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Thoughts On RealtyShares Closing Its Doors To New Investors

Started by Sam, November 07, 2018, 11:29:29 AM

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JD

Just got notification that Communications Drive Lien is also going to be an almost assured default.

I know things are bad when something like that comes in and I feel a wave of relief, saying to myself: "oh well, at least I *only* had ten grand in that one."

What in the ever-loving...

para655

Quote from: mspringer on June 20, 2019, 04:59:18 AM
16620 Linda Terrace

It looks like myself, crossfire, para655, and cheezus so far.

The original listing reads as though the sponsor has a $1.9MM loan he wants to refinance.  With that he is raising additional money to raze the current structure, build and sell new construction.  The senior loan is $4+MM, our second lien (RS') is ~$1.5MM, and then the sponsor/3rd party is putting in around $1MM.  The intention was to sell a CONSTRUCTED house for $7MM.

From what I can tell, and there have been 0 construction updates since last June, they refinanced the original loan, razed the existing structure, and now have a base of land, and approved plans to build.  But rather than building the structure, they are selling this listing as a lot with approved plans for the buyer to build.  It would then make sense why the asking price is $4MM rather than $7MM as there is NO HOUSE on the lot.

What I don't know is what happens with that money that has not been used between the original loan refinance + leveling costs and the total of the loan sources (~$6.5MM)?  My hope is the new people at RealtyShares just did not fully understand the status (since there has been zero communication and I am piecing this together by looking at random google sites) and it is not a matter of the sponsor trying to "sell" this off as they did all the work they intended and are taking a loss but will fully recoup their senior loan.

I really hope this is true. I think the most frustrating thing is not being able to discuss this in detail with anyone in the know.


Hindsight2020

Quote from: kt1984 on June 20, 2019, 07:33:50 AM
I think I did receive some money on the Taylor MI deal which looks like to be around ~53 % of the principal but it did come in 2 different amounts in all. I thought they had ~55% in reserves but may be took some for legal fees. Not sure I have 2 other deals as well which is the Captain D in Shelbyville and the AFC and I believe both of them were fully built so no return from there yet.  At least- this is a start, I hope we are able to get at least 80% of our money back when all is said and done.

Same here. Received 52.7% for the Taylor, MI deal as well. Looks like they took out about $50,000 from the overall loan for fees, presumably for the appraisal and future action. The remaining loan balance is about $1.88 million. There's a lien against a cleared and (I think) paved lot zoned for fast food. I found the deed transfer form for this parcel at 14400 Pardee Rd, Taylor, MI dated 8/10/17, but I couldn't find a sale price. The transferee is DH-14400 Pardee Rd, Taylor, MI, LLC (these guys are very creative) and the address is listed as Egoavil & Horvat, Coral Gables, FL (a familiar address for FG). A cleared lot in a high-traffic retail location should be attractive to other parties, so I hope the JV does its job and generates interest from other fast food operators with respect to the sale of the loan.

sdnerd

I have two pending transactions thus far:

$5,273.52 on $10,000 Investment
RSN2210.1-4
Detroit MSA Dog Haus and Taco Johns

$88.29 on $5,000 Investment
RSN2983.1-1
Coastal FLorida Church's Chicken

It continues to blow my mind that I learned about this from THIS FORUM and not from the folks actually distributing it. If anyone from these companies happens to be reading this, this is really not that hard and I'd be happy to consult for you.

1. Update the dashboard to say distributions of the reserve fund are going to begin, and expect to see the money within the next few days. This then notifies everyone.
2. Send the money.

The last update on the Detroit Dog Haus was on May 21st. And then today I find out via an internet forum and bank notifications that money is being sent out.

If anyone from Intoo or otherwise is reading this forum... it's stupidity like that why I'm ignoring every email you keep sending me to sign up and invest more money.




1UnknownSubject

#764
I also received 176.57 as returned capital on a $10,000 loan for the Coastal Florida Church's Chicken, Melbourne, FL. No other message or information. Currently the stats on this loan would be;

$10,000.00 Loan
- $1,098.22 Interest Payments
- $  176.57  Return of Capital
--------------
$ 8725.21  Still outstanding or a possible loss

crossfire

Are those all Franchise Growth's deals? What about Louisville MSA Captain D's Tranche 2 - I haven't rcvd anything yet

Louisville MSA Captain D's Tranche 2 update on 5/15/19 - "There is $104,932 remaining in the construction reserve. Since the loan is in default, we will distribute this reserve balance less $50,000 to investors within two weeks. The $50,000 held back will be reserved to cover the cost of the appraisal, the suit under the guaranty, legal fees, and the cost of foreclosure (if needed). Once the construction reserve is distributed (less the hold-back) the loan balance will be $1,747,608.  The entire interest reserve of $113,545 was used to pay interest and has been distributed to investors (net of RS fees)."


kierra

I just received $.46 per dollar on my AFC (FG) Largo Florida today. 

FloridaMan

Hello, I'm new here but have been browsing the RS thread for several weeks. My own experiences seem entirely consistent with those described by others.

I have 4 active investments, 2 equity, 2 preferred equity. All 4 look to be in varying degrees of trouble. I've not seen these discussed in great detail elsewhere in the thread, so wondering if at least anyone else is experiencing the same thing (or anything different!):

1. RS239 / RS265 - Sacramento 80 unit Multi-Family. Common Equity. Two different SPVs but invested in the same project. The project was slow to materialize and lease up, although has paid regular cash yields from late 2017 up until approximately Feb/March 2019. Since then...no distributions, no updates.

2. RS-Pref-A Southeast Michigan Unlevered. SF Fix and Flip Fund. Scheduled maturity 04/2019. This one had regular distributions and 2 return of principal payments, last in February 2019. This has had some updates from Asset Management in the last several months, that the sponsor reported running into various troubles in fixing and flipping houses.  The latest update suggested a loss of about 33% of the fund's capital. The thing that doesn't jive for me on this is that the fund had reported prior financials that seemed to show lots of profit flowing to the sponsor. I thought - by being in a preferred position - that we would have priority on return of principal and preferred returns. No one from RS seems to have noticed this...

3. RS195. Alliance Capital/Massimino. I might say - this was my first notice that RS had atrocious skills at asset risk management and workout. When this stopped performing in early 2017, I did no new deals with RS after that.

It was the first example of a sponsor allowed to run wild (sounds like an earlier FG). This sponsor ended up with ~10 different investments funded in 2016 for a total of $10MM+, stopped paying on all of them approximately 1 year later (Feb 2017). Now there is the lawsuit. My own sense is that RS has been unrealistic from the beginning in clinging to the idea that they would get repaid in full, when that seemed entirely unrealistic. Now...my expectation is almost total loss of 90%, only not 100% because it paid 1 years worth of preferred returns.

mspringer

For those in Linda Terrace, below is an email exchange I had with someone from IIRR.  I will say that for the first time since last Fall, I actually felt like I was communicating (via email) with a live person and not some boilerplate response that said they would pass it along.  I didn't include all the correspondence but there were about 3 and while not significant in content, it actually was a response.  I'm not sure the guy from IIRR will be able to get to a resolution, but crazy how we are now celebrating small wins (i.e. an actual human responding to our inquiry).

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++
My email

Thanks for your reply XXX.  My concern is with property 16620 Linda Terrace (RSN2877).  The most recent update is shown below.  I understand this is a second position loan, but what I am not able to determine is how much of the total spend has occurred as they have NOT built the actual house on the lot.  Therefore, most of the costs that were to occur have actually not occurred and will not occur as part of the proposed offer.  What has been done with the $1.45MM second loan from RS? 

As the original list shows the sponsor acquired the property for just under $2MM and was going to get a loan to refinance that as well as construction costs of about $4MM (senior loan).  On top of our second was ~$1MM from the sponsor/3rd party.

To this point the only thing that has been done to the property is removing the existing structure and approved blueprint plans.  It is my opinion that most of the 1st, 2nd, and sponsor money was to go into actually building the new structure before sale.  But because this has not occurred, I assume there should be plenty of money remaining unspent on construction costs.  RealtyShares (or it's representatives) should be able to find out how much has actually been spent and thus how much is still remaining in the balance between the three sources.   

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
IIRR's response,

As per our update, The sponsor has been unresponsive. This is causing a lack of transparency on the construction progress among other things. Our asset mangers are in the process of gather additional information that will help us make a decision on the next course of action. We plan on updating the investors throughout this process.

andyo

My RS Dashboard on Church Chicken in Orlando is showing a "Principal" credit of $0.02 on the $ - that's $655 on a $31,000 investment. I hope that's not the end of the story on this one...

mspringer

Quote from: andyo on June 24, 2019, 03:23:13 AM
My RS Dashboard on Church Chicken in Orlando is showing a "Principal" credit of $0.02 on the $ - that's $655 on a $31,000 investment. I hope that's not the end of the story on this one...

andyo,
Unfortunately, that's what I am see for that one as well.  I thought we were at an advantage compared with some other FG deals in that this location was nearing completion and I had hoped it would be taken over by GOALZ before the sh*tstorm.  But turns out the other way as because it was so far along, there was basically nothing left on in the reserve ($0.02/$1) and now we wait to see how it's valued and hopefully sold.

This location could be the perfect example of Franchise Growth using all of the capital to "nearly" build out the location, file BK or whatever it is they are considering this, come back in as a shell company to buy for pennies on the dollar, put a small amount of money in to finish it (benches and tables) and turn it over to the franchisee for a very nice profit.

I am not sure what our options are and I am just waiting to see what RS comes back with for an appraisal.

REI

I am in the same situation re. FG deals  - $0.02 on the $1 on one deal & about $0.41 on another. I know some of you have indicated interest in hiring a lawyer, depending on the final outcome of these deals. Please count me in. I am still hoping for a reasonable appraisal to come in. It is just that we all seem to have found out about these disbursements via our bank statements first, only now the dashboard appears to have been updated - indicating return of principal (if you call it that!). As such, I was hoping communications would improve after RS changed hands  - but it's deja vu all over again, I guess!

ATLJAD

Some great info on here folks.  I feel a bit better knowing we have a forum to express frustrations and gather answers on what is going on @ RS.

So, I have 4 investments through RS.  All of which are debt deals from 2017 - early 2018.  Churches Chicken (Florida), Linda Terrace (Cali), Chicago Retail and Long Island Medical Office.   Also, all of these were performing exactly as expected....that is until about the time RS announced they were shuttering. 

So, I didn't get into this oblivious to the risks.  I fully assumed I'd lose some money on 1 of 4 (just the odds, so I thought).  However, now all 4 of them are in bankruptcy or some other form of major trouble.  And, as I stated, they were all current and progressing nicely until RS shut their doors.  I diversified geographically, by borrower, by sector, etc...you know, all of the stuff you are supposed to do to avoid getting virtually wiped out 

This CAN'T be coincidental.  I just can't.  Economy is still too good.  Rates are low enough.  Banks are lending.  Real estate values have held up well.  So, what is going on here?  Seems 1 of 2 possibilities (assuming this is all too coincidental):

1. Realtyshares was basically a scam.  They were raising $$$ to fund sham deals and had some sort of undisclosed skin in the game.  Once they got caught, they closed their doors and high-tailed it out of town before the sh*t hit the fan.  OR,

2. Once RS went belly-up, all of these borrowers (with smart CPAs/Attorneys), figured out there was NO WAY that RS was going to be able to monitor these investments, so they saw it as an opportunity to get out from under some debt burdens on the cheap (or one of several other schemes I've seen on here).

I just don't see any other way that this just happened to so many investments at basically the same time.  I know there are smarter minds on here than me.  I'd love to hear other opinions.

PS - Count me in on any lawsuits against FG or any of these other sham borrowers. 

andyo

I have to agree that the only thing that makes sense here is RS as a ponzi scheme. It's just inconceivable that every single one of their projects is either broke or failing unless they were set up that way in the first place.

mspringer

Quote from: ATLJAD on June 24, 2019, 11:55:03 AM
Some great info on here folks.  I feel a bit better knowing we have a forum to express frustrations and gather answers on what is going on @ RS.

So, I have 4 investments through RS.  All of which are debt deals from 2017 - early 2018.  Churches Chicken (Florida), Linda Terrace (Cali), Chicago Retail and Long Island Medical Office.   Also, all of these were performing exactly as expected....that is until about the time RS announced they were shuttering. 

So, I didn't get into this oblivious to the risks.  I fully assumed I'd lose some money on 1 of 4 (just the odds, so I thought).  However, now all 4 of them are in bankruptcy or some other form of major trouble.  And, as I stated, they were all current and progressing nicely until RS shut their doors.  I diversified geographically, by borrower, by sector, etc...you know, all of the stuff you are supposed to do to avoid getting virtually wiped out 

This CAN'T be coincidental.  I just can't.  Economy is still too good.  Rates are low enough.  Banks are lending.  Real estate values have held up well.  So, what is going on here?  Seems 1 of 2 possibilities (assuming this is all too coincidental):

1. Realtyshares was basically a scam.  They were raising $$$ to fund sham deals and had some sort of undisclosed skin in the game.  Once they got caught, they closed their doors and high-tailed it out of town before the sh*t hit the fan.  OR,

2. Once RS went belly-up, all of these borrowers (with smart CPAs/Attorneys), figured out there was NO WAY that RS was going to be able to monitor these investments, so they saw it as an opportunity to get out from under some debt burdens on the cheap (or one of several other schemes I've seen on here).

I just don't see any other way that this just happened to so many investments at basically the same time.  I know there are smarter minds on here than me.  I'd love to hear other opinions.

PS - Count me in on any lawsuits against FG or any of these other sham borrowers.

ALTJAD,
I'm in the same Church's and Linda Terrace.  It certainly does seem as though there is something very shady with the Franchise Growth investments as ours was nearing a successful sale in January and now returns $0.02 on the $1.

With regards to Linda Terrace, and maybe this should be more concerning, the latest update seems to be just confusion on RS's side (or whoever is in charge of that now).  I have a few other posts going into more details but they are currently selling the land "as is" (i.e. no house) with a listing of $4MM.  If it sells for that, I believe we will get most, if not all of our debt deal back.  But the sponsor is also moving forward with construction of the planned house and that will list closer to $7-8MM when completed.  If it sells for that, we again should get back most if not all of our investment. 

I think RS just saw the listing and assumed the house was built and therefore the value had depreciated by $3MM in 2 years.  That's the scary part that it appears they failed to do even a little bit of DD to contact the key players (as a few of us have) and piece together what actually was going on.

What I am not sure is why they have missed the last few monthly distributions and if they plan to extend the contract again or refinance.  Again, I am hoping someone from RS is following up on these types of questions.

groovydude

Quote from: ATLJAD on June 24, 2019, 11:55:03 AM
Some great info on here folks.  I feel a bit better knowing we have a forum to express frustrations and gather answers on what is going on @ RS.

So, I have 4 investments through RS.  All of which are debt deals from 2017 - early 2018.  Churches Chicken (Florida), Linda Terrace (Cali), Chicago Retail and Long Island Medical Office.   Also, all of these were performing exactly as expected....that is until about the time RS announced they were shuttering. 

So, I didn't get into this oblivious to the risks.  I fully assumed I'd lose some money on 1 of 4 (just the odds, so I thought).  However, now all 4 of them are in bankruptcy or some other form of major trouble.  And, as I stated, they were all current and progressing nicely until RS shut their doors.  I diversified geographically, by borrower, by sector, etc...you know, all of the stuff you are supposed to do to avoid getting virtually wiped out 

This CAN'T be coincidental.  I just can't.  Economy is still too good.  Rates are low enough.  Banks are lending.  Real estate values have held up well.  So, what is going on here?  Seems 1 of 2 possibilities (assuming this is all too coincidental):

1. Realtyshares was basically a scam.  They were raising $$$ to fund sham deals and had some sort of undisclosed skin in the game.  Once they got caught, they closed their doors and high-tailed it out of town before the sh*t hit the fan.  OR,

2. Once RS went belly-up, all of these borrowers (with smart CPAs/Attorneys), figured out there was NO WAY that RS was going to be able to monitor these investments, so they saw it as an opportunity to get out from under some debt burdens on the cheap (or one of several other schemes I've seen on here).

I just don't see any other way that this just happened to so many investments at basically the same time.  I know there are smarter minds on here than me.  I'd love to hear other opinions.

PS - Count me in on any lawsuits against FG or any of these other sham borrowers.

An ex RS employee told me he thought the debt deals were the worst of the bunch across the board. My GUESS is that whomever was in charge of vetting those deals was crooked, taking kick-backs from sponsors who couldn't get a loan any other way. Ponsi scheme? Possibly, I think that may be true for FG but not likely for RS. Whether or not the kick-back scheme extended up the management chain, well it's literally anyone's guess. What to do about it? I have no idea. A lawsuit seems like a waste of time to me. Notifying the FBI might get someone in jail years from now, but I doubt it. My $.02.

Sdb

What I, and I suspect most on this forum, failed to realize is that these crowdfunding platforms were nothing but tech startups, able to generate slick websites and the ability to attract some sponsors that were probably shut out of the private market. What was, and in my opinion still is, are people who have absolutely no real estate experience. They can design a damn good website, but when you need them to negotiate a foreclosure or any of the other issues we are dealing with, you are dealing with a bunch of people who simply don't have the ability to carry out the task. Maybe the new guys have the appropriate staff going forward, but for most of us the damage has already been done.

JD

With respect to RS being an outright scam, I don't think this is the case. I'm into around 15 deals that all closed in 2018. The equity ones are doing just fine and continuing to pay out. As some have mentioned, it's the debt ones that have mostly gone awry. And in fairness, a handful of those have continued to pay out as expected too.

I think it's the sponsors taking advantage of RS folding, which will hopefully be remedied now by the new management. We are potentially in big trouble with entities like FG so maybe we should pursue legal action on them if nothing further is recovered.

I will feel a bit better when we start getting more updates and also if I get some more payments this week. This month has really dropped off and it's a bit unusual but sometimes in the past a bunch of payments come in the last few days of the month. Okay, literally just as I finished writing that, I got notifications that I have 6 new deposits and they look to be from RS, so there you go.

Now if we can just see some tax documents, I'd say we should feel a bit hopeful about the new management and give them support in righting the ship before decrying them further.

andyo

Well, I can't share the same optimism. Other than the MSA Chicken in Orlando (Debt), I have an "investment" in Windgate Apartments RS310 (Common Equity) and 12 Inner Loop Townhomes RS261 (Preferred Equity). The Windgate Apartments have never returned a dime despite promises of quarterly distributions to come and being "98% occupied" and the 12 Inner Loop was paying fine until it dried up like most everything else once RS announced although they did pay out for the first quarter of 2019.

JD

Quote from: andyo on June 25, 2019, 04:31:34 AM
Well, I can't share the same optimism. Other than the MSA Chicken in Orlando (Debt), I have an "investment" in Windgate Apartments RS310 (Common Equity) and 12 Inner Loop Townhomes RS261 (Preferred Equity). The Windgate Apartments have never returned a dime despite promises of quarterly distributions to come and being "98% occupied" and the 12 Inner Loop was paying fine until it dried up like most everything else once RS announced although they did pay out for the first quarter of 2019.

That's certainly not good. So you have 3 deals in total and 2 are looking bad, the third may be back on track now?

It's a pretty small sample size tbh but still worrying.

I'd trade my portfolio for a very small one, even if they all were bad - I'm terrified that I'm stuck in 15 RS deals and they are all less than a year old. But it seems to me that some positive steps are being taken recently.