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CORRESP
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    t63847_corresp.htm

      October
22, 2008

      Via
EDGAR Submission and

      Overnight
Delivery

      U.S.
Securities and Exchange Commission

      Division
of Corporation Finance

      100 F St.
Street, NE, Mailstop 4561

      Washington,
D.C. 20549

      Attn:  Daniel
L. Gordon, Branch Chief

              Re:

              Whitestone REIT (the
      “Company”)

              Form 10-K for the Year Ended
      December 31, 2007

                Form
      10-Qs for the Quarters Ended March 31, 2008 and June 30,
    2008

      Dear Mr.
Gordon:

      We have reviewed the Staff’s letter
dated October 9, 2008, regarding the Company’s Annual Report on Form 10−K for
the year ended December 31, 2007 (the “Annual
Report”) and Quarterly Reports on Form 10−Q for the quarters ended March
31, 2008 and June 30, 2008 (the “Form
10−Qs”) and have prepared the following responses to your comments. For
ease of reference, we have reproduced the comments in their entirety below. In
addition, we have attached to this response letter the forms of the Amendment
No. 2 to the Annual Report and Amendment No. 1 to the Form 10−Qs as Exhibit A, Exhibit B and Exhibit C,
respectively (collectively, the “Amendments”),
that the Company proposes to file in response to the Staff’s comments. The
Company would propose to file the Amendments once the Staff confirms that it
does not have any additional comments relating to the disclosure contained in
the Amendments.

      Form 10-K for the Year Ended
December 31, 2007

      Item 5. Market for
Registrant’s Common Equity_ Related Shareholder Matters and Issuer Purchases of
Securities, page 18

                1.

                You disclose that shareholders
      that received approximately 64,000 shares issued under your dividend
      reinvestment plan on or after October 2, 2006, could be entitled to
      rescission rights. Please tell us how you determined that these shares
      should be classified as shareholders’ equity and not as a
      liability.

                RESPONSE:
      We note the Staff’s comment and acknowledge that approximately 64,000
      shares (the “Shares”) referenced above should have been classified as a
      liability.  We inadvertently classified the Shares as
      equity.  The amount recorded for the Shares is approximately
      $608,000 (the share price of $9.50 multiplied by the approximate number of
      shares, 64,000).

                The
      $608,000 misclassification equates to approximately 0.6% of liabilities or
      1.2% of equity, earnings per share are not affected because the Shares are
      considered common stock equivalents in both cases. Accordingly, we do not
      believe the misclassification rises to a level of materiality requiring
      restated financial statements, but advises the staff that in future
      filings, beginning with its Form 10-Q for the quarter ended September 30,
      2008, the Company will classify the shares as a liability as long as the
      rescission rights exist.

              2600 South
      Gessner

              Phone (713)
      827-9595

              info@whitestonereit.com

              Suite 500

              Toll Free (866)
      789-7348

              www.whitestonereit.com

              Houston, Texas
      77063

              Fax (713)
      465-8847

      Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations, page
21

      Liquidity and Capital
Resources, page 25

                2.

                You
      disclose that your $10.0 million mortgage loan is payable in equal monthly
      installments of principal and interest of $60,212. However, we note that
      you have included the entire outstanding principal balance of this note in
      the “More than 5 Years” column in your tabular presentation of contractual
      obligations. In future filings, please revise this table and the table of
      annual debt maturities included in Note 9 to include the principal
      payments due by period.

      RESPONSE: We note the Staff’s comment and
advise the Staff that in future filings, beginning with its Form 10-K for the
year ended December 31, 2008, the Company will revise the above referenced table
and the table of annual debt maturities included in the notes to the financial
statements to include the principal payments due by period.

                3.

                In future filings, please
      revise your tabular presentation of contractual obligations to include
      your interest commitments under your interest-bearing debt in this table,
      or provide textual discussion of this obligation below the table. If you
      provide a textual discussion, the discussion should quantify the interest
      payments using the same time frames stipulated in the table. Regardless of
      whether you decide to include interest payments in the table or in textual
      discussion below the table, you should provide appropriate disclosure with
      respect to your assumptions of your estimated variable rate interest
      payments.

      RESPONSE:
We note the Staff’s comment and advise the Staff that in future filings,
beginning with our Form 10-K for the year ended December 31, 2008, the Company
will revise our tabular presentation of contractual obligations to include our
interest commitments under our interest-bearing debt.

      Notes to Consolidated
Financial Statements, page F-7

      Note 9. Debt, page
F-14

                4.

                Please
      disclose in future filings whether you are in compliance with the
      covenants in your various loan
agreements.

      RESPONSE:
We note the Staff’s comment and advise the Staff that in future filings,
beginning with its Form 10-Q for the quarter ended September 30, 2008, the
Company will disclose whether or not we are in compliance with the covenants in
our various loan agreements.

      Exhibits 31.1 and
31.2

                5.

                We
      refer you to paragraph 4 of your certifications and note that it is
      missing the words “and internal control over financial reporting (as
      defined in Exchange Act Rules 13a-15(f) and 15d-15(f))” and also missing
      paragraph 4(b) related to internal control over financial reporting.
      Please note that the certifications must be exactly as set forth in Item
      601(b)(31)(i) of Regulation S-K. Please file an abbreviated amendment to
      your Form 10-K that consists of the cover page, explanatory note,
      signature page and paragraphs 1, 2, 4, and 5 of the
      certifications.

      RESPONSE:
In response to the Staff’s comment, the Company has revised the certifications
required by Item 601(b)(31) of Regulation S-K as set forth in the Company’s
proposed amendment attached hereto as Exhibit A.
Additionally, the Company intends to amend its Form 10-Q for the quarter ended
March 31, 2008 to include the required language in Exhibit 31, as set forth in
Exhibit B
attached hereto.

          2

      Form 10-Q for the Quarter
Ended June 30, 2008

      Note 10. Related-Party
Transactions, page 15

                6.

                Please
      tell us how you determined to record a gain of approximately $3.6 million
      related to the settlement of litigation with Allen R. Hartman and Hartman
      Management L.P., citing the authoritative literature upon which you relied
      in reaching this conclusion. Specifically tell us how you determined that
      the settlement was not a treasury stock transaction subject to the
      provisions of ARB 43, Chapter 1B; APB Opinion No. 6, paragraphs 12 and 13;
      and APB Opinion No. 9, paragraph
28.

      RESPONSE:
The $3.6 million gain related to the settlement was accounted for as a
nonreciprocal transfer to owners in accordance with APB Opinion No. 29,
paragraphs 3.d., 18 and 23.

                §

                Paragraph 3.d. states “An
      entity’s reacquisition of its outstanding stock is an example of a
      nonreciprocal transfer”, and paragraph 23 states “Other nonreciprocal
      transfers of nonmonetary assets to owners should be accounted for at fair
      value if the fair value of the nonmonetary asset distributed is
      objectively measureable and would be clearly realizable to the
      distributing entity in an outright sale at or near the time of the
      distribution.”  Paragraph 18 states “A transfer of a nonmonetary
      asset to a stockholder or to another entity in a nonreciprocal transfer
      should be recorded at the fair value of the asset transferred, and a gain
      or loss should be recognized on the disposition of the
      asset.”

                §

                The properties distributed to
      the owner were objectively measured and realizable by the Company at or
      near the time of the distribution.  Independent appraisals were
      performed to determine the fair value of the
      properties.

                o

                The $3.6 million gain was
      calculated in accordance with FAS 141, paragraphs 5, 6 and A6 of paragraph
      14.  The gain of $3.6 million equals the fair value of the
      nonmonetary assets ($11.4 million) minus the carrying value of the
      nonmonetary assets ($7.8
million).

                §

                Paragraph 5. states “Exceptions
      to that general condition include (a) the gain or loss that is recognized
      if the fair value of noncash assets given as consideration differ from
      their carrying amounts on the acquiring entity’s
      books.”

                §

                Paragraph 6. states
      “measurement is based on the fair value of the consideration given or the
      fair value of the asset (or net assets) acquired, whichever is more
      clearly evident and, thus, more reliably measurable.” The property
      appraisals provided a more clearly evident fair value, as there is no
      market for the common stock and operating units exchanged for the
      property.

                o

                The settlement was an exchange
      of nonmonetary assets (the properties) for ownership interests consisting
      of common stock and operating partnership units.  The fair value
      of the properties was allocated to the common stock ($2.4 million) and the
      operating partnership units ($9.0 million) on a pro rata basis based on
      the number of respective shares and units which were deemed to be equally
      valued.

                o

                The common stock was recorded
      as a treasury stock transaction in accordance with the provisions of ARB
      43, Chapter 1B; APB Opinion No. 6, paragraphs 12 and 13; and APB Opinion
      No. 9, paragraph 28.  Treasury stock was debited for $2.4
      million and the assets exchanged were credited for $2.4
      million.

                o

                The operating partnership unit
      transaction was accounted for using the purchase method in accordance with
      FAS 141 A5. paragraph 14, which states “A5. Paragraph 14 continues the
      practice established by Opinion 16 of accounting for the acquisition of
      noncontrolling equity interests of a subsidiary (commonly referred to as
      minority interest) using the purchase method.”  As such, the
      fair value of the properties allocated to the operating partnership units
      ($9.0 million) reduced the carrying value of the minority interest shares
      as a debit to minority interest of $4.8 million with the remaining $4.2
      million being allocated to the Company’s remaining non-cash
      assets.

          3

        A
summary of how the entire transaction was recorded is included
below:

                  Account

                  Debit

                  Credit

                  Description

                   Treasury
      Stock

                $
                2,479,144.40

                   Received 293,961 common
      shares

                   Minority
      Interest

                4,761,669.93

                   Received 1,068,451 operating
      partnership units

                   Non-cash
      Assets

                4,249,185.67

                   Received 1,068,451 operating
      partnership units

      Assets

                $
                7,844,416.00

                   Carrying value of assets
      exchanged for stock and operating partnership
  units

      Gain

                3,645,584.00

                   Fair value of assets
      exchanged minus carrying value of assets
  exchanged

      Item 4T. Controls and
Procedures, page 31

                7.

                We
      note that you did not include the conclusions of your principal executive
      and principal financial officers, or persons performing similar functions,
      regarding the effectiveness of your disclosure controls and procedures as
      of the end of the period covered by the report, based on the evaluation of
      those controls and procedures required by paragraph (b) of Rule 13a-15 or
      Rule 15d-15 of the Exchange Act. Please amend your filing to comply with
      the disclosure requirements of Item 307 of Regulation S-K. In doing so,
      please consider whether management’s failure to perform or complete its
      assessment of disclosure controls and procedures, or to provide
      management’s conclusion as to the effectiveness of your disclosure
      controls and procedures, impacts its conclusions disclosed in the amended
      filing. This comment also applies to your Form 10-Q for the quarter ended
      March 31, 2008.

          4

      RESPONSE:
We note the Staff’s comment and acknowledge that we were required to include the
conclusions of our principal executive and principal financial officers
regarding the effectiveness of our disclosure controls and procedures in
accordancewith Item 307 of Regulation S−K. The principal executive and principal
financial officers did perform such an assessment prior to filing the Form 10-Q
for each of the quarters ended March 31, 2008 and June 30, 2008, but the
required disclosure with respect to such assessment was inadvertently omitted
from each such Form 10-Q. In response to the Staff’s comment, the Company
intends to amend each such Form 10-Q in the manner set forth in Exhibit B and Exhibit C attached
hereto.

      *****

      In connection with responding to the
Staff’s comments, we acknowledge that:

                ·

                the
      Company is responsible for the adequacy and accuracy of the disclosure in
      the filings;

                ·

                Staff
      comments or changes to disclosure in response to Staff comments do not
      foreclose the Commission from taking any action with respect to the
      filings; and

                ·

                the
      Company may not assert Staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

      In addition, the Company understands
that the Division of Enforcement has access to all information that it provides
to the Staff of the Division of Corporation Finance in their review of our
filings or in response to their comments on our filings.

      Please direct any further questions or
comments concerning this response letter, the Annual Report, the Quarterly
Reports and the proposed amendments thereto to the undersigned at (713) 827-9595, extension 3027.

                      Sincerely,

                      /s/  David K.
Holeman

                      David K.
Holeman

                      Chief Financial
Officer

      Attachments
(3)

          5

        Exhibit
A

        UNITED
STATES

        SECURITIES
AND EXCHANGE COMMISSION

        Washington,
D.C. 20549

        FORM
10-K/A

        (Amendment
No. 2)

        (Mark
One)

                    x