UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
Proxy
Statement Pursuant To Section 14(A) of the Securities
Exchange
Act of 1934
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¨ Preliminary
Proxy Statement
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¨ Definitive
Proxy Statement
ý Definitive
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Material Pursuant to § 240.14a-12
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Whitestone
REIT
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(Name
of Registrant as Specified In Its Charter)
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N/A
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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July 17,
2008
Dear
Shareholder:
As your
Board of Trustees, it is a pleasure to write and tell you how pleased we are
with the progress that has been made at Whitestone REIT in the past 20
months. As you know, you were promised ownership in a public real
estate trust, whose shares would trade on a stock exchange. As such,
the marketplace could then determine the value of your shares and provide you
with liquidity. While there are three items that are being presented
to you for a vote at our Annual Meeting of Shareholders on July 29th, this
letter is intended to share details about two of the items that will bring
Whitestone another step closer to being listed on a stock exchange.
The
proposals recommended by the Board in the Proxy Statement are as
follows:
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1.
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The
election of Donald F. Keating to serve as a trustee until
our
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2011
Annual Meeting of Shareholders,
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2.
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The
approval of the Whitestone REIT 2008 Long Term
Equity
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Incentive
Ownership Plan, and
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3.
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The
approval of Whitestone’s Articles of Amendment and
Restatement.
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Investment
bankers advised us in 2005 that the management of Whitestone must be
internalized to eliminate potential conflicts of interest to attract the
interest of institutional investors. We made the changes in October
2006 to internalize the management; however, litigation ensued related to the
termination of the advisory and management agreements with our former external
advisor and property manager. The litigation recently ended in May of
2008, when a settlement and five-year standstill agreement were
reached. The settlement involved our exchanging two properties,
Garden Oaks and Northeast Square retail plazas, and our receiving all of the
equity ownership of the former chairman and chief executive officer, which was
approximately 1.4 million common shares and operating partnership
units. The five-year standstill means that the former chairman and
chief executive officer will not have any involvement in Whitestone and
similarly we will have no involvement in his company, including no investments
in voting securities or proxy proposals. The entire litigation process, though,
has prolonged our efforts to gain a public listing.
| 2600 South Gessner | Phone (713) 827-9595 | info@whitestonereit.com | ||||
| Suite 500 | Toll Free (866) 789-7348 | www.whitestonereit.com | ||||
| Houston, Texas 77063 | Fax (713) 465-8847 |
While we
missed a “window” from 2004 to mid-2007 to list and trade our shares, we
anticipate the opportunity will return in the next 12 to 24 months. In
preparation, investment bankers and potential institutional investors with whom
we have met over the past year have told us the following: (1) management must
have significant stock ownership to align their interests with the interests of
shareholders, and (2) Whitestone’s Declaration of Trust must conform to more
stringent underwriting standards and requirements acceptable to institutional
investors. Two of the proxy proposals for the Annual Meeting seek to
accomplish those goals.
We have
submitted to you with a recommendation that you approve the 2008 Long Term
Equity Incentive Ownership Plan. As background relating to the
Board’s decision to approve this item and recommend it to the shareholders for
approval, the Compensation Committee, comprised of the independent trustees of
the Board, hired an independent consultant who is a recognized expert in
compensation plans for REITs, to evaluate Whitestone and compare it with other
companies in the REIT industry. He developed a plan to encourage,
incent, and ultimately reward the management and employee team based on their
success in producing exceptional results for shareholders over the long
term. We believe that the value of shareholders’ ownership interest
will be maximized if the management and employee team has a stake in the
long-term financial success of Whitestone and the team can earn equity
ownership.
Whitestone’s
real estate business is somewhat complicated by having three different types of
“C” class properties. It is a public filing company with the
Securities and Exchange Commission, yet non-traded. Comprised of
approximately 3.0 million square feet, our 35 properties are smaller with few
anchor tenants. Attaining occupancies in the 90% range is a challenge
with over 700 tenants that have an average size space of only 2,000 square
feet.
Whitestone’s
primary asset is its platform on which we must capitalize to profitably grow as
a real estate company, otherwise we will stagnate. To grow, we need
to restructure our debt, raise equity, sell old assets, purchase newer assets
and portfolios, redevelop some of our existing properties, diversify our risk
into other geographic markets, list our shares, and then raise equity in the
future as warranted. We have the management and employee team in
place that has the education, experience, knowledge, and relationships to
accomplish these major objectives, though they have no equity
ownership. We believe the time is right to provide an equity based
incentive plan recognizing what they have accomplished over the past 20 months
and committing to them the opportunity to earn ownership in the
future.
The Long
Term Equity Incentive Ownership Plan is a tangible program that encourages an
entrepreneurial approach in the entrepreneurial business of real estate, and we
believe this equity plan is required to sufficiently motivate our management and
employee team to maximize shareholder return. The proposed 2008 Long
Term Equity Incentive Ownership Plan has been recommended by the Compensation
Committee, approved by the Board of Trustees, and is recommended for your
approval at the Annual Meeting of Shareholders. The plan is discussed
in the Proxy Statement.
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We have
also proposed amending and restating the current Declaration of
Trust. Investment banking firms with whom we are discussing the
preparation for listing our shares on a stock exchange and our securities
counsel have advised us that changes should be made to our Declaration of Trust
to conform more closely to the charters of listed REITs. A change in
Whitestone’s Declaration of Trust requires the approval of 50% of the
outstanding common shares. The Board of Trustees recommends your support of this
amendment, as it will bring us closer to listing our shares on a stock exchange
without materially affecting your rights as current shareholders. The
Declaration of Trust changes are explained further in the Proxy
Statement.
Whitestone
has hired Georgeson Inc., a proxy solicitation firm, to call and explain these
items and answer any questions you may have. Georgeson’s toll free
telephone number is (888) 605-7515 if you wish to call to discuss any of the
proxy proposals. As always, you can call our management or trustees
with your questions as well. For your convenience, we have also
enclosed a proxy card and return envelope so that you can vote your shares if
you do not have the card that was mailed with the Proxy Statement. If
you have already voted the original proxy card, you can disregard the enclosed
card.
For those
who are able to attend, we look forward to seeing you at our Annual Meeting of
Shareholders on July 29, 2008, at 10:00 a.m., at the Westchase Marriott in
Houston. For those who will not be able to join us, we ask your
support of the proxy proposals discussed above as well as electing Donald F.
Keating to a three-year term. Don is experienced as a trustee, has a
substantial background in finance, and has been a shareholder for a number of
years.
We thank
you for your continued confidence and support, and look forward to a prosperous
future.
Sincerely,
| /s/ James C. Mastandrea | ||
| James C. Mastandrea | ||
| Chairman of the Board of Trustees | ||
| /s/ Jack Mahaffey | ||
| Jack Mahaffey | ||
| Trustee and Chairman of the Compensation Committee | ||
| /s/ Chris Minton | ||
| Chris Minton | ||
| Trustee and Chairman of the Audit Committee | ||
| /s/ Don Keating | ||
| Don Keating | ||
| Trustee and Chairman of the Nominating Committee | ||
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