Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 173913 times)

Mark

  • Apprentice
  • *
  • Posts: 10
  • Karma: +3/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #640 on: May 16, 2019, 04:49:54 AM »
This is the notice for Church's Chicken in Winston Salem, NC:

We hired an appraiser and expect to receive the appraisal report in approximately two weeks. The value determined by the appraisal will be helpful in our settlement negotiations with the borrower.

The loan was structured to hold back funds for future costs and obligations. The original loan was $1,745,000 but we held back funds to support construction activities and interest payments. The borrower reports that permitting is 80% completed and that construction has not started.

There is $716,915 remaining in the construction reserve. Since the loan is in default, we will distribute this reserve balance less $50,000 to investors within two weeks. The $50,000 held back will be reserved to cover the cost of the appraisal, the suit under the guaranty, legal fees, and the cost of foreclosure (if needed). Once the construction reserve is distributed (less the hold-back) the loan balance will be $1,047,511. The entire interest reserve of $137,419 was used to pay interest and has been distributed to investors (net of RS fees).

We trust this information is helpful and will provide additional updates as we move through this process.


So, same wording, but unique numbers for each loan.  Looks like we will be getting back around 40% of our original investment, and then wait and see what can be done to get back the rest of the money based on "settlement negotiations with the borrower".

Also, as a side note, I received my first payoff of an outstanding debt since this all started.  The Mabel townhome development has closed and returned all funds successfully.  Things are moving along...

sdnerd

  • Apprentice
  • *
  • Posts: 16
  • Karma: +11/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #641 on: May 16, 2019, 08:04:58 AM »
My FG deals aren't having as good of luck as some of the others. There's basically no reserves to distribute for these two:

Coastal Florida Church's Chicken, Melbourne, FL

 - There is $96,501 remaining in the construction reserve.
 - The borrower reports that construction is 90% complete and estimates that approximately $350,000 still needs to be spent

Louisville MSA Captain D's Tranche 2, Rock Hill, SC

 - There is $104,932 remaining in the construction reserve.
 - he borrower reports that construction is 80% complete and estimates that approximately $350,000 still needs to be spent

And this one is still in the Limbo w/ the South America deal:

Detroid MSA Dog Haus and Taco John's Tranche 4, Taylor, MI

 

Hopefully good news is this one with Invest Squared instead of FG appears to be near a possible exit:

Wytheville VA Captain D's, Wytheville, VA (Invest Squared)

- On April 30, 2019, the borrower sent us a copy of a fully executed Purchase Agreement for the sale of the property at a price for more than underwritten. The transaction is in escrow, but a closing date has not been established. The closing date will be set after the buyer's receipt and acceptance (or waiver) of its inspection period and receipt of the tenant's estoppel certificate. This is a positive step toward exiting this investment and RealtyShares will keep you apprised as we move through this process.

Hindsight2020

  • Apprentice
  • *
  • Posts: 48
  • Karma: +24/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #642 on: May 16, 2019, 09:26:15 AM »
sdnerd,

Do you know who the franchisee is for that Wytheville Captain D's?  I'm curious if it's the same franchisee on the FG deals.  Can you post the original link?

Thanks.

Hindsight2020

  • Apprentice
  • *
  • Posts: 48
  • Karma: +24/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #643 on: May 16, 2019, 10:00:04 AM »
I found the franchisee for that Captain D's. It's not the one that's involved with a handful of the FG restaurant deals.

mspringer

  • Aonisaibushi (Amateur Samurai)
  • **
  • Posts: 53
  • Karma: +15/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #644 on: May 17, 2019, 10:43:18 AM »
I received the update on church’s chicken Florida investment. They are releasing the reserves back to the investors within next two weeks. It’s almost half of the total investment which the investors will receive back, the remaining will be decided if they are directed towards foreclosure or come to a deal with the sponsor. Things have started to move at a much brisk pace now after the new company have taken over.

Beat:

Are you in the Apopka, FL Church's Chicken?  Because I received the same update as others but that location was nearly completed and thus only had about $98k in reserve.  Minus the $50k in admin fees, I think we are only splitting around $48k + whatever they can salvage of value from the property.  My hope is it is close enough to finish with FF&E (new term I had to look up) that a franchisee like Goalz will come in and buy it, as originally planned.

mspringer

  • Aonisaibushi (Amateur Samurai)
  • **
  • Posts: 53
  • Karma: +15/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #645 on: May 17, 2019, 10:47:51 AM »
My FG deals aren't having as good of luck as some of the others. There's basically no reserves to distribute for these two:

Coastal Florida Church's Chicken, Melbourne, FL

 - There is $96,501 remaining in the construction reserve.
 - The borrower reports that construction is 90% complete and estimates that approximately $350,000 still needs to be spent

Louisville MSA Captain D's Tranche 2, Rock Hill, SC

 - There is $104,932 remaining in the construction reserve.
 - he borrower reports that construction is 80% complete and estimates that approximately $350,000 still needs to be spent

And this one is still in the Limbo w/ the South America deal:

Detroid MSA Dog Haus and Taco John's Tranche 4, Taylor, MI

 

Hopefully good news is this one with Invest Squared instead of FG appears to be near a possible exit:

Wytheville VA Captain D's, Wytheville, VA (Invest Squared)

- On April 30, 2019, the borrower sent us a copy of a fully executed Purchase Agreement for the sale of the property at a price for more than underwritten. The transaction is in escrow, but a closing date has not been established. The closing date will be set after the buyer's receipt and acceptance (or waiver) of its inspection period and receipt of the tenant's estoppel certificate. This is a positive step toward exiting this investment and RealtyShares will keep you apprised as we move through this process.

The Church's Chicken in Apopka, FL is in a similar situation.  There is $98k left in reserve and $350k in remaining expenses for FF&E.  I would hope since they are so close, that Goalz is still interested in taking this location over.  I wonder if that will factor into the appraisal?

sdnerd

  • Apprentice
  • *
  • Posts: 16
  • Karma: +11/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #646 on: May 18, 2019, 01:42:17 PM »
My FG deals aren't having as good of luck as some of the others. There's basically no reserves to distribute for these two:

Coastal Florida Church's Chicken, Melbourne, FL

 - There is $96,501 remaining in the construction reserve.
 - The borrower reports that construction is 90% complete and estimates that approximately $350,000 still needs to be spent

Louisville MSA Captain D's Tranche 2, Rock Hill, SC

 - There is $104,932 remaining in the construction reserve.
 - he borrower reports that construction is 80% complete and estimates that approximately $350,000 still needs to be spent

And this one is still in the Limbo w/ the South America deal:

Detroid MSA Dog Haus and Taco John's Tranche 4, Taylor, MI

 

Hopefully good news is this one with Invest Squared instead of FG appears to be near a possible exit:

Wytheville VA Captain D's, Wytheville, VA (Invest Squared)

- On April 30, 2019, the borrower sent us a copy of a fully executed Purchase Agreement for the sale of the property at a price for more than underwritten. The transaction is in escrow, but a closing date has not been established. The closing date will be set after the buyer's receipt and acceptance (or waiver) of its inspection period and receipt of the tenant's estoppel certificate. This is a positive step toward exiting this investment and RealtyShares will keep you apprised as we move through this process.

The Church's Chicken in Apopka, FL is in a similar situation.  There is $98k left in reserve and $350k in remaining expenses for FF&E.  I would hope since they are so close, that Goalz is still interested in taking this location over.  I wonder if that will factor into the appraisal?

Yeah, my hope is they really are just missing the FF&E and the actual building itself is essentially done. Someone can come in pick up the loan or building at a reasonable discount and run with it. Maybe we take a 50% loss. Hopefully less.

If the building is really half finished or in total disarray and gets dragged into a long foreclosure process, etc. Ugh.

Unfortunately it's hard to trust any of the updates at this point. Could be sitting there with holes in the roof or people stripping out the electrical/copper/etc.

Hindsight2020

  • Apprentice
  • *
  • Posts: 48
  • Karma: +24/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #647 on: May 19, 2019, 04:49:13 AM »
There are so many paths these restaurant deals can take. A DogHaus in Decatur, IL (with Goalz as franchisee) was fully constructed and operated for about 13 months before closing. Sales were below plan (despite hundreds of Google reviews with an average rating of 4 stars) and the rent wound up being too high, so they couldn't sell it. We were told they were going to negotiate a lower rent for the franchisee but it never happened. It just closed. It has been sitting dormant for 3 months already with the loan in payment default and an uncertain future. For now it's tied up with this "attempt" by FG to sell to South American money. When that fails, the best case would be getting another tenant that could operate it with aesthetic modifications, but that would likely still include lower rent that could impair the loan. It would be a shame to see a newly constructed $2.5 million land/building combination just go to waste. Based on what I've read in local press they paid $1 million just for the land (about 44% of the loan). Hopefully we can recover at least that much.

« Last Edit: May 19, 2019, 04:56:32 AM by Hindsight2020 »

Sam

  • Shogun, Administrator
  • *****
  • Posts: 502
  • Karma: +85/-3
  • Always curious
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #648 on: May 19, 2019, 07:32:49 AM »
There are so many paths these restaurant deals can take. A DogHaus in Decatur, IL (with Goalz as franchisee) was fully constructed and operated for about 13 months before closing. Sales were below plan (despite hundreds of Google reviews with an average rating of 4 stars) and the rent wound up being too high, so they couldn't sell it. We were told they were going to negotiate a lower rent for the franchisee but it never happened. It just closed. It has been sitting dormant for 3 months already with the loan in payment default and an uncertain future. For now it's tied up with this "attempt" by FG to sell to South American money. When that fails, the best case would be getting another tenant that could operate it with aesthetic modifications, but that would likely still include lower rent that could impair the loan. It would be a shame to see a newly constructed $2.5 million land/building combination just go to waste. Based on what I've read in local press they paid $1 million just for the land (about 44% of the loan). Hopefully we can recover at least that much.

Are there some key takeaways we can learn from these type of deals? Who actually wins b/c if DogHaus just goes into default, then the landlord can't earn any rent. This shouldn't be an either or scenario no?
Regards,

Sam

Hindsight2020

  • Apprentice
  • *
  • Posts: 48
  • Karma: +24/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #649 on: May 19, 2019, 08:24:01 AM »
There are so many paths these restaurant deals can take. A DogHaus in Decatur, IL (with Goalz as franchisee) was fully constructed and operated for about 13 months before closing. Sales were below plan (despite hundreds of Google reviews with an average rating of 4 stars) and the rent wound up being too high, so they couldn't sell it. We were told they were going to negotiate a lower rent for the franchisee but it never happened. It just closed. It has been sitting dormant for 3 months already with the loan in payment default and an uncertain future. For now it's tied up with this "attempt" by FG to sell to South American money. When that fails, the best case would be getting another tenant that could operate it with aesthetic modifications, but that would likely still include lower rent that could impair the loan. It would be a shame to see a newly constructed $2.5 million land/building combination just go to waste. Based on what I've read in local press they paid $1 million just for the land (about 44% of the loan). Hopefully we can recover at least that much.

Are there some key takeaways we can learn from these type of deals? Who actually wins b/c if DogHaus just goes into default, then the landlord can't earn any rent. This shouldn't be an either or scenario no?

It's not DogHaus in default, it's Franchise Growth, the landlord. If a new restaurant fails to meet projections and ceases operation, it's presumably because the franchisee can't fund further losses and doesn't see a way to grow out of the problem. I assume the individual LLC the franchisee likely created to execute the lease and run the restaurant then files for bankruptcy and rejects the lease. Companies reject leases all the time in bankruptcy and landlords wind up with an unsecured claim. I believe lenders on the property can pursue remedies against the franchisee to the extent they provided any personal rent guarantee. We don't know if there are any with the Decatur restaurant.

This situation is complicated by the relationship between FG and Goalz. It seems that many of FG's restaurants with sudden construction cost problems and cost overruns are with that franchisee. We have no clue what's going on there. Did the failure of the Decatur restaurant cause problems between them? Is FG's claim of construction cost problems a pressure point against them? Who knows?

The main takeaway for me from this situation is that once I couldn't find detailed information on FG on the internet I should have just run the other way. I was assuaged by my research into Goalz and I like the Dog Haus concept, but you really need to have comfort with the sponsor, brand concept, franchisee AND developer. Absent that I'd never touch a single restaurant development loan again. 
« Last Edit: July 10, 2019, 10:19:10 AM by Hindsight2020 »

Sdb

  • Apprentice
  • *
  • Posts: 25
  • Karma: +4/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #650 on: May 19, 2019, 06:01:03 PM »
Agree, lesson learned.  I’m in three of these train wrecks, AFC Long Island, AFC Largo, and Church’s Deland. The deals that aren’t in the construction phase have a different issue. I have no idea on the AFC LI, as it has a tenant that is not paying rent. No updates from RS on that one.

DECA

  • Apprentice
  • *
  • Posts: 18
  • Karma: +11/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #651 on: May 19, 2019, 09:34:54 PM »
Agree, lesson learned.  I’m in three of these train wrecks, AFC Long Island, AFC Largo, and Church’s Deland. The deals that aren’t in the construction phase have a different issue. I have no idea on the AFC LI, as it has a tenant that is not paying rent. No updates from RS on that one.

On the AFC Long Island deal, the franchisee informed me some time ago that they had made a partial rent payment for April, but FG apparently has just pocketed that money.  RS  hasn't reported that.  RS/RREAF needs to talk to franchisees and not just FG (if FG can even be found).

DECA

  • Apprentice
  • *
  • Posts: 18
  • Karma: +11/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #652 on: May 19, 2019, 09:37:47 PM »
So far, it’s nice to see the increased responsiveness from RREAF compared to RS.  But after their initial flurry of general responses, there hasn’t been any specific news on a number of the deals (such as Louisville MSA Captain D’s or Long Island AFC).  Unfortunately, on the FG deals, my guess is that all that the investors will see will be a return of the portion of the money that was held back and then we will see whatever can be recovered through foreclosures.

What we won’t see (unless we do it ourselves) is any action against FG -- which appears to have defaulted on all of its deals at about the same time – or against RS for its apparent failure to exercise even the slightest due diligence before falsely promoting FG’s “extensive expertise”:

“The sponsor, Franchise Growth, LLC (the "Sponsor"), has extensive experience in restaurant franchising and anticipates the development of 400+ triple net leased facilities (of various tenancies) across 13 states in the next 3 years.”  [From the Louisville MSA Captain D’s investment docs]

RREAF will have no interest in suing RS (and probably no standing to do so) and probably very little interest in suing FG.  From their perspective, it would make sense for them to just try to wind up these loser deals through the foreclosure actions, distribute the recovered funds (net of their costs and fees) and move on.  Pursuing fraud actions against FG on behalf of RS  -- unlikely.  And pursuing RS for securities law fraud? RREAF likely has no standing to sue.  We investors would have to pursue that (probably best done after we see what the foreclosures recover).


groovydude

  • Apprentice
  • *
  • Posts: 47
  • Karma: +16/-17
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #653 on: May 20, 2019, 12:45:42 PM »
It seems to me that all email queries are passing through Assure. I've been communicating with a guy named Travis who has been pretty responsive and helpful. I'm still not very clear on the breakdown of the new companies responsibilities. It seems as though Assure is handling the distributions. I can't tell what RREAF and iintoo are actually responsible for. Hopefully we'll hear soon.

Jim6058

  • Apprentice
  • *
  • Posts: 2
  • Karma: +0/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #654 on: May 22, 2019, 06:05:44 AM »
Does anyone know if any other RS deals are in jeopardy? Are all of them in trouble?

I see that the Franchise Growth deals are crumbling, but what about the other developers?

The "committee" that was supposed to be vetting these deals realy screwed up on FG. Is anyone auditing the others?

RREAF is busy, I know, but it would be really nice to hear an update.

chitown-2020

  • Apprentice
  • *
  • Posts: 30
  • Karma: +7/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #655 on: May 22, 2019, 01:05:02 PM »
Does anyone know if any other RS deals are in jeopardy? Are all of them in trouble?

The good news is that for sure they are not all in trouble.   A number of them are, but the good deals are still good.    Most of mine are still performing as expected, although a few are falling apart -- as have been discussed here.    So the good news is that under new management, the good operators should be motivated to keep performing IMHO.


Jim6058

  • Apprentice
  • *
  • Posts: 2
  • Karma: +0/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #656 on: May 22, 2019, 01:50:24 PM »
Thanks, Chitown. My other two deals with RS are not in the distribution state yet, so they're really quiet.

I hope we can do a necropsy on this beast after the smoke clears.  :o

ramesh

  • Aonisaibushi (Amateur Samurai)
  • **
  • Posts: 69
  • Karma: +25/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #657 on: May 28, 2019, 09:30:16 AM »
Not sure if this agrees with others' experience, but I find that under the new business operators RealtyShares is no more responsive than before.  I wrote asking for information on the status of a couple deals nearly ten days ago, and resent the mail a few days ago, but no word back.  I am going to put this down to starting problems, and I hope things improve.

Dgilpin

  • Apprentice
  • *
  • Posts: 14
  • Karma: +2/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #658 on: May 28, 2019, 09:50:52 AM »
Well here we are 43 days since The Taylor MI Dog Haus deal was supposed to be delayed 30 days, and 36 days since the Long Island American Family care deal was given 30 days to foreclosure, with no updates on the conclusion. Hoping this means they are delaying because they are close to a sale, but something tells me that's a little too optimistic.

Hindsight2020

  • Apprentice
  • *
  • Posts: 48
  • Karma: +24/-0
Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #659 on: May 28, 2019, 01:34:49 PM »
Oddly, one of my investments with RREAF as sponsor, the Charleston Cambria Hotel, which makes a current preferred interest payment monthly, hasn't made a payment since 4/11. This is despite the fact that the total current preferred interest payments for the 3-year term of the deal is in a reserve controlled by RealtyShares. (The deal is about 2 years old.)