Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 283624 times)

dwengca

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #700 on: June 12, 2019, 11:08:02 AM »
Received full payout on The Realm Multifamily in Fort Worth, Fort Worth, TX today.   Actually ended up getting a good returned on this one.  Invested since 8/2016, 15k invested and received 21.5k back.

Wish all of them or if not most would end up with similar results.  I still have 150k+ in RS.

La Bella Palms was about 23% total over 2 years.  I'm certainly not going to look a gift horse in the mouth at this point and very happy with at least my money back, but the investment sold for more than anticipated and thus I expected a bit more.  Did you receive any kind of breakdown of the actual waterfall of payback on The Realm?  I know what is in the initial offering but just wondering if RS should also give us the actual once completed.

I am in an FG deal, so yes, I am very happy to have some money back on other deals to help make up for that likely loss.

Have not receive any sort of breakdown on the payment yet.  In my dashboard, it showed a total of 3 payments, (15K original investments, then $4xxx, and $2xxx as cash yields.)


dwengca

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #701 on: June 12, 2019, 03:47:12 PM »
Just received this update.  It's sad to me that RS never mentioned these limitations or risk & possible challenges during the funding process.

220 Unit Multifamily in Springfield, IL 6/12/2019
06/12/2019
Since the last update, the sponsor has become unresponsive. RealtyShares has engaged counsel to draft a letter informing the sponsor that RealtyShares will be taking over LLC. There are a number of reasons why RealtyShares is hesitant to do this. First mortgages have change of control language where the replacement of the managing member changes who controls the LLC is an event of default. This allows the first mortgage holder to foreclose on the property. Before RealtyShares actually takes over as the managing member, RealtyShares would need to have a conversation with the bank informing them of our intentions to take over the property, replace the property manager and immediately put the property on the market for sale. The bank may or may not allow it. RealtyShares is also hesitant because the managing member may not relinquish control. This could lead to a lengthily and expensive court battle. RealtyShares will continue to explore any options and what is in the best interest of the investors in the deal. We will update you when we have additional relevant information to share with you.

dwengca

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #702 on: June 13, 2019, 10:17:43 AM »
Received update on another on one of the "failed" investments I have with RS.   The borrower of this pig has not pay a dime for over 2 years.  Looks like RS is just taking the easy way out and I simply can't believe we are going to let the borrower get a way with this.   The original loan funded by RS was 411k.  So this means us investors will probably only get half of investment back.

292 Corning Drive 6/12/2019
06/13/2019
The foreclosure of this loan continues to be tied up in the court system. We did receive indication from the borrower that he is interested in buying out the note. RealtyShares had a BPO commissioned on the property that concluded the property fair market value is $199,000 "as is". At that point, the borrower's offer was $240,000 to buy the note. Over the past year, RealtyShares negotiated the price up to $325,000. While this price is lower than the principal balance of the loan, we are accepting this offer because it is substantially higher than the BPO value and we believe this is currently the best option to recover as much principal as possible and avoid further risk. There is significant downside risk, and more time involved, in pursuing the foreclosure and then possibly selling the asset. Foreclosing will take more time, particularly since courts are involved, and incur additional cost and legal fees. Moreover, the property, at a post-foreclosure sale, may be perceived as “distressed” lowering the likely bids. The borrower aims to close on the purchase in approximately 30 days. We will provide further updates and recovery estimates when additional information becomes available.

Dgilpin

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #703 on: June 13, 2019, 11:36:12 AM »
Yikes.  It definitely sounds like new ownership is cutting their losses as fast as possible instead of slugging it out with the bad actors.  This doesn’t bode well for the FG deals.  I’ll consider the payoff plan for the Taylor, MI deal pretty much null and void.  Especially since they can’t even seem to return our unused funds 6 months after interest payments stopped.

Dgilpin

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #704 on: June 13, 2019, 05:49:40 PM »
FG seemingly never intended to honor the Taylor, MI settlement agreement. It was another sucker play for delay that RS fell for. I believe we'll get the construction reserve back soon (about 55% of the original loan), but the remaining recovery will be negotiated based on the appraisals for the various FG loans. At least the entity owns a cleared plot of land. That has to be worth something meaningful.

It better not be a significantly lower payout in order to compensate for some of the deals that are even worse off.  IE loans that we’re fully disbursed and then the restaurant closed and is sitting boarded up.  It would defy the agreement investors signed if the properties aren’t being appraised for payout solely on their individual current values.

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #705 on: June 13, 2019, 05:57:29 PM »
They ultimately might be bundled in a sale, but I see no legal path for them other than to negotiate the settlement for each loan based on its own merits.
« Last Edit: June 13, 2019, 06:02:20 PM by Hindsight2020 »

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #706 on: June 13, 2019, 06:13:07 PM »
BTW, after searching for a while I stumbled upon For Li's profile on Linked In. Who knows how accurate this is, but his bio lists him as a former partner at FGLLC (ending in 2017). I also noticed that a former RS employee in Business Development and Originations, who went to work for FG in 2017, changed his bio. He removed the FG name on that job and replaced it with Private Family Office.


Mark

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #707 on: June 14, 2019, 09:19:47 AM »
Update on another FG deal today.  Sounds like IIRR is trying to prepare us for what will be a disappointing amount of principal returned...  (Also, still no return of the balance of the construction loan that remains in RealtyShares hands)



Church's Chicken Winston Salem Tranche 2 6/14/2019
06/14/2019
Since the last update IIRR Management Services, LLC (IRM) has taken over the asset management duties on behalf RealtyShares, Inc.

IRM has researched the investment status and has received an updated appraisal of the property. IRM is in the process of analyzing the appraisal; however, the preliminary finding indicates that your investment will incur a substantial loss.

After our analysis is complete, hopefully within two weeks, IRM will be in a position to provide an estimate of the potential loss. The borrower remains interested in buying out the loan and IRM will continue to pursue this possibility to see which option provides the highest return with minimal risk, to investors.

IRM is keeping investor’s interests in the forefront of our work to conclude this matter. We will continue to provide new information quickly, whether it is good or bad news.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #708 on: June 14, 2019, 09:53:00 AM »
Identical verbiage in the notification for my FG-sponsored Church's Chicken, Colorado. No word on why the construction reserve hasn't been returned to investors a month past their notice that they would release it.  I wonder if they are holding on to it  till such time as they figure out how much they are going to dip into it for legal and administrative costs associated with the final settlement.

Update on another FG deal today.  Sounds like IIRR is trying to prepare us for what will be a disappointing amount of principal returned...  (Also, still no return of the balance of the construction loan that remains in RealtyShares hands)
..
IRM is keeping investor’s interests in the forefront of our work to conclude this matter. We will continue to provide new information quickly, whether it is good or bad news.

kierra

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #709 on: June 14, 2019, 10:20:27 AM »
My latest notification on FG.......

American Family Care Largo FL Tranche 3 6/14/2019


Since the last update IIRR Management Services, LLC (IRM) has taken over the asset management duties on behalf RealtyShares, Inc.

IRM has researched the investment status and has received an updated appraisal of the property. IRM is in the process of analyzing the appraisal; however, the preliminary finding indicates that your investment will incur a substantial loss.

After our analysis is complete, hopefully within two weeks, IRM will be in a position to provide an estimate of the potential loss. The borrower remains interested in buying out the loan and IRM will continue to pursue this possibility to see which option provides the highest return with minimal risk, to investors.

IRM is keeping investor’s interests in the forefront of our work to conclude this matter. We will continue to provide new information quickly, whether it is good or bad news.

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #710 on: June 14, 2019, 10:51:51 AM »
I hate to say this but we are being Donald Trump'd here. This is his business model. Sign a deal. Other side does their part, he fails to do his part. He says if you want me to do what I said I would do in the contract, then sue me. Other side likely can't afford to fight and throws in towel, accepts a fraction of what's owed. He pockets as profits the other side's losses.
« Last Edit: June 14, 2019, 10:59:55 AM by Hindsight2020 »

Dgilpin

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #711 on: June 14, 2019, 11:16:46 AM »
Same exact message for Long Island Family care in West islip NY.  Somehow this is an even bigger disaster than we expected.  I sure hope new management has some ace in he hole leverage for recovery,  but it sounds like they’re just setting us up for terrible news.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #712 on: June 14, 2019, 11:19:08 AM »
Just signed up to this forum and so glad to see others working with the same RS issues I am.

At the moment, I have 2 FG Church's Chicken deals that have gone into default and 2 Chicago Retail Portfolio deals that are also problematic. I see that you guys have discussed them here already so I'm chiming in to ask if there's anything I can do to voice my concerns as well. Or maybe we just need to straight out sue these guys.

I haven't read through this whole thread yet but I will stay on top of all posts from here on out. Please feel free to reach out if I can help in any way.

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #713 on: June 14, 2019, 11:35:56 AM »
Same exact message for Long Island Family care in West islip NY.  Somehow this is an even bigger disaster than we expected.  I sure hope new management has some ace in he hole leverage for recovery,  but it sounds like they’re just setting us up for terrible news.

Is the franchisee of Long Island Family Care in West Islip, NY affiliated with FG at all?  Is that business still operating? Do you have a link to the initial investment page?

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #714 on: June 14, 2019, 11:44:21 AM »
Same or similar notice for Decatur, IL Dog Haus, which was fully completed and operated for a year before closing earlier this year.

Of course FG wants to buy this loan at a discount. FG apparently shut this restaurant without attempting to negotiate lower rent, even though I understand the franchisee wanted to keep operating it with a lower rent. If FG is allowed to now buy the loan at a "failed restaurant" discount—creating substantial losses for investors--they will basically be buying a completed new restaurant for a very small fraction of its value as an operating asset. The loan on Decatur is $2.256 million. The rent was $270K. They used a 7.83% cap rate in the initial investment presentation to value it at $3.45 million, but said the cap rate comp was more like 6.5%. Now, for kicks, let's say they pay 40 cents for the loan, or about $900K. Then they re-open the restaurant or find another operator to pay them $150K in rent. Even using a 9% cap rate the building's worth $1.7 million. In the process, we lock in a loss of $1.35 million, and they basically double their money on the loan buyout.

What’s to stop FG from doing this? I assume that’s what’s going to happen.

What about the franchisee’s rent guarantees? What are those worth? These are all things RS has kept investors in the dark on.

I encourage everyone in these FG deals to ask about it. Email priority@iirrms.com and demand answers.

I wonder if the AFC facility in West Islip, NY falls into this category. Has anyone actually confirmed with the franchisee that it has stopped paying rent? I bet you could reach them.

Look at page 6 in here. I'm not in the deal. If I was I'd do it myself. http://images4.loopnet.com/d2/mgsFp-6EPPx_QtC4MHmB7UgSwkbMKmdC-Nqipi_Y3sw/document.pdf

The franchisees are on the webpage for the business.  https://www.afcurgentcare.com/west-islip/about/meet-the-team/

Have to contemplate worst-case scenarios here in order to defend against them. If they buy the loan on an unfinished restaurant for 30 or 40 cents on the dollar, and another another 10-20 cents on the dollar of invested capital makes it an operating restaurant, it's a home run for them. Is this the intent across the board?
« Last Edit: June 14, 2019, 11:54:29 AM by Hindsight2020 »

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #715 on: June 14, 2019, 11:48:05 AM »
Church's Chicken in Orlando just received identical update.  This location was near completion in January, and I'm guessing there was very little left in reserve on this one. 

Could IIR go to someone like Goalz and just eliminate the FG portion at this point?

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #716 on: June 14, 2019, 11:56:45 AM »
Church's Chicken in Orlando just received identical update.  This location was near completion in January, and I'm guessing there was very little left in reserve on this one. 

Could IIR go to someone like Goalz and just eliminate the FG portion at this point?

At a minimum, RS should be speaking with Goalz about these loans and/or the outright sale of the buildings to them (post-foreclosure).

Frankly, if the FG bids for these loans are bad, we should organize, get together with Goalz and work on a deal.
« Last Edit: June 14, 2019, 12:15:20 PM by Hindsight2020 »

groovydude

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #717 on: June 14, 2019, 02:13:01 PM »
Just signed up to this forum and so glad to see others working with the same RS issues I am.

At the moment, I have 2 FG Church's Chicken deals that have gone into default and 2 Chicago Retail Portfolio deals that are also problematic. I see that you guys have discussed them here already so I'm chiming in to ask if there's anything I can do to voice my concerns as well. Or maybe we just need to straight out sue these guys.

I haven't read through this whole thread yet but I will stay on top of all posts from here on out. Please feel free to reach out if I can help in any way.

JD, welcome! I think the best bet at this point is to hope that RREAF can get the deals you mentioned straightened out. They seem to be professional, although it seems to be in their interest to get the really bad deals off the books as quickly as possible. The FG deals sound like the whole thing was a ponsi scheme to me (I think a separate thread for these deals might be in order at this point), or at the very least investors got Trumped. Yuk.

DECA

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #718 on: June 14, 2019, 02:44:05 PM »
Same or similar notice for Decatur, IL Dog Haus, which was fully completed and operated for a year before closing earlier this year.

Of course FG wants to buy this loan at a discount. FG apparently shut this restaurant without attempting to negotiate lower rent, even though I understand the franchisee wanted to keep operating it with a lower rent. If FG is allowed to now buy the loan at a "failed restaurant" discount—creating substantial losses for investors--they will basically be buying a completed new restaurant for a very small fraction of its value as an operating asset. The loan on Decatur is $2.256 million. The rent was $270K. They used a 7.83% cap rate in the initial investment presentation to value it at $3.45 million, but said the cap rate comp was more like 6.5%. Now, for kicks, let's say they pay 40 cents for the loan, or about $900K. Then they re-open the restaurant or find another operator to pay them $150K in rent. Even using a 9% cap rate the building's worth $1.7 million. In the process, we lock in a loss of $1.35 million, and they basically double their money on the loan buyout.

What’s to stop FG from doing this? I assume that’s what’s going to happen.

What about the franchisee’s rent guarantees? What are those worth? These are all things RS has kept investors in the dark on.

I encourage everyone in these FG deals to ask about it. Email priority@iirrms.com and demand answers.

I wonder if the AFC facility in West Islip, NY falls into this category. Has anyone actually confirmed with the franchisee that it has stopped paying rent? I bet you could reach them.

Look at page 6 in here. I'm not in the deal. If I was I'd do it myself. http://images4.loopnet.com/d2/mgsFp-6EPPx_QtC4MHmB7UgSwkbMKmdC-Nqipi_Y3sw/document.pdf

The franchisees are on the webpage for the business.  https://www.afcurgentcare.com/west-islip/about/meet-the-team/

Have to contemplate worst-case scenarios here in order to defend against them. If they buy the loan on an unfinished restaurant for 30 or 40 cents on the dollar, and another another 10-20 cents on the dollar of invested capital makes it an operating restaurant, it's a home run for them. Is this the intent across the board?

I reached the franchisee on AFC West Islip in April. He said he had made a partial rent payment for April after missing the previous four months.  The business seems to be doing fine.

Today, I received the same "cut and paste" update for AFC West Islip and for Louisville MSA Captain D's.  Both of these deals were supposed to be short term senior debt deals.  I don't understand how senior debt would incur such a "substantial loss" in a foreclosure since it should be ahead of the junior debt and equity. To me, IIRM doesn't seem any more responsive than RS was.  They should be providing details in their updates, specific to each deal.  Vague cookie cutter language doesn't cut it.

Further, who should take on pursuing RS for the FG deals?  I suspect that it will have to be the investors (i.e., us). RS touted FG's "extensive experience" in restaurant franchise deals.  RS' interest was in doing as many loans as possible using our money.  They don't seem to believe that they had any duty to protect our interests or even to do any due diligence on FG.

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #719 on: June 14, 2019, 06:06:47 PM »
The loans to construct FG restaurants were generally 90% of totally committed capital, with the other 10% or so being equity from FG. The loans are senior to the slim equity tranche but bear significant downside risk if something goes bad before the restaurants are completed and operating successfully. They say FG is still interested in buying the loans, but I presume at a predatory price that values them at some percentage of the invested PP&E. That would provide FG with massive option value to finish construction on incomplete restaurants or re-open the closed Decatur, IL Dog Haus, and then dispose of them for huge profits as a percentage of the loan purchase prices. I have made it clear to RS and the JV that it would be unacceptable to hit a stink bid from the (possibly intentional?) defaulter and transfer our losses to their pockets as profits.

How the JV companies handle this will determine whether I ever invest a nickel in any investment offered by either of them.

« Last Edit: July 10, 2019, 10:27:35 AM by Hindsight2020 »