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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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danielj

Hi everyone. I'm new to this thread, but intend to check in every day now.

I'm looking at losing my principal in:
Louisville MSA Captain D's Tranche 2
Long Island American Family Care Tranche 3
Church's Chicken Winston Salem Tranche 1

For all three, I received the form update on June 14 that begins:
Since the last update IIRR Management Services, LLC (IRM) has taken over the asset management duties... IRM is in the process of analyzing the appraisal; however, the preliminary finding indicates that your investment will incur a substantial loss.
~

I'm going to peruse all the past messages on this board, and would like to start calling RS to demand answers, but am unsure of what exactly I should say to them or what specific answers I should be demanding. (This was my first venture into a real estate platform, so I'm inexperienced.) If anybody has the patience to suggest a few effective sentences, I'll take them!

I would also be interested in chipping in for a lawyer in some sort of group action.

crossfire

I am in for hiring a lawyer for below deals.

405 Alberto Way 2nd TD, Los Gatos, CA
Louisville MSA Captain D's Tranche 2, Rock Hill, SC
16620 Linda Terrace, Pacific Palisades, CA

JD

I think it's time to start a thread and/or spreadsheet around exactly which deals folks on here need to pursue.

I am concerned that each deal and at the very least, each negligent sponsor, is going to require a separate lawsuit. That could also mean separate retainers, bumping costs significantly.

If we start aggregating who needs which deal (s) represented, we can start with the biggest offender (likely FG) and work our way down from there. Plus, whoever contacts a lawyer will be able to give some hard numbers as to number of plaintiffs.

I'm guessing this will need a new thread where the first post is updated by # deals and client counts as people post their list to it? I'd be more than happy to set that up and own it, if people think it's a good idea. And certainly open to alternative approaches as well.

Hindsight2020

Maybe start with a new thread called Franchise Growth, post the link, and have everyone with an FG deal list it there?  Reply with name of deal, amount of loan, maturity, last payment. Then we could create a list from those submissions.

ramesh

A response from RealtyShares to a two week-old email requesting info on Church's Chicken, CO.

Thank you for your email. IRM recently took over day to day operations of the RealtyShares' portfolio. We are analyzing the situation with respect to the Franchise Growth portfolio. This portfolio includes multiple deals across different locations and many individual investors.

We have reasons to believe that the sponsor did not execute well on the original business plan, and as such, we now estimate that potential, partial or complete, losses are possible in this portfolio. We wanted to share this information with you without delay.

Our asset managers are in communication with the sponsor. We have started an investigation process that includes on-site inspections of some locations, forensic accounting research of financial statements and collecting documentations and materials relevant to the original offering as well as the execution of the business plan.

IRM plans are to collect all available information, review all possible alternatives, including possibly taking legal action against the sponsor, and share what we believe is the best course of action for the investors in this deal. We plan to hold a Webinar to communicate these results to the entire investor group as soon as the research phase is completed. The Webinar is planned as an interactive opportunity and will include Q&A with management, asset manager and legal review.

GADAWG

I followed up on the recent note received on FG - here is what Eric told me via email

[/iThere are no specific dates yet. We are expecting the webinar to be within a few weeks. Investors will be notified on when and how.

Asset management is working on updating in regards to appraisals.

There was a delay in the construction reserve distributions due to some inaccuracy's in the numbers. They are expected to be deployed soon. 

Redeemer

Quote from: crossfire on June 19, 2019, 07:26:06 AM
I am in for hiring a lawyer for below deals.

405 Alberto Way 2nd TD, Los Gatos, CA
Louisville MSA Captain D's Tranche 2, Rock Hill, SC
16620 Linda Terrace, Pacific Palisades, CA

m e too on 405 Alberto Way

Beat_The_Fraud

Received the Construction reserve back for the Church's chicken investment in DeLand, FL. It's approximately 41 cents to my dollar investment is what they have credited back

JD

Well, that's a start.

Based on this and ramesh's post, I'm inclined to hold off on consulting lawyers a bit longer.

GADAWG

Received a number of deposits into my bank account from RS - no notifications, updates, emails or earnings notes received from RS (I know, I know - it is really hard to believe), but I think they are primarily from FG investments. 

I expect that they will post updates sometime in the near future and adjust dashboard so people can keep up with what is going on.

mspringer

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.

mspringer

RS SERVICING LLC BATCH 26A FG DEFAULT

Not sure if this is good or bad, but I just saw this was deposited today.  No info on the RS website though.  The amount is just under my normal 3 month deposit for an FG investment.  My hope is it is for the missed deposits (last one was Jan'19) and NOT some kind of final payout.

JD

Quote from: GADAWG on June 20, 2019, 03:24:55 AM
Received a number of deposits into my bank account from RS - no notifications, updates, emails or earnings notes received from RS (I know, I know - it is really hard to believe), but I think they are primarily from FG investments. 

I expect that they will post updates sometime in the near future and adjust dashboard so people can keep up with what is going on.

x2

I believe it's for my FG investment construction reserve as well. Not quite $0.41 cents on the dollar in this case, closer to $0.37.

I don't imagine this is all we'll get back so it should hopefully be the start of recovered funds.

mspringer

Quote from: JD on June 20, 2019, 05:33:52 AM
Quote from: GADAWG on June 20, 2019, 03:24:55 AM
Received a number of deposits into my bank account from RS - no notifications, updates, emails or earnings notes received from RS (I know, I know - it is really hard to believe), but I think they are primarily from FG investments. 

I expect that they will post updates sometime in the near future and adjust dashboard so people can keep up with what is going on.

x2

I believe it's for my FG investment construction reserve as well. Not quite $0.41 cents on the dollar in this case, closer to $0.37.

I don't imagine this is all we'll get back so it should hopefully be the start of recovered funds.

Mine is closer to $0.02 on the $1, as the Orlando Church's Chicken was basically completed.  I guess I can hope there is a bit higher ask in the sale as it is move in ready now.  Only thing missing is the smell of chicken grease...which is certainly more appealing than the smell of these FG deals.

ramesh

I received a deposit this morning.  This is almost certainly my construction reserve from Church's Chicken, CO. About 47c on the dollar, which is on the nose based on the numbers they sent out four weeks ago.  Hopefully they will be able to recover something more from the lien on the acquired land.

Mark

x3

I got $3800 back on $10k, so 38c on the dollar for Church's Chicken in Winston-Salem NC.

This should be the construction reserve, so we are still waiting on the resolution of the actual property and remainder of loan that left RS and is in FG's hands...

I'm actively reading and very interested in the effort of keeping FG from buying back their property for pennies on the dollar that is being discussed in this thread.  Thanks for the effort and keep up the good work.  The communication on here is much better than RS and the new owners and is much appreciated.

Dgilpin

Yes the recent message cited here about a webinar sounds much more promising than the one we got last week.  My only questions is why the F*** did it only go to some Investors?  I've gotten no communication since being told to prepare to lose my ass.  This is the worst part of this situation is the underwhelming communication by RS.  I guess we can wait and see what happens now.

No return of construction reserve on Taylor MI dog house yet here.  Also nothing from Long Island AFC,  but I think all capital was deployed in that deal.

cleon

Lots of distributions from FG stuff today.  About 1/2 of initial investment.  No notifications.  Assuming it's a final payment at -50% ROI...

kt1984

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.


Sam

Anybody invest in the Taylor Fitzpatrick, Student Housing at College Town, Arizona deal? It's the one deal out of 17 that is underperforming from the DME Fund. I'm trying understand why Taylor Fitzpatrick and this deal sucks so bad, given Student Housing is a pretty defensive demographic.

Taylor Fitzpatrick Capital advertised a 16.5% IRR objective and successfully raised $2,900,000 to rehab the property.

Here's what they said they'd do with the money:

College Town Tucson ("the Property") is an 88-unit, 247 bed, student-housing apartment complex in Tucson, Arizona, located 7 blocks from the University of Arizona campus. The Property is comprised of four two-story buildings with community amenities including a clubhouse, fitness center, swimming pool, picnic area, and landscaped common areas throughout the complex. The Property was built in 1972 and partially renovated in 2006 and 2013.

The Sponsor intends to reposition the Property with a $1.73 million (1) renovation program that is to make improvements to the common areas and amenities, renovate and update 53 of the 88 units, update HVAC and mechanical infrastructure, and rebrand the Property. The Sponsor anticipates the renovation program to be largely completed within 15 months of closing.

As part of the renovation plan, the Sponsor intends to upgrade floors, kitchens, and bathrooms as well as outfit each unit with modern furniture, 55" smart TVs, in-unit and property-wide wifi, wiring to high-speed Gigabit Ethernet internet, robust DirecTV packageincluding NFL Sunday Ticket, and in-unit washer/dryers. Property-wide renovations are to include improvements to exterior paint, landscaping, etc.

Status as of 4Q2018 DME Fund update:

Student Housing at College Town is currently performing below plan and is on our watchlist. After an underwhelming response to a capital call to finance operations and capital improvements, the Sponsor proposed to exit the investment in order to avoid default on the senior loan.

We have requested a BOV from the Sponsor in order to better assess options available for RealtyShares investors. Based on preliminary discussions with market participants, the Sponsor believes that we will incur some loss on this investment.


Regards,

Sam