The Company has a track record of poor
capital allocation and ineffective governance
Urges Whitestone's shareholders to demand answers to
critical questions
NEW
ROCHELLE, N.Y., March 7,
2024 /PRNewswire/ -- Erez Asset Management, LLC
("Erez"), a shareholder of Whitestone REIT (NYSE: WSR)
("Whitestone" or the "Company"),
has provided Whitestone notice of
Erez's intention to nominate two candidates to serve on the
Whitestone Board of Trustees after
years in which Whitestone has
underperformed its peers and potential. Erez's nominees will stand
for election at the 2024 annual meeting of Whitestone shareholders, which Erez
anticipates will be held in May.
This morning, Whitestone's
management team is holding a conference call to address questions
from Whitestone shareholders. Erez
urges Whitestone's shareholders to
demand answers regarding the Company's history of poor capital
allocation decisions and the ineffective governance framework
within which those decisions have been made.
In particular, Erez encourages Whitestone shareholders to ask the following
questions on today's call:
- It has been reported that Whitestone received an indication of interest
to take the Company private from Fortress Investment Group LLC
("Fortress"), a well-regarded and well-financed investment
manager.1 We understand the proposed price was a
significant premium to the market price. Reports suggest you
"rebuffed" the offer.2 Presumably, management and the
Board feel the intrinsic value of the Company is even higher than
the price at which Fortress was prepared to transact. If that is
the case, why haven't you prioritized investing the Company's
capital, or your personal capital, into Whitestone's undervalued stock?
- "Buy low, sell high" is a surefire way to make money. The
opposite is true too. You have continuously bought properties (at
prices that then became the basis for NAV) and then sold equity in
the Company, and by extension, in those properties, well below NAV.
Worse, you then use the capital raised at a discount to NAV to
engage in the same value-destructive "buy high, sell low" strategy.
We estimate approximately $75-80
million in shareholder equity value has been destroyed due to
equity issuances below NAV over the years. Why are you selling
portions of Whitestone's asset base at prices well below
NAV?
- Being a public company has unavoidable costs. If the cash flows
in the core business are large enough, these costs are de minimis.
But Whitestone is not large, and
its public company costs are a substantial drag on cash flow and
earnings. Why should Whitestone
remain an independent public company, with all the attendant costs,
when "excess" G&A expenses (public company and standalone
corporate costs well above other shopping center REITs) are,
we estimate, approximately $7-8
million per year and drag earnings down by roughly 15% per
year?
- At Whitestone's current debt
levels (close to 8x debt/EBITDA last quarter), many long-only REIT
investors will not invest. How will Whitestone ever attract enthusiastic real
estate investors at current debt levels, or do you plan on further
dilutive equity raises or value-destructive asset sales to reduce
leverage? What mistake got you into this capital structure?
- If you were organizing a shopping center REIT like Whitestone today and picking a group of
trustees to oversee the strategy and execution of such a business,
would you again select a lawyer, a PR professional, an energy
executive, an investment banker who specializes in bankruptcy and a
former politician? Why wouldn't you want at least a few people who
have substantial experience owning and operating a portfolio of
shopping centers and/or managing a public REIT among those
trustees? Do you think there is a connection between Whitestone's chronic underperformance, poor
capital allocation decisions, subscale platform and massive NAV
discount, and the fact that Whitestone has no trustees with any shopping
center or REIT capital markets experience?
Erez's two exceptional and experienced trustee candidates –
Bruce Schanzer, a former shopping
center REIT CEO who now leads Erez, and Cathy Clark, a former shopping center REIT
senior investment executive – intend to ask these questions if and
when they are seated on the Whitestone Board and provide independent
oversight of the Company's strategy and execution. Unlike the
current independent members of the Board, Mr. Schanzer and Ms.
Clark have extensive real estate and shopping center REIT
experience.
Erez intends to file and mail proxy materials to Whitestone shareholders in support of the
election of its candidates. Other than asking hard questions of
management, Whitestone
shareholders do not need to take any action at this time.
About Erez Asset Management, LLC
Erez Asset
Management, LLC is an investment management firm focused on
undervalued small market cap REITs. Erez was founded in 2022 by
Bruce Schanzer, former CEO of Cedar
Realty Trust, a shopping center REIT, after the
successful monetization of Cedar. Erez seeks to acquire
meaningful stakes in REITs in which it believes it can work
collaboratively with the management team and the board to help
catalyze improved performance and share price appreciation by
pursuing operational initiatives and strategic alternatives
intended to benefit all stakeholders.
Contacts
Media:
Mark Semer / Iain Hughes
Gasthalter & Co.
(212) 257-4170
erez@gasthalter.com
Investors:
Jonathan Salzberger / Scott Winter
Innisfree M&A Incorporated
212-750-5833
DISCLAIMER
This material does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities
described herein in any state to any person. In addition, the
discussions and opinions in this press release and the material
contained herein are for general information only, and are not
intended to provide investment advice. All statements contained in
this press release that are not clearly historical in nature or
that necessarily depend on future events are "forward-looking
statements," which are not guarantees of future performance or
results, and the words "may," "might," "could," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of these terms and other
comparable terminology are generally intended to identify
forward-looking statements. Any such forward-looking statements
contained herein are based on current assumptions, estimates and
expectations, but are subject to a number of known and unknown
risks and significant business, economic and competitive
uncertainties that may cause actual results to differ materially
from expectations. Any forward-looking statements should be
considered in light of those risk factors. The Participants (as
defined below) caution readers not to rely on any such
forward-looking statements, which speak only as of the date they
are made. Certain information included in this press release is
based on data obtained from sources considered to be reliable. No
representation is made with respect to the accuracy or completeness
of such data, and any analyses provided to assist the recipient of
this press release in evaluating the matters described herein may
be based on subjective assessments and assumptions and may use one
among alternative methodologies that produce different results.
Accordingly, any analyses should also not be viewed as factual and
also should not be relied upon as an accurate prediction of future
results. Any figures are unaudited estimates and subject to
revision without notice. The Participants disclaim any intent or
obligation to publicly update or revise any such forward-looking
statements to reflect any change in expectations or future events,
conditions or circumstances on which any such forward-looking
statements may be based, or that may affect the likelihood that
actual results may differ from those set forth in such
forward-looking statements.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Erez
REIT Opportunities LP ("Erez Opportunities"), together with the
other participants named herein (collectively, "Erez"), intends to
file a preliminary proxy statement and an accompanying proxy card
with the Securities and Exchange Commission ("SEC") to be used to
solicit votes for the election of its slate of highly-qualified
trustee nominees at the 2024 annual meeting of shareholders of
Whitestone REIT, a Maryland real
estate investment trust (the "Trust").
EREZ STRONGLY ADVISES ALL SHAREHOLDERS OF THE TRUST TO READ THE
PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A PROXY CARD,
AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON
THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE
PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE
PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY
SOLICITOR.
The participants in the proxy solicitation are expected to be
Erez Opportunities, Erez Asset Management, LLC ("Erez Asset
Management"), Bruce Schanzer and
Catherine Clark (collectively, the
"Participants").
As of the date hereof, Erez Opportunities directly beneficially
owned 270,000 common shares, par value $0.001 per share (the "Common Shares"), of the
Trust. As of the date hereof, Erez Asset Management may be deemed
to beneficially own 505,000 Common Shares, including 235,000 Common
Shares beneficially owned by certain separately-managed accounts
managed by Erez Asset Management and, by virtue of its role as
investment manager of Erez Opportunities, the 270,000 Common Shares
beneficially owned by Erez Opportunities. As of the date hereof,
Mr. Schanzer may be deemed to beneficially own 644,900 Common
Shares, including 139,900 Common Shares directly beneficially owned
by Mr. Schanzer held in his Fidelity Rollover IRA and, by virtue of
his position as Chairman and Chief Investment Officer of Erez Asset
Management, the 505,000 Common Shares beneficially owned by Erez
Asset Management. As of the date hereof, Ms. Clark does not
beneficially own any Common Shares. As of the date hereof, the
Participants may be deemed to collectively beneficially own 644,900
Common Shares.
1 See "Fortress Approached Whitestone REIT About
a Takeover," Bloomberg, October 26,
2023 available at
https://www.bloomberg.com/news/articles/2023-10-26/fortress-said-to-approach-whitestone-reit-with-takeover-offer.
2 Id.
View original
content:https://www.prnewswire.com/news-releases/erez-nominates-two-candidates-for-whitestone-reit-board-of-trustees-302082897.html
SOURCE Erez Asset Management, LLC