Founder Allen Hartman Fires Back Against Silver Star REIT’s Move To Kick Him Off Board
Silver Star Properties REIT is getting pushback from its founder after the board accused him of mismanagement and illegal meddling while allegedly trying to remove him from the board.
Allen Hartman has come out fighting against the company’s attempt to gain stockholder consent to reelect three of four board members and exclude him by reducing the number of directors to those three, according to a news release. Hartman and the Hartman Group issued the release Thursday in response to a Nov. 29 Silver Star Properties filing with the Securities and Exchange Commission claiming a history of poor management.
The stockholder consent would effectively remove Hartman from the board he has served on since he was pushed out as CEO in 2022.
The SEC filing, a transcript of a video by board Chairman Gerald Haddock, accuses Hartman of conflict of interest, developing succession plans for young, inexperienced family members rather than devoting himself to company priorities, borrowing cash from Hartman vREIT XXI to subsidize Silver Star’s shortfalls and not engaging in the business, among other complaints.
In his response, Hartman accused board directors of trying to block stockholders from having a choice in the future of Silver Star. Hartman owns 13.2% of the company’s common stock, making him its largest shareholder, while the remaining directors collectively own less than 0.25% of outstanding shares, the release says.
Silver Star didn't respond to a request for comment Thursday.
Silver Star is soliciting consent from stockholders rather than holding an annual meeting, which it has not done in a number of years, according to the release.
“This is concerning because this is a crucial time for the Company when stockholders need to be able to make important decisions about the Company’s future, including whether the Company should be liquidated and capital returned to stockholders as required under the Company’s charter,” the release says.
Silver Star Properties REIT filed a petition for Chapter 11 bankruptcy protection on Sept. 13, citing $217M in outstanding debt. It has sold several properties in Dallas to relieve its debt and has a long-term plan to exit bankruptcy with $370M to invest in future business plans, primarily to acquire self-storage assets, it said in an SEC filing.
The REIT management company has seen numerous leadership changes in the past year, following Hartman’s decades-long tenure as CEO.
Hartman founded the company that would eventually become Silver Star Properties REIT in 1983. Hartman was ousted as CEO last year.
Mark Torok was named CEO in late 2022 and led the company’s transition into self-storage. Hartman was still serving as the executive chairman of the board as of May, but Haddock was identified as the executive chairman by August.
Steve Treadwell was named CEO in August but resigned in October. Silver Star President David Wheeler was then named interim CEO.
Hartman has been at the center of his fair share of legal and political drama over almost two decades. In 2006, he was ousted from Hartman Commercial Properties REIT, whose board sued him and accused him of violating fiduciary responsibility, The Real Deal reported. That lawsuit was settled in 2008.
Hartman Commercial Properties REIT went on to become Whitestone REIT, which has experienced its own personnel and legal kerfuffle in recent years, albeit not involving Hartman.
Hartman got national media attention in the early months of the coronavirus pandemic when he allegedly didn't allow employees to wear masks in the office and called the pandemic a hoax. Hartman also sued Harris County Judge Lina Hidalgo and Texas Gov. Greg Abbott over lockdown and masking orders and once handed out Make America Great Again hats during a company-sponsored outing.
In the late November SEC filing, Haddock accused Hartman of not engaging in the business, instead focusing on what Haddock described as personal, religious and political matters.
In his press release, Hartman highlighted Silver Star's claim “that Hartman had an excessive degree of control as CEO due to creating a culture that stifled dissenting viewpoints,” deeming it “FALSE.”
“Hartman was very intentional about running a bottom-up culture, in the interest of allowing the Company to arrive at the right answers by solving the department problems at the department level,” his release says.
