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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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ReadyToSue89

#1220
Redacted

groovydude

Quote from: ReadyToSue89 on January 28, 2020, 08:57:00 AM
Quote from: JD on January 28, 2020, 07:59:31 AM
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).

Incorrect, as you can see here for the parties being sued:

https://dockets.justia.com/docket/massachusetts/madce/1:2020cv10107/218112

In my instance, I understand the indemnification that IRM is attempting to hide behind however in one of the properties I am involved in they are severely mismanaging the case. They had the opportunity to litigate immediately when the developer missed their payment. Now the property is 2 months past due in paying their property tax liability and they've missed dividend payments for a long time.

One party has failed their payment obligations and another has failed in their attempts to collect payment and foolishly granted extensions without any evidence of repayment or goodwill other than the fact that the sponsor is responding to e-mails. These poorly managed extensions have exacerbated my losses.

If you were involved with LXR or Dutchints just know that I have $250k in checking liquid for potential attorney fees and I'm seeking counsel now so these two deals will get sticky soon. Getting the ball rolling in March, a bit later than expected but it's time to collect.

ReadyToSue89, how are you concluding that IRM is mismanaging your investment? I'm not defending them, but it seems that their defense will be that lawsuits are expensive and by contract the costs come out of investor's pockets, not theirs, so they are trying to exhaust all other options before litigation.

I'm all for suing the pants off of Nav Athwal and the other founders. Even RS lending. I think Nav belongs in jail too, I hope that someone can prove that he knew they were propping up horrible deals in order to raise more cash (ie fraud), but suing what's left of RS and IIRM Management seems counter productive at this point.

JD

Quote from: ReadyToSue89 on January 28, 2020, 08:57:00 AM
Quote from: JD on January 28, 2020, 07:59:31 AM
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).

Incorrect, as you can see here for the parties being sued:

https://dockets.justia.com/docket/massachusetts/madce/1:2020cv10107/218112

In my instance, I understand the indemnification that IRM is attempting to hide behind however in one of the properties I am involved in they are severely mismanaging the case. They had the opportunity to litigate immediately when the developer missed their payment. Now the property is 2 months past due in paying their property tax liability and they've missed dividend payments for a long time.

One party has failed their payment obligations and another has failed in their attempts to collect payment and foolishly granted extensions without any evidence of repayment or goodwill other than the fact that the sponsor is responding to e-mails. These poorly managed extensions have exacerbated my losses.

If you were involved with LXR or Dutchints just know that I have $250k in checking liquid for potential attorney fees and I'm seeking counsel now so these two deals will get sticky soon. Getting the ball rolling in March, a bit later than expected but it's time to collect.

Oh wow, I hadn't realized IRM is in there as well - fair enough. Admittedly, I'm underwhelmed by what they've done so far but like groovy said, I'm not entirely sure it makes sense to go after them at this time.

It is good to have litigation in action though, wish it had happened sooner.

babets

Quote from: JD on January 28, 2020, 07:59:31 AM
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).

Thank you. Are you recommending to join a lawsuit? I mean will we be excluded if a deal get fixed itself or we have nothing to lose in participating to class action?
Sorry i dont know anything about law...

JD

Quote from: babets on January 28, 2020, 02:13:17 PM
Quote from: JD on January 28, 2020, 07:59:31 AM
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).

Thank you. Are you recommending to join a lawsuit? I mean will we be excluded if a deal get fixed itself or we have nothing to lose in participating to class action?
Sorry i dont know anything about law...

I can't really recommend what you should do when it comes to lawsuits but if you're upset about what's happened and you want to try and recover some money, you should consider joining.

You probably don't have anything to lose but I can't say that definitively. If you're curious, contact the lawyer who has posted here and ask him that  :)

Dgilpin

The links to the cases provided state that we have 60 days from January 17th to join the case as a lead plaintiff.  The shapiro notice states that not doing so will not exclude us from any class action settlement, so I'm wondering what benefit there is to joining the case, if any.

The acusations in these cases aside, I've been pondering the Franchise Growth sitiatuion for some time, and I definitely think there is a strong case for suing IIRM if the settlement doesn't play out according to it's best case scenario.  Here is my case:

on March 5th 2019, investors received the following message regarding Detroit MSA dog Haus/Taco Johns:
"RealtyShares has come to a negotiated settlement to sell the loan. The borrower reports that the franchisee who had entered into a turnkey lease for both a Dog Haus and a Taco John has declared bankruptcy.  The building on the property has been demolished but no other work was completed. Without the lease, the property is less valuable. The land value at the time of the July 25, 2017 appraisal was $990,000. This value is fair market value without the lease.  We have negotiated a $1.5MM sale of the loan. "

This message indicated a payoff of the loan of about 91 cents on the dollar for investors.


on 3/21 we received the following message:
"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."

Then on 4/15/19:
"The sale has been delayed by approximately 30 days. The transaction has gotten a little more complicated. The buyer is still committed to the sale but the buyer indicated that they would be rolling this loan up with others in a package and the equity for the purchase needs to be moved from South America. RealtyShares will update you if the situation changes."

From this point there was radio silence until the IIRM takeover and the announcement of the package sale at 100% of original invested capital.

Here's the problem:  When it defaulted this deal was bare land, having only dispursed funds for the demolition of the existing structure before construction.  This deal was basically closed until IIRM used it as a negotiating tool to bundle in other FG deals, the majority of which were in significantly worse  position.  IE: restaurants that were fully built, all funds disbursed and are no longer operating.  But when I invested in this deal I didn't agree to take on the risk of other FG projects.  IIRM had a duty to isolate my deal and negotiate it's settlement on it's own merits. 

If the superceding settlement communicated by IIRM is finalized, I'll accept it and walk away satisfied.  But if it fails, I will definitely be seeking counsel  to take IIRM to task for leveraging my investment without my consent to benefit the larger FG portfolio. 

DECA

Dgilpin, I agree with you.  I have the same concerns about IIRM's bundling of nearly all of the FG deals and negotiating for the same remedy for each deal even though (a) some were in better shape than others and (b) each deal has a unique set of investors.  For example, the AFC - West Islip deal is a completed building, with a lessee operating and paying rent in accordance with the lease since the spring of 2019.  (I have been told that directly by the lessee.)  Yet that deal is lumped into the FG portfolio deal made by IIRM, rather than insisting that FG perform by making interest payments to the investors and listing the property for sale. 

While I will be satisfied to just get my original capital back, I am not happy about the way IIRM has managed that deal.  I have pointed out the problem of lumping all the deals together several times to IIRM, but they have not responded to that problem.  Further, it seems excessive to have taken four months to negotiate and sign the forbearance agreement. 

mspringer

Quote from: DECA on February 01, 2020, 08:09:40 PM
Dgilpin, I agree with you.  I have the same concerns about IIRM's bundling of nearly all of the FG deals and negotiating for the same remedy for each deal even though (a) some were in better shape than others and (b) each deal has a unique set of investors.  For example, the AFC - West Islip deal is a completed building, with a lessee operating and paying rent in accordance with the lease since the spring of 2019.  (I have been told that directly by the lessee.)  Yet that deal is lumped into the FG portfolio deal made by IIRM, rather than insisting that FG perform by making interest payments to the investors and listing the property for sale. 

While I will be satisfied to just get my original capital back, I am not happy about the way IIRM has managed that deal.  I have pointed out the problem of lumping all the deals together several times to IIRM, but they have not responded to that problem.  Further, it seems excessive to have taken four months to negotiate and sign the forbearance agreement.

The Church's Chicken, in Orlando, FL was 95% completed at the time of FG's "issues".  It has since completed, opened, and is being run by the original intended franchisee (Goalz) from the initial deal.  Without seeing any of the numbers, I would assume this was a completely successful loan and thus full interest and capital should be returned.

Dgilpin

DECA,  I'm in on the west islip deal as well.  Those are my 2 FG deals.  I too am completely befuddled as to why we aren't receiving interest payments while the tenant is making their rent payments.  I also agree about the forebearance agreement,  considering we were told October 28th: "We are exchanging final versions of the agreement and expect to have it executed very soon". Figuring "very soon meant two weeks,  not two months, I was expecting finality on this situation by now.

Beat_The_Fraud

Email received from IRM this morning

IMPORTANT UPDATES ABOUT FRANCHISE GROWTH PORTFOLIO

Dear RealtyShares Franchise Growth Investor,

IRM would like to update you on two important developments in the Franchise Growth Portfolio forbearance agreement process.

1. The Antioch, TN property, the only one left out of the original agreement, has now been added to the scope of the agreement under the exact same terms. IRM accepted the investment into the original agreement "as-is", and subject to the same terms and deadlines as all other Franchise Growth properties in the RealtyShares portfolio.

2. IRM received a verbal update from the executives of Franchise Growth, LLC in which we were told the group is making progress with regards to re-financing the portfolio. Franchise Growth has reported advanced discussions, and draft terms sheet with a large 3rd party group, that has the means, experience and motivation to buyout the properties.

While this is a positive development, IRM does not know the identity of this group and has not independently verified any of the information provided. IRM continues to caution investors in the portfolio that any outcome is still possible, and foreclosure on the assets is still an option.

The deadline for the agreement is April 9th, 2020 and IRM expects to post additional updates before that date, contingent upon receiving more material updates from Franchise Growth.


dwengca

Every single one of my remaining 12 investments have stopped paying since last year.  I have not receive a dime since late Nov last year other than the Plaza Apartment payout.... :-(

groovydude

Quote from: dwengca on February 03, 2020, 01:37:38 PM
Every single one of my remaining 12 investments have stopped paying since last year.  I have not receive a dime since late Nov last year other than the Plaza Apartment payout.... :-(

Dwengca, I feel your pain! Just curious, do you feel that the IRM communications have been thorough and timely for your investments? Here's the thing... I'm at 3/5 not paying, however, there actually seems to be hope in all three. But oddly, the IRM communications don't tell the full story, apparently even when the news is somewhat good!

Here's how bad IRM is at doing their job. For one of mine - a preferred equity deal in 4039 95th Ave (near Seattle), they've told us that payments have stopped and that they have issued a default notice to the sponsor, and they claim to have spoken with the sponsor. But, there's no mention that the homes (in this case two from the same deal), are selling for 30% more than projected. One has already sold. The sponsor could sell the second at a 50% discount and still fall within projections and probably easily meet all their debt. In other words, the sponsor is very likely going to make out well, and the investors will likely get paid with projected interest. So, as of discovering this today I'm not too worried.

I welcome the good news of course, but why wouldn't IRM just tell us this? Laziness? Incompetence? Afraid of a lawsuit if something else goes wrong? I even had a communication about this investment with Jeff Holzmann, the CEO of IRM and he didn't mention it. I figured this out myself just by looking closely at the sponsor's web site and doing a little research.  Either way it's annoying. And, I seriously doubt that the other crowdfunding sites I've invested with would make this mistake. 

Go figure.

dwengca

They really have not been doing their job in my opinion....  "communication"??  I hate to say it, what communication.   Even when I email them directly with questions, I would get these one line responses back that really doesn't tell me anything...

Quote from: groovydude on February 03, 2020, 04:14:20 PM
Quote from: dwengca on February 03, 2020, 01:37:38 PM
Every single one of my remaining 12 investments have stopped paying since last year.  I have not receive a dime since late Nov last year other than the Plaza Apartment payout.... :-(

Dwengca, I feel your pain! Just curious, do you feel that the IRM communications have been thorough and timely for your investments? Here's the thing... I'm at 3/5 not paying, however, there actually seems to be hope in all three. But oddly, the IRM communications don't tell the full story, apparently even when the news is somewhat good!

Here's how bad IRM is at doing their job. For one of mine - a preferred equity deal in 4039 95th Ave (near Seattle), they've told us that payments have stopped and that they have issued a default notice to the sponsor, and they claim to have spoken with the sponsor. But, there's no mention that the homes (in this case two from the same deal), are selling for 30% more than projected. One has already sold. The sponsor could sell the second at a 50% discount and still fall within projections and probably easily meet all their debt. In other words, the sponsor is very likely going to make out well, and the investors will likely get paid with projected interest. So, as of discovering this today I'm not too worried.

I welcome the good news of course, but why wouldn't IRM just tell us this? Laziness? Incompetence? Afraid of a lawsuit if something else goes wrong? I even had a communication about this investment with Jeff Holzmann, the CEO of IRM and he didn't mention it. I figured this out myself just by looking closely at the sponsor's web site and doing a little research.  Either way it's annoying. And, I seriously doubt that the other crowdfunding sites I've invested with would make this mistake. 

Go figure.

JD

Quote from: dwengca on February 04, 2020, 12:32:02 AM
They really have not been doing their job in my opinion....  "communication"??  I hate to say it, what communication.   Even when I email them directly with questions, I would get these one line responses back that really doesn't tell me anything...

Quote from: groovydude on February 03, 2020, 04:14:20 PM
Quote from: dwengca on February 03, 2020, 01:37:38 PM
Every single one of my remaining 12 investments have stopped paying since last year.  I have not receive a dime since late Nov last year other than the Plaza Apartment payout.... :-(

Dwengca, I feel your pain! Just curious, do you feel that the IRM communications have been thorough and timely for your investments? Here's the thing... I'm at 3/5 not paying, however, there actually seems to be hope in all three. But oddly, the IRM communications don't tell the full story, apparently even when the news is somewhat good!

Here's how bad IRM is at doing their job. For one of mine - a preferred equity deal in 4039 95th Ave (near Seattle), they've told us that payments have stopped and that they have issued a default notice to the sponsor, and they claim to have spoken with the sponsor. But, there's no mention that the homes (in this case two from the same deal), are selling for 30% more than projected. One has already sold. The sponsor could sell the second at a 50% discount and still fall within projections and probably easily meet all their debt. In other words, the sponsor is very likely going to make out well, and the investors will likely get paid with projected interest. So, as of discovering this today I'm not too worried.

I welcome the good news of course, but why wouldn't IRM just tell us this? Laziness? Incompetence? Afraid of a lawsuit if something else goes wrong? I even had a communication about this investment with Jeff Holzmann, the CEO of IRM and he didn't mention it. I figured this out myself just by looking closely at the sponsor's web site and doing a little research.  Either way it's annoying. And, I seriously doubt that the other crowdfunding sites I've invested with would make this mistake. 

Go figure.

But you know one thing they are really good at - taking management fees. It's quite a slap in the face when an investment is *finally* going to pay out a distribution and IRM deposits $100 in your account, taking the bulk of it for "past due management fees". They would have been wise to waive some of those fees for a good part of last year, in order to make up for all of the problems.

ft2008

I have received several emails today indicating that Tax documents have been posted. On checking, there was nothing new. I emailed support and was pleasantly surprised to receive a response in an hour. But I did not understand their response. posting it below and requesting someone help me understand it. Thank you.

>>>>>>> "Thank you for your email. In regards to this deal's tax form you will need to take your subscription documents, your earnings history and a copy of the updates to your tax accountant who can help you record the transaction on your tax return. The 1099 INT reports the cash paid to investors that is distributed as interest income so there will be no 1099 INT issued since the amount distributed during 2019 was principal and not interest income."

Sam

For those in the DME Fund, some income/distribution should be coming in today (Feb 5) or by end of this week. It looks like I have a pending distribution equal to 20% of my entire DME fund investment.

I had reached out wondering why I hadn't received anything since late 3Q2019. IRM reminded me that they have up to 90 days after the the quarter closes to pay.

Still waiting for the quarterly DME fund review to post though. That's where I'm really interested in knowing the details of each deal.
Regards,

Sam

hitperson

I got an email reply in regarding to  debt deal loss in 2019.  Expecting RS to generate 1099-B(gain/loss) but....
<<<Thank you for your email. Our Fund Administrator has confirmed that we do not provide 1099-B documents. In order for you to record the loss you will need to provide your tax adviser with a copy of your subscription agreement, a copy of the distributions and a copy of the updates provided on your investor dashboard for the tax adviser>>>>
Anyone else received 1099-B other than the 1099INT??

schin98@juno.com

"But you know one thing they are really good at - taking management fees. It's quite a slap in the face when an investment is *finally* going to pay out a distribution and IRM deposits $100 in your account, taking the bulk of it for "past due management fees". They would have been wise to waive some of those fees for a good part of last year, in order to make up for all of the problems."

It sounds like you are surprised. It's probably time for a wake-up call if any of you are still surprised. IRM is in this to make money. They will take every dime they can out of this POS and will squeeze the marrow out of the bones if they can. Realtyshares didn't get taken over by the American Red Cross, they got taken over by an investment consortium. Their only job is to make money for their shareholders. The only way we'll get any of it is to sue. Stop dreaming that they are in this to help you.

JD

Quote from: schin98@juno.com on February 06, 2020, 08:03:18 PM
"But you know one thing they are really good at - taking management fees. It's quite a slap in the face when an investment is *finally* going to pay out a distribution and IRM deposits $100 in your account, taking the bulk of it for "past due management fees". They would have been wise to waive some of those fees for a good part of last year, in order to make up for all of the problems."

It sounds like you are surprised. It's probably time for a wake-up call if any of you are still surprised. IRM is in this to make money. They will take every dime they can out of this POS and will squeeze the marrow out of the bones if they can. Realtyshares didn't get taken over by the American Red Cross, they got taken over by an investment consortium. Their only job is to make money for their shareholders. The only way we'll get any of it is to sue. Stop dreaming that they are in this to help you.

Only surprised that they think we'll actually invest with Iintoo and/or will not pursue legal action after managing in this fashion. If they were a smart investment consortium, they would have realized how much more they could have made off of this group of investors with better management tactics.

groovydude

This just posted on the 4039 95th Ave investment I mentioned here a few days ago:

"The sponsor has sold one of the homes in this investment. The sponsor has used the proceeds from this sale to pay costs that were due on both homes, and also paid the senior loan off. The sponsor will use the proceeds from the sale of the second home to pay off RealtyShares investors."

I also saw a message from IRM since my post talking about communication (but now I can't find it). It would appear that someone at IRM might be monitoring this board, unless it's just coincidence.

Suing is an option, but so let's not forget that the internet has power. As has been mentioned, one would think that iintoo bought into this hoping to impress thousands of high net worth real estate investors with their professionalism (potentially much more fruitful in the long term than taking a couple mil in fees from RS), but I agree that if that was one of their goals they seem to have missed the boat so far. At the end of the day we can all post negative reviews about iintoo, but I for one will hold off on that until my investments exit.