Item 1.02 Termination of a Material Definitive Agreement.
On July 19, 2022, the registrant received written notice that Whitestone TRS,
Inc. ("Whitestone TRS") confirmed termination of the management agreements for
the registrant's eight real estate assets (the "Real Estate Assets"). Whitestone
TRS is a subsidiary of Whitestone REIT, which owns Whitestone REIT Operating
Partnership, L.P. ("Whitestone OP"), the holder of 81.4% of the total
outstanding Class A units representing limited partnership interests in
Pillarstone Capital REIT Operating Partnership LP ("Pillarstone OP").
Substantially all of the registrant's business is conducted through Pillarstone
OP. The registrant is the sole general partner of Pillarstone OP and owns 18.6%
of the outstanding equity in Pillarstone OP.
Pursuant to the management agreements with respect to each Real Estate Asset
(other than the Uptown Tower Real Estate Asset), Whitestone TRS agreed to
provide certain property management, leasing and day-to-day advisory and
administrative services to such Real Estate Asset in exchange for (x) a monthly
property management fee equal to 5.0% of the monthly revenues of such Real
Estate Asset and (y) a monthly asset management fee equal to 0.125% of GAV (as
defined in each management agreement as, generally, the purchase price of the
respective Real Estate Asset based upon the purchase price allocations
determined pursuant to the contribution agreement pursuant to which the
registrant acquired the equity interests of the entities that owned the Real
Estate Assets) of such Real Estate Asset. Pursuant to the management agreement
with respect to the Uptown Tower Real Estate Asset, Whitestone TRS agreed to
provide certain property management, leasing and day-to-day advisory and
administrative services to Pillarstone OP in exchange for (x) a monthly property
management fee equal to 3.0% of the monthly revenues of Uptown Tower and (y) a
monthly asset management fee equal to 0.125% of GAV of Uptown Tower.
The registrant had previously communicated to Whitestone REIT of its plan to
internalize the management of the Real Estate Assets, but the registrant had not
made efforts to terminate the management agreements. However, Whitestone TRS
stated in its notice letter that while it had not received written notice of the
termination of the management agreements, it "confirms receipt of your intent to
terminate, and hereby confirms termination of the Agreements effective 30 days
from" July 19, 2022.
Following the transition of management from Whitestone TRS, the registrant
intends to internalize the management of its Real Estate Assets and to continue
to pursue its business without the management services provided by Whitestone
TRS under the management agreements.
Item 5.02 Departure of Directors or Certain O?cers; Election of Directors;
Appointment of Certain O?cers; Compensatory Arrangements of Certain O?cers.
On July 21, 2022, the Board of Trustees (the "Board") of the registrant
increased the size of the Board to six and appointed:
? Bradford Johnson as the registrant's President and Chief Executive Officer and
to the Board to serve as a Class I trustee with a term expiring at the
registrant's annual meeting of shareholders to be held in 2025. Mr. Johnson
replaces James C. Mastandrea as President and Chief Executive Officer. Mr.
Mastandrea, who had been the registrant's Chairman, President and Chief
Executive Officer since 2003, ended his term as President and Chief Executive
Officer and continues to serve in his role as Chairman and trustee of the
registrant;
? Dan P. Kovacevic as the registrant's Chief Financial Officer. Mr. Kovacevic
replaces John J. Dee as Chief Financial Officer. Mr. Dee, who had been the
registrant's Senior Vice President, Chief Financial Officer, Secretary and a
trustee since 2003, ended his term as Chief Financial Officer and continues to
serve in his role as a trustee of the registrant; and
? William J. Carter as the registrant's Chief Operating Officer.
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President and Chief Executive Officer
Bradford D. Johnson, 63, has 40 years of experience in debt and equity capital
markets, portfolio asset management and commercial development for domestic and
international public and private REITs, pension funds and corporations with
office, retail, industrial, senior living, student housing, multi-family
apartments, and single-family rental operations in the U.S. Most recently, he
served as Executive Vice President of Acquisitions and Asset Management for
Whitestone REIT from 2010 to February 2022. Prior to Whitestone, Mr. Johnson
held the positions of VP of Acquisitions and Development with Campus Living
Villages Funds; Director of Finance & Capital Markets for Place Properties;
Managing Director and CFO for Matrix Healthcare Development, Inc.; VP
Development Manager for Robert Patillo Properties; and VP Asset & Portfolio
Management, SE Region USA for Lendlease North America, formerly known as The
Yarmouth Group Inc. Mr. Johnson began his career as an Associate Financial
Analyst, Property Finance Group for LaSalle Partners, a predecessor firm of
Jones Lang LaSalle, and Income Property Broker for Marcus & Millichap. Mr.
Johnson holds a Bachelor of Arts degree from Baylor University with a
concentration in Business. The Board determined that Mr. Johnson should serve as
a trustee based on his appointment and position as President and Chief Executive
Officer and his understanding of and experience in the registrant's markets and
industry.
There is no arrangement or understanding between Mr. Johnson and any other
persons pursuant to which Mr. Johnson was appointed as President and Chief
Executive Officer or as a director. There are no family relationships between
Mr. Johnson and any trustee or executive officer of the registrant, and he has
no direct or indirect material interest in any transaction required to be
disclosed pursuant to Item 404(a) of Regulation S-K. The terms of Mr. Johnson's
compensation have not yet been determined. In accordance with Instruction 2 of
Item 5.02 of Form 8-K, the registrant will amend this Current Report on Form 8-K
within four business days after such information is determined or becomes
available.
Chief Financial Officer
Dan P. Kovacevic, 63, has more than 30 years of experience in commercial and
residential real estate as a developer and financial executive for public and
private REITs and corporations with operations in the retail, multi-family
apartments, and single-family sectors. Prior to joining the registrant, Mr.
Kovacevic was VP of Whitestone REIT, responsible for leasing and management of
2.4 million retail square feet from 2011 to February 2022. His previous roles
include Chief Financial Officer and Principal with the Mitroff Companies, a
suburban Chicago homebuilder and commercial real estate business; VP-Finance
with Midwest Development Corporation, a Chicago based real estate developer; and
Audit Partner with Coopers and Lybrand, now part of Price Waterhouse Coopers.
Mr. Kovacevic was President of Homebuilders Association of Greater Chicago in
2006 and currently is serving his second term on Town of Fountain Hills Planning
and Zoning Commission. He is a Certified Public Accountant and holds a Bachelor
of Science, Civil Engineering from Northwestern University, McCormick School of
Engineering and a Master of Management, Finance and Accounting degree from
Northwestern University, Kellogg Graduate School of Management.
There is no arrangement or understanding between Mr. Kovacevic and any other
persons pursuant to which Mr. Kovacevic was appointed as Chief Financial
Officer. There are no family relationships between Mr. Kovacevic and any trustee
or executive officer of the registrant, and he has no direct or indirect
material interest in any transaction required to be disclosed pursuant to Item
404(a) of Regulation S-K. The terms of Mr. Kovacevic's compensation have not yet
been determined. In accordance with Instruction 2 of Item 5.02 of Form 8-K, the
registrant will amend this Current Report on Form 8-K within four business days
after such information is determined or becomes available.
Chief Operating Officer
William J. Carter, 75, has more than 40 years of experience in commercial real
estate. Prior to joining the registrant, he was President and Owner of Columbia
Capital LLC, which provides short-term bridge loans to real estate professionals
since 2013. His previous experience includes serving as Group Vice President for
Continental Illinois Bank with divisional responsibility for a $2 billion
construction loan portfolio and managerial responsibility for 30 real estate
professionals; CEO and President for Granada Construction Corporation, a
regional apartment development company, where he developed more than 5,000
apartment units and sourced in excess of $300 million debt and equity capital;
Managing Member for De Morgan Capital, a venture with a British pension fund to
acquire real estate, source capital and provide advisory services; senior
analyst for Real Estate Research Corporation, an international real estate
consulting firm; and Executive Officer for Jupiter Realty, Major Realty and
Brencor LLC. Mr. Carter holds a Bachelor of Business Administration degree from
the University of Georgia.
There is no arrangement or understanding between Mr. Carter and any other
persons pursuant to which Mr. Carter was appointed as Chief Operating Officer.
There are no family relationships between Mr. Carter and any trustee or
executive officer of the registrant, and he has no direct or indirect material
interest in any transaction required to be disclosed pursuant to Item 404(a) of
Regulation S-K. The terms of Mr. Carter's compensation have not yet been
determined. In accordance with Instruction 2 of Item 5.02 of Form 8-K, the
registrant will amend this Current Report on Form 8-K within four business days
after such information is determined or becomes available.
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Item 7.01 Regulation FD Disclosure.
On or about July 26, 2022, the registrant issued a press release announcing the
notice of termination of the management agreements, the registrant's proceeding
to internalize management and become a self-directed, self-managed real estate
company, and Mr. Johnson's appointment as President, Chief Executive Officer and
trustee, Mr. Kovacevic's appointment as Chief Financial Officer, and Mr.
Carter's appointment as Chief Operating Officer, which is filed as Exhibit 99.1
to this Current Report on Form 8-K.
The information contained or incorporated in this Item 7.01 of this Current
Report, including Exhibit 99.1, is being furnished, and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in such a filing.
Item 8.01. Other Events
On July 12, 2022, the registrant was named as a defendant in a lawsuit filed in
the Court of Chancery of the State of Delaware by Whitestone OP. The suit
challenges the registrant's rights agreement, dated as of December 27, 2021 (as
the same may be amended from time to time, the "Rights Agreement"), between the
registrant and American Stock Transfer & Trust Company, LLC, as rights agent,
and claims that the registrant's adoption of the Rights Agreement has breached
the Pillarstone OP partnership agreement, the registrant breached its fiduciary
duties as general partner of Pillarstone OP to Whitestone OP, and breached the
implied covenant of good faith and fair dealing under the Pillarstone OP
partnership agreement. On July 21, 2022, Whitestone OP filed a Motion to
Preserve the Status Quo requesting broad restrictions on the registrant's
ability to conduct its business, including buying properties, enforcing the
Rights Agreement, incurring expenses, or engaging in transactions.
The registrant believes that these allegations are without merit, intends to
vigorously defend against them, and is considering its rights and potential
courses of action with respect to the lawsuit. However, an unfavorable outcome
of this lawsuit is unpredictable and could result in substantial costs to the
registrant.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 Press Release
104 Cover Page Interact Data File - the cover page XBRL tags are
embedded within the Inline XBRL document
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