[07-14-26 – The deal has now closed].
Whitestone REIT has agreed to go private in a $19 per share deal with Ares Real Estate. The transaction is worth $1.7 billion, including debt
The company’s portfolio comprises 56 retail properties, mostly in Houston, Dallas and Phoenix. Whitestone has its head office in west Houston.
MCB Real Estate, which owns 9.2% of Whitestone’s shares, offered to buy the company in 2024 and 2025 for $15 and $15.20 per share respectively. The company rejected those proposals. In March, according to Reuters, the company put itself up for sale and received interest from a number of private equity firms. The $19 per share represents a 26% premium to the price at the time the Reuters article was published.
MCB had argued that Whitestone lagged larger public REITs because it is a regional player that is hampered by high borrowing costs, making it challenging for the company to raise new capital to fund acquisitions and develop new properties.
If the Whitestone Board accepts a superior proposal to the one from Ares, the company will have to pay a $36 million termination fee. Likewise, if Ares fails to close, it will have to pay the company $77 million.
The business began in 1998. James Mastandrea took over as Chairman and Chief Executive in 2006 and took the business public in 2010.
CEO fired for cause
The company had a spectacular falling out with Mr. Mastandrea in 2022 when he was fired for cause. The board alleged that Mr. Mastandrea disclosed confidential information to a third party during unauthorized negotiations to sell the company to a third party. In a counter-claim, they also alleged that he failed to return corporate property including ‘two Range Rovers, two laptops, two IPads and three IPhones’.
Mr. Mastandrea alleged that the ‘for cause’ designation was a tactic to avoid paying him the $25 million severance stipulated in his employment agreement. Adding to the chaos, the same day he was fired, Mr. Mastandrea filed for divorce from his wife of nearly 30 years, Christine. She worked at Robert W Baird and helped advise the company on its IPO in 2010. She joined the company in 2013 as VP of Corporate Strategy and was promoted to COO not long after Mr. Mastandrea’s departure.
The litigation between the company and Mr. Mastandrea is still ongoing.
The deal is expected to close in the third quarter.
SEC Filing – Whitestone to be acquired by Ares