The Securities and Exchange Commission initiated an investigation related to Silver Star Properties REIT Inc., its acquisitions and/or its former officers, as based upon a letter to the company’s principal executive officer David Wheeler from the commission that was made available to The DI Wire. The letter from the SEC does not disclose the exact target of the investigation.
The letter focuses on several matters and advises Silver Star to retain documents and data that may be relevant to the investigation, including:
- the removal of Allen Hartman, whom, as previously reported, the executive committee of the Silver Star’s board of directors removed as executive chairman of the company, as well as the termination of the agreement between Hartman Short Term Income Properties XX Inc. and Mr. Hartman;
- Silver Star’s investigation into “certain violations of fiduciary and other duties to Silver Star by Hartman;”
- Silver Star’s purchase of all equity interests in Southern Star Self-Storage Investment Company;
- the recent resignation of Mark Torok as chief executive officer of Silver Star, who resigned in May, less than a month after reaching a long-term employment agreement with the board of directors;
- and the determination that Silver Star had material weaknesses in controls over the review, approval and disclosure of related party transactions and the insufficient design of controls relating to the timing of revenue recognition of estimated recoveries of operating expense items under leasing agreements.
The SEC’s letter included statements from the company’s 10-K, including the significant depreciation of value in the company’s net asset value per share, from $12.08 in 2021 to $6.25 in 2022, among other things.
Last month, the company disclosed a warning regarding its ability to continue as a going concern due to a $259 million loan that had an initial maturity date of Oct. 9, 2020.
[Editor’s note: the above article has been updated as of July 19, 2023.]