Investor Lawyers Blog
Investors in Silver Star Properties REIT Inc. (“Silver Star”, formerly known as Hartman Short Term Properties XX Inc.), may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
Silver Star announced earlier this month that Hartman SPE LLC, an indirect subsidiary that owns legacy office, retail and industrial properties, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code.
The bankruptcy filing comes after what Silver Star calls “failed efforts” to negotiate with Hartman vREIT XXI Inc. which is under the control of Allen Hartman. Allen Hartman was recently named interim chief financial officer of Hartman vREIT XXI.
In March 2023, the executive committee of Silver Star’s board removed Allen Hartman, founder, as executive chairman of the company. In May 2023, Silver Star announced that their recently appointed chief executive officer, Mark Torok, had resigned. Silver Star, in the aggregate, has reportedly sold eight assets in 2023 for net proceeds over $108 million, which includes four assets sold by the SPE for net proceeds of $44 million.
In June 2023, Silver Star issued a warning regarding its ability to continue as a going concern due to questions concerning Silver Star’s ability to refinance its debts.
Silver Star, a publicly registered non-traded real estate investment trust, reportedly owned 44 commercial properties comprising approximately 6.8 million square feet plus four pad sites and two land developments, all located in Texas, as of September 30, 2022. Silver Star suspended its share redemption plan in July 2022 to “support the long-term fiscal health” of the REIT.
Stockbrokers and financial advisors who sell non-traded REITs and other non-conventional investments have an obligation to recommend these investments only when they have a reasonable basis to recommend them to an individual customer. Advisors also may not sell non-traded REITs or other investments via a misleading sales presentation that omits to disclose material risks. A hallmark of non-traded REITs is their high up-front commissions, typically between 7-10%, which many investors may overlook at the time of purchase, and which may motivate financial advisors to recommend non-traded REITs instead of lower-commission alternatives such as publicly traded REITs and ETFs.
Silver Star’s estimated net asset value (NAV) per share has dropped as the foregoing issues have emerged, suggesting that investors in the REIT have incurred losses. The REIT’s estimated NAV per share was $12.08 in 2021, but was revised downward to $6.25 in 2022. Shares were originally sold to investors at $10.00 a share. The shares are not listed on a stock exchange and investors have limited options to sell shares in the secondary market.
Investors with questions about claims against a stockbroker or investment advisor concerning Silver Star or other non-traded REITs or non-conventional investments may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).