Former CEO’s $25M Lawsuit Against Whitestone REIT Dismissed
A Harris County judge has dismissed the lawsuit James Mastandrea filed against Whitestone REIT, the Houston-based company where he served as CEO before being ousted nearly two years ago, court records show.
Harris County District Judge Elaine Palmer last week dismissed the lawsuit Mastandrea filed in February 2022, which claimed that he was wrongfully terminated and that the REIT owed him $25M. Whitestone disclosed the previous month that Mastandrea had been fired for cause and named then-Chief Financial Officer David Holeman as CEO.
In a news release, Holeman said the dismissal "will unburden" the company from legal defense costs and puts it in a strong position going into 2024. Tom Ajamie, an attorney for Mastandrea, told Bisnow this is just "a bump in the road of a long and wide-ranging set of litigations pending in Delaware and Texas."
Whitestone is involved in two other pending lawsuits, one brought by Pillarstone Capital REIT and its operating partnership in Harris County that alleges Whitestone's leadership embarked on a scheme to breach contractual agreements, violate fiduciary duties owed to Pillarstone and "pillage Pillarstone OP's assets," according to the original petition.
Mastandrea serves as a trustee of Pillarstone, and Whitestone owns 81.4% of Pillarstone, according to Pillarstone’s Securities and Exchange Commission filings. The two REITs are involved in the intertwined entity that owns an Uptown Dallas office building that is temporarily thwarting foreclosure after filing for bankruptcy.
The other lawsuit was brought by Whitestone against Pillarstone to invalidate a "poison pill" provision preventing Whitestone from exiting and monetizing its stake in the Pillarstone Partnership, according to Whitestone.
There is no connection between the Delaware litigation and the Texas litigation, Whitestone said in a statement to Bisnow. A ruling hasn't been issued in Delaware, but Whitestone is anticipating it shortly, the company said in the statement.
"Clearing up litigation not only reduces our [general and administrative] expense, but provides us with a greater ability to forecast and deliver consistent earnings growth," Whitestone said in the statement.
Ajamie, who represents Mastandrea and Pillarstone, said they are contemplating filing additional litigation.
"We’ll overcome it. We’re going to keep going," Ajamie said of the dismissal, adding that he and his client believe Whitestone shareholders are unhappy with the REIT’s management.
As part of the now-dismissed suit, Whitestone filed an amended counterclaim in March alleging that Mastandrea disclosed confidential information in pursuit of a sale of the company and failed to return Whitestone property after his departure. Asked whether Whitestone intended to pursue the counterclaim or let the matter drop with the case, the company declined to comment.
Whitestone has also been busy fending off acquisition attempts. Fortress Investment Group, which owned about 1.4% of Whitestone’s stock as of the end of the second quarter, was rebuffed by Whitestone after a takeover bid in October. Whitestone told Bisnow it doesn't comment on market rumors or speculation.
Anthony Hau, a lead analyst for Whitestone REIT’s stock, told Bisnow early this year that Whitestone had become more shareholder-friendly since its leadership change.
Whitestone stock closed at $11.64 on Tuesday, up about 18% from a year earlier. Whitestone's portfolio consists of about 5M SF of open-air shopping centers in Arizona, Texas and Illinois.
