Thoughts On RealtyShares Closing Its Doors To New Investors

[JD]

Thanks Ramesh - definitely good to get as many experiences as possible reported here 🙂

[cfojim]

RS176 has an amended K-1 dated 9/19/19, which shows the income missing on the original version.  No notification of this amendment has been posted yet. 

[JD]

Chantilly principal + accrual just posted, along with 2 smallish monthly distributions.

Definitely encouraging but still a long way to go to make up the gap in total monthly distributions.

[Sam]

Hi Folks,

I spoke to the CEO of IRM (Iintoo RREAF Management) the other day and here are some bullet points:

* IRM was created specifically to be the management company for the remaining RS portfolio of deals. IRM was hired by RS.

* There were about ~255 deals they were managing several months ago, and now there are about ~225 today.

* Their goal is to wind everything down within 24 months, but obviously nothing is concrete.

* They did notice some sponsors try to take advantage of RS shutting down (RS is still technically alive, but owe money to creditors) to not follow the terms of their contracts. But IRM has been diligent in tracking down these bad sponsors and making them follow through on the respective agreements. They have lawyers and a team.

* They have a guy w/ 20+ years of experience managing the DME fund (17 deals).

* Believes DME fund will show a positive IRR and be wound down in about 24 months as well.

* IRM will fully take over the RS portfolio fully come Jan 1, 2020. I asked what's the difference between what they are doing now and Jan 1, 2020. He said some minor stuff that still needs to be finalized, but we investors shouldn't notice the difference. For all intents and purpose, IRM is managing the remaining portfolio.

Overall, I came away from the call feeling good that IRM is doing the best it can to actively manage the remaining deals to completion in the best interest of investors. Iintoo has been around for ~4 years and RREAF has been around for decades.

There are obviously going to be bad deals and bad sponsors, which will negatively hurt investors. For example, I tried contacting Taylor Fitzpatrick (http://www.taylorfitzpatrick.com/), the Sponsor who is going to lose me and other investors in the deal 80% - 90% on the Arizona Student Housing deal.... but no response. Their main contact info doesn't work. If anybody has any ideas, let me know.

It feels like IRM is highly motivated to manage the portfolio as well as possible because they earn fees and want to bring new investors onto the Iintoo platform. If they screw up the management process, they'll have a harder time getting existing investors. Fingers crossed for the next 24 months.

Regards,

Sam

[JD]

Hi Folks,

I spoke to the CEO of IRM (Iintoo RREAF Management) the other day and here are some bullet points:

* IRM was created specifically to be the management company for the remaining RS portfolio of deals. IRM was hired by RS.

* There were about ~255 deals they were managing several months ago, and now there are about ~225 today.

* Their goal is to wind everything down within 24 months, but obviously nothing is concrete.

* They did notice some sponsors try to take advantage of RS shutting down (RS is still technically alive, but owe money to creditors) to not follow the terms of their contracts. But IRM has been diligent in tracking down these bad sponsors and making them follow through on the respective agreements. They have lawyers and a team.

* They have a guy w/ 20+ years of experience managing the DME fund (17 deals).

* Believes DME fund will show a positive IRR and be wound down in about 24 months as well.

* IRM will fully take over the RS portfolio fully come Jan 1, 2020. I asked what's the difference between what they are doing now and Jan 1, 2020. He said some minor stuff that still needs to be finalized, but we investors shouldn't notice the difference. For all intents and purpose, IRM is managing the remaining portfolio.

Overall, I came away from the call feeling good that IRM is doing the best it can to actively manage the remaining deals to completion in the best interest of investors. Iintoo has been around for ~4 years and RREAF has been around for decades.

There are obviously going to be bad deals and bad sponsors, which will negatively hurt investors. For example, I tried contacting Taylor Fitzpatrick (http://www.taylorfitzpatrick.com/), the Sponsor who is going to lose me and other investors in the deal 80% - 90% on the Arizona Student Housing deal.... but no response. Their main contact info doesn't work. If anybody has any ideas, let me know.

It feels like IRM is highly motivated to manage the portfolio as well as possible because they earn fees and want to bring new investors onto the Iintoo platform. If they screw up the management process, they'll have a harder time getting existing investors. Fingers crossed for the next 24 months.

Regards,

Sam

Thanks Sam - it's nice to have a high-level communication and summary like this.

The 24 month wind-down sounds great but I do wonder how they'll achieve that with the handful of deals that are slated to take 5-7 years and only closed in 2018 (I've got 2 set for exit in 2023 and 1 in 2025). Maybe they'll work on getting those sponsors to refi.

Sorry about your ASU deal; I always thought the student housing offers on RS were some of the better ones all around. I don't know what other recourse there would be short of foreclosure/liens.

[stingray]

@Sam--I used SEC filings to track down your man Jason Taylor (of Taylor Fitzpatrick).  His phone # is 480-283-7798.  He is answering it.

[sdnerd]

A bizarre situation with one of my debt investments -- Wytheville, VA Captain D's.  The sponsor paid off 95% of the principal, and despite repeated notices from IRM refuses to make us whole!  Here is the notification from IRM.

For the investment numbered: RSL.2017A.148 and identified as East Commonwealth Drive - Captain D's (Wytheville, VA), IRM has determined that RealtyShares has made a common clerical error as described in a letter to the Sponsor below:

"On May 13, 2019 RealtyShares Inc. sent you a payoff letter for East Commonwealth Drive - Captain D's (Wytheville, VA) – RSL.2017A.148 – for a payoff on May 16, 2019. That letter included a $66,887.34 credit for funds remaining in the Rehab Reserve and a credit for $4,736.33 in the Interest Reserve. The total credit was $71,623.67. RealtyShares received the funds for the payoff of the loan on May 16, 2019. Once the payoff funds were received, RealtyShares' fund administrator began the reconciliation process and on July 3rd, 2019, reported that the payoff was $71,623.67 short. The shortage was caused because neither the last draw from the Rehab Reserve (February 2019) nor the final payment from the Interest Reserve (March 2019) were reflected in the reserve balance ledgers that are routinely used to prepare pay off calculations."

Since then, IRM has reached out and discussed the matter with Mr. Daniel Epstein, the executive in charge on behalf of Invest Squared, a real estate firm based in New York that also includes Mr. Yonah Kaufman and Joseph Kaufman among its executives.

Despite our efforts, including legal notices sent on on July 9th, July 15th, July 26th, and August 8th of this year, Mr. Epstein has refused the pay the outstanding debt, offering a 10% settlement which IRM rejected on behalf of investors.

IRM now plans to hand over the debt to an established collection agency, including all rights to pursue Invest Squared and its executives in a court of law, on behalf of investors, and will post an update once that process is complete.

I'm in on that deal as well. The way I read it/interpreted it is both parties effectively shook hands and concluded the deal was finalized. Then nearly 2 months later (mid May -> early July) the error was detected and they went back to get the money but no longer have any hold on the property:

"received the funds for the payoff of the loan on May 16, 2019. Once the payoff funds were received, RealtyShares' fund administrator began the reconciliation process and on July 3rd, 2019, reported that the payoff was $71,623.67 short."

I don't live in that world, so a nearly 2 month gap between final pay off and reconciliation may be normal... but seems long to me given the surrounding RS circumstances.

I'm just assuming I'm not going to get anything else out of that deal.

[dwengca]

I emailed them on why I have not been getting distributions on some of my regular performers in the past 2 months.  And this is the response I got.   I did appreciate the fast response, however, the response on New Jersey Multi and Philadelphia Multi fund really concerns me.  I have $40k into both of those funds.

eric sullivan
11:34 AM (8 minutes ago)
to me

Hi Dennis,

In regards to Corey Place, This is a common equity investment, according to the operating agreement the sponsor is not obligated to pay a distribution to common equity investors unless there is excess capital. We recently spoke to the sponsor and is planning on making a another distribution payment to  investors in the next month or so. We will keep investors informed.

In regards to New Jersey Multi Fund 2, we are aware of the delinquency and contacted the sponsor in regards to the amount owed. They have been responsive. We will reach again today.

In regards to Philadelphia Multi fund  VII, same sponsor as New jersey and same course of action. This is a pending situation and our asset management team is working on this. The sponsor has been responsive to our outreach.

[babets]

Hi all, i mentioned briefly on a previous post that i am having trouble getting payments in my usual bank account. RS is claiming that they get an error message when trying to send me money. The error says invalid bank account. They made me set up a new profile in the bank detail section, with the same bank details, but it appears to have trouble again. Is anyone experiencing this issue? I believe is an error on their end

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

I just got a notification that the River's Edge investment is closed and all principal has been returned to the investors but I still haven't received my principal back.

@DigitalNomad, did you?

[DigitalNomad]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

I just got a notification that the River's Edge investment is closed and all principal has been returned to the investors but I still haven't received my principal back.

@DigitalNomad, did you?

Nope nothing yet. I also got that notification.

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

I just got a notification that the River's Edge investment is closed and all principal has been returned to the investors but I still haven't received my principal back.

@DigitalNomad, did you?

Nope nothing yet. I also got that notification.

Thanks. They just followed up with a new notification as I'm sure you saw. A bit of a screw up there but no real harm done.

[stingray]

@sdnerd and @ramesh:  Regarding your Wyethville, GA Captain D's investment, do I correctly understand that RS released a lien without verifying that the loan was fully paid, and then discovered that they had been underpaid by about $71K?  If those facts are true, in my view such a mistake is grossly negligent.  No reasonable businessperson would allow that to happen with his or her own money.  If those facts are true, you should take RS to small claims court to recover your share of that $71K.  Please PM if you would like names/addresses of corporate defendants.  **Not Legal Advice**

[rs_thoughts]

hi stingray

i think my issue is they have not "wholly" clarified whether they released the lien/or maintained the lien. All they said in their note was that they sent the issue to a debt collection agency.  But my question was "why send it to a debt collection agency??" when u can easily hang the lien on them and get back the money (since the facts are true about the miscalculation). Debt collection agencies are typically for "unsecured" credit. Consequently, the setup seems suspect, which highlights they potentially gave up the lien without getting the full payment. But unclear is certainly the issue

[ramesh]

@rs_thoughts,  the question of whether IIRM has released the lien on the Wytheville VA  Captain D's is a good one to get clarity on.  Have you written to Eric Sullivan at the iirrms.com address inquiring about it? 

[ramesh]

@rs_thoughts,  the question of whether IIRM has released the lien on the Wytheville VA  Captain D's is a good one to get clarity on.  Have you written to Eric Sullivan at the iirrms.com address inquiring about it?

I wrote to Eric Sullivan asking about this.  His response: "We do not have the lien. "

[rs_thoughts]

thank u ramesh. i wish u well and hope everything works out for you on your remaining deals.

[DigitalNomad]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

I just got a notification that the River's Edge investment is closed and all principal has been returned to the investors but I still haven't received my principal back.

@DigitalNomad, did you?

I just got the principal paid back

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

I just got a notification that the River's Edge investment is closed and all principal has been returned to the investors but I still haven't received my principal back.

@DigitalNomad, did you?

I just got the principal paid back

Oh nice. I haven't yet but suspect that means my bank will post it in a few hours when deposits usually come in.

Thanks for letting me know!

[andyo]

I'm sure everyone else here knows this but WHO IS the contact at RS/whoever that actually will answer questions on specific investments?