Erez Asset Management Outlines Specific Initiatives Its Nominees Will Advance If Elected To Whitestone Reit Board

$WSR

Whitestone’s Inexperienced Board is Responsible for Years of Underperformance Driven by Uneconomic Capital Allocation, Inattentive Financial and Management Oversight, and Retrograde Corporate Governance

Erez’s Two Trustee Nominees Have the REIT Capital Markets, Shopping Center, and Public Company Board Experience Necessary to Create Long-Term Value for Whitestone Shareholders

Dear Fellow Whitestone REIT Shareholders:

Whitestone’s 2024 Annual Meeting is taking place this coming Tuesday, May 14, and now is your last chance to vote for change. For years, Whitestone has underperformed its potential and its peers. Whitestone’s Board does not operate with rigor or excellence and lacks the relevant experience or expertise to ensure Whitestone delivers on its promises. Whitestone missed the specific promises it was to deliver in 2023 regarding lowering G&A and leverage that the Company made in the last contested election in 2018; the management team missed nearly every performance metric in the 2023 compensation plan by a wide mark; and the Company even missed its lowered 2023 earnings guidance after reaffirming that very guidance a month earlier.

These performance challenges are not new and they will not be remedied by the same trustees who created them. In fact, the Company’s current trustees are responsible for years of deficient capital allocation decisions that have destroyed significant shareholder value, poor corporate financial management that has resulted in both short-term and long-term guidance misses, and major governance and disclosure failures that have deprived shareholders of a truly independent Board. If you choose to support them, we believe Whitestone will continue to trade at the largest discount to net asset value (NAV), and at the lowest earnings multiple, of any of the shopping center REITs Whitestone cites as its peers.

Alternatively, you can vote for Erez’s two highly qualified trustee nominees, who have the REIT capital markets, shopping center, and public company board experience – and the energy, motivation and enthusiasm – necessary to help improve Whitestone for the benefit of all shareholders. If elected, our nominees will promptly pursue the following key initiatives to help resolve the Company’s most significant and critical issues:

1.Poor Capital Allocation

a. We will work with management to precisely calculate Whitestone’s weighted average cost of capital so it can better ascertain which investments create value and which investments destroy value.

b. We will encourage management to develop an extensive database of relevant transaction activity so that it has a data-driven, timely view of Whitestone’s net asset value to inform the Board’s analysis of equity issuance or buybacks in the future.

c. We will suggest the Board form an investment committee and encourage the Board to require management to prepare and provide the committee with detailed investment memoranda for all investments or capital expenditures over $10 million.

d. We will encourage the Board and management to undertake a quarterly review of returns on capital to refine and improve Whitestone’s underwriting.

e. We will encourage the Board’s audit committee to more carefully review dividend payments to ensure they satisfy REIT requirements while avoiding wasteful ‘re-cycling’ returns of equity capital as have occurred in the past.

2.Excess G&A

a. We will encourage management to conduct a highly detailed study of every corporate expenditure over $5,000 with a “zero-based” approach to evaluating the necessity of all items.

b. We will also encourage management to iteratively work backwards to the Company’s G&A target. We believe this approach will likely result in a significant reduction of Whitestone’s G&A costs.

3.Poor Corporate Financial Management

a. We will encourage management to build a robust and flexible 5-year corporate planning model that will allow it to provide precise and reliable guidance, both internally and to the market.

b. We will encourage the Board to thoroughly review the model every quarter.

c. We will encourage the Board’s audit committee to participate in Whitestone’s annual preparation of guidance and conduct an intensive annual review of the corporate model.

4.Corporate Governance Issues

a. We will encourage Whitestone to issue corrective disclosures to remedy past deficiencies.

b. We will encourage the Board’s Nominating and Corporate Governance Committee to conduct searches for future trustees using a nationally recognized search firm.

c. We will encourage the Board to work with management to convert the single trigger change of control provisions to a double trigger and will endeavor to remove the proxy put.

d. We will seek to revise the executive compensation program to introduce challenging performance targets that align the interests of management with those of shareholders.

This list is certainly not exhaustive. There is a lot to fix and a lot to do. We are energized by the opportunity to help Whitestone finally create meaningful value for shareholders.

We would be honored if you trust us with your vote, and we look forward to working with our new colleagues on Whitestone’s Board for the benefit of all the Company’s shareholders.

Sincerely,

/s/ Bruce Schanzer

Bruce Schanzer

Chairman, Erez Asset Management

Source:

https://www.sec.gov/Archives/edgar/data/1175535/000101359424000453/erezdfan14a-05092024.htm