Financial Samurai - Forums

Real Estate Investing => Real Estate Crowdfunding => Topic started by: John_PVF on April 03, 2019, 08:53:29 AM

Title: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF on April 03, 2019, 08:53:29 AM
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.
--------------------------------------

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]
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF on April 05, 2019, 10:13:09 AM
Currently have 26 signatures.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: TryinToMakeIt on April 05, 2019, 10:34:34 AM
Just DM'd you - let me know if you did not get it.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: kierra on April 05, 2019, 05:34:20 PM
I have also DM'd you.  Thanks for the effort. 
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: samalamadingdong 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF on April 09, 2019, 06:25:32 AM
Currently have 35 signatures.  Would like to have 50 names if possible before sending.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: stu71 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: REI 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: Sam 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
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: REI 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'.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF 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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: groovydude on April 17, 2019, 10:15:22 AM
Thanks for taking the lead on this John!
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: cgblack on May 07, 2019, 12:48:33 PM
Has there been any other updates to this?

Thanks!
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: groovydude on May 07, 2019, 02:38:29 PM
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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: dwengca on May 07, 2019, 03:49:54 PM
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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: groovydude on May 07, 2019, 04:20:05 PM
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.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: Nosferatu_FL on May 08, 2019, 01:14:37 PM
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
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: groovydude on May 08, 2019, 01:34:33 PM
It was over 100 mil.

Fellow investors - I had a couple of very interesting conversations today. One was with a former employee of RS. This person agreed to let me share what he said to the group, I'll summarize:

The employees who were laid off (95% of the staff) had NO idea that this change was coming. They had been told that new financing was a sure thing, and it was full steam ahead.
The employees were told that the transition team would be managing the investments and trying to sell the company's assets
There were about 10 people who remained to be on the transition team, mostly asset management staff
This person's opinion was that most of the equity deals were pretty safe, and that some of these have already exited, and that some of the sponsors of these deals pushed forward or are pushing forward to exit sooner just to get away from the RS mess. The preferred equity and especially debt deals are in worse shape (I concur with this).
This person agrees with me that: RS is a fast dying company and that their assets have little future value, that every time a good deal exits it leaves the asset pool looking much worse, and does not understand why the CEO would be trying to sell the assets at this point.
This person has no idea why the company has been communicating so poorly and why the CEO would ignore our group letter.

The second conversation was with a retired real estate attorney. He told me that we, individually and as a group have a few options:
1. File a complaint with the SEC
2. Hire an attorney as a group to initiate a suit. This could be complicated as each member of the group will be suing regarding different investments, but the cost to each person might not be too much if we can get enough people.
3. Contact the owners of the company and try to have a discussion.

He seemed to think that a class action suit was pointless. I will be looking into filing a complaint in the next few days. I'm going to start talking with attorneys in Seattle. If anyone is in the Bay Area (Sam), perhaps it would be best to originate the action from there.

There's a website with information about the VC firms and lead investors that own RealtyShares:
https://www.crunchbase.com/organization/realtyshares#section-funding-rounds

I suggest we start with a letter to these firms and principles. It can be from us as a group or from an attorney. However, those with equity investments will probably stand more to gain if we have to start paying for service. Either way, IMHO we must demand that they redo all the contracts and release all servicing rights back to the sponsors immediately. I see this as the fastest and cleanest way out of this. (Receivership might be a huge mess. Lawsuits may be needed on a case-by-case basis, but problematic for a group this diverse. PM me if you're on board.) I'll draft something up.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: Nosferatu_FL on May 08, 2019, 01:59:28 PM
Groovy I'm on Board.  Thanks for gathering the intel 

I'm making some calls to finance lawyers.  still trying to figure out if it's finance or RE lawyer that would handle this.  would not hurt to get diff opinions until we get some good info. 

Will post any new info I have
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: dwengca on May 08, 2019, 05:11:17 PM
Groovy,

I am on board as well. 

Thanks!
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: groovydude on May 09, 2019, 04:52:04 PM
I posted notes from my conversation today with an attorney on the other thread, have a look.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF on May 09, 2019, 07:57:14 PM
I’ve been traveling so haven’t been on the forums in a while, but did want to provide a quick update re our letter to Realty Shares since people are inquiring.

After it was sent, I was able to connect with Alexis to give him a bit more context on our concerns and recommendations.  I haven’t spoken to him since then, but also haven’t pressed. I sent him a note today to follow up.

I’m still hoping Realty Shares will respond to us officially.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: DECA on May 09, 2019, 09:22:17 PM
See my post on the other forum thread. I think the debt deals and the equity deals may need different approaches (e.g., debt deals don't work to hand them over to the sponsor). 

Perhaps in both cases, however, a securities fraud action against RS might be appropriate.  Certainly for the debt deals, RS Lending sold securities (i.e., promissory notes) and were either reckless or intentional about their knowledge or lack thereof about the sponsors (such as FG). They just wanted to sell their securities, knowing that they had misrepresented FG's expertise.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: John_PVF on June 10, 2019, 05:49:37 AM
I am attempting to get someone at RS/RREAF/iintoo to respond to me.  I have not heard anything in a while, nor have I seen any formal response to our letter.  Appears others are have some success getting through, however, so maybe I just haven't found the right person yet.  I will advise of any updates.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: JD on June 14, 2019, 11:07:02 AM
Hello everyone, I'm brand new to this forum and thread but really glad I finally found it.

If you're still taking names/bodies for this cause, I've got over 500k stuck in RS deals and like many of you, far too many of them seem to be going into default. Furthermore, I haven't received one tax statement for 2018 yet, INT or K1.

I will definitely do whatever I can to help legitimize our concern as investors. If that ends up including hiring lawyers, I've got enough at stake to justify offering support in that respect as well.

Glad to hear what you guys have done already so thank you all for that. Please feel free to ask or message me if you think I can be of any use. I'll be on this forum from here on out...
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: gabe on June 15, 2019, 07:36:59 AM
Signed up for the forum and in the same boat - in a lot of RS deals and can offer legal cost support also.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: quittj on June 17, 2019, 03:42:58 PM
Another one here; 10k of capital not yet returned (I did receive interest payments). My inquires have been met with radio-silence. The investment was expected to close well over a year ago.
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: gabe on June 17, 2019, 06:46:04 PM
let's move to https://www.financialsamurai.com/forums/real-estate-crowdfunding/thoughts-on-realtyshares-closing-its-doors-to-new-investors/ so that we don't duplicate threads
Title: Re: Letter to Realty Shares CEO from Deal-Level Investors - Add Your Name
Post by: oxygen99 on June 23, 2019, 04:32:58 PM
John, I'm a newbie on FS and just found the letter you sent to RS.  Would you think it useful to send a second letter signed by yet another wave of deal-level investors?  If, yes, count me in. I have 50k invested with RS. Thanks, Nick