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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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ramesh

I understand that a few people here have reached out directly to sponsors.  Has anyone managed to connect with OC Ventures?  These guys have sold multiple student housing deals -- University of Buffalo, Binghampton U -- through RealtyShares.  I have messaged one of the founders, Steve Zhang, on linkedin, but no response yet.

ramesh

Quote from: ramesh on January 15, 2019, 06:33:50 AM
I understand that a few people here have reached out directly to sponsors.  Has anyone managed to connect with OC Ventures?  These guys have sold multiple student housing deals -- University of Buffalo, Binghampton U -- through RealtyShares.  I have messaged one of the founders, Steve Zhang, on linkedin, but no response yet.

I just heard back from Steve Zhang about the University of Buffalo investment.  He writes:

I want to first assure you the property is performing well both in terms of occupancy and pre-lease. We typically post final financials on the 15th of each month, which means we will have distributions and final reports sent out to RS servicing team in the next couple days. Thanks again for your patience.

Ventan

Quote from: ramesh on January 15, 2019, 06:38:22 AM
Quote from: ramesh on January 15, 2019, 06:33:50 AM
I understand that a few people here have reached out directly to sponsors.  Has anyone managed to connect with OC Ventures?  These guys have sold multiple student housing deals -- University of Buffalo, Binghampton U -- through RealtyShares.  I have messaged one of the founders, Steve Zhang, on linkedin, but no response yet.

I just heard back from Steve Zhang about the University of Buffalo investment.  He writes:

I want to first assure you the property is performing well both in terms of occupancy and pre-lease. We typically post final financials on the 15th of each month, which means we will have distributions and final reports sent out to RS servicing team in the next couple days. Thanks again for your patience.

Thanks Ramesh for the info. Quick question, the last payment I received from RS on this was for the period 5/18 to 6/30. I don't see any financials or updates posted as well. Did you get any distributions lately from them on this investment? For sure mine is not posted monthly.

Thanks
Ven

ramesh

My last distribution from the U of Buffalo Student Housing was in Aug, 2018.  Distributions for this investment are supposed to be quarterly, so I am not sure what he means when he refers to posting on a monthly schedule.  Gonna wait and watch.

In better times, when they were fully staffed,  RealtyShares was misdirecting distributions, so, who knows,  they might be doing so here as well.  I am invested in RS 346 (Woodcreek Farms Equity), and I received a whole bunch of distributions in 2018.  Then, in December,  I received this notification  ;D!

Based on discussions with the sponsor, the HUD loan limits distributions to twice per year and cash available for distributions and capital plans will be assessed after Q4. The sponsor believes that they will start making distributions for this investment in January and six months thereafter. However, we have noticed that you have been receiving distributions that belonged to another investment since June 2018. The total amount over distributions post-RealtyShares fees equals $35,928.74. The reason for the confusion is that the sponsor tagged this distribution to the wrong investment vehicle. Going forward, any distribution received by this investment will be reallocated to the other investment


Quote from: Ventan on January 15, 2019, 09:10:55 AM
Quote from: ramesh on January 15, 2019, 06:38:22 AM
Quote from: ramesh on January 15, 2019, 06:33:50 AM
I understand that a few people here have reached out directly to sponsors.  Has anyone managed to connect with OC Ventures?  These guys have sold multiple student housing deals -- University of Buffalo, Binghampton U -- through RealtyShares.  I have messaged one of the founders, Steve Zhang, on linkedin, but no response yet.

I just heard back from Steve Zhang about the University of Buffalo investment.  He writes:

I want to first assure you the property is performing well both in terms of occupancy and pre-lease. We typically post final financials on the 15th of each month, which means we will have distributions and final reports sent out to RS servicing team in the next couple days. Thanks again for your patience.

Thanks Ramesh for the info. Quick question, the last payment I received from RS on this was for the period 5/18 to 6/30. I don't see any financials or updates posted as well. Did you get any distributions lately from them on this investment? For sure mine is not posted monthly.

Thanks
Ven

Ventan

Quote from: ramesh on January 15, 2019, 09:27:53 AM
My last distribution from the U of Buffalo Student Housing was in Aug, 2018.  Distributions for this investment are supposed to be quarterly, so I am not sure what he means when he refers to posting on a monthly schedule.  Gonna wait and watch.

In better times, when they were fully staffed,  RealtyShares was misdirecting distributions, so, who knows,  they might be doing so here as well.  I am invested in RS 346 (Woodcreek Farms Equity), and I received a whole bunch of distributions in 2018.  Then, in December,  I received this notification  ;D!

Based on discussions with the sponsor, the HUD loan limits distributions to twice per year and cash available for distributions and capital plans will be assessed after Q4. The sponsor believes that they will start making distributions for this investment in January and six months thereafter. However, we have noticed that you have been receiving distributions that belonged to another investment since June 2018. The total amount over distributions post-RealtyShares fees equals $35,928.74. The reason for the confusion is that the sponsor tagged this distribution to the wrong investment vehicle. Going forward, any distribution received by this investment will be reallocated to the other investment


Quote from: Ventan on January 15, 2019, 09:10:55 AM
Quote from: ramesh on January 15, 2019, 06:38:22 AM
Quote from: ramesh on January 15, 2019, 06:33:50 AM
I understand that a few people here have reached out directly to sponsors.  Has anyone managed to connect with OC Ventures?  These guys have sold multiple student housing deals -- University of Buffalo, Binghampton U -- through RealtyShares.  I have messaged one of the founders, Steve Zhang, on linkedin, but no response yet.

I just heard back from Steve Zhang about the University of Buffalo investment.  He writes:

I want to first assure you the property is performing well both in terms of occupancy and pre-lease. We typically post final financials on the 15th of each month, which means we will have distributions and final reports sent out to RS servicing team in the next couple days. Thanks again for your patience.

Thanks Ramesh for the info. Quick question, the last payment I received from RS on this was for the period 5/18 to 6/30. I don't see any financials or updates posted as well. Did you get any distributions lately from them on this investment? For sure mine is not posted monthly.

Thanks
Ven

Thanks , his quote of monthly drew a blank with me. Anyways hopefully quarterly will come thru. Regarding RS, mess is a small word when they have such poorly thought out process and dealing with millions of investor .

Ven
money. We can only pray for an acquisition to take place.

Taxman

I have remained in touch with the RS representative with whom I primarily interacted when RS was fully operational.  He was able to land on his feet with another firm (keep in mind that most of the former employees were called into a conference room and let go with no notice whatsoever and there were good people who worked at the company).  He has offered his assistance in obtaining what information he can from his remaining contacts at RS.  Late last week he confirmed the rumors are true that RS is working on selling the portfolio mostly to another private equity firm and has received a number of bids, which they are in the process of evaluating.  Not to get hopes up but one of the bids submitted is from a company (I won't name it here due to the confidential nature of the information) that he says would be a particularly good fit for investors, as they have a similar business model and understand the level of work it will take to manage the portfolio relative to a more traditional real estate private equity firm.  He is meeting with the RS Director of Asset Management this week to better understand where everything stands and I outlined a number of questions for him to ask when he meets, not so much about specific investments, although I obviously have the same concerns expressed on this board about a couple of them in particular, but rather what changes are going to be implemented to the current system, which isn't working at all despite RS's representations to all of us when we invested.  He may also gather some additional intel on the status of potential suitors for the portfolio, which I will share here as soon as I know it.  I told him in no uncertain terms that this skeleton crew approach is not working at all and the remaining executive management team of RS needs to put themselves in the shoes of the individual investors who entrusted them with hundreds of millions of dollars of hard-earned money and do a better job managing the situation and especially communicating to everyone where things stand.  I'll let you know when I receive an update. 

Sam

Thanks for the update Taxman!

Fingers crossed a competitor with know how buys then.
Regards,

Sam

Ventan

Quote from: Taxman on January 15, 2019, 09:47:39 AM
I have remained in touch with the RS representative with whom I primarily interacted when RS was fully operational.  He was able to land on his feet with another firm (keep in mind that most of the former employees were called into a conference room and let go with no notice whatsoever and there were good people who worked at the company).  He has offered his assistance in obtaining what information he can from his remaining contacts at RS.  Late last week he confirmed the rumors are true that RS is working on selling the portfolio mostly to another private equity firm and has received a number of bids, which they are in the process of evaluating.  Not to get hopes up but one of the bids submitted is from a company (I won't name it here due to the confidential nature of the information) that he says would be a particularly good fit for investors, as they have a similar business model and understand the level of work it will take to manage the portfolio relative to a more traditional real estate private equity firm.  He is meeting with the RS Director of Asset Management this week to better understand where everything stands and I outlined a number of questions for him to ask when he meets, not so much about specific investments, although I obviously have the same concerns expressed on this board about a couple of them in particular, but rather what changes are going to be implemented to the current system, which isn't working at all despite RS's representations to all of us when we invested.  He may also gather some additional intel on the status of potential suitors for the portfolio, which I will share here as soon as I know it.  I told him in no uncertain terms that this skeleton crew approach is not working at all and the remaining executive management team of RS needs to put themselves in the shoes of the individual investors who entrusted them with hundreds of millions of dollars of hard-earned money and do a better job managing the situation and especially communicating to everyone where things stand.  I'll let you know when I receive an update.

Thanks for the update. Hopefully we can all breathe easy soon.

Ven

DigitalNomad

Some good updates from Taxman.  :)

Small update from me: So far I've received January payments from all but one of my 7 investments. I do have hopes I'll also receive this final one since they never been late before.

chitown-2020

A small update and tidbit from me...

In addition to RealtyShares, I have investments on a competing platform.    I had a call with them the other day and asked if they were a potential bidder for the assets.    The response was maybe there would be a fit for part of the portfolio, but in no uncertain terms would they be interested in all of it.   The message was that quite a few of the deals were a dumpster fire mess of low quality.   Because they had a high focus on deal flow, the quality of deals suffered significantly -- as an example, quite a few deals that had been rejected by the firm I was speaking with, had ended up on the RealtyShares platform, they had noticed.

I guess hindsight is 20/20 - and of course, it could just be gloating / sour grapes from the competition, but it is interesting.   It does appear that most platforms no longer offer any kind of debt, especially for fix-n-flips.    I had given up on those too awhile ago, and am still working through some apparent failures on RS.

Anyway, lets hope that we get a manager who can at least accurately manage the portfolio.   In the past two days I received two distributions -- one seemed normal and the other just appeared in my account without any record on the dashboard.   I know which deal its from and its correct/expected, but worrisome that they're not maintaining their visible records.    I guess I'll take getting paid to good record-keeping, but actually I'm not sure...   come on guys!   Let's get it together! 



Taxman

As a follow-up to my earlier post respecting the potential sale of the RS portfolio, below is a distilled down version of some of the feedback I received from my contact.

There are a few things apparently at play with several active bidders.  The sale is taking longer than anticipated due to the issue of price and what value, if any, potential suitors are willing to attribute to the existing investor base in addition to the NPV of the asset management fee prospective revenue streams.  The smaller PE firms and online syndicators seem willing to attribute some value to the existing investor base, whereas the larger, more established PE firms do not.  This leaves the CEO in the difficult position of focusing negotiations on the smaller PE and online syndicators.  Having another online syndicator buy the portfolio would appear to be the best option, as they would have the best understanding of the work and bandwidth needed to manage it as well as their own online platform, so investors are able to track the investments once uploaded into their software.  Ultimately, the sale has to be approved by the CEO as well as the board of directors.  The current CEO was an active investor on the platform prior to joining RS and most likely still has significant dollars invested across a number of deals, so he also has personal capital invested alongside other RS investors. 

As to how sponsors have been reacting and if there has been any malicious intent to take advantage of the situation, I was very happy to hear that the general consensus from sponsors was to stay the course with the investments and to not take advantage of the situation as they have reputational risk on the line and are bound to their original operating agreements which can still be acted upon and pursued by RS as well as the next manager who buys the portfolio.  The sponsors, primarily on the equity side, also make the majority of their money from outperforming LP's preferred returns and thus are monetarily tied to the performance of the properties as well. 

The process of hiring and onboarding a 3rd party servicing company is still in the works.  This will make tax season difficult for the remaining folks at RS, as prior tax seasons were a struggle even with a full team.  Hopefully the new servicing company is fully operational as tax season looms closer.  I would expect K-1 production and distribution to be messy and would anticipate many investors will have to file extensions.

Moral of the story is there will still be some bumps in the road in the near-term, but it does appear that senior management is working hard at finding a viable purchaser for the business.  Who knows what the deal will look like and how much of the existing portfolio may be acquired, but in combination with transferring servicing to a competent 3rd party servicing company, perhaps there's light at the end of the tunnel and its not a train heading towards us. 

cgblack

Quote from: celtic_saint on January 08, 2019, 11:59:17 AM
I'm new on this forum and found my way here because of this Realty Shares thread. I could rant on how bad RS was and has become but instead I'll offer a few insights.

I spoke to all of my sponsors whom I've invested with at Realty Shares. 2 investments, Beacon Street Hotel and Marketplace Center, have confirmed they sent their distributions to RS and that RS is trying to get them to the investors. Try harder please or at least communicate. OK 1 little rant. My investment with 1 Sand and Sea's sponsor wasn't all that forthcoming other than they at least emailed me back saying they hope to get the house finished and sold (they stopped paying distributions). 151 Bernard Street is a bust and if anyone knows the results of the upcoming auction please share.

In the meantime, thanks to Sam for extracting some tidbits of info out of RS.

I'm in 1 Sand and Sea as well for $25K, no distributions for Nov, Dec and likely Jan now.  The target exit date was 10/06/18, so obviously, that was missed.  Last notification was 11/28 about them waiting for the planning department to approve a small addition. 

I had an email from Robert on Oct 30th that said

I just spoke with our asset management team who indicated they have a call scheduled with the sponsor to inquire about the indication to begin paying down the principal as well as the new anticipated maturity date. Once they have the call they will be publishing a new update with additional details.

I asked about any update on this, and on Nov 9th received from Victor Perez:

Robert is no longer with the company. I will make sure to post an update on the result of this call as soon as information becomes available.

Since then, nothing.

cj60031

Update.  I got three distributions today but all of them were payouts from sponsors for Nov.   Realtyshares are very slow but they are doing something at least.

Sam

Quote from: chitown-2020 on January 15, 2019, 06:29:38 PM
A small update and tidbit from me...

In addition to RealtyShares, I have investments on a competing platform.    I had a call with them the other day and asked if they were a potential bidder for the assets.    The response was maybe there would be a fit for part of the portfolio, but in no uncertain terms would they be interested in all of it.   The message was that quite a few of the deals were a dumpster fire mess of low quality.   Because they had a high focus on deal flow, the quality of deals suffered significantly -- as an example, quite a few deals that had been rejected by the firm I was speaking with, had ended up on the RealtyShares platform, they had noticed.

I guess hindsight is 20/20 - and of course, it could just be gloating / sour grapes from the competition, but it is interesting.   It does appear that most platforms no longer offer any kind of debt, especially for fix-n-flips.    I had given up on those too awhile ago, and am still working through some apparent failures on RS.

Anyway, lets hope that we get a manager who can at least accurately manage the portfolio.   In the past two days I received two distributions -- one seemed normal and the other just appeared in my account without any record on the dashboard.   I know which deal its from and its correct/expected, but worrisome that they're not maintaining their visible records.    I guess I'll take getting paid to good record-keeping, but actually I'm not sure...   come on guys!   Let's get it together!

Yeah, acquirers don't want to acquire so much the single family fix-and-flip business from the past. But there's a price for everything. The winning bidder will likely be one that acquires the entire book for the best price.

For future investments, it's interesting to see that the poorest performing deals so far are the residential ones. Perhaps it's because they were the most speculative with the least amount of creditworthiness as banks weren't willing to lend to them. I'm definitely not going to invest in residential fix-and-flip on a real estate crowdfunding platform. I want to focus on commercial real estate with proven operators that have skin in the game.

I was doing some research on Realty Mogul, and learned they got out of residential in late 2015 due to some warning signs. Here's my post: https://www.financialsamurai.com/why-realtymogul-got-out-of-single-family-investment-properties/

Regards,

Sam

Followthesunand72

All of my RS investments have paid for December and 333 Parnassus(debt) is now under contract of sale @$2.3m, after successful foreclosure.

Seems to be business as usual, just maybe at a slower pace of delivery, which is reasonable under the circumstances.

dwengca

Quote from: Followthesunand72 on January 17, 2019, 09:00:53 AM
All of my RS investments have paid for December and 333 Parnassus(debt) is now under contract of sale @$2.3m, after successful foreclosure.

Seems to be business as usual, just maybe at a slower pace of delivery, which is reasonable under the circumstances.

I hope you're right on 333 Parnassus... based on history, the previous owner does not go down without a fight.   This was first foreclosed on nearly a year ago, and he came up with bunch BS to block the sale and while continue to stay in the house.   I really hope this is finally gonna come to closure.

RoyallyScrewed

Hello - Anybody here that invested in either SFR Package II or SFR Package I?  If yes, please DM me. Both of them were $2.5M loans each. Sponsor started defaulting in 3-4 months and declared bankruptcy. Here is the update I got on my dashboard.

SFR Package II 1/16/2019
01/16/2019
The sale has closed. The portfolio of homes secured by this loan was coupled with additional homes that were part of the same court action. Allocation of the purchase price was determined by the buyer. Reconciliation of the sale price and expenses and a calculation of losses will take as much as an additional week. It is clear at this point that the investment returned less than $0.10 on the dollar. The reasons for the poor results are several.

The borrower's original plan was to do minor repairs and clean up and to re-market the properties to local investors interested in purchasing individual or smaller groups of these homes. Only a few homes were sold, however, under this plan. The balance of the properties was not well maintained and so deteriorated physically. The property values decreased accordingly. Additionally, tax liens accrued and some of the houses were foreclosed upon by the taxing authority. Due to the number of potential liens on the property, cleaning up the title so that the properties could be sold was a lengthy, costly and time-consuming process. As a result of the sale, the net proceeds are expected to be less than $100,000. The loan has a personal guarantee and we are continuing to assess a potential continuation of our suit against the borrower. As a reminder, RealtyShares already has a judgment in California against the borrower, but we will need to have it perfected in Florida. In order to potentially fund the further pursuit of this judgment against the borrower, RealtyShares will not be immediately distributing the remaining proceeds of the sale to investors but will be temporarily holding that money while assessing the benefits of using those funds to continue to pursue that additional claim.  RealtyShares will update you with a reconciliation of the sale proceeds and with our findings on the chances of collecting on the guarantee judgment after we complete an asset search. The net sales proceeds will be promptly distributed if we determine that further litigation is unlikely to be of material benefit.

dolemite

Quote from: RoyallyScrewed on January 17, 2019, 08:16:11 PM
Hello - Anybody here that invested in either SFR Package II or SFR Package I?  If yes, please DM me. Both of them were $2.5M loans each. Sponsor started defaulting in 3-4 months and declared bankruptcy. Here is the update I got on my dashboard.

This one is a complete disaster, especially for a deal secured with alleged "first position liens".

princyraj

Hello - Anybody here invested in 34811 Doheny Place deal. The project was delayed by 6 months and now it's been sitting on the market for almost 6 months. Based on the last communication from RS they were planning to force a sale by end of January, but with the recent debacle at RS I am not sure what's gonna happen. Does anyone have the latest update on this deal?

Zenz

I also just got 2 distributions from RS for equity investments (Ortega Village and Slate Apartments).  Like everyone else, I'm hoping for the best...