KBS Strategic Opportunity REIT, Inc. to Nominate Three to Whitestone REIT Board

January 3, 2018

KBS Strategic Opportunity REIT, Inc. to Nominate Three to Whitestone REIT Board

January 2, 2018 | James Sprow | Blue Vault


KBS SOR Properties LLC, a wholly owned subsidiary of California-based KBS Strategic Opportunity REIT Inc., submitted a notice on December 28 that it plans to nominate three people to the Houston-based real estate investment trust’s board of trustees at its 2018 annual meeting, according to a Whitestone press release.

KBS reported a 7.1 percent ownership stake in Whitestone REIT (NYSE: WSR) in June with the goal of increasing the figure to 9.6 percent. According to KBS Strategic Opportunity REIT’s Q3 2017 report, the nontraded REIT bought more than 3.6 million shares of Whitestone common stock for a total of $43.3 million, including $400,000 in acquisition fees, during the nine months ended September 30, 2017.

KBS Strategic Opportunity REIT, Inc., is a nontraded REIT program externally managed by KBS Capital Advisors LLC. It raised $574.4 million in its initial public offering which closed in 2012, including DRIP proceeds. As of September 30, 2017, the REIT owned 11 office properties, one office campus consisting of nine office buildings, one office portfolio consisting of four office buildings and 25 acres of undeveloped land, one office portfolio consisting of three office properties, one office/flex/industrial portfolio consisting of 21 buildings, one retail property encompassing, in the aggregate, approximately 6.0 million rentable square feet. The REIT also owned two investments in undeveloped land with approximately 1,100 developable acres.

Whitestone REIT was organized in 2003 for the purpose of merging with Hartman Commercial Properties REIT, a REIT organized in 1998. It merged with the Hartman REIT in 2004. Its common shares began trading on the NYSE MKT in August 2010. In 2012 its listing was transferred to the NYSE. As of September 30, 2017, it owned 51 properties that met its Community Centered Properties Strategy and had a majority interest in Pillarstone Capital REIT OP with an interest in 14 consolidated properties. It also had a redevelopment and acquisitions portfolio with two retail properties and five parcels of land. The REIT had total assets as of September 30, 2017, of $1.07 billion.

Whitestone’s common stock closed trading on January 2, 2018, at $14.37 per share. The Company’s market cap was $568.9 million. On January 2, 2017, the Company’s shares closed at $13.94. The company recently declared a monthly dividend, which will be paid on Wednesday, February 14th. Stockholders of record on Monday, February 5th will be given a $0.095 dividend. This represents a $1.14 dividend on an annualized basis and a dividend yield of 7.91%.

On December 29, Whitestone REIT issued the following statement regarding the KBS action:

“The Whitestone Board and management team value the views of all of our shareholders, and continually review the Company’s strategic priorities and opportunities to enhance shareholder value. While we are open to and appreciate constructive feedback from our shareholders, KBS’ Trustee nominations come as a surprise to us given our outstanding financial and operating performance over the last several years resulting in Whitestone producing total shareholder returns (“TSR”) among the best in the publicly traded shopping center REIT industry. Whitestone’s TSR ranking of the publicly traded shopping center REITs, per S&P Global Market Intelligence, is #1 of 17, #2 of 16 and #4 of 15, for the 1 Year, 3 Year and 5 Year periods, respectively. Moreover, we find it unusual that KBS has not requested to meet with our management team to learn more about our unique business model and strategy or visit our community-centered properties before stating its intent to nominate Trustee candidates. 

Whitestone’s Board has recently taken significant actions to enhance its corporate governance.  Whitestone’s Board is composed of seven highly qualified nominees, six of whom are independent and all of whom are actively engaged in overseeing the Company’s growth and success. With diversity and extensive financial, operational and strategic expertise, Whitestone’s Board provides significant experience and oversight to ensure the Company continues executing on its goals. To further enhance our corporate governance in 2017, we appointed three new independent trustees and adopted stock ownership guidelines for the Board and management team.

Whitestone continues to execute its strategy to acquire, own, manage, develop and redevelop “internet resistant” neighborhood shopping centers that attract and retain customers by providing daily essential services and products not readily available online. We are pleased with the progress we have made so far and will continue to take actions to advance these objectives and to create value for all Whitestone shareholders.

The Board and Nominating and Corporate Governance Committee will evaluate the nominees proposed by KBS like any Trustee candidate to assess their ability to add value to the Board for the benefit of all Whitestone shareholders. Our Board and management team remain committed to acting in the best interests of our shareholders and will continue to consider all opportunities that would enhance value. We welcome constructive dialogue with all Whitestone shareholders, including KBS, and as part of these efforts, we invite them to visit our corporate offices, meet our management team and tour our unique properties to gain understanding how we create value for our shareholders.

In addition, KBS indicated that it further intends to submit a non-binding proposal at the Annual Meeting seeking shareholder approval of a request to declassify Whitestone’s Board.”

Whitestone’s Chairman and CEO is James C. Mastandrea, aged 73, who has served since 2006. The REIT’s CFO is David Holeman, who also serves as CFO of Hartman Management, the REIT’s former advisor.



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