Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 64758 times)

John

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #460 on: March 15, 2019, 05:11:00 PM »
I don't want to call out bad sponsors on here. After I contacted a couple of sponsors RS told me sponsors aren't allowed to talk to me anyway as part of their partnership agreement with RS. I want RS' process to run its course first. Once that's done, if I believe there was illegal activity that resulted in loss I will notify the appropriate state AG(s).

You seem to be very protective of RS John. Just my opinion. I don't want to burden them with more work than they already have, but I do want them to understand that I'm not going to just blow them a kiss if they stop doing what I pay them to do. As long as the investments are performing, they'll be taking their cut of the proceeds, which should give them ample operating capital to pay a staff to manage distributions and answer emails.

One can only speculate, but I find it hard to believe that their contracts prohibit the sponsors from "talking" with RS investors. It would make more sense that they are prohibited from reaching out to RS investors, which is what I was told by a sponsor. Anyone can call a company and ask to talk with someone, the person on the end of the line will likely engage in conversation. I've been in the syndication game for a long time, I've never known a sponsor that wasn't eager to develop a relationship with a potential investor.

As for calling out "bad" sponsors, what's your rational for not doing that here? It seems like the perfect place for that to me. I'd like to know if one of my sponsors is having trouble meeting their performance expectations, even if it's on a different investment. ESPECIALLY since RS is currently TERRIBLE at communicating. Also, perhaps we can call them "troubled" and not "bad" - seems a bit excessive to me unless they're downright crooks.

You don't know anything about me. Your opinion about my view of RS is meaningless. Congratulations on being in the syndication game a long time. I have 20 years experience as a financial officer in a leveraged company and capital structure investing. If a sponsor is going to break the law, NOTHING I say about them on here, or when I reach out to them, will matter. You should also read the investment documents you signed. Do what you want. I know what my rights are and am preparing to exercise them if/when the opportunity arises.
« Last Edit: March 16, 2019, 03:41:19 AM by John »

finmaster

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #461 on: March 15, 2019, 10:00:43 PM »
Unfortunately, it's true that technically you are not supposed to contact your sponsors since RS is serving as the trustee. The role of a trustee is really taking care of all the paperwork, distributions, communication and the legal work for both parties'. There is a reason why RS is the middle man and that's what they are charging their management fee for. But given RS's current trend especially with their poor communication and delayed distributions, trying to reach out to the sponsor is definitely warranted. Also I want to mention that whatever cut RS gets from managing all these deals is not going to be a guaranteed profit as there will be unforeseeable legals costs for dealing with defaulted properties which may or may not have to come out of their own pocket. I personally don't see why RS would hire more staff from a profit stand point of view at this point in the midst of transition. It would be futile to hire a bunch of staff only to let them go once they sell off their portfolio.
« Last Edit: March 16, 2019, 01:51:03 AM by finmaster »

groovydude

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #462 on: March 16, 2019, 10:03:52 AM »
Unfortunately, it's true that technically you are not supposed to contact your sponsors since RS is serving as the trustee. The role of a trustee is really taking care of all the paperwork, distributions, communication and the legal work for both parties'. There is a reason why RS is the middle man and that's what they are charging their management fee for. But given RS's current trend especially with their poor communication and delayed distributions, trying to reach out to the sponsor is definitely warranted. Also I want to mention that whatever cut RS gets from managing all these deals is not going to be a guaranteed profit as there will be unforeseeable legals costs for dealing with defaulted properties which may or may not have to come out of their own pocket. I personally don't see why RS would hire more staff from a profit stand point of view at this point in the midst of transition. It would be futile to hire a bunch of staff only to let them go once they sell off their portfolio.

That’s a great point, thanks. There’s always a delicate balance for any business in providing good customer service and maximizing profits. Let’s hope that whomever buys their assets has something to gain by providing good service. This is the point I made in my original post, and I think a little skepticism can be constructive.

Saint

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #463 on: March 16, 2019, 04:38:13 PM »
Has anyone received money on "333 Parnassus Avenue". On Mar-05, I received message on my dashboard stating:
"That's a wrap! RealtyShares is pleased to announce that the property has sold and your final payment should be distributed to you shortly.". But it has been over two weeks and I have not seen anything come to my bank. Don't understand why it should take that long

daletucker50

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #464 on: March 17, 2019, 07:23:34 AM »
I received 1099 but it was incorrect.  RS said they would be updating and sending asap.  I did just get a response from them that they would show up "shortly"...

dwengca

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #465 on: March 18, 2019, 10:05:19 AM »
Has anyone received money on "333 Parnassus Avenue". On Mar-05, I received message on my dashboard stating:
"That's a wrap! RealtyShares is pleased to announce that the property has sold and your final payment should be distributed to you shortly.". But it has been over two weeks and I have not seen anything come to my bank. Don't understand why it should take that long

A couple of the investors on here stated that they have received their payout.  However, I have not myself.   In fact, my earning update on the RS site now says "failed" for 333 Parnassus.   It used to say "crediting", but I never got the money.

I have emailed them several times, and all I have gotten back so far are the generic template replies says they are working on it.  Lame.

John

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #466 on: March 19, 2019, 04:56:30 AM »
An update on my payments. I received notice of two payments on 2/25 that hit my account today 3/19. So effectively these payments took 22 days from posting on the site to reach my bank account. I received a notification on 2/28 of pending payments that have not hit my back account yet. Hopefully I'll see them this week.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #467 on: March 20, 2019, 10:01:20 AM »
Today I inquired about a couple deals I haven't received January payments for.   FWIW, here are the cursory responses I received.

Church's Chicken, Westminster CO  RS had notified me a couple weeks ago saying the sponsor was in default and that they are attempting a negotiated settlement with the sponsor (Franchise Growth) instead of foreclosing.  In response to my request for an update this morning
 
Quote
An update in regards to this call is coming shortly.  We appreciate your patience

Camden Multifamily, Camden, SC In early March, the sponsor had claimed they had made a Jan payment and  RS claimed they hadn't received it!  Anyways, I asked again, and here was their response:
Quote
We will provide an update on the status and distributions of the property as soon as it becomes available from the sponsor. When notifications are posted in your dashboard, an email will also be sent to alert you. We appreciate your patience.

I have also pinged our Assset Managment team to ask if they can provide a new update






John

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #468 on: March 20, 2019, 10:44:06 AM »
RS finally notified investors today that the Dog Haus in Decatur, IL closed...even though it closed a month ago.

This is a Franchise Growth deal.

Beat_The_Fraud

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #469 on: March 20, 2019, 11:21:23 AM »
RS finally notified investors today that the Dog Haus in Decatur, IL closed...even though it closed a month ago.

This is a Franchise Growth deal.

John, does this mean that Franchise Growth is closing and paying off some deals but defaulting on the other ones? Like Ramesh mentioned above, his deal with Church's chicken, the sponsor (Franchise Growth) is at default, but the same sponsor closed on the Dog Haus, Decatur deal. I am just trying to figure out the pattern Franchise Growth is adopting, they may be trying to bail out after RS closure.
« Last Edit: March 20, 2019, 11:23:12 AM by Beat_The_Fraud »

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #470 on: March 20, 2019, 11:24:47 AM »
More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

Quote
The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.

techOnFIRE

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #471 on: March 20, 2019, 12:37:54 PM »
More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

Quote
The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.


Moments ago recieved the same message verbatim for Church's Chicken Deland FL.  Seriously wtf?

John

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #472 on: March 20, 2019, 12:51:41 PM »
RS finally notified investors today that the Dog Haus in Decatur, IL closed...even though it closed a month ago.

This is a Franchise Growth deal.

John, does this mean that Franchise Growth is closing and paying off some deals but defaulting on the other ones? Like Ramesh mentioned above, his deal with Church's chicken, the sponsor (Franchise Growth) is at default, but the same sponsor closed on the Dog Haus, Decatur deal. I am just trying to figure out the pattern Franchise Growth is adopting, they may be trying to bail out after RS closure.

I don't know what's going on with Franchise Growth other than the deals I have left (one of which FG recently reached a deal with RS to repay almost in full) and what I read on here. FG is basically invisible and clearly takes its time responding to RS. There's a lot that goes into these construction deals. The sponsor, franchisee, franchisor and developer (who does the actual construction) have to be on the same page, and issues can emerge at various points.

The Decatur, IL Dog Haus apparently never got near its projected revenue. We were notified months ago that FG approached RS about negotiating a lower rent for the restaurant, but apparently that failed or went nowhere.

The franchisee on Decatur apparently has multiple other restaurants under development with FG, including the Church's Chicken in Westminster, CO and the one in Deland, FL that have apparently run into construction cost problems. The Decatur notice said FG is looking to sell or lease the property, bring in new investors to buy the loan, etc.

One other point about FG. They had problems with one of my restaurant deals (Taylor, MI) more than 6 months before the RS announcement.
« Last Edit: March 20, 2019, 01:04:43 PM by John »

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #473 on: March 20, 2019, 12:59:01 PM »
More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

Quote
The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.


Moments ago recieved the same message verbatim for Church's Chicken Deland FL.  Seriously wtf?

Dodgy.  Granted it's the same sponsor and the same franchisee, but does it make sense to experience the same issue ("construction estimates") in two different deals?  Six months ago FG switched to a new developer, Embree Group, for the Westminster Church's Chicken deal.  Is Embree the developer for the Deland, FL property also? 

techOnFIRE

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #474 on: March 20, 2019, 01:10:30 PM »

Dodgy.  Granted it's the same sponsor and the same franchisee, but does it make sense to experience the same issue ("construction estimates") in two different deals?  Six months ago FG switched to a new developer, Embree Group, for the Westminster Church's Chicken deal.  Is Embree the developer for the Deland, FL property also? 

Strange same issue in different states - FL vs CO, right?  A developer swap occurred about six months ago but we were never told who it was.  Timely payment were made until February when the processor changed.  Deland was in good standing through Feb unlike Westminster so the RS statement doesn't jive.  Did they suddenly decide to default because of construction estimates?  The information vacuum is more unsettling than telling me know my money is gone.  Sitting on my hands now waiting for this entire mess to unravel.

John

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #475 on: March 20, 2019, 01:19:13 PM »
More on the Franchise Growth-sponsored Church's Chicken, Westminster CO property:

Quote
The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower.


Moments ago recieved the same message verbatim for Church's Chicken Deland FL.  Seriously wtf?

Dodgy.  Granted it's the same sponsor and the same franchisee, but does it make sense to experience the same issue ("construction estimates") in two different deals?  Six months ago FG switched to a new developer, Embree Group, for the Westminster Church's Chicken deal.  Is Embree the developer for the Deland, FL property also?

I am not in the Deland, FL or Westminster, CO deals, but anyone that is should contact RS to ask how much of the loans have been disbursed. RS might have some left. The sponsor is required to maintain a certain equity investment in these deals, and the loan draws are conditioned on hitting certain construction thresholds. Each disbursement should require a capital contribution from the sponsor to maintain required equity exposure.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #476 on: March 20, 2019, 01:24:24 PM »

I am not in the Deland, FL or Westminster, CO deals, but anyone that is should contact RS to ask how much of the loans have been disbursed. RS might have some left. The sponsor is required to maintain a certain equity investment in these deals, and the loan draws are conditioned on hitting certain construction thresholds. Each disbursement should require a capital contribution from the sponsor to maintain required equity exposure.

I have sent them five emails in the last 4 weeks requesting precisely this information, and just did so again thirty minutes ago.  I get back vague responses, but this specific question is ignored.

Beat_The_Fraud

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #477 on: March 20, 2019, 02:15:12 PM »

Dodgy.  Granted it's the same sponsor and the same franchisee, but does it make sense to experience the same issue ("construction estimates") in two different deals?  Six months ago FG switched to a new developer, Embree Group, for the Westminster Church's Chicken deal.  Is Embree the developer for the Deland, FL property also? 

Strange same issue in different states - FL vs CO, right?  A developer swap occurred about six months ago but we were never told who it was.  Timely payment were made until February when the processor changed.  Deland was in good standing through Feb unlike Westminster so the RS statement doesn't jive.  Did they suddenly decide to default because of construction estimates?  The information vacuum is more unsettling than telling me know my money is gone.  Sitting on my hands now waiting for this entire mess to unravel.

I am in DeLand, FL deal and this notification came to me as part of a well documented drafted script. This is so hard to believe that they are notifying the investors about construction delays almost 30 days before the loan matures (After a 6 months extension, which seems part of the plan too). I am in Tranche 3 (last Tranche) of the loan and RS should have undisbursed loans as John mentioned, but even after inquiring multiple times, they just send a generic message or doesn’t reply at all. All of this seems to be so shady😡

Chicago81

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #478 on: March 20, 2019, 03:29:43 PM »
Hi everyone - I am glad to have found this forum.  According to RS notifications, my investment in Church's Chicken - Winston Salem, also appears to be in default, and I received the same message today:

"The borrower has informed us that the construction of the property is on hold because construction estimates are far higher than proforma. The borrower is looking at alternatives. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. RealtyShares will update you after this research is completed and if we receive relevant information from the borrower."

This is surprising considering that the borrower (Franchise Growth LLC) was still within the interest reserve period and construction was supposed to be complete by now.  Instead, according to RS, the borrower suddenly realized that their proformas for many of their remaining properties (in different states) were so far off that they could not even begin construction.

Here are my thoughts and concerns; maybe you all see something that I am missing:

1.  I worry this was a scam from the onset.  The borrower has virtually no presence online and the coincidence of all projects defaulting (without construction having begun) due to prospective construction costs after construction was supposed to be complete is hard to believe.

2.  Even if this was not a scam, and the borrower was extremely unlucky or inept, I worry that there may have been fraudulent transfers.  I am specifically concerned with funds being diverted from the intended project (Winston-Salem) to other projects or to individuals (e.g., excessive compensation, dividends). 

3.  RS needs to explore whether to pull the plug on any further distributions and, if there is evidence of fraud, pursue the borrower and be candid with investors.  It is hard to imagine how RS is fulfilling its obligations to investors considering its outright refusal to provide information (e.g., I sent five emails, offering advice, without a response).  Not to mention the possibility that RS may have solicited us to fund a fraud (and profited from it via fees).

For the same $10k, I wish I had played in the World Series of Poker instead of walking into this mess.  But I am relieved to have found others in the same boat.  Fingers crossed these issues can be resolved.  If they can't, I am studying up on taking a bad debt loss deduction.

Best,

kt1984

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #479 on: March 20, 2019, 03:56:19 PM »
I received the following notification on Captain D in Shelbyville KY from Franchise Growth.

The borrower has informed us that the completion of the property has been delayed because the borrower has insufficient funds to complete construction. The borrower informs us that he has been attempting to raise additional equity to enable the completion of the construction. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. We will update you after this research is completed and if we receive relevant information from the borrower.

And the following notification on American Family Care in West Islip NY from Franchise Growth.

The borrower has informed us that the tenant is now 4 months in arrears on rent payments and is attempting to negotiate a reduction in rent. We will update you if we receive further information on the outcome of these negotiations. We are also in discussions with the borrower who is interested in bringing in other investors to buy the loan. We will be conducting independent research to determine the current value of the property. We will update you after this research is completed and if we receive relevant information from the borrower.


This is extremely poor and shoddy background investigation by RS on the sponsors. To me, it looks like- all Franchise Growth deals are now on hold because they have run out of money. Shelbyville loan was supposed to mature in Feb so how is the sponsor behind in construction and why did RS not know about this in advance. The American Family care has been in operation for a while now and has been sitting on the market and now the tenant is attempting a rent reduction- I have a bad feeling that this will end the same way as the Decatur IL Doghaus and get closed.  I am kicking myself for putting money with RS in supposedly safe NNN investments. John- any news on when do we get the money back from the Taylor MI deal until I get that money in my bank- you never know.