Author Topic: Thoughts On RealtyShares Closing Its Doors To New Investors  (Read 320590 times)

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1140 on: November 08, 2019, 12:49:50 PM »
Investors in the Vernazza Apartments preferred equity were notified today that the asset has been sold and our investment paid off in full, including accrued preferred interest and the remaining interest reserve. We are expected to receive full payment in the next 10-15 days.

This was probably my best investment on the platform, so I'm not surprised to see the sponsor meet all obligations. But it's good to share the news anytime one of our deals goes right. My only disappointment was that it paid off 9 months early.

groovydude

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1141 on: November 10, 2019, 09:11:25 AM »
Here's a weird one and a bit out of the norm for RS deals - Palo Alto Residential Development. This was a debt deal to flip a high-end home, 8% interest + 5.5% accrued on a second loan. Construction took longer than expected (laughable), and the sponsor stopped paying interest months ago, claiming to be out of cash. IRM has agreed to let interest accrue as the house is now on the market. The original purchase price was $8M and the RS listing states a target price of $16.5M, and claims an appraisal of $19.5M (I never liked this sales point in the first place - how can one appraise plans???). IRM just reported that the project is now complete and has the house listed for $27.8M. Yes, $27.8M - almost double the original estimate. That's about $3,700 psf! (Zillow estimate for the value is Estimated sales range: $25.91M - $28.91M). If the house is near the same size the original sale was for around $1,100 psf. IRM is reporting that realtors have raised eyebrows at the listing price (no kidding?).

I'm not complaining, yet. It seems likely I'll have made a 13.5% return eventually. But what are we looking at here? A greedy-ass sponsor trying to make a killing while investors sweat it out? The sponsor stands to make over 400% gross return on equity at market price if construction costs were accurate. A contractor run amok? Or, yet another stark example of how the billionaire class has obscenely profited from our cockeyed economy?

I'd hate to be the original seller if the deal actually goes down at over $26M.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1142 on: November 10, 2019, 03:51:10 PM »
Here's a weird one and a bit out of the norm for RS deals - Palo Alto Residential Development. This was a debt deal to flip a high-end home, 8% interest + 5.5% accrued on a second loan. Construction took longer than expected (laughable), and the sponsor stopped paying interest months ago, claiming to be out of cash. IRM has agreed to let interest accrue as the house is now on the market. The original purchase price was $8M and the RS listing states a target price of $16.5M, and claims an appraisal of $19.5M (I never liked this sales point in the first place - how can one appraise plans???). IRM just reported that the project is now complete and has the house listed for $27.8M. Yes, $27.8M - almost double the original estimate. That's about $3,700 psf! (Zillow estimate for the value is Estimated sales range: $25.91M - $28.91M). If the house is near the same size the original sale was for around $1,100 psf. IRM is reporting that realtors have raised eyebrows at the listing price (no kidding?).

I'm not complaining, yet. It seems likely I'll have made a 13.5% return eventually. But what are we looking at here? A greedy-ass sponsor trying to make a killing while investors sweat it out? The sponsor stands to make over 400% gross return on equity at market price if construction costs were accurate. A contractor run amok? Or, yet another stark example of how the billionaire class has obscenely profited from our cockeyed economy?

I'd hate to be the original seller if the deal actually goes down at over $26M.

Wow, that is just bizarre!!! Keep us posted on what happens, I'm really interested to hear.

It feels to me like you should be making more than 13.5% though :)

Sam

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1143 on: November 11, 2019, 05:58:05 AM »
Investors in the Vernazza Apartments preferred equity were notified today that the asset has been sold and our investment paid off in full, including accrued preferred interest and the remaining interest reserve. We are expected to receive full payment in the next 10-15 days.

This was probably my best investment on the platform, so I'm not surprised to see the sponsor meet all obligations. But it's good to share the news anytime one of our deals goes right. My only disappointment was that it paid off 9 months early.

Nice! Do you know what the IRR and absolute return will be? I did not get a notification. Hope we're talking about the same deal.

The DME fund invested in this project, and I wrote about my fears of investing in this project: https://www.financialsamurai.com/potential-real-estate-crowdfunding-loss/


VERNAZZA APARTMENTS
 LOCATION   Las Vegas, NV   
 PRODUCT TYPE   Preferred Equity
 ASSET TYPE   Multifamily
 SPONSOR   The Nathan Family Office and Madison Residential
 FUND ALLOCATION   $600,000
 Deal Page   Click Here: https://www.realtyshares.com/login?next=%2Finvestments%2Fvernazza-apartments
https://www.financialsamurai.com/realtyshares-dme-fund-information-investments-sponsors-updates/
« Last Edit: November 11, 2019, 05:59:57 AM by Sam »
Regards,

Sam

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1144 on: November 11, 2019, 07:47:02 AM »
Investors in the Vernazza Apartments preferred equity were notified today that the asset has been sold and our investment paid off in full, including accrued preferred interest and the remaining interest reserve. We are expected to receive full payment in the next 10-15 days.

This was probably my best investment on the platform, so I'm not surprised to see the sponsor meet all obligations. But it's good to share the news anytime one of our deals goes right. My only disappointment was that it paid off 9 months early.

Nice! Do you know what the IRR and absolute return will be? I did not get a notification. Hope we're talking about the same deal.


The DME fund invested in this project, and I wrote about my fears of investing in this project: https://www.financialsamurai.com/potential-real-estate-crowdfunding-loss/


VERNAZZA APARTMENTS
 LOCATION   Las Vegas, NV   
 PRODUCT TYPE   Preferred Equity
 ASSET TYPE   Multifamily
 SPONSOR   The Nathan Family Office and Madison Residential
 FUND ALLOCATION   $600,000
 Deal Page   Click Here: https://www.realtyshares.com/login?next=%2Finvestments%2Fvernazza-apartments
https://www.financialsamurai.com/realtyshares-dme-fund-information-investments-sponsors-updates/



It must be the same deal. Here's the original listing. https://www.realtyshares.com/investments/vernazza-apartments

It had a current preferred return of 9% and an accrued of 4% per year. Based on my math, the accrued distribution to be paid is about 8.7% of the initial investment, and the current interest payment/return of interest reserve to be paid is about 3.5%.

This investment had the biggest initial cash sponsor equity cushion I've seen in a RS deal. They purchased the asset for $18.2 million and after executing the business plan, sold it just over 2 years later for $28.5 million.
« Last Edit: November 13, 2019, 04:05:43 AM by Hindsight2020 »

MikeATL

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1145 on: November 13, 2019, 10:21:27 AM »
A question for folks here who have equity investments in RS: have you received any quarterly financial updates in the last two quarters since IRM took over?
I think all my projects have received updates in the last 6 months.  I have a few investments performing well, so I receive updates and distributions on those.  For the ones that are a disaster (mostly Franchise Growth) there's less updates, but I'm not sure there's anything new to report.

Sam

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1146 on: November 13, 2019, 06:01:09 PM »
Investors in the Vernazza Apartments preferred equity were notified today that the asset has been sold and our investment paid off in full, including accrued preferred interest and the remaining interest reserve. We are expected to receive full payment in the next 10-15 days.

This was probably my best investment on the platform, so I'm not surprised to see the sponsor meet all obligations. But it's good to share the news anytime one of our deals goes right. My only disappointment was that it paid off 9 months early.

Nice! Do you know what the IRR and absolute return will be? I did not get a notification. Hope we're talking about the same deal.


The DME fund invested in this project, and I wrote about my fears of investing in this project: https://www.financialsamurai.com/potential-real-estate-crowdfunding-loss/


VERNAZZA APARTMENTS
 LOCATION   Las Vegas, NV   
 PRODUCT TYPE   Preferred Equity
 ASSET TYPE   Multifamily
 SPONSOR   The Nathan Family Office and Madison Residential
 FUND ALLOCATION   $600,000
 Deal Page   Click Here: https://www.realtyshares.com/login?next=%2Finvestments%2Fvernazza-apartments
https://www.financialsamurai.com/realtyshares-dme-fund-information-investments-sponsors-updates/



It must be the same deal. Here's the original listing. https://www.realtyshares.com/investments/vernazza-apartments

It had a current preferred return of 9% and an accrued of 4% per year. Based on my math, the accrued distribution to be paid is about 8.7% of the initial investment, and the current interest payment/return of interest reserve to be paid is about 3.5%.

This investment had the biggest initial cash sponsor equity cushion I've seen in a RS deal. They purchased the asset for $18.2 million and after executing the business plan, sold it just over 2 years later for $28.5 million.

Thanks for the color. I reached out to IRM and they said the reason why I didn’t get it update is because I am an investor in the fund. So I will just get quarterly updates regarding the fund and then the specific investments.

Got a love sponsors who have good skin in the game. That is so huge. 30% more would be nice.
Regards,

Sam

mspringer

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1147 on: November 18, 2019, 09:36:00 AM »
MSH,
I am still not showing any updates on the RS site nor a deposit to my bank account.

My dashboard updated this AM. It shows it as an Exited investment now...$2,255.41 returned on a $10K invest

I do see mine posted now as well.  I will reach out again to IRM as I feel there is a lot to be desired on the extent of investigation they've done on this investment. 

daletucker50

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1148 on: November 18, 2019, 01:55:26 PM »
New England Home Fund II is officially a bust.  IIRR has closed the account. No chance of getting anything back.   >:(

DigitalNomad

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1149 on: November 18, 2019, 03:47:52 PM »
New England Home Fund II is officially a bust.  IIRR has closed the account. No chance of getting anything back.   >:(

Same with New England High Yield Portfolio VII. Just got the notification.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1150 on: November 20, 2019, 06:16:39 AM »
More awesome news from IRM, this time about Chicago Retail Lockport. Looking to be around an 85% loss.

This officially puts me in the red with my RS investments and there's another Chicago Retail I'm in that will likely have a similar outcome.

"Chicago Retail Portfolio Lockport 2nd Lien Tranche 1 11/19/2019
11/19/2019
As previously reported, IIRR Management Services, LLC (IRM) has recently taken over the Asset Management and Fund Admin functions of this investment. Our goal is to provide timely and accurate updates on each asset as best as possible.

This asset is not performing according to the original business plan. IRM has concluded the main reason for this is the failure of the borrower to properly execute the original business plan which was to sell the property immediately after the loans closed. The 1st mortgage lender and the RealtyShares secondary financing provided refinancing for two cross-collateralized failed CMBS loans. Pangea Capital provided first mortgages for those properties, while RealtyShares provided second mortgages. In addition to the $5.6 million in new financing provided by Pangea and RealtyShares, the borrower also raised an additional $200,000 in new equity financing. Approximately $700,000 were paid in fees and transaction costs including interest and tenant improvement reserves.

IRM concluded that due to the high-interest rate paid to the first and second mortgage lenders, the property did not provide enough cash flow to pay debt service. The appraisal for the property optimistically assumed that a buyer would be able to lease-up the 13% of space that was vacant. The sponsor delayed placing the property on the market while it tried to lease the property to full occupancy. Ultimately, the sponsor was not able to lease this space, and the occupancy fell to 83%.

IRM held several discussions with brokers in the local market and found that they believe the average market occupancy is somewhere in the 85% range. As the current stabilized occupancy level is less than the stabilized occupancy in the appraisal, the value of the property is, therefore, less than the appraised value. IRM believes the borrower held on to the property, perhaps thinking it could lease the balance of the vacant space. As more time elapsed, interest payments and property tax payments were missed and the loan finally went into default. This property has therefore been classified as a Tier 3 asset.

Distributions, interest payments from this investment have not been distributed in accordance with the original business plan.

Since the last update, IRM has continued to pursue foreclosure action. The first mortgage holder, Pangea Capital was approached and has been very cooperative with IRM efforts. Information has been exchanged regarding loan balances, default interest, and value. A thorough and professional analysis of the property has been undertaken. IRM estimates the current balance of the debt at $4.7 million. Default interest on the first loan accrues at $76,000 per month. IRM has valued the property at $5.85 million, and this value is supported by the broker's opinions. Subtracting a 7.5% cost of selling the property, the net proceeds available from sale would be $5.4 million.

The lawyer for the borrower’s investors has proven to be litigious. Pangea Capital’s representative believes that a lawyer who knows the system in Illinois can substantially delay the foreclosure process. Legal fees mount for all investors, as the borrower’s lawyer asks for what IRM believes are deposition requests meant to delay the foreclosure action. While that could be very frustrating, it is a legal right of the borrower and IRM now believes in its professional opinion that the value of the RealtyShares second mortgage will be reduced to zero if held through the foreclosure process.

IRM attempted to maximize investor value by shifting the legal cost risk to a success-basis counsel, but have found that the lawyers will not agree to take this on a contingency basis. The external legal team have completed their own analysis of the merits and have declined to take the case. IRM has identified two parties interested in buying both this note and the note held on the other property invested by RealtyShares investors. At a best a final offer the highest bid was to an outside investor.

The third-party investor will pay $110,000 for both notes and is expected to close on December 2nd. This represents a substantial loss on this investment. IRM believes that the sale of the note is the best possible outcome given the difficult circumstances, and will continue to act in the best interests of our investors."

Hindsight2020

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1151 on: November 20, 2019, 04:42:25 PM »
Sorry to hear about the fate of Chicago Retail Lockport. These last 12 months navigating the RS mess have been really challenging--it definitely FEELS like it's been much longer than a year. Which reminds me, has anyone involved in the Vernazza Apartments deal received their payoff yet? I know IRM says 10-15 business days (it's been 10 or 11), but two weeks also feels like a long time when you're waiting to see it in your bank account.

Once that's paid I'll be down to 8 deals (out of 17 originally)--three Tier 1, one delayed but progressing SFR, and 4 in various states of default. I hope 2020 brings almost all of them to conclusion so I can be done with this part of the process. 



ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1152 on: November 21, 2019, 05:47:23 AM »
JD, Sorry to hear about the outcome of the Chicago Retail Deal.  Realty Shares‘ underwriting  seems to have picked  a disproportionate share of hucksters, bad credits and incompetents for its sponsors.

After nearly a year, I received the financial report for Woodcreek Farms. I’d given this deal up for dead since their late 2018 report indicated that their modeling of the business was way off. Based on their current report, sounds like the operators have been able turn around the business somewhat.  At current liquidation estimates the investment is still under water.  If anyone else is invested in this, I’d be interested in hearing your views.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1153 on: November 21, 2019, 11:38:04 AM »
JD, Sorry to hear about the outcome of the Chicago Retail Deal.  Realty Shares‘ underwriting  seems to have picked  a disproportionate share of hucksters, bad credits and incompetents for its sponsors.

After nearly a year, I received the financial report for Woodcreek Farms. I’d given this deal up for dead since their late 2018 report indicated that their modeling of the business was way off. Based on their current report, sounds like the operators have been able turn around the business somewhat.  At current liquidation estimates the investment is still under water.  If anyone else is invested in this, I’d be interested in hearing your views.

So true, Ramesh.

Is the Woodcreek deal an RS one? If so, did the sponsor turn it around themselves or was there any help from IRM?

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1154 on: November 21, 2019, 04:00:16 PM »
 JD,  yes, Woodcreek is an RS equity deal.  No help from IRM in the turnaround as far as I know.

The sponsor claimed in the offering document that the seller had inherited the property and was an inexperienced operator, and that was why they were able to pick it up at a bargain.  But, once they took over the property they realized they were saddled with a low credit quality tenant base. It’s taken them nearly 18 months to clean up the mess.  I hope this is the entire story, and that there are no more ugly surprises here; fingers crossed.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1155 on: November 21, 2019, 06:32:20 PM »
JD,  yes, Woodcreek is an RS equity deal.  No help from IRM in the turnaround as far as I know.

The sponsor claimed in the offering document that the seller had inherited the property and was an inexperienced operator, and that was why they were able to pick it up at a bargain.  But, once they took over the property they realized they were saddled with a low credit quality tenant base. It’s taken them nearly 18 months to clean up the mess.  I hope this is the entire story, and that there are no more ugly surprises here; fingers crossed.

Man. Well at least it sounds like they are trying to get it back on track. That's a huge win for any RS these days.

ManOfLeisure

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1156 on: November 22, 2019, 07:38:25 AM »
Looks like New England High Yield Portfolio VII will be a total loss  :(

As previously reported,  IIRR Management Services, LLC (IRM) took over the Asset Management and Fund administrative functions of this investment in June 2019. Since then, IRM along with legal counsel has been researching past records and analyzing financial information and disclosures received through the judicial process. IRM is taking steps to recover investment funds and maximize returns on this investment, but unfortunately, the prospects for a recovery have been determined to be remote.

Since the last update, the sponsor’s attorney has provided IRM with detailed financial statements, as requested, from the principal’s brother, Mario Massimino, and the related real estate entities. IRM agreed to a Confidentiality Stipulation in order to obtain the financial disclosure and thus, cannot make the financial statements public. The Sponsor and its related entities previously provided detailed financial statements.

After the document review, IRM has concluded that the Sponsor’s brother and business partner has a substantial negative net worth. The lawyers for the Sponsor have suggested a possible bankruptcy filing for the Sponsor and/or the guarantors and have indicated they are also not being paid for their legal services. Unfortunately, the investment may be a total loss. IRM filed comprehensive litigation against the Sponsor, the guarantors, and the principals, even though recovery of IRM funds looks unlikely at this point. IRM engaged a national third-party collection agency and requested that they take over collection of the claim on a contingency basis. The collection agency, however, declined to take the case, signaling that the prospects of a recovery will be remote. IRM is analyzing the documents and conferring with IRM counsel to determine the next steps. We will continue to explore all options possible and will continue to act in the best interests of investors.
So now I'm wondering if we're finally going to get K-1s for all the Alliance Realty Capital/Massimino brothers deals so we can actually report the losses for tax purposes. I got the same notification for the RS 195 deal (New England Fund I). This surely means the lawsuit will be dropped. I'm frustrated that they are basically getting a pass for walking away with 10M of other people's money and there won't even be a judgement or lien placed. Googling Michael Massimino's name shows that he is actively involved in other companies and real estate deals, so he's going to make plenty of money in the future. I do not see this as a "trying to get blood from a turnip" deal. I'm betting that he walks away from this and makes plenty of money in the future.

ramesh

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1157 on: November 22, 2019, 08:17:04 AM »
In one of my exchanges with IRM's customer service, the person said something like ".. but we didn't underwrite these messes" (I wasn't even pointing out anything about the outcomes, just expressing frustration about the absence of any reports of the financial condition of the businesses).    It is also clear that IRM is trying to wind  down these deals, and get then off  their porch as quickly as possible. I hope they don't wind these down without securing  the best outcomes for the investors, just because they can hide behind the fig leaf that this mess was not of their creation.  Their language certainly indicates that they are trying to do right by us investors, but a couple instances make me worry.

JD

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Re: Thoughts On RealtyShares Closing Its Doors To New Investors
« Reply #1158 on: November 22, 2019, 12:32:01 PM »
In one of my exchanges with IRM's customer service, the person said something like ".. but we didn't underwrite these messes" (I wasn't even pointing out anything about the outcomes, just expressing frustration about the absence of any reports of the financial condition of the businesses).    It is also clear that IRM is trying to wind  down these deals, and get then off  their porch as quickly as possible. I hope they don't wind these down without securing  the best outcomes for the investors, just because they can hide behind the fig leaf that this mess was not of their creation.  Their language certainly indicates that they are trying to do right by us investors, but a couple instances make me worry.

Yep, I've had similar concerns. My worry is their priority is collecting fees and hoping to convert RS customers to Intoo. But they'll fail at that if they don't get some decent outcomes for us all.

They seem mostly interested in deals that impacted many RS customers, like FG, than ones where RS probably put up a good deal of the money, like Chicago Retail.

cdratwien

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IIRM Management & Banking Fees
« Reply #1159 on: November 25, 2019, 06:28:55 AM »
Has anyone else noticed in your IRA accounts that the reimbursements noted on the RS pages are not exactly equal to what your IRA receives?  I got in contact with IIRM and here is what they said...

"Thank you for your email. IRM has changed banking institutions, and as a result you may see very minor fluctuations in your distribution amounts associated with slightly different tranactionsal costs. These micro amounts are usually only a few cents, and never exceed one Dollar. We appreciate your understanding."

So 2 questions: 1) Does this just affect IRA accounts and 2) Why weren't we told - I've seen nothing about this and think their fees should cover this cost and more to the point why change banks if the cost is greater??

I never had "transactional costs" before - now we do with IRA accounts....something stinks here.