The leadership dispute at Silver Star Properties continues as the company seeks to delay a crucial proxy vote. The Houston-based real estate investment trust is in a contentious battle with its former CEO, Allen Hartman, over control of the company.
Silver Star has asked a Maryland District Court to postpone the shareholder vote until December 31, citing what it describes as misleading communications from Hartman to shareholders. Voting is currently underway and was set to conclude before an October 6 shareholder meeting.
In legal filings, Silver Star accuses Hartman of spreading false information about executive compensation, company performance, and allegations regarding statements made to the Securities and Exchange Commission. Director Jack Tompkins stated in an affidavit that “We have been advised by our proxy solicitor that some shareholders recently changed their votes from Silver Star to Hartman based on his unfounded accusations.”
Hartman responded by calling the court filing “part of Silver Star’s ongoing effort to illegally reject the Company’s bylaws, which require an annual shareholder meeting.” He added, “By pushing to delay the vote, Silver Star is seeking to extend their control, continue collecting salaries and fees, and further destroy shareholder value for their own benefit at the expense of the Company and its investors.”
Silver Star had already delayed the meeting once before, moving it from August to October. The company told shareholders this was due to Hartman “creating chaos” and so that they would have “full and accurate information before casting your vote.”
This latest move is part of a prolonged conflict following Hartman’s removal by the board in 2023 amid accusations of nepotism and mismanagement. These issues reportedly led to Silver Star defaulting on a $259 million CMBS loan from Goldman Sachs in October 2023. Subsequently, trustees sued Hartman for $50 million alleging fraud and self-dealing. In February 2024, the SEC began investigating Silver Star Properties.
Hartman has denied all allegations against him.
Financial difficulties have persisted for Silver Star during this period. Gerald Haddock led efforts to sell off much of its office property portfolio—once comprising 35 properties—and shift toward self-storage assets. However, challenges remain: one subsidiary filed for bankruptcy in 2023 and last month the firm faced foreclosure on a $57.8 million loan related to three office buildings.
Despite these setbacks, Silver Star has continued acquiring self-storage properties such as a $26.5 million facility purchased in Delray Beach, Florida.
For more background on these developments:
– The SEC opened an investigation into Silver Star Properties earlier this year (https://therealdeal.com/houston/2024/02/23/sec-launches-investigation-into-silver-star-properties/)
– Gerald Haddock has outlined plans for restructuring at Silver Star (https://therealdeal.com/texas/2024/03/05/how-gerald-haddock-plans-to-dig-silver-star-properties-out-of-a-hole/)
– A subsidiary sought bankruptcy protection amid ongoing asset sales (https://therealdeal.com/houston/2023/12/19/silver-star-subsidiary-seeks-protection-amid-sell-off-of-commercial-portfolio/)
– The leadership feud between Hartman and current management has included public accusations (https://therealdeal.com/houston/2024/03/04/silver-star-founder-fires-back-at-ceo-calls-him-evil/)
