Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 260240 times)

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #840 on: July 09, 2019, 06:18:16 PM »
Was on the FG call. The main person said that Coastal Florida Church's Chicken, Melbourne, FL, should be completed in August. However, I am not sure what that means for anyone invested in that specific deal. Anyone else hear what it would mean if it is completed? Probably still a near 100% loss at this point.

Not super impressed with FG....they missed something.

I'm in Apopka, FL (Orlando) Church's, which he lumped in with yours.  I took it to mean that by August it will be ready for GOALZ (I assume they are still onboard) to take over.  Maybe it's wishful thinking but I would think that would lead to a near full recovery of funds.  Perhaps minus the $350k still needed to finish and legal fees.  To this point we have only gotten 2% back and I'm at the point where anything close to 100% would be really good.

Thank you for catching that. I was not aware of GOALZ until now. Not holding my breath though...

https://www.goalzllc.com/brands/churchs-chicken/

Here is GOALZ website and it still lists many of the RS' Church's Chicken as "Coming Soon!"

Chicago81

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #841 on: July 09, 2019, 07:57:24 PM »
All,

Some observations about today's webinar, and passing along generic legal guidance that I received:

1.  Webinar

Today's FG webinar suggested to me that the FG deals were based on material misrepresentations from the onset.  Many of us believed that FG had significant experience (upward of "400 deals") with similar franchise construction development deals.  Instead, it appears that they had little to no experience with actual construction development, and instead relied on ADP and a third-party individual (with whom FG had little to no track record) to do all the work.  That should have been disclosed, as it changes the deal completely.  Now they accuse ADP and the individual of stealing $7mm, yet they have not found a contingency attorney to take their case or referred the alleged crime to law enforcement.  That sounds odd.  I know some great attorneys that will take a reasonably strong $7mm contingency case like that.

FG has no remorse whatsoever, and they even seem to blame RS, claiming that RS was responsible for vetting the alleged crooks.  If that is correct, and RS knew that FG was outsourcing all of the work to these third parties, then RS should have disclosed that information.

Although FG avoided putting dates on their story, it also sounds like they (and perhaps RS) knew about the problems with the third parties before they accepted money from investors in the last deals through the door.  That certainly should have been disclosed, if true.

FG's broken hearts about chatter on "online forums" rings hollow.  People complaining about radio silence from FG for several months as these deals fizzled out under objectively bizarre circumstances is not defamation.  If FG was as honest a company as they insist, they would have disclosed their apparent lack of experience and the true risk involved in these investments from the onset, and most of us wouldn't be here.  They also would have provided a concise and candid update about this apparent scandal long ago.  Today's webinar validates all the panic that we've expressed to date.

2.  Info From a Plaintiff's Lawyer

I spoke with one of the top plaintiff's firms in California.  Their initial reaction is that investors would benefit from a criminal referral under these circumstances.  Given the variables at play with the different deals, it could be difficult for one firm to represent a lot of folks as a "class."  The SEC, state AG, or US Attorney's office are often more capable of representing large groups of investors.

Interestingly, FG now admits that this was a fraud, although they point their fingers at the third party crooks.  If that is the case, then one would think that FG would be supportive of a criminal referral, as they too are victims.

As always, I am trying to piece together the limited information available to us from afar.  If people think I have made any misstatements or am being unfair, please let me know, or send me a message.

Thanks,

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #842 on: July 10, 2019, 12:20:39 AM »
All,

Some observations about today's webinar, and passing along generic legal guidance that I received:

1.  Webinar

Today's FG webinar suggested to me that the FG deals were based on material misrepresentations from the onset.  Many of us believed that FG had significant experience (upward of "400 deals") with similar franchise construction development deals.  Instead, it appears that they had little to no experience with actual construction development, and instead relied on ADP and a third-party individual (with whom FG had little to no track record) to do all the work.  That should have been disclosed, as it changes the deal completely.  Now they accuse ADP and the individual of stealing $7mm, yet they have not found a contingency attorney to take their case or referred the alleged crime to law enforcement.  That sounds odd.  I know some great attorneys that will take a reasonably strong $7mm contingency case like that.

FG has no remorse whatsoever, and they even seem to blame RS, claiming that RS was responsible for vetting the alleged crooks.  If that is correct, and RS knew that FG was outsourcing all of the work to these third parties, then RS should have disclosed that information.

Although FG avoided putting dates on their story, it also sounds like they (and perhaps RS) knew about the problems with the third parties before they accepted money from investors in the last deals through the door.  That certainly should have been disclosed, if true.

FG's broken hearts about chatter on "online forums" rings hollow.  People complaining about radio silence from FG for several months as these deals fizzled out under objectively bizarre circumstances is not defamation.  If FG was as honest a company as they insist, they would have disclosed their apparent lack of experience and the true risk involved in these investments from the onset, and most of us wouldn't be here.  They also would have provided a concise and candid update about this apparent scandal long ago.  Today's webinar validates all the panic that we've expressed to date.

2.  Info From a Plaintiff's Lawyer

I spoke with one of the top plaintiff's firms in California.  Their initial reaction is that investors would benefit from a criminal referral under these circumstances.  Given the variables at play with the different deals, it could be difficult for one firm to represent a lot of folks as a "class."  The SEC, state AG, or US Attorney's office are often more capable of representing large groups of investors.

Interestingly, FG now admits that this was a fraud, although they point their fingers at the third party crooks.  If that is the case, then one would think that FG would be supportive of a criminal referral, as they too are victims.

As always, I am trying to piece together the limited information available to us from afar.  If people think I have made any misstatements or am being unfair, please let me know, or send me a message.

Thanks,

Wow. I haven't had a chance to listen to the webinar yet, as I live in the UK and have a baby to take care of but if this is indeed what came out of it, we need to take more serious action.

Should we reach out to one or all of the following: "SEC, state AG, or US Attorney's office"?

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #843 on: July 10, 2019, 04:01:38 AM »
The past with FG is obviously murky--I'm in the Decatur, IL Dog Haus where they didn't disclose their partial ownership of the franchise--and there are various avenues to consider pursuing. If they have offers to make they should make them. I think they need to do that before anyone proceeds with legal remedies.

Here's a clear way to determine if FG has any interest in proceeding in good faith. In March a deal for the repayment of 91 cents on the dollar for the Taylor, MI Dog Haus/Taco Johns (which was never built) loan was negotiated, signed, notarized and sent to the closing attorney for completion the following week. That deal didn't close, as it supposedly got delayed waiting for this South American money that was supposed to take 30 days but never happened. If they want to be taken seriously, they should complete the deal immediately. Most of it was already paid back from the construction reserve. If they won't honor a negotiated, signed and notarized deal, how can they be trusted on anything else?
« Last Edit: July 10, 2019, 10:31:48 AM by Hindsight2020 »

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #844 on: July 10, 2019, 05:00:53 AM »
All,

Some observations about today's webinar, and passing along generic legal guidance that I received:

1.  Webinar

Today's FG webinar suggested to me that the FG deals were based on material misrepresentations from the onset.  Many of us believed that FG had significant experience (upward of "400 deals") with similar franchise construction development deals.  Instead, it appears that they had little to no experience with actual construction development, and instead relied on ADP and a third-party individual (with whom FG had little to no track record) to do all the work.  That should have been disclosed, as it changes the deal completely.  Now they accuse ADP and the individual of stealing $7mm, yet they have not found a contingency attorney to take their case or referred the alleged crime to law enforcement.  That sounds odd.  I know some great attorneys that will take a reasonably strong $7mm contingency case like that.

FG has no remorse whatsoever, and they even seem to blame RS, claiming that RS was responsible for vetting the alleged crooks.  If that is correct, and RS knew that FG was outsourcing all of the work to these third parties, then RS should have disclosed that information.

Although FG avoided putting dates on their story, it also sounds like they (and perhaps RS) knew about the problems with the third parties before they accepted money from investors in the last deals through the door.  That certainly should have been disclosed, if true.

FG's broken hearts about chatter on "online forums" rings hollow.  People complaining about radio silence from FG for several months as these deals fizzled out under objectively bizarre circumstances is not defamation.  If FG was as honest a company as they insist, they would have disclosed their apparent lack of experience and the true risk involved in these investments from the onset, and most of us wouldn't be here.  They also would have provided a concise and candid update about this apparent scandal long ago.  Today's webinar validates all the panic that we've expressed to date.

2.  Info From a Plaintiff's Lawyer

I spoke with one of the top plaintiff's firms in California.  Their initial reaction is that investors would benefit from a criminal referral under these circumstances.  Given the variables at play with the different deals, it could be difficult for one firm to represent a lot of folks as a "class."  The SEC, state AG, or US Attorney's office are often more capable of representing large groups of investors.

Interestingly, FG now admits that this was a fraud, although they point their fingers at the third party crooks.  If that is the case, then one would think that FG would be supportive of a criminal referral, as they too are victims.

As always, I am trying to piece together the limited information available to us from afar.  If people think I have made any misstatements or am being unfair, please let me know, or send me a message.

Thanks,

Chicago81,

I would like more info on what FG means by "purchase the RS loans at a discount".  This scenario is what others have mentioned could happen if indeed this is a shady deal.  Run a loan into the ground to make it nearly worthless... then come in and buy it out at a much reduced price.

Having said that, I would like to know how they plan to value the properties and what % of a discount from that they are expecting.  The investment I am in (Church's in Apopka/Orlando, FL) is only $350k from completion.  If I'm RS/IRM I would consider going to GOALZ and see if they want to take over the lease now at a discount of at least $350k and have them finish (tables, chairs, etc.).

Does anyone know or have a way to directly communicate with the guy from IRM who was leading the call.  I believe he said he was the CEO?

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #845 on: July 10, 2019, 05:21:37 AM »
Chicago81,

I would like more info on what FG means by "purchase the RS loans at a discount".  This scenario is what others have mentioned could happen if indeed this is a shady deal.  Run a loan into the ground to make it nearly worthless... then come in and buy it out at a much reduced price.


If you listen to the webinar starting at about 10 minutes before it ends, they talk about this proposal. I'm listening to it now... it may actually be a reasonable option.

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #846 on: July 10, 2019, 10:07:06 AM »
Chicago81,

I would like more info on what FG means by "purchase the RS loans at a discount".  This scenario is what others have mentioned could happen if indeed this is a shady deal.  Run a loan into the ground to make it nearly worthless... then come in and buy it out at a much reduced price.


If you listen to the webinar starting at about 10 minutes before it ends, they talk about this proposal. I'm listening to it now... it may actually be a reasonable option.

Thanks JD and I was on the webinar yesterday, although as Murphy's Law would have it, it was around that moment that all hell started to break loose around my house, so I certainly could have missed a few details. 

I took a screengrab of the final slide, but it was light on specifics with regards to %.  I believe the moderator asked this question but I don't think it was answered specifically.  Again, I could be wrong.

But I would like to know that if we supplied them with an appraisal (as I believe we have already had them done), are they then willing to payout X percent of that appraisal back to RS/IRM?  That's what it sounded like and what I read. 

However, what is missing is two very key pieces:
1) who is doing the appraisal (i.e. how are we valuing it)?
2) what percent of that value are they willing to pay?

That of course would lead to other questions like who is going after ADM, where is FG's money coming from to buy up these loans, etc.  But at this point I am trying to be made whole or as close to whole as I can get.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #847 on: July 10, 2019, 10:34:56 AM »

However, what is missing is two very key pieces:
1) who is doing the appraisal (i.e. how are we valuing it)?
2) what percent of that value are they willing to pay?


My impression was that the answer to question (1) was that appraisals had already been commissioned by RS, and are available.  And on (2)  Arinaga wasn't going to allow himself to be pinned down:  in effect "let's talk and see if we can arrive at a number keeping the franchisee's appetite for rental rates in mind, as well as something  that wouldn't cause equity loss".  I hope he was referring to the new equity to be injected, and not the existing equity in place.

Quite striking how these guys fingered ADP without admitting their own incompetence and lack of judgment and oversight.

sdnerd

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #848 on: July 10, 2019, 01:26:44 PM »
I re-watched the webinar again.

Like the rest of us, I can only speculate - but my interpretation is that the ADP issue is perhaps not as black and white as they would like it to be. In some cases they say ADP stole money, and in others they state ADP conducted activity "bordering criminal conduct." In my world stealing money is in fact a criminal act; they stole money or they didn't. In addition to ADP, they are looking at litigating against Manny Butera, and "some or all of the operators that FB also believes materially, and fraudulently misrepresented facts on its CVS, financial statements, etc." At the same time, their initial 7 projects all completed successfully.

They also claim to have retained outside council who has reviewed this, and subsequently decided not to pursue legal activity at this time due to lack of funds. If someone backed up the truck and took 7 million dollars and drove into the sunset, I would think that would seem like a slam dunk case for a contingency lawyer.  Hence, my suspicion their legal council is telling them it could be an ugly fight and I'm sure ADP has a completely different story as to how everything unfolded. Their council is likely also advising them that they are likely to be subject to lawsuits as well which they would need capital to defend with. Net: Messy and costly.

Without all the facts, this is just a nightmare to try and even understand. So many conflicts of interest, questionable information, and a real lack of hard fact transparency. I do not envy IRM's position in having to sort all this out.
 
I wouldn't be surprised if FG is one of the main reasons RS's funding fell through at the end. FG says they had 14 of their 27 sites with RS; anyone doing due diligence on investing in RS would have likely been briefed on this situation and all it's potential implications legal and otherwise.


DECA

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #849 on: July 10, 2019, 02:25:16 PM »
I am adding my thoughts on the FG Webinar


1.   It was disturbing that FG studiously avoided ever mentioning dates about when they found out about ADP’s fraud.  Who knew what and when did they know it?

2.   FG’s failure to sue ADP indicates that FG’s story may not be accurate.  ADP must have some different story that has caused FG not to sue.  Otherwise it would be a slam dunk win (although collection could be being problematic).

3.   What did FG and RS know about the problems when they were still soliciting investments? With RS, we are looking at possible securities fraud.

4.   IRM (Jeff Holzman) seemed far too interested in selling out for appraised values.  Some of these properties have advanced since the time RS obtained appraisals, so the appraisals can be out of date in some cases.  E.g., According to FG, AFC Long Island is now paying rent for the past two months and is planning to repay back rent on an amortized schedule.  Louisville MSA Captain D’s is supposed to be complete in September.  Surely appraisals now would be higher than when these were in default.

I agree with Chicago81 and others who think we need an attorney and that a criminal referral can only help.  IRM’s first priority is still likely to dispose of this “problem” as quickly as possible (e.g., by selling everything at some percentage of the appraisals they already have in hand from months ago), rather than to figure out loan-by-loan solutions based on current conditions to maximize returns to investors.

Whether we can do a class action is questionable, but not out of the question.  RS Lending Inc. was the entity that sold the notes to all of us.  Their representations were to some extent common to all of us (e.g., reps about FG’s expertise), but were also to some extent specific to each deal.  Nevertheless, if we could get a class action securities fraud attorney to file against RS, such complaints almost always name the directors personally (I assume in this case the VC investors in RS) and thereby get their attention. They then pressure the RS attorneys to resolve the lawsuit. This is extremely common in securities fraud actions.

If we want to pursue FG directly, I think we would need to do so as third party beneficiaries under their contracts with RS.  If so, then I think each deal might need to be a separate action since I assume each FG-RS deal was a separate contract (loan).  If there is an attorney who can come up with an argument that these cases should be consolidated before one judge (e.g., because of the common issues of RS’ due diligence on FG, conflicts of interest, etc.), that could be a great help.

I would appreciate the continuing thoughts from the rest of you. At some point, we need to figure out how to get the full investor list for each of the FG deals so that we can coordinate, or have an attorney for us coordinate, our approach to resolve this with the least pain possible. Does anyone have ideas of how to do that? 

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #850 on: July 10, 2019, 06:22:09 PM »
I don't think suing RS would do anything at this point. What, if anything, is left in that shell? I assume the RS entities would file bankruptcy in response to a lawsuit from investors, and would subsequently liquidate with administrative claims consuming any remaining value. From a criminal/SEC perspective, those RS Notes had some of the most ridiculous CYA risk factors I've ever seen. ("The information provided by the sponsor might be intentionally false and RS does not verify the information provided to them by the sponsor." I might not be 100% accurate--I'm currently paraphrasing from my best recall.) I'm not a lawyer so I don't know how well risk factors indemnify someone in RS' position, but we all signed the docs with 20 pages of risk factors in there.

IRM's next move is to track down ADP and franchisees to see if they can prove/disprove what FG said on the call. In the interim, FG needs to take steps that show actual good faith. 1) Completing a discounted loan sale for a DogHaus/Taco John in Michigan that was negotiated, signed, notarized and delivered to the closing attorney in late March. If they won't honor that deal, how can we trust anything else? 2) Submitting realistic bids for each loan with committed financing and a form of contract. 3) Include language that enables lenders to participate in any improved future recoveries until investors are made whole.

Investors are angry, but I think before anyone pursues explicit legal or criminal remedies, we need more information from IRM and need to see what kind of bids FG makes on these loans and the terms associated with them.
 
« Last Edit: July 10, 2019, 06:40:05 PM by Hindsight2020 »

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #851 on: July 11, 2019, 06:03:21 AM »
I received a notification on one of my debt deals (Wytheville Captain D’s), over a month ago, that the loan had been repaid in full by the sponsor.  Then two days ago there was a dashboard update which showed that an amount slightly lower than the full amount was being credited. No mention of 3 months of accrued interest either.  And today I received a deposit that is substantially lower than the dashboard amount.

Moral of the story: If you don’t already, keep an eye on deposits, and reconcile with dashboard numbers.

stingray

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #852 on: July 11, 2019, 11:50:50 AM »
As the number of readers of this thread grows, I would like to once more broadcast a request for anybody invested in the ROIPGM deals to private message me.

cleon

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #853 on: July 12, 2019, 08:40:43 AM »
It is surprising that with so much talk on the webinar of essentially what I would think is flat out embezzlement...there is no current investigation into what was a fairly major business presence. 

Realtyshares execs walk away easily...and I'm assuming were paid well during the entire 'build process of trying to IPO a complete and probably known lemon.
FG sounds like they had no real experience in this type of development process, and was just winging it... was there misrepresentation?
ADP, assuming FG is actually telling the truth, can actually just walk away with millions with no repercussions?  Makes no sense.

The whole thing just smells rotten.  Still think it would make a great 60 Minutes episode.
Meanwhile, Linda Terrace just goes dark and also walks away with plenty of free $.

Reminds me of the old dot.com days...get a bunch of websites pimping a bad business model, and then walk away with a nice payout when it collapses...
« Last Edit: July 12, 2019, 08:42:29 AM by cleon »

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #854 on: July 12, 2019, 10:17:40 AM »

Meanwhile, Linda Terrace just goes dark and also walks away with plenty of free $.


My thought/hope on the Linda Terrace deal is the new people at IRM/RS simply looked at the sale listing and assumed the value of what was proposed with the investment had dropped from +$7MM to $4MM.  I assume they did not take the 10 minutes to call the real estate agent to find out that indeed no structure had been built and thus the $4MM price was for the land and access to the plans for the new buyer to build the lot. 

Now I am not sure, and this is where I get concerned, how much has been spent to get the lot where it is today and if it sells for the asking price, how much we get back since there should have been $0 costs incurred to build a structure.

I have been trying to catch IRM/RS up to speed on this but of course that's tough to do via email and templated responses.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #855 on: July 12, 2019, 02:42:14 PM »
I have been trying to catch IRM/RS up to speed on this but of course that's tough to do via email and templated responses.

I have had some success with getting meaningful responses by cc’ing Eric Sullivan at priority@iirrms.com. I had generally avoided cc’ing him unless the matter was exceedingly critical, so as not to flood what seemed like an emergency issues mailbox, but a recent response from him seemed to suggest it was ok to cc him if the issue was important, even if not critical.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #856 on: July 13, 2019, 01:03:52 AM »
I have been trying to catch IRM/RS up to speed on this but of course that's tough to do via email and templated responses.

I have had some success with getting meaningful responses by cc’ing Eric Sullivan at priority@iirrms.com. I had generally avoided cc’ing him unless the matter was exceedingly critical, so as not to flood what seemed like an emergency issues mailbox, but a recent response from him seemed to suggest it was ok to cc him if the issue was important, even if not critical.

Thanks Ramesh, that's good to hear as he still hasn't responded to me about Cleveland Heights. I keep snoozing my email in order to follow up but didn't want to pester him either. This gives me hope that he's paying attention.

I'd also like to see IRM follow up with us about FG fairly soon. They said on the webinar that they'd solicit all of us for our thoughts on what to do next... I'm hopeful that happens by end of the month.

cleon

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #857 on: July 13, 2019, 08:30:41 AM »
I have been trying to catch IRM/RS up to speed on this but of course that's tough to do via email and templated responses.

I have had some success with getting meaningful responses by cc’ing Eric Sullivan at priority@iirrms.com. I had generally avoided cc’ing him unless the matter was exceedingly critical, so as not to flood what seemed like an emergency issues mailbox, but a recent response from him seemed to suggest it was ok to cc him if the issue was important, even if not critical.

Was there anything noteworthy in terms of an update?  The last notification was a month ago.  Money disappears...no one seems to know where it goes...

As an aside, does anyone happen to know where the original RS CEO landed?

MSH

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #858 on: July 14, 2019, 08:47:12 AM »
I'm in two deals both in Cali..the aforementioned/discussed Linda Terrace and Vivante Apartments deal in NorCal. Just received this recent notification on Vivante. Sounds promising anyway (at least better than Linda Terrace and many of the others)...

Vivante Apartments – Asset Update (7/10/19)
07/10/2019
IRR Management Services, LLC (IRM) has taken over the Asset Management and Fund Administration functions of this investment. Our goal is to provide timely and accurate updates on each asset as best as possible.

The extended maturity date for this second-position preferred equity investment was May 17, 2019 and that date passed without repayment, putting the deal in maturity default. IRM informed the sponsor of the default and asked about the payoff plan. The sponsor responded and asked for a payoff letter assuming repayment on July 31, 2019. IRM’s fund administrators prepared and delivered the letter.  If the payoff does not happen within a few days of the scheduled date, IRM will deliver a default notice to the borrower and is prepared to undertake the remedies available under the note. IRM will post an update about the payoff in approximately one month.

Please continue to monitor the Investor Dashboard for updates and keep your bank account information current so our fund administrators can accurately process payments and avoid delayed or missed payments.

*Disclaimer: All of the information presented above is on an as-is basis, as provided to our team members, and has not been independently verified by IRM.

Deal Page Link: Vivante Apartments

IRM Asset Management Team

cleon

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #859 on: July 14, 2019, 09:27:58 AM »
Thanks for the update.  At least there is progress in Communications now.  Thanks to IRM.

Let's hope they can figure out whatever is really going on between FG and ADP...