Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 655709 times)

Cheezus

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #20 on: November 09, 2018, 04:29:14 AM »
Here is what I have from PeerStreet:

"In the event of a default, PeerStreet will handle the workout process and work on behalf of investors to protect their investment and maximize proceeds. Our in-house team has more than 97 years experience in residential and commercial real estate (average of 13 years per person), 52 years of law and 12 years of regulatory compliance, ensuring that the interests of our investors are protected at every stage of the default/foreclosure process. PeerStreet also holds loans in a bankruptcy-remote entity that is separate from our primary corporate entity. In the event PeerStreet no longer remains in business, a third-party “special member” will step in to serve as a trustee to manage loan investments and ensure that investors continue to receive interest and principal payments. Additionally, from the time funds are received in an investor account until an investment closes (but not while funds are invested), all investor funds are held in an Investors Trust Account with Wells Fargo and FDIC insured up to $250,000."

Cheezus

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #21 on: November 09, 2018, 04:30:41 AM »
Fundrise response if they go under:

In the event of a bankruptcy of Rise Companies (Fundrise's parent entity), the Fundrise investments should not be pulled into to the bankruptcy estate, as the Fundrise eREITs and eFunds are not wholly owned subsidiaries of Rise Companies. However, the Manager may be disrupted by any such bankruptcy. In such event, assuming that the Manager was also deemed bankrupt or insolvent, the shareholders would have the opportunity to replace the Manager for cause under the terms of the Fundrise eREIT and eFund operating agreements.

For more information, please see the disclosure regarding "Term and Removal of the Manager" under the Management section of each investments' Offering Circulars here, as well as each investments' operating agreement (below).

Income eREIT Operating Agreement
Growth eREIT Operating Agreement
East Coast eREIT Operating Agreement
Heartland eREIT Operating Agreement
West Coast eREIT Operating Agreement
Los Angeles eFund Operating Agreement
DC eFund Operating Agreement
National eFund Operating Agreement
Income eREIT II Operating Agreement
Growth eREIT II Operating Agreement

Our operating agreements require that we prepare an annual report and deliver it to our common shareholders within 120 days after the end of each fiscal year.

This could just be my legal ignorance, but Fundrise seems like they don't have a very good plan in place.  "If we are gone, you as shareholders have some rights... yeah, good luck" is how I read it.

Followthesunand72

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #22 on: November 09, 2018, 07:02:51 AM »
My two cents......

I have invested significant amounts with several platforms, including RealtyShares, Peerstreet, Fundrise, Groundfloor, Crowdstreet and Realcrowd, since 2014.

Although all have slightly different business models, I have never had a deal that didn't eventually pay off.  Some took longer than others to "clean up" but I have never lost principal on any of them.

The key for me has been to diversify among the various deals/platforms and not put too many eggs in one basket.


Sam

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #23 on: November 09, 2018, 08:15:54 AM »
My two cents......

I have invested significant amounts with several platforms, including RealtyShares, Peerstreet, Fundrise, Groundfloor, Crowdstreet and Realcrowd, since 2014.

Although all have slightly different business models, I have never had a deal that didn't eventually pay off.  Some took longer than others to "clean up" but I have never lost principal on any of them.

The key for me has been to diversify among the various deals/platforms and not put too many eggs in one basket.

Good two cents! Thanks for sharing. Yes, given there is collateral, unlike P2P lending, your money just doesn't go poof. All the investors in a specific deal, including the sponsors have an incentive to get the best return possible.

Are you aware of sponsors not putting any skin the game? I don't think I've ever come across a deal where the sponsor hasn't put up at least 10% of the capital.
Regards,

Sam

stingray

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #24 on: November 09, 2018, 08:24:30 AM »
I am a RealtyShares investor.  Like others on this site, I am worried that sponsors will not repay because they know that RealtyShares or its successor does not have the resources to compel them.

I would like to suggest that we form an online website for RealtyShares investors.  Please let me know if you are interested.
« Last Edit: November 09, 2018, 08:26:57 AM by stingray »

Derek

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #25 on: November 09, 2018, 08:47:22 AM »
My two cents......

I have invested significant amounts with several platforms, including RealtyShares, Peerstreet, Fundrise, Groundfloor, Crowdstreet and Realcrowd, since 2014.

Although all have slightly different business models, I have never had a deal that didn't eventually pay off.  Some took longer than others to "clean up" but I have never lost principal on any of them.

The key for me has been to diversify among the various deals/platforms and not put too many eggs in one basket.

My experience is likewise positive overall and has been for years, but I do have a number of deals that have ended up with the 'sponsor' just vanishing. These are still not resolved, so I don't know what that means given the latest developments - will RealtyShares still be going through with the foreclosure proceedings, for example? What about when this happens after RS 'closes their doors'? Anyway, I have all of my investor packages for my ~$300K in RS investments, so theoretically I have enough information to track people down should things go south. Without RS in the picture, there's just no way, IMO, to recoup your money if you have a $5K investment in a property in Utah and the sponsor takes off. Legal costs alone are prohibitive unless we find a forum like this where we can team up on the same deals and take action together.

What's funny is that right before this announcement I was considering how to improve my RS returns, because one of the biggest issues I had been facing is the 'lost opportunity' during deal ramp ups and ramp downs. I.e., I've had investments withdrawn from my account MONTHS before the deal closes, and similarly not getting returns/principal returned until MONTHS after the deal closes. Even with a good return during the 'active' period, you have to account for all of this downtime when considering your total return. Anyway, not the biggest concern now.


Sam

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #26 on: November 09, 2018, 11:57:18 AM »
Just spoke to someone at RealtyShares: They are keeping their entire asset management and servicing team (operational team) for the $400M in assets. Hence, nothing really changes at the moment. The only thing that changes is that you can't invest in more deals.

And if you think about it, given there are no new deals coming in for them to manage, theoretically, the job of the asset management and servicing team gets easier over time since they will eventually have less and less deals to manage as the deals roll off, while their pay I'm assuming will stay the same.

I'm looking on the positive side of things, as this is my nature. Feel free to share the negatives. I wonder if I can even try and join that team to help. Hmm.
Regards,

Sam

CrowdFundingInvestor

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #27 on: November 09, 2018, 12:15:38 PM »
Is it better to have a realtyshares subforum within real estate crowdfunding? In this subforum there will be separate posts (and only one thread per deal) with all the information and current status of the distributions from the sponsor.


I saw your post with info on dme fund with Realtyshares: https://www.financialsamurai.com/realtyshares-dme-fund-information-investments-sponsors-updates/

So we can have similar info for each of the deals.

I am invested in 9 different deals and we can crowdfund effort to get the specifics and post info and also monitor if the payment is delayed.

Hopefully with the servicing team that should not happen but it doesn't take much time to keep all the info independently for all the deals.

You are right that sponsors though who go through RealtyShares or other platform have a reputation to keep. Also I even talked to few sponsors offline.

Thanks.

Followthesunand72

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #28 on: November 09, 2018, 12:41:25 PM »
My two cents......

I have invested significant amounts with several platforms, including RealtyShares, Peerstreet, Fundrise, Groundfloor, Crowdstreet and Realcrowd, since 2014.

Although all have slightly different business models, I have never had a deal that didn't eventually pay off.  Some took longer than others to "clean up" but I have never lost principal on any of them.

The key for me has been to diversify among the various deals/platforms and not put too many eggs in one basket.

Good two cents! Thanks for sharing. Yes, given there is collateral, unlike P2P lending, your money just doesn't go poof. All the investors in a specific deal, including the sponsors have an incentive to get the best return possible.

Are you aware of sponsors not putting any skin the game? I don't think I've ever come across a deal where the sponsor hasn't put up at least 10% of the capital.

I don't recall ever seeing any deals where the sponsor doesn't have skin in the game but I would not participate if that was the case.

As for sponsors disappearing, that sounds like the platform didn't properly vet them.

I typically only look at deals presented by "repeat sponsors", so that there is a track record.  That's easier to do with equity deals than it is with debt deals but it can still be done.

With Crowdstreet and Realcrowd, you have direct access to the sponsor from the beginning, so "finding" them is never an issue, unless the sponsor goes bust.

Again, pick deals offered by repeat, experienced sponsors and I believe you can mitigate the fear factor of a disappearing sponsor.

As stated earlier by Sam, reputable sponsors need us or they wouldn't be posting deals on crowdfunding platforms, so it is incumbent on them to keep their nose clean with the platforms, investors and the SEC.

stingray

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #29 on: November 09, 2018, 02:58:33 PM »
Thanks all for sharing your thoughts and information @Derek--the problem with the RealtyShares special purpose entity (SPE) investment structure is that individual investors (LLC members) may not have legal rights to pursue a defaulted sponsor--at least on the surface, the deal documents allow only the LLC and its Manager to do so.  But if enough investors are united, there are simple ways to address that.

If my experience with >250 crowdfunding real estate investments tells me anything, there will be some sponsors who take advantage of this situation.

Does anybody have the expertise to set up a simple discussion board for RS Investors?  I am not very sophisticated on the web side but would gladly help populate/moderate the site.  If nobody else I can help, I think I can figure out WordPress.

Thanks

barnold24

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #30 on: November 09, 2018, 03:40:42 PM »
Just tried to take the advice to download the documents on my two remaining deals with RS but because they are from 2014 and 2015, they were never uploaded. Anyone else having this issue?

MarinBoomerDad

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #31 on: November 09, 2018, 05:46:27 PM »
Thanks Sam and all for sharing great info re the RS shutdown.  I've got two active equity deals, and I'm hopeful that the RS team left in place will do right by existing investors... but I have questions like everyone else.  As you all know, we RS investors own a stake in an LLC, not the real estate directly, so not sure if that causes any legal issues here. Would like to get more specific communication from management to better understand the situation.

Sam

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #32 on: November 09, 2018, 06:47:32 PM »
Thanks Sam and all for sharing great info re the RS shutdown.  I've got two active equity deals, and I'm hopeful that the RS team left in place will do right by existing investors... but I have questions like everyone else.  As you all know, we RS investors own a stake in an LLC, not the real estate directly, so not sure if that causes any legal issues here. Would like to get more specific communication from management to better understand the situation.

I’ve been told by multiple people, including at realtyshares and competitors, that these separate LLCs will simply be managed by a third-party administrator. Investors in RS the company have no right to these seperate LLCs.

Here are RS’s VC investors: https://www.crunchbase.com/organization/realtyshares/investors/investors_list#section-investors
Regards,

Sam

hashiryu

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #33 on: November 09, 2018, 08:03:56 PM »
What's funny is that right before this announcement I was considering how to improve my RS returns, because one of the biggest issues I had been facing is the 'lost opportunity' during deal ramp ups and ramp downs. I.e., I've had investments withdrawn from my account MONTHS before the deal closes, and similarly not getting returns/principal returned until MONTHS after the deal closes. Even with a good return during the 'active' period, you have to account for all of this downtime when considering your total return. Anyway, not the biggest concern now.

Cash drag is an inherent issue for real estate investments. The shorter the loan term, the more opportunity loss you have.

Greg

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #34 on: November 10, 2018, 07:29:31 AM »
what do you guys think about realty Shares Debt? Is there LLC for each one?

stingray

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #35 on: November 10, 2018, 12:55:22 PM »
Hi Greg,

As far as I know, the standalone single family residential (SFR) deals were through RS Lending, Inc., which issued a borrower-dependent note to the investor.  RealtyShares stopped doing SFR deals several months ago, but some of them are still around.

Each of the sponsor deals was done through a special purpose entity with a name such as RealtyShares 222, LLC.  Investors received a partnership interest in the LLC.

You can easily tell the difference by looking at your deal documents.

Greg

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #36 on: November 10, 2018, 02:06:19 PM »
My Debt loan is from RS Lending. 405 Alberto way
Hopefully they pay it off early. They pay the interest on time. 2 months ago requested  last extension. Did you guys invested in 405 Alberto way Debt?

Greg

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #37 on: November 10, 2018, 03:18:55 PM »
Hi Beat the fraud,

It was your first extension or second extension? Did they complete the construction on time?

Greg

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #38 on: November 10, 2018, 03:31:06 PM »
Hopefully they pay full principal back.

techOnFIRE

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #39 on: November 11, 2018, 06:46:05 AM »
All of my previous investments exited early.  Currently have 6 investments in mix of debt and equity of which 5 are current on payments.  Church's and Chalon Rd asked for extensions.  As has been mentioned Church's changed builders but they continue making payments.  I expect them to exit on-time or maybe early.  Chalon was making payments through September so they are now in default which is of concern.  The "Important Message" on RS says they will continue to be managed by the new company so I am hopeful.  No legal action any of us can do for now but wait.

A new investment I signed last Monday was pulled back at the shutdown announcement and removed from my profile.  This make me hopeful RS is doing an orderly wind-own.  Yeah, I know - check hope at the door.

Chalon Rd is listed here: http://www.13187chalon.com/schedule-a-showing.html
and the brokers: http://www.thedamongroup.com/team/