FAQs

Answers to Frequently Asked Questions (FAQs)

Q1. Al Hartman has proposed to sell all properties and close down the Silver Star REIT. How much of a loss would this proposal cost to shareholders?
A vote against the board’s recommended pivot strategy is simply the worst outcome for shareholders, including Hartman. Hartman’s proposal is not an alternative. Hartman’s proposal will ensure the worst outcome for shareholders. How much of a loss would Hartman’s proposal cause, all of it. Our strategy is focused on preserving and rebuilding value. We are committed to reinventing the illiquid and mismanaged real estate company Hartman founded. Hartman’s proposal is to ring the death knell.


Q2. Please describe when Silver Star began acquiring self-storage units, and over what period it intends to divest office space holdings and reinvest in self-storage.
Public Market data shows self-storage has delivered one of the best 25-year track records, beating office apartments, industrial and retail assets. Silver Star’s consideration to begin pivoting towards self-storage in 2022 recognizing the sector’s resilience and growth. In December 2023, Silver Star’s first self-storage investment consisted of two properties located in Houston. The properties involved 1031 tax-deferred exchange of a legacy property which had been sold. Sales of our remaining legacy office properties will be reinvested in self-storage properties utilizing the tax-deferred advantages of 1031 exchanges as needed to position the company for long-term stability and growth. Legacy office properties will continue to be marketed.

 

Q3. What are the company’s plans for asset sales or refinancing, and how will proceeds be used, whether debt reduction distributions or re-investment?
We are actively marketing select assets for sale and pursuing refinancing where it benefits shareholders. The remaining legacy assets will be sold over time in an orderly fashion to maximize sales proceeds. These proceeds will be utilized to fund additional acquisition of institutional grade self-storage properties that enhance shareholder value. The Walgreens properties will also be sold at the appropriate time to minimize tax consequences and provide proceeds for acquisition of self-storage properties. Resuming shareholder distributions will be based upon the strong cash flow characteristics of our growing institutional grade self-storage portfolio.

Q4. We talk about improving the operations. Can you review what was done?
Silver Star has reduced head count from 190 to 22, which cuts $15 million from our annual overhead expenses. Silver Star focuses on internal property management. We’re confident that our staff and operating methodology can match or exceed the best in self-storage as we practice a hands-on property level approach. A key component of our operating strategy is the execution of the Neighborly Community Connect local-marketing playbook. Success stems from building deep ties to local chambers of commerce, local businesses and charitable organizations. Property Managers report weekly on community outreach, strategic partnerships and rate optimization.


Q5. What are the projected timelines and milestones for the self-storage transition, and what happens if these are not met?
The self-storage transition is already happening. Our ability to continue the self-storage pivot strategy is first, dependent upon our ability to sell and reinvest capital from legacy office properties and second, to raise new capital. A letter of intent to raise $50 million of new capital on a best efforts basis is in hand, subject to a vote for the pivot strategy into self-storage and not liquidation investment criteria for self-storage acquisitions have been clearly articulated. The board has targeted three years from the time shareholders approved the self-storage pivot strategy to achieve shareholder liquidity. The problem with liquidation versus self-storage pivot strategy is once the liquidation is declared and the mandate has changed to liquidate the company, the highest possible sales proceeds will not be achieved.
Additionally, taxable gains on property sales, even at depressed prices, will also hurt cash return to shareholders without the use of tax advantaged 1031 exchanges to preserve value. With the large amount of recent immigration, there is an increased demand for new housing and storage supply that is not kept up with demand. This will result in increased demand for additional self-storage for people to put their stuff. The pivot perfectly positions us to profit from this demographic shift.

 

Q6. What are your early proof points of success in your strategy?
Distributions, with respect to self-storage under our leadership, have already been underway and will continue to expand. Our interest is in executing in the same manner that we did at Southern Star as we develop scale at Silver Star. We have already achieved successes at Silver Star, and they include our McKinney Texas Property showing significant increase in occupancy, rising from 64% to 77% and that’s within six months. Our George Texas Property occupancy has improved from approximately 54% to 63%, and that’s within one year. Our Plano, Texas Property, more than doubled in NOI from quarter 2024 to quarter one 2025. Our Montrose, Colorado property, NOI tripled within that same time frame, quarter one 2024 to quarter one 2025.

 

Q7. What performance metrics or milestones are tied to executive compensation?
Executives’ compensation is directly linked to performance metrics such as asset sales, NAV growth and progress in the self-storage transition. We believe in pay for performance and full alignment with shareholder outcomes.

 

Q8. Next, discuss Mr. Haddock’s salary and recent stock grants.
The company is fortunate to have Mr. Haddock at this salary. We use a third-party consultant to provide market data. When compared to the industry, he is underpaid and paid less than the past two CEOs. Compensation arrangements must incentivize to be effective. To be clear, Gerald did not receive a, quote, recent stock grant, unquote. He received a stock award that he earned by performing and ensuring that what needed to happen, happened. He earned it. When your compensation is largely stock compensation and share price falls, you either run or you fight. Gerald Haddock’s determination is clear, fight.

 

Q9. Why do you think your team is more qualified than Hartman’s?
One of the main reasons is that Gerald Haddock is our CEO, and has experience in running as a CEO, multiple companies, several in real estate, several in oil and gas, all public companies. He has experience with respect to turnaround, restructuring and solving delicate issues. He has been a major partner in three major law firms, and has received significant honors along his legal path, which made him adept at structuring, managing and operating while he served in dual capacities within companies. He has brought companies to a listing on the New York Stock Exchange, NASDAQ, London Stock Exchange, American Exchange over the counter, and has been involved with numerous private equity transactions.

The Silver Star board has three season turnaround executives that make up the Executive Committee. This turnaround experience, plus outstanding executive recognition at the national level, plus experience and taking companies public is far more than the zero experience Al Hartman has. We are already turning the ship around. We are collecting rent and performing over the empty promises Hartman made you. We have real money lined up and a real chance at an IPO. Hartman could never, ever do that, regardless of what he promised you.

 

Q10. It seems the only way to hopefully get any compensation from my investment is to agree to transition to self-storage properties, but even that is not guaranteed. Are we expected to get 100% of our capital investment returned to us? What will happen if Hartman is unable to sell the assets needed to generate enough revenue to return 100% of shareholders capital investments?
First, it always depends which year you invested in Hartman. Shareholders have already received significant distribution, which in part, represent a return of investment. If the board’s pivot strategy is not approved, Hartman won’t have an opportunity to sell assets, the secured lenders will and shareholders might get pennies on the dollar. Liquidation is the worst possible outcome.

 

Q11. When will investors be able to sell shares and receive a fair investment return?
If Hartman’s strategy is approved and the company liquidates, you will not have the opportunity to sell any. If the board strategy is approved, you have the opportunity to be very successful. The board’s timeline is currently three years from the approval of pivot strategy, and perhaps as little as two years.

 

Q12. What are your capital plans?
Hartman claims refinancing is impossible, yet the company is in discussion with lenders, and equity investors are lining up behind the pivot strategy, if it is approved by the shareholders. Emerson Equity’s term sheet and recent storage acquisitions underwritten by new debt contradict Hartman’s no capital narrative. Emerson’s Letter of Intent indicates the company can raise an additional $50 million of preferred equity, anchored by Emerson, subject to approval of the pivot strategy by shareholders.

 

Q13. In this pivot strategy, where is the money coming from to purchase many storage properties? If Silver Star has already defaulted on a loan, how will there be credit available?
Initially, we acquired Southern Star self-storage investment company, at first as an entree into the self-storage asset class. In 2023 and 2024, Silver Star acquired four self-storage properties with equity financing from lenders and utilization of 1031 tax-deferred exchanges to redeploy sales proceeds from legacy assets sold.

 

Q14. If you open up the REIT to more investors, won’t that dilute the shares already owned by the present investors? Is the strategy for investors and ROI with a regular monthly dividend, a cash event in the future, or both?
New capital is initially dilutive by definition. New capital raised and deployed for accretive investments is accretive for everyone. The goal of the strategy is both regular cash distributions and liquidity.

 

Q15. What were the reasons that Hartman was ousted by the board?
The compensation committee discovered that a distribution that had been suspended by the board for all shareholders was still paid to Hartman. When asked to repay the $200,000 in distributions, Hartman was obstinate. Only after pushing and shoving, did he repay the distribution. That broke the trust. Further, Hartman was regularly misstating occupancy levels by including expected leases rather than in place leases. The board discovered that he was spending an inordinate amount of time on religious, political and other activities, creating discourse at the company.

 

Q16. What are the ongoing legal risks stemming from the Hartman litigation, and how might they impact operations or the upcoming shareholder vote?
We have actively managed all legal matters related to Mr. Hartman. It is impossible to implement safeguards. We expect him to bring more litigation, and we cannot predict outcomes, as it is customary with any litigation. That said, we have fared extremely well in every litigation brought by Hartman. The biggest threat has been and still remains, was summarized by the judge as follows, the court also finds that the defendant, Silver Star, reasonably believed that they could not trust plaintiff Hartman to act honestly and appropriately at the annual meeting in light of the facts that he had admitted to bending the truth and improperly using the judicial process to seek leverage over the defendants. Our legal team is focused on protecting shareholder interests and seeing that current management provides true and correct information to the shareholders to the best of our ability.

 

Q17. How is the company ensuring transparency and fairness in the upcoming shareholder vote, especially given the court’s findings and the ongoing dispute with Hartman?
There is no way to stop Mr. Hartman from behaving improperly. We are committed to the highest standards of transparency and are committed to continued disclosure to the shareholders. The court’s findings also include that Harmon had general credibility issues stemming from instances in which he was shown to be dishonest. The court accepted certain testimony for Silver Star, rather than accepting the facts as portrayed by Hartman. The best source of honest information is the Silver Star website, at https://silverstarreit.com.

 

Q18. Can Al Hartman dismiss the lawsuit against himself, or would the judge say that significant damages are alleged, and Silver Star REIT shareholders could continue the lawsuit in Harris County courts?
In our opinion, the only reason Hartman is pushing for liquidation is so that he can get out of the Harris County litigation. If liquidation is successful, there is no doubt he will dismiss the lawsuit and it will be over. The only way the lawsuit survives is if there is an ongoing company with real, live human beings that can represent the company in Harris County.


Q19. If the judge allows such dismissal of the lawsuit in Harris County, the Silver Star shareholders potentially would still have a lawsuit against Al Hartman under the Federal Security statutes for potentially undermining the value of the shareholders shares through those pendants and other matters, correct?
The only way to clearly protect the shareholder claims is to vote for the pivot.

 

Q20. What has caused the delay of the Harris County lawsuit? The lawsuit was filed in the fall of 2023.
Legal proceedings can be complex and time consuming, especially with multiple parties and claims. Discovery is underway now, and the trial is set for December 2025.

 

Q21. Is there a plan to become a traded REIT?
While our immediate focus is on restoring value through our self-storage pivot for, we remain mindful of the plan to achieve listing on a primary exchange such as the NASDAQ or the New York Stock Exchange, as soon as feasible, shareholder liquidity remains a priority for the board of directors and the management team.

Q22. When will distributions resume?
We are focused on achieving the milestones necessary to resume distributions as soon as possible, including reduction of debt cost, growth of income through quality acquisitions and enhanced operations. Our goals regarding distributions include establishing durable and reliable payments to shareholders that fosters dividend sustained sustainability for Silver Star.

 

Q23. Will there be an opportunity to cash out these shares in the near future? Secondly, when does the board believe distributions to shareholders will continue, and what will that percentage be?
Investors needing near-term liquidity are encouraged to explore selling their shares on LODAS Markets, L-O-D-A-S. For additional information, see our About Us page on our website at Silver Star Properties REIT. We remain focused on the plan to achieve listing on a primary exchange such as the NASDAQ or the New York Stock Exchange, as soon as feasible, to provide enhanced liquidity. Enhancing shareholder liquidity remains a priority for the board of directors and the management team. We will keep shareholders informed of any developments. Distributions will resume as soon as it is prudent, based upon our financial position.

 

Q24. How dependable is the reported NAV per share, given the lack of marketability and the dramatic drop in secondary market trading prices?
Net asset value or NAV and fair value are not the same thing. NAV is a measure of the estimated net asset value of real estate. Fair value, stock value, with rare exception, is less than NAV due to considerations such as liquidity. Our NAV is based on independent, third-party valuation reports. While secondary market prices are low due to illiquidity, we believe our NAV reflects accurate estimates of real estate asset values, consistent with prior practices.

 

Q25. How will the company ensure the self-storage strategy will recover or enhance shareholder value given the steep decline in NAV and secondary market share price from $10 to $0.42?
The pivot strategy to self-storage was not adopted on a whim. The board carefully considered and evaluated the pivot strategy to self-storage. We refer to it as the new direction plan. The result of that careful consideration and evaluation was an informed conclusion that based on the dire condition of the company in mid 2022, the pivot strategy to self-storage affords the highest probability of success. Our discipline transition is designed to stabilize and grow net asset value over time.

 

Q26. If liquidation is chosen, what is the estimated recovery per share and what is the timeline for returning capital to investors?
A vote for liquidation is a vote for fire sale. The interests of secured lenders are superior to the interests of shareholders. Liquidation is the worst possible outcome for shareholders. In our proxy statement, we provide an estimate of net realizable value of zero to 24 cents per share, if liquidation is the outcome.

Q27. How are IRA required minimum distributions being managed?
Investors with Silver Star shares in an IRA who have required minimum distributions are encouraged to explore selling their shares on REITs – LODAS Markets. For additional information see: About Us – Silver Star Properties REIT

 

Q28. There is currently no liquidity for Silver Star Properties REIT shares by the Company. If a shareholder’s required minimum distribution (RMD) must involve Silver Star Properties REIT shares, the IRA investor may take a distribution of shares equal to the value of the RMD to be added to or established in a non-IRA shareholder account. (from investor)
Investors with Silver Star shares in an IRA who have required minimum distributions are encouraged to explore selling their shares on REITs – LODAS Markets. For additional information see: About Us – Silver Star Properties REIT

 

Q29. Does the board plan to having yearly meetings?
Yes, after the long tenure of Hartman without an annual meeting the current Board of Directors had the first annual meeting of the Company during January 2024 and will schedule annual meetings which the current Board of Directors believe are needed for transparency and shareholder engagement.


Q30. Why did the company fail to file timely quarterly reports, and what is being done to restore timely financial disclosures?
The Company’s auditors declined to be reappointed after the Company filed its 3rd quarter 2023 quarterly report. It took over a year for the Company to engage a successor registered public accounting firm.

The substantial complexities involved in the accounting for the Hartman SPE bankruptcy are significant challenges to our ability to prepare financial statements in accordance with generally accepted accounting principles.

The audit of our 2023 annual financial statements is in progress and nearing completion. We currently expect to complete the audit of 2024 annual financial statements near the end of the 3rd quarter of 2025.

 

Q31. How did the bankruptcy of the Hartman SPE subsidiary impact Silver Star’s consolidated financials, and what is the current status of those assets?
The bankruptcy filing of Hartman SPE requires a deconsolidation of our significant subsidiary and the adjustment of the value in our investment to fair market value. The exit of Hartman SPE requires a reconsolidation of the significant subsidiary, again requiring adjustment to fair market value.

The complexities and requirements involved in the accounting for Hartman SPE during the bankruptcy period and the resulting presentation and disclosure required in the consolidated financial statements in accordance with generally accepted accounting principles are explained in the 2023 annual report which will be made available to shareholders and filed with the Securities and Exchange Commission upon completion of the audit.

 

Q32. What internal controls have been implemented to prevent future financial reporting delays or mismanagement?
The formation of the Executive Committee in October 2022, and the actions taken thereafter, including changes in senior management, have resulted in a strengthened review process over the form, substance, and evaluation of related party transactions. Further, effective in the second quarter of 2023, the Company no longer serves in an advisory or management capacity to Hartman vREIT XXI, Inc. and its affiliates. The termination of this relationship will reduce the volume and magnitude of related party transactions.
At present, day to day oversight of senior management is in effect by the Executive Committee through the Company’s Chief Executive Officer who is the Chairman of the Executive Committee and through our Compliance Officer.

 

Q33. What is happening with management? Why did Alex Board resign as Deputy Chief Financial Officer and Principal Accounting Officer of the Company? Why did Adrienne Collins, former General Counsel, Chief Compliance Officer, and Corporate Secretary resign shortly after being featured on a podcast?

Both Alex and Adrienne made personal decisions to move on.
We thank them for their service and have strong leadership in place to continue executing our strategy.

 

Q34. What steps is Silver Star taking to improve investor relations and communication, especially after staff reductions and the elimination of the investor relations function?
We are rebuilding our investor relations capabilities.
Launching a new website section for key documents.
Leveraging podcasts and conference calls to keep shareholders informed.

 

Q36. How will management ensure shareholders have adequate information and time to make an informed decision at the critical upcoming vote?
We are committed to full transparency.
All relevant materials will be provided well in advance.
Management will be available to answer questions through multiple channels.