Former Hartman REIT, Silver Star Properties REIT, Declares Net Asset Value
The White Law Group is investigating securities claims involving the liability that broker dealers may have for improperly recommending non-traded REITs such as Silver Star Properties REIT to investors.
Silver Star Properties REIT Inc changed its name from Hartman Short term Properties XX, in an attempt at “maximizing shareholder value,” as we previously reported.
According to FactRight, a due diligence site for alternative investments, Silver Star Properties’ CEO has resigned after just seven months. He was reportedly appointed as CEO one month after Silver Star closed on the purchase of the executive’s former firm, Southern Star Self-Storage.
Silver Star reportedly acquired Southern Star Self-Storage Investment Company in April 2023 for $3 million in cash and 301,659 restricted stock units.
Silver Star Properties noted that the resignation was not the result of any disagreements with the policies, practices, or operations of the REIT. The executive did reportedly sign a three-year employment agreement, which included a base salary of $550,000 per year and approximately $1.3 million performance units per year. The company has appointed an interim CEO until they can fill the position permanently.
The company is reportedly still investigating its former CEO who resigned as Chairman of the Board in March 2023 for alleged “issues related to certain violations of fiduciary and other duties to the Company.”
Silver Star Properties reportedly owns a portfolio of 44 office, retail and industrial properties located primarily in the Houston and San Antonio. The company recently reported a NAV per share of $6.25 as of the fourth quarter of 2022. The original offering price was $10 per share. Office REITs are facing difficulty in 2023 due to the ever-increasing interest rates and lower occupancy rates post-pandemic.
As we reported in July, Silver Star Properties REIT suspended distributions to common stockholders to “focus on strengthening its balance sheet and preserving cash.” The company reported at the time it would like to swap out certain floating rate debts for fixed rate debts.
In a Form 10-K for the period ending March 31, 2022, the company expressed doubt in its ability to continue as a “going concern” due to “Uncertainty as to the debt yield calculation as of June 30, 2022, and the Company’s ability to exercise the next remaining (loan extension option)…solely on the basis of the uncertainty regarding the loan maturity extension.”
Silver Star Properties and the Risks of Non-traded REITs
Many investors are not fully aware of the problems and risks associated with illiquid, high risk, non-traded REITs before purchasing them.
Real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Liquidity Issues
Non-traded Real Estate Investment Trusts (REITs) can face several liquidity issues due to their unique characteristics and structure. They don’t trade on a public exchange like traditional stocks. As a result, there is no established secondary market for these investments, making it difficult for investors to sell their shares before the REIT’s liquidation event, which typically occurs after several years.
Non-traded REITs often have lock-up periods, during which investors are prohibited from selling their shares. These lock-up periods can extend for several years, further restricting liquidity and preventing investors from accessing their capital when needed.
Another problem often associated with REIT recommendations is the high sales commissions brokers typically earn for selling them– as high as 15%. Brokers have an obligation to make investment recommendations that are consistent with their clients risk tolerance, net worth, investment objectives and experience in the market.
Unfortunately, in many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.
Broker Due Diligence
Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Firms that fail to do so may be held responsible for any losses in a FINRA arbitration claim.
Hiring a Securities Attorney
If you are concerned about investment in Silver Star Properties REIT and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses. For more information, please visit our website, www.whitesecuritieslaw.com.
Tags: alternative investments, Hartman Short term Properties XX, non traded REIT investigation, Silver Star Properties REIT Last modified: May 19, 2023
