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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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Saint

Has anyone received money on "333 Parnassus Avenue". On Mar-05, I received message on my dashboard stating:
"That's a wrap! RealtyShares is pleased to announce that the property has sold and your final payment should be distributed to you shortly.". But it has been over two weeks and I have not seen anything come to my bank. Don't understand why it should take that long

daletucker50

I received 1099 but it was incorrect.  RS said they would be updating and sending asap.  I did just get a response from them that they would show up "shortly"...

dwengca

Quote from: Saint on March 16, 2019, 04:38:13 PM
Has anyone received money on "333 Parnassus Avenue". On Mar-05, I received message on my dashboard stating:
"That's a wrap! RealtyShares is pleased to announce that the property has sold and your final payment should be distributed to you shortly.". But it has been over two weeks and I have not seen anything come to my bank. Don't understand why it should take that long

A couple of the investors on here stated that they have received their payout.  However, I have not myself.   In fact, my earning update on the RS site now says "failed" for 333 Parnassus.   It used to say "crediting", but I never got the money.

I have emailed them several times, and all I have gotten back so far are the generic template replies says they are working on it.  Lame.

ramesh

Today I inquired about a couple deals I haven't received January payments for.   FWIW, here are the cursory responses I received.

Church's Chicken, Westminster CO  RS had notified me a couple weeks ago saying the sponsor was in default and that they are attempting a negotiated settlement with the sponsor (Franchise Growth) instead of foreclosing.  In response to my request for an update this morning
 
QuoteAn update in regards to this call is coming shortly.  We appreciate your patience

Camden Multifamily, Camden, SC In early March, the sponsor had claimed they had made a Jan payment and  RS claimed they hadn't received it!  Anyways, I asked again, and here was their response:
QuoteWe will provide an update on the status and distributions of the property as soon as it becomes available from the sponsor. When notifications are posted in your dashboard, an email will also be sent to alert you. We appreciate your patience.

I have also pinged our Assset Managment team to ask if they can provide a new update






ramesh

More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

QuoteThe borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.

ramesh

Quote from: techOnFIRE on March 20, 2019, 12:37:54 PM
Quote from: ramesh on March 20, 2019, 11:24:47 AM
More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

QuoteThe borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.


Moments ago recieved the same message verbatim for Church's Chicken Deland FL.  Seriously wtf?

Dodgy.  Granted it's the same sponsor and the same franchisee, but does it make sense to experience the same issue ("construction estimates") in two different deals?  Six months ago FG switched to a new developer, Embree Group, for the Westminster Church's Chicken deal.  Is Embree the developer for the Deland, FL property also? 

ramesh

Quote from: John on March 20, 2019, 01:19:13 PM

I am not in the Deland, FL or Westminster, CO deals, but anyone that is should contact RS to ask how much of the loans have been disbursed. RS might have some left. The sponsor is required to maintain a certain equity investment in these deals, and the loan draws are conditioned on hitting certain construction thresholds. Each disbursement should require a capital contribution from the sponsor to maintain required equity exposure.

I have sent them five emails in the last 4 weeks requesting precisely this information, and just did so again thirty minutes ago.  I get back vague responses, but this specific question is ignored.

Chicago81

Hi everyone - I am glad to have found this forum.  According to RS notifications, my investment in Church's Chicken - Winston Salem, also appears to be in default, and I received the same message today:

"The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower."

This is surprising considering that the borrower (Franchise Growth LLC) was still within the interest reserve period and construction was supposed to be complete by now.  Instead, according to RS, the borrower suddenly realized that their proformas for many of their remaining properties (in different states) were so far off that they could not even begin construction.

Here are my thoughts and concerns; maybe you all see something that I am missing:

1.  I worry this was a scam from the onset.  The borrower has virtually no presence online and the coincidence of all projects defaulting (without construction having begun) due to prospective construction costs after construction was supposed to be complete is hard to believe.

2.  Even if this was not a scam, and the borrower was extremely unlucky or inept, I worry that there may have been fraudulent transfers.  I am specifically concerned with funds being diverted from the intended project (Winston-Salem) to other projects or to individuals (e.g., excessive compensation, dividends). 

3.  RS needs to explore whether to pull the plug on any further distributions and, if there is evidence of fraud, pursue the borrower and be candid with investors.  It is hard to imagine how RS is fulfilling its obligations to investors considering its outright refusal to provide information (e.g., I sent five emails, offering advice, without a response).  Not to mention the possibility that RS may have solicited us to fund a fraud (and profited from it via fees).

For the same $10k, I wish I had played in the World Series of Poker instead of walking into this mess.  But I am relieved to have found others in the same boat.  Fingers crossed these issues can be resolved.  If they can't, I am studying up on taking a bad debt loss deduction.

Best,

kt1984

I received the following notification on Captain D in Shelbyville KY from Franchise Growth.

The borrower has informed us that the completion of the property has been delayed because the borrower has insufficient funds to complete construction. The borrower informs us that he has been attempting to raise additional equity to enable the completion of the construction. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. We will update you after this research is completed and if we receive relevant information from the borrower.

And the following notification on American Family Care in West Islip NY from Franchise Growth.

The borrower has informed us that the tenant is now 4 months in arrears on rent payments and is attempting to negotiate a reduction in rent. We will update you if we receive further information on the outcome of these negotiations. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. We will update you after this research is completed and if we receive relevant information from the borrower.


This is extremely poor and shoddy background investigation by RS on the sponsors. To me, it looks like- all Franchise Growth deals are now on hold because they have run out of money. Shelbyville loan was supposed to mature in Feb so how is the sponsor behind in construction and why did RS not know about this in advance. The American Family care has been in operation for a while now and has been sitting on the market and now the tenant is attempting a rent reduction- I have a bad feeling that this will end the same way as the Decatur IL Doghaus and get closed.  I am kicking myself for putting money with RS in supposedly safe NNN investments. John- any news on when do we get the money back from the Taylor MI deal until I get that money in my bank- you never know.

kt1984

John- is there any legal action that we as investors can take against Franchise Growth given almost all the deals are on hold/facing problems. Also- what is the absolute worst that can happen in some of these deals in case all the funds have been disbursed? Do you think we can have any 10 cents on the dollar type scenarios? The worst case scenario would be they just sell the land and the building is worthless which would in most cases net 10 cents on the dollars. I hope we can at least get 50-75 % back, but not sure if that is being optimistic.

finmaster

#410
Not sure what RS was talking about...   Captain D in  Shelbvylle is available for sale here and looks complete? unless it's a rendered graphics.  https://www.embreegroup.com/properties/   https://www.loopnet.com/Listing/1709-Midland-Trl-Shelbyville-KY/13750099/

finmaster

You are right about that. Thanks.

Quote from: John on March 21, 2019, 04:21:22 AM
Quote from: finmaster on March 20, 2019, 09:05:21 PM
Not sure what RS was talking about...   Captain D in  Shelbvylle is available for sale here and looks complete? unless it's a rendered graphics.  https://www.embreegroup.com/properties/   https://www.loopnet.com/Listing/1709-Midland-Trl-Shelbyville-KY/13750099/

The franchisee still shows it as coming soon. These deals regularly get pre-marketed. The best way to understand the status of construction is to Google Map the address, go to ground view, and look for surrounding businesses. Then call one and ask an employee about the construction status of the Captain D "across the street" or "next door", whatever the case may be. That's how I found out the Taylor, MI Dog Haus wasn't even being built--I actually spoke to someone at the Pier 1 next door. I knew it months before RS told investors.

dmk395

Just an update...I did receive months of back dividends today, which was great news

CushLash

All-

I am growing increasing frustrated by the lack of communication from Realty Shares - I basically received an email from them today regarding one of my investments (RS 277- Lynnview Apartments) stating the sponsor is current with their payments but they are delayed in making distributions because they are transitioning to a third party Fund Administrator.  This concerns me even more in that I can understand a 30 day delay or so with a transition as they want to get things right with flow of payments, but its now been over 90 DAYS since the last distribution was made -- I can't help but wonder if they are taking the payments from sponsors and using them to fund the operations of their business while they look for an exit/acquirer rather than distributing these funds to investors.  Just all feels very fishy.

In an effort to take some action, I reached out to Mark Roederick (https://crowdfundattny.com/about/) yesterday to discuss options. From my research, Mark seems to one of the preeminent legal minds focused on crowdfunding real estate.  The range of options we talked about were as simple as writing a demand letter all the way to filing a class action lawsuit.  His recommendation where we landed
after talking through the options was to engage his company to write a letter to Realty Shares demanding that they take action - part of his thinking was that given that he is well known in real estate crowdfunding circles, a letter coming from him may carry more weight than if one us individually drafted a demand letter on our own.

The only kicker was that he wanted $2,500 as a retainer for his efforts -- I'm not super hopeful that a letter from Mark will have an impact, but I'm also tired of sitting around on my hands doing nothing while Realty Shares turns it back on investors so would be willing to go this effort if there was a 5-10% chance this might help shake things loose.  Just thought I'd throw it out there to see if there were other investors who were interested in joining together to engage Mark?  I figure if we could round up ~20 people, we could each kick in $100 and fund the letter.  I hate to throw good money after bad, but $100 seems well worth it.

Any thoughts from others on the board?

princyraj

I finally see the principal being credited/returned  (Post RS meltdown) on one of the investments (Villas De La Luz). I hope at least the logistics issues settles down at RS soon.

Dgilpin

Update on Detroit MSA dog house in Taylor MI:

"The sale and assignment documents have been signed, notarized and overnighted to the attorney who is closing on the sale. We will hopefully close next week. RealtyShares will keep you updated."

ramesh

Quote from: ramesh on March 20, 2019, 01:24:24 PM
Quote from: John on March 20, 2019, 01:19:13 PM

I am not in the Deland, FL or Westminster, CO deals, but anyone that is should contact RS to ask how much of the loans have been disbursed. RS might have some left. The sponsor is required to maintain a certain equity investment in these deals, and the loan draws are conditioned on hitting certain construction thresholds. Each disbursement should require a capital contribution from the sponsor to maintain required equity exposure.

I have sent them five emails in the last 4 weeks requesting precisely this information, and just did so again thirty minutes ago.  I get back vague responses, but this specific question is ignored.

My last email elicited the following response:
QuoteAt the moment we are a small team working hard on getting the updates from the sponsors, including distributions. We will provide more information on the status of the property and distributions as soon as it becomes available. Please continue to check your dashboard for updates. At this time, we have provided all the information we have.

Please rest assured that our Asset Management team continues to look after your investments. They post updates to your dashboard when they have relevant news to report. We apologize for the delayed response and appreciate your patience.

No surprise there.  The asset management team doesn't want to answer the question for whatever reason, and the poor customer service folks are stuck between them and irate clients.  Reinforces my view that

  • the operating team is overstretched,

  • the current team is doing their best given the screw-ups of their past leadership, and


  • as frustrated as I am,  nothing good will come from my leaning any harder than I already am
If the situation changes I will revisit this assessment.

finmaster

Which ones of your investments are not performing?
For now my main one is Captain D in Shelbvylle. I also have Texarkana Multifamily Bridge Loan Tranche which was supposed to close a few months ago but they keep postponing the closing.



Quote from: John on March 24, 2019, 06:01:12 PM
I have several remaining investments with RS. 2-3 of them are not performing, and I think at least one of them has been marred by sponsor fraud. Once RS is done with their workout process I will gladly pursue to the ends of the earth any entity that I think has committed fraud or negligence. This is purely my opinion--but I believe that RS didn't fulfill its obligation to investors to properly manage the investment I'm discussing here. The sponsor provided irregular amateur financial reporting on Excel. It was obvious not long after closing that the sponsor never implemented the business plan. Yet RS checked the box and even EXTENDED the maturity of the obligation despite knowing that the borrower obtained this capital under a fake business plan.

Paul20

IMO, Just hearing the name of the investment personifies the irrational exuberance of real estate crowdfunding.........."Texarkana Multifamily Bridge Loan Tranche"


Zenz

Did anyone else have their final distribution of Villas de la Luz deposited in your bank account and then reversed out of your bank account?  I was initially quite happy this investment cashed out early and was able to return all principal with a return to investors this month, but now I'm alarmed that the deposit has been reversed by RealtyShares.

Edit: I see RealtyShares sent an email that there was a mismatch for some investors between the ACH amount credited and the amount calculated in the Dashboard, so they reversed all distributions for Villas de la Luz and will re-distribute funds next week.