**" means an Order as to which any appeal that has been taken has not been stayed following the expiration of the time for appeal or has been resolved, or as to which the time for appeal has expired.

"**Impaired**" means the treatment of an Allowed Claim or Interest pursuant to the Plan unless, with respect to such Claim or Interest, either: (i) the Plan leaves unaltered the legal, equitable and contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest; (ii) notwithstanding any contractual provision or applicable law that entitles the holder of such Claim or Interest to demand or receive accelerated payment of such Claim or Interest after occurrence of a default, the Debtor (A) cures any default that occurred before or after the commencement of the Chapter 11 Case on the Petition Date, other than default of the kind specified in § 365(b)(2) of the Bankruptcy Code; (B) reinstates the maturity of such Claim or Interest as such maturity existed before such default; (C) compensates the holder of such Claim or Interest for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law; and (D) does not otherwise alter the legal, equitable or contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest; or (iii) the Plan provides that on the Effective Date, the holder of such Claim or Interest receives, on account of such Claim or Interest, cash equal to the Allowed Amount of such Claim or Interest.

"**Insider**" has the meaning provided by § 101(31) of the Bankruptcy Code.

"**Interest**" means any equity or ownership interest in the Debtor.

"**Lien**" means any charge against or interest in property to secure payment of debt or performance of an obligation and includes a judicial lien, security interest, and deed of trust, mortgage and property tax lien.

"**Order**" means an Order of the Bankruptcy Court.

"**Petition Date**" means December 1, 2023, the date on which the Debtor filed its voluntary petition under Chapter 11 of the Bankruptcy Code.

"**Plan**" means this *Plan of Reorganization*, including any amendments, modifications or corrections made thereto pursuant to the Bankruptcy Code.

"**Priority Tax Claim**" means a Claim entitled to priority pursuant to Bankruptcy Code § 507(a)(8).

Debtor's Second Amended Plan of Reorganization

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"**Priority Wage Claim**" means a Claim entitled to priority pursuant to Bankruptcy Code § 507(a)(4).

"**Priority Unsecured Claim**" means an Unsecured Claim entitled to priority under Bankruptcy Code § 507(a), except Priority Tax Claims and Priority Wage Claims.

"**Proof of Claim**" means a written statement setting forth a Creditor's Claim filed in this Case and conforming substantially to the appropriate official form.

"**Reorganized Debtor**" means the Debtor as it exists after Confirmation of the Plan.

"**Schedules and Statements**" means the Debtor's bankruptcy schedules A/B, D-H and the Statement of Financial Affairs.

"**Secured Claim**" means a Claim that is secured within the meaning of Bankruptcy Code §506(a). Should the value of the Collateral securing a Secured Claim be less than the amount of the Claim, the Claim will be bifurcated into a Secured Claim equal to the value of the Collateral and a general Unsecured Claim for the remainder, pursuant to Bankruptcy Code §506(d).

"**Unsecured Claim**" means any Claim that is not a Secured Claim or an Administrative Expense Claim and that is not entitled to priority treatment under Bankruptcy Code § 507.

**ARTICLE II**

**<u>CONCEPT OF THE PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.01** The Plan is a Plan of Reorganization. The Debtor will continue its business after Confirmation of this Plan. The Debtor is the owner and operator of a twelve-story, 253,000 square-foot office tower located at 4144 North Central Expressway in Dallas, Texas (the "Property"). Under the Plan, the Debtor will make installment payments with interest to all Creditors while it markets the Property for sale, and once the Property is sold the Debtor will pay all Allowed Claims in full.

**ARTICLE III**

**<u>GENERAL TERMS AND CONDITIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.01** <u>**Treatment of Claims**</u>. This Plan is intended to resolve all Claims against the Debtor and/or property of the Debtor of whatever character, whether contingent or liquidated, or whether allowed by the Bankruptcy Court pursuant to Bankruptcy Code Section 502(a). However, only Allowed Claims will receive payments under the Plan. The Plan is designed to ensure that Claimants shall receive at least as much pursuant to this Plan as they would receive in a liquidation pursuant to Chapter 7 of the Bankruptcy Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.02** <u>**Time for Filing Claims**</u>. The holder of any Administrative Claim other than (i) a Fee Claim, (ii) a liability incurred and paid in the ordinary course of business by the Debtor, or (iii) an Allowed Administrative Claim, must file with the Bankruptcy Court and serve on the Debtor and its respective counsel, notice of such Administrative Claim within thirty (30) days after the Effective Date. At a minimum, such notice must identify (i) the name of the holder of such Claim, (ii) the amount of such Claim, and (iii) the basis of such Claim. Failure to file this notice timely and properly shall result in the Administrative Claim being forever barred and discharged.

Debtor's Second Amended Plan of Reorganization

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Each Person asserting an Administrative Expense that is a Fee Claim incurred before the Effective Date shall be required to file a Fee Application with the Bankruptcy Court and serve same on the Debtor's counsel and the U. S. Trustee within sixty (60) days after the Effective Date.

A person who is found to have received a voidable transfer shall have thirty (30) days following the date upon which the order ruling that such transfer is avoidable becomes a Final Order in which to file a Claim in the amount of such avoided transfer.

Liabilities incurred from the Petition Date through the Effective Date in the ordinary course of business shall be paid in the ordinary course of business by the Debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.03** <u>**Modification to the Plan**</u>. In accordance with Bankruptcy Rule 3019, to the extent applicable, this Plan may be modified or amended upon application of the Debtor, or corrected prior to the Confirmation Date, provided that notice and an opportunity for hearing have been given to any affected party. The Plan may be modified at any time after Confirmation and before the Effective Date, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as modified, under section 1129 of the Bankruptcy Code, the circumstances warrant such modification and Debtor consents thereto in writing.

**ARTICLE IV**

**<u>DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS</u>**

The Debtor designates the following Classes of Claims and Interests pursuant to Bankruptcy Code Section 1123.

---

| |
|:---|
| **CLASSIFICATION OF CLAIMS** |
| Class 1: Allowed Secured Claims of Dallas County |
| Class 2: Allowed Secured Claims of Katy ISD |
| Class 3: Allowed Secured Claims of Harris County |
| Class 4: Allowed Secured Claims of RSS MSBAM2013-C13-TX WUT, LLC |
| Class 5: Allowed General Unsecured Claims Other than Insider Claims |
| Class 6: Allowed Insider Claims |
| Class 7: Allowed Equity Interests |

---

**ARTICLE V**

**<u>PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS</u>**

***A. <u>SALE OF PROPERTY AND PAYMENT OF ALL CLAIMS AND EXPENSES</u>***. Under this Plan the Reorganized Debtor will promptly market the Property for sale and use the proceeds of sale to pay all Allowed Claims and Administrative Expenses in full at the closing of the sale or transfer of the Property. Until the sale occurs the Debtor will make the payments described below, to be funded by income from the normal business operations of the Debtor.

Debtor's Second Amended Plan of Reorganization

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***B. <u>NON-CLASSIFIED CLAIMS.</u>*** The following Claims are not classified, pursuant to Bankruptcy Code Section 1123:

**<u>Treatment of Administrative Claims</u>**. Each holder of an Administrative Claim other than Professional Fee Administrative Claims shall receive, in full satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Administrative Claim, (i) Cash equal to the unpaid portion of such Allowed Administrative Claim or (ii) such other treatment as to which the Debtor and such holder shall have agreed upon in writing; provided, however, that Allowed Administrative Claims with respect to liabilities incurred by the Debtor in the ordinary course of business during the Bankruptcy Case shall be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto. On or before the Effective Date, the Debtor or Reorganized Debtor shall pay or have paid in full all Allowed Administrative Claims. All Allowed Administrative Claims shall be paid by the Reorganized Debtor when they are due until the Bankruptcy Case is closed pursuant to a final decree, order of dismissal, or order of conversion. Until entry of such an order, the Reorganized Debtor shall file with the Bankruptcy Court and serve upon the United States Trustee a quarterly financial report. Any administrative ad valorem tax claims shall be paid pursuant to otherwise applicable state law.

**<u>Treatment of Professional Fee Administrative Claims.</u>** All persons who are awarded compensation or reimbursement of expenses by the Bankruptcy Court in accordance with sections 330 or 331 of the Bankruptcy Code or entitled to the priorities established pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, shall be paid in full, in Cash, the amounts allowed by the Bankruptcy Court on the later of the Effective Date or the date on which the order allowing such Claim becomes a Final Order, or upon such other terms as may be mutually agreed upon between such holder of an Allowed Professional Fee Claim and the Reorganized Debtor.

**<u>Treatment of Priority Tax Claims.</u>** Priority Tax Claims, if any, shall be paid in full in 60 equal monthly installments of principal plus interest accruing from the Petition Date at the prevailing statutory rate. Equal payments of principal and interest will commence on the first day of the first month after the Effective Date and continue on the first day of each month thereafter until the Claims are paid in full. The Debtor does not believe any such Claims exist.

**<u>Treatment of Other Priority Claims</u>**. All Priority Unsecured Claims other than Priority Tax Claims, if any, shall be paid in full over a period of six (6) months, with interest accruing from the Effective Date at the rate of 2% per annum. Equal payments of principal and interest will commence on the first day of the first month after the Effective Date and continue on the first day of each month thereafter until the Claims are paid in full. The Debtor does not believe any such Claims exist.

Debtor's Second Amended Plan of Reorganization

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**<u>Title 28 U.S.C. Section 1930 Fees.</u>** The Reorganized Debtor shall pay all post-Confirmation fees assessed by the Office of the United States Trustee until this Case is closed by the Court.

***C. <u>CLASSIFIED CLAIMS.</u>*** The following Claims are classified pursuant to Bankruptcy Code Section 1123, and are treated as follows:

**<u>General Provisions Regarding Treatment of Claims.</u>**

**No pre-payment penalty**. No Claimant shall be entitled to a pre-payment penalty if its Claim is paid early.

**Plan voting.** Impaired Claims are entitled to vote to accept or reject the Plan.

**Default remedies.** The Reorganized Debtor shall have twenty (20) days after notice to cure any default under the Plan. In the event the Reorganized Debtor fails to cure the default within 20 days after receipt of written notice from the affected Claimant, the Claimant shall be entitled to pursue collection of all amounts owed pursuant to state law outside of the Bankruptcy Court. The Reorganized Debtor shall be entitled to two notices of default. In the event of a third default, the Claimant shall be entitled to pursue collection of all amounts owed pursuant to contract or state law outside the Bankruptcy Court without further notice.

**Lien rights.** Allowed Secured Creditors shall retain their pre-Petition Date Liens until paid in full as provided in this Plan.

**Bifurcation of Partially Secured Claims.** Should the value of the Collateral securing a Secured Claim be less than the amount of the Claim, the Claim will be bifurcated into a Secured Claim equal to the value of the Collateral and a general Unsecured Claim for the remainder, pursuant to Bankruptcy Code §506(d).

**<u>Class 1: Allowed Secured Claims of Dallas County</u>**

These Claims shall be paid in full by the Reorganized Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through sixty (60) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. In the event the Reorganized Debtor sells, conveys, or transfers the Property before the expiration of 60 months from the Petition Date, these Claims shall be paid in full at the closing of the sale or transfer. These Claims are IMPAIRED.

**<u>Class 2: Allowed Secured Claims of Katy ISD</u>**

These Claims shall be paid in full on the Effective Date with interest accruing from the Petition Date at the rate of twelve percent (12%) per annum. These Claims are not Impaired.

Debtor's Second Amended Plan of Reorganization

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**<u>Class 3: Allowed Secured Claims of Harris County</u>**

These Claims shall be paid in full on the Effective Date with interest accruing from the Petition Date at the rate of twelve percent (12%) per annum. These Claims are not Impaired.

**<u>Class 4: Allowed Secured Claims of RSS MSBAM2013-C13-TX WUT, LLC</u>**

Class 4 Claims shall be paid in full in 60 equal monthly installments of principal plus interest at the rate of 5% per annum. The payments shall begin on the first day of the first month following the Effective Date and continue on the first day of each subsequent month until the Claim is paid in full under the Plan. In the event the Reorganized Debtor sells, conveys, or transfers the Property before the expiration of 60 months from the Effective Date, these Claims shall be paid in full at the closing of the sale or transfer. Further given the 9019 Motion that has been filed this Claim may be paid sooner based on the 9019 Motion and the Financing Motion that have been filed. These Claims are IMPAIRED.

**<u>Class 5: Allowed General Unsecured Claims other than Insider Claims</u>**

Class 5 Claimants shall be paid in full over forty-eight (48) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of 48 months. In the event the Reorganized Debtor sells, conveys, or transfers the Property before the expiration of 48 months from the Effective Date, these Claims shall be paid in full at the closing of the sale or transfer. These Claims are IMPAIRED.

**<u>Class 6: Allowed Insider Claims</u>**

Class 6 shall consist of the Allowed Claims of Insiders of the Debtor. Class 6 Claims shall be paid in full once the Allowed Class 5 Claims are paid in full. These Claims are IMPAIRED.

**<u>Class 7 - Allowed Equity Interests</u>**

Class 7 shall consist of Allowed Equity Interests in the Debtor. Class 7 Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1 – 6 are paid in full pursuant to this Plan. Once such Allowed Claims are paid in full per the terms of this Plan then monies shall be paid out to the equity owners of the Debtor. These Interests are not Impaired.

**ARTICLE VI**

**<u>MEANS FOR IMPLEMENTATION OF PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.01 <u>Implementation of Plan</u>**<u>.</u> This Plan will be substantially consummated by the commencement of payments as called for above. The Reorganized Debtor will promptly market the Property for sale and use the proceeds of sale to pay all Claims in full. Until the sale occurs the Plan payments described above will be funded by income derived from the normal business operations of the Debtor. Further details regarding the implementation of the Plan and projections of the Debtor's income, expenses and Plan payments are provided in the Debtor's Disclosure Statement accompanying this Plan.

Debtor's Second Amended Plan of Reorganization

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**ARTICLE VII**

**<u>TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.01 <u>Assumption and Rejection of Executory Contracts and Unexpired Leases</u>**. All executory contracts and unexpired leases not expressly assumed by the Debtor as of the Confirmation Date are hereby REJECTED by this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.02 <u>Reservation of Rights</u>**. The Debtor shall have the right to assume or reject, pursuant to Bankruptcy Code Section 365, prior to the Confirmation Date, any executory contract or unexpired lease of real property (to the extent permitted under the Bankruptcy Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.03 <u>Bar Date for Claims Based on Rejection</u>**. If the rejection of an executory contract or an unexpired lease results in damages to the other party or parties to such contract or lease, a Claim for such damages shall be forever barred and shall not be enforceable against the Plan Proponent or their properties or agents, successors, or assigns, unless a proof of Claim is filed with the Bankruptcy Court and served upon the Reorganized Debtor, by the earlier of (a) the end of the month following the period in which the Effective Date occurs or (b) such other deadline as the Court may set for asserting a Claim for such damages. Any Rejection Claim arising from the rejection of an unexpired lease or executory contract shall be treated as a General Unsecured Claim; *provided, however*, that any Rejection Claim based upon the rejection of an unexpired lease of real property either prior to the Confirmation Date or upon the entry of the Confirmation Order shall be limited in accordance with section 502(b)(6) of the Bankruptcy Code and state law mitigation requirements. Nothing contained herein shall be deemed an admission that such rejection gives rise to or results in a Claim or shall be deemed a waiver of any objections to such Claim if asserted.

**ARTICLE VIII**

**<u>ENFORCEMENT, SETTLEMENT, OR ADJUSTMENT OF CLAIMS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.01 <u>The Debtor</u>**<u>'</u>**<u>s Causes of Action</u>**. Except as otherwise released pursuant to the Plan, all Claims recoverable under Section 550 of the Bankruptcy Code, all Claims against third parties on account of an indebtedness, and all other Claims of any kind or character whatsoever owed to or in favor of the Debtor or Reorganized Debtor or the Estate to the extent not specifically compromised and released pursuant to this Plan or any agreement referred to and incorporated herein, are hereby preserved and retained for enforcement by the Reorganized Debtor for the benefit of the Creditors subsequent to the Effective Date. This Plan shall not estop the Debtor or Reorganized Debtor from asserting any claim or cause of action whether disclosed or not.

The Debtor hereby specifically retains and preserves all causes of action that have been brought or could be brought against RSS MSBAM2013-C13-TX WUT, LLC for lender liability and dispute of default. These claims are best described in the adversary proceeding brought by the Debtor against RSS MSBAM2013-C13-TX WUT, LLC and others and referenced herein as Whitestone Uptown Tower, LLC v. Wells Fargo Bank, National Association, et al., Adversary Case No. 24-03008-mvl, pending in the United States Bankruptcy Court, Northern District of Texas, Dallas Division. These claims are subject to approval of a 9019 Motion with RSS MSBAM2013-C13-TX WUT, LLC. If that 9019 Motion to settle the claims with RSS MSBAM2013-C13-TX WUT, LLC is approved then the claims described herein will be released.

Debtor's Second Amended Plan of Reorganization

------

Further the Debtor contends it has claims against the Whitestone entities for breach of fiduciary duty, gross mismanagement, breach of contract, misrepresentation and civil theft.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.02 <u>Objections to Claims</u>.** Any party authorized by the Bankruptcy Code may object to the allowance of Pre-Petition Date Claims at any time prior to sixty (60) days after the Effective Date and, as to Rejection Claims, at any time prior to sixty (60) days after the filing of any such Rejection Claim. Any proof of Claim filed after the Court sets bar dates shall be of no force and effect and shall be deemed disallowed. All Contested Claims shall be litigated to Final Order; *provided, however,* that the Debtor or Reorganized Debtor may compromise and settle any Contested Claim, subject to the approval of the Bankruptcy Court. Notwithstanding the foregoing, a person who is found to have received a voidable transfer shall have thirty (30) days following the date upon which the order ruling that such transfer is avoidable becomes a Final Order in which to file a Claim in the amount of such avoided transfer.

No distributions under this Plan shall be made to the holder of a Claim that is in dispute, unless and until such Claim becomes an Allowed Claim. If a Claim is Disputed in whole or in part because the Debtor or Reorganized Debtor asserts a right of offset against such Claim or recoupment against the holder of such Claim, then, if and to the extent the Claim giving rise to the offset or recoupment is sustained by Final Order, the Claim in dispute shall be reduced or eliminated and, if applicable, the holder of such Claim shall be required to pay the amount of such offset or recoupment, less the amount of its Allowed Claim. In addition, any party authorized by the Bankruptcy Code, at any time, may request that the Court estimate any contingent, disputed or unliquidated Claim pursuant to Section 502(c) of the Bankruptcy Code, regardless of any prior objections.

**ARTICLE IX**

**<u>EFFECT OF CONFIRMATION</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.01 <u>Discharge and Release of Debtor</u>**. Pursuant to Bankruptcy Code Section 1141(d), confirmation of this Plan <u>does</u> discharge the Debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.02 <u>Legal Binding Effect</u>**. The provisions of this Plan, pursuant to the Bankruptcy Code Section 1141 shall bind the Debtor and all Creditors, whether or not they accept this Plan. The distributions provided for Claimants shall not be subject to any Claim by another creditor or interest holder by reason of any assertion of a contractual right of subordination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.03 <u>Discharge</u>**. Confirmation of the Plan shall result in the inability to commence or continue any judicial, administrative, or other action or proceeding on account of any Pre-Petition Date Claims against the Debtor or Reorganized Debtor.

Debtor's Second Amended Plan of Reorganization

------

Except as provided in the Plan, from and after the Confirmation Date, all holders of Claims against the Debtor are restrained and enjoined by the Confirmation of the Plan: (a) from commencing or continuing in any manner, any action or other proceeding of any kind with respect to any such Claim against the Debtor or Reorganized Debtor, or its property; (b) from enforcing, attaching, collecting, or recovering by any manner or means, any judgment, award, decree, or order against the Assets or the Debtor or Reorganized Debtor on account of such Claims; (c) from creating, perfecting, or enforcing any encumbrance of any kind against the Assets, or the Debtor or Reorganized Debtor on account of such Claims; (d) from asserting any setoff, right of subrogation, or recoupment of any kind against any obligation due the Debtor or Reorganized Debtor on account of such Claims; and (e) from performing any act, in any manner, in any place whatsoever, that does not conform to or comply with the provisions of the Plan on account of such Claims; provided, however, that each holder of a Contested Claim may continue to prosecute its proof of Claim in the Bankruptcy Court and all holders of Claims shall be entitled to enforce its rights under the Plan and any agreements executed or delivered pursuant to or in connection with the Plan. Creditors shall not pursue claims against non-debtor third parties at the same time as their claims are being paid through the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.04 <u>Satisfaction of Claims and Interests</u>**. Except as otherwise provided by the Plan, the consideration distributed under the Plan shall be in complete satisfaction of all Claims of any Creditor against the Debtor, including Claims arising prior to the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.05 <u>Temporary Injunction</u>.** Except as otherwise expressly provided in or permitted under this Plan, the Confirmation Order shall provide, among other things, that all Creditors and persons who have held, hold, or may hold Claims or Interests against the Debtor are enjoined on and after the Effective Date as long as the Plan is not in default and has not been completed against the: (i) commencement or continuation of any judicial, administrative, or other action or proceeding against the Debtor or any third-party guarantor on account of Claims against the Debtor; (ii) enforcement, attachment, collection, or recovery by any manner or means of any judgment, award, decree, or order against the Debtor or any third-party guarantor or any assets or property of same; or (iii) creation, perfection, or enforcement of any encumbrance of any kind against the Debtor or any third-party guarantor arising from a Claim. Such injunction expires at the end of the Plan term at which time all Allowed Claims will have been paid in accordance with the terms of the Plan.

**ARTICLE X**

**<u>MISCELLANEOUS PROVISIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.01** <u>**Request for Relief Under Bankruptcy Code Section 1129**</u>. In the event any Impaired Class shall fail to accept this Plan in accordance with Bankruptcy Code Section 1129(a), the Plan Proponent reserves the right to, and does hereby request the Bankruptcy Court to confirm the Plan in accordance with Bankruptcy Code Section 1129(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.02** <u>**Revocation**</u>. The Plan Proponent reserves the right to revoke and withdraw this Plan at any time prior to the Confirmation Date.

Debtor's Second Amended Plan of Reorganization

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.03** <u>**Effect of Withdrawal or Revocation**</u>. If the Plan Proponent revokes or withdraws this Plan prior to the Confirmation Date, or if the Confirmation Date or the Effective Date does not occur, then this Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claims by or against the Debtor or any other person or to prejudice in any manner the rights of the Debtor or any person in any further proceedings involving the Debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.04** <u>**Due Authorization by Creditors**</u>. Each and every Claimant who elects to participate in the distributions provided herein warrants that it is authorized to accept in consideration of its Claim against the Debtor the distributions provided in the Plan and that there are no outstanding commitments, agreements, or understandings, express or implied, that may or can in any way defeat or modify the rights conveyed or obligations undertaken by it under this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.05** <u>**Entire Agreement**</u>. This Plan, as described herein, the Confirmation Order, and all other documents and instruments to effectuate this Plan provided for herein, constitute the entire agreement and understanding among the parties hereto relating to the subject matter hereof and supersedes all prior discussions and documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.06 <u>Section 1146 Exemption</u>.** Pursuant to Section 1146 of the Bankruptcy Code, the issuance, transfer or exchange or any security under this Plan or the making or delivery of any instrument or transfer pursuant to, in implementation of or as contemplated by this Plan or the transfer of any property pursuant to this Plan shall not be taxed under any federal, state or local law imposing a stamp, transfer or similar tax or fee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.07 <u>Provisions Governing Distributions</u>.** All payments and distributions under the Plan shall be made by the Reorganized Debtor as indicated. Any payments or distributions to be made by the Plan Proponent pursuant to the Plan shall be made as soon as reasonably practicable after the Effective Date, except as otherwise provided for in the Plan, or as may be ordered by the Bankruptcy Court. Any payment or distribution by the Reorganized Debtor pursuant to the Plan, to the extent delivered by the United States Mail, shall be deemed made when deposited into the United States Mail.

Payments of Cash to be made by the Reorganized Debtor pursuant to the Plan shall be made by check drawn on a domestic bank or by wire transfer from a domestic bank.

Distributions and deliveries to holders of Allowed Claims shall be made at the addresses set forth on the proofs of Claim or proofs of interest filed by such holders (or at the last known addresses of such holders if no proof of Claim or proof of interest is filed). All Claims for undeliverable distributions shall be made on or before the second anniversary of the Effective Date. After such date, all unclaimed property shall remain the property of the Reorganized Debtor and the Claim of any other holder with respect to such unclaimed property shall be discharged and forever barred.

Debtor's Second Amended Plan of Reorganization

------

Checks issued by the Reorganized Debtor in respect of Allowed Claims shall be null and void if not cashed within ninety (90) days of the date of delivery thereof. Requests for reissuance of any check shall be made directly to the Plan Proponent by the holder of the Allowed Claim to whom such check originally was issued. Any claim in respect of such a voided check within ninety (90) days after the date of delivery of such check. After such date, all Claims in respect of void checks shall be discharged and forever barred, and the amount of such checks shall become Unclaimed Property and returned to the Reorganized Debtor.

No interest shall be paid on any Claim unless, and only to the extent that, the Plan specifically provides otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.08 <u>Governing Law</u>.** Unless a rule of law or procedure supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) is applicable, or a specific choice of law provision is provided, the internal laws of the State of Texas shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan, without regard to conflicts of law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.09 <u>Notices to Debtor.</u>** Any notices required to be given to the Debtor under this Plan shall be mailed by certified mail to the Debtor at 19407 Park Row, Suite 140, Houston, Texas 77084 and to Debtor's counsel, Joyce Lindauer, at 1412 Main Street, Suite 500, Dallas Texas 75202 and by email at joyce@joycelindauer.com.

**ARTICLE XI**

**<u>MODIFICATION OF THE PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.01** The Debtor may propose amendments to or modifications of this Plan at any time prior to Confirmation, upon notice to all parties-in-interest. After Confirmation, the Reorganized Debtor may, with approval of the Court and so long as it does not materially or adversely affect the interest of creditors, modify to remedy any defect or omission or reconcile any inconsistencies in the Confirmation Order in such manner as may be necessary to carry out the purposes and effect of this Plan.

**ARTICLE XII**

**<u>RETENTION OF JURISDICTION</u>**

Notwithstanding confirmation of the Plan or the Effective Date having occurred, the Court will retain jurisdiction for the following purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.01** <u>**Allowance of Claims**</u>. To hear and determine the allowability of all Claims upon objections to such Claims.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.02** <u>**Executory Contracts and Unexpired Leases Proceedings**</u>. To act with respect to proceedings regarding the assumption of any executory contract or unexpired lease of the Debtor pursuant to Sections 365 and 1123 of the Code and Article VII of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.03** <u>**Plan Interpretation**</u>. To resolve controversies and disputes regarding the interpretation of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.04** <u>**Plan Implementation**</u>. To implement and enforce the provisions of the Plan and enter orders in aid of confirmation and implementation of the Plan.

Debtor's Second Amended Plan of Reorganization

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.05** <u>**Plan Modification**</u>. To modify the Plan pursuant to Section 1127 of the Code and applicable Bankruptcy Rules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.06** <u>**Adjudication of Controversies**</u>. To adjudicate such contested matters and adversary proceedings as may be pending or subsequently initiated in the Court against the Debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.07** <u>**Injunctive Relief**</u>. To issue any injunction or other relief as appropriate to implement the intent of the Plan, and to enter such further orders enforcing any injunctions or other relief issued under the Plan or in the Confirmation Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.08** <u>**Interpleader Action**</u>. To entertain interpleader actions concerning assets to be distributed or other assets of the Estate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.09** <u>**Correct Minor Defects**</u>. To correct any defect, cure any omission or reconcile any inconsistency or ambiguity in the Plan, the Confirmation Order or any document executed or to be executed in connection therewith, as may be necessary to carry out the purposes and intent of the Plan, provided that the rights of any holder or an Allowed Claim are not materially and adversely affected thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.10** <u>**Authorization of Fees and Expenses**</u>. To review and authorize payment of professional fees incurred prior to the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.11** <u>**Post-Confirmation Orders Regarding Confirmation**</u>. To enter and implement such orders as may be appropriate in the event the Confirmation Order is, for any reason, stayed, reversed, revoked, modified, or vacated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.12** <u>**Final Decree**</u>. To enter a final decree closing the Case pursuant to Bankruptcy Rule 3022.

Dated: May 16, 2024.

---

| |
|:---|
| Respectfully Submitted, |
| &nbsp;&nbsp;&nbsp;*/s/ Joyce W. Lindauer* |
| Joyce W. Lindauer |
| State Bar No. 21555700 |
| Joyce W. Lindauer Attorney, PLLC |
| 1412 Main St. Suite 500 |
| Dallas, Texas 75202 |
| Telephone: (972) 503-4033 |
| Facsimile: (972) 503-4034 |
| ATTORNEYS FOR THE DEBTOR |
| &nbsp;&nbsp;&nbsp;*/s/ Bradford D. Johnson* |
| President and CEO of Pillarstone Capital REIT, as general partner of Pillarstone Capital REIT Operating Partnership, the sole member of the Debtor |

---

Debtor's Second Amended Plan of Reorganization

## Exhibit 2.2

**Exhibit 2.2**

Joyce W. Lindauer

State Bar No. 21555700

Joyce W. Lindauer Attorney, PLLC

1412 Main Street, Suite 500

Dallas, Texas 75202

Telephone: (972) 503-4033

Facsimile: (972) 503-4034

ATTORNEYS FOR DEBTORS

**IN THE UNITED STATES BANKRUPTCY COURT**

**FOR THE NORTHERN DISTRICT OF TEXAS**

**DALLAS DIVISION**

---

| | |
|:---|:---|
| **IN RE:**<br>**§** |  |
| **§** |  |
| **WHITESTONE INDUSTRIAL-**<br>**§** | **CASE NO. 24-30653-mvl-11** |
| **OFFICE, LLC, et. al.<sup>1</sup>,**<br>**§** |  |
| **§** | (**Jointly Administered under** |
| **Debtors.**<br>**§** | **Case No. 24-30653-mvl-11)** |

---

**<u>DEBTORS</u>**<u>'</u> **<u>FIFTH AMENDED JOINT PLAN OF LIQUIDATION</u>**

**COMES NOW** Whitestone Industrial-Office, LLC, Whitestone Offices, LLC, Whitestone CP Woodland Ph 2, LLC, Pillarstone Capital REIT Operating Partnership, LP, and Pillarstone Capital REIT, Debtors in the above styled jointly administered cases, and file this their Fifth Amended Joint Plan of Liquidation (the "Plan"). The Debtors are the owners and operators of several income-producing real properties in greater Dallas and Houston, Texas.

The sources and uses of income to fund the Plan are described in more detail in the Disclosure Statement accompanying this Plan. Periodic financial reports will be filed with the Court, as required by the Bankruptcy Code, covering the profitability, projections of cash receipts and disbursements for a reasonable period. These reports shall be available on the Court's PACER site using the Debtors' name and/or case number as referenced above or can be also obtained from Debtors' counsel by written request.

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<sup>1</sup> The jointly administered cases are Whitestone Industrial-Office, LLC, Case No. 24-30653; Whitestone Offices, LLC, Case No. 24-30654; Whitestone CP Woodland Ph 2, LLC, Case No. 24-30655; Pillarstone Capital REIT Operating Partnership, LP, Case No. 24-30656; and Pillarstone Capital REIT, Case No. 24-30657.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>**TABLE OF CONTENTS**</u>**

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| | |
|:---|:---|
| ARTICLE I - DEFINITIONS AND USE OF TERMS | 3 |
| ARTICLE II - CONCEPT OF THE PLAN | 6 |
| ARTICLE III - GENERAL TERMS AND CONDITIONS | 7 |
| ARTICLE IV - DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS | 8 |
| ARTICLE V- PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS | 9 |
| ARTICLE VI - MEANS FOR IMPLEMENTATION OF PLAN | 17 |
| ARTICLE VII - TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES | 17 |
| ARTICLE VIII - ENFORCEMENT, SETTLEMENT, OR ADJUSTMENT OF CLAIMS | 18 |
| ARTICLE IX - EFFECT OF CONFIRMATION | 20 |
| ARTICLE X - MISCELLANEOUS PROVISIONS | 20 |
| ARTICLE XI - MODIFICATION OF THE PLAN | 22 |
| ARTICLE XII - RETENTION OF JURISDICTION | 23 |

---

Attachments:

Plan Agent Agreement Exhibit "A" <br>List of Tenant Leases and Executory Contracts Exhibit "B"

Debtors' Fifth Amended Joint Plan of Liquidation

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**ARTICLE I**

**<u>DEFINITIONS AND USE OF TERMS</u>**

**1.01 <u>Defined Terms</u>**. Unless the context otherwise requires, capitalized terms shall have the meanings set forth in this section 1.01.

"**Administrative Expense or Administrative Claim**" means an administrative expense described in Bankruptcy Code § 503 and entitled to administrative priority pursuant to Bankruptcy Code § 507(a)(1), including, but not limited to, Fee Claims.

"**Allowed Amount**" means the amount of any Allowed Claim.

"**Allowed Claim**" means a Claim against the Debtors allowable under the Bankruptcy Code to the extent that: (i) a Proof of Claim or request for payment was timely filed, or, with leave of the Bankruptcy Court, late filed, and as to which no objection has been timely filed with the Bankruptcy Court, or, if filed, is allowed by a Final Order, unless otherwise provided in this Plan; (ii) the Claim is scheduled and not listed as disputed, contingent, or unliquidated, and no objection has been timely filed or, if filed, is allowed by a Final Order; or (iii) with respect to an Administrative Expense Claim or Fee Claim, the Administrative Expense Claim or Fee Claim has been approved by a Final Order upon notice and application to the Bankruptcy Court.

"**Assets**" means property of the Estate.

"**Avoidance Actions**" means any and all rights, claims, and causes of action which a trustee, Debtors, or other appropriate party in interest would be able to assert on behalf of the Estate under applicable state statutes or the avoidance provisions of chapter 5 of the Bankruptcy Code, including actions under one or more of the provisions of Bankruptcy Code §§ 506, 542-551, and 553.

"**Ballot**" means the written ballot to be distributed to Creditors for voting on whether to approve this Plan of reorganization.

"**Bankruptcy Case**" or "**Case**" means these jointly-administered bankruptcy cases pending before the Bankruptcy Court, or one or more of said cases individually, as the context requires.

"**Bankruptcy Code**" or "**Code**" means the United States Bankruptcy Code, 11 U.S.C. §§ 101, *et seq.*, as amended.

"**Bankruptcy Court**" or "**Court**" means the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, or other such court that may have jurisdiction with respect to the reorganization of the Debtors pursuant to Chapter 11 of the Bankruptcy Code.

"**Bankruptcy Rules**" means the Federal Rules of Bankruptcy Procedure.

Debtors' Fifth Amended Joint Plan of Liquidation

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"**Bar Date**" means July 15, 2024, the deadline established by the Bankruptcy Court pursuant to Bankruptcy Rule 3003(c)(3), after which any Proof of Claim may not be timely filed, except Claims held by governmental agencies.

"**Business Day**" shall mean any day that is not a Saturday, Sunday, or one of the legal holidays listed in Bankruptcy Rule 9006(a).

"**Claim**" shall have the meaning set forth in Bankruptcy Code § 101(5).

"**Claimant**" or "**Creditor**" means the holder of a Claim.

"**Class**" means any class into which Claims are classified pursuant to the Plan. Each subclass of a class shall be treated as a separate class.

"**Collateral**" means the real or personal property securing a Secured Claim.

"**Confirmation**" means the Bankruptcy Court's entry of the Confirmation Order.

"**Confirmation Date**" means the date on which the Order confirming this Plan is entered.

"**Confirmation Hearing**" means the hearing or hearings held before the Bankruptcy Court in which the Debtors will seek Confirmation of this Plan.

"**Confirmation Order**" means the Order confirming this Plan.

"**Contested**" when used with respect to a Claim, means a Claim against the Debtors: (i) that is listed in the Debtors' Schedules of Assets and Liabilities as disputed, contingent, or unliquidated; (ii) that is listed in the Debtors' Schedules of Assets and Liabilities as undisputed, liquidated, and not contingent and as to which a Proof of Claim has been filed with the Bankruptcy Court, to the extent the Proof of Claim amount exceeds the scheduled amount; (iii) that is the subject of a pending action in a forum other than the Bankruptcy Court unless such Claim has been determined by Final Order in such other forum and Allowed by Final Order of the Bankruptcy Court; or (iv) as to which an objection has been or may be timely filed and has not been denied by Final Order. To the extent an objection relates to the allowance of only a part of a Claim, such Claim shall be a Contested Claim only to the extent of the objection.

"**Debtors**" means Whitestone Industrial-Office, LLC, Whitestone Offices, LLC, Whitestone CP Woodland Ph 2, LLC, Pillarstone Capital REIT Operating Partnership, LP, and Pillarstone Capital REIT, the Debtors herein. Where the context so requires, "Debtors" shall also include the Reorganized Debtors.

"**Disputed**" with respect to a Claim means either: (i) a Claim which has been objected to by the Debtors; or (ii) a Claim that is listed on the Debtors' bankruptcy schedules as "disputed, contingent or unliquidated" and for which such Creditor or Interest holder has not filed a Proof of Claim.

"**Effective Date**" means the fifteenth (15<sup>th</sup>) day after the Confirmation Date.

Debtors' Fifth Amended Joint Plan of Liquidation

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"**Estate**" means the bankruptcy estate of the Debtors in this Case.

"**Fee Claim**" means a Claim under Bankruptcy Code §§ 330 or 503 for allowance of compensation and reimbursement of expenses to professionals in this Bankruptcy Case.

"**Fee Application**" means an application filed with the Bankruptcy Court for allowance of a Fee Claim.

"**Final Order**" means an Order as to which any appeal that has been taken has not been stayed following the expiration of the time for appeal or has been resolved, or as to which the time for appeal has expired.

"**Impaired**" means the treatment of an Allowed Claim or Interest pursuant to the Plan unless, with respect to such Claim or Interest, either: (i) the Plan leaves unaltered the legal, equitable and contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest; (ii) notwithstanding any contractual provision or applicable law that entitles the holder of such Claim or Interest to demand or receive accelerated payment of such Claim or Interest after occurrence of a default, the Debtors (A) cures any default that occurred before or after the commencement of the Chapter 11 Case on the Petition Date, other than default of the kind specified in § 365(b)(2) of the Bankruptcy Code; (B) reinstates the maturity of such Claim or Interest as such maturity existed before such default; (C) compensates the holder of such Claim or Interest for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law; and (D) does not otherwise alter the legal, equitable or contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest; or (iii) the Plan provides that on the Effective Date, the holder of such Claim or Interest receives, on account of such Claim or Interest, cash equal to the Allowed Amount of such Claim or Interest.

"**Insider**" has the meaning provided by § 101(31) of the Bankruptcy Code.

"**Interest**" means any equity or ownership interest in the Debtors.

"**Lien**" means any charge against or interest in property to secure payment of debt or performance of an obligation and includes a judicial lien, security interest, and deed of trust, mortgage and property tax lien.

"**Order**" means an Order of the Bankruptcy Court.

"**Petition Date**" means March 4, 2024, the date on which all the Debtors filed their voluntary petitions under Chapter 11 of the Bankruptcy Code.

"**Plan**" means this *Joint Plan of Reorganization*, including any amendments, modifications or corrections made thereto pursuant to the Bankruptcy Code.

"**Plan Agent**" means Frances Smith, the professional selected to act as the Plan Agent under this Plan and the Plan Agent Agreement that accompanies this Plan.

Debtors' Fifth Amended Joint Plan of Liquidation

------

"**Plan Agent Agreement**" means the Agreement that accompanies and is incorporated into this Plan by this reference that describes the role, duties, compensation and authority vested in the Plan Agent by this Plan and the Plan Agent Agreement. Approval of this Plan also includes approval of the Plan Agent Agreement.

"**Plan Term**" means twelve (12) months following the Effective Date unless extended pursuant to Section 10.10 of the Plan.

"**Priority Tax Claim**" means a Claim entitled to priority pursuant to Bankruptcy Code § 507(a)(8).

"**Priority Wage Claim**" means a Claim entitled to priority pursuant to Bankruptcy Code § 507(a)(4).

"**Priority Unsecured Claim**" means an Unsecured Claim entitled to priority under Bankruptcy Code § 507(a), except Priority Tax Claims and Priority Wage Claims.

"**Proof of Claim**" means a written statement setting forth a Creditor's Claim filed in this Case and conforming substantially to the appropriate official form.

"**Reorganized Debtors**" means the Debtors as they exist after Confirmation of the Plan.

"**Schedules and Statements**" means the Debtors' bankruptcy schedules A/B, D-H and the Statement of Financial Affairs.

"**Secured Claim**" means a Claim that is secured within the meaning of Bankruptcy Code §506(a). Should the value of the Collateral securing a Secured Claim be less than the amount of the Claim, the Claim will be bifurcated into a Secured Claim equal to the value of the Collateral and a general Unsecured Claim for the remainder, pursuant to Bankruptcy Code §506(d).

"**Unsecured Claim**" means any Claim that is not a Secured Claim or an Administrative Expense Claim and that is not entitled to priority treatment under Bankruptcy Code § 507.

**ARTICLE II**

**<u>CONCEPT OF THE PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.01 <u>Plan of Liquidation</u>**. The Plan is a Plan of Liquidation. The Debtors are the owners and operators of several income-producing commercial office buildings in greater Dallas and Houston, Texas (the "Properties"). Under the Plan the post-Confirmation Debtors will continue to operate the Properties and promptly market the Properties for sales that will occur within one year from the Effective Date of the Plan and use the proceeds of sale to pay all Claims against the Debtors that are subsidiaries (the "Subsidiary Debtors") of Pillarstone Capital REIT Operating Partnership, LP (the "Partnership"). Any remaining funds after payment in full of all Claims against the Subsidiary Debtors shall flow into the Partnership. Funds in the Partnership will be used to satisfy classes of Claims in accordance with the terms of this Plan. Whitestone REIT Operating Partnership, LP's ("WROP's") Claim against the Partnership, to the extent Allowed, shall receive the same treatment under the Plan as Class Pillarstone OP 2: Allowed Claims of Insiders, though WROP is not an Insider for the purposes of the Plan. WROP's Claim against Pillarstone Capital REIT ("Pillarstone"), to the extent Allowed, shall be treated for Plan purposes as a Class Pillarstone 1: Allowed Unsecured Claims other than Insider Claims subject to any Claims of the Debtors as to the Allowance of such Claims, including but not limited to subordination of such Claims. Funds remaining in the Debtors' estates after payment of all Claims shall be distributed to the Debtors' Equity Interest Holders according to their percentages of ownership. Until the sales occur, the Plan payments described below will be funded by income derived from the normal business operations of the Debtors. The Plan Agent shall have discretion in making Plan payments from available funds.

Debtors' Fifth Amended Joint Plan of Liquidation

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**ARTICLE III**

**<u>GENERAL TERMS AND CONDITIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.01 <u>Treatment of Claims</u>**. This Plan is intended to resolve all Claims against the Debtors and/or property of the Debtors of whatever character, whether contingent or liquidated, or whether allowed by the Bankruptcy Court pursuant to Bankruptcy Code Section 502(a). However, only Allowed Claims will receive payments under the Plan. The Plan is designed to ensure that Claimants shall receive at least as much pursuant to this Plan as they would receive in a liquidation pursuant to Chapter 7 of the Bankruptcy Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.02 <u>Time for Filing Claims</u>**. The holder of any Administrative Claim other than (i) a Fee Claim, (ii) a liability incurred and paid in the ordinary course of business by the Debtors, or (iii) an Allowed Administrative Claim, must file with the Bankruptcy Court and serve on the Debtors and its respective counsel, notice of such Administrative Claim within thirty (30) days after the Effective Date. At a minimum, such notice must identify (i) the name of the holder of such Claim, (ii) the amount of such Claim, and (iii) the basis of such Claim. Failure to file this notice timely and properly shall result in the Administrative Claim being forever barred and discharged.

Each Person asserting an Administrative Expense that is a Fee Claim incurred before the Effective Date shall be required to file a Fee Application with the Bankruptcy Court and serve same on the Debtors' counsel and the U. S. Trustee within sixty (60) days after the Effective Date.

A person who is found to have received a voidable transfer shall have thirty (30) days following the date upon which the order ruling that such transfer is avoidable becomes a Final Order in which to file a Claim in the amount of such avoided transfer.

Liabilities incurred from the Petition Date through the Effective Date in the ordinary course of business shall be paid in the ordinary course of business by the Debtors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.03 <u>Modification to the Plan</u>**. In accordance with Bankruptcy Rule 3019, to the extent applicable, this Plan may be modified or amended upon application of the Debtors, or corrected prior to the Confirmation Date, provided that notice and an opportunity for hearing have been given to any affected party. The Plan may be modified at any time after Confirmation and before the Effective Date, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as modified, under section 1129 of the Bankruptcy Code, the circumstances warrant such modification and Debtors consents thereto in writing.

Debtors' Fifth Amended Joint Plan of Liquidation

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**ARTICLE IV**

**<u>DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS</u>**

The Debtors designate the following Classes of Claims and Interests pursuant to Bankruptcy Code Section 1123.

**<u>Claims against Whitestone Industrial-Office, LLC, Case No. 24-30653</u>**

Class Whitestone Ind-Ofc 1: Allowed Secured Claims of City of Houston

Class Whitestone Ind-Ofc 2: Allowed Secured Claims of Houston ISD

Class Whitestone Ind-Ofc 3: Allowed Secured Claims of Spring Branch ISD

Class Whitestone Ind-Ofc 4: Allowed Secured Claims of Houston Community College System

Class Whitestone Ind-Ofc 5: Allowed Secured Claims of Westpark Municipal Utility District

Class Whitestone Ind-Ofc 6: Allowed Secured Claims of Cypress Fairbanks ISD

Class Whitestone Ind-Ofc 7: Allowed Secured Claims of Katy ISD

Class Whitestone Ind-Ofc 8: Allowed Secured Claims of Harris County ESD #47

Class Whitestone Ind-Ofc 9: Allowed Secured Claims of Lone Star College System

Class Whitestone Ind-Ofc 10: Allowed Unsecured Claims other than Insider Claims

Class Whitestone Ind-Ofc 11: Allowed Claims of Insiders

Class Whitestone Ind-Ofc 12: Allowed Equity Interests

**<u>Claims against Whitestone Offices, LLC, Case No. 24-30654</u>**

Class Whitestone Offices 1: Allowed Secured Claims of Dallas County

Class Whitestone Offices 2: Allowed Secured Claims of Richardson ISD

Class Whitestone Offices 3: Allowed Secured Claims of Harris County

Class Whitestone Offices 4: Allowed Secured Claims of Cypress-Fairbanks ISD

Class Whitestone Offices 5: Allowed Secured Claims of City of Houston

Class Whitestone Offices 6: Allowed Secured Claims of Houston Community College System

Class Whitestone Offices 7: Allowed Secured Claims of Houston ISD

Class Whitestone Offices 8: Allowed Secured Claims of Lone Star College System

Class Whitestone Offices 9: Allowed Unsecured Claims other than Insider Claims

Class Whitestone Offices 10: Allowed Claims of Insiders

Class Whitestone Offices 11: Allowed Equity Interests

**<u>Claims against Whitestone CP Woodland Ph 2, LLC, Case No. 24-30655</u>**

Class Whitestone Woodland 1: Allowed Secured Claims of Montgomery County

Class Whitestone Woodland 2: Allowed Unsecured Claims other than Insider Claims

Class Whitestone Woodland 3: Allowed Claims of Insiders

Class Whitestone Woodland 4: Allowed Equity Interests

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Claims against Pillarstone Capital REIT Operating Partnership, LP, Case No. 24-30656</u>**

Class Pillarstone OP 1: Allowed Unsecured Claims other than Insider Claims

Class Pillarstone OP 2: Allowed Claims of Insiders

Class Pillarstone OP 3: Allowed Equity Interests

**<u>Claims against Pillarstone Capital REIT, Case No. 24-30657</u>**

Class Pillarstone 1: Allowed Unsecured Claims other than Insider Claims

Class Pillarstone 2: Allowed Claims of Insiders

Class Pillarstone 3: Allowed Equity Interests

**ARTICLE V**

**<u>PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS</u>**

***A. <u>SALE OF PROPERTY AND PAYMENT OF ALL CLAIMS AND EXPENSES</u>***. Under this Plan the Debtors will promptly market the Properties for sales to occur within one year of the Effective Date of the Plan and use the proceeds of sale to pay all Allowed Claims and Administrative Expenses in order of priority at the closing of the sale or transfer of the Properties. Until the sales occur, the Debtors will make the payments described below, to be funded by income from the normal business operations of the Debtors.

***B. <u>NON-CLASSIFIED CLAIMS.</u>*** The following Claims are not classified, pursuant to Bankruptcy Code Section 1123:

**<u>Treatment of Administrative Claims</u>**. Each holder of an Administrative Claim other than Professional Fee Administrative Claims shall receive, in full satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Administrative Claim, (i) Cash equal to the unpaid portion of such Allowed Administrative Claim or (ii) such other treatment as to which the Debtors and such holder shall have agreed upon in writing; provided, however, that Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Bankruptcy Case shall be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto. On or before the Effective Date, the Debtors or Reorganized Debtors shall pay or have paid in full all Allowed Administrative Claims. All Allowed Administrative Claims shall be paid by the Reorganized Debtors when they are due until the Bankruptcy Case is closed pursuant to a final decree, order of dismissal, or order of conversion. Until entry of such an order, the Reorganized Debtors shall file with the Bankruptcy Court and serve upon the United States Trustee a quarterly financial report. Any administrative ad valorem tax claims shall be paid pursuant to otherwise applicable state law.

**<u>Treatment of Professional Fee Administrative Claims.</u>** All persons who are awarded compensation or reimbursement of expenses by the Bankruptcy Court in accordance with sections 330 or 331 of the Bankruptcy Code or entitled to the priorities established pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, shall be paid in full, in Cash, the amounts allowed by the Bankruptcy Court on the later of the Effective Date or the date on which the order allowing such Claim becomes a Final Order, or upon such other terms as may be mutually agreed upon between such holder of an Allowed Professional Fee Claim and the Reorganized Debtors.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Treatment of Priority Tax Claims.</u>** Priority Tax Claims, if any, shall be paid in full with statutory interest on the Effective Date.

**<u>Treatment of Other Priority Claims</u>**. All Priority Unsecured Claims other than Priority Tax Claims, if any, shall be paid in full on the Effective Date. The Debtors do not believe any such Claims exist.

**<u>Title 28 U.S.C. Section 1930 Fees.</u>** The Reorganized Debtors shall pay all post-Confirmation fees assessed by the Office of the United States Trustee until this Case is closed by the Court.

***C. <u>CLASSIFIED CLAIMS.</u>*** The following Claims are classified pursuant to Bankruptcy Code Section 1123, and are treated as follows:

**<u>General Provisions Regarding Treatment of Claims.</u>**

**No pre-payment penalty**. No Claimant shall be entitled to a pre-payment penalty if its Claim is paid early.

**Plan voting.** Impaired Claims are entitled to vote to accept or reject the Plan.

**Default remedies.** The Reorganized Debtors shall have twenty (20) days after notice to cure any default under the Plan. In the event the Reorganized Debtors fail to cure the default within 20 days after receipt of written notice from the affected Claimant, the Claimant shall be entitled to pursue collection of all amounts owed pursuant to state law outside of the Bankruptcy Court. The Reorganized Debtors shall be entitled to two notices of default. In the event of a third default, the Claimant shall be entitled to pursue collection of all amounts owed pursuant to contract or state law outside the Bankruptcy Court without further notice.

**Lien rights.** Allowed Secured Creditors shall retain their pre-Petition Date Liens until paid in full as provided in this Plan.

**Bifurcation of Partially Secured Claims.** Should the value of the Collateral securing a Secured Claim be less than the amount of the Claim, the Claim will be bifurcated into a Secured Claim equal to the value of the Collateral and an Unsecured Claim for the remainder, pursuant to Bankruptcy Code §506(d).

**Duplicate Claims.** To the extent the Claims in any of these jointly-administered Cases are duplicative of other Claims filed by or scheduled in any other Case, any such Claimant shall be entitled to only a single recovery under the Plan. Under no circumstances will any Claimant receive multiple recoveries on a single Claim for which the Debtors may be jointly liable.

Debtors' Fifth Amended Joint Plan of Liquidation

------

**<u>SALE OF PROPERTIES.</u> IN THE EVENT ONE OR MORE OF THE DEBTORS SELLS, CONVEYS, OR TRANSFERS ONE OF ITS PROPERTIES BEFORE THE EXPIRATION OF THE PERIODIC PAYMENTS DESCRIBED BELOW, ALL SECURED CLAIMS AGAINST SUCH PROPERTY SHALL BE PAID IN FULL AT THE CLOSING OF THE SALE OR TRANSFER.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.**  **<u>CLAIMS AGAINST WHITESTONE INDUSTRIAL-OFFICE, LLC</u>** 

**<u>Class Whitestone Ind-Ofc 1: Allowed Secured Claims of City of Houston</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 2: Allowed Secured Claims of Houston Independent School District</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 3: Allowed Secured Claims of Spring Branch Independent School District</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 4: Allowed Secured Claims of Houston Community College System</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Class Whitestone Ind-Ofc 5: Allowed Secured Claims of Westpark Municipal Utility District</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 6: Allowed Secured Claims of Cypress Fairbanks ISD</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 7: Allowed Secured Claims of Katy ISD</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 8: Allowed Secured Claims of Harris County EDS #47</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 9: Allowed Secured Claims of Lone Star College System</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 10: Allowed Unsecured Claims other than Insider Claims</u>**

These Claims shall be paid in full over twelve (12) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of 12 months. In the event the Debtor sells, conveys, or transfers all its Properties before the expiration of 12 months from the Effective Date, these Claims shall be paid in full upon the closing of the last such sale or transfer. These Claims are IMPAIRED.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Class Whitestone Ind-Ofc 11: Allowed Claims of Insiders</u>**

These Claims shall be paid their pro-rata share of all net operating funds remaining after Classes 1-6 have been paid in full under this Plan, up to the full amount of such Claims, without interest. These Claims are IMPAIRED.

**<u>Class Whitestone Ind-Ofc 12: Allowed Equity Interests</u>**

These Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1–7 are paid in full pursuant to this Plan. These Interests are not Impaired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.**  **<u>CLAIMS AGAINST WHITESTONE OFFICES, LLC</u>** 

**<u>Class Whitestone Offices 1: Allowed Secured Claims of Dallas County</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 2: Allowed Secured Claims of Richardson ISD</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 3: Allowed Secured Claims of Harris County</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Class Whitestone Offices 4: Allowed Secured Claims of Cypress-Fairbanks ISD</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 5: Allowed Secured Claims of City of Houston</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 6: Allowed Secured Claims of Houston Community College System</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 7: Allowed Secured Claims of Houston ISD</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 8: Allowed Secured Claims of Lone Star College System</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 9: Allowed Unsecured Claims other than Insider Claims</u>**

These Claims shall be paid in full over twelve (12) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of 12 months. In the event the Debtor or Reorganized Debtor sells, conveys, or transfers all its Properties before the expiration of 12 months from the Effective Date, these Claims shall be paid in full upon the closing of the last such sale or transfer. These Claims are IMPAIRED.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Class Whitestone Offices 10: Allowed Claims of Insiders</u>**

These Claims shall be paid their pro-rata share of all net operating funds remaining after Classes 1-5 have been paid in full under this Plan, up to the full amount of such Claims, without interest. These Claims are IMPAIRED.

**<u>Class Whitestone Offices 11: Allowed Equity Interests</u>**

These Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1–6 are paid in full pursuant to this Plan. These Interests are not Impaired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.**  **<u>CLAIMS AGAINST WHITESTONE CP WOODLAND PH 2, LLC</u>** 

**<u>Class Whitestone Woodland 1: Allowed Secured Claims of Montgomery County</u>**

These Claims shall be paid in full by the Debtor's payment of equal, consecutive monthly installments of principal and interest commencing on the first day of the first full month following the Effective Date and continuing through twelve (12) months from the Petition Date. Interest shall accrue at the rate of twelve percent (12%) per annum from the Petition Date until these Claims are paid in full. These Claims are IMPAIRED.

**<u>Class Whitestone Woodland 2: Allowed Unsecured Claims other than Insider Claims</u>**

These Claims shall be paid in full over twelve (12) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of 12 months. In the event the Debtor or Reorganized Debtor sells, conveys, or transfers all its Properties before the expiration of 12 months from the Effective Date, these Claims shall be paid in full upon the closing of the last such sale or transfer. These Claims are IMPAIRED.

**<u>Class Whitestone Woodland 3: Allowed Claims of Insiders</u>**

These Claims shall be paid their pro-rata share of all net operating funds remaining after Classes 1 and 2 have been paid in full under this Plan, up to the full amount of such Claims, without interest. These Claims are IMPAIRED.

**<u>Class Whitestone Woodland 4: Allowed Equity Interests</u>**

These Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1, 2 and 3 are paid in full pursuant to this Plan. These Interests are not Impaired.

Debtors' Fifth Amended Joint Plan of Liquidation

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.**  **<u>CLAIMS AGAINST PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP, LP</u>** 

**<u>Class Pillarstone OP 1: Allowed Unsecured Claims other than Insider Claims</u>**

These Claimants shall be paid in full over twelve (12) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of twelve (12) months. The Plan Agent may pay the Allowed Claims sooner than twelve (12) months if funds are available. The Plan Agent may withhold payments based on her business judgment that the Claims in this class have not been finally Allowed and she does not have funds on hand to pay the Claims in full. In the event the Debtors owning real property (Whitestone Industrial-Office, LLC, Whitestone Offices, LLC, Whitestone CP Woodland Ph 2, LLC) sell, convey, or transfer all their Properties before the expiration of 12 months from the Effective Date or any extension of the twelve (12) month period, these Claims shall be paid in full upon the closing of the last such sale or transfer. These Claims are IMPAIRED.

**<u>Class Pillarstone OP 2: Allowed Claims of Insiders</u>**

These Claims shall be paid their pro-rata share of all net operating funds remaining after Class 1 has been paid in full under this Plan, up to the full amount of such Claims, without interest. These Claims are IMPAIRED.

**<u>Class Pillarstone OP 3: Allowed Equity Interests</u>**

These Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1 and 2 are paid in full pursuant to this Plan. These Interests are not Impaired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.**  **<u>CLAIMS AGAINST PILLARSTONE CAPITAL REIT</u>** 

**<u>Class Pillarstone 1: Allowed Unsecured Claims other than Insider Claims</u>**

These Claimants shall be paid in full over twelve (12) months from the Effective Date. Equal payments of principal and interest at 1% per annum shall commence on the first day of the first month following the Effective Date and continue on the first day of each month thereafter for a total of twelve (12) months. The Plan Agent may pay the Allowed Claims sooner than twelve (12) months if funds are available. The Plan Agent may withhold payments based on her business judgment that the Claims in this class have not been finally allowed and she does not have funds on hand to pay the Claims in full. These Claims are IMPAIRED.

Debtors' Fifth Amended Joint Plan of Liquidation

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**<u>Class Pillarstone 2: Allowed Claims of Insiders</u>**

These Claims shall be paid their pro-rata share of all net operating funds remaining after Class 1 has been paid in full under this Plan, up to the full amount of such Claims, without interest. These Claims are IMPAIRED.

**<u>Class Pillarstone 3: Allowed Equity Interests</u>**

These Interests shall be retained by their owners but shall receive no dividends or other distributions on these Interests until Classes 1 and 2 are paid in full pursuant to this Plan. These Interests are not Impaired.

**ARTICLE VI**

**<u>MEANS FOR IMPLEMENTATION OF PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.01 <u>Implementation of Plan</u>**<u>.</u> This Plan will be substantially consummated by the commencement of payments as called for above. The Debtors will promptly market the Properties for sale and use the proceeds of sale to pay all Claims in full. Until the sales occur the Plan payments described above will be funded by income to the extent available derived from the normal business operations of the Debtors. Further details regarding the implementation of the Plan and projections of the Debtors' income, expenses and Plan payments are provided in the Debtors' Disclosure Statement accompanying this Plan. The Debtors' liquidation of the Properties shall be primarily undertaken at the direction of Bradford Johnson, whose compensation shall be determined by the Bankruptcy Court on separate motion. None of the Debtors shall otherwise increase any compensation paid to any of their employees, officers, directors, or trustees from the amounts or rates paid in the ordinary course of the Debtors' businesses during the pendency of the Cases without Court approval after notice and hearing.

On the Effective Date the Debtors will appoint a "Plan Agent" to administer all Claims as described in the Plan Agent Agreement appointing the Plan Agent attached hereto as Exhibit "A", setting out her duties, compensation and role following Confirmation of the Plan.

**ARTICLE VII**

**<u>TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.01 <u>Assumption and Rejection of Executory Contracts and Unexpired Leases</u>**. All executory contracts and unexpired leases not expressly assumed by the Debtors as of the Confirmation Date are hereby REJECTED by this Plan. The Debtors are assuming all tenant leases and all contracts related to the use and occupancy of the Properties by the Debtors set forth on Exhibit "B": attached to this Plan. Notice of assumption shall be provided to such parties by first Class U.S. Mail as part of the service of the Order of Confirmation of this Plan and any party wishing to object to the assumption or rejection of their executory contract or lease shall have fourteen (14) days from the date of the entry of the Confirmation Order to provide notice to Debtors' counsel and the Plan Agent of their objection. If no such objection is made then the Plan as to the effectiveness of the assumption or rejection of such contract or lease shall be final. If an objection is provided to Debtors' counsel and the Plan Agent within the time allowed then Debtors' counsel shall set a hearing on the Objection at the next available date provided by the Court and provide notice of such date to the objecting party. The Pillarstone and the Partnership are assuming the Limited Partnership Agreement with WROP, as set forth and as defined in Section 8.01 of this Plan.

Debtors' Fifth Amended Joint Plan of Liquidation

------

Assumption of desired contracts and leases is being done as part of Confirmation and the Debtors have provided a a list of desired contracts as part of this Plan on Exhibit "B".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.02 <u>Reservation of Rights</u>**. The Debtors shall have the right to assume or reject, pursuant to Bankruptcy Code Section 365, prior to the Confirmation Date, any executory contract or unexpired lease of real property (to the extent permitted under the Bankruptcy Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.03 <u>Bar Date for Claims Based on Rejection</u>**. If the rejection of an executory contract or an unexpired lease results in damages to the other party or parties to such contract or lease, a Claim for such damages shall be forever barred and shall not be enforceable against the Plan Proponent or their properties or agents, successors, or assigns, unless a proof of Claim is filed with the Bankruptcy Court and served upon the Reorganized Debtors, by the earlier of (a) the end of the month following the period in which the Effective Date occurs or (b) such other deadline as the Court may set for asserting a Claim for such damages. Such deadline shall be thirty (30) days following the entry of the order rejecting such Claim. Any Rejection Claim arising from the rejection of an unexpired lease or executory contract shall be treated as a General Unsecured Claim; *provided, however*, that any Rejection Claim based upon the rejection of an unexpired lease of real property either prior to the Confirmation Date or upon the entry of the Confirmation Order shall be limited in accordance with section 502(b)(6) of the Bankruptcy Code and state law mitigation requirements. Nothing contained herein shall be deemed an admission that such rejection gives rise to or results in a Claim or shall be deemed a waiver of any objections to such Claim if asserted.

**ARTICLE VIII**

**<u>ENFORCEMENT, SETTLEMENT, OR ADJUSTMENT OF CLAIMS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.01 <u>The Debtors</u>**<u>'</u> **<u>Causes of Action</u>**. Except as otherwise released pursuant to the Plan, all Claims recoverable under Section 550 of the Bankruptcy Code, all Claims against third parties on account of an indebtedness, and all other Claims of any kind or character whatsoever owed to or in favor of the Debtors or Reorganized Debtors or the Estate to the extent not specifically compromised and released pursuant to this Plan or any agreement referred to and incorporated herein, are hereby preserved and retained for enforcement by the Plan Agent for the benefit of the Creditors subsequent to the Effective Date. This Plan shall not estop the Plan Agent from asserting any claim or cause of action whether disclosed or not.

The agreements, conditions, covenants, obligations, promises, rights and terms set forth in each of that certain Amended and Restated Agreement of Limited Partnership of Pillarstone Capital REIT Operating Partnership LP, dated as of December 8, 2016, and that certain Contribution Agreement, dated December 8, 2016, by and among WROP, Pillarstone Capital REIT Operating Partnership LP, and Pillarstone Capital REIT (the "<u>Limited Partnership Agreement</u>") shall survive as modified by the Plan, Plan Agent Agreement, Confirmation Order, any orders entered by the Bankruptcy Court in the Debtors' Cases, and by applicable provisions of the Bankruptcy Code, including 11 U.S.C. 1107, pursuant to which the Debtors shall act during the implementation of this Plan, but shall not otherwise be modified, cancelled, expired, or terminated.

Debtors' Fifth Amended Joint Plan of Liquidation

------

The Debtors hereby specifically retain and preserve all causes of action that have been brought or could be brought against each other, Whitestone REIT, Whitestone REIT Operating Partnership, L.P., Whitestone TRS, Inc., and each of their respective officers, directors, trustees, and affiliate entities (the "Whitestone Parties"), including claims or causes of action for breach of fiduciary duty, gross mismanagement, breach of contract, misrepresentation, and civil theft.

The Debtors also reserve all claims against their tenants for any breaches of their leases. Further any claims by Pillarstone against the Partnership and by the Partnership against Pillarstone are preserved, as are any claims of Pillarstone and the Partnership against WROP, its parent Whitestone REIT, or any of its affiliates, employees, officers, or trustees for any and all claims already plead in any pending litigation and can still be pled against them therein.

The agreements, conditions, covenants, obligations, promises, rights and terms set forth in each of that certain Amended and Restated Agreement of Limited Partnership of Pillarstone Capital REIT Operating Partnership LP, dated as of December 8, 2016, and that certain Contribution Agreement, dated December 8, 2016, by and among WROP, Pillarstone Capital REIT Operating Partnership LP, and Pillarstone Capital REIT shall survive as modified by the Plan, Plan Agent Agreement, Confirmation Order, any orders entered by the Bankruptcy Court in the Debtors' Cases, and by applicable provisions of the Bankruptcy Code, but shall not otherwise be modified, cancelled, expired, or terminated.

Nothing in this Plan shall be deemed to be an admission, conclusion or finding regarding the actions of any party, including any Whitestone Party, with respect to the matters discussed in or contemplated by this Section 8.01, whether by reason of any treatment or classification proposed under this Plan or by provision in this Plan for the treatment of Claims, to the extent Allowed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.02 <u>Objections to Claims</u>**. The Plan Agent is authorized by this Plan and the Plan Agent Agreement to object to the allowance of Pre-Petition Date Claims at any time prior to sixty (60) days after the Effective Date and, as to Rejection Claims, at any time prior to sixty (60) days after the filing of any such Rejection Claim. The Plan Agent may move to extend the deadlines contained in this provision, and extensions shall be freely given by the Bankruptcy Court to enable the Plan Agent to administer Claims in a reasonable manner. Any proof of Claim filed after the Court sets bar dates shall be of no force and effect and shall be deemed disallowed. All Contested Claims shall be litigated to Final Order; *provided, however,* that the Plan Agent may compromise and settle any Contested Claim, in accordance with the terms of the Plan Agent Agreement and this Plan. Notwithstanding the foregoing, a person who is found to have received a voidable transfer shall have thirty (30) days following the date upon which the order ruling that such transfer is avoidable becomes a Final Order in which to file a Claim in the amount of such avoided transfer.

Debtors' Fifth Amended Joint Plan of Liquidation

------

No distributions under this Plan shall be made to the holder of a Claim that is in dispute, unless and until such Claim becomes an Allowed Claim. If a Claim is Disputed in whole or in part because the Plan Agent asserts a right of offset against such Claim, or recoupment against the holder of such Claim, then, if and to the extent the Claim giving rise to the offset or recoupment is sustained by Final Order, the Claim in dispute shall be reduced or eliminated and, if applicable, the holder of such Claim shall be required to pay the amount of such offset or recoupment, less the amount of its Allowed Claim. In addition, the Plan Agent, at any time, may request that the Court estimate any contingent, disputed or unliquidated Claim pursuant to Section 502(c) of the Bankruptcy Code, regardless of any prior objection, unless the Court has ruled on the objection or a ruling is pending.

**ARTICLE IX**

**<u>EFFECT OF CONFIRMATION</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.01 <u>No Discharge of Debtors</u>**. Because this is a liquidating Plan, pursuant to Bankruptcy Code Section 1141(d) confirmation of this Plan <u>does</u> <u>not</u> discharge the Debtors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.02 <u>Legal Binding Effect</u>**. The provisions of this Plan, pursuant to Bankruptcy Code Section 1141 shall bind the Debtors and all Creditors, whether or not they accept this Plan.

**ARTICLE X**

**<u>MISCELLANEOUS PROVISIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.01 <u>Request for Relief Under Bankruptcy Code Section 1129</u>**. In the event any Impaired Class shall fail to accept this Plan in accordance with Bankruptcy Code Section 1129(a), the Plan Proponent reserves the right to, and does hereby request the Bankruptcy Court to confirm the Plan in accordance with Bankruptcy Code Section 1129(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.02** <u>**Revocation**</u>. The Plan Proponent reserves the right to revoke and withdraw this Plan at any time prior to the Confirmation Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.03 <u>Effect of Withdrawal or Revocation</u>**. If the Plan Proponent revokes or withdraws this Plan prior to the Confirmation Date, or if the Confirmation Date or the Effective Date does not occur, then this Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claims by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.04 <u>Due Authorization by Creditors</u>**. Each and every Claimant who elects to participate in the distributions provided herein warrants that it is authorized to accept in consideration of its Claim against the Debtors the distributions provided in the Plan and that there are no outstanding commitments, agreements, or understandings, express or implied, that may or can in any way defeat or modify the rights conveyed or obligations undertaken by it under this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.05 <u>Entire Agreement</u>**. This Plan, as described herein, the Confirmation Order, and all other documents and instruments to effectuate this Plan provided for herein, including the Plan Agent Agreement, constitute the entire agreement and understanding among the parties hereto relating to the subject matter hereof and supersedes all prior discussions and documents.

Debtors' Fifth Amended Joint Plan of Liquidation

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.06 <u>Section 1146 Exemption</u>.** Pursuant to Section 1146 of the Bankruptcy Code, the issuance, transfer or exchange or any security under this Plan or the making or delivery of any instrument or transfer pursuant to, in implementation of or as contemplated by this Plan or the transfer of any property pursuant to this Plan shall not be taxed under any federal, state or local law imposing a stamp, transfer or similar tax or fee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.07 <u>Provisions Governing Distributions</u>.** All payments and distributions under the Plan shall be made by the Plan Agent as set forth in the Plan Agent Agreement. Any payments or distributions to be made by the Plan Agent pursuant to the Plan shall be made as soon as reasonably practicable after the Effective Date, except as otherwise provided for in the Plan, or as may be ordered by the Bankruptcy Court. Any payment or distribution by the Plan Agent pursuant to the Plan, to the extent delivered by the United States Mail, shall be deemed made when deposited into the United States Mail.

Payments of Cash to be made by the Plan Agent pursuant to the Plan shall be made by check drawn on a domestic bank or by wire transfer from a domestic bank.

Distributions and deliveries to holders of Allowed Claims shall be made at the addresses set forth on the proofs of Claim or proofs of interest filed by such holders (or at the last known addresses of such holders if no proof of Claim or proof of interest is filed). All Claims for undeliverable distributions shall be made on or before the second anniversary of the Effective Date. After such date, all unclaimed property shall remain the property of the Reorganized Debtors and the Claim of any other holder with respect to such unclaimed property shall be discharged and forever barred.

Checks issued by the Plan Agent in respect of Allowed Claims shall be null and void if not cashed within ninety (90) days of the date of delivery thereof. Requests for reissuance of any check shall be made directly to the Plan Agent by the holder of the Allowed Claim to whom such check originally was issued. Any claim in respect of such a voided check within ninety (90) days after the date of delivery of such check. After such date, all Claims in respect of void checks shall be discharged and forever barred, and the amount of such checks shall become Unclaimed Property and returned to the Reorganized Debtors.

No interest shall be paid on any Claim unless, and only to the extent that, the Plan specifically provides otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.08 <u>Governing Law</u>.** Unless a rule of law or procedure supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) is applicable, or a specific choice of law provision is provided, the internal laws of the State of Texas shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan, without regard to conflicts of law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.09 <u>Notices to Debtors.</u>** Any notices required to be given to the Debtors under this Plan shall be mailed by certified mail to the Debtors at 19407 Park Row, Suite 140, Houston, Texas 77084 and to Debtors' counsel, Joyce Lindauer, at 1214 Main St., Suite 500, Dallas TX 75202 and by email at joycejoycelindauer.com. Any notices to the Plan Agent shall be pursuant to the Notice provision in the Plan Agent Agreement.

Debtors' Fifth Amended Joint Plan of Liquidation

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.10 <u>Plan Term for Disposition of Assets</u>**. The Plan Term applies to the Debtors' liquidation of the Properties. Nothing in this section shall affect or limit the duration of time required by or afforded to the Plan Agent for the administration of Claims under the Plan and Plan Agent Agreement. Similarly, nothing in this section shall preclude the post-confirmation Debtors from continuing to exist after the expiration of the Plan Term for the purpose of the Plan Agent's administration of Claims or to wind up affairs. The Debtors shall use commercially reasonable efforts to sell all of the Properties for value by the conclusion of the Plan Term. To effectuate that goal, the Debtors shall endeavor to sell all of the Properties by the conclusion of the tenth month following the Effective Date of the Plan. Thereafter, as to any Properties remaining unsold, the Debtors shall take commercially reasonable efforts to successfully auction the remaining Properties at a binding auction by the conclusion of the eleventh month following the Effective Date of the Plan unless the parties have agreed to extend the Plan Term. The Debtors shall then use commercially reasonable efforts to ensure that all sales closings for the remaining Properties occur by the conclusion of the twelfth and final month of the Plan Term. After the conclusion of the tenth month following the Effective Date of the Plan (in furtherance of the terms herein), if the Debtors have not sold all of the Properties, then the Plan Agent, the Debtors and WROP may agree to extend the Plan Term for up to six months.

During the Plan Term, if all classes of Claims senior to WROP's Claims have been satisfied in full pursuant to the Plan, or if WROP funds a cash reserve to satisfy such claims for any Debtor whose property is for sale, then WROP may "credit bid" up to the Allowed amount of its Claim against Pillarstone Capital REIT Operating Partnership, LP to acquire such Properties, so long as its credit bid has been reviewed and approved by the Plan Agent for fundamental fairness. Debtors reserve the right to contest any "Credit Bid" by filing an Objection to Credit Bid with the Bankruptcy Court. If, at the conclusion of the Plan Term Properties remain unsold, and WROP has not elected to make a Credit Bid for any remaining Properties then the parties agree to either a "fire sale" of any remaining Properties; or the distribution of Properties in kind for the satisfaction of Claims in order to complete the liquidation of the Properties and to facilitate the wind down of the Debtors, *provided however*, that if the parties cannot agree on how to proceed, the Plan Agent may direct the parties to either the "fire sale" or distribution of Properties in kind.

Pillarstone may remain as an existing legal entity following the completion of the Plan Agent's administration of the Pillarstone estate, and any wind down described herein.

**ARTICLE XI**

**<u>MODIFICATION OF THE PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.01 <u>Modification of the Plan</u>**. The Debtors may propose amendments to or modifications of this Plan at any time prior to Confirmation, upon notice to all parties-in-interest. After Confirmation, the Plan Agent may, with approval of the Court and so long as it does not materially or adversely affect the interest of creditors, modify to remedy any defect or omission or reconcile any inconsistencies in the Confirmation Order in such manner as may be necessary to carry out the purposes and effect of this Plan.

Debtors' Fifth Amended Joint Plan of Liquidation

------

**ARTICLE XII**

**<u>RETENTION OF JURISDICTION</u>**

Notwithstanding confirmation of the Plan or the Effective Date having occurred, the Court will retain jurisdiction for the following purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.01 <u>Allowance of Claims</u>**. To hear and determine the allowability of all Claims upon objections to such Claims.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.02 <u>Executory Contracts and Unexpired Leases Proceedings</u>**. To act with respect to proceedings regarding the assumption of any executory contract or unexpired lease of the Debtors pursuant to Section 365 and 1123 of the Code and Article VII of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.03 <u>Plan Interpretation</u>**. To resolve controversies and disputes regarding the interpretation of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.04 <u>Plan I</u>mplementation**. To implement and enforce the provisions of the Plan and enter orders in aid of confirmation and implementation of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.05 <u>Plan Mo</u>dification**. To modify the Plan pursuant to Section 1127 of the Code and applicable Bankruptcy Rules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.06 <u>Adjudication of Controversies</u>**. To adjudicate such contested matters and adversary proceedings as may be pending or subsequently initiated in the Court against the Debtors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.07 <u>Injunctive Relief</u>**. To issue any injunction or other relief as appropriate to implement the intent of the Plan, and to enter such further orders enforcing any injunctions or other relief issued under the Plan or in the Confirmation Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.08 <u>Interpleader Action</u>**. To entertain interpleader actions concerning assets to be distributed or other assets of the Estate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.09 <u>Correct Minor Defects</u>**. To correct any defect, cure any omission or reconcile any inconsistency or ambiguity in the Plan, the Confirmation Order or any document executed or to be executed in connection therewith, as may be necessary to carry out the purposes and intent of the Plan, provided that the rights of any holder or an Allowed Claim are not materially and adversely affected thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.10 <u>Authorization of Fees and Expenses</u>**. To review and authorize payment of professional fees incurred prior to the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.11 <u>Post-Confirmation Orders Regarding Confirmation</u>**. To enter and implement such orders as may be appropriate in the event the Confirmation Order is, for any reason, stayed, reversed, revoked, modified, or vacated.

Debtors' Fifth Amended Joint Plan of Liquidation

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.12 <u>Final Decree</u>**. To enter a final decree closing the Case pursuant to Bankruptcy Rule 3022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.13 <u>Plan Agent Agreement</u>**. To enforce the terms of the Plan Agent Agreement and to approve any 9019 Motions filed by the Plan Agent following Confirmation to settle Claims as that term is defined in the Plan Agent Agreement.

Dated: November 6, 2024.

---

| |
|:---|
| Respectfully Submitted, |
| &nbsp;&nbsp;&nbsp;*/s/ Joyce W. Lindauer* |
| Joyce W. Lindauer |
| State Bar No. 21555700 |
| Joyce W. Lindauer Attorney, PLLC |
| 1412 Main St. Suite 500 |
| Dallas, Texas 75202 |
| Telephone: (972) 503-4033 |
| Facsimile: (972) 503-4034 |
| ATTORNEYS FOR THE DEBTORS |
| &nbsp;&nbsp;&nbsp;*/s/ Bradford D. Johnson* |
| Authorized Agent for the Debtors |

---

Debtors' Fifth Amended Joint Plan of Liquidation

## Exhibit 10.1

**Exhibit 10.1**

**EXECUTIVE COMPENSATION AGREEMENT**

THIS EXECUTIVE COMPENSATION AGREEMENT (this "**<u>Agreement</u>**") is made as of [1/31], 2025 to be effective as of the Effective Date (as defined below) by and between Pillarstone Capital REIT, a Maryland real estate investment trust ("**<u>PREIT</u>**") Pillarstone Capital REIT Operating Partnership LP, a Delaware limited partnership ("**<u>PROP</u>**", and together with PREIT, the "**<u>Company</u>**"), and Bradford D. Johnson, an individual resident of the State of Texas (the "**<u>Executive</u>**").

**RECITALS**

**WHEREAS**, PREIT is the general partner of PROP.

**WHEREAS**, the Company and certain of their subsidiaries are debtors in those certain jointly administered cases bankruptcy case styled *In re: Whitestone Industrial Office, LLC, et. al.,* Case No. 24-30653-mvl-11 (collectively, the "**<u>Bankruptcy Case</u>**") under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "**<u>Court</u>**").

**WHEREAS**, the Company's subsidiaries in the Bankruptcy Case currently own the real estate assets (the "Properties"), as follows:

**8303-8317 Knight Road, Houston, Texas**<br> **1507 Ricefield & 19407 Park Row, Houston, Texas**<br> **7010-25 W. Tidwell Road & 5715 NW Central Drive, Houston, Texas**<br> **2110-2130 Holly Hall St., Houston, Texas**<br> **14704 I-45 N, Spring, Texas**<br> **24714 I-45 N, Spring, Texas**<br> **24722 1-45 N, Spring, Texas (collectively, the "Houston Properties")**<br> **and**<br> **4144 North Central Expressway, Dallas, Texas (the "Uptown Tower")**

**WHEREAS**, the Executive has served as President and Chief Executive Officer of PREIT since July 2022.

**NOW, THEREFORE**, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree, intending to be legally bound, as follows:

------

**AGREEMENT**

**Section 1. <u>Compensation</u>**. For services rendered by the Executive for the periods described herein, the Executive shall be compensated as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) *Salary.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Base Salary. PROP will pay the Executive a base salary as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) $20,000 per month for November 2024, December 2024 and January 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) $16,000.00 per month starting February 2025 through the earlier of (i) the disposition of all of the Houston Properties and (ii) end November, 2025, unless extended by agreement with Whitestone REIT Operating Partnership, LP ("WROP"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) $5,000/month starting after the disposition of the Houston Properties if Uptown Tower remains unsold, until the earlier of the disposition of Uptown Tower and September 1, 2025;

(the "**<u>Base Salary</u>**") on a monthly basis in accordance with the Company's regular payroll policy for employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Withholding. The Company shall withhold from any compensation all sums required by federal, state and local laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) *Performance Bonuses.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Houston Properties Disposition Bonus**: If sales of *all* the Houston Properties are closed by May 31, 2025, PROP shall pay to the Executive a cash bonus of $150,000 on the first payroll payment date following the closing of the last remaining Houston Property. This bonus is not allocable on a property by property basis, and is earned only upon the sale of all the Houston Properties if sold together, or upon sale of the final remaining Houston Property by May 31, 2025. Failure to sell all the Houston Properties by May 31, 2025 will result in failure to earn the Houston Properties Disposition Bonus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Uptown Tower Disposition Bonus**. If a sale of Uptown Tower is closed on or before May 31, 2025 PROP shall pay to the Executive a cash bonus in the amount of $75,000 on the first payroll payment date following the closing.

Section 2. **Duties.** The Executive shall continue in his role and responsibilities as Chief Executive Officer, President and Trustee of PREIT until and unless terminated, removed, or replaced, including but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Leasing and organizational functions as follows:

● Collect and organize due diligence documents for selling agents and buyers;

------

● Lead the completion of ongoing and other capex and staging projects prior to potential buyer property showings and negotiations;

● Supervise buyer's due diligence and on-site inspections and continue supervising day-to-day leasing negotiations and operations to maximize value;

● Review, approve and ensure reasonable expenditures related to the repair of life-safety deferred capital expenditures;

● Supervise marketing and leasing of current vacant and renewing spaces / value creation; and

● Direct marketing, inquiries and showings to prospective buyers and negotiate sale contracts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) The Executive shall deliver monthly leasing activity, repairs and sales status reports to the Plan Administrator and to WROP in accordance with the Plan and Plan Agent Agreement in the Bankruptcy Case, or more frequently if requested, to keep the Plan Administrator and WROP apprised of the status of PREIT' s Houston Properties and Uptown Tower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Upon request and reasonable notice, the Executive will facilitate Q&A discussions with real estate brokers and the Plan Administrator and WROP representatives regarding the status of offers, marketing efforts, and other related inquiries.

**Section 3. Reimbursed Business Expenses.** The Executive shall be entitled to reasonable reimbursement for expenses incurred during the performance of job duties, including auto tolls, mileage (at the IRS Federal mileage rate), and office supplies, to be submitted and paid monthly.

**Section 4. Termination.** In the event the Executive's employment is terminated by Executive for any reason, the Executive shall be entitled to

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any earned but unpaid Base Salary through the date of termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any earned but unpaid Bonus.

In the event the Executive's Employment is terminated by the Employer then Executive shall be entitled to receive:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any earned but unpaid Base Salary through the date of termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any earned but unpaid Bonus.

------

Payment of the amounts due under this <u>Section 4</u> shall be made by PROP in a single lump sum no later than the first payroll payment date immediately following the termination of employment.

**Section 5. Miscellaneous.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) *Successors and Assignment.* This Agreement shall be binding upon and inure to the benefit of the Company, its successors, legal representatives and assigns, and upon the Executive, his heirs, executors, administrators, representatives, legatees and permitted assigns. Executive agrees that his rights and obligations hereunder are personal to him and may not be assigned without the express written consent of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) *Amendments.* This Agreement may not be altered, amended, modified, revised or supplemented except by a written instrument executed by all parties hereto and approved by the Bankruptcy Court after notice and hearing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) *Notices.* Any notices to be given hereunder by any party to the other may be affected either by personal delivery in writing, by mail, registered or certified, postage prepaid with return receipt requested, by facsimile or by e-mail. Notices delivered personally shall be deemed communicated as of actual receipt; mailed notices shall be deemed communicated as of three (3) days after mailing; facsimile and e-mail notices shall be deemed communicated one (1) business day after transmission, receipt confirmed. Notices shall be addressed to the Company at its principal executive office and to the Executive at the address listed on the signature page to this Agreement. Each party may change its address or other information by written notice in accordance with this paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) *Governing Law.* This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, interpretation, performance and validity of this Agreement shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) *Enforcement of This Agreement.* Any failure by a party to take immediate action with respect to a breach of any provision of this Agreement does not waive such party's right to act with respect to such breach or any other breach. Any action or inaction by a party in response to any breach of this Agreement does not limit such party's rights with respect to actions it may take in response to any other similar or different type of breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) *Severability.* If any portion of this Agreement is found to be invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Further, any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) *Entire Agreement.* This Agreement constitutes the entire agreement between the parties with respect to the matters set forth herein, and supersedes any prior agreement between the parties with respect to the subject matter of this Agreement.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) *Headings.* Headings in this Agreement are for reference only and do not limit the scope or extent of such section.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) *Counterparts.* This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) *References.* When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement, unless otherwise indicated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) *Effective Date.* This Agreement shall be effective upon approval of this Agreement by the Court, or, should the Court determine that no approval is necessary, on the date of such determination.

**[Signature page follows.]**

------

IN WITNESS WHEREOF, the parties have duly executed this Executive Compensation Agreement as of the date first written above.

**PILLARSTONE CAPITAL REIT**

By:   <br> Name:   <br> Title:  

**PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP LP**

By: Pillarstone Capital REIT, its general partner

By: <br> Name: <br> Title:

---

| |
|:---|
| /s/ Bradford D. Johnson |
| **BRADFORD D. JOHNSON** |

---

---

| | |
|:---|:---|
| Address: | 19407 Park Row Suite 140 |
|  | Houston TX 77084 |
| Email: | bjohnson@pillarstone-capital.org |

---

## Exhibit 10.2

**EXHIBIT 10.2**

**AMERICAN BANK, N.A.**

**LOAN AGREEMENT**

(Loan No. 89765200)

This Loan Agreement (this "**Agreement**") is made and entered into to be effective as of June 7, 2024 by and between **AMERICAN BANK, N.A., a national banking association ("Lender")** and **WHITESTONE UPTOWN TOWER, LLC, a Delaware limited liability company** (**"Borrower"**);

WHEREAS, Borrower is or will be the owner in fee of that certain parcel of land situated in Dallas County, Texas, which property is more particularly described on <u>Exhibit A</u> attached hereto and made a part hereof (collectively, the "**Project**");

WHEREAS, Borrower has applied to Lender for a loan (**"Loan"**) in an amount of $1,500,000.00 (the "**Loan Amount**") to be secured by the Property and the improvements thereon;

WHEREAS, to evidence the Loan, Borrower has, of even date herewith, executed and delivered to Lender a Promissory Note (**"Note"**) in the Loan Amount;

WHEREAS, as partial security for the Loan, Borrower has, of even date herewith, executed and delivered for the benefit of Lender a Deed of Trust (**"Deed of Trust"**) covering the Project and other property described therein (collectively, the "**Property**"); and

NOW, THEREFORE, in connection with the Loan, and in consideration of Lender's commitment to fund proceeds of the Loan up to the Loan Amount, the parties hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lender agrees to make and advance said Loan upon, and Borrower agrees to accept the Loan in accordance with, the provisions hereof and the other documents executed and delivered by Borrower to Lender securing and/or evidencing the Loan (**"Loan Documents"**).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The Loan shall be advanced, in multiple advances, subject to the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Borrower has fully complied with all the provisions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The terms and conditions of the Note, Deed of Trust, and other Loan Documents have been fully complied with and there is then no existing Event of Default or event which, when coupled with the giving of notice, or passage of time, or both would be an Event of Default thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The lien of the Deed of Trust is a valid first lien for the full amount of the Loan on good and indefeasible fee title to the Property and improvements thereon, free and clear of all encumbrances, except for Permitted Encumbrances (as such term is defined in the Deed of Trust).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Borrower has delivered to Lender certificates of insurance as required by the Deed of Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Borrower has delivered to Lender a survey of the Property acceptable to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Lender has received a loan policy of title insurance in the Loan Amount in a form and substance satisfactory to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Borrower has approved the delivery of notices of default under the Loan Documents to Whitestone REIT Operating Partnership, L.P. ("**Existing Guarantor**"); provided that nothing herein determines the status of the relationship between Borrower and Existing Guarantor.

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 1

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. The proceeds of the loan shall be used for (the "**Approved Uses**"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Legal fees of Joyce W. Linduaer, PLLC and The O'Dowd Law Firm, and as approved by the bankruptcy court in the Existing Bankruptcy (as defined below).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Loan closing expenses approved by Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Legal expenses and fees incurred by or charged to Lender, both incurred or charged prior to and after the date hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Any other uses agreed upon between Borrower and Lender and approved by the Bankruptcy Court (defined below); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Payoff of the existing lender on the Property.

In no event shall Borrower's cash whether proceeds of the Loan or proceeds from the Property (collectively, the "**Cash Collateral**") be used to(a) investigate, analyze, commence, prosecute, threaten, litigate, object to, or challenge in any manner or raise any defenses to, the validity, perfection, priority, extent or enforceability of (i) any and all amounts owed, debts, claims, obligations and indebtedness of any kind, including interest (including default interest), fees, costs, expenses, charges, and indemnities in connection with any amount due under the Loan, or (ii) any liens, claims, security agreements, control agreements, pledge agreements, financing statements, mortgages, schedules or other similar documents granted under the DIP Order (as defined below) or the Loan Documents, (b) assert claims, defenses, set-off, avoidance, impairment, disallowance, recharacterization, reduction, subordination (equitable, contractual or otherwise), counterclaims, recoupment, cross-claims, defenses, or any other challenges under or pursuant to the United States Bankruptcy Code or any other applicable domestic or foreign law or regulation, including Avoidance Actions, or any other causes of action against the Lender, (c) prevent, hinder or otherwise delay the Lender's assertion, enforcement or realization of the Property in accordance with the DIP Order, (d) seek to subordinate or recharacterize the Loan or to disallow or avoid any claim, mortgage, security interest, lien or replacement lien or payment thereunder, (e) seek to modify the rights granted to the Lender, or (f) pay any amount on account of any claims arising prior to the date of filing of the Existing Bankruptcy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. A final non-appealable order approving the Loan acceptable to Lender has been entered in Borrower's existing bankruptcy case - Case No. 23-32832-mvl-11 filed in the US Bankruptcy Court for the Northen District of Texas (the "**Existing Bankruptcy**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. All other documents reasonably required by Lender have been delivered to Lender, and all conditions to funding the Loan have been met.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Borrower (a) has previously paid to Lender a $26,000.00 non-refundable deposit for Lender's analysis of the Loan and (b) agrees to pay to Lender either (1) a loan commitment fee in the amount of $45,000.00 and an underwriting fee in the amount of $15,000.00 on the date hereof ("**Closing Fees**") or (2) at Borrower's election, $75,000.00 at Maturity (as defined in the Note), together with, on the date hereof, the reasonable attorney's fees and expenses of Lender's counsel, title insurance premiums, survey costs, filing and recording fees, and any actual expenses incurred by the Lender in connection with the consummation of the transactions contemplated by this Agreement. Additionally, Borrower agrees and promises to pay to Lender (a) a "**Makewhole Fee**" of two percent (2.00%) of the maximum Loan amount, if applicable, in accordance with the terms of the Note, and (b) at Maturity an **Undrawn Line Fee** (herein so called) of four and three-quarters percent (4.75%) per annum of the unadvanced portion of the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Upon Borrower's compliance with the foregoing provisions of this Agreement, and provided that Borrower is not in default under any Loan Document, and subject to all other provisions of this Agreement, Lender will advance and disburse the Loan. Interest will be computed and paid in accordance with the terms of the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Intentionally Omitted.

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 2

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Event of Default</u>. Each of the following shall be deemed an "**Event of Default**":

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Borrower shall fail to pay when due any monetary obligations existing under the Note, Deed of Trust, or other Loan Documents, and such failure continues for fifteen (15) days after such amount becomes due and payable (provided that, amounts coming due as a result of a sale of the Property shall be due simultaneously with such sale and shall be settled as part of the sale closing).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any representation or warranty made or deemed made by the Borrower in any Loan Document or in any certificate, report, notice, or financial statement furnished at any time in connection with the Loan shall be false, misleading, or erroneous in any material respect when made or deemed to have been made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Except as otherwise provided herein, Borrower or any other obligated party shall fail to perform, observe, or comply with any non-monetary covenant, agreement or term contained in this Agreement or any other Loan Document, and such failure is not cured within thirty (30) days of written notice to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Excluding the Existing Bankruptcy case, Borrower or any other obligated party shall commence a voluntary proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, conservator, or other similar official of it or a substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in such a proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any corporate action to authorize any of the foregoing or shall be subject to any proceeding to accomplish a comparable arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. An involuntary proceeding shall be hereinafter commenced against the Borrower or any obligated party seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, conservator, or other similar official for it or a substantial part of its property, and such involuntary proceeding shall remain undismissed and unstayed for a period of thirty (30) days.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Borrower or any obligated party shall fail to discharge within a period of thirty (30) days after the commencement thereof any judgment or any attachment, sequestration, or similar proceeding against the Property or any of its other assets or properties, unless such proceeding is being contested diligently and in good faith and adequate reserves acceptable to Lender have been established.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. A material adverse change in the business, condition (financial or otherwise), operations, performance, payments or prospects of the Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. A substantial change in any fact warranted or represented in this Agreement or in any other agreement between Borrower and Lender or in any statement, schedule, or other writing furnished in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The acceleration of the maturity of debt of Borrower to any other person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. A levy on, seizure or attachment upon the Property or any other property of Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. A judgment against Borrower becomes final.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. Any liability or agreement of third parties to Borrower or on the Property shall not be paid or performed in accordance with the terms thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m. Any financing statement regarding the Property but not related to a security interest granted by any of the Loan Documents and not favoring Lender is filed, without Lender's consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n. The sale, loss, theft, destruction, encumbrance or transfer of any Property in violation hereof or in the Loan Documents, or substantial damage to any Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o. A fraudulent representation is made in the Loan Documents or in the financial information delivered to Lender in connection with the Loan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. A violation of laws, regulations, or ordinances occurs relating to the Property.

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 3

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q. Funds from the Loan or the Property are used for purposes other than the Approved Uses or are otherwise misapplied in any manner, including rents and other profits from the business associated with the Property retained by Borrower in violation of the terms of the Loan Documents, or the misuse or misappropriation of any insurance proceeds which should have been delivered to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r. There occurs gross mismanagement, intentional waste, theft, or other misappropriation of the Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s. A breach by Borrower occurs under the Final Order (I) Authorizing the Debtor to (A) Obtain Post-Petition Financing, (B) Grant Senior Secured Priming Liens and Superpriority Administrative Expense Claims, and (C) Utilize Cash Collateral; (II) Modifying the Automatic Stay; and (III) Granting Related Relief (the "**DIP Order**") entered in the Existing Bankruptcy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;t. An occurrence of any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Borrower requests authority to obtain any financing not consented to by the Lender and the proceeds are not used to immediately pay the Loan in full;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the filing by the Borrower (or with the Borrower's consent) of any Chapter 11 Plan or related disclosure statement that does not provide for payment in full of the Loan, unless agreed to by the Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the appointment of a Trustee in the Existing Bankruptcy or the appointment of a responsible officer or an examiner with expanded powers (powers beyond those set forth under sections 1106(a)(3) and (4) of the United States Bankruptcy Code) to operate, oversee or manage the financial affairs, the business, or reorganization of the Borrower under United States Bankruptcy Code section 1106(b);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the dismissal of the Existing Bankruptcy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the conversion of the Existing Bankruptcy to a Chapter 7 case;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) any material breach by the Borrower of any of the terms of the DIP Order, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) an order is entered in the Existing Bankruptcy modifying, reversing, revoking, staying, rescinding, or vacating the DIP Order, the Loan Documents, or any portion thereof; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) granting of relief from any stay of proceeding (including the Automatic Stay) so as to allow a third party to proceed against any asset of the Borrower.

Notwithstanding anything contained herein or in the Note, Deed of Trust, or any of the other Loan Documents to the contrary, no non-monetary default by Borrower shall be actionable by Lender unless and until Borrower receives written notice of such failure and said failure nonetheless continues for thirty (30) days after delivery of such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Borrower shall deliver, or cause to be delivered, to Lender the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Within thirty (30) days after the close of each calendar quarter, company-prepared quarterly financial statements of Borrower, including balance sheets and income statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Within thirty (30) days after filing, and in any event no later than November 15, copies of Borrower's annual income tax returns (including all schedules and K-1s), commencing with the tax year 2023; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Such other financial information concerning the Borrower, Guarantor, or the Property as Lender may from time to time reasonably request.

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 4

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Borrower hereby represents that (i) Borrower and/or its members have contributed capital to the Property in the form of cash or Borrower contributed land (or has paid development expenses out-of-pocket) of at least fifteen percent (15%) of the said Property's appraised value (the "**Capital Contribution**"), and (ii) the Capital Contribution was made prior to any advance made by Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Except as the Existing Bankruptcy case, there is no material claim pending or threatened claim or litigation against the Property, Borrower, or any Guarantor of the Loan, or any partner, venturer, shareholder, director of Borrower, if Borrower is a partnership, joint venture or corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. The execution and delivery of the Loan Documents will not violate or contravene in any way any instrument or agreement pursuant to which Borrower has been organized, or any indenture, agreement, or other instruction to which Borrower or its partners, venturers, shareholders, or directors is a party or which any of them or any of their respective property may be bound, or be in conflict with, result in a breach of or constitute a default under any such indenture, agreement, or other instrument, or result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any property or assets of Borrower, or any partner, venturer, shareholder, or director, as aforesaid, and no action or approval with respect thereto by any third person is required.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. Borrower represents and warrants that, except for U.S. Bankruptcy Court approval in the Existing Bankruptcy, no consent or approval of any regulatory body to execution, delivery, or performance of the Loan Documents is required by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. Borrower represents and warrants that, except for U.S. Bankruptcy Court approval in the Existing Bankruptcy, the execution and delivery of the Loan Documents does not contravene any law, order, decree, rule, or regulation to which any person, firm, or entity executing any such Loan Documents is subject.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. Borrower represents and warrants that the financial statements delivered to Lender by or on behalf of Borrower, and any partner, venturer, shareholder, or director, as aforesaid, are true and correct in all respects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. **<u>TEXAS FINANCE CODE</u>** <u>§</u>**<u>307.052 COLLATERAL PROTECTION INSURANCE NOTICE</u>: BORROWER IS REQUIRED TO: (i) KEEP THE PROPERTY AND IMPROVEMENTS THEREON INSURED AGAINST DAMAGE IN THE AMOUNT SPECIFIED IN THE CORRESPONDING DEED OF TRUST, (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (iii) NAME THE LENDER AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS. BORROWER MUST, IF REQUIRED BY LENDER, DELIVER TO LENDER A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS. IF BORROWER FAILS TO MEET ANY REQUIREMENT LISTED ABOVE, LENDER MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF BORROWER AT BORROWER**'**S EXPENSE.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. The terms and provisions of Article V (Usury Savings Provisions) of the Note are incorporated herein by reference and made a part of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. This Agreement is made for the sole protection and benefit of Borrower and of Lender and no other person or persons shall be deemed to have any privity of contract hereunder nor any right of action of any kind hereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. No waiver by Lender of any breach of any covenant of Borrower herein contained shall be construed as a waiver of any subsequent breach of the same or any other covenant herein contained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. Lender shall at all reasonable times have access to the Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns in the event said party is a corporation or other legal entity, and said party's respective heirs, executors and personal representatives in the event said party is an individual.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. **THE PARTIES HERETO VOLUNTARILY AND KNOWINGLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION WITH, OR RELATED TO ANY OF THE LOAN DOCUMENTS.**

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 5

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. The terms and conditions of this Agreement shall be construed pursuant to and in accordance with laws of the State of Texas and all of the covenants and obligations hereunder are fully enforceable and performable in Dallas County, Texas.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22. Provided no Event of Default then exists (nor has an event occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default) hereunder or under the, Note, Deed of Trust, or other Loan Documents, and all of the following conditions have then been met or satisfied (unless waived by Lender in writing), Borrower shall be entitled to extend the Maturity of the Note for up to two (2) additional three (3) month periods (each an "**Extension Period**" and collectively, the "**Extension Periods**"); provided, however, that all of the following conditions have then been met (unless waived by Lender in writing):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Borrower has notified Lender in writing, at least one (1) day prior thereto, that it desires to extend the Maturity (an "**Extension Request**");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Rate, as defined in the Note is increased by an additional three percent (3.00%) per annum during the Extension Periods.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Borrower delivers complete, true, and correct financial statements, and such other financial information as reasonably requested by Lender, evidencing and representing that no material adverse change has occurred in the financial condition of Borrower and/or Guarantor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. All Lender's out-of-pocket costs relating to this extension, including the preparation of documentation therefor, together with any other costs of Lender associated therewith, shall be paid by Borrower;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Lender has received information, satisfactory to Lender in its discretion, authorizing execution, delivery and performance of any additional Loan Documents, together with certificates of existence, good standing, and other corporate or partnership certificates or documents as Lender may reasonably require to evidence Borrower's authority;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Court approval has been obtained in the Existing Bankruptcy, if still in effect

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. Borrower has satisfied all other requirements relating to the Loan as Lender may require; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The parties shall enter into an amendment to the Note or a loan modification agreement (as determined by Lender) to evidence the modified terms of the Note, together with all other related documentation that may be requested by Lender to evidence the extension.

The foregoing is known as the "**Extension**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23. **ALL AMOUNTS ADVANCED OR OTHERWISE PROVIDED FOR HEREUNDER SHALL CONSTITUTE SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS IN THE EXISTING BANKRUPTCY CASE WITH PRIORITY OVER ALL OTHER ADMINISTRATIVE EXPENSES, CLAIMS, EXPENSES, AND COSTS PERMITTED TO BE DESCRIBED IN, OR ENTITLED TO PRIORITY UNDER THE UNITED STATES BANKRUPTCY CODE AND ALL OTHER UNSECURED CLAIMS AGAINST BORROWER.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24. **Borrower shall indemnify, pay, defend, and hold harmless Lender (and each of its respective directors, officers, members, employees, or agents) against any loss, liability, cost or expense incurred in respect of the financing contemplated hereby or the use or the proposed use of proceeds thereof (excepts to the extent resulting from gross negligence, willful misconduct or actual fraud of the indemnified party, as determined by a final, non-appealable judgement of a court of competent jurisdiction). Notwithstanding anything herein to the contrary, any actions under this Section 24 shall be adjudicated in the Northern District of Texas Bankruptcy Court (**"**Bankruptcy Court**"**).**

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 6

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***[Signature Page Follows.]***

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 7

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IN WITNESS WHEREOF, this Agreement was executed to be effective as of the date first written above.

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| | |
|:---|:---|
| **<u>LENDER:</u>** | **<u>BORROWER:</u>** |
| AMERICAN BANK, N.A., | WHITESTONE UPTOWN TOWER, LLC, |
| a national banking association | a Delaware limited liability company |
|  | By: PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP LP, |
| By:<u> </u><u> </u><u> </u><u> </u> | a Delaware limited partnership, |
| Zane Smith, EVP, Chief Banking Officer | its Sole Member |
|  | By: PILLARSTONE CAPITAL REIT, |
|  | a Maryland Real Estate Investment Trust |
|  | its General Partner |
|  | By: <u>/s/ Bradford D. Johnson</u><u> </u><u> </u><u> </u> |
|  | Bradford D. Johnson, President and CEO |

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LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 8

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**<u>EXHIBIT A</u>**

**Property Description**

Fieldnotes for a 2.9763 acre tract of land out of Lot 9, Block 7/2000 of 4144 Centre Tower, an addition to the City of Dallas out of the John Grigsby Survey, Abstract No. 495, in Dallas County, Texas according to the map or plat thereof recorded in Vol. 81161, Pg. 1556 of the Deed Records of Dallas County, and being that same tract of land conveyed to Whitestone Offices LLC, as described in deed recorded under County Clerk's File No. 20080319414 of the Real Property Records of Dallas County, said 2.9763 acre tract of land being more particularly described by metes and bounds as follows:

Beginning at a 5/8 inch steel rod found in the Northwesterly line of Alcott Street, based on a 50 foot right-of-way, at a point North 23°36'00" East 203.30 feet from its intersection with the Southwesterly line of Kirby Street, based on a 50 foot right-of-way, said point being the most Southerly corner of 4144 Centre Tower Addition and the most Southerly corner of the herein described tract, said point also being the most Easterly corner of Lot 10, Block 7/2000 Central Storeguard Addition, the map or plat of same being recorded in Vol. 95146, Pg. 2656 of the said Deed Records of Dallas County and the most Easterly corner of that certain 2.21 acre tract of land conveyed to Extra Space of Texas Eleven, L.P. as described in deed recorded under County Clerk's File No. 3449198 of the said Real Property Records;

Thence, North 65°51'00" West, 464.08 feet (called North 66°03'30" West, 465.14 feet in 2.21 acre deed) with the Southwesterly line of said Lot 9 and the Northeasterly line of said Lot 10 and the said 2.21 acre tract to a 1/2 inch steel rod with cap found in the Southeasterly line of North Central Expressway, right-of-way varies, marking the most Westerly corner of the herein described tract, said point also being the most Northerly corner of the said 2.21 acre tract;

Thence, in a Northeasterly direction with the Southeasterly line of said North Central Expressway the following courses and distances:

North 28°50'30" East, 135.75 feet to an "X" in concrete set at an angle point;

North 23°42'30" East, 85.99 feet to an "X" in concrete set at a second angle point;

North 29°00'07" East, 73.90 feet to an "X" in concrete set at a third angle point; and

North 28°09'33" East, 112.70 feet to a 3/4 inch steel rod with cap set for the most Northerly corner of the herein described tract, said point being in the Northeasterly line of said Lot 9, said point also being the most Westerly corner of that certain 1.3014 acre tract of land conveyed to RAJ Hospitality, L.P., as described in deed recorded under County Clerk's File No. 1984224 of the said Real Property Records;

Thence, South 65°51'00" East, 290.02 feet (called South 66°08'41" East 289.90 feet in 1.3014 acre deed) with the Southwesterly line of the said 1.3014 acre tract and the Northeasterly line of said Lot 9 to a 5/8 inch steel rod found marking the most Easterly corner of said Lot 9 and the herein described tract, and the most Southerly corner of the said 1.3014 acre tract, said point also being in the most Westerly or Northwesterly line of Lot IA, Block 7/2000, Cityville at Fitzhugh Addition, the map or plat of same being recorded in Volume 2004025, Page 00020 of the said Deed Records of Dallas County, said point also being in the most Westerly or Northwesterly line of that certain 3.5718 acre tract of land conveyed to WRPV XI Vue FH Dallas LP, as described in deed recorded under County Clerk's File No. 201100306330 of the said Real Property Records;

Thence, South 23°42'30" West, 367.30 feet (called South 24°08' 11" East, 367.64 feet in 3.5718 acre deed) with the most Westerly or Northwesterly line of said Lot lA and the said 3.5718 acre tract and the most Easterly or Southeasterly line of said Lot 9 to a 5/8 inch steel rod with cap set at an inside ell corner, said point being the most Westerly corner of said Lot lA and the said 3.5718 acre tract;

Thence, South 65°51'00" East, 146.21 feet (called South 65°23'50" East, 146.54 feet in 3.5718 acre deed) with the most Southwesterly or Southerly line of said Lot IA and the said 3.5718 acre tract and with a Northeasterly line of said Lot 9 to a 5/8 inch steel rod with cap found in the Northwesterly line of aforesaid Alcott Street for corner;

Thence, South 23°30'45" West, 40.06 feet with the Northwesterly line of said Alcott Street to the PLACE OF BEGINNING and containing 2.9763 acres or 129,649 square feet of land, more or less.

LOAN AGREEMENT WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 9 Exhibit A

## Exhibit 10.3

**Exhibit 10.3**

**FIRST AMENDMENT TO LOAN**

(Loan No. 89765200)

THIS FIRST AMENDMENT TO LOAN (this "**Amendment**") is made by and between **WHITESTONE UPTOWN TOWER, LLC**, a Texas limited liability company ("**Maker**") and **AMERICAN BANK, N.A.** ("**Payee**"), to be effective as of the 7th day of March, 2025.

**RECITALS:**

WHEREAS, Maker executed and delivered to Payee that certain Promissory Note, dated effective as of June 7, 2024, in the stated principal amount of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) ("**Note**"); and

WHEREAS, as partial security for the Note, Maker delivered to Payee that certain Deed of Trust recorded in the Real Property Records of Dallas County, Texas ("**Deed of Trust**"), which Deed of Trust covers, among other property, the real property described therein; and

WHEREAS, Maker has requested an extension to the maturity of the Note in accordance with the terms of the Loan Agreement (herein so called), executed of even date with the Note and Deed of Trust, and Payee has agreed to such changes upon the terms hereof.

NOW, THEREFORE, for and in consideration of $10.00 paid by Maker to Payee in connection herewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The parties hereby acknowledge that, as of the date hereof, the outstanding principal due under the Note is currently $1,500,000.00 ("**Principal Amount**") and no additional funds are available to be advanced. Maker promises to pay to Payee the Principal Amount, together with interest thereon as described in the Note, as modified herein, and to perform all of the covenants and obligations under the Note, Deed of Trust, Loan Agreement, and other Loan Documents (as defined in the Note).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Effective as of the date hereof, the first two (2) paragraphs of Section I titled Interest Rates and Payments shall be deleted in their entirety and replaced as follows:

*"Prior to default or maturity, the unpaid principal of this Note from time to time outstanding shall bear interest at the rate of interest per annum equal to the rate reported in the Markets or Money Rates section (or similar section) of <u>The Wall Street Journal</u> (or its website) as the* "*WSJ Prime Rate*" *(the* "***Index***"*), as announced from time to time without notice to Maker,* ***<u>plus</u>*** *seven and one-half percent (7.50%) (the* "***Margin***"*) (the sum of the Index and Margin, being the* "***Rate***"*); provided, however that in no event shall the Rate exceed the greater of eighteen percent (18%) per annum or the maximum rate permitted under applicable law (*"***Maximum Rate***"*). All interest accruing under this Note shall be calculated on the basis of a 365/360-day year.*

*Subject to earlier default and acceleration of the indebtedness evidenced hereby, all principal and accrued interest hereunder shall be due and payable on the earlier of (1) June 7, 2025 or (2) dismissal of Maker*'*s existing bankruptcy case (such earliest date being the* "***Maturity***"*); subject, however, to extension pursuant to that certain Extension Option (as defined in the Loan Agreement of even date herewith, between Maker and Payee (the* "***Loan Agreement***"*).*"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. This Amendment memorializes Maker's first Extension Request under the Loan Agreement and one (1) additional three (3) month Extension Period (as defined in the Loan Agreement) remains.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Maker agrees to pay Payee all costs incurred by Payee in connection with the Amendment including, without limitation, attorneys' fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Maker ratifies and confirms the Note and other Loan Documents, and hereby promises to pay the indebtedness evidenced by the Note, in accordance with the terms thereof, as hereby amended.

FIRST AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Solo Page

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Except as amended hereby, the Note and all other Loan Documents shall remain unmodified and in full force and effect.

**THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.**

*[Signature Page Follows.]*

FIRST AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Solo Page

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the Effective Date written above.

---

| | |
|:---|:---|
| **<u>PAYEE</u>:** | **<u>MAKER:</u>** |
| AMERICAN BANK, N.A., | WHITESTONE UPTOWN TOWER, LLC, |
| a national banking association | a Texas limited liability company |
|  | By: PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP LP, |
| By: <u>/s/ Zane Smith</u><u> </u><u> </u><u> </u> | a Delaware limited partnership, |
| Zane Smith, EVP, Chief Banking Officer | its Sole Member |
|  | By: PILLARSTONE CAPITAL REIT, |
|  | a Maryland Real Estate Investment Trust |
|  | its General Partner |
|  | By: <u>/s/ Bradford D. Johnson</u><u> </u><u> </u> |
|  | Bradford D. Johnson, President and CEO |

---

FIRST AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Solo Page

## Exhibit 10.4

**Exhibit 10.4**

**NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER**'**S LICENSE NUMBER.**

**SECOND AMENDMENT TO LOAN**

(Loan No. 89765200)

THIS SECOND AMENDMENT TO LOAN (this "**Amendment**") is made by and between **WHITESTONE UPTOWN TOWER, LLC**, a Texas limited liability company ("**Maker**") and **AMERICAN BANK, N.A.** ("**Payee**"), to be effective as of the 7th day of June, 2025.

**RECITALS:**

WHEREAS, Maker executed and delivered to Payee that certain Promissory Note, dated effective as of June 7, 2024, in the stated principal amount of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) (as previously amended, the "**Note**"); and

WHEREAS, as partial security for the Note, Maker delivered to Payee that certain Deed of Trust recorded as **Instrument Number 202400115376** in the Real Property Records of Dallas County, Texas ("**Deed of Trust**"), which Deed of Trust covers, among other property, the real property which is more particularly described on <u>Exhibit A</u> attached hereto and made a part hereof; and

WHEREAS, Maker has requested an extension to the maturity of the Note in accordance with the terms of the Loan Agreement (herein so called), executed of even date with the Note and Deed of Trust, and Payee has agreed to such changes upon the terms hereof.

NOW, THEREFORE, for and in consideration of $10.00 paid by Maker to Payee in connection herewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The parties hereby acknowledge that, as of the date hereof, the outstanding principal due under the Note is currently $1,500,000.00 ("**Principal Amount**") and no additional funds are available to be advanced. Maker promises to pay to Payee the Principal Amount, together with interest thereon as described in the Note, as modified herein, and to perform all of the covenants and obligations under the Note, Deed of Trust, Loan Agreement, and other Loan Documents (as defined in the Note).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Effective as of the date hereof, the first two (2) paragraphs of <u>Section I</u> titled *Interest Rates and Payments* shall be deleted in their entirety and replaced as follows:

*"Prior to default or maturity, the unpaid principal of this Note from time to time outstanding shall bear interest at the rate of interest per annum equal to the rate reported in the Markets or Money Rates section (or similar section) of <u>The Wall Street Journal</u> (or its website) as the* "*WSJ Prime Rate*" *(the* "***Index***"*), as announced from time to time without notice to Maker,* ***<u>plus</u>*** *seven and one-half percent (7.50%) (the* "***Margin***"*) (the sum of the Index and Margin, being the* "***Rate***"*); provided, however that in no event shall the Rate exceed the greater of eighteen percent (18%) per annum or the maximum rate permitted under applicable law (*"***Maximum Rate***"*). All interest accruing under this Note shall be calculated on the basis of a 365/360-day year.*

*Subject to earlier default and acceleration of the indebtedness evidenced hereby, all principal and accrued interest hereunder shall be due and payable on the earlier of (1) September 7, 2025 or (2) dismissal of Maker*'*s existing bankruptcy case (such earliest date being the* "***Maturity***"*); subject, however, to extension pursuant to that certain Extension Option (as defined in the Loan Agreement of even date herewith, between Maker and Payee (the* "***Loan Agreement***"*).*"

SECOND AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 1

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. This Amendment memorializes Maker's second and final Extension Request under the Loan Agreement and no additional Extension Periods (as defined in the Loan Agreement) remain.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Maker agrees to pay Payee all costs incurred by Payee in connection with the Amendment including, without limitation, attorneys' fees and a title policy endorsement as may be requested by Payee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Maker ratifies and confirms the Note and other Loan Documents, and hereby promises to pay the indebtedness evidenced by the Note, in accordance with the terms thereof, as hereby amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Except as amended hereby, the Note and all other Loan Documents shall remain unmodified and in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. The effectiveness of this Amendment shall be subject to approval by the court in Maker's bankruptcy case.

**THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.**

*[Signature Page Follows.]*

SECOND AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 2

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the Effective Date written above.

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;**<u>PAYEE</u>:** | **<u>MAKER:</u>** |
| &nbsp;&nbsp;&nbsp;AMERICAN BANK, N.A., | WHITESTONE UPTOWN TOWER, LLC, |
| &nbsp;&nbsp;&nbsp;a national banking association | a Texas limited liability company |
|  | By: PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP LP, |
| &nbsp;&nbsp;&nbsp;By: <u>/s/ Zane Smith</u> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a Delaware limited partnership, |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Zane Smith, EVP, Chief Banking Officer | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;its Sole Member |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By: PILLARSTONE CAPITAL REIT, |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a Maryland Real Estate Investment Trust |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;its General Partner |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By: <u>/s/ Bradford D. Johnson</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bradford D. Johnson, President and CEO |

---

THE STATE OF TEXAS § <br> § <br> COUNTY OF HARRIS §

This instrument was acknowledged before me on June 13, 2025, by BRADFORD D. JOHNSON, President and CEO of PILLARSTONE CAPITAL REIT, a Maryland Real Estate Investment Trust, the General Partner of WHITESTONE REIT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, the Sole Member of WHITESTONE UPTOWN TOWER, LLC, a Delaware limited liability company, on behalf of said entities.

<u>/s/ Priscilla Ann Gonzales</u><u> </u><u> </u><u> </u><br> Notary Public, State of Texas<br>

THE STATE OF TEXAS § <br> § <br> COUNTY OF TARRANT §

This instrument was acknowledged before me on June 24, 2025, by ZANE SMITH, EVP, Chief Banking Officer of AMERICAN BANK, N.A., a national banking association, on behalf of said association.

<u>/s/ Brittany Lytle</u><u> </u><u> </u><u> </u><u> </u><br> Notary Public, State of Texas<br>

SECOND AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 3

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<u>Exhibit A</u>

LEGAL DESCRIPTION

Fieldnotes for a 2.9763 acre tract of land out of Lot 9, Block 7/2000 of 4144 Centre Tower, an addition to the City of Dallas out of the John Grigsby Survey, Abstract No. 495, in Dallas County, Texas according to the map or plat thereof recorded in Vol. 81161, Pg. 1556 of the Deed Records of Dallas County, and being that same tract of land conveyed to Whitestone Offices LLC, as described in deed recorded under County Clerk's File No. 20080319414 of the Real Property Records of Dallas County, said 2.9763 acre tract of land being more particularly described by metes and bounds as follows:

Beginning at a 5/8 inch steel rod found in the Northwesterly line of Alcott Street, based on a 50 foot right-of-way, at a point North 23°36'00" East 203.30 feet from its intersection with the Southwesterly line of Kirby Street, based on a 50 foot right-of-way, said point being the most Southerly corner of 4144 Centre Tower Addition and the most Southerly corner of the herein described tract, said point also being the most Easterly corner of Lot 10, Block 7/2000 Central Storeguard Addition, the map or plat of same being recorded in Vol. 95146, Pg. 2656 of the said Deed Records of Dallas County and the most Easterly corner of that certain 2.21 acre tract of land conveyed to Extra Space of Texas Eleven, L.P. as described in deed recorded under County Clerk's File No. 3449198 of the said Real Property Records;

Thence, North 65°51'00" West, 464.08 feet (called North 66°03'30" West, 465.14 feet in 2.21 acre deed) with the Southwesterly line of said Lot 9 and the Northeasterly line of said Lot 10 and the said 2.21 acre tract to a 1/2 inch steel rod with cap found in the Southeasterly line of North Central Expressway, right-of-way varies, marking the most Westerly corner of the herein described tract, said point also being the most Northerly corner of the said 2.21 acre tract;

Thence, in a Northeasterly direction with the Southeasterly line of said North Central Expressway the following courses and distances:

North 28°50'30" East, 135.75 feet to an "X" in concrete set at an angle point;

North 23°42'30" East, 85.99 feet to an "X" in concrete set at a second angle point;

North 29°00'07" East, 73.90 feet to an "X" in concrete set at a third angle point; and

North 28°09'33" East, 112.70 feet to a 3/4 inch steel rod with cap set for the most Northerly corner of the herein described tract, said point being in the Northeasterly line of said Lot 9, said point also being the most Westerly corner of that certain 1.3014 acre tract of land conveyed to RAJ Hospitality, L.P., as described in deed recorded under County Clerk's File No. 1984224 of the said Real Property Records;

Thence, South 65°51'00" East, 290.02 feet (called South 66°08'41" East 289.90 feet in 1.3014 acre deed) with the Southwesterly line of the said 1.3014 acre tract and the Northeasterly line of said Lot 9 to a 5/8 inch steel rod found marking the most Easterly corner of said Lot 9 and the herein described tract, and the most Southerly corner of the said 1.3014 acre tract, said point also being in the most Westerly or Northwesterly line of Lot IA, Block 7/2000, Cityville at Fitzhugh Addition, the map or plat of same being recorded in Volume 2004025, Page 00020 of the said Deed Records of Dallas County, said point also being in the most Westerly or Northwesterly line of that certain 3.5718 acre tract of land conveyed to WRPV XI Vue FH Dallas LP, as described in deed recorded under County Clerk's File No. 201100306330 of the said Real Property Records;

Thence, South 23°42'30" West, 367.30 feet (called South 24°08' 11" East, 367.64 feet in 3.5718 acre deed) with the most Westerly or Northwesterly line of said Lot lA and the said 3.5718 acre tract and the most Easterly or Southeasterly line of said Lot 9 to a 5/8 inch steel rod with cap set at an inside ell corner, said point being the most Westerly corner of said Lot lA and the said 3.5718 acre tract;

Thence, South 65°51'00" East, 146.21 feet (called South 65°23'50" East, 146.54 feet in 3.5718 acre deed) with the most Southwesterly or Southerly line of said Lot IA and the said 3.5718 acre tract and with a Northeasterly line of said Lot 9 to a 5/8 inch steel rod with cap found in the Northwesterly line of aforesaid Alcott Street for corner;

Thence, South 23°30'45" West, 40.06 feet with the Northwesterly line of said Alcott Street to the PLACE OF BEGINNING and containing 2.9763 acres or 129,649 square feet of land, more or less.

SECOND AMENDMENT TO PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 4

## Exhibit 10.5

**Exhibit 10.5**

**NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER**'**S LICENSE NUMBER.**

**AMERICAN BANK, N.A.**

**DEED OF TRUST**

(Loan No. 89765200)

**WHITESTONE UPTOWN TOWER, LLC, a Delaware limited liability company** ("**Grantor**"), in order to secure the payment of the indebtedness hereinafter referred to and the performance of the obligations, covenants, agreements and undertakings of Grantor hereinafter described, does hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and SET OVER to **ZANE SMITH, Trustee, 2707 West Northwest Highway, Dallas, Texas 75220** (**"Trustee"**), the land in Dallas County, Texas and more particularly described in <u>Exhibit A</u> attached hereto and made a part hereof, together with (i) all the buildings and other improvements now on or that may be placed hereafter on such land during the existence of this lien; (ii) Grantor's rights and interests in all fixtures or other property now or hereafter attached to, installed in, or used in connection with the buildings and other improvements now erected or hereafter to be erected on such land; (iii) Grantor's rights and interests in all easements and rights of way used in connection with any of the foregoing property or as a means of ingress to or egress from such property; (iv) Grantor's rights and interests in any streets, ways, alleys and strips of land adjoining such land or any part thereof; and (v) all rights, estates, powers and privileges appurtenant or incident to the foregoing.

TO HAVE AND TO HOLD the foregoing property (herein called the "**Property**") unto the Trustee and his successors or substitutes in this trust and to his or their successors and assigns, IN TRUST, however, upon the terms, provisions and conditions herein set forth.

**ARTICLE I**

<u>Secured Indebtedness</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <u>Secured Indebtedness</u>. This Deed of Trust ("**Deed of Trust**") is made to secure and enforce the payment of the following note, obligations, indebtedness and liabilities: (a) one certain promissory note of even date herewith in the maximum stated principal amount of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), made by Grantor, and payable to the order of **AMERICAN BANK, N.A., a national banking association** (**"Bank"**), with interest at the rate or rates therein provided, both principal and interest being payable as therein provided, and containing a provision for the payment of a reasonable additional amount as attorneys' fees, and all other notes given in substitution therefor or in modification, increase, renewal or extension thereof, in whole or in part (such note and all other notes given in substitution therefor or in modification, increase, renewal or extension thereof, in whole or in part, are hereinafter collectively called the "**Note**," and the Bank and all subsequent holders of the Note or any part thereof or any interest therein or any of the "secured indebtedness" [as hereinafter defined] are hereinafter collectively called the "**Noteholder**"), and (b) all loans and future advances made by the Noteholder to Grantor and all other debts, obligations and liabilities of every kind and character of Grantor now or hereafter existing in favor of the Noteholder (including all indebtedness incurred or arising pursuant to the provisions of this Deed of Trust or any loan agreement relating to the above described indebtedness or any other instrument now or hereafter evidencing, governing or securing the above described indebtedness or any part there) whether such debts, obligations or liabilities be direct or indirect, primary or secondary, joint or several, fixed or contingent, and whether originally payable to the Noteholder or to a third party and subsequently acquired by the Noteholder and whether such debts, obligations and liabilities are evidenced by note, open account, overdraft, endorsement, surety agreement, guaranty or otherwise, it being contemplated that Grantor may hereafter become indebted to the Noteholder in further sum or sums. The indebtedness referred to in this Paragraph, the proceeds of which indebtedness were used, in whole or in part, to acquire (or satisfy existing liens upon) the Property, is hereinafter sometimes called the "**secured indebtedness**" or the "**indebtedness secured hereby**." **IT IS EXPRESSLY CONTEMPLATED BY THE GRANTOR AND NOTEHOLDER THAT ADDITIONAL DEBTS, OBLIGATIONS AND LIABILITIES OF GRANTOR TO NOTEHOLDER MAY FROM TIME TO TIME BE OUTSTANDING AND THAT SUCH FUTURE DEBTS, OBLIGATIONS AND LIABILITIES ARE INTENDED TO BE SECURED HEREBY TO THE SAME EXTENT AS IF THE SAME WERE SPECIFICALLY DESCRIBED AND REFERENCED HEREIN.**

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 1

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**ARTICLE II**

<u>Representations, Warranties and Covenants</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. <u>Title</u>. Grantor shall warrant and forever defend the title to the Property against the claims of all persons whomsoever claiming or to claim the same or any part thereof, subject only to the recorded encumbrances described in the loan policy of title insurance issued to Noteholder insuring the lien of this Deed of Trust (the "**Permitted Encumbrances**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2. <u>Covenants and Agreements</u>. So long as the secured indebtedness or any part thereof remains unpaid, Grantor covenants and agrees with the Noteholder as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. <u>Payment</u>. Grantor shall make prompt payment, as the same becomes due, of the Note and of all installments of principal and interest thereon and of all other secured indebtedness without setoff, deduction or demand.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. <u>Use of Property</u>. Grantor shall use and keep the Property in a safe and proper manner and in accordance with all laws, ordinances and regulations of governmental bodies having jurisdiction over Grantor or the Property and all restrictive covenants included in the Permitted Encumbrances (collectively, "**Applicable Laws**") and shall pay all fees or charges of any kind in connection therewith. Grantor shall allow the Noteholder or its authorized representative to enter the Property at any reasonable time to inspect the Property. If Grantor receives a notice or claim that the Property is not in compliance with any Applicable Law, Grantor shall promptly furnish a copy of such notice or claim to the Noteholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. <u>Repair and Maintenance</u>. Grantor shall keep the Property in good order and repair, causing all necessary repairs, renewals and replacements to be promptly made, and shall not allow any of the Property to be misused, abused or wasted. Grantor shall promptly replace all worn-out fixtures covered by this Deed of Trust with fixtures comparable to the replaced fixtures when new, and shall repaint the Property when needed. Notwithstanding the foregoing, Grantor shall not, without the prior written consent of the Noteholder, make any structural alteration to the Property or any other alterations thereto which impair the value thereof.

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 2

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. <u>Insurance and Casualty</u>. Grantor shall (i) during any construction phase for any improvements on the Property, keep in place Builder's Risk insurance (and other coverage acceptable to Noteholder, and thereafter, or otherwise, (ii) keep in force general liability insurance in amounts and under terms as shall be acceptable to Noteholder, and (iii) shall keep any improvements on the Property insured against loss or damage by fire, explosion, windstorm, hail, tornado and such other hazards as are from time to time included in "all risks coverage" or as the Noteholder may require from time to time in an amount equal to one hundred percent (100%) of the full replacement value of all of the improvements on the Property under policies of fire, extended coverage and other insurance in such company or companies, in such amounts, upon such terms and provisions, and with such endorsements, all as is acceptable to the Noteholder. Grantor further agrees that Grantor shall deliver to the Noteholder certified copies of the original policies evidencing such insurance and evidence of the payment of all premiums, and shall deliver certificates evidencing renewals of all such policies of insurance to the Noteholder at least fifteen (15) days before any such insurance shall expire. Grantor further agrees that all such policies shall provide that proceeds thereunder will be payable to the Noteholder as its interest may appear (or to the Noteholder's designee) pursuant and subject to a mortgage clause (without contribution) of standard form attached to or otherwise made a part of the applicable policy. In the event of foreclosure of this Deed of Trust, or other transfer of title to the Property in extinguishment in whole or in part of the secured indebtedness, all right, title and interest of Grantor in and to such policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or the Noteholder or other transferee in the event of such other transfer of title; and to that end Grantor hereby grants to the Noteholder a security interest in such policies and proceeds, which security interest shall be subject to foreclosure in accordance with procedures herein set out for the foreclosure of the lien of this Deed of Trust. In the event any of the Property covered by such insurance is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) the Noteholder may, but shall not be obligated to, make proof of loss if not made promptly by Grantor, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to the Noteholder instead of to Grantor, and (iii) the Noteholder shall have the right to apply the insurance proceeds first, to reimburse the Noteholder or the Trustee for all reasonable costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection of such proceeds and, second, the remainder of the proceeds shall be applied, at the discretion of the Noteholder, in payment (without premium or penalty) of the secured indebtedness, either in whole or in part, in the order determined by the Noteholder, or to the repair, restoration or replacement of the Property so destroyed or damaged; provided that no default or breach exists (or any event which, with the giving of notice, or passage of time, or both, would constitute a default or breach) hereunder, under the Note, or any documents executed in connection therewith, and provided that, any insurance proceeds held by the Noteholder to be applied to the repair, restoration or replacement of the Property shall be paid out from time to time upon compliance by Grantor with such terms, conditions and requirements as may be reasonably imposed by the Noteholder. In any event the unpaid portion of the secured indebtedness shall remain in full force and effect and Grantor shall not be excused in the payment thereof. In the event a default or breach exists (or any event which, with the giving of notice, or passage of time, or both, would constitute a default or breach) hereunder, under the Note, or any document executed in connection therewith, Noteholder may, at the discretion of Noteholder, apply the remainder of the proceeds to the payment (without premium, or penalty) of the secured indebtedness, either in whole or in part, in the order determined by the Noteholder, prior to the repair, restoration or replacement of the Property so destroyed or damaged. If any act or occurrence of any kind or nature (including any casualty on which insurance was not obtained or obtainable) shall result in any material damage to or loss or destruction of the Property, Grantor shall give immediate notice thereof by mail to the Noteholder and, unless otherwise so instructed by the Noteholder, shall promptly, at Grantor's sole cost and expense and regardless of whether the insurance proceeds, if any, shall be sufficient for the purpose, restore, repair, replace and rebuild the Property as nearly as possible to its value, condition and character immediately prior to such damage, loss or destruction.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. <u>Condemnation</u>. All proceeds of condemnation awards or proceeds of sale in lieu of condemnation with respect to the Property and all judgments, decrees and awards for injury or damage to the Property shall be paid to the Noteholder and shall be applied, first, to reimburse the Noteholder or the Trustee for all costs and expenses, including reasonable attorneys' fees, incurred in connection with collection of such proceeds and, second, provided that no default or breach exists (or any event which, with the giving of notice, or passage of time, or both, would constitute a default or breach) hereunder, under the Note, or any documents executed in connection therewith, the remainder of the proceeds shall be paid out to repair or restore the Property so affected by such condemnation, injury or damage in the same manner as provided in <u>subparagraph 2.2(e)</u>. In any event the unpaid portion of the secured indebtedness shall remain in full force and effect and Grantor shall not be excused in the payment thereof. In the event a default or breach exists (or any event which, with the giving of notice, or passage of time, or both, would constitute a default or breach) hereunder, under the Note, or any document executed in connection therewith, Noteholder may, at the discretion of Noteholder, apply the remainder of the proceeds to the payment (without premium, or penalty) of the secured indebtedness, either in whole or in part, in the order determined by the Noteholder, prior to the repair, restoration or replacement of the Property so affected by such condemnation, injury or damage. In the event any of the foregoing proceeds are applied to the repair, restoration or replacement of the Property, Grantor shall promptly commence and complete such repair, restoration or replacement of the Property as nearly as possible to its value, condition and character immediately prior to such damage or taking. Grantor hereby assigns and transfers all such proceeds, judgments, decrees and awards to the Noteholder for application as provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. **<u>INDEMNIFICATION</u>. GRANTOR SHALL INDEMNIFY AND HOLD HARMLESS THE TRUSTEE AND THE NOTEHOLDER FROM AND AGAINST, AND REIMBURSE THEM FOR, ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) WHICH MAY BE IMPOSED UPON, ASSERTED AGAINST OR INCURRED OR PAID BY THEM BY REASON OF, ON ACCOUNT OF OR IN CONNECTION WITH (i) ANY BODILY INJURY OR DEATH OR PROPERTY DAMAGE OCCURRING IN OR UPON THE PROPERTY THROUGH ANY CAUSE WHATSOEVER, (ii) ANY BREACH OF THIS DEED OF TRUST BY GRANTOR HEREUNDER, OR (iii) ANY VIOLATION BY GRANTOR OR THE PROPERTY OF APPLICABLE LAWS, INCLUDING APPLICABLE LAWS PERTAINING TO HEALTH OR THE ENVIRONMENT. THIS INDEMNITY WILL SURVIVE ANY FORECLOSURE OR TERMINATION OF THIS DEED OF TRUST.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. <u>Permitted Encumbrances</u>. Grantor shall comply with and shall perform all of the covenants, agreements and obligations imposed upon it or the Property in the Permitted Encumbrances in accordance with their respective terms and provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Loan Agreement</u>. Grantor shall comply with and shall perform all of the covenants, agreements and obligations imposed upon it or the Property by the Loan Agreement (herein so called) entered into as of even date herewith between Grantor and Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. <u>Tax Account</u>. During the existence of a default hereunder, and in addition to the requirements of subparagraphs (c) and (e) above, Grantor will pay with and in addition to the payments of principal and interest payable under the terms of the Note, on the same day as the interest only, or the principal and interest, as applicable, installments are due and payable, a sum equal to a prorated portion (1/12, with any make-up for partial years) of the estimated annual real property taxes and assessments next due on the Property. Such monies shall be funded into an escrow account with Noteholder and shall not bear interest. If the amount so paid is not sufficient to pay such taxes and assessments when due, then Grantor will deposit immediately with the Noteholder an amount sufficient to pay such taxes and assessments. If there is a default of any of the provisions of this Deed of Trust resulting in a sale of the Property or foreclosure, or if the Noteholder acquires the Property otherwise after default, the Noteholder shall apply, at the time of commencement of such proceedings or at the time the property is otherwise acquired, the balance in such account to the then remaining unpaid balance of the Note. No interest shall accrue or be allowed on any payment made under the provisions of this paragraph. If the amount so paid is in excess of the amount needed to pay such taxes and assessments in any calendar year, such excess may be applied by Noteholder to the next maturing installments of principal and interest. All deposits made pursuant to this paragraph shall be held by the Noteholder as additional security for the payment of the debt described herein and shall not be assigned, attached or otherwise alienated except when transferred by Grantor to a new owner of the Property concurrently with a bona fide sale of the Property, if allowed hereby. Noteholder is authorized and directed to make such payments directly to the applicable taxing authority(ies) or to release to Grantor to make such payments, at Noteholder's discretion.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <u>Right of the Noteholder to Perform</u>. Grantor agrees that, if Grantor fails to perform any act or to take any action which hereunder Grantor is required to perform or take, or to pay any money which hereunder Grantor is required to pay, or takes any action prohibited hereby, the Noteholder may, but shall not be obligated to, perform or cause to be performed such act or take such action or pay such money or remedy any action so taken, and any expenses so incurred by the Noteholder, and any money paid by the Noteholder in connection therewith, shall be a demand obligation owing by Grantor to the Noteholder and the Noteholder, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. Any amounts due and owing by Grantor to the Noteholder pursuant to this Deed of Trust shall bear interest from the date such amount becomes due until paid at the rate of interest payable on matured but unpaid principal of or interest on the Note and shall be a part of the secured indebtedness and shall be secured by this Deed of Trust.

**ARTICLE III**

<u>Remedies in Event of Default</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>Defaults</u>. The term "**default**" as used in this Deed of Trust shall mean the occurrence of any of the following events, beyond any applicable notice and cure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the failure of Grantor to make due and punctual payment of the Note or of any other secured indebtedness or of any installment of principal thereof or interest thereon, or of any other amount required to be paid under the Note or this Deed of Trust, as the same shall become due and payable; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the failure of Grantor timely and properly to observe, keep or perform any covenant, agreement, warranty or condition herein required to be observed, kept or performed (except a failure described in any other subparagraph of this <u>Paragraph 3.1</u>, including <u>subparagraph 3.1(a)</u>), if such failure continues for thirty (30) days after Grantor receives written notice thereof; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. without the prior written consent of the Noteholder, (i) Grantor sells, leases (other than leases in the ordinary course of business on market terms, approved by the Bank), exchanges, assigns, transfers, conveys or otherwise disposes of all or any part of the Property or any interest therein (except for the disposition of worn-out fixtures under the circumstances described in <u>subparagraph 2.2(d)</u> hereof), or legal or equitable title to the Property, or any interest therein, is vested in any other party, in any manner whatsoever, by operation of law or otherwise, or (ii) any ownership of Grantor or any guarantors of the secured indebtedness (whether one or more, the "Guarantors") is transferred, assigned, or otherwise hypothecated (but expressly exempting therefrom transfers of publicly traded ownership interests), it being understood that the consent of the Noteholder required hereunder may be refused by the Noteholder in its sole discretion or may be predicated upon any terms, conditions and covenants deemed advisable or necessary in the sole discretion of the Noteholder, including but not limited to the right to change the interest rate, date of maturity or payments of principal or interest on the Note, to require payment of any amount as additional consideration as a transfer fee or otherwise and to require assumption of the Note and this Deed of Trust; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. without the prior written consent of the Noteholder, Grantor creates, places or permits to be created or placed, or through any act or failure to act, acquiesces in the placing of any deed of trust, mortgage, voluntary or involuntary lien, whether statutory, constitutional or contractual (except for the lien for ad valorem taxes on the Property which are not delinquent and any broker liens reasonably incurred while marketing the Property for sale), security interest, encumbrance or charge, or conditional sale or other title retention document, against or covering the Property, or any part thereof, other than the Permitted Encumbrances, regardless of whether the same are expressly or otherwise subordinate to the lien created in this Deed of Trust; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. a default occurs under (i) any other agreements or instruments evidencing or relating to the secured indebtedness or (ii) any other agreements of Grantor or any guarantors of the secured indebtedness to Noteholder; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. the failure of Grantor to maintain its existence and authority to do business in the jurisdiction where the Property is located, if Grantor is an entity; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. the death or insolvency of Grantor, if applicable, or of a guarantor, if any, of the secured indebtedness, provided, however, that the death or legal incapacity of a guarantor shall not be a default if, within thirty (30) days of the date of such death or incapacity, either (1) the representative or legal guardian of such guarantor or his/her estate affirms in writing (which instrument shall be in form and substance reasonably satisfactory to Noteholder) (a) liability for the secured indebtedness and (b) that no distributions shall be made from such estate without the prior written consent of Noteholder, or (2) a substitute guarantor, with creditworthiness and non-exempt assets equal to or greater than the deceased guarantor, is approved by Noteholder in its reasonable discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>Acceleration</u>. Upon the occurrence of a default, the Noteholder shall have the option of declaring all secured indebtedness in its entirety to be immediately due and payable, and the liens and security interests created hereby shall be subject to foreclosure in any manner provided for herein or provided for by law as the Noteholder may elect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <u>Foreclosure</u>. Upon the occurrence of a default, the Trustee, his successor or substitute, is authorized and empowered and it shall be his special duty at the request of the Noteholder to sell the Property or any part thereof situated in the State of Texas at the courthouse of any county in the State of Texas in which any part of the Property is situated, at public vendue to the highest bidder for cash between the hours of 10 o'clock a.m. and 4 o'clock p.m. on the first Tuesday in any month after having given notice of such sale in accordance with the statutes of the State of Texas then in force governing sales of real estate under powers conferred by deed of trust. Any sale made by the Trustee hereunder may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by law. After any such sale, the Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances in the name of Grantor, conveying the property so sold to the purchaser or purchasers in fee simple with general warranty of title, and shall receive the proceeds of the sale or sales and apply the same as herein provided. Payment of the purchase price to the Trustee shall satisfy the obligation of purchaser at such sale therefor, and such purchaser shall not be responsible for the application thereof. In the event any sale hereunder is not completed or is defective in the opinion of the Noteholder, such sale shall not exhaust the power of sale hereunder and the Noteholder shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds given by the Trustee or any successor or substitute appointed hereunder as to nonpayment of the indebtedness secured hereby, or as to the occurrence of any default, or as to the Noteholder having declared all of such indebtedness to be due and payable, or as to the request to sell, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to the refusal, failure or inability to act of the Trustee or any substitute or successor, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by the Noteholder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. The Trustee, his successor or substitute, may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by the Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of the Trustee, his successor or substitute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <u>Proceeds of Sale</u>. The proceeds of any sale held by the Trustee or in foreclosure of the lien evidenced hereby shall be applied:

FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale including but not limited to a reasonable fee to the Trustee acting under the provisions of <u>Paragraph 3.3</u>;

SECOND, to the payment in full of the secured indebtedness (including specifically without limitation the principal, interest and attorneys' fees due and unpaid on the Note and the amounts due and unpaid and owed to the Noteholder under this Deed of Trust) in such order as the Noteholder may elect; and

THIRD, the remainder, if any there shall be, shall be paid to Grantor or to such other party or parties as may be entitled thereto by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <u>The Noteholder as Purchaser</u>. The Noteholder shall have the right to become the purchaser at any sale held by any Trustee or substitute or successor or by any receiver or public officer, and any Noteholder purchasing at any such sale shall have the right to credit upon the amount of the bid made therefor, to the extent necessary to satisfy such bid, the secured indebtedness owing to such Noteholder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 <u>Remedies Cumulative</u>. All remedies herein expressly provided for are cumulative of any and all other remedies existing at law or in equity and are cumulative of any and all other remedies provided for in any other instrument securing the payment of the secured indebtedness, or any part thereof, or otherwise benefitting the Noteholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <u>Delivery of Possession After Foreclosure</u>. In the event there is a foreclosure sale hereunder and at the time of such sale Grantor or Grantor's heirs, devisees, representatives, successors or assigns or any other persons claiming any interest in the Property by, through or under Grantor are occupying or using the Property, or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day-to-day, terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser. In the event the tenant fails to surrender possession of such property upon demand, the purchaser shall be entitled to institute and maintain an action for forcible entry and detainer of such property in the Justice of the Peace Court in the Justice Precinct in which such property, or any part thereof, is situated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 **<u>Waiver of Anti-Deficiency Statutes</u>. Grantor specifically, knowingly, and intentionally waives the protections afforded by Sections 51.003** – **51.005 of the Texas Property Code.**

**ARTICLE IV**

<u>Miscellaneous</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <u>Defeasance</u>. If all of the secured indebtedness be paid as the same becomes due and payable and if all of the covenants, warranties, undertakings and agreements made in this Deed of Trust are kept and performed, then and in that event only, all rights under this Deed of Trust shall terminate and the Property shall become wholly clear of the liens, security interests, conveyances and assignments evidenced hereby, which shall be released by the Noteholder in due form at Grantor's cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <u>Successor Trustee</u>. The Trustee may resign by an instrument in writing addressed to the Noteholder, or the Trustee may be removed at any time with or without cause by an instrument in writing executed by the Noteholder. In case of the death, resignation, removal or disqualification of the Trustee or if for any reason the Noteholder shall deem it desirable to appoint a substitute or successor trustee to act instead of the herein named trustee or any substitute or successor trustee, then the Noteholder shall have the right and is hereby authorized and empowered to appoint a successor trustee, or a substitute trustee, without other formality than appointment and designation in writing executed by the Noteholder and the authority hereby conferred shall extend to the appointment of other successor and substitute trustees successively until the indebtedness secured hereby has been paid in full or until the Property is sold hereunder. Upon the making of any such appointment and designation, all of the estate and title of the Trustee in the Property shall vest in the named successor or substitute trustee and he shall thereupon succeed to and shall hold, possess and execute all the rights, powers, privileges, immunities and duties herein conferred upon the Trustee. All references herein to the Trustee shall be deemed to refer to the Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <u>Liability of Trustee</u>. **THE TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY THE TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING THE TRUSTEE'S NEGLIGENCE), EXCEPT FOR THE TRUSTEE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.** The Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by him hereunder, believed by him in good faith to be genuine. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and the Trustee shall be under no liability for interest on any moneys received by him hereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <u>Waiver by the Noteholder</u>. The Noteholder may at any time and from time to time (a) waive or not enforce compliance by Grantor with any covenant herein made by Grantor; (b) consent to Grantor doing any act which hereunder Grantor is prohibited from doing, or consent to Grantor failing to do any act which hereunder Grantor is required to do; (c) release any part of the Property, or any interest therein, from the lien of this Deed of Trust without the joinder of the Trustee, or (d) release any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other instrument now or hereafter securing the payment of the secured indebtedness, without impairing or releasing the liability of any other party. No such act shall in any way impair the rights of the Noteholder hereunder except to the extent specifically agreed to by the Noteholder in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <u>Actions by the Noteholder</u>. The lien and other security rights of the Noteholder hereunder shall not be impaired by any indulgence, moratorium or release granted by the Noteholder, including but not limited to (a) any renewal, extension, increase or modification which the Noteholder may grant with respect to any secured indebtedness, (b) any surrender, compromise, release, renewal, extension, exchange or substitution which the Noteholder may grant in respect of the Property, or any part thereof or any interest therein, or (c) any release or indulgence granted to any endorser, guarantor or surety of any secured indebtedness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <u>Rights of the Noteholder</u>. The Noteholder may waive any default without waiving any other prior or subsequent default. The Noteholder may remedy any default without waiving the default remedied. Neither the failure by the Noteholder to exercise, nor the delay by the Noteholder in exercising, any right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by the Noteholder of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Grantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Noteholder and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to nor demand on Grantor in any case shall of itself entitle Grantor to any other or further notice or demand in similar or other circumstances. Acceptance by the Noteholder of any payment in an amount less than the amount then due on any secured indebtedness shall be deemed an acceptance on account only and shall not in any way affect the existence of a default hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <u>Dealing with Successor</u>. In the event the ownership of the Property or any part thereof becomes vested in a person other than Grantor, the Noteholder may deal with such successor or successors in interest with reference to this Deed of Trust and to the indebtedness secured hereby in the same manner as with Grantor, without in any way vitiating or discharging Grantor's liability hereunder or for the payment of the indebtedness secured hereby. No sale of the Property, no forbearance on the part of the Noteholder and no extension of the time for the payment of the indebtedness secured hereby given by the Noteholder shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Grantor hereunder or for the payment of the indebtedness secured hereby or the liability of any other person hereunder or for the payment of the indebtedness secured hereby, except as agreed to in writing by the Noteholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <u>Place of Payment</u>. The Note and all other secured indebtedness which may be owing hereunder at any time by Grantor shall be payable at the place designated in the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <u>Notice</u>. Any notice, request, demand or other communication required or permitted hereunder, or under the Note, or under any other instrument securing the payment of the Note (unless otherwise expressly provided therein) shall be given in writing by (a) personal delivery, or (b) expedited delivery service with proof of delivery, or (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address shown on the signature page of this Deed of Trust, or to such different address as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given and received either at the time of personal delivery or, in the case of delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein; provided that, service of a notice required by Tex. Property Code §51.002 shall be considered complete when the requirements of that statute are met.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <u>Application of Indebtedness</u>. If any part of the secured indebtedness is not, for any reason, lawfully secured by this Deed of Trust, then the Noteholder may without notice to Grantor apply payments made on the secured indebtedness first in discharge of the part not secured by this Deed of Trust. If for any reason any part of the secured indebtedness is not lawfully secured by the entire Property, then the Noteholder may without notice to Grantor apply payments made on the secured indebtedness first in discharge of that part. If the Noteholder has full recourse against Grantor or any guarantor for part, but not all, of the secured indebtedness for any reason, then the Noteholder may without notice to Grantor apply foreclosure proceeds which are to be applied to the secured indebtedness first against that portion of the secured indebtedness for which the Noteholder does not have full recourse against Grantor or the guarantor. Similarly, the Noteholder may without notice to Grantor apply any cash payments actually paid by Grantor or any guarantor before final maturity of the Note (by acceleration or otherwise) to the portion of the secured indebtedness for which the Noteholder does not have full recourse against Grantor or the guarantor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11 <u>Heirs, Successors and Assigns</u>. The terms, provisions, covenants and conditions hereof shall be binding upon Grantor, and the heirs, devisees, representatives, successors and assigns of Grantor including all successors in interest of Grantor in and to all or any part of the Property, and shall inure to the benefit of the Trustee and the Noteholder and their respective heirs, successors, substitutes and assigns and shall constitute covenants running with the land. All references in this Deed of Trust to Grantor, Trustee or the Noteholder shall be deemed to include all such heirs, devisees, representatives, successors, substitutes and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12 <u>Severability</u>. A determination that any provision of this Deed of Trust is unenforceable or invalid shall not affect the enforceability or validity of any other provision and any determination that the application of any provision of this Deed of Trust to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13 <u>Gender and Number</u>. Within this Deed of Trust, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural and words in the plural number shall be held and construed to include the singular, unless in each instance the context otherwise requires.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14 <u>Counterparts</u>. This Deed of Trust may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15 <u>Joint and Several</u>. Where two or more persons or entities have executed this Deed of Trust, unless the context clearly indicates otherwise, the term "**Grantor**" as used in this Deed of Trust means the grantors hereunder or either or any of them and the obligations of Grantor hereunder shall be joint and several.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16 <u>Modification or Termination</u>. Subject to <u>Paragraph 4.7</u> above, the Note and this Deed of Trust may only be modified or terminated by a written instrument or instruments executed by the party against which enforcement of the modification or termination is asserted, and any alleged modification or termination which is not so documented shall not be effective as to any party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17 <u>Filing and Recordation</u>. Grantor shall cause this Deed of Trust and all amendments and supplements thereto and substitutions therefor and all financing statements and continuation statements relating hereto to be recorded, filed, re-recorded and refiled in such manner and in such places as the Trustee or the Noteholder shall reasonable request, and shall pay all such recording, filing, re-recording and refiling taxes, fees and other charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18 <u>ENTIRE AGREEMENT</u>. **THE NOTE, THIS DEED OF TRUST AND OTHER DOCUMENTS EXECUTED BY GRANTOR AND THE NOTEHOLDER AND DELIVERED IN CONNECTION THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.**

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 9

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**ARTICLE V**

<u>Assignment of Rents</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <u>Assignment</u>. To provide a source of future payment of the secured indebtedness, Grantor does hereby assign, transfer and set over to the Noteholder all of the rents, income, receipts, revenues, issues, profits and other sums of money (collectively, "**Rent**") that are now or at any time hereafter become due and payable to Grantor under the terms of any leases (the "**Leases**") now or hereafter covering the Property, or any part of the Property, or arising or issuing from or out of the Leases or from or out of the Property. Rents covered by this assignment will include but not be limited to minimum rents, additional rents, percentage rents, deficiency rents and liquidated damages following default, security deposits, advance rents, all proceeds payable under any policy of insurance covering the loss of rents. Rents covered by this assignment shall also include any money Grantor is entitled to recover from any lessee in bankruptcy such as, without limitation, money recoverable for use and occupancy of any part of the Property and damage claims arising out of lease defaults, including rejections, under any applicable bankruptcy law. Until receipt from the Noteholder of notice of the occurrence of a default specified in this Deed of Trust (a "**Notice of Default**"), each lessee under the Leases may pay Rent directly to Grantor and Grantor shall have the right to receive such Rent provided that Grantor shall hold such Rent as a trust fund to be applied as required by the Noteholder, and Grantor agrees so to apply Rent, before using any part of the same for any other purposes, first, to the payment of taxes and assessments upon the Property before penalty or interest is due thereon; second, to the cost of insurance, maintenance and repairs required by the terms of this Deed of Trust; third, to the satisfaction of all obligations specifically set forth in the Leases; and, fourth, to the payment of interest and principal becoming due on the Note and this Deed of Trust. Upon receipt from the Noteholder of a Notice of Default, each lessee under the Leases is hereby authorized and directed to pay directly to the Noteholder all Rent thereafter accruing and the receipt of Rent by the Noteholder shall be a release of such lessee to the extent of all amounts so paid. The receipt by a lessee under the Leases of a Notice of Default shall be sufficient authorization for such lessee to make all future payments of Rent directly to the Noteholder and each such lessee shall be entitled to rely on such Notice of Default and shall have no liability to Grantor for any Rent paid to the Noteholder after receipt of the Notice of Default. Rent received by the Noteholder for any period prior to foreclosure under this Deed of Trust or acceptance of a deed in lieu of foreclosure shall be applied by the Noteholder to the payment (in such order as the Noteholder shall determine) of: (a) all expenses of managing the Property, including but not limited to the salaries, fees and wages of a managing agent and such other employees as the Noteholder may deem necessary or desirable; all expenses of operating and maintaining the Property, including but not limited to all taxes, assessments, charges, claims, utility costs and premiums for insurance, and the cost of all alterations, renovations, repairs or replacements; and all expenses incident to taking and retaining possession of the Property or collecting Rent due and payable under the Leases; and (b) the Note and other indebtedness secured by this Deed of Trust, principal, interest, attorneys' and collection fees and other amounts, in such order as the Noteholder in its sole discretion may determine. In no event will the assignment pursuant to this Paragraph 5.1 reduce the indebtedness evidenced by the Note or otherwise secured by this Deed of Trust, except to the extent, if any, that Rent is actually received by the Noteholder and applied upon or after receipt to such indebtedness in accordance with the preceding sentence. At any time during which Grantor is receiving Rent directly from lessees under the Leases, Grantor shall, upon receipt of written direction from the Noteholder, make demand and sue for all Rent due and payable under one or more Leases, as directed by the Noteholder, as it becomes due and payable, including Rent which is past due and unpaid. In the event Grantor fails to take such action, or at any time during which Grantor is not receiving Rent directly from lessees under the Leases, the Noteholder shall have the right (but shall be under no duty) to demand, collect and sue for in its own name all Rent due and payable under the Leases, as it becomes due and payable, including Rent which is past due and unpaid. The Noteholder shall not be deemed to have taken possession of the Property except on the exercise of any option the Noteholder may have to do so, evidenced by its demand and overt act for such purpose. Grantor shall (a) make no Leases without Noteholder's prior written consent, (b) make no assignment or other disposition of Rent, (c) not cancel or amend any Lease or any other instrument under which Rent is to be paid or waive, excuse, condone, discount, set off, compromise or in any manner release any obligation thereunder, (d) not receive or collect any Rent for a period of more than one month in advance of the date on which payment thereof is due , (e) duly and punctually observe and perform every obligation to be performed by it under each Lease, (f) not do or permit to be done anything to impair the security thereof, and (g) enforce, to the extent such enforcement would be reasonably prudent under the circumstances, every obligation of each other party thereto. The assignment contained in this <u>Paragraph 5.1</u> shall become null and void upon the release of this Deed of Trust.

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 10

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <u>Statutory Rights</u>. Nothing in this Article V shall limit any rights granted to Noteholder under Chapter 64 of the Texas Property Code. Noteholder's rights in this Article V shall be cumulative with all rights and remedies available to Noteholder under Chapter 64.

**ARTICLE VI**

<u>Security Interest</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <u>Grant of Interest</u>. In order to secure the payment of the indebtedness hereinabove referred to and the performance of the obligations, covenants, agreements and undertakings of Grantor hereinabove described, Grantor hereby grants to the Noteholder a security interest in each of the following now or hereafter owned by Grantor (the "**Collateral**") and all proceeds of the Collateral:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. all goods, equipment, furnishings, fixtures, furniture, chattels and personal property of Grantor, and all renewals or replacements of or substitutions for any of the foregoing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. all building materials and equipment now or hereafter delivered to the Property and intended to be installed therein;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. all security deposits and advance rentals under lease agreements now or at any time hereafter covering or affecting any of the Property or any Collateral and held by or for the benefit of Grantor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. all monetary deposits which Grantor has been required to give to any public or private utility with respect to utility services furnished to the Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. all issues and profits from any part of the Property or any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. all proceeds (including premium refunds) of each policy of insurance relating to the Property or any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. all proceeds from the taking of the Property or any Collateral or any part thereof or any interest therein or right or estate appurtenant thereto by eminent domain or by purchase in lieu thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. all contracts related to the Property or any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. all money, funds, accounts, instruments, documents, general intangibles (including trademarks, trade names and symbols used in connection therewith), and notes or chattel paper owned by Grantor, including those (i) arising from or related to the Property or any Collateral, including any funds deposited or set aside for the payment of taxes or insurance premiums related to the Mortgaged Property or any Collateral, or (ii) on deposit with or in the possession of Noteholder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. all permits, licenses, franchises, certificates, and other rights and privileges obtained in connection with the Property or any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. all plans, specifications, maps, surveys, reports, architectural, engineering and construction contracts, books of account, insurance policies and other documents, of whatever kind or character, relating to the use, construction upon, occupancy, leasing, sale or operation of the Property or any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. all proceeds and other amounts paid or owing to Grantor under or pursuant to any and all contracts and bonds relating to the construction, erection or renovation of the Property or any Collateral; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m. all oil, gas and other hydrocarbons and other minerals produced from or allocated to the Property and all products processed or obtained therefrom, the proceeds thereof, and all accounts and general intangibles under which such proceeds may arise, together with any sums of money that may now or at any time hereafter become due and payable to Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and future oil, gas and mining leases covering the Property or any part thereof.

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 11

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <u>Uniform Commercial Code</u>. Upon the occurrence of a default, the Noteholder may exercise its rights of enforcement with respect to the Collateral under the Texas Business and Commerce Code, as amended, and in conjunction with, in addition to or in substitution for those rights and remedies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the Noteholder may enter upon the Property to take possession of, assemble and collect the Collateral or to render it unusable; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the Noteholder may require Grantor to assemble the Collateral and make it available at a place the Noteholder designates which is mutually convenient to allow the Noteholder to take possession or dispose of the Collateral; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. written notice mailed to Grantor as provided herein five (5) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. any sale made pursuant to the provisions of this paragraph shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Collateral hereunder as is required for such sale of the Property under power of sale; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. in the event of a foreclosure sale, whether made by the Trustee under the terms hereof, or under judgment of a court, the Collateral and the Property may, at the option of the Noteholder, be sold as a whole; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. it shall not be necessary that the Noteholder take possession of the Collateral or any part thereof prior to the time that any sale pursuant to the provisions of this paragraph is conducted and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. prior to application of proceeds of disposition of the Collateral to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable attorneys' fees and legal expenses incurred by the Noteholder; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the indebtedness or as to the occurrence of any default, or as to the Noteholder having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by the Noteholder, shall be taken as prima facie evidence of the truth of the facts so stated and recited; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. the Noteholder may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by the Noteholder, including the sending of notices and the conduct of the sale, but in the name and on behalf of the Noteholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <u>Reproduction as Financing Statement</u>. A carbon, photographic or other reproduction of this Deed of Trust or of any financing statement relating to this Deed of Trust shall be sufficient as a financing statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <u>Fixture Filing</u>. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records in the Office of the County Clerk where the Property (including such fixtures) is situated. The mailing address of Grantor is set forth below opposite the signature of Grantor to this Deed of Trust and the address of the Noteholder from which information concerning the security interest may be obtained is the address of the Noteholder set forth at the end of this Deed of Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <u>Filing and Recordation</u>. Grantor shall cause this Deed of Trust and all amendments and supplements thereto and substitutions therefor and all financing statements and continuation statements relating hereto to be recorded, filed, re-recorded and refiled in such manner and in such places as the Trustee or the Noteholder shall reasonably request, and shall pay all such recording, filing, re-recording and refiling taxes, fees and other charges.

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 12

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <u>Financing Statement Filings</u>. Grantor authorizes Noteholder to file any financing statements it deems necessary relating to the Collateral, including an "all asset," "super generic" filing or otherwise.

**ARTICLE VII**

<u>Subrogation</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <u>Subrogation; Carry Forward of Lien</u>: All or a portion of the indebtedness secured hereby has been advanced by Noteholder, at Grantor's request, to RSS MSBAM2013-C13-TX WUT, LLC, in full satisfaction and payment of, and refinance of, the remaining indebtedness due and payable to RSS MSBAM2013-C13-TX WUT, LLC; and Noteholder is subrogated to and carries forward all of RSS MSBAM2013-C13-TX WUT, LLC's liens, security interests, rights, titles, and interest in and to the Property and the Collateral including, without limitation, the lien of that certain Deed of Trust, Assignment of Leases and Rents and Security Agreement filed September 30, 2013, made by Whitestone Uptown Tower, LLC, and recorded in Clerk's File No. 201300309177 in the real property records of Dallas County, Texas.

**[REMAINDER OF PAGE INTENTIONALLY BLANK]**

**[SIGNATURE PAGE FOLLOWS]**

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 13

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IN WITNESS WHEREOF, this instrument is executed by the undersigned effective as of June 7, 2024.

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| | |
|:---|:---|
| **<u>GRANTOR</u>**<u>'</u>**<u>S ADDRESS</u>**: | **<u>GRANTOR:</u>** |
| <u>c/o Pillarstone Capital REIT</u><br> <u>19407 Park Row, Suite 140</u><br> <u>Houston, Texas 77084</u> | WHITESTONE UPTOWN TOWER, LLC, |
|  | a Delaware limited liability company |
|  | By: WHITESTONE REIT OPERATING PARTNERSHIP, L.P., |
|  | a Delaware limited partnership, |
|  | its Sole Member |
|  | By: PILLARSTONE CAPITAL REIT, |
|  | a Maryland Real Estate Investment Trust |
|  | its General Partner |
|  | By: <u>/s/ Bradford D. Johnson</u><u> </u><u> </u> |
|  | Bradford D. Johnson, President and CEO |

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THE STATE OF TEXAS § <br> § <br> COUNTY OF DALLAS §

This instrument was acknowledged before me on June 6, 2024, by BRADFORD D. JOHNSON, President and CEO of PILLARSTONE CAPITAL REIT, a Maryland Real Estate Investment Trust, the General Partner of WHITESTONE REIT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, the Sole Member of WHITESTONE UPTOWN TOWER, LLC, a Delaware limited liability company, on behalf of said entities.

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| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Stacie Taylor |
| Notary Public, State of Texas |

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**Noteholder's Address**

**and**

**<u>After Recording Return to</u>**:

AMERICAN BANK, N.A.

2707 West Northwest Highway

Dallas, Texas 75220

DEED OF TRUST WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 14

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<u>Exhibit A</u>

LEGAL DESCRIPTION

Fieldnotes for a 2.9763 acre tract of land out of Lot 9, Block 7/2000 of 4144 Centre Tower, an addition to the City of Dallas out of the John Grigsby Survey, Abstract No. 495, in Dallas County, Texas according to the map or plat thereof recorded in Vol. 81161, Pg. 1556 of the Deed Records of Dallas County, and being that same tract of land conveyed to Whitestone Offices LLC, as described in deed recorded under County Clerk's File No. 20080319414 of the Real Property Records of Dallas County, said 2.9763 acre tract of land being more particularly described by metes and bounds as follows:

Beginning at a 5/8 inch steel rod found in the Northwesterly line of Alcott Street, based on a 50 foot right-of-way, at a point North 23°36'00" East 203.30 feet from its intersection with the Southwesterly line of Kirby Street, based on a 50 foot right-of-way, said point being the most Southerly corner of 4144 Centre Tower Addition and the most Southerly corner of the herein described tract, said point also being the most Easterly corner of Lot 10, Block 7/2000 Central Storeguard Addition, the map or plat of same being recorded in Vol. 95146, Pg. 2656 of the said Deed Records of Dallas County and the most Easterly corner of that certain 2.21 acre tract of land conveyed to Extra Space of Texas Eleven, L.P. as described in deed recorded under County Clerk's File No. 3449198 of the said Real Property Records;

Thence, North 65°51'00" West, 464.08 feet (called North 66°03'30" West, 465.14 feet in 2.21 acre deed) with the Southwesterly line of said Lot 9 and the Northeasterly line of said Lot 10 and the said 2.21 acre tract to a 1/2 inch steel rod with cap found in the Southeasterly line of North Central Expressway, right-of-way varies, marking the most Westerly corner of the herein described tract, said point also being the most Northerly corner of the said 2.21 acre tract;

Thence, in a Northeasterly direction with the Southeasterly line of said North Central Expressway the following courses and distances:

North 28°50'30" East, 135.75 feet to an "X" in concrete set at an angle point;

North 23°42'30" East, 85.99 feet to an "X" in concrete set at a second angle point;

North 29°00'07" East, 73.90 feet to an "X" in concrete set at a third angle point; and

North 28°09'33" East, 112.70 feet to a 3/4 inch steel rod with cap set for the most Northerly corner of the herein described tract, said point being in the Northeasterly line of said Lot 9, said point also being the most Westerly corner of that certain 1.3014 acre tract of land conveyed to RAJ Hospitality, L.P., as described in deed recorded under County Clerk's File No. 1984224 of the said Real Property Records;

Thence, South 65°51'00" East, 290.02 feet (called South 66°08'41" East 289.90 feet in 1.3014 acre deed) with the Southwesterly line of the said 1.3014 acre tract and the Northeasterly line of said Lot 9 to a 5/8 inch steel rod found marking the most Easterly corner of said Lot 9 and the herein described tract, and the most Southerly corner of the said 1.3014 acre tract, said point also being in the most Westerly or Northwesterly line of Lot IA, Block 7/2000, Cityville at Fitzhugh Addition, the map or plat of same being recorded in Volume 2004025, Page 00020 of the said Deed Records of Dallas County, said point also being in the most Westerly or Northwesterly line of that certain 3.5718 acre tract of land conveyed to WRPV XI Vue FH Dallas LP, as described in deed recorded under County Clerk's File No. 201100306330 of the said Real Property Records;

Thence, South 23°42'30" West, 367.30 feet (called South 24°08' 11" East, 367.64 feet in 3.5718 acre deed) with the most Westerly or Northwesterly line of said Lot lA and the said 3.5718 acre tract and the most Easterly or Southeasterly line of said Lot 9 to a 5/8 inch steel rod with cap set at an inside ell corner, said point being the most Westerly corner of said Lot lA and the said 3.5718 acre tract;

Thence, South 65°51'00" East, 146.21 feet (called South 65°23'50" East, 146.54 feet in 3.5718 acre deed) with the most Southwesterly or Southerly line of said Lot IA and the said 3.5718 acre tract and with a Northeasterly line of said Lot 9 to a 5/8 inch steel rod with cap found in the Northwesterly line of aforesaid Alcott Street for corner;

Thence, South 23°30'45" West, 40.06 feet with the Northwesterly line of said Alcott Street to the PLACE OF BEGINNING and containing 2.9763 acres or 129,649 square feet of land, more or less.

DEED OF TRUST

Page 15 WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200)

Exhibit A

## Exhibit 10.6

**Exhibit 10.6**

**IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THIS NOTE MAY REQUIRE A** "**BALLOON**" **PAYMENT OF ALL UNPAID PRINCIPAL AND ACCRUED BUT UNPAID INTEREST ON THE MATURITY DATE. THE UNPAID PRINCIPAL INDEBTEDNESS EVIDENCED BY THIS NOTE IS PAYABLE IN FULL AT MATURITY. MAKER MUST REPAY THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS NOTE AND ACCRUED BUT UNPAID INTEREST THEN DUE. PAYEE IS UNDER NO OBLIGATION TO REFINANCE THIS NOTE AT THAT TIME.**

**AMERICAN BANK, N.A.**

**PROMISSORY NOTE**

(Loan No. 89765200

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| | |
|:---|:---|
| $1500000.00 | Effective as of June 7, 2024 |

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FOR VALUE RECEIVED, the undersigned, **WHITESTONE UPTOWN TOWER, LLC, a Delaware limited liability company** ("**Maker**"), promises to pay to the order of **AMERICAN BANK, N.A., a national banking association** ("**Payee**") the principal sum of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), or so much as may be advanced hereunder, at or before the maturity of this Note, with interest on the unpaid balance outstanding from time to time at the rate or rates specified below, both principal and interest payable as provided below in lawful money of the United States of America at the address of Payee set forth below or at such other place as from time to time may be designated by the holder of this Note.

***I. <u>Interest Rates and Payments</u>***

Prior to default or maturity, the unpaid principal of this Note from time to time outstanding shall bear interest at the rate of interest per annum equal to the rate reported in the Markets or Money Rates section (or similar section) of <u>The Wall Street Journal</u> (or its website) as the "WSJ Prime Rate" (the "**Index**"), as announced from time to time without notice to Maker, **<u>plus</u>** four and one-half percent (4.50%) (the "**Margin**") (the sum of the Index and Margin, being the "**Rate**"); provided, however that in no event shall the Rate exceed the greater of eighteen percent (18%) per annum or the maximum rate permitted under applicable law ("**Maximum Rate**"). All interest accruing under this Note shall be calculated on the basis of a 365/360-day year.

Subject to earlier default and acceleration of the indebtedness evidenced hereby, all principal and accrued interest hereunder shall be due and payable on the earlier of (1) March ___, 2025 or (2) the date that is ten (10) days following Maker's receipt of proceeds from the sale of any property securing this Note or (3) dismissal of Maker's existing bankruptcy case (such earliest date being the "**Maturity**"); subject, however, to extension pursuant to that certain Extension Option (as defined in the Loan Agreement of even date herewith, between Maker and Payee (the "**Loan Agreement**").

Upon the occurrence of a default or Event of Default under the Loan Documents (defined below) and until such default or Event of Default is cured, the Rate shall be increased by four and three-quarters percent (4.75%) per annum (such sum shall be the "**Default Rate**"); provided, however, in no event shall the Default Rate exceed the Maximum Rate. However, following the Maturity Date, all amounts outstanding under this Note shall bear interest at the Maximum Rate, or, if no such rate is designated under applicable law, at the rate of eighteen percent (18%) per annum. All Default Rate interest and fees provided for under the Loan Agreement shall be compounded and capitalized monthly and be due and payable at Maturity.

Advances hereunder shall be made in accordance with the Loan Agreement. If Maturity occurs within ninety (90) days of the date hereof (the "**Makewhole Fee Date**"), Maker agrees to pay to Payee two percent (2.00%) of the face amount hereof ("**Makewhole Fee**"). Prepayment in full, but not in part, may be made following forty-five (45) days from the date hereof, provided that a voluntary prepayment made prior to the Makewhole Fee Date shall include the Makewhole Fee. **Amounts advanced hereunder and repaid shall not be available to be drawn again.**

PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 1

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***II. <u>Security</u>***

This Note is secured *inter alia* by a Deed of Trust ("**Deed of Trust**") of even date herewith in favor of **ZANE SMITH**, Trustee, in which the Deed of Trust reference is made for a description of the property covered by the liens created thereby and the nature and extent of the rights and powers of the holder of this Note with respect to such property.

***III. <u>Right to Accelerate Upon Default</u>***

The holder of this Note shall have the option of declaring the principal balance hereof and the interest accrued hereon to be immediately due and payable upon the failure of Maker to pay any installment of the principal of or interest on this Note when due or upon the occurrence of a default specified in the Deed of Trust, the Loan Agreement, and or any other documents evidencing or securing the loan evidenced hereby (this Note, the Loan Agreement, the Deed of Trust, and any such other documents are herein called the "**Loan Documents**").

***IV. <u>Waiver of Conditions and Defenses to Liability</u>***

Maker and any other party who is or becomes liable to pay all or any part of this Note, or who grants any lien or security interest to secure all or any part of this Note (each called an "**other liable party**" below), including but not limited to any drawer, acceptor, endorser, guarantor, surety or accommodation party, severally waive presentment for payment, demand, notice of demand and of dishonor and nonpayment of this Note, notice of intention to accelerate the maturity of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party.

Further, Maker and any other liable party severally waive any notice of or defense based upon any agreement or consent of the holder of this Note made or given from time to time, before or after maturity, to any of the following, unless such agreement is reduced to writing and executed by the holder of the Note: the acceleration, renewal or extension of this Note; a change in the time or manner of payments required by this Note; a change in the rates of interest specified in this Note; acceptance or surrender of security; a substitution of security or subordination, amendment or release of security; an addition or release of any other liable party; changes of any sort whatever in the terms of payment of this Note or in the manner of doing business with Maker; and any settlement or compromise with Maker or any other liable party on such terms as the holder of this Note may deem appropriate in its sole and absolute discretion.

Following a default under the Loan Documents beyond any applicable cure period, the holder of this Note may apply all moneys received from Maker or others, or from any security (whether held under a security instrument or not), in such manner upon the indebtedness evidenced or secured by any Loan Documents (whether then due or not) as such holder may determine to be in its best interest, without in any way being required to marshal assets or to apply all or any part of such moneys upon any particular part of such indebtedness. The holder of this Note is not required to retain, hold, protect, exercise due care with respect to, perfect security interests in or otherwise assure or safeguard any security for this Note, and no failure by the holder of this Note to do any of the foregoing and no exercise or failure to exercise by such holder of any other right or remedy shall in any way affect any of Maker's or any other liable party's obligations hereunder or under other Loan Documents or affect any security or give Maker or any other liable party any recourse against the holder of this Note.

PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 2

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***V. <u>Usury Savings Provision</u>***

It is the intent of Maker and Payee in the execution of this Note and all other Loan Documents to contract in strict compliance with applicable usury law. In furtherance thereof, Maker and Payee stipulate and agree that none of the terms and provisions contained in this Note, or in any other instrument executed in connection herewith, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, or interest at a rate in excess of the Maximum Rate. Neither Maker nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of this Note shall ever be obligated or required to pay interest on this Note at a rate in excess of the Maximum Rate, and the provisions of this paragraph shall control over all other provisions of this Note and any other Loan Documents now or hereafter executed which may be in apparent conflict herewith. Payee expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of this Note is accelerated. If the maturity of this Note shall be accelerated for any reason or if the principal of this Note is paid prior to the end of the term of this Note, and as a result thereof the interest received for the actual period of existence of the loan evidenced by this Note exceeds the applicable maximum lawful rate, the holder of this Note shall credit the amount of such excess against the principal balance of this Note then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest; provided, however, that if the principal hereof has been paid in full, such excess shall be refunded to Maker. If the holder of this Note shall receive money (or anything else) which is determined to constitute interest and which would increase the effective interest rate on this Note or the other indebtedness secured by the Loan Documents to a rate in excess of that permitted by applicable law, the amount determined to constitute interest in excess of the lawful rate shall be credited against the principal balance of this Note then outstanding or, if the principal balance has been paid in full, refunded to Maker, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. If the holder of this Note shall not actually receive, but shall contract for, request or demand, a payment of money (or anything else) which is determined to constitute interest and which would increase the effective interest rate contracted for or charged on this Note or the other indebtedness evidenced or secured by the Loan Documents to a rate in excess of that permitted by applicable law, the holder of this Note shall be entitled, following such determination, to waive or rescind the contractual claim, request or demand for the amount determined to constitute interest in excess of the lawful rate, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Note Maker acknowledges that Maker believes the loan evidenced by this Note to be non-usurious and agrees that if, at any time, Maker should have reason to believe that such loan is in fact usurious, Maker will give the holder of this Note notice of such condition and Maker agrees that the holder shall have sixty (60) days in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists. Additionally, if, from any circumstance whatsoever, fulfillment of any provision hereof or of the Deed of Trust or any other Loan Documents shall, at the time fulfillment of such provision be due, involve transcending the Maximum Rate then, *ipso facto*, the obligation to be fulfilled shall be reduced to the Maximum Rate. The term "**applicable law**" as used in this Note shall mean the laws of the State of Texas or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future.

***VI. <u>Miscellaneous</u>***

Should the indebtedness represented by this Note or any part thereof be collected at law or in equity or through any bankruptcy, receivership, probate or other court proceedings or if this Note is placed in the hands of attorneys for collection after default, Maker and all endorsers, guarantors and sureties of this Note jointly and severally agree to pay to the holder of this Note in addition to the principal and interest due and payable hereon all the costs and expenses of the holder in enforcing this Note including, without limitation, reasonable attorneys' fees and legal expenses.

This Note and the rights, duties and liabilities of the parties hereunder or arising from or relating in any way to the indebtedness evidenced by this Note or the transaction of which such indebtedness is a part shall be governed by and construed in accordance with the law of the State of Texas and the law of the United States applicable to transactions within such State.

No amendment of this Note shall be binding unless expressed in a writing executed by Maker and the holder of this Note.

**Maker certifies, represents, and warrants to Payee that the proceeds hereof are to be used for a commercial purpose and not for personal, family, household, or agricultural purposes.**

**THE PARTIES HERETO VOLUNTARILY AND KNOWINGLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION WITH, OR RELATED TO ANY OF THE LOAN DOCUMENTS.**

PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 3

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**MAKER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY TEXAS OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, AND MAKER HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY TEXAS OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS (OR SUCH OTHER COUNTY IN TEXAS) MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.**

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| | |
|:---|:---|
|  | **<u>MAKER:</u>** |
| **<u>Maker</u>**<u>'</u>**<u>s Address</u>:** |  |
|  | WHITESTONE UPTOWN TOWER, LLC, |
|  | a Delaware limited liability company |
|  | By: PILLARSTONE CAPITAL REIT OPERATING PARTNERSHIP LP, |
|  | a Delaware limited partnership, |
|  | its Sole Member |
|  | By: PILLARSTONE CAPITAL REIT, |
|  | a Maryland Real Estate Investment Trust |
|  | its General Partner |
|  | By: <u>/s/ Bradford D. Johnson</u><u> </u><u> </u> |
|  | Bradford D. Johnson, President and CEO |

---

**<u>Payee's Address</u>**:

AMERICAN BANK, N.A.

2707 West Northwest Highway

Dallas, Texas 75220

PROMISSORY NOTE WHITESTONE UPTOWN TOWER, LLC (Loan No. 89765200) Page 4

## Exhibit 10.7

**Exhibit 10.7**

**PLAN AGENT AGREEMENT**

This Plan Agent Agreement (as it may be amended, modified, supplemented or restated from time to time, this "<u>Agreement</u>") is made effective this ______ day of ___________, 2024, by and among the following parties (each a "<u>Party</u>" and, collectively, the "<u>Parties</u>"): (a) Whitestone Industrial-Office LLC and its debtor affiliates, as debtors and debtors in possession in the Chapter 11 Cases (defined below) (collectively, the "<u>Debtors</u>")<sup>1</sup>, which shall include the reorganized debtors after the Effective Date<sup>2</sup> of the Plan); and (b) Frances A. Smith, as the duly-appointed Plan Agent (defined below).

**RECITALS**

WHEREAS, on March 4, 2024 (the "<u>Petition Date</u>"), each of the Debtors filed voluntary petitions under chapter 11 of title 11 of the United States Code (the "<u>Bankruptcy Code</u>") in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "<u>Court</u>" or "Bankruptcy Court"), thereby initiating the bankruptcy cases (the "<u>Chapter 11 Cases</u>"); and

WHEREAS, on July 24, 2024, the Debtors filed their *Third Amended Joint Plan of Liquidation* [Docket No. 220]; and

WHEREAS, on September 5, 2024, Whitestone REIT Operating Partnership, L.P. ("<u>WROP</u>") filed its *Objection to the Debtors' Third Amended Joint Plan of Liquidation* [Docket No. 300]; and

WHEREAS, on September 16, 2024, the Debtors filed their *Notice of Appointment of Plan Agent for Third Amended Joint Plan of Liquidation* [Docket No. 303]; and

WHEREAS, on October 22, 2024, the Debtors filed their *Fourth Amended Joint Plan of Liquidation* [Docket No. 367]; and

WHEREAS, on November 6, 2024, the Debtors filed their *Fifth Amended Joint Plan of Liquidation* (as it may be further modified or amended, the "<u>Plan</u>"), a copy of which is attached hereto as **Exhibit A**; and

WHEREAS, on ___________, 2024, the Court entered an Order confirming the Plan (the "<u>Confirmation Order</u>"), a copy of which is attached hereto as **Exhibit B**; and

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<sup>1</sup> The Debtors in these jointly administered cases are: Whitestone Industrial-Office, LLC ("<u>Whitestone Industrial</u>") [Case No. 24-30653]; Whitestone Offices, LLC ("<u>Whitestone Offices</u>") [Case No. 24-30654]; Whitestone CP Woodland Ph 2 LLC ("<u>Whitestone CP</u>") [Case No. 24-30655]; Pillarstone Capital REIT Operating Partnership, LP (the "<u>Partnership</u>") [Case No. 24-30656]; and Pillarstone Capital REIT ("<u>Pillarstone</u>") [Case No. 24-30657].

<sup>2</sup> All capitalized terms not defined herein shall have the meaning set forth in the Plan.

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WHEREAS, the Plan contemplates, on the Effective Date, the appointment of a Plan Agent to administer the claims of all parties holding claims against the Debtors or held by the Debtors against others, including claims the Debtors may have against one another; and

WHEREAS, the Court shall have jurisdiction over the Plan Agent and any disputes regarding the Plan Agent's proposed resolution of Claims;

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and in the Plan, the Parties agree as follows:

**Article I**

**DEFINITIONS AND INTERPRETATIONS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 "<u>Claims</u>" shall mean (a) all claims, causes of action, and rights appurtenant thereto the Debtors may have, whether known or unknown, asserted or unasserted, against any party, including each other, and (b) all claims, causes of action, and rights appurtenant thereto asserted or held by non-Debtor third parties against the Debtors, including but not limited to all secured, administrative, professional, priority, general unsecured claims, and equity interests scheduled by or filed against the Debtors in the Chapter 11 Cases, now or in the future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <u>Agreement Terms Control</u>. In the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Agreement shall govern and control. References herein to the "Plan" shall also include the terms, provisions and Plan modifications as set forth in the Confirmation Order.

**Article II**

**PLAN AGENT FUNCTIONS AND DUTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <u>Role of Plan Agent.</u> The Plan Agent is appointed for the purposes of administering all Claims and making distributions to holders of allowed claims and equity interests under the Plan. The Plan Agent's administration of the Claims may include, without limitation, and pursuant to her reasonable business judgment, investigating, prosecuting, objecting to, resolving, reconciling, compromising, litigating, administering, and making distributions on account of, the Claims. The Plan Agent is not a trustee, and shall not participate in the management or operations of the Debtors' businesses, assets or financial affairs. The Plan Agent's administration of Claims shall not include the review and approval of the day-to-day operational expenses of the Debtors' business post-confirmation, unless the Court determines cause exists for the Plan Agent to do so after notice and hearing.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <u>Resolution of Claims.</u> The Plan Agent shall have the sole and exclusive authority, to administer the Claims. If the Plan Agent determines to compromise a Claim involving WROP, any Debtor, or any of their respective insiders, officers, directors, trustees, affiliates, or professionals, then the Plan Agent shall promptly file a motion pursuant to Federal Rule of Bankruptcy Procedure 9019 ("<u>9019 Motion</u>") seeking Bankruptcy Court approval upon notice and hearing. Any party in interest may file a good-faith objection to such 9019 Motion. Once the Court reaches a final adjudication on the 9019 Motion, the Plan Agent shall proceed to implement the Court's ruling to the best of her ability and pursuant to her reasonable business judgment. The Plan Agent shall have the authority to make demand on the Debtors for funds necessary to satisfy allowed Claims asserted against a Debtor from that Debtor's funds (even if held by the Partnership), which may include sales proceeds. Debtors shall make such disbursements to the Plan Agent, within 7 days of her request, so that the Plan Agent may issue distributions to holders of allowed Claims pursuant to this Agreement and the Plan. Distributions shall be made in accordance with the absolute priority rule and Plan such that all claims shall be administered and paid before distributions are made to holders of equity interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <u>Retention of Professionals.</u> The Plan Agent may retain law firms or other professionals or experts to assist in resolving the Claims as necessary to efficiently collect the Claims in accordance with the terms of the Plan. Such professionals shall specifically include a Conflict Plan Agent for a specific Debtor and his or her professionals in the event the Plan Agent identifies a conflict among the Debtors. The terms of this Agreement shall apply to any Conflict Plan Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <u>Compensation and Reimbursement of Plan Agent.</u> The Plan Agent shall receive compensation as a flat fee the amount of $10,000.00 per month, plus reimbursement of actual, necessary expenses, to be paid at the end of each month following the Effective Date, for so long as administration of the case requires the services of the Plan Agent and completion of the terms of the Plan. If during any month the Plan Agent spends more than fifteen (15) hours in the performance of her duties she shall be compensated at a rate of $650.00 per hour for each additional hour of services. All compensation and reimbursement of expenses of the Plan Agent and Conflict Plan Agent, if any, shall be paid by the Debtors. Any dispute between the Plan Agent or Conflict Plan Agent and the Debtors as to compensation or reimbursement that cannot be resolved by the parties shall be resolved by the Bankruptcy Court. The Plan Agent may seek compensation for work done prior to the Effective Date at her hourly rate under Section 503(b)(4) of the Bankruptcy Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <u>Duration of Plan Agent</u><u>'</u><u>s duties.</u> The Plan Agent shall serve until the Claims are resolved. The Plan Agent may resign by an instrument in writing filed with the Bankruptcy Court at least thirty (30) days before the proposed effective date of resignation. Should the Plan Agent resign, a successor plan agent shall be appointed by agreement of the Debtors and WROP, or, if no agreement can be reached, by the Court.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <u>Removal of Plan Agent.</u> The Plan Agent may be removed from office upon application and order of the Bankruptcy Court for (i) fraud or willful misconduct in connection with the affairs of the Plan, (ii) for such physical or mental disability as substantially prevents the Plan Agent from performing the duties of Plan Agent hereunder or (iii) for cause, which shall include a breach of fiduciary duty or an unresolved conflict of interest.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7. <u>Limitation of Plan Agent's Liability.</u> Notwithstanding anything in this Agreement, the Plan, or the Confirmation Order to the contrary, in exercising the rights granted herein, the Plan Agent shall exercise her reasonable business judgment, to the end that the affairs of the Debtors, WROP and all creditors and parties in interest are reasonably safeguarded; but notwithstanding the foregoing or anything to the contrary in this Agreement, the Plan Agent shall not incur any responsibility or liability of any kind of character whatsoever for any reason, including by reason of any error of law or of any matter or thing done or suffered or omitted to be done under or related to this Agreement, her duties, obligations, activities, or actions as Plan Agent or otherwise related directly or indirectly thereto, unless a Court determines in a final order that such action or omission complained of or damage allegedly incurred thereby is solely a direct result of the Plan Agent's gross negligence, fraud, or willful misconduct. The Plan Agent's obligations, duties, and responsibilities under the Plan, the Confirmation Order, and this Agreement are qualified in their entirety by the availability of and reasonable likelihood of recovery of sufficient assets or cash to fund the Plan Agent's activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8 <u>Indemnification of Plan Agent.</u> The Plan Agent and each of her respective accountants, agents, assigns, attorneys (including the Plan Agent's law firm, if retained), bankers, consultants, directors, employees, executors, financial advisors, investment bankers, real estate brokers, transfer agents, independent contractors, managers, members, officers, partners, predecessors, principals, professional persons, representatives, affiliate, employer, successors and the Plan Agent's firm (each, an "Indemnified Party") shall be indemnified against and held harmless by the Debtors, and solely from the Debtors' assets, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost, or expense (including the reasonable fees and expenses of their respective professionals) actually incurred without gross negligence, willful misconduct, or fraud on the part of the applicable Indemnified Party (which gross negligence, willful misconduct, or fraud, if any, must be determined by a Final Order of the Bankruptcy Court) for any action taken, suffered, or omitted to be taken by the Plan Agent or Indemnified Party in connection with the acceptance, administration, exercise, and performance of their duties under the Plan or this Agreement, as applicable, if the applicable Indemnified Party acted in good faith and in a manner reasonably believed to be in, in his or her reasonable business judgment. An act or omission taken with the approval of the Bankruptcy Court will be conclusively deemed not to constitute gross negligence, willful misconduct, or fraud. The amounts necessary for the indemnification provided in this section of this Agreement shall be paid by the Debtors. The Plan Agent shall not be personally liable for the payment of any expense related to the discharge of her duties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9. <u>Reporting.</u> The Debtors shall provide monthly reports to the Plan Agent and WROP in the same form as the monthly operating reports provided by the Debtors to the U.S. Trustee's Office during the administration of the Chapter 11 Cases and shall include, without limitation, cash on-hand, sources and uses of cash on a per-debtor basis. Debtors shall, within 7 days of Debtors' receipt of such information, supplement such reporting to timely notify the Plan Agent and WROP of any executed letters of intent and purchase and sale agreements for real estate, modifications to or terminations of executed letters of intent or sale agreements, sale closure dates mutually confirmed and scheduled by the parties to such transaction, sale closures, receipt of funds from sales, and the payment of any non-routine operational expense in excess of $50,000.00. The reporting on sales of property shall include money attributable to each specific debtor. Debtors shall provide other general monthly reporting related to broker activity and marketing updates on the 1<sup>st</sup> of the month each month during the term of the Plan.

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**Article III**

**MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>Notices</u>. Any notice or other communication which may be or is required to be given, served, or sent to the Plan Agent, the Debtors or WROP shall be in writing and shall be sent by registered or certified United States mail, return receipt requested, postage prepaid, or transmitted by hand delivery (if receipt is confirmed) addressed as follows.

If to the Plan Agent:

Frances A. Smith

Ross, Smith & Binford, PC

700 N Pearl St., Suite 1610

Dallas, TX 75219

Email: frances.smith@rsbfirm.com

with copy to Jason Binford via email at <u>jason.binford@rsbfirm.com</u>

If to Debtors:

Joyce W. Lindauer

Joyce W. Lindauer Attorney, PLLC

1412 Main Street, Suite 500

Dallas, TX 75202

And to

Bradford Johnson

CEO and President

19407 Park Row, Ste. 140

Houston, TX 77084

If to WROP:

Peter Tropoli, General Counsel and Corporate Secretary

Whitestone REIT

2600 S. Gessner Road, Suite 500

Houston, TX 77063

Email: ptropoli@whitestonereit.com

And to

John J. Kane

Kane Russell Coleman Logan PC

901 Main Street, Suite 5200

Dallas, TX 75219

Email: jkane@krcl.com

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>No Bond/Insurance</u>. Notwithstanding any state law to the contrary, the Plan Agent (including any successor) shall be exempt from giving any bond or other security in any jurisdiction. Nothing herein shall prevent the Plan Agent from obtaining a bond or other security as she deems necessary in her reasonable business judgment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <u>Successors and Assigns</u>. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <u>Headings</u>. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or understanding of this Agreement or any provision hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <u>Cumulative Rights and Remedies</u>. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights and remedies under law or in equity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6. <u>Waiver</u>. No failure by any Party to exercise or delay in exercising any right, power, or privilege hereunder shall operate as a waiver, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any further exercise thereof, or of any other right, power, or privilege.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <u>Severability</u>. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable, or against its regulatory policy, the remainder of the terms, provisions, covenants, and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 <u>Further Assurances</u>. The Parties agree to execute and deliver all such documents and notices and to take all such further actions as may reasonably be required from time to time to carry out the intent and purposes and provide for the full implementation of this Agreement and the pertinent provisions of the Plan, and to consummate the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 <u>Counterparts and Facsimile Signatures</u>. This Agreement may be executed in counterparts and a facsimile or other electronic form of signature shall be of the same force and effect as an original.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <u>Jurisdiction</u>. The Bankruptcy Court shall have jurisdiction regarding the Plan Agent and the determination of all disputes arising out of or related to administration of the Plan Agent's duties hereunder. The Bankruptcy Court shall have continuing jurisdiction and venue to hear and finally determine all disputes and related matters arising out of or related to this Agreement. The parties expressly consent to the Bankruptcy Court hearing and exercising such judicial power as is necessary to finally determine all such disputes and matters. If the Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising in, arising under, or related to the Chapter 11 Cases, including the matters set forth in this Agreement, then the provisions of this Agreement shall have no effect on and shall not control, limit, or prohibit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such matter, and all applicable references in this Agreement to an order or decision of the Court shall instead mean an order or decision of such other court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <u>Modifications</u>. Any modifications of this Agreement shall be in writing, signed by the Plan Agent, Pillarstone, and WROP, and approved by the Bankruptcy Court. The Plan Agent shall retain the exclusive right and authority to seek Bankruptcy Court approval of a proposed modification of this Agreement if any of the aforementioned parties declines to agree to a proposed modification sought by the Plan Agent.

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**DEBTORS:**<br>**Pillarstone Capital REIT**<br> a Maryland real estate investment trust<br>**Pillarstone Capital REIT Operating Partnership LP**<br> a Delaware limited partnership<br>By: Pillarstone Capital REIT, its general partner<br>**Whitestone Industrial-Office, LLC**<br> a Texas limited liability company<br>By: Pillarstone Capital REIT Operating Partnership LP, its sole Member<br> By: Pillarstone Capital REIT, its general partner<br>**Whitestone Offices LLC**<br> a Texas limited liability company<br>By: Pillarstone Capital REIT Operating Partnership LP, its sole Member<br> By: Pillarstone Capital REIT, its general partner<br>**Whitestone CP Woodland PH2, LLC**<br> a Delaware limited liability company<br>By: Pillarstone Capital REIT Operating Partnership LP, its sole Member<br> By: Pillarstone Capital REIT, its general partner<br>By:<u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><br> Bradford D. Johnson<br> President and CEO of Pillarstone Capital REIT<br>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By:<u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><br> Joyce W. Lindauer<br> State Bar No. 21555700<br> Joyce W. Lindauer Attorney, PLLC<br> 1412 Main Street, Suite 500<br> Dallas, TX 75202<br> Attorneys for Debtors<br>**Whitestone REIT Operating Partnership, L.P.**<br> **A Delaware limited partnership**<br>By: Whitestone REIT<br> a Maryland real estate investment trust<br> Its: General Partner<br><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><br> By: David K. Holeman<br> Its: CEO<br>**PLAN AGENT:**<br>By:<u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><u> </u><br> Frances A. Smith<br> Ross, Smith & Binford, PC<br> 700 N Pearl St., Suite 1610<br> Dallas, TX 75219<br> Email: frances.smith@rsbfirm.com<br>

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Bradford D. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pillarstone Capital REIT;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2025

By: <u>/s/ Bradford D. Johnson</u><u> </u><u> </u>

Bradford D. Johnson

Chief Executive Officer

(Principal executive officer)

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Daniel P. Kovacevic, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pillarstone Capital REIT;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2025

By: <u>/s/ Daniel P. Kovacevic</u> <u> </u><u> </u>

Daniel P. Kovacevic

Chief Financial Officer

(Principal financial and accounting officer)

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the filing of the quarterly report of Pillarstone Capital REIT (the "Company") on Form 10-Q for the period ending September 30, 2022 (the "Report") with the Securities and Exchange Commission, I, Bradford D. Johnson, Chief Executive Officer and I, Daniel P. Kovacevic, Chief Financial Officer, of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

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| | | | |
|:---|:---|:---|:---|
|  |  | By: | PILLARSTONE CAPITAL REIT<br> /s/ Bradford D. Johnson |
| Date: | July 31, 2025 |  | Bradford D. Johnson<br> *Chief Executive Officer* |

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| | | | |
|:---|:---|:---|:---|
|  |  | By: | PILLARSTONE CAPITAL REIT<br> /s/ Daniel P. Kovacevic |
| Date: | July 31, 2025 |  | Daniel P. Kovacevic<br> *Chief Financial Officer* |

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