Finance  ·  Industry

Shareholders Vote to Keep Whitestone REIT Board, Stymying Proxy Battle

Bruce Schanzer, an experienced REIT CEO, had accused Whitestone’s board of mismanagement in an April interview with CO


Bruce Schanzer’s bid to join the board of Whitestone REIT has been rebuffed by shareholders. 

Shareholders voted Tuesday to keep David Taylor and Nandita Berry, two existing trustees of Whitestone’ six-person board, in place instead of replacing them with Schanzer and his business partner Cathy Clark, an investor in the shopping center space. 

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The vote came during the firm’s 2024 annual meeting of shareholders. 

Schanzer, chairman and CIO of Erez Asset Management, a real estate investment firm that bought a 1.7 percent stake in the company, had asked shareholders to give him the opportunity to turn around the fortunes of Whitestone, a Houston-based real estate investment trust (REIT) with a shopping center portfolio exclusively invested in Arizona and Texas and a market capitalization of $571 million. 

Whitestone’s board framed Schanzer’s bid as a takeover attempt and issued several combative press releases that called into question both his character and motivations. 

“Whitestone’s Board and management team thank our shareholders for their support and input during this proxy contest,” Whitestone said in a statement to CO. “We are pleased that shareholders have reaffirmed their support for the board’s highly qualified nominees and recognized our commitment to continue creating shareholder value.”

The vote is the culmination of a months-long proxy battle between Schanzer, Erez Asset Management, and Whitestone senior leadership over control of the REIT.  

Over the last several months, Schanzer has argued in letters to shareholders that Whitestone’s board failed to meet three key quantitative performance targets — primarily FFO per share (referring to funds from operations, a proxy for cash flow) — and that current board trustees lack experience overseeing shopping centers, public REITs or real estate capital markets. 

In April, Schanzer told CO in an exclusive interview that board mismanagement had repeatedly issued equity at steep discounts to net asset values, which had manipulated the REIT’s stock price and drastically reduced the stock’s value. 

Whitestone’s stock price is currently $12.48 per share. The former Cedar CEO believes Whitestone’s stock should be trading at closer to $16 or $17 per share. 

But Whitestone’s existing leadership dug in and resisted Schanzer’s attempts to join the company C-suite. The board issued several letters to shareholders essentially framing the board seat bid by Schanzer as a hostile takeover that threatened the REIT’s business model. 

“We are also concerned as a new activist, Erez Asset Management, threatens to disrupt our progress, derail our strategy, and destroy our momentum to generate value for our shareholders,” said the board in its April 29 letter. 

The shareholder vote Tuesday affirming Whitestone’s existing leadership comes after more than two weeks of press warfare by the two parties and several months of strategizing. 

On May 6, Whitestone sent a letter to shareholders alleging that beginning in late 2023 Schanzer “colluded” with former Whitestone CEO James Mastandrea, who was fired for cause in 2022 after leading the REIT for 16 years. Whitestone argued that Schanzer misrepresented whether he’d ever had a business relationship with Mastrandrea, and that this demonstrated “double-talk” and “lies and deception” on the part of Schanzer. 

The Whitestone May 6 letter shareholder cited screenshots of slides taken from a powerpoint presentation allegedly created by Schanzer that revealed Erez Asset Management leadership had met with Mastandrea about securing his support for Schanzer’s board seat bid. Whitestone argued that Mastandrea was working with Schanzer to “settle the score” with those at Whitestone who terminated his employment two years ago.  

Schanzer and Erez fired back with two letters on May 8 and May 9. 

Schanzer argued to shareholders that Whitestone’s board is “entrenched, insular, and does not have the best interests of shareholders as its highest value,” but did not address any of the allegations regarding Mastandrea.  

“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,” wrote Schanzer on May 9. “There is a lot to fix and a lot to do.” 

Whitestone’s portfolio includes 55 retail spaces occupied by 1,453 tenants spread across 5 million square feet. Nearly half of the REIT’s portfolio exists in the Phoenix area, with substantial portions in Houston, Dallas, Fort-Worth, Austin and San Antonio.  

Representatives for Schanzer and Erez did not respond to requests for comment. 

Brian Pascus can be reached at