Silver Star Properties Responds to Ousted CEO's Shareholder Letters

Silver Star Properties REIT, Inc. ("Silver Star" or the "Company"), a self-managed real estate investment trust currently repositioning into the self-storage asset class, today announced its response to the recent letters Allen Hartman has sent to shareholders on April 1 and April 10, 2025.

April 1, 2025 Letter

In Hartman's April 1, 2025 letter, Hartman claims Silver Star has destroyed the net asset value. He claims he cannot be blamed for the failure to properly manage the Company's assets. In reality, Hartman is the direct reason behind the drop in NAV.

 

The deferred maintenance problems have been an issue going back to Hartman's leadership. The deferred maintenance was one of the multitude of reasons Mr. Hartman was removed following the Executive Committee's internal investigation. He failed to maintain appropriate capital reserves for HVAC, roof and elevator replacements as needed.

 

For example, in 2019 Hartman was made aware of an issue with a particular HVAC chiller. At the time, Hartman was advised that this particular chiller needed to be replaced. When this recommendation was made, Hartman refused. He refused to allow the Company to enter into a preventative maintenance agreement to maintain the already deficient equipment, which could have lengthened the life of all equipment. Between 2019 and his ouster in 2022, the chiller was repaired in the least expensive way as possible. The unit continually broke down leaving tenants without adequate cooling during hot summer months.

 

Due to financial constraints Hartman left the Company, the Company did not have the funds for the needed replacement. Tenants threatened to leave. The Company had to sell the building to free up equity to replace the unit and keep the tenants. In 2019 when Hartman was advised of the needed replacement, the unit would have cost around $200k. At closing, the Company had to pay over $400k for the same. Inflation made the same equipment more expensive.

 

Hartman could have prevented this. Hartman could have prevented the legacy assets from declining in value, from losing tenants and the loss to shareholders. The Company will reserve providing further examples of similar instances due to pending litigation in the Harris County case against Hartman. However, suffice it to say, this was a continual problem – Hartman did this again and again and again. The Company has not only experienced this with respect to repairs but also price reductions that buyers demanded due to the condition of the properties.

 

April 10, 2025 Letter

On April 10, 2025 Hartman issued a letter to Silver Star Shareholders that can be described as nothing else but desperation. On April 9, 2025 the Appellate Court of Maryland issued a decisive victory to Silver Star – a victory that could ultimately lead to Hartman's removal from the Board. His April 10th letter is evidence he is scared and grasping at straws.

 

In this fear laden correspondence, Hartman attacks compensation Silver Star paid to our CEO, Gerald Haddock. As we have previously stated, Hartman was removed from Silver Star for his mismanagement of the Company and its assets. The Maryland Circuit Judge himself stated Hartman hamstrung the Company and is the direct reason we are in the predicament we are in.

 

Hartman's latest claims that the recent stock grant is egregious and unwarranted are patently false. In 2024, Mr. Haddock was paid $225,000 for his position as Chief Executive Officer. Per salary.com, "as of April 01, 2025, the average annual salary for a Chief Executive Officer in Texas is $707,704. According to Salary.com, salaries can range from a low of $557,628 to a high of $854,781, with most professionals earning between $629,149 and $784,690." And in 2025, Mr. Haddock's salary will be even less, as he has taken a significant reduction in pay as the Company continues to reduce overhead costs to fight the battles for the benefit of the shareholders.

 

The Company's Compensation Committee spent considerable time and effort negotiating the employment agreement entered into between Mr. Haddock and the Company. The final agreed upon terms were dependent upon the Company's future success, beginning with paying off the senior loan from the bankruptcy exit financing. Despite the research and agreed upon salary rate, you will note Mr. Haddock was paid far less than the Company contractually agreed to. The issuance of the 1 million shares of stock were done following the payment of the senior loan as required, but also a means of the Company compensating it's CEO when cash is tight.

 

However, it is important to note that the lack of marketability of the shares drives the fair market value significantly below any attributable net asset value. In addition, in the event of the liquidation of the Company, the value of these shares is virtually worthless. The stock award and salary are not excessive. If anything, they are low. The Company is fortunate to have the caliber of leader we have in Mr. Haddock for such low pay.

 

Further Reading:

Silver Star REIT Calls Former CEO's Statements Slanderous