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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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groovydude

Quote from: John_PVF on April 02, 2019, 09:36:17 AM
I agree with @John that engaging a lawyer at this point is likely counterproductive as it will divert some of what limited resources they have.  I had another idea that I'd like the group to consider.  Instead of a lawyer, why don't we as a group write one.  Address to the CEO, but copy to relevant board members at their VC owners.  We could express our concerns, make recommendations for how they could better serve us, but also reserve the right to go bigger if it came to that.  If a sufficient number of signatories committed, we might get their attention. 

In no particular order, here is what I would want to convey:

1. Concern about platform stability/their ability to accurately and timely service payments, provide updates and reporting (quarterly reports, 1099s, K-1s, etc.).
2. Accuracy of the items above, process by which we can audit/dispute if there are disagreements
3. Confirmation of what/where servicing has been transitioned and timing of those efforts.
4. Concern about lack of communication.  Their hasn't been anything global that I'm aware of since the official announcement.  I'm sure they know, but reiterate that without something from them people naturally assume the worst and will act accordingly (lawyer up, etc.).   They would likely be well served by providing us regular updates as I'm guessing they're answering the same questions individually multiple times.

Any thoughts?  It seemed like a reasonable option to me as it would be no cost to us (other than time to draft it) and wouldn't generate a legal response on their end.

I'm in favor of this, if it's unsuccessful then we can pursue harsher measures. I would add/suggest:

- Requesting a full and detailed disclosure of whatever actions are being investigated and/or pursued by RS to sell or transfer the servicing rights to our investments (not just what's been done, which may be nothing)
- Pointing out that there has been speculation in this group that malfeasance on the part of RS seems possible, and the lack of communication/responsiveness on the part of RS is contributing to these concerns.
- Ending the letter with something firm, saying that no response, or even an inadequate response will likely lead to legal inquiries by the group, or something of that nature.
- CC the major investors

John_PVF, why don't you take a crack at a first draft? I have a link that lists the RS investors by name, I can provide that. Does anyone know the names of the board members? The CEO?

John_PVF

Quote from: groovydude on April 02, 2019, 12:52:19 PM
John_PVF, why don't you take a crack at a first draft? I have a link that lists the RS investors by name, I can provide that. Does anyone know the names of the board members? The CEO?

Was just throwing out the idea to see if it had legs.  I'd be happy to do something if 50+ people sign on and we can demonstrate we represent a meaningful portion of their investing base.  Not worth it if only a handful are on board.

groovydude

Quote from: John_PVF on April 02, 2019, 01:04:38 PM
Quote from: groovydude on April 02, 2019, 12:52:19 PM
John_PVF, why don't you take a crack at a first draft? I have a link that lists the RS investors by name, I can provide that. Does anyone know the names of the board members? The CEO?

Was just throwing out the idea to see if it had legs.  I'd be happy to do something if 50+ people sign on and we can demonstrate we represent a meaningful portion of their investing base.  Not worth it if only a handful are on board.

I'm not sure if the number of people means as much as the amount of AUM they represent. I'm not sure if folks would be comfortable sharing this info, but if it's a significant portion of RS's total AUM it would have some weight.

erdenis

I would sign the letter to the CEO and board. I think that's the right move in this situation.

dwengca

Quote from: erdenis on April 02, 2019, 08:20:18 PM
I would sign the letter to the CEO and board. I think that's the right move in this situation.

I would sign as well.  I currently have $174k in RS which I'm very concerning that I may not see "them" again.

Beat_The_Fraud

Count me in for the signatures. Received an email from RealtyShares early morning today regarding the mailing of K-1s which will happen after April 15th. I did not ask about the 1099s or K1s, and it seems they may have sent this email to everyone.

mspringer

Quote from: dwengca on April 03, 2019, 02:25:55 AM
Quote from: erdenis on April 02, 2019, 08:20:18 PM
I would sign the letter to the CEO and board. I think that's the right move in this situation.

I would sign as well.  I currently have $174k in RS which I'm very concerning that I may not see "them" again.

My dollars are not as large, but equally important.  Count me in as a signature.

John_PVF

Quote from: Beat_The_Fraud on April 03, 2019, 03:54:17 AM
Count me in for the signatures. Received an email from RealtyShares early morning today regarding the mailing of K-1s which will happen after April 15th. I did not ask about the 1099s or K1s, and it seems they may have sent this email to everyone.

I received it as well.  Guess I'll be filing extensions on my taxes this am.

John_PVF

Quote from: groovydude on April 02, 2019, 01:33:49 PM
Quote from: John_PVF on April 02, 2019, 01:04:38 PM
Quote from: groovydude on April 02, 2019, 12:52:19 PM
John_PVF, why don't you take a crack at a first draft? I have a link that lists the RS investors by name, I can provide that. Does anyone know the names of the board members? The CEO?

Was just throwing out the idea to see if it had legs.  I'd be happy to do something if 50+ people sign on and we can demonstrate we represent a meaningful portion of their investing base.  Not worth it if only a handful are on board.

I'm not sure if the number of people means as much as the amount of AUM they represent. I'm not sure if folks would be comfortable sharing this info, but if it's a significant portion of RS's total AUM it would have some weight.

I represent a whopping 0.015% of their stated AUM, so don't think they care about me on that metric alone.  Let's be clear though, nothing we do here is going to change the situation or have any impact on us recovering our investment.  This is for our peace of mind only and hopefully to make it so we don't all feel in the dark on everything.

REI

Quote from: John_PVF on April 02, 2019, 01:04:38 PM
Quote from: groovydude on April 02, 2019, 12:52:19 PM
John_PVF, why don't you take a crack at a first draft? I have a link that lists the RS investors by name, I can provide that. Does anyone know the names of the board members? The CEO?

Was just throwing out the idea to see if it had legs.  I'd be happy to do something if 50+ people sign on and we can demonstrate we represent a meaningful portion of their investing base.  Not worth it if only a handful are on board.

Hello John_PVF, Thanks for taking the initiative to draft a letter to the CEO/RS Board. I will sign it along with all the other investors. I think this is the right move at this point in time. Like everyone on this forum I feel the lack of proper communication from them and worst of all not distributing even when the Sponsors have is very appalling. I have tried to email them but do only get generic responses! I have $90k in various investments on the platform.

John_PVF

I have drafted a letter to the RS CEO which I think pretty well outlines our concerns and provides recommendations for how they can make amends.  I'm going to post it in a new thread for people to review.  If you want your name added, please DM me your first/last name.  If comfortable, please also share how much you have invested so I can put a total in the final version.

As I stated previously, this is only going to work if we get a substantial amount of people to sign on.  How can we reach a greater number of investors than just those active on this forum?  I'd like to try to send them something by the middle of the month and think critical mass is on the order of 50+ people.

dwengca

3081 Carrigan Canyon Drive Tranche 3
RSL.2016B.366-3 • RSN2086.1-3
$2,784.22   

Got this update today.  Basically, my $5k investment has turned into $2,784.  Almost 50% loss.  I guess this is better than nothing, but I really think RS got us into this bad deal due to extremely poor vetting and poor management.   Sigh...

kt1984

I spoke to a broker from the Embree group which had listed a few properties from FG.

1) The American Family care in West Islip has been taken off-market. The broker confirmed that the tenant American Family Care is 4 months delinquent on the rent and a rent reduction is being negotiated. Let's hope it is successfully negotiated and the property is sold. It was listed for $4.5 MM which was much higher than the expected property valuation of $3.8 MM in the original documents. If it's bought back to the original expected valuation of $3.8 MM with the reduced rent, we should have some cushion. Let's hope the FG guys have some sense to negotiate the rent reduction and get the property sold.

2) The Captain D in Shelbyville according to him is still set to open in May with the first Rent payment coming in May. There has been a slight construction delay but looks like it is on track as per him. Let's hope it stays this way.

I think all of us are still waiting on the final word about the Taylor MI closing. If that goes through- it will definitely give all of us some confidence about FG's ability to pay us back.

daletucker50

Latest notification on Utah SFR Fund IV:
04/05/2019
During our most recent conversation with the sponsor, they told us that they were considering selling the remaining houses in the Fund to a large investor. Since this encouraging conversation a few weeks ago, the sponsor has not been responsive and we have engaged counsel to strategize on leveraging our remedies which could include removing the sponsor.  RealtyShares will update you when we have additional relevant information to share.

princyraj

Quote from: daletucker50 on April 05, 2019, 09:40:16 AM
Latest notification on Utah SFR Fund IV:
04/05/2019
During our most recent conversation with the sponsor, they told us that they were considering selling the remaining houses in the Fund to a large investor. Since this encouraging conversation a few weeks ago, the sponsor has not been responsive and we have engaged counsel to strategize on leveraging our remedies which could include removing the sponsor.  RealtyShares will update you when we have additional relevant information to share.

This is a bit disturbing as I got the same canned note for Utah Diversified Residential Fund II about a month ago. How can the sponsor disengage like clockwork for both the investments?

Utah Diversified Residential Fund II - 03/06/2019
03/06/2019
During our most recent conversation with the sponsor, they told us that they were considering selling the remaining houses in the Fund to a large investor. Since this encouraging conversation a few weeks ago, the sponsor has not been responsive and we are therefore engaging counsel to strategize on leveraging our remedies which could include removing the sponsor. We will update you when we have additional relevant information to share.

princyraj

Quote from: John on April 05, 2019, 11:51:21 AM
Quote from: princyraj on April 05, 2019, 10:58:14 AM
Quote from: daletucker50 on April 05, 2019, 09:40:16 AM
Latest notification on Utah SFR Fund IV:
04/05/2019
During our most recent conversation with the sponsor, they told us that they were considering selling the remaining houses in the Fund to a large investor. Since this encouraging conversation a few weeks ago, the sponsor has not been responsive and we have engaged counsel to strategize on leveraging our remedies which could include removing the sponsor.  RealtyShares will update you when we have additional relevant information to share.

This is a bit disturbing as I got the same canned note for Utah Diversified Residential Fund II about a month ago. How can the sponsor disengage like clockwork for both the investments?

Utah Diversified Residential Fund II - 03/06/2019
03/06/2019
During our most recent conversation with the sponsor, they told us that they were considering selling the remaining houses in the Fund to a large investor. Since this encouraging conversation a few weeks ago, the sponsor has not been responsive and we are therefore engaging counsel to strategize on leveraging our remedies which could include removing the sponsor. We will update you when we have additional relevant information to share.

I don't know anything about Utah SFR Fund IV, but I am in Utah Diversified Residential Fund II. I don't know if you've paid close attention to the updates and financial reporting from this entity, but there have been serious red flags since shortly after closing. They raised the money with a business plan to buy/remodel/rent/sell 84 homes/year, then never implemented it. They bought ~16 homes in the first quarter after the deal was done and renovated/sold some of them over time, then practically nothing else. The financial reporting has been amateurish and late and/or missing. It raised serious questions for me that I haven't been able to get answered. Despite the sponsor abandoning the business plan after a quarter, RS actually extended the original 2-year maturity more than a year later.

Is there anyone in both Utah SFR Fund IV and Utah Diversified Residential Fund II who can compare the financial reporting and the addresses listed for the homes they claim each entity purchased?  Also, does anyone know how Utah SFR Funds I-III fared?

Try this: https://www.realtyshares.com/investments/utah-diversified-residential-fund-i
Seems like it's in the same boat as us if you check the updates section. I tried to launch https://www.realtyshares.com/investments/utah-diversified-residential-fund-iiii <= Didn't work. So not sure if there was a III investment.
https://www.realtyshares.com/investments/utah-diversified-residential-fund-iv <= didn't work either for me. So maybe the URL for III is different.


stingray

@John:  From my interactions with RS, I don't think they have the bandwidth to proactively scour external sources to verify the information that sponsors report to them.  While I am not sure that Zillow is a reliable source and have no opinion about the particular case you mention:  if you have credible evidence that a sponsor has made a false report or has done something else improper, send it to them with a request to forward to their Sr. Director of Asset Management.  They take such information seriously and follow up on it. 

Sdb

John, I hope you reconsider leaving the group. Most of us have performing deals and some others that are problematic. We need to stay together if we ever hope to see this through to some conclusion.

I have no idea how this will eventually play out, but I do know that there is strength in numbers. My hope is that this group can influence the eventual outcome.

daletucker50

Latest re: ROIPGM Unlevered Diversified Fund
04/09/2019
It has come to our attention that at least one of the properties in the portfolio was sold to an entity related to the sponsor at a loss to the Fund, but then later sold at a profit. The sponsor indicated that the first sale price that was recorded was recorded at the loan amount when the property was financed and did not reflect a sale. We are concerned since the fund was supposed to be unlevered and the entity that financed the property was not the Fund, but another company controlled by the sponsor. As a result, we do not have confidence that the financial statement provided by the sponsor and posted by RS are accurate. We have hired counsel who is drafting a letter demanding to examine the books and records of the Fund. If the sponsor doesn't comply, we will get a judge to compel the sponsor to produce the books and records. If the sponsor complies, we will have a forensic accountant trace the flow of funds from the first purchase of the property to the final sale. RealtyShares will update you when we have additional relevant information to share.

ramesh

I received a heads-up from RS that the sponsor of one of my debt deals (Camden County Multifamily) is initiating a refinance process.  Keeping my fingers crossed. 

With several disastrous deals reported here (including my own Franchise Growth investment),  it is difficult not to get the impression that the underwriting standards at RS have been broadly horrible, so much so, that I have marked several of my deals down by 20% in my own bookkeeping.  The reality, broadly speaking, is probably less dismal.

I had a conversation with the investor relations head at RealtyMogul last week.  In the process, I raised some questions about RS' underwriting.  He believes that RS underwriting quality has been quite good in MFR.  It is the SFR and Hospitality (I have one of these) deals that have been weak, primarily because these categories are problematic.  For this reason, he said,  RealtyMogul exited these categories.