News:

To return to the forum homepage, please click the banner at the top of your browser.

Main Menu

Thoughts On RealtyShares Closing Its Doors To New Investors

Started by Sam, November 07, 2018, 11:29:29 AM

Previous topic - Next topic

WengerTodd

Quote from: Sam on January 07, 2020, 09:21:34 AM
WengerTodd- Do you have investments that are losing money? If so share your thoughts and analysis to help and get help.


No, not really. I don't mean to be smug, but before I invest in something, I really beat a dead horse. But I usually invest in stocks and things that are tangible (physical real estate).



Quote from: Sam on January 07, 2020, 09:21:34 AM
Deals are structured in different ways, and investors need to be aware of how they are structured to know their risk and return.

We are trying to determine whether sponsors are acting below board, or whether the deals were simply bad investments.

Many people posting here are those who have lost money and trying to figure things out. But most of the deals have made money, you just don't hear from them.

I suppose that's true... but I wish they would post their positive feedback as well, otherwise, I can only assume it's only negative, and not just the vocal minority.

JD

Quote from: WengerTodd on January 07, 2020, 07:43:04 PM
Quote from: Sam on January 07, 2020, 09:21:34 AM
WengerTodd- Do you have investments that are losing money? If so share your thoughts and analysis to help and get help.


No, not really. I don't mean to be smug, but before I invest in something, I really beat a dead horse. But I usually invest in stocks and things that are tangible (physical real estate).



Quote from: Sam on January 07, 2020, 09:21:34 AM
Deals are structured in different ways, and investors need to be aware of how they are structured to know their risk and return.

We are trying to determine whether sponsors are acting below board, or whether the deals were simply bad investments.

Many people posting here are those who have lost money and trying to figure things out. But most of the deals have made money, you just don't hear from them.

I suppose that's true... but I wish they would post their positive feedback as well, otherwise, I can only assume it's only negative, and not just the vocal minority.

So if you want positive feedback, I can tell you that of my 12 CRE investments on CrowdStreet, only 1 is under-performing. A handful haven't started generating any income yet but the ones that have are generally doing excellent.

Of my 26 RS investments, 6 are in trouble or dead in the water and the others are treading water or performing fairly well. But overall, it's a loss on RS - that's not say there aren't winners, just too many losers and no significant exits to make it a net positive so far.

If you look back at this thread, probably 5 pages or so, you can see tallies where people mention how many RS investments are performing, under-performing, failed/fraudulent.

If you look even further back (and I know there's a lot of content here) you will see plenty of discussion about hiring lawyers, class action lawsuits, etc... We haven't had enough encouraging momentum from chats with lawyers to believe that a lawsuit would be worthwhile as of yet. And while the losses are painful, I think we're all kind of borderline as to what a lawsuit would cost versus what we could recover. Now if Franchise Growth defaults, that could tip those scales.

Also back in the thread you'll find links to filing complaints with the California Attorney General and the SEC - everybody should be doing this. That would at least put the Bernie Madoff potential out there.

I had a thought that we should reach out to the VC firms that invested in RS to see if they wanted to pool resources in going after RS, as I agree with you that this is clearly fraud of some kind. Then again, if the VCs thought there were grounds for trying to recover their funds, wouldn't they be doing something already?

There's my brain dump for you. I am pretty mad, to be frank. I don't like people stealing from me and that's what's happened here - it's clearly theft/fraud at potentially multiple levels. At this time though, not enough pieces have lined up for me to pull the trigger on enlisting outside help... but it may not take much more to change that.

On a lighter note, I lived in San Antonio from 2015-2018 and at that time it was supposedly the second fastest growing major metropolitan area in the US (Austin being the first). You should do very well with your home there so congrats on that  :)

babets

Quote from: WengerTodd on January 07, 2020, 07:43:04 PM
Quote from: Sam on January 07, 2020, 09:21:34 AM
WengerTodd- Do you have investments that are losing money? If so share your thoughts and analysis to help and get help.


No, not really. I don't mean to be smug, but before I invest in something, I really beat a dead horse. But I usually invest in stocks and things that are tangible (physical real estate).



Quote from: Sam on January 07, 2020, 09:21:34 AM
Deals are structured in different ways, and investors need to be aware of how they are structured to know their risk and return.

We are trying to determine whether sponsors are acting below board, or whether the deals were simply bad investments.

Many people posting here are those who have lost money and trying to figure things out. But most of the deals have made money, you just don't hear from them.

I suppose that's true... but I wish they would post their positive feedback as well, otherwise, I can only assume it's only negative, and not just the vocal minority.


My RS are performing fairly well. All in all my ROI is approx 8-10% per year  for the past 3 years. This is below business plan but still not bad.

Its a matter of diversification also, i have invested 5% of my net worth so even if i lose its ok.

groovydude

IIRM posted an update today on two investments:

4095 95th Ave
Transit Oriented Development

These are both in the Seattle area. IMHO, if either of these loose a penny, it's fraud. This region has been on fire in the last several years. Both investments are debt deals, and should have a TON of equity. The latest notifications are essentially identical:

"IRM has demoted this investment to a Tier 2 asset as Distributions from this investment have not been distributed in accordance with the original business plan.

Since the last update, IRM has continued contact with the sponsor. As of now, the sponsor is working to bring the deal current on distributions as quickly as possible. That being said, since the sponsor has defaulted, IRM is drafting a default letter to issue the sponsor.

IRM will update investors as more information arises."

In response, I sent this to IIRM:

"Sirs,

I read the latest notifications regarding 4095 95th Ave, and Transit Oriented Development. Can you please (or have the Asset Management Team) elaborate and/or provide more detail on what the process is after a default letter has been issued to the sponsor? I'd like to know what your company's plans are moving forward in the event that the sponsors do not bring the deals current on overdue distributions. "

I'm concerned that they'll settle for some reduced amount, rather than go through the full process of foreclosure and recover the full amount. I think they will use the "Tier 2" label as justification for bailing out with minimal effort. How can we make sure they BEST serve our interests??? Note: this might be the tip of another iceberg, these were both labeled "Tier 1" originally.

JD

@groovydude

Seattle Townhomes Predevelopment got the same notification today, so it must be the same sponsor. Those of us in that deal can join up forces as necessary with yourself and anyone else in this group of Seattle-based deals.

groovydude

Quote from: JD on January 09, 2020, 11:43:59 AM
@groovydude

Seattle Townhomes Predevelopment got the same notification today, so it must be the same sponsor. Those of us in that deal can join up forces as necessary with yourself and anyone else in this group of Seattle-based deals.

JD - that's good to know. I would suggest that you and anyone else who is in any one of these investments sends the same request to IIRM that I did. I want them to know that we're keeping close tabs on this and in communication with each other.

The sponsor for both of the deals I mentioned is BDR Holdings. They have a website: bdrholdings.com. Pressuring the sponsor may be counter-productive, but at the same time they could be trying to take advantage of the RS mess and get out from under their loans. In one of the other deals that IIRM settled, they took a buyout offer on the loan from some third party for pennies on the dollar. It sounded like a "sweetheart deal" to me. We can't let that happen here. If they have to foreclose, so be it, we should be fully protected by the equity of these properties.

JD

Quote from: groovydude on January 09, 2020, 11:58:28 AM
Quote from: JD on January 09, 2020, 11:43:59 AM
@groovydude

Seattle Townhomes Predevelopment got the same notification today, so it must be the same sponsor. Those of us in that deal can join up forces as necessary with yourself and anyone else in this group of Seattle-based deals.

JD - that's good to know. I would suggest that you and anyone else who is in any one of these investments sends the same request to IIRM that I did. I want them to know that we're keeping close tabs on this and in communication with each other.

The sponsor for both of the deals I mentioned is BDR Holdings. They have a website: bdrholdings.com. Pressuring the sponsor may be counter-productive, but at the same time they could be trying to take advantage of the RS mess and get out from under their loans. In one of the other deals that IIRM settled, they took a buyout offer on the loan from some third party for pennies on the dollar. It sounded like a "sweetheart deal" to me. We can't let that happen here. If they have to foreclose, so be it, we should be fully protected by the equity of these properties.

Yep, it's BDR Holdings: https://www.realtyshares.com/investments/seattle-townhomes-predevelopment

I'll reach out to IRM as well and post back their reply.

Hindsight2020

Based on what I've seen on my investments, Tier 2 means the asset value/coverage is considered intact but distributions/repayments are delinquent. I had a Tier 2 preferred equity investment--1575 Grant Road--pay off in full, including deferred interest, in September 2019.

Hopefully that's what will happen with the Seattle investments mentioned.

groovydude

I received a correspondence from an IRM executive today in regards to my concerns about my 2 Seattle investments with BDR Holdings (it turns out that Transit Oriented was changed in error, and is actually Tier 1, but 4095 95th Ave is Tier 2). I'll summarize the response, some of this is pertinent for all our investments.

The Tier designations are a categorizing of the investment's performance. Tier 2 and 3 are underperforming and therefor require an action plan by IRM. Tier 3 are projected for principle loss, Tier 2 are not. As far as actions that IRM can do for underperforming deals - for equity deals IRM can replace the sponsor, for debt deals, IRM can foreclose. Both actions can be time consuming and costly, and IRM will negotiate with a sponsor other options to avoid these expenses if it behooves the investors, including settling for a lesser amount. According to the email, "IRM rarely agrees to settle and to date we've only settled with a handful of sponsors where it was determined to be in the best interest of investors." They currently are foreclosing on some debt deals and in court to change sponsors on some equity deals.

I pointed out IRM's fiduciary responsibility to us, the response was, "You are absolutely correct and IRM's primary role under this obligation is to try and maximize your return."

I had asked if they would share their plans moving forward on a Tier 2 investment. IRM pointed out that this would be poor business, as someone could post those plans on a public forum thereby tipping off the sponsor. I agree with this, and tbh I hadn't really thought it through in asking the question.

The final thoughts were: "While the RealtyShares investment portfolio is clearly not great, in the six months since IRM was hired, the overwhelming majority of investments have been converted to tier 2 and above. IRM has returned tens of millions of Dollars to thousands of investors and have resolved situations that were estimated to cause investors millions of Dollars in losses. IRM regularly receives Thank You letters from investors,  and our hard working men and women are committed to doing anything in our power to try and maximize the value for each investor, large or small."

The other point made was that IRM has been hired by RS to manage the assets (as we know RS now seems to be controlled by or have been purchased by iintoo and REEAF), and that the expenses of foreclosures and sponsor removal are born by the investors. So, my take is that IRM is getting paid no matter what action is taken. One could argue that their bosses have some control, but at least at the asset management level it seems likely that they will do what's best for their customers. And the parent companies do have some skin in the game, and probably would like the customer list to feel well served when it's all said and done.

I see this as positive. The response was timely and thoughtful, and the respondent addressed each of the concerns I had made. Night and Day different from a year ago.

Was there fraud at RS? Maybe. Was there fraud perpetrated by some sponsors? Almost positively. I'd still like to see a bit more communication and transparency from IRM, but I do think IRM, at least for now, has my confidence. Let's just hope the fraudulent sponsors are all exposed by now, so at least we know what we're up against.


Hindsight2020

I have 4 RS deals in some kind of default/trouble. I now expect to realize some losses on each of them, and in each instance I am disappointed and extremely frustrated with the performance/behavior of the sponsor. And yes, in one case I believe the sponsor committed fraud to try to mask the failure of the business plan as long as it could. However none of that has anything to do with IRM. At times I have felt frustrated with what appears to be slow progress in resolving these situations, but I also know I don't have experience in working out busted deals like these, and I need to be patient. Based on what I've seen, IRM is carrying out its fiduciary responsibility to maximize returns in my bad deals.

In the investment where I suspect fraud, I have accumulated as much evidence as possible (including documentation/disclosures/updates provided by the sponsor to investors) and am keeping my options open. I want to see what return IRM is able to obtain for investors in the deal. Once I have that information it will provide clarity on next steps.

groovydude

I've asked IRM to share with us the status of other deals our sponsors are involved with. I'm somewhat doubtful that they'll come through on this request, but it would be helpful to know, especially in cases like yours Hindsight. If one can find a pattern of deceit, I'm guessing it will strengthen a legal case.  I wish you all the best with your bad deal.

WengerTodd

Quote from: JD on January 08, 2020, 02:41:20 AM

On a lighter note, I lived in San Antonio from 2015-2018 and at that time it was supposedly the second fastest growing major metropolitan area in the US (Austin being the first). You should do very well with your home there so congrats on that  :)

A couple of people have just posted some positive feedback, so I won't harp on that. I think that's often the problem with places like BBB and message forums. The only people who feel the energy to talk / discuss things are when they feel they've been wronged. So it often puts things into an incorrect light. Although, that one organization that everyone seems to have problems with clearly has some problems.

As for San Antonio... yeah, I've only been here for a few years, but I absolutely like the city. I still consider South Florida (Miami and Fort Lauderdale) "home," but I've really enjoyed living in San Antonio for the past few years. We bought a total wreck of a house. It was a luxury Sitterle home where everything was 100% custom. All the cabinets were solid oak, made specifically for the home. As an example, there's a 93" wide solid oak double-vanity in one of the bathrooms... I don't even know how it was installed because they don't even sell that size, so it might have been built on-site, and obviously stained in place. Even the roof has concrete tiles "Lifetime" as they call them. Rather large home, and even a custom mailbox structure that's made of the same brick the home is. It was built new in 1983 and was in the place where San Antonio's super-wealthy were moving. When I came along, the home had been abandoned for almost 2 years, had numerous issues... none of them structural. Everything was original... for better or worse. I was able to get the home at 60% of the value of the neighboring homes. Over the next year and a half, I completely renovated it. We just had it appraised and it's gone up substantially... almost double the value of what we paid for it when we got it 3 years ago.

I will probably have to move for work in another few years, and I'm debating whether or not to sell it or keep it. I can't imagine someone renting this house and trashing it... I've done so much custom work to it. But... I've got a couple of years to think about it. There's a lot going on in San Antonio though, so it's been great for the family.

finmaster

#1192
I concur that the greater Seattle area has been on fire. However, there are too many newly built cookie cutter townhomes, unsold. There is an oversupply of these,  as a lot of people are still looking for the good old traditional single family homes. I do really think that they might have  overbuilt these townhomes, micro apartments and condos as the decreasing rent reflects that.    I think the main cause of the delay was the construction permit. Hopefully they sort it out and get my money back!

WengerTodd

Quote from: finmaster on January 09, 2020, 09:19:08 PM
I concur that the greater Seattle area has been on fire. However, there are too many newly built cookie cutter townhomes, unsold. There is an oversupply of these,  as a lot of people are still looking for the good old traditional single family homes. I do really think that they might have  overbuilt these townhomes, micro apartments and condos as the decreasing rent reflects that.    I think the main cause of the delay was the construction permit. Hopefully they sort it out and get my money back!

People who know me, know I'm full of opinions. And these cookie-cutter homes absolutely kill me. I'm really interested to know whether or not people simply "don't care" about the design of their home on the outside, if they don't know any better, or if they just take whatever is affordable and meets their requirement.

Particularly what's on my mind is the absurd nature of most of the homes that are built today. Most of the homes are built on smaller tracts of land, and as such, in order to have a two-car garage... the garage becomes the "centerpiece" of the home. Quite literally, most new homes built today have a modest two-car garage that stands proudly out front, and... if you're a guest visiting the home, you have to walk around the garage to what seems like a side entrance. It doesn't matter how much fancy stonework or construction-grade lanterns they hang from either side of the garage entrance because essentially, it screams... "Welcome to my warehouse... the door is on the side."

I absolutely cannot like these homes, which is why I'm constantly buying older homes that are more ranch style where the garage, at worst, is parallel to the face of the home, and not standing proud. Don't get me wrong, I am 100% a "car guy." I've had plenty of cool sports cars and big block engines, and my share of jalopies that I bought at auction over the years. But my home is a representation of how I present myself, and the last thing I want to portray is... I have no style and no class, welcome to my crappy 2-car garage.

I'm not an architect, but I know unequivocally that there's a way to design a home on track-lots where you can still have the front entrance have prominence over the front of the home, rather than the garage. I think designers build homes on these small lots with the idea that they're going to maximize the view of the backyard, and they usually put a bedroom behind the garage. Move all that to the side, and push the garage back... or if they can't have the garage pushed back, then build a front porch that wraps the entire rest of the front of the home that's at least parallel to the face of the garage to give the front some interest and character.

Ugh... makes me sick.

finmaster

yeah I feel you Wenger. Most of the property value is tied to the land in Seattle just like any other major cities. Land is limited and lot space is hard to come by. Developers have been churning out these cookie cutter shoe boxes everywhere in Seattle and they are ugly. What I know is that a lot of them are left unsold for many months and some of them end up reducing the price. Single family homes get sold like hot cake but most of them are in terrible condition.

JD

Quote from: WengerTodd on January 09, 2020, 08:49:27 PM

As for San Antonio... yeah, I've only been here for a few years, but I absolutely like the city. I still consider South Florida (Miami and Fort Lauderdale) "home," but I've really enjoyed living in San Antonio for the past few years. We bought a total wreck of a house. It was a luxury Sitterle home where everything was 100% custom. All the cabinets were solid oak, made specifically for the home. As an example, there's a 93" wide solid oak double-vanity in one of the bathrooms... I don't even know how it was installed because they don't even sell that size, so it might have been built on-site, and obviously stained in place. Even the roof has concrete tiles "Lifetime" as they call them. Rather large home, and even a custom mailbox structure that's made of the same brick the home is. It was built new in 1983 and was in the place where San Antonio's super-wealthy were moving. When I came along, the home had been abandoned for almost 2 years, had numerous issues... none of them structural. Everything was original... for better or worse. I was able to get the home at 60% of the value of the neighboring homes. Over the next year and a half, I completely renovated it. We just had it appraised and it's gone up substantially... almost double the value of what we paid for it when we got it 3 years ago.

I will probably have to move for work in another few years, and I'm debating whether or not to sell it or keep it. I can't imagine someone renting this house and trashing it... I've done so much custom work to it. But... I've got a couple of years to think about it. There's a lot going on in San Antonio though, so it's been great for the family.

Nice! You've done what my friend out there did - got a house on massive discount with everything in disarray, cleaned it all up and turned it into a beautiful home again - he did it all himself too. So because of that, it's worth at least double what he paid as well. He's also a huge car guy, having turned their garage into a full-blown automotive workshop.

What area is that where you're living - the Dominion? We were out in Mico, about 15 minutes west of the loop - a town originally designed for executives from the mining companies in that area. It made selling our place somewhat difficult because most people didn't want to live that far from the city... but having 40 acres with a view out to the city was enough incentive for some  :D

WengerTodd

Quote from: JD on January 10, 2020, 05:24:56 AM

Nice! You've done what my friend out there did - got a house on massive discount with everything in disarray, cleaned it all up and turned it into a beautiful home again - he did it all himself too. So because of that, it's worth at least double what he paid as well. He's also a huge car guy, having turned their garage into a full-blown automotive workshop.

What area is that where you're living - the Dominion? We were out in Mico, about 15 minutes west of the loop - a town originally designed for executives from the mining companies in that area. It made selling our place somewhat difficult because most people didn't want to live that far from the city... but having 40 acres with a view out to the city was enough incentive for some  :D

I am (was) a car guy too... but learned a few years ago that you never really make money with cars as they are purely liabilities. Homes are liabilities too, but it's much easier to build equity with the hard work. I got rid of most of my cars, but I still have a couple of cool cars.

I don't really want to post where exactly I live on here, but I'm 281 North. It basically takes me 18-20 minutes to get to The Pearl. They're doing highway construction now, and once complete, it will be more realistically like 15 minutes. I really love the area, far more than I believed I would. I've lived in a few cool places, but I just assumed nothing could be as awesome as Fort Lauderdale. San Antonio has been really great... and I very much enjoy it. Lots of great things to do... and lots of festivals and events going on, which is really important. Plus, the city has a lot of culture and history.

But yeah, I hate having tenants, but I really do like fixing up homes... well, I don't enjoy always doing the work, but I do enjoy when it's complete. I'd almost think maybe I'd quit my job one day and do this to keep me busy.

schin98@juno.com

Does anybody know if there are any active lawsuits against this IRM/Realtyshares group I can add my name to? I don't see any reason to sit back any longer and wait for "hopeful" emails from these guys. None of this passes the "sniff test" when the real estate market has been booming but all my investments with RS are under water. Any links to an investigation or lawsuit I can add my name to?

stingray

@schin98@juno.com:  The answer to your question may depend.  What deals are you invested in?

ramesh

A couple positive things to report.

1. One of my debt deals paid back principal in full (Camden Multifamily SC).
2.I have been repeatedly requesting IRM to post financial reports on the various deals, over the last 4+ months. In the last few days,  they have posted reports from the last 3-4 quarters on various deals.  Granted that the information from some of them is worrisome.  Nevertheless, I am glad to know what is going  on in these projects.