Thoughts On RealtyShares Closing Its Doors To New Investors

[Nosferatu_FL]

I urge everyone to email priority@iirrms.com and let them know that hitting low FG bids on its own (intentionally?) defaulted loans is not an option, because they could have closed Decatur without a rent reduction negotiation (which the franchisee wanted) and staged the construction cost issue so they could force this very outcome. I also urge that you tell them to come up with a solution that would preclude FG from translating our losses into their profits. I have already done so.

I think suing RS directly is a lost cause. I don't know what would be left in that shell at this point, but it could easily just file bankruptcy to avoid all legal action. That's why I think we need to focus on sharing our views with the JV, which is running the FG recovery process now (with the old RS workout people still there, I believe).

I wrote a very stern email to the priority email that was set up and to the former CEO and current asset managers that an easy way out and a way that benefits the FG screw ups would not be accepted.  I have invested significantly amounts of $$ into RS and into FG deals... I would be willing to look at legal advice/options if anyone has good ideas.  maybe go after the FG losers if they have assets?

[Nosferatu_FL]

Did anyone get the reserve $$ that was supposedly to be returned to Investors on some fo the FG deals?
I did not get any of that back.  I wrote them about this too and have not heard back.

[Nosferatu_FL]

Hindsight2020 an Chicago81, I agree with both of you.  Perhaps by getting an attorney now, we can prevent any low-ball sale of the loan to FG and also prepare for suits against FG and RS.  Does anyone have an attorney that they recommend? RS is San Francisco-based, so perhaps a California firm that does plaintiff securities fraud actions?

Another thought is whether to try to spark a criminal investigation of FG.  Their default on all of their deals at the same time  makes me think Ponzi scheme.  If each deal had its own problems, one would think the defaults would be staggered.

Deca I like your thinking.
Has anyone thought about getting a conference call for all the FG investors and exchange ideas and maybe divide and conquer how to go about
getting legal representation at this point? I have tried to contact few lawyers early on but did not feel they were helpful.

[dwengca]

I urge everyone to email priority@iirrms.com and let them know that hitting low FG bids on its own (intentionally?) defaulted loans is not an option, because they could have closed Decatur without a rent reduction negotiation (which the franchisee wanted) and staged the construction cost issue so they could force this very outcome. I also urge that you tell them to come up with a solution that would preclude FG from translating our losses into their profits. I have already done so.

I think suing RS directly is a lost cause. I don't know what would be left in that shell at this point, but it could easily just file bankruptcy to avoid all legal action. That's why I think we need to focus on sharing our views with the JV, which is running the FG recovery process now (with the old RS workout people still there, I believe).

I wrote a very stern email to the priority email that was set up and to the former CEO and current asset managers that an easy way out and a way that benefits the FG screw ups would not be accepted.  I have invested significantly amounts of $$ into RS and into FG deals... I would be willing to look at legal advice/options if anyone has good ideas.  maybe go after the FG losers if they have assets?

I agree and willing to participate as well.  It's not just the FG deals.  I am seeing evidence that RS and possibly the new management are taking the easy way out all non-performing deals.  I have several non FG deals, and RS asset management is letting the original borrower doing the same crap as FG without challenaging them.

[ramesh]

Per Hindsight's suggestion, I sent a note to priority@iirrms.com.  Here is the note:

---------------------------------------------------------
I have an investment in several RealtyShares (RS) investments, and in particular a debt investment in Church's Chicken, Westminster CO.  I have recently received a notification from you stating that significant losses are to be expected in this deal, and that you are considering selling the note back to the borrower at a discount.  I also gather from speaking with  several other investors that

a) Franchise Growth, that has offered this and other investments, has defaulted on every one of these
b) In every case the plot line seems similar: in most cases they have either failed to start construction claiming elevated construction costs, or, where construction is complete, failed to negotiate a rent with the restaurant operator  that is economically viable for the project
c) Franchise Growth now wants to buy back these loans at a discounted price.

All this smells of malfeasance on Franchise Growth's part:  it is too much of a coincidence that this is happening in over a dozen situations.  It appears that IIRR is in a hurry to let these scamsters off the hook.  You have a fiduciary responsibility to do right by your investors, and in the absence of detailed communication explaining your position, I and other investors will view this as a sacrifice of our interests. 

As such I suggest the following:

1.  Promptly return the construction reserve.  This has been held at RS for a year earning interest for RS, while investors are taking the risk.  You were supposed to return this by May end, per your latest notification on the topic.
2.  Pursue the scamsters vigorously
3.  If you have reasons to believe that pursuing Franchise Growth is against the best interest of the  investors, please communicate your reasoning in a detailed note. 

My investment in this deal is small, but I want to be confident that you will not sacrifice my interests for  expediency, on other deals.

[1846flickj]

I am new here, but I did get a response back from the priority email on Friday in regards to the construction reserve:

Dear me,

Its going through the approval process. We are accounting every dollar to make sure the distributions that go out to investors are correct.

Your patience is greatly appreciated.

--
Best Regards,

Eric Sullivan | Director of Customer Service
IIRR Management Services, LLC
on behalf of RealtyShares, Inc

What a jag... I think we've been pretty patient to date.

[JD]

I am sending a similar e-mail to priority@iirrms.com regarding both FG and the Chicago Retail investments. Will update back when they reply.

[tim2018]

Anybody receive their K-1 tax documents?

[ramesh]

Response from IIRR to my email (reproduced in my previous message above):

My name is Eric Sullivan and I am the Director of customer service. IIRR management services will be handling all customer concerns on behalf of RealtyShares. We will be happy to try and help.

We understand your concerns in regards to the Franchise Growth investment. Our asset managers are trying their best to work out the situation that is in the best interest of the clients involved.

In regards to the construction reserve distributions, I have reached out to our administrator to find out why they haven't been deployed yet. I will get back to you with an answer.

[Nosferatu_FL]

I urge everyone to email priority@iirrms.com and let them know that hitting low FG bids on its own (intentionally?) defaulted loans is not an option, because they could have closed Decatur without a rent reduction negotiation (which the franchisee wanted) and staged the construction cost issue so they could force this very outcome. I also urge that you tell them to come up with a solution that would preclude FG from translating our losses into their profits. I have already done so.

I think suing RS directly is a lost cause. I don't know what would be left in that shell at this point, but it could easily just file bankruptcy to avoid all legal action. That's why I think we need to focus on sharing our views with the JV, which is running the FG recovery process now (with the old RS workout people still there, I believe).

I wrote a very stern email to the priority email that was set up and to the former CEO and current asset managers that an easy way out and a way that benefits the FG screw ups would not be accepted.  I have invested significantly amounts of $$ into RS and into FG deals... I would be willing to look at legal advice/options if anyone has good ideas.  maybe go after the FG losers if they have assets?

I agree and willing to participate as well.  It's not just the FG deals.  I am seeing evidence that RS and possibly the new management are taking the easy way out all non-performing deals.  I have several non FG deals, and RS asset management is letting the original borrower doing the same crap as FG without challenaging them.

Here is the email and response from the Former CEO.
I also got the same generic Response from Eric Sullivan about the distributions..etc.

"Alexis
I recently received notifications that there would be substantial losses to some of the FG deals.
It seems the transition team is trying to take the easy way out and possibly sell the loans to the FG guys who totally
Screwed this up in the first place
I have written to the priority email that’s something that is opposed by many investors and will lead investors to consider all options.
I have been in discussion with many of the investors who are involved in the FG deals.
I urge you to talk to the transition team to be more diligent on handling this.
This is a bad situation and we need to look at the best way out, and definitely without benefitting the
FG sponsors who may have set this up to fail in the first place and at this point have major legal liability."

His response:

"Thank you for the email.
IIRR MS is handling FG Asset Management in continuity with RealtyShares and I have no reason to believe that the transition to IIRR Management Services has lessened any pressure on the sponsor.
Best regards,
Alexis"

My response:

"Thanks Alexis.
I appreciate the prompt response.
I received an email From Eric Sullivan this am who is going to look into this.
ALL investors are watching the development on the FG situation very closely.
There is strong feelings among the investors that criminal activity/negligence
on the part of the FG sponsors precipitated this situation.
Thanks"


I suggest We chip in and hire a lawyer who can dig up the details on the finances for the FG and RS folks to see what are our options.
If anyone knows someone who does that kind of work, I'm open to have that option in place.

[JD]

I am up for chipping in for a lawyer, as previously mentioned, should it come to that. I don't have any contacts at the moment but I did know a real estate lawyer who I worked with in the SF area over a decade back that I could try and track down again if needed.

Here's my response from Mr. Sullivan. Nothing new from what others have posted here but it is good to have a specific contact who will reply.

"My name is Eric Sullivan and I am the Director of customer service. IIRR management services will be handling all customer concerns on behalf of RealtyShares. We will be happy to try and help.

We understand your concerns in regards to the Franchise Growth investments. As well as your Chicago retail and Elmhurst investments. Our asset managers are trying their best to work out the situation that is in the best interest of the clients involved.

In regards to the construction reserve distributions, I have reached out to our administrator to find out why they haven't been deployed yet. I will get back to you with an answer.

When the K-1 package is ready for your investments, you will receive a notification and you will be able to access your K-1's through the "documents" section of your investor dashboard.
Please login to your account at RealtyShares, check for updates. There is a chance your K-1's have been uploaded. If it has not been uploaded then your tax documents are not ready.

We are working on getting more clarity on specific K-1 documents to give investors with missing tax documents an ETA on arrival. "

[Nosferatu_FL]

“RealtyShares continues to try to work with the sponsor to resolve the maturity and payment defaults but the borrower remains difficult to reach.  Further, RealtyShares has not been able to obtain an update on the status of the construction. RealtyShares researched the property and found on Redfin that it was listed for sale in October 2018 for $3,850,000. The price was increased to $4,050,000 in February 2019 and increased again to $4,350,000 in June 2019. It may be that the price increases are due to elements of development risk being overcome. However, the listing says the property is a “developer take over opportunity” perhaps suggesting a distressed sale. The current sale price is less than the $7,500,000 underwritten exit price. Further, the 1st position construction loan could be for as much as $4,825,000 (depending on how may construction draws have been taken) and has repayment priority over our $1,415,000 2nd position loan. RealtyShares reached out to the 1st  lender to find the loan balance and for additional information to help gauge the 2nd loan's exposure.
 
If the property is sold for the listed sale price, this investment will likely result in a large or total loss of the invested funds. If the 1st Lender responds, RealtyShares will inform investors of that conversation. RealtyShares expects to be able to provide a material update on the status of the investment within two months.”


I don't think the Sponsors are taking them seriously.
I spoke to Dari who said that a group of RS investors had a conference call with Kip the New CEO.
Anyone has information on this?

[Nosferatu_FL]

I am up for chipping in for a lawyer, as previously mentioned, should it come to that. I don't have any contacts at the moment but I did know a real estate lawyer who I worked with in the SF area over a decade back that I could try and track down again if needed.

Here's my response from Mr. Sullivan. Nothing new from what others have posted here but it is good to have a specific contact who will reply.

"My name is Eric Sullivan and I am the Director of customer service. IIRR management services will be handling all customer concerns on behalf of RealtyShares. We will be happy to try and help.

We understand your concerns in regards to the Franchise Growth investments. As well as your Chicago retail and Elmhurst investments. Our asset managers are trying their best to work out the situation that is in the best interest of the clients involved.

In regards to the construction reserve distributions, I have reached out to our administrator to find out why they haven't been deployed yet. I will get back to you with an answer.

When the K-1 package is ready for your investments, you will receive a notification and you will be able to access your K-1's through the "documents" section of your investor dashboard.
Please login to your account at RealtyShares, check for updates. There is a chance your K-1's have been uploaded. If it has not been uploaded then your tax documents are not ready.

We are working on getting more clarity on specific K-1 documents to give investors with missing tax documents an ETA on arrival. "

JD if you have any good leads with that lawyer i'm also in.  At minimum we might need serious research into the finances of the FG sponsors and any guidance we can get.  I will make some calls for SF area lawyers and give updates.

[1UnknownSubject]

Still haven't received them - I have two deals that both have not been reported.

[JD]

I am up for chipping in for a lawyer, as previously mentioned, should it come to that. I don't have any contacts at the moment but I did know a real estate lawyer who I worked with in the SF area over a decade back that I could try and track down again if needed.

Here's my response from Mr. Sullivan. Nothing new from what others have posted here but it is good to have a specific contact who will reply.

"My name is Eric Sullivan and I am the Director of customer service. IIRR management services will be handling all customer concerns on behalf of RealtyShares. We will be happy to try and help.

We understand your concerns in regards to the Franchise Growth investments. As well as your Chicago retail and Elmhurst investments. Our asset managers are trying their best to work out the situation that is in the best interest of the clients involved.

In regards to the construction reserve distributions, I have reached out to our administrator to find out why they haven't been deployed yet. I will get back to you with an answer.

When the K-1 package is ready for your investments, you will receive a notification and you will be able to access your K-1's through the "documents" section of your investor dashboard.
Please login to your account at RealtyShares, check for updates. There is a chance your K-1's have been uploaded. If it has not been uploaded then your tax documents are not ready.

We are working on getting more clarity on specific K-1 documents to give investors with missing tax documents an ETA on arrival. "

JD if you have any good leads with that lawyer i'm also in.  At minimum we might need serious research into the finances of the FG sponsors and any guidance we can get.  I will make some calls for SF area lawyers and give updates.

Here's a link with some info about him. He doesn't appear to be a perfect fit but it does mention that he has done work in real estate disputes, as I had used him for (it was a personal one though).

https://www.avvo.com/attorneys/94403-ca-cary-kletter-256645.html

If there's enough interest, I will reach out to him.

[mspringer]

“RealtyShares continues to try to work with the sponsor to resolve the maturity and payment defaults but the borrower remains difficult to reach.  Further, RealtyShares has not been able to obtain an update on the status of the construction. RealtyShares researched the property and found on Redfin that it was listed for sale in October 2018 for $3,850,000. The price was increased to $4,050,000 in February 2019 and increased again to $4,350,000 in June 2019. It may be that the price increases are due to elements of development risk being overcome. However, the listing says the property is a “developer take over opportunity” perhaps suggesting a distressed sale. The current sale price is less than the $7,500,000 underwritten exit price. Further, the 1st position construction loan could be for as much as $4,825,000 (depending on how may construction draws have been taken) and has repayment priority over our $1,415,000 2nd position loan. RealtyShares reached out to the 1st  lender to find the loan balance and for additional information to help gauge the 2nd loan's exposure.
 
If the property is sold for the listed sale price, this investment will likely result in a large or total loss of the invested funds. If the 1st Lender responds, RealtyShares will inform investors of that conversation. RealtyShares expects to be able to provide a material update on the status of the investment within two months.”


I don't think the Sponsors are taking them seriously.
I spoke to Dari who said that a group of RS investors had a conference call with Kip the New CEO.
Anyone has information on this?

Nosferatu_FL,
I'm in Linda Terrace as well and just received the same update.  Perhaps I am "misremembering" but I thought the intention was to purchase the lot, raze the existing house, design and approve the construction plans, and then sell that package to a buyer who would actually do the construction.  I do not believe any actual work (substantial) has been done on the property to this point.  All images I see on the realtor website include the old house and drawings of the new plans.  Is it possible that this lot, and just the lot, has decreased in value by $3.5MM in 2 years? 

I do not think they have actually started any construction on a new structure. 

[Nosferatu_FL]

I am up for chipping in for a lawyer, as previously mentioned, should it come to that. I don't have any contacts at the moment but I did know a real estate lawyer who I worked with in the SF area over a decade back that I could try and track down again if needed.

Here's my response from Mr. Sullivan. Nothing new from what others have posted here but it is good to have a specific contact who will reply.

"My name is Eric Sullivan and I am the Director of customer service. IIRR management services will be handling all customer concerns on behalf of RealtyShares. We will be happy to try and help.

We understand your concerns in regards to the Franchise Growth investments. As well as your Chicago retail and Elmhurst investments. Our asset managers are trying their best to work out the situation that is in the best interest of the clients involved.

In regards to the construction reserve distributions, I have reached out to our administrator to find out why they haven't been deployed yet. I will get back to you with an answer.

When the K-1 package is ready for your investments, you will receive a notification and you will be able to access your K-1's through the "documents" section of your investor dashboard.
Please login to your account at RealtyShares, check for updates. There is a chance your K-1's have been uploaded. If it has not been uploaded then your tax documents are not ready.

We are working on getting more clarity on specific K-1 documents to give investors with missing tax documents an ETA on arrival. "

JD if you have any good leads with that lawyer i'm also in.  At minimum we might need serious research into the finances of the FG sponsors and any guidance we can get.  I will make some calls for SF area lawyers and give updates.

Here's a link with some info about him. He doesn't appear to be a perfect fit but it does mention that he has done work in real estate disputes, as I had used him for (it was a personal one though).

https://www.avvo.com/attorneys/94403-ca-cary-kletter-256645.html

If there's enough interest, I will reach out to him.

I looked at his page.  if he thinks this is in his scope of work, we can message the other investors to get on a conf call with him?
I wonder if you can ask him without taking up too much of your time.

[Nosferatu_FL]

“RealtyShares continues to try to work with the sponsor to resolve the maturity and payment defaults but the borrower remains difficult to reach.  Further, RealtyShares has not been able to obtain an update on the status of the construction. RealtyShares researched the property and found on Redfin that it was listed for sale in October 2018 for $3,850,000. The price was increased to $4,050,000 in February 2019 and increased again to $4,350,000 in June 2019. It may be that the price increases are due to elements of development risk being overcome. However, the listing says the property is a “developer take over opportunity” perhaps suggesting a distressed sale. The current sale price is less than the $7,500,000 underwritten exit price. Further, the 1st position construction loan could be for as much as $4,825,000 (depending on how may construction draws have been taken) and has repayment priority over our $1,415,000 2nd position loan. RealtyShares reached out to the 1st  lender to find the loan balance and for additional information to help gauge the 2nd loan's exposure.
 
If the property is sold for the listed sale price, this investment will likely result in a large or total loss of the invested funds. If the 1st Lender responds, RealtyShares will inform investors of that conversation. RealtyShares expects to be able to provide a material update on the status of the investment within two months.”


I don't think the Sponsors are taking them seriously.
I spoke to Dari who said that a group of RS investors had a conference call with Kip the New CEO.
Anyone has information on this?

Nosferatu_FL,
I'm in Linda Terrace as well and just received the same update.  Perhaps I am "misremembering" but I thought the intention was to purchase the lot, raze the existing house, design and approve the construction plans, and then sell that package to a buyer who would actually do the construction.  I do not believe any actual work (substantial) has been done on the property to this point.  All images I see on the realtor website include the old house and drawings of the new plans.  Is it possible that this lot, and just the lot, has decreased in value by $3.5MM in 2 years? 

I do not think they have actually started any construction on a new structure.

mspringer.. not sure.  I actually called the Sponsor directly and waiting for call back.

http://www.bbsre.com

Scott is the guy who has that project.

[mspringer]

“RealtyShares continues to try to work with the sponsor to resolve the maturity and payment defaults but the borrower remains difficult to reach.  Further, RealtyShares has not been able to obtain an update on the status of the construction. RealtyShares researched the property and found on Redfin that it was listed for sale in October 2018 for $3,850,000. The price was increased to $4,050,000 in February 2019 and increased again to $4,350,000 in June 2019. It may be that the price increases are due to elements of development risk being overcome. However, the listing says the property is a “developer take over opportunity” perhaps suggesting a distressed sale. The current sale price is less than the $7,500,000 underwritten exit price. Further, the 1st position construction loan could be for as much as $4,825,000 (depending on how may construction draws have been taken) and has repayment priority over our $1,415,000 2nd position loan. RealtyShares reached out to the 1st  lender to find the loan balance and for additional information to help gauge the 2nd loan's exposure.
 
If the property is sold for the listed sale price, this investment will likely result in a large or total loss of the invested funds. If the 1st Lender responds, RealtyShares will inform investors of that conversation. RealtyShares expects to be able to provide a material update on the status of the investment within two months.”


I don't think the Sponsors are taking them seriously.
I spoke to Dari who said that a group of RS investors had a conference call with Kip the New CEO.
Anyone has information on this?

Nosferatu_FL,
I'm in Linda Terrace as well and just received the same update.  Perhaps I am "misremembering" but I thought the intention was to purchase the lot, raze the existing house, design and approve the construction plans, and then sell that package to a buyer who would actually do the construction.  I do not believe any actual work (substantial) has been done on the property to this point.  All images I see on the realtor website include the old house and drawings of the new plans.  Is it possible that this lot, and just the lot, has decreased in value by $3.5MM in 2 years? 

I do not think they have actually started any construction on a new structure.

mspringer.. not sure.  I actually called the Sponsor directly and waiting for call back.

http://www.bbsre.com

Scott is the guy who has that project.

Nosferatu_FL,
The last structure update was from June'18 and concerned additional costs for asbestos remediation and concrete overage.  I have not see anything since concerning the raze nor building of new home.  I would assume in a year, there should be a finished home that would be displayed on the realtor site.  So my hope, and could be wishful thinking, is they have not spent all of the first loan and thus are able to ask for a lower amount on the sale, knowing the buyer has additional construction costs to incur.  I don't know anything about the first lien to know if it's a draw down loan, etc.

[Cheezus]

The picture of the house on the realtor sites looks quite a bit like the renderings.  Sure looks like Linda Terrace is well in to construction.  And the sales pitch on the sites is for a developer to come in an finish the deal.  Appears that is the best way forward for the sponsor, to just steal out money, basically, and get out of it.  Wonderful.  This is why I won't waste money or time with individual deals anymore.  Fundrise has better returns and none of this nonsense.