Houston-based Whitestone REIT is one step closer to moving past its legal woes after a bankruptcy court approved a settlement agreement.

Pillarstone Capital REIT Operating Partnership paid the open-air shopping center owner $33.4M, Whitestone announced Monday. The REIT is slated to receive all cash remaining after Pillarstone’s other payments.

The settlement agreement distributed $33.4M to Whitestone and $4M to Pillarstone Capital REIT, leaving a $2.5M reserve. Whitestone expects to receive the $4M in cash and any excess from the $2.5M in reserves next year.

“What I will say is, we're nearing the end,” Whitestone CEO Dave Holeman said in October in response to a question about the Pillarstone joint venture during a third-quarter earnings call. For years, Whitestone has been trying to exit its partnership with Pillarstone, which it owned 81.4% of as of December 2023.

The settlement was reached in October, and Whitestone had been awaiting court approval, Holeman said.

Whitestone and Pillarstone’s legal clash began in 2022 after Whitestone ousted former CEO James Mastandrea for cause early in the year. Mastandrea sued for wrongful termination, but that lawsuit was dismissed in December 2023.

Pillarstone and its operating partnership sued Whitestone, alleging Whitestone's leadership embarked on a scheme to breach contractual agreements and "pillage Pillarstone OP's assets.” The partnership owned assets with the former CEO, Holeman said.

Whitestone also sued Pillarstone to invalidate a "poison pill" provision preventing Whitestone from exiting and monetizing its stake in the Pillarstone Partnership, according to Whitestone.

Pillarstone Capital REIT filed for Chapter 11 Bankruptcy in March 2024.

The settlement announced Monday is in addition to a $13.6M payment Pillarstone made to Whitestone in November related to the sale of the Uptown Tower in Dallas, for which Whitestone was a guarantor of the loan. Bradford Cos. bought the troubled 254K SF office building in July.

“The settlement and subsequent payments strengthen Whitestone’s balance sheet as we head into 2026,” Holeman said in a statement.

Whitestone has also fended off multiple takeover attempts in recent years, including MCB Real Estate’s offer last month to buy the firm at a 21% premium to its share price.

The REIT expanded its portfolio by two shopping centers so far this quarter, including the World Cup Plaza in Frisco and Ashford Village in Houston.