Silver Star Executes Triple Share Increase in Ongoing Battle With Former CEO Hartman
The ongoing battle between Silver Star Properties REIT, a publicly registered non-traded real estate investment trust formerly known as Hartman Short Term Income Properties XX Inc., and its former chief executive officer, Allen R. Hartman, continues. Silver Star has announced the execution of a shareholder rights plan provision that will result in a triple share increase for most shareholders, excluding Hartman and his affiliates.
According to Silver Star, the company has resolved to exchange valid shareholder rights under the company’s amended and restated rights agreement for two additional shares of common stock per right, effectively tripling the shares for many shareholders and resulting in the issuance of approximately 121.5 million new shares.
This action follows a flip-in event originally triggered in January 2024, when the board determined that Hartman and his affiliates had acquired more than 10% of the company’s outstanding common stock, therefore classifying them as an “acquiring person” under the terms of the agreement. At that time, the exchange ratio was expected to be one-to-one. The tripling of shares may further dilute Hartman’s voting power as the court-ordered shareholder meeting quickly approaches.
The years-long conflict between Silver Star and Hartman has escalated ahead of the meeting. Hartman has filed a number of letters to shareholders criticizing Silver Star’s current board for declining asset values, high debt costs, and an overall lack of transparency. Hartman claimed that Silver Star’s total net asset value fell from $412 million to $134 million as of June 30, 2024. He also accused the company of “squandering” investor capital “through rushed, below-market assets” while “Silver Star’s board members collect massive compensation and reward themselves with performance units.” Hartman claimed that investors have lost over 70% of their equity.
In response, Silver Star CEO Gerald Haddock has repeatedly defended the company’s leadership. Additionally, Silver Star also recently stated that an incident was reported to the company by an employee involving Hartman allegedly exposing himself in 2021. The company also reported that Hartman allegedly paid the employee $185,000 in “hush money” to sign a settlement agreement with a confidentiality provision.
Earlier this month, Hartman was removed from Silver Star’s board and no longer serves in any capacity at Silver Star, though he reportedly remains one of the REIT’s largest stockholders.
The feud between the two sides has been going on since at least March 2023 when Silver Star announced the removal of Hartman as executive chairman. A series of legal actions have followed, initiated by both Hartman and Silver Star.
As the two sides fight for Silver Star’s future, Hartman is advocating for liquidation, while Silver Star’s current board is promoting a pivot to self-storage assets. The decision may be made on July 7 at 10 a.m., CT, where shareholders will vote either for liquidation or for supporting the company’s pivot into self-storage. Shareholders of record as of June 1 are eligible to vote.
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