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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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jy2005

Quote from: schin98@juno.com on January 16, 2020, 04:10:44 AM
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?

I read one of the IRM's notification and the following is quite disturbing:

"The sponsor made a distribution payment to IRM on behalf of RealtyShares of $ 24,750.00   (gross of IRM AM fees and expenses) on 11/04/19.

IRM asset management fees of $12,476 included a significant amount of past-due accrued asset management fees and expenses.  IRM made a distribution payment (net of IRM AM fees & expenses) to RS investors on 11/21/19 of $12,272."

This is a tear 1 property, may be the Sponsor has paid late, but why should IRM deduct so much money from Sponsor's payment to investors? Isn't IRM already getting compensation for what they do?

Everyone please input on this subject, as if you have any project that is late in payment, a big chuck of the payment may go to IRM's pocket when it arrives. This is very disturbing.

John_PVF

Quote from: jy2005 on January 17, 2020, 07:44:55 AM
Quote from: schin98@juno.com on January 16, 2020, 04:10:44 AM
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?

I read one of the IRM's notification and the following is quite disturbing:

"The sponsor made a distribution payment to IRM on behalf of RealtyShares of $ 24,750.00   (gross of IRM AM fees and expenses) on 11/04/19.

IRM asset management fees of $12,476 included a significant amount of past-due accrued asset management fees and expenses.  IRM made a distribution payment (net of IRM AM fees & expenses) to RS investors on 11/21/19 of $12,272."

This is a tear 1 property, may be the Sponsor has paid late, but why should IRM deduct so much money from Sponsor's payment to investors? Isn't IRM already getting compensation for what they do?

Everyone please input on this subject, as if you have any project that is late in payment, a big chuck of the payment may go to IRM's pocket when it arrives. This is very disturbing.

I noticed they started adding this language as well.  Here is my take based on my read of the offering docs in one of the deals I'm in.  Third paragraph of the 1st page: "The manager of the Company will charge a management fee of generally up to 2.75% annually on the aggregate initial investor contributions in the Company (the exact amount is indicated elsewhere in the Property Information Package)." 

Now it may end up being less than that amount (my specific deal was 1.5%), but basically whatever RS investors put into a deal, they are going to get some percentage of that annually out of the payments made back to us.  If payments aren't made/delayed, then RS continues to accrue their fee and takes it off the top of any money that does come in.  That's what the docs say, now whether that aligns with what was verbally represented by their sales staff is anyone's guess.  I can't imagine they weren't taking their fees out of previous distributions though, so it is a bit surprising that the discount would be so large.  I'm sure it varies but deal, but may be worth asking them to provide more detail.

My bigger issue (and I've expressed this to both RS and IRM at various points in time) is that we're taking all their calculations on faith and trusting that it's been done correctly.  We don't have enough info from them to to the math ourselves, so are basically stuck.  My suggestion to them previously (which was rebuffed for lack of resources to provide to us) was as follows:

Gross Sponsor Distribution to RS
Less: RS Management Fees (calculated as annualized % RS fee * days since last RS fee accrual / 365)
= Net Sponsor Distribution to RS
Multiplied by: Investor % Ownership Distribution in RS Entity
= Net Distribution to Investor

I know they give out bits and pieces of this info as part of the periodic updates/distribution notices, but would be nice to have in a consolidated place.  It would also be nice to know the amount of accrued and unpaid fees each deal has so we aren't caught off guard by a low distribution.  Unfortunately, this is just one more surprise which only solidifies my desire to put this whole thing in the real view mirror.  One deal exited, four to go.

schin98@juno.com

Quote from: stingray on January 16, 2020, 05:26:07 AM
@schin98@juno.com:  The answer to your question may depend.  What deals are you invested in?

Rochester High Yield.
Chicago Town Homes
NJ retail
Pompano Marketplace.

That doesn't include a number of other deals that closed and I lost money on, ie "Santa Monica Bridge Capital" (How did they lose money in this market in Santa Monica?)

stingray

Hi @schin98:  So, I don't know of any active lawsuits on those deals.  If you check your investor documents you will likely find that you've waived your ability to initiate or participate in a class action lawsuit. Also, you may have agreed to binding arbitration.  So your options would be to file your own suit or arbitration, depending on the contract you have.  It's unfortunate.  They structured their contracts to protect themselves.

realtyrealty

Anyone else involved in Smartland SFR preferred equity fund? Is this one going to go down to losses like the rest of the crappy realtyshares investments ?


ramesh

Wytheville VA Captain D was a debt investment where the sponsor was incorrectly issued an all clear after a partial repayment of principal.  The sponsors, Invest Squared, are taking advantage of the situation, and are refusing to make the investors whole.  IRM is essentially giving up the fight.  OTOH, the shortfall is only 10%.

QuoteThe sponsors have contested our collection efforts via legal channels, and have retained a legal defense firm in their efforts to further evade this payment. While IRM has not given up on this effort, we now believe that given the additional costs required in pursuing this matter, the chances of successful collection are very low.

ramesh

I wrote to IRM about the Invest Squared situation described in the previous message, asking them to escalate the issue to senior management.  I argued that the clerical error was contributory to the loss, and that IRM owed it to investors to make us whole.  I received the following  response from IRM's CEO.

I should point out that the loss itself is minor; I am just indignant about being cheated so blatantly by sponsors,  as well as the utter incompetence of RS.

Quote1. .. Your senior debt investment was part of a total loan amount of $1,016,000 to the Sponsor, Invest Squared LLC.

2. As reported to you earlier, RealtyShares Inc. sent a lien release to the sponsor on May 10th, 2019. RealtyShares has since ceased operations and hired IRM to manage the investment portfolio in June 2019.

3. IRM has uncovered what we believe to be a clerical error in RealtyShares' communication mentioned above. In our professional opinion, this by itself does not give reason for the sponsor to avoid paying you the funds you are legally entitled to. IRM has notified the sponsor of this issue multiple times, and tried to collect on this debt using internal and external means. Our efforts on your behalf have been contested in legal channels and are currently stalled. Further action to collect the debt will require additional capital investment from investors such as yourself, and IRM has advised against that due to the complexities, cost, time and uncertainty of outcome in this matter.

4. RealtyShares and IRM are two different companies, and not as you stated in your previous email. IRM has no authority to direct RealtyShares on how to act with respect to your claims.

5. I am aware of at least one individual who has collected the relevant information and is planning to sue Invest Squared LLC, Mr. Daniel Epstien and Mr. Yonah Kaufman personally. IRM has provided this individual with all the information we have, but IRM itself is not a party to that claim.

Lastly, I totally understand your frustration and I think the Sponsor has acted in a very unprofessional manner in this case. I hope you and other investors like you will be able to pursue them and hold them responsible for their actions.

imcloughlin

I am an attorney who represents investors who have been defrauded. My firm recently filed a case against RealtyShares and affiliated entities and individuals, particularly arising out of the investments with Franchise Growth and the "Nationwide SFR Package": http://www.shulaw.com/About-Us/Active-Cases/shapiro-haber-urmy-llp-announces-filing-of-a-class-action-lawsuit-against-realtyshares-inc-rs-lending-inc-and-others/.  Please call or e-mail me if you have relevant information and would be interested in discussing further.

Thanks,

Ian J. McLoughlin
SHAPIRO HABER & URMY LLP
Seaport East
Two Seaport Lane
Boston, MA 02210
Tel: 617-439-3939, ext. 315 
Fax: 617-439-0134
imcloughlin@shulaw.com
www.shulaw.com
http://lawyermcloughlin.com/

barnold24

K-1's - can't believe it is that time of the year - wonder how long it will take us to receive our K-1's this year and if they will be correct or not?

andyo

Anyone else have a stake in this one? I received a notification that it has been sold for $8.5MM - reviewing the original valuation seems to be 7.6MM. There has GOT to be some profit in this thing!!

barnold24

Is anyone else in the one above? Received an update today saying that there would be a capital call sometime this spring. What is everyone's thoughts about putting up additional funds with only getting spotty information?

Thanks

andyo

I'm not putting any new money into RealtyShares or it affiliates until I see some resolution from existing situations

Hindsight2020

Quote from: andyo on January 23, 2020, 06:07:51 AM
Anyone else have a stake in this one? I received a notification that it has been sold for $8.5MM - reviewing the original valuation seems to be 7.6MM. There has GOT to be some profit in this thing!!

What's the capital structure, and what tranche is the investment? Do you have a link to it?

barnold24

Quote from: Hindsight2020 on January 23, 2020, 03:34:12 PM
Quote from: andyo on January 23, 2020, 06:07:51 AM
Anyone else have a stake in this one? I received a notification that it has been sold for $8.5MM - reviewing the original valuation seems to be 7.6MM. There has GOT to be some profit in this thing!!

What's the capital structure, and what tranche is the investment? Do you have a link to it?

It is equity. There is only common equity and debt in this deal. A link to the letter they sent?

Thanks

Hindsight2020


barnold24

Quote from: Hindsight2020 on January 24, 2020, 01:18:59 PM
I meant a link to the original investment.

https://www.realtyshares.com/investments/anderson-ferry-plaza

Here you go

ReadyToSue89

#1216
Redacted

babets

Quote from: ReadyToSue89 on January 27, 2020, 07:52:20 AM
Here are two lawsuits currently:

https://www.businesswire.com/news/home/20200127005436/en/EQUITY-ALERT-ROSEN-TOP-RANKED-LAW-FIRM
https://www.prnewswire.com/news-releases/shapiro-haber--urmy-llp-announces-filing-of-a-class-action-lawsuit-against-realtyshares-inc-rs-lending-inc-and-others-300989140.html

More to follow. I encourage everyone to seek damages regardless of the profitability of such actions.



But if they are out of business and managing just existing deals, a lawsuit could just knock them out completely and damage also existing deals that are performing maybe, no?

JD

Quote from: babets on January 28, 2020, 05:27:03 AM
Quote from: ReadyToSue89 on January 27, 2020, 07:52:20 AM
Here are two lawsuits currently:

https://www.businesswire.com/news/home/20200127005436/en/EQUITY-ALERT-ROSEN-TOP-RANKED-LAW-FIRM
https://www.prnewswire.com/news-releases/shapiro-haber--urmy-llp-announces-filing-of-a-class-action-lawsuit-against-realtyshares-inc-rs-lending-inc-and-others-300989140.html

More to follow. I encourage everyone to seek damages regardless of the profitability of such actions.



But if they are out of business and managing just existing deals, a lawsuit could just knock them out completely and damage also existing deals that are performing maybe, no?

The lawsuits wouldn't target IRM or any sponsors who are actively handling their deals; they go after previous RS principals and sponsors who have committed theft/fraud.

Any sponsor who is doing what they should be has nothing to worry about, nor do any of the investors in their property(ies).

JD

Anyone else in Vida on Valley and get today's update? It's definitely very concerning. Funded in late 2018, has never paid a cent in distributions, is unresponsive and hasn't provided quarterly updates since Q2 2019.

I looked up the sponsor, they have 3 Google Reviews - all 1-star, fairly recent - and all about how the sponsor doesn't pay their debts and is almost impossible to get hold of. Another one that seems should never have gotten a green light from RS.