SEC Concludes Its Investigation of Silver Star Properties REIT
The U.S. Securities and Exchange Commission recently notified Silver Star Properties REIT Inc. that it had concluded its investigation of the company and that, based on the information that it had as of Aug. 15, 2024, it did not recommend enforcement against any parties.
The SEC had issued a formal investigation of the publicly registered non-traded real estate investment trust on Feb. 2. Prior to that, the company noted interactions with the SEC in November 2023 related to voluntary information requests pertaining to activities of the REIT, its affiliates, and current and former officers and directors. Dating back to July 2023, AltsWire reported via an anonymous letter made available to this news service, that Silver Star received notice of an SEC investigation into the REIT’s acquisitions and/or its former officers, as based upon a letter to David Wheeler, the REIT’s president and co-chief executive officer. The letter from the SEC, however, did not disclose the exact target of the investigation.
In the letter previously issued to Silver Star in July 2023, the SEC focused on several matters and advised Silver Star to retain documents and data that might have related to the investigation, including those pertaining to: the removal of then-chief executive officer Allen R. Hartman, whom, as we previously reported, the Silver Star board’s executive committee removed as executive chairman of the company, as well as the termination of the agreement between Hartman Short Term Income Properties XX Inc. and Hartman; Silver Star’s investigation into “certain violations of fiduciary and other duties to Silver Star by Hartman”; Silver Star’s purchase of all equity interests in Southern Star Self-Storage Investment Company; the resignation of Mark Torok as chief executive officer of Silver Star, who resigned in May 2023, less than a month after reaching a long-term employment agreement with the board of directors; and the determination that Silver Star had material weaknesses in controls over the review, approval, and disclosure of related party transactions and the insufficient design of controls relating to the timing of revenue recognition of estimated recoveries of operating expense items under leasing agreements.
Previously known as Hartman Short Term Income Properties XX Inc., the company rebranded to Silver Star Properties in December 2022 and adopted a plan to pivot away from investment in office properties to instead focus on self-storage facilities. Soon thereafter, in March 2023, the company revealed that founder Allen Hartman had been removed as executive chairman and was being investigated by the company for “issues related to certain violations of fiduciary and other duties…”
An ongoing legal battle between Silver Star and Hartman has since ensued. AltsWire recently reported that the Circuit Court for Baltimore City signed an order denying Hartman and Hartman vREIT XXI, Inc.’s motion for partial summary judgment, which sought to liquidate Silver Star. Gerald Haddock, executive chairman of Silver Star’s executive committee and current CEO, stated “we are pleased with the court’s ruling and will continue our progress towards our goals of moving the company into self-storage and single-tenant real estate assets and making distributions to our shareholders much quicker, all of which have been hindered by the dissident shareholder’s interference.”
Additionally, the company announced in July that it will continue to conduct an orderly transition of its legacy assets to maximize capital available for redeployment into self-storage and single-tenant real estate assets.
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