HOUSTON, July 5, 2024
/PRNewswire/ -- Silver Star Properties REIT, Inc. ("Silver Star" or
the "Company") is a self-managed real estate investment trust that
is currently repositioning in an orderly manner into the
self-storage and single tenant real estate assets. Today the
Company announced an update to the on-going litigation between the
Company and former CEO, Allen R.
Hartman ("Hartman") in Maryland state court. On June 17, 2024, the Circuit Court for Baltimore City signed an order denying Hartman
and Hartman vREIT XXI, Inc.'s motion for partial summary judgement.
Hartman's motion sought the drastic and unprecedented measure
of liquidating a solvent Company where there is no deadlock and no
claim of oppression.
Gerald Haddock, Executive
Chairman of the Executive Committee of Silver Star and Chief
Executive Officer, 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."
The Company will continue to conduct an orderly transition of
its legacy assets to maximize capital available for redeployment
into the self-storage and single tenant real estate assets.
The Company has 20 remaining legacy assets which it intends
to sell as soon as reasonably possible. When the transition
has been completed, based upon value estimates and anticipated
expenses, all of which can change, Silver Star has estimated that
it will have approximately $350
million in self-storage and single-tenant real estate
assets, with an estimated loan-to-value ratio of approximately 65%.
As explained below, not including any assets in the Southern
Star DSTs, Silver Star has $100.75M
in self-storage and single tenant real estate assets.
As part of its pivot strategy, on June
28, 2024, the Company completed the sale of the Richardson
Heights Shopping Center located in Richardson, Texas for $40.5 million. The 201,433 square foot
shopping center went under contract April
11, 2024, and at that time, was anchored by an Alamo Draft
House Cinema franchisee, Iced Tea with Lemon LLC. The
property was under contract for sale to an unrelated third party
and expected to close on June 12,
2024. On June 6, 2024, the
franchisee, Iced Tea with Lemon LLC, filed a petition under Chapter
7 of the bankruptcy code, which was widely reported in the local
media. The Chapter 7 filing threatened the scheduled sale but
through heavy negotiations on the part of Gerald Haddock and the Silver Star team,
together with its counsel Michaela
Crocker and John Mitchell of
Katten Munchin Rosenman LLP, on June 27,
2024, the U.S Bankruptcy Court for the Northern District of
Texas, held an expedited hearing.
The hearing resulted in a transaction between Alamo Draft
House Cinema, the franchisor of Alamo Draft House and a subsidiary
of Sony, to bid and ultimately acquire the rights of the bankruptcy
estates to the theater franchises and right to assume the in place
leases. Gerald Haddock stated,
"These are the types of creative transactions this Company is newly
positioned to execute."
Additionally, in furtherance of its goals to maximize capital,
on July 1, 2024, the Company
completed the acquisition of sixteen (16) triple-net properties
leased by Walgreens for $60.25
million which was 100% financed. Gerald Haddock stated, "We believe these
properties are being advantageously acquired in a strategic fashion
to help with continuing as rapidly as possible the disposition of
our legacy assets and our new conversion to other asset
classes." As the Company executes its orderly transition to
other asset classes, the Walgreen's portfolio acquisition provides
the Company with a number of replacement properties to facilitate
1031 tax-free exchange transactions with a goal of eliminating or
minimizing any tax cost. The Company has already identified
eight (8) of the Walgreens as exchange properties in connection
with legacy assets already sold. Mr. Haddock emphasized "If
the macro economy benefits from anticipated lower interest rates,
single tenant lease properties may afford an even higher return for
the Company. Regardless, this investment is a vehicle to
facilitate replacement exchanges resulting in significant savings
in capital gain tax deferral from legacy assets sold."
As of July 1, 2024, Silver Star
has completed the acquisition of three self-storage properties at a
combined cost of $40.75 million,
comprising 1,668 units within 161,164 square feet. In
July 2024, the Company expects to
close its fourth self-storage property acquisition of a 907 unit,
81,370 square feet Class A facility located in Delray Beach,
Florida. The Company has two other self-storage facilities
under contract which it expects to close by the end of the third
quarter. David Wheeler states,
"We've actively covered the Sunbelt to build a brokerage network
and substantial pipeline of acquisition opportunities for Silver
Star that facilitates our growing portfolio of institutional grade
self-storage properties. In 2023, Silver Star in building
this pipeline reviewed approximately 400 acquisition opportunities
worth about $3.8 billion."
The transition of legacy assets and acquisition of self-storage
and single tenant real estate assets is fundamental to the success
of the Company's New Direction Plan. The Company's ongoing
relationship with Raymond James, led
by Jozsi Popper, has been fruitful and invaluable from the
beginning of Raymond James'
engagement by the Company to source capital and provide ongoing
oversight of our underwriting processes as the Company further
expands its ownership of institutional quality assets. Jozsi
Popper added, "We are pleased to be a part of helping the Company
to quickly and successfully achieve its New Direction Plan."
"The goal of the New Direction Plan is to position the Company
where it can resume distributions to shareholders, achieve an
exchange listing of Company shares and undertake a new IPO.
Overcoming the detrimental results of prior leadership and
achieving maximum shareholder value are the order of the day"
reiterated Gerald Haddock.
Mr. Haddock, who has been instrumental in founding and building
major public companies such as Crescent Real Estate, Ensco,
Consolidated Petroleum Industries, Wolverine Exploration, and more
recently, two successful SPACs, noted specifically that "the recent
and monumental steps taken by the Company since the start of 2024,
including the transactions described above, are going to prove to
be the cornerstone for this Company. The aggregation of the
assets will create the critical mass size that will help catapult
Silver Star forward more quickly than expected toward its efforts
to achieve an exchange listing." He further noted that "the
effort of the entire Silver Star team, including Michaela Crocker at Katten, reflected a great
effort with respect to solving the potentially disastrous issues
with respect to a bankrupt anchor tenant. Had the sale of
Richardson Heights Shopping Center not been completed, none of the
other acquisitions would have happened. The sale did occur
within three weeks of the filing of the Chapter 7 filing, and
without an adjustment in purchase price. That great result
can be attributed to this entire team. David Wheeler is in
charge of underwriting and management oversight of the self-storage
business and will be directly overseeing the operations of third
party managers as an adjunct responsibility to his Chief Operating
Officer position for Silver Star."
The Company also announced it is evaluating potential strategic
opportunities for restoring and reenergizing the prospects of its
wholly owned subsidiary, Southern Star Investment Management
Company ("Southern Star"). As the Company continues its
taking charge of day-to-day operations of Southern Star, it is
evaluating various options, including new DST offerings that could
be beneficial to the Company's long-term strategy. Moreover,
Silver Star is in the process of completing the consolidation of
the Southern Star office.
Silver Star is in the process of providing a $1 million loan to Southern Star, and with
respect to such loan an independent trustee of the Southern Star
DSTs shall negotiate the loan on behalf of Southern Star to ensure
an independent arm's length transaction that is in the best
interest of the Southern Star DST investors.
Management of the Southern Star DST programs and properties are
now under the direct oversight of David
Wheeler and Gerald Haddock;
none of the former Southern Star shareholders continue to be
directly involved, except for minimal consultation as to historical
matters.
Contact:
Investor and Media Relations
press@silverstarreit.com
1-877-734-8876
Forward-Looking Statements: This press release
contains certain forward-looking statements. Because such
statements include risks, uncertainties, and contingencies, actual
results may differ materially from those expressed or implied by
such forward-looking statements, and you should not place undue
reliance on any such statements. Several important factors could
cause actual results to differ materially from the forward-looking
statements contained in this material. Forward-looking statements
in this press release speak only as of the date on which such
statements were made, and the company undertakes no obligation to
update any such statements that may become untrue because of
subsequent events. Such forward-looking statements are subject to
the safe harbor protection for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995.
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SOURCE Silver Star Properties REIT, Inc.