Author Topic: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name  (Read 33025 times)

John_PVF

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Please DM me if you would like your name added as a signatory.  If comfortable, please add how much you have invested so I can include a total.  I plan to send this to them by mid-month if enough people sign on to make it worth it.  Does anyone have board member info too so we know who to direct copies to at their VC owners?  Thanks.
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Mr. Alexis de Belloy
Chief Executive Officer
Realty Shares, Inc.
525 Market Street, Suite 2800
San Francisco, CA 94105

April [  ], 2019

Dear Mr. de Belloy:

I am writing on behalf of myself and [   ] of my fellow investors in debt and equity deals placed through Realty Shares.  Taken together we represent [$  ] million of Realty Shares’ assets under management.  We are writing to express our concern and displeasure with the manner in which our investments have been managed since your November 7, 2018, notification that the platform would be entering run-off.  Additionally, we are frustrated by the lack of communication about status of our specific investments, the transition to third-party administration, tax reporting and payment processing. 

Since the announcement was made [nearly/more than] five months ago, members of this group have experienced the following issues with respect to our investments:

1.   Incorrect payments that subsequently had to be reversed and redistributed
2.   Timing delays and/or mismatches between payments received by our banks and the Realty Shares dashboard
3.   Substantial delays in processing payments from sponsors
4.   Incorrect 1099 tax documents
5.   Delayed K-1 tax documents
6.   Reduction in quality of reporting on underlying investment status
7.   Limited updates on “problem” deals

This is not meant to be an exhaustive list, but to be indicative of the frustrations we have felt, especially since these were the areas you assured us were your focus post-runoff.  The fees we are paying Realty Shares were meant to cover these basic investment management processes, but the level of service we are receiving is not where it should be.  We do not know if this is transition-related or the new normal, which brings us to our next point: communication.

We feel your communication strategy has been severely lacking and likely has caused you greater harm than if you were open and upfront to begin with.  This group generally feels we have either been inadvertently or deliberately left in the dark over the past few months.  Apart from the initial announcement and notices of delays on tax documents, there has been no global messaging to investors.  Nature abhors a vacuum, and in absence of information about our investments we can and have assumed the worst.  This has more than likely generated a substantial number of inbound information requests, which require substantial effort to respond to individually.  We feel you would be better served by more transparent communication to the underlying investors, both on our specific deals and the business transition plan in general. 

We recognize the difficulty of the situation you find yourselves in, but feel we have been more than patient with you as you work through these issues.  To that end, we would like to offer you these specific recommendations for improvement:

1.   Full and detailed disclosure of information on Realty Shares' plan for managing our investments now that the platform is in run-off.  What services are being performed by Realty Shares personnel vs. third parties? 
2.   Full and detailed disclosure of whatever actions are being investigated and/or pursued by Realty Shares to sell or transfer the servicing rights to our investments to a third party.
3.   Commitment to provide timely and relevant updates on the above items.
4.   Utilization of dashboard notifications to provide timely updates on payments and other investment-related items.  For example, provide notification when a payment is received from a sponsor and when investors can expect their proportional distribution.  Additionally, notice should be provided when terms of a deal change, such as granting an extension on repayment.
5.   Provide detail on gross payments received from sponsors, Realty Shares fees taken, and net payment due to investors.  This will provide investors the ability to check that they are in fact receiving accurate payments and help allay concerns about potential malfeasance that some have expressed.
6.   Provide greater detail on status of “problem” deals, including timely updates whenever status changes.  We fear some sponsors may seek to take advantage of your situation and want as much information as possible to decide whether additional action on our behalf is warranted.

We hope that this letter is received with the seriousness it requires and expect you to respond to our concerns.  We, like you, are highly committed to seeing a successful conclusion and return of our investments.  Our fear is that continued inadequate efforts on your part will cause others to take more serious action against you, which would divert resources and reduce our chances of recovery.  Thank you for your time and consideration of our position.

Regards,
[signatories]

CC:
[VC Investors]
« Last Edit: April 03, 2019, 10:55:54 AM by John_PVF »

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #1 on: April 04, 2019, 06:40:06 AM »
Day one update: 10 people have signed on with over $1m invested.  I don't intend to provide an update every day, but think this is a good start.  Still a ways to go though.

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #2 on: April 05, 2019, 10:13:09 AM »
Currently have 26 signatures.

TryinToMakeIt

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #3 on: April 05, 2019, 10:34:34 AM »
Just DM'd you - let me know if you did not get it.

kierra

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #4 on: April 05, 2019, 05:34:20 PM »
I have also DM'd you.  Thanks for the effort. 

samalamadingdong

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #5 on: April 05, 2019, 09:12:02 PM »
Since they did a site visit of my property, gave a construction/permit update and have resumed payments, I'm scraped off the ceiling.
But thank you for this letter. My key frustration was that there wasn't a contingency plan of what would happen if RS went under. They were requiring communication go through them (RS) but were not in a position to really handle that piece of things. Also, it wasn't clear who would represent the individual RS investors if RS went under and the deal sponsors decided to stop paying. That piece still isn't clear. And it's odd to me that we had to find each other on Financial Samurai as opposed to there being an investors forum on Realty Shares itself.

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #6 on: April 09, 2019, 06:25:32 AM »
Currently have 35 signatures.  Would like to have 50 names if possible before sending.

stu71

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #7 on: April 11, 2019, 02:03:27 PM »
Hope you got my PM yesterday. Have we considered asking the Financial Samurai himself to add his weight to this? From what I recall from his posts, he put a lot of money into RS investments. As a high-profile figure, he would add a lot of clout. I wonder how many of his investments are having problems. Would be a good subject for a new post.

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #8 on: April 12, 2019, 07:26:15 AM »
Hope you got my PM yesterday. Have we considered asking the Financial Samurai himself to add his weight to this? From what I recall from his posts, he put a lot of money into RS investments. As a high-profile figure, he would add a lot of clout. I wonder how many of his investments are having problems. Would be a good subject for a new post.

PM received and I just sent you a response relative to your query.

REI

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #9 on: April 13, 2019, 06:49:25 AM »
Hope you got my PM yesterday. Have we considered asking the Financial Samurai himself to add his weight to this? From what I recall from his posts, he put a lot of money into RS investments. As a high-profile figure, he would add a lot of clout. I wonder how many of his investments are having problems. Would be a good subject for a new post.

I agree. I wonder why Sam has been silent.

Sam

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #10 on: April 13, 2019, 08:00:26 AM »
Hope you got my PM yesterday. Have we considered asking the Financial Samurai himself to add his weight to this? From what I recall from his posts, he put a lot of money into RS investments. As a high-profile figure, he would add a lot of clout. I wonder how many of his investments are having problems. Would be a good subject for a new post.

I agree. I wonder why Sam has been silent.

I'm here, just busy writing posts and taking care of my family. If you really want my attention you can try messaging me or e-mailing me. Hard to keep track of everything.

I saw one of the latest updates from RS here on tax docs: https://mailchi.mp/3d966c6dd944/realtyshares-2018-tax-documents-update?

Also, for DME fund investors, the response I got from Alexis is  that the distribution calculations for Q4 are ready and awaiting blessing from the Fund Administrator, Opus. They are also planning on shifting responsibility to Assure, who is the Fund Admin for all other RS investments.

From my POV, it seems like things are slowly chugging along, so I haven't been as worried. The goal of these investments is to set it and forget about it. I've always had a 5 year time horizon for my DME fund.

If you know of any red flags going on w/ RS, let me and everyone know!

REI and Stu71 - Please let us know what the latest is you've discovered.

thx, Sam
« Last Edit: April 13, 2019, 08:02:40 AM by Sam »
Regards,

Sam

REI

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #11 on: April 13, 2019, 12:01:43 PM »
Hello Sam,
Nice to hear from you. I totally understand you are busy. First of all, thank you for starting this Forum, as this continues to be the most effective way to stay in touch with many of RS' investors. Your effort and John's in taking the lead to voice all of our concerns to Alexis is much appreciated.

I do not have any more information than what folks in this Forum already know. The simple reason is  - despite my emails RS is just not giving me any specific updates on the deals I am in. I am still waiting on distributions for more than a month, and that to after they admitted errors in their accounting. Also, the latest status on the deals with Franchise Growth remains unknown.

While I, like others, continue to be patient, it is the lack of communication that is frustrating. In fact only from your reply do I even know that Assure might be taking on more of RS' responsibilities.

John has covered all these concerns in his letter, which I hope Alexis will take as constructive feedback and act on. As a start, it will be nice to see our distributions credited to our bank a/cs - at least the ones that the Sponsors themselves have paid out!

Thanks much & let us continue to stick together and ride this thru'.

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #12 on: April 15, 2019, 06:17:11 AM »
Letter was sent this morning to RS.  Final count was 39 signatories and over $3m of AUM.  I will keep the group apprised of any response I receive back.  Thank you everyone who contributed their name.  Hopefully they will take the feedback in stride and try to be more responsive to our concerns.

John_PVF

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #13 on: April 16, 2019, 07:06:46 AM »
All, Alexis reached out to me to acknowledge receipt of our letter.  While he wasn't in a position to respond to our concerns or recommendations right then, I don't think they were surprised by any of our feedback.  We are going to schedule a further discussion sometime in the near future.  Stay tuned.

groovydude

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Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
« Reply #14 on: April 17, 2019, 10:15:22 AM »
Thanks for taking the lead on this John!

cgblack

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Has there been any other updates to this?

Thanks!

groovydude

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The silence is deafening.

Why would this be ignored? Perhaps there's criminal activity to be hidden, perhaps they're just completely inept. Either way, I think we have to acknowledge that every passing day makes RS less of a viable business. Lawsuits are mounting (expenses rising), and deals are exiting (revenue decreasing). That spells death. From the lack of response I'm guessing it happens by the end of this year.

Next course of action? Please chime in. Some possibilities are:

Call the FBI?
Find a class action attorney?
Find attorneys individually?
Do nothing? (please state your reasoning).

My feeling from the get-go on this has been that we should try and contact to the owners of the company directly (the VC investors, there's a list) and convince them that the honorable thing to do is to disband the company and ask each sponsor to take on their own deals. I doubt that threats of lawsuits will do any good, I'm sure they're protected even if RS has been running a ponsi scheme.

dwengca

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The silence is deafening.

Why would this be ignored? Perhaps there's criminal activity to be hidden, perhaps they're just completely inept. Either way, I think we have to acknowledge that every passing day makes RS less of a viable business. Lawsuits are mounting (expenses rising), and deals are exiting (revenue decreasing). That spells death. From the lack of response I'm guessing it happens by the end of this year.

Next course of action? Please chime in. Some possibilities are:

Call the FBI?
Find a class action attorney?
Find attorneys individually?
Do nothing? (please state your reasoning).

My feeling from the get-go on this has been that we should try and contact to the owners of the company directly (the VC investors, there's a list) and convince them that the honorable thing to do is to disband the company and ask each sponsor to take on their own deals. I doubt that threats of lawsuits will do any good, I'm sure they're protected even if RS has been running a ponsi scheme.

I'm voting for Option 1 and 2.  My opinion is that the sooner we get together and take legal action against RS, the more likely that we might recover something.  The longer we wait as a group, the more likely that RS will just shut down completely.

groovydude

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After reading my contracts over again, It seems to me that for the equity and preferred equity investments at least, each investment is set up as a separate business. I believe this was done with the intent of making it more difficult for one or several really bad deals to effect the outcome of other deals. Although, the contracts do say something like it will be up to the courts to enforce this separation or not in the event of a bankruptcy. This is in part why I'm in favor of trying to get RS to just quit, and give up all rights to the processing, and transfer those rights to each sponsor. If that's possible, the sponsors would be able to keep an extra 1% for their trouble, and we get paid on the good deals. Those with bad deals will be on their own to try and recoup though.

Also, I believe that the loans might be a different story, as they seem to be all done through RS as the underwriter (?). This is where a consult with a professional might behoove us.

Nosferatu_FL

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I also vote for options 1 and 2.
I have sent few emails today to finance lawyers with description of the situation and copy of the LLC agreement of one of the deals.
Will keep everyone posted.

As I also mentioned I got notice that best western toledo investment just defaulted with complete loss of original investment of 150K.  when I googles their sponsor Bridgeton Holdings.. they had terrible reviews!!
so clearly RS failed to even do basic background checks or basic checks on these sponsors.

how do you burn through 60 mil in 3 months or so