Thoughts On RealtyShares Closing Its Doors To New Investors

[berkel]

Hi all,
Didn't see this posted, so wanted to share an update on the Franchisee Growth "issues" at Realty Shares.  Cautiously optimistic that this is "good" news?

On a side note, joined Realty Mogul and verified accreditation via a phone interview.  Have not invested in anything yet and plan to wait until my remaining Realty Shares investments shake out.

Also joined Fundrise and started a small investment with auto invest and re-investing dividends.  Glad to be on this forum!

Thanks

Update For Franchise Growth Portfolio Investors

As noted in our email communication delivered on August 19th, 2019, IRM senior leadership met with Franchise Growth representatives in New York for several meetings in which IRM delivered the news that it had decided to reject the settlement offer (86% of last assessed market value of each asset) and move ahead with foreclosure proceedings, IRM has indicated that the only possible compromise it would consider on behalf of investors is a complete refund of 100% of original invested capital.

IRM has recently received official acknowledgment from Franchise Growth leadership that they have agreed to IRM's terms, and as such IRM has, for the time being, stopped all proceedings to foreclose on the secured assets, and is now in the process of drafting a Memorandum of Understanding between the parties.

While this is a very positive development for investors in this portfolio and represents a more promising potential financial outcome, IRM cautions investors to consider the following important factors;

Franchise Growth's ability to honor this agreement depends on its ability to raise additional capital, which it may be unsuccessful in doing.
Franchise Growth has excluded 2 of the most distressed investments from it's offer. These are properties located in Antioch, TN and Decatur, IL. Investors will retain all their rights in these locations, including but not limited to, foreclosing on the assets.
Franchise Growth has agreed to pay back 100 percent of net invested capital by RealtyShares investors. This is a nominal amount, not adjusted for inflation, not carrying any interest and is presented gross, before any legally imposed fees.
Whether successful or not, this process will likely take several months before investors can expect to actually receive any funds. This is to allow Franchise Growth time to raise additional capital, restructure the capital stack on all the participating assets, obtain all legally required approvals, and then for IRM to collect, process and distribute funds to each investor pro-rata.
To be clear, many of the considerations listed above would have also applied in the former settlement offer, but IRM chose to emphasize all possible risk factors to investors at this time as the negotiations with Franchise Growth advance.

The next step will be to execute an agreement between the parties, known as a forbearance agreement, that will allow Franchise Growth a time limited opportunity to raise the additional capital and restructure the debt. IRM expects to complete this phase in the coming weeks and will continue to update investors in this portfolio ad-hoc.

Respectfully,

IIRR Management Services, LLC

[Hindsight2020]

Hi all,
Didn't see this posted, so wanted to share an update on the Franchisee Growth "issues" at Realty Shares.  Cautiously optimistic that this is "good" news?

On a side note, joined Realty Mogul and verified accreditation via a phone interview.  Have not invested in anything yet and plan to wait until my remaining Realty Shares investments shake out.

Also joined Fundrise and started a small investment with auto invest and re-investing dividends.  Glad to be on this forum!

Thanks

Update For Franchise Growth Portfolio Investors

As noted in our email communication delivered on August 19th, 2019, IRM senior leadership met with Franchise Growth representatives in New York for several meetings in which IRM delivered the news that it had decided to reject the settlement offer (86% of last assessed market value of each asset) and move ahead with foreclosure proceedings, IRM has indicated that the only possible compromise it would consider on behalf of investors is a complete refund of 100% of original invested capital.

IRM has recently received official acknowledgment from Franchise Growth leadership that they have agreed to IRM's terms, and as such IRM has, for the time being, stopped all proceedings to foreclose on the secured assets, and is now in the process of drafting a Memorandum of Understanding between the parties.

While this is a very positive development for investors in this portfolio and represents a more promising potential financial outcome, IRM cautions investors to consider the following important factors;

Franchise Growth's ability to honor this agreement depends on its ability to raise additional capital, which it may be unsuccessful in doing.
Franchise Growth has excluded 2 of the most distressed investments from it's offer. These are properties located in Antioch, TN and Decatur, IL. Investors will retain all their rights in these locations, including but not limited to, foreclosing on the assets.
Franchise Growth has agreed to pay back 100 percent of net invested capital by RealtyShares investors. This is a nominal amount, not adjusted for inflation, not carrying any interest and is presented gross, before any legally imposed fees.
Whether successful or not, this process will likely take several months before investors can expect to actually receive any funds. This is to allow Franchise Growth time to raise additional capital, restructure the capital stack on all the participating assets, obtain all legally required approvals, and then for IRM to collect, process and distribute funds to each investor pro-rata.
To be clear, many of the considerations listed above would have also applied in the former settlement offer, but IRM chose to emphasize all possible risk factors to investors at this time as the negotiations with Franchise Growth advance.

The next step will be to execute an agreement between the parties, known as a forbearance agreement, that will allow Franchise Growth a time limited opportunity to raise the additional capital and restructure the debt. IRM expects to complete this phase in the coming weeks and will continue to update investors in this portfolio ad-hoc.

Respectfully,

IIRR Management Services, LLC

Most of my FG exposure is in the Decatur, IL restaurant carved out of this deal. Seems like the paths for that and Antioch will diverge from the rest of the FG pack from here. Many of us on here have been whipsawed by FG for a while, and I sincerely hope that the main deal they agreed to is successfully documented and executed so that people can get some closure.

[JD]

Hi all,
Didn't see this posted, so wanted to share an update on the Franchisee Growth "issues" at Realty Shares.  Cautiously optimistic that this is "good" news?

On a side note, joined Realty Mogul and verified accreditation via a phone interview.  Have not invested in anything yet and plan to wait until my remaining Realty Shares investments shake out.

Also joined Fundrise and started a small investment with auto invest and re-investing dividends.  Glad to be on this forum!

Thanks

Update For Franchise Growth Portfolio Investors

As noted in our email communication delivered on August 19th, 2019, IRM senior leadership met with Franchise Growth representatives in New York for several meetings in which IRM delivered the news that it had decided to reject the settlement offer (86% of last assessed market value of each asset) and move ahead with foreclosure proceedings, IRM has indicated that the only possible compromise it would consider on behalf of investors is a complete refund of 100% of original invested capital.

IRM has recently received official acknowledgment from Franchise Growth leadership that they have agreed to IRM's terms, and as such IRM has, for the time being, stopped all proceedings to foreclose on the secured assets, and is now in the process of drafting a Memorandum of Understanding between the parties.

While this is a very positive development for investors in this portfolio and represents a more promising potential financial outcome, IRM cautions investors to consider the following important factors;

Franchise Growth's ability to honor this agreement depends on its ability to raise additional capital, which it may be unsuccessful in doing.
Franchise Growth has excluded 2 of the most distressed investments from it's offer. These are properties located in Antioch, TN and Decatur, IL. Investors will retain all their rights in these locations, including but not limited to, foreclosing on the assets.
Franchise Growth has agreed to pay back 100 percent of net invested capital by RealtyShares investors. This is a nominal amount, not adjusted for inflation, not carrying any interest and is presented gross, before any legally imposed fees.
Whether successful or not, this process will likely take several months before investors can expect to actually receive any funds. This is to allow Franchise Growth time to raise additional capital, restructure the capital stack on all the participating assets, obtain all legally required approvals, and then for IRM to collect, process and distribute funds to each investor pro-rata.
To be clear, many of the considerations listed above would have also applied in the former settlement offer, but IRM chose to emphasize all possible risk factors to investors at this time as the negotiations with Franchise Growth advance.

The next step will be to execute an agreement between the parties, known as a forbearance agreement, that will allow Franchise Growth a time limited opportunity to raise the additional capital and restructure the debt. IRM expects to complete this phase in the coming weeks and will continue to update investors in this portfolio ad-hoc.

Respectfully,

IIRR Management Services, LLC

Most of my FG exposure is in the Decatur, IL restaurant carved out of this deal. Seems like the paths for that and Antioch will diverge from the rest of the FG pack from here. Many of us on here have been whipsawed by FG for a while, and I sincerely hope that the main deal they agreed to is successfully documented and executed so that people can get some closure.

Man, that's a bummer, sorry to hear it won't help you and also appreciate the comments about closure for the rest of us.

I was relieved to see this as well and that my 2 FG deals were not excluded. Granted, we still need them to raise capital in what could be a corroding real estate market. Hopefully they can, and fast.

I have 4 other deals that have gone Tier 3 so while this is welcome news to me, there's still quite a bit more work to be done by IRM to make us all whole or close to it.

[alan_p.e.]

In recent emails I had with IIRRM, they are still negotiating with FG to include the 2 investments (Antioch, TN and Decatur, IL)  being excluded from the settlement.

Fingers Crossed...... 

[babets]

Is anyone on the 1118 Chantilly Rd, Los Angeles investment?
Do you have any news on the house sale? distributions have been made regularly but capital should be returned next month and no updates have been posted recently so I wonder if any of you knows what is going on. Thanks

[JD]

Is anyone on the 1118 Chantilly Rd, Los Angeles investment?
Do you have any news on the house sale? distributions have been made regularly but capital should be returned next month and no updates have been posted recently so I wonder if any of you knows what is going on. Thanks

I am. It was the first RS deal I did actually.

I thought they sent an update a little while back that it was running a bit behind schedule but the sponsor was working on it and would continue paying interest until he got it sold. Does that ring a bell?

I can see from my email that the latest update was sent on July 10 so if you don't have that, lmk and I'll log in and paste the content of it here for you.

Edit - just reread it and it isn't quite as positive as I recalled. Just says it probably won't be ready by loan maturity date and they were working on options so you'd think we should hear something soon.

[babets]

Thanks! yes now I remember the note. I went to Zillow and the house is not listed for sale i wonder if constructions have stopped because of no buyers. The track record of the sponsor is quite good. lets see...

[DECA]

Same exact message for Long Island Family care in West islip NY.  Somehow this is an even bigger disaster than we expected.  I sure hope new management has some ace in he hole leverage for recovery,  but it sounds like they're just setting us up for terrible news.

Is the franchisee of Long Island Family Care in West Islip, NY affiliated with FG at all?  Is that business still operating? Do you have a link to the initial investment page?

i am on this deal (west islip family care). out of the 3 FG investment I own, this is the only one that has not been returning any capital yet. The other 2 are in default but at least they returned approx 50% of the initial investment plus some partial interest during the time. according to RS we should have resolution soon on FG with a new offer from FG or foreclosure.
The west islip one is strange as it seem the only one of my 3 operating but no news for a long time...


ironically an update just came from RS...if this will be the case, not bad! good luck to all.

On the July conference call with Bruce Arinaga of FG, he said that the West Islip AFC tenant had paid the rent the previous two months.  There has been no explanation from RS or IRM of why this investment is not paying out the monthly interest payments since it is now performing.

On the issue of IRM's negotiations with FG, their note that they have a tentative agreement from FG to repay 100% of investors original investments is a relief, but it raises the question of how IRM can justify the same result for various investments, which are at different stages of completion (or lack thereof).  FG, understandably, wants to treat all of deals as a "pool" (except the two that they are trying to exclude).  But IRM might want to consider that there are different sets of investors for each deal. A performing deal, like West Islip, should merit a return better than just a return of the original capital since it is a performing deal.  Others might realistically merit a lesser return.  Negotiating for the same return for all deals basically sacrifices some of the return that should be received for some deals to subsidize the return on other deals.

[Hindsight2020]

Same exact message for Long Island Family care in West islip NY.  Somehow this is an even bigger disaster than we expected.  I sure hope new management has some ace in he hole leverage for recovery,  but it sounds like they're just setting us up for terrible news.

Is the franchisee of Long Island Family Care in West Islip, NY affiliated with FG at all?  Is that business still operating? Do you have a link to the initial investment page?

i am on this deal (west islip family care). out of the 3 FG investment I own, this is the only one that has not been returning any capital yet. The other 2 are in default but at least they returned approx 50% of the initial investment plus some partial interest during the time. according to RS we should have resolution soon on FG with a new offer from FG or foreclosure.
The west islip one is strange as it seem the only one of my 3 operating but no news for a long time...


ironically an update just came from RS...if this will be the case, not bad! good luck to all.

On the July conference call with Bruce Arinaga of FG, he said that the West Islip AFC tenant had paid the rent the previous two months.  There has been no explanation from RS or IRM of why this investment is not paying out the monthly interest payments since it is now performing.

On the issue of IRM's negotiations with FG, their note that they have a tentative agreement from FG to repay 100% of investors original investments is a relief, but it raises the question of how IRM can justify the same result for various investments, which are at different stages of completion (or lack thereof).  FG, understandably, wants to treat all of deals as a "pool" (except the two that they are trying to exclude).  But IRM might want to consider that there are different sets of investors for each deal. A performing deal, like West Islip, should merit a return better than just a return of the original capital since it is a performing deal.  Others might realistically merit a lesser return.  Negotiating for the same return for all deals basically sacrifices some of the return that should be received for some deals to subsidize the return on other deals.

While the concept of treating assets separately has merit, unless the West Islip debt has been paying interest monthly, the deal is not performing, it is in default. I thought FG said that West Islip fell behind multiple months on the rent. If that's the case then even the asset itself isn't performing. Fighting to obtain par plus maybe a year of unpaid interest on a defaulted debt instrument, when par has already been offered, seems like a risky proposition to me, especially given who you're dealing with here. You definitely need to be prepared to proceed with foreclosure and all the costs/risks that come with it, to obtain upside above par.

[DECA]

Hindsight202, I agree that just getting back par would be a relief and probably the best we could hope for.  However, I doubt that FG will be able to obtain financing (with their track record at this point, who will provide that financing?).  So we will probably eventually wind up in the foreclosure scenario.  I hope I am wrong about that.

As to West Islip, maybe my terminology was inaccurate.  According to Arinaga (FG), the "asset" is performing.  Also, I received information directly from the AFC franchisee back in April that they had paid part of their rent that month.  It appears from Arinaga's statement that FG then probably had received full rent in May and June. Presumably that has continued (that AFC franchise is a well regarded business according to online reviews, so it should be capable of continuing to perform.)  While there were missed months of rent for Jan-March, I don't understand why FG is now apparently pocketing all of the rent from a currently performing asset and making no payments on the debt owed to RS investors. (So, yes, the "deal" is in default, thanks to FG -- but why isn't IRM pursuing those payments from FG on a currently performing  asset?)

[Hindsight2020]

This is part of the foreclosure consideration. IRM has the ability to exercise whatever remedies exist in the agreement/indenture with the FG entity if they don't repay principal and interest. It becomes a negotiation, for better or worse. IRM says pay us the interest, too. FG says no, if you want the interest you have to sue/foreclose as provided for under the note. IRM then has to choose between taking the full repayment of principal (albeit dependent on FG raising capital) or just proceeding with foreclosure and trying to then dispose of the property to get your money back plus interest. Potentially large costs/risks are introduced once you go the foreclosure route and take actual ownership. You need to be certain you can sell the building. Even though the AFC unit has good reviews, it has missed multiple months of rent at times, and that could make the sale more difficult and/or hurt the price. Moreover, you will incur legal, administrative and broker costs (as much as 6% alone) to get it sold. It could work, but lets say over the next 12-24 months we go into a recession.

I hear you on all of this. I'm just telling you how I think about that back interest after seeing who we're dealing with and the risks of foreclosure. You might wind up going down that route if FG can't raise capital, but IMO it's wise to avoid it if you can get par back.

[JD]

Thanks! yes now I remember the note. I went to Zillow and the house is not listed for sale i wonder if constructions have stopped because of no buyers. The track record of the sponsor is quite good. lets see...

Just got the notification that it's all paid off and we should be getting our principal and recent interest soon 

[babets]

Thanks! yes now I remember t
he note. I went to Zillow and the house is not listed for sale i wonder if constructions have stopped because of no buyers. The track record of the sponsor is quite good. lets see...

Just got the notification that it's all paid off and we should be getting our principal and recent interest soon 

Yes! 

[dwengca]

Anyone here have stake in Corey Place?   They have been paying consistently for about 6 month, but suddenly stopped paying about 2 months ago...  No word/updates since July.  I'm getting worried on this one.

[DigitalNomad]

First good news in a looong time 

River's Edge Townhomes 2nd Lien 9/13/2019

IIRR Management Services, LLC (IRM) has taken over the Asset Management and Fund Admin functions of this investment. Our goal is to provide timely and accurate updates on each asset as best as possible.

According to our findings, this asset is currently performing according to the original business plan. This property has been identified as a Tier 1 asset.

IRM has been researching past records, analyzing and updating the business models for this investment and attempting to reconcile the actual financial statements with the original projections. IRM asset managers make every attempt possible to recover investment funds and maximize returns on each investment.

IRM will occasionally utilize in house and third party legal services, forensic accounting professionals and other investigative means, where possible, to do so. IRM is bounded by the original operating agreement investors signed with RealtyShares, Inc., and works to maximize investors' returns to the extent possible under those agreements.

For RSN3724.1-1, RSL.2017A, 1564301 Bream Road - River's Edge Townhomes  (property), CK Realty Partners (borrower).

The borrower paid off the 2nd lien debt in full for all principal, current interest, interest reserve, and processing fee for 1564301 Bream Road - River's Edge Townhomes  (property). (RSN3724.1-1) on 08/09/19 to IRM on behalf of Realtyshares.

The borrower paid a total of $876,449.98 to IRM on behalf of Realtyshares, which included paying off the 2nd lien debt of $866,000, the current interest of $17,299.98, reserves of ($7,000), and a processing fee of $150 on 08/09/19.

Please allow 15-20 business days for disbursements to be processed by IRM on behalf of RealtyShares.

The sponsor was successful in the execution of the original business plan.

RM will supply additional updates regarding the status of this deal as it progresses.

The sponsor in this property is responsive to our communications. IRM believes that the sponsor will continue to act in the best interests of our investors. Please continue to monitor the Investor Dashboard for updates, and be sure to keep your bank account information up-to-date in order for our Fund Administrators to process payments accurately and avoid any delays or missed payments.

** Disclaimer: All information and financial statements above are presented on an as-is basis, as provided to our team members, and have not been independently verified by IRM."


IRM Asset Management Team

[JD]

First good news in a looong time 

River's Edge Townhomes 2nd Lien 9/13/2019

IIRR Management Services, LLC (IRM) has taken over the Asset Management and Fund Admin functions of this investment. Our goal is to provide timely and accurate updates on each asset as best as possible.

According to our findings, this asset is currently performing according to the original business plan. This property has been identified as a Tier 1 asset.

IRM has been researching past records, analyzing and updating the business models for this investment and attempting to reconcile the actual financial statements with the original projections. IRM asset managers make every attempt possible to recover investment funds and maximize returns on each investment.

IRM will occasionally utilize in house and third party legal services, forensic accounting professionals and other investigative means, where possible, to do so. IRM is bounded by the original operating agreement investors signed with RealtyShares, Inc., and works to maximize investors' returns to the extent possible under those agreements.

For RSN3724.1-1, RSL.2017A, 1564301 Bream Road - River's Edge Townhomes  (property), CK Realty Partners (borrower).

The borrower paid off the 2nd lien debt in full for all principal, current interest, interest reserve, and processing fee for 1564301 Bream Road - River's Edge Townhomes  (property). (RSN3724.1-1) on 08/09/19 to IRM on behalf of Realtyshares.

The borrower paid a total of $876,449.98 to IRM on behalf of Realtyshares, which included paying off the 2nd lien debt of $866,000, the current interest of $17,299.98, reserves of ($7,000), and a processing fee of $150 on 08/09/19.

Please allow 15-20 business days for disbursements to be processed by IRM on behalf of RealtyShares.

The sponsor was successful in the execution of the original business plan.

RM will supply additional updates regarding the status of this deal as it progresses.

The sponsor in this property is responsive to our communications. IRM believes that the sponsor will continue to act in the best interests of our investors. Please continue to monitor the Investor Dashboard for updates, and be sure to keep your bank account information up-to-date in order for our Fund Administrators to process payments accurately and avoid any delays or missed payments.

** Disclaimer: All information and financial statements above are presented on an as-is basis, as provided to our team members, and have not been independently verified by IRM."


IRM Asset Management Team

Yeah, I'm happy about this too - one of my only Debt deals that is performing and closing as expected.

Only wondering why, if it was paid off on 08/09/19 as they state, I haven't received my distribution+capital back yet. Sure hoping it comes in next week.

[JD]

Anyone here have stake in Corey Place?   They have been paying consistently for about 6 month, but suddenly stopped paying about 2 months ago...  No word/updates since July.  I'm getting worried on this one.

Yep, I'm on this one. Originally I thought it was because it's a quarterly payment but you're right, they were paying every month. However, if I look back, they didn't pay in April or December so maybe there is some fluctuation in their payment schedule.

Certainly if we don't see anything by the end of the month, it's worth reaching out to IRM.

[babets]

Hello, I have a question. Yesterday an updated k1 has posted but i already have filed my taxes. It seems to be quite different than the previous one. What should i do? Thanks

[cfojim]

Hello, I have a question. Yesterday an updated k1 has posted but i already have filed my taxes. It seems to be quite different than the previous one. What should i do? Thanks

You will need to file an amended return.  I would give it another few weeks before you do, to make sure there are no additional changes to the K-1's which might cause you to need to file another amended return.

[babets]

Thanks