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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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Sam

Quote from: greenfrog2020 on November 17, 2018, 07:22:19 AM
Hi Sam - your take on acquiring RS for 2 million is definitely intriguing.  Why would RS be selling their portfolio of investments if their IRR is so high?  I guess I'm asking why they wouldn't just keep this profit for themselves?

Based on my conversations, the VCswant to move on. They control the company, and RS is just one of 10-15 investments in their portfolio.

Employees want to move on as well.

Maybe I can't acquire for $2 million, but I'm sure I could acquire for $5 million or less imo.
Regards,

Sam

Kalliste

I like the idea. How did you assume the cost of administrator? Is this a % of revenue that you estimated? Would be nice to see how many could contribute from this site and then see how much we need from outside of the financial samourai forum.

Sam

Quote from: Kalliste on November 17, 2018, 12:45:39 PM
I like the idea. How did you assume the cost of administrator? Is this a % of revenue that you estimated? Would be nice to see how many could contribute from this site and then see how much we need from outside of the financial samourai forum.

From hedgeco.net

Fund administrative fees vary greatly depending upon the size of your fund. In particular, it depends upon fund assets under management and the number of fund clients. For a small start up fund, expect to pay a flat fee of around $1,500 per month. Conversely with a larger fund, say one with $500 million in AUM, the administrator will charge a fee based on AUM, such as 10-15 basis points. Hence, for a $500 million fund, a fee of 10 bps amounts to $500,000 in fees per year. Also bear in mind that in general, administrators will only work with clients who manage in excess of $100 million.

Therefore, the fee would only be about $400,000 a year and not the $1M+ that I stated. Just wanted to be conservative and have a couple more people managing the investments.

I'm going to try and buy the book of business myself and see what happens. I'm sure other sites with deeper pockets are considering as well. The economics and synergies are just too great.

To get rich, you've got to take calculated and concentrated risk. I see an opportunity.

Regards,

Sam

Halfempty

Intriguing idea but bear in mind that every deal that loses money will find an attorney to sue all parties involved including the administrator. You should plan on having a full time litigant on staff to help you

Cheezus

I wouldn't underestimate potential legal fees as Halfempty suggested.

Sam

Quote from: Halfempty on November 18, 2018, 12:54:34 PM
Intriguing idea but bear in mind that every deal that loses money will find an attorney to sue all parties involved including the administrator. You should plan on having a full time litigant on staff to help you

Got it. When you lose money in investment that you voluntarily made, do you usually sue when you lose money in investment that you voluntarily made?

If so, can you share with me your success rate in recuperating your losses and how much a cost you to sue for each investment?

Thanks!
Regards,

Sam

Cheezus

What about having to sue the sponsors who default?  Is this included in the management fees?

Sam

I can't share details, but I'm more confident than ever we will hear good news by Christmas. I have way more competition than I realized.
Regards,

Sam

Largent

As a result of the change in status at RS (~ opportunity is knocking), I am joining the forum and this thread. Based on your competitive landscape comment, are you reconsidering the buying power of assembling a syndicate of investors from FS to potentially enhance the chance of acquisition success?

Sam

Quote from: Largent on November 21, 2018, 04:46:04 AM
As a result of the change in status at RS (~ opportunity is knocking), I am joining the forum and this thread. Based on your competitive landscape comment, are you reconsidering the buying power of assembling a syndicate of investors from FS to potentially enhance the chance of acquisition success?

I've considered it, but it makes the entire process more complicated. I have the capital to make a competitive offer, although I'm not the ideal acquirer. The ideal acquirer is a competing platform with the infrastructure.
Regards,

Sam

dwengca

Hi Folks,

I noticed the site has updated that

Philadelphia Multifamily Fund VII -
New Jersey Multifamily Fund II -
Redford Package Part 2

All stated has distribution to investors this month.  However, I do not see these distributions in my earning updates.   I emailed them already but have not heard back.   Anyone participated in the above investments, can you please confirm if you are seeing the same?

Thanks,

Dennis

RandyP

Quote from: Sam on November 19, 2018, 12:27:40 PM
Quote from: Halfempty on November 18, 2018, 12:54:34 PM
Intriguing idea but bear in mind that every deal that loses money will find an attorney to sue all parties involved including the administrator. You should plan on having a full time litigant on staff to help you

Got it. When you lose money in investment that you voluntarily made, do you usually sue when you lose money in investment that you voluntarily made?

If so, can you share with me your success rate in recuperating your losses and how much a cost you to sue for each investment?

Thanks!
I'm a class action lawyer that has specialized in securities fraud litigation at various times over the years. (That type of litigation has largely dried up now). If a suit was brought, there is a pretty good chance the current administrator would be brought in as a defendant. Of course, there's insurance for that and you could build that into your model.

Do these investments/LLC have offering documents? I would be interested to read to see what representations were made.

cgblack

For those of you that have investments in the 1 Sand and Sea, along with me, there is a troubling notification on the portal.

1 Sand and Sea - Distribution: 11/21/2018
RSN2075.1-1

11/26/2018
Realtyshares has not received the scheduled monthly payment for 1 Sand and Sea from the sponsor. We are working with the sponsor to collect this money. As soon as it is received we will process distributions to investors. Please allow 3-5 business days for payments to clear.

=============================

I've reached out to them, along with questions about previous notifications that did not happen, specifically:

=============================

1 Sand and Sea: 08/15/2018
08/15/2018
The partner of the sponsor who had been RealtyShares' primary contact has been demoted to a non-managerial role; we are now working with two other partners there.

Construction on the property's progress is only 30% complete and the property's existing trust deed loan is in payment default. It will take approximately $250k to bring that loan current.  RealtyShares explored several options, including potentially raising additional money to finish the project, perhaps by hiring other managers to bring construction to completion; this option, however, would likely tie up the property in potential litigation. RealtyShares ultimately negotiated a separate resolution with the sponsor.

-- RealtyShares 294 will fund approx. $260,000 from its construction reserve to bring the existing loan current
-- The sponsor will pay approx. $50,000 to settle outstanding property tax bills
-- The sponsor will pay 5 points ($13,126) for this additional advance; this amount will be distributed to investors
-- $100,000 from the construction reserve will be used, now, to pay current and accrued returns and a partial paydown of investor principal; we expect these distributions to be sent out to investors within a few weeks
--  Another $100,000 from the construction reserve will be used, in one month, to pay additional current and accrued returns and a partial paydown of investor principal; we expect these distributions to be sent out to investors within a few weeks of that date
-- RealtyShares 294 has obtained an additional personal payment guarantee from another sponsor principal whose net worth is $12 million
-- RealtyShares 294 shall be entitled to an extra 1% interest on the balance of the accrued preferred return.
-- The sponsor will get a new loan to cover the cost of paying off the existing loan, finishing construction and covering all carrying costs
-- The sponsor will hire two retired construction executives to manage the construction process.
-- The maturity date of the preferred equity investment is being extended to be no later than one year from now

The new first trust deed loan is with Civic Financial Services, and is for a total loan amount of $4,030,991, at an 8.5% rate. That amount should be sufficient for remaining construction efforts.

The Civic appraisal did show a slight increase in the property's value compared to the appraisal obtained when the investment was first made.

While it is clearly not ideal to effectively bear an increased loan-to-value ratio (as relates to the preferred equity investment's position in the new capital stack), the above restructuring does provide a higher probability of returning principal and returns to investors.

=======================================

I have not received any of the additional distributions (other than the usual monthly distribution) referred to above, nor any indication of the new maturity date.  I asked these questions over a month ago and keep getting somewhat of a run around.

cgblack

Just got another update on 1 Sand and Sea.  It at least appears like they are staying on top of things.

======================
1 Sand and Sea: 11/28/2018
11/28/2018
The Planning Department has approved the requested changes. The change will allow for the addition of a full 3rd bath and add an additional 93 sq ft to the dining/kitchen area. The changes vastly improve the product and the sponsor believes will add at least $225K-$325K in value. The Building Department still needs to approve the engineering changes.

Approval from the Building Department will hopefully happen within two weeks. They will then need to complete the framing and do the concrete work for the wrap-around deck plus punch out the southeast wall 8 feet with the foundation work to support that, including some engineering in the garage to provide support for the shear wall we are moving from its current spot in the middle of the south wall towards the east. Progress should pick up speed then. RealtyShares will keep you updated on the construction progress.

kt1984

I got this message on my Detroit MSA Dog Haus and Taco John's investment:

The borrower is in talks with another equity partner to recapitalize the partnership and pay off this loan. RealtyShares will keep you updated as talks progress.

This was supposed to be a NNN debt deal with a first lien so relatively safe, I am a little stressed as I have decent chunk in this deal !

Sam

CGback - what type of property is 1 sand and sea? Sounds like a single family home, so a relatively old deal since RS got out  i've single-family residential last year. I'm glad you're getting an update because that means as a management team is still working.

Kt - Thanks for the update!
Regards,

Sam

cgblack

Yes, it's an SFR that was supposed to mature this month (18 month), but it looks like they are extending it up to 12 more months.  At least we are getting some updates, and supposedly an extra 1% return for the extension, but we'll see.

Followthesunand72

Happy to report that almost all of my RS investments paid on time and in the usual amounts for November.

The lone exception being the infamous 333 Parnassus Ave, which has a posted eviction date of 12/5 for the squatters.  The notice stated that there is a buyer in the wings, once the eviction is carried out and the building properly secured.

So far, it seems like business as usual.

Followthesunand72

I also received full return of principal on Westheimer Oaks apartment deal.

Sam

Quote from: cgblack on November 28, 2018, 09:47:26 PM
Yes, it's an SFR that was supposed to mature this month (18 month), but it looks like they are extending it up to 12 more months.  At least we are getting some updates, and supposedly an extra 1% return for the extension, but we'll see.

That's good. Yeah, RS and RealtyMogul got out of the single family resi market bc it couldn't scale and they saw some declining signs. Probably best to stick with commercial or multi family property in the future, but everything will slow in a recession. He's bigger projects will have a bigger watchdogs hopefully.
Regards,

Sam