The drama unfolding at Silver Star Properties reads like a corporate thriller: a web of accusations, a flurry of legal battles and both commercial and personal fallout.
At the heart of this saga are two partners-turned-rivals: Allen Hartman and Gerald Haddock.
Hartman is the Houston-based commercial real estate firm’s founder, who was ousted as CEO and executive chair in October 2022 and March 2023, respectively. Haddock is the current executive chair and newly minted co-CEO. The besieged firm is valued at just over $200 million, according to its latest quarterly report.
For a year, Hartman and Haddock have been fighting for Silver Star in a saga of corporate maneuvering that reflects the tumultuous nature of Texas’ shifting real estate market. It’s hard to look away.
Silver Star’s trouble began when Hartman tapped Haddock to join the firm, previously called Hartman Short Term Income Properties XX, as an independent director in May 2020, while the COVID-19 pandemic ravaged commercial real estate. Haddock is a former CEO of Crescent Real Estate Equities and served on the board of one of Texas’ largest homebuilders, Meritage Homes.
Haddock said he uncovered what was ailing the company: Hartman.
“Now, the matter we have to get over first is completing the resolution of the problems that Al Hartman has developed,” Haddock said in a fireside chat about the future of the firm.
Haddock and his supporters said Hartman was unable to fulfill his fiduciary duty and had thrown the company into disarray. Accused of fraud, self-dealing and nepotism, Hartman came under intense scrutiny in his final hours as an executive over the company’s default on a $259 million CMBS loan.
“Early on, the board knew that the [nearly] $300 million debt had to be refinanced, and we called [Hartman] in to instruct him on how to get it done,” Haddock said. “When we realized it wasn’t being done, we called and it was almost like an appearance before Congress.
“We went after him.”
The company announced an investigation into “certain violations of fiduciary and other duties to the company by Mr. Hartman,” after Hartman’s departure as CEO.
“I was gone 12 months before the debt was due,” Hartman said in a January Q&A with The Real Deal. “I really had nothing to do with the company.”
Steering the ship amidst a storm
Haddock is now spearheading the legal charge against Hartman from inside the firm.
Haddock’s argument focuses on Hartman’s alleged preoccupation with personal, political and religious matters, which, according to Haddock, led to poor decision-making and financial distress for Silver Star. One black mark against Hartman, Haddock says, was his lack of enthusiasm for the company’s dramatic pivot from traditional real estate holdings to the burgeoning self-storage market.
After suspending distributions in 2022, the company sought to reposition Silver Star’s entire 6.8-million-square-foot retail, office and industrial portfolio to self-storage in the summer of 2023. It was a critical juncture. Office and retail faced distress from falling valuations and looming defaults, but self-storage was resilient.
Haddock intimated that he was one of the loudest voices advocating for self-storage, which he saw as a saving grace amid the uncertainty and woes in Texas’ retail and office markets. Hartman disagreed.
In December 2023, Haddock led a lawsuit on behalf of Silver Star, demanding over $50 million in damages from Hartman for harming the firm. The suit painted a grim picture of Hartman’s tenure, and implicated both his daughter, Margaret Hartman, who had worked at the firm, and his wife, Lisa Hartman.
Hartman denies all allegations and claims that the executive committee’s mismanagement led to the company’s downfall. He took aim at the self-storage pivot, which he describes as a shortsighted attempt to counteract his efforts to liquidate Silver Star.
“Shareholders,” he added, “overwhelmingly support a liquidation of the company.”
Legal labyrinth: Hartman v. Silver Star
In its most recent legal challenge, a December lawsuit filed in Houston, Silver Star accused Hartman of “a pattern and practice of manipulation” in efforts to elevate the personal interests of himself and his family.
The suit also accused Hartman of traveling to the U.S. Capitol during the Jan. 6 riot and backing false claims about the 2020 general election’s legitimacy as examples of his bad decision-making and political obsessions that allegedly cost the company upwards of $50 million.
According to accusations in a lawsuit Silver Star filed in the District Court of Maryland, where the company is registered, Hartman attempted to sway stockholders into replacing its three-person executive committee with his own preferred candidates and of disseminating misleading information to stockholders.
Hartman uses his status as primary shareholder in Silver Star to stay in the game. In a countersuit against the firm, he accused the executive committee of incompetence and illegal actions, such as altering bylaws without shareholder consent and forgoing the annual shareholder meeting in an attempt to entrench themselves.
On Feb. 2, Hartman was successful in temporarily blocking the shareholder vote count.
But three days later, Silver Star announced that it was under a formal SEC investigation, with an impending subpoena from the commission’s Fort Worth Regional Office set to request undisclosed documents.
The nature of the inquiry remains unknown, but the firm could see cease and desist orders, hefty civil money penalties and restrictions on individuals serving in leadership capacities within the public company — as the Silver Star story winds on.