StoryBuilt: Receivership & Abandoned Projects
In the dynamic realm of urban development, where ambitious projects and grand visions collide with financial realities, the story of StoryBuilt serves as a cautionary tale. Once a prominent infill housing developer known for its dense housing communities had expanded to Multi-Level Multi Family and Mixed Use. Tthe company now finds itself in the throes of a financial crisis, facing lawsuits, organizational restructuring, and even the shadow of a receivership. Beck-Reit aims to delve into the unraveling saga of StoryBuilt, exploring the company's rise, fall, legal battles, and the implications for the communities it has under construction.
AS OF APRIL 2024 “ The company's website remains active and still boasts of having "250+ employees, 50+ communities built and 1,500 homeowners" served.” per Austin Business Journal.
StoryBuilts Rise to Fame to Recievership in the Summer of 2023
“StoryBuilt borrowed $3 million+ from hard-money lenders at ”
Discussions with a Banker
On Receivership:
“They just took every project, whether it was performing or not, and said, we're going to throw it into receivership. And, once you, you throw a property that's under construction into receivership, that's like putting a gun to the project's head and pulling the trigger. Because the bank stops funding.”
“maybe they should have extended excluded some projects from the receivership based on their performance. They made the situation worse. StoryBuild lost all the equity in their project. If the objective was to recoup equity… once it goes into default and bank forecloses on it they don't get anything. Unless someone on the courthouse steps offers us more money than banks bid. In that case, you have to give the borrower the difference. If a seller doesn't transact and bank forecloses on it, then it's the banks property. Bank sells it and recoups. And above, if you get… it is a break even proposition usually..”
“But, if you want to recoup equity, not sure throwing it into receivership is the right thing to do. Because all that equity went bye bye. “
Storybuilt has problems with:
FBI
Department of Justice
Texas Workforce Commission
IRS
Update April 2024 - South Austin Bruno Foreclosure
Moody Bank takes 2001 South 1st Austin project back in Foreclosure.
The once-promising Bruno apartment project in South Austin, opposite the bustling Polvos eatery, now stands incomplete and abandoned, emblematic of the broader financial collapse of its developer, StoryBuilt. Here’s a rundown of the financial turmoil and key details surrounding this development:
Financial Facts:
Bruno aimed to offer 42 units, including studio and one-bedroom apartments but halted construction at 35% completion.
StoryBuilt raised $2.9 million from Class A investors for Bruno, with unexplained non-cash markups totaling $15,000.
Between September 1, 2022, and June 30, 2023, the Bruno project saw $800,000 more in receipts than disbursements.
At the end of June 2023, Bruno had over $500,000 in unpaid invoices and an intercompany balance of only $95,000.
More than a dozen liens have been filed against the property, signaling severe financial discrepancies.
These developments indicate a significant breakdown in both fiscal responsibility and corporate governance within StoryBuilt, leading to the foreclosure of the Bruno project.
BEWARE
Skepticism by investors is growing in Austin and across the country, casting doubt on other syndication groups and the "pie in the sky" returns promised back when interest rates were low and money was flowing. DeLea as an experts in the field of commercial real estate and development, urges the public and investors to exercise extreme caution, as StoryBuilt may just be one of many dysfunctional and potentially fraudulent players in this volatile market.
UPDATES March 2024 - As Details come to light + Money evaporates
DECEMBER 2023 - 3 Storybuilt LLCs Declare Bankruptcy
PSW Urban Homes LLC
SB-Downtown Plano
SB Willa Commercial
The receiver has accused of profound and shocking mismanagement of investor funds, highlighted by several key points:
Funds allocated for particular developments were diverted to cover "miscellaneous expenses."
A sum of $6.7 million was collected from investors for a property acquisition that never materialized.
Failed to ascertain the accredited status of investors, leading to 320 unaccredited investors.
The complexity of the corporate structure has left the receiver with an unclear understanding of the exact scope of StoryBuilt's assets.
Also in December 2023 ………. A class-action lawsuit against StoryBuilt for violating federal labor laws and not paying wages for two months and firing employees without notice.
And More ALLEGATIONS:
Leased units without informing investors or reporting any generated income
Took deposits on houses in 2020, still not built. Receivership stating now their deposit will not apply when buy since different entity/lender.
“Most of StoryBuilt’s developments are worth less than their secured debt.”
Exposed: The Shocking Collapse of StoryBuilt - How Millions are Vanished Overnight
As Investigations proceed by wide array of regulatory bodies - indiscations point to serious potential for legal violations and misconduct. Rumors around Austin are some will do Jail Time.. ~ Federal Bureau of Investigations, Internal Revenue Service, Securities and Exchange Commission, Texas State Securities Board and Texas Comptroller of Public Accounts currently have ongoing investingations.
The unraveling of Austin-based developer StoryBuilt is a stark reminder of how quickly fortunes can change in the world of commercial real estate. Like any industry it is a draw for Crooks and Commercial Real Estate Syndicaiton is often a popular vehicle. For Storybuilt it’s clear that a mixture of financial mismanagement, regulatory scrutiny, and investment losses contributed to it’s downfall. Here are five critical issues unearthed by investigators, highlighting the alarming incompetence at the heart of StoryBuilt’s operations:
Sloppy Bookkeeping and Documentation: The first nail in the coffin was the discovery of chaotic bookkeeping practices. Projects like "Willa" suffered from such disorganized financial records that determining accurate ownership percentages became a Herculean task. This lack of financial clarity not only jeopardizes investor returns but also reeks of negligence.
Random Deposits and Intercompany Transactions: Funds from lenders and investors were deposited haphazardly, sometimes in the company's main account rather than project-specific ones. This practice of paying project expenses from unrelated accounts, with transactions noted as mere "intercompany activity," suggests a disturbing lack of oversight and accountability.
Poor Documentation and Lack of Approval Processes: The absence of clear documentation and approval for cash transfers and payments underlines a fundamental disregard for basic financial controls. Such practices are not just incompetent; they betray a blatant disrespect for the trust investors place in a developer.
Regulatory Scrutiny and Cooperation with Law Enforcement: The expanding circle of regulators, including the FBI, IRS, and SEC, investigating StoryBuilt underscores the gravity of the company’s missteps.
Loss of Value and Foreclosure Auction: The foreclosure auction of the "Bruno" development for a mere third of its loan value is a glaring example of the financial mismanagement that characterized StoryBuilt's latter days. Allowing a project to be auctioned without protest is tantamount to admitting defeat, leaving lenders to bear the brunt of the loss.
These revelations paint a picture of a company that operated with a reckless disregard for financial integrity, regulatory compliance, and investor trust. The audacity to mismanage funds, obfuscate financial records, and then face the consequences of regulatory scrutiny is not just incompetence; it's a criminal betrayal of every stakeholder involved. In the world of commercial real estate, where every dollar counts and reputations are built on trust and performance, StoryBuilt’s saga serves as a cautionary tale of how not to conduct business.
INVESTORS BEWARE. DO YOUR DUE DILIGENCE. DO NOT BE ENTICED BY LARGE RETURNS.
My question above all - why did all these investors and banks give them money?
Read more by Joe Lovinger, January 3, 2024, at The Real Deal here
SUMMER 2023
The Rise to Prominence
StoryBuilt, formerly known as PSW Real Estate LLC was co-founded in 2001 under the name by Anthony Siela and Ryan Diepenbrock . They primarily functioned as an infill developer and emerged as a key player in the Austin urban development landscape over the past decade. The company specialized in infill projects, crafting mixed-use developments that combined apartments, condos, townhomes, single-family homes, and commercial spaces. These endeavors were not only aimed at fulfilling the housing needs of a rapidly growing city but also contributed to the vibrant transformation of neighborhoods. Along the way they announced a rebrand to StoryBuilt (always a suspect move) and then in 2021 a fresh partnership with Swiss based Partners Group ($119B AUM). The partnership planned for $1B worth of multifamily, residential and mixed used .
With projects like the George condos and Thornton Flats apartments, StoryBuilt left its mark on Austin's South First Street along Bouldin Creek. The company's focus on mixed-use developments aligned well with the city's changing urban fabric, as South First Street underwent a revitalization, witnessing the emergence of new dining, retail, and residential options. Of course, in my back yard of East Austin, a $44 million mixed-use community Project was announced.
Financial Turmoil and Organizational Restructuring
However, beneath the surface of StoryBuilt's outward success, financial challenges were brewing. The company's trajectory took a sudden downturn, leading to a cascade of events that would reshape its operations.
Insight from friends of Beck-Reit. A large National Developer and General Contractor was approached and partner on one of their office buildings in Austin. After 1 discussion and receiving the Pro Forma they ended talks. The Pro Forma showed Office Rent Projected $15 dollars above the highest Leased Comp in the area. A sure sign that projects were not going well or the company simply inflated numbers to get more money and help. Never a good tactic in Commercial Real Estate.
In July 2023, a letter to investors revealed the extent of StoryBuilt's financial struggles. Co-founder Anthony Siela acknowledged issues with focused growth, reporting, financial controls, and liquidity. These factors "materially affected our performance as a business and our partners," Siela wrote.
The letter also disclosed significant leadership changes. Co-founder Ryan Diepenbrock stepped away from day-to-day managerial responsibilities, while Chad Shepler resigned from his role as chief operating officer and a director of StoryBuilt's board. The company's board appointed an oversight committee consisting of shareholders, an independent director, and preferred shareholders to manage operations.
Amid these changes, StoryBuilt decided to furlough a significant portion of its staff. The rationale was to achieve a "vast reduction in headcount" and to focus exclusively on core development services for ongoing projects and partners. This strategy aimed to navigate the financial challenges that had beset the company.
Legal Battles and Construction Controversies
While StoryBuilt was grappling with its financial troubles, legal battles and construction-related controversies added to its challenges. Lawsuits from both investors and residents of the condo communities the company developed shed light on some of the difficulties it faced.
Construction Defects: One lawsuit came from the Eastline Condominium Community, alleging that negligence on StoryBuilt's part resulted in water damage to 28 of the 48 condos in the Eastline development. The lawsuit sought over $1 million in damages, highlighting construction-related issues and potential oversights.
Investor Disputes: StoryBuilt faced legal action from investors who claimed they were owed money. Capscar LLC filed a lawsuit alleging breach of contract, fraud, and other violations, seeking over $399,000 in damages. Another investor, Joseph Thweatt, filed a lawsuit alleging breach of contract and fraud related to a settlement. These lawsuits underscored the complexity of the financial challenges StoryBuilt was confronting.
TROUBLE WAS BREWING - WALKED BY Thier BANK
Another source close to Beck-Reit disclosed a Bank in Austin “walked” StoryBuilt several years ago. The bank abruptly closed their accounts & canceled their loans. Typically happens due to various reasons, like risk assessment or regulatory compliance.
The Receivership Decision
As StoryBuilt's financial situation worsened, the company made a strategic decision to enter voluntary receivership. This step was taken to address the deep financial issues and provide a mechanism for the company to restructure. In a receivership, an independent receiver is appointed by the court to manage the business's affairs, aiming to assist creditors in recovering funds and potentially avoiding bankruptcy.
StoryBuilt's statement regarding the receivership emphasized the company's commitment to stabilizing operations and navigating the financial landscape. The move was seen as an effort to maximize potential recovery for all stakeholders, including shareholders, customers, and creditors. Following the receiver's preliminary evaluation, it was communicated that an urgent infusion of $2.5 million was essential from investors to avert a potential financial disaster. StoryBuilt's situation rapidly deteriorated.
Just one month into the receivership, it was declared that their extensive $2 billion development portfolio, encompassing 28 projects—17 located in Austin—would be divested. This development caught Partner’s Group, StoryBuilt’s primary financier, completely off guard.
The Future of StoryBuilt and Its Communities
As StoryBuilt undergoes receivership and works through its financial challenges, questions linger about the fate of its ongoing projects and the communities it has under construction. The company's ambitious plans to develop condos and office space in communities like Ellie May raise uncertainty, especially given the partially cleared construction sites and unfinished residences.
UPDATE : After the receivers initial assessment, he stated that investors needed to pitch in $2.5M immediately or risk “financial Armageddon.” StoryBuilt continued to unravel at a manic pace.
Within 1 month of receivership Storybuilt announced they would offload their $2B development portfolio which included 28 developments, 17 of which were in Austin. Partner’s Group (StoryBuilt’s largest financial backer) claimed to be blindsided by the news of the sale.
AND INTO 2024
6 months after entering receivership, the web of StoryBuilt continued to unravel. The receiver accused them of “egregious mismanagement” and “inexplicable” accounting. Most of StoryBuilt’s developments are worth less than their secured debt.
The receiver alleged the StoryBuilt borrowed $3 million+ from hard-money lenders at rates above 280%.
Welcome to the present. In an unsurprising move, top StoryBuilt executives have been sued (former CEO Anthony Siela, former CFO Ryan Diepenbrock and former COO Chad Shepler) for severe mismanagement and “abdicating their duty of care and loyalty”. So what’s next for StoryBuilt? A single buyer has not been found for their entire portfolio so developments are being sold individually. A few buyers are Stillwater Capital and D.R. Horton subsidiary Forestar Group who picked a 4.5-acre property in Dallas. Many still have more questions than answers: employees, individual buyers and investors all of whom were misled and whose funds have seemingly vanished.
Conclusion: Lessons from StoryBuilt's Journey
The saga of StoryBuilt serves as a reminder of the volatile nature of the real estate development industry. The company's rise and subsequent fall underscore the importance of prudent financial management, transparent communication with investors, and rigorous quality control in construction projects. The legal battles and receivership decisions highlight the potential consequences of financial mismanagement and the complexities of navigating such challenges.
As StoryBuilt navigates its way through receivership and attempts to reshape its future, its journey offers valuable lessons for developers, investors, and industry stakeholders alike. The tale of StoryBuilt serves as a cautionary tale about the delicate balance between ambitious urban development, financial sustainability, and ethical responsibility in a rapidly evolving cityscape.
East Austin- Elie May Project Abandoned - Crane Taken Down
Ellie May- 755 Springdale Road - August 1, 2023
Ellie May- 755 Springdale Road, Austin, TX 78702
Why would a company choose Receivership over Bankruptcy?
A company might choose receivership over bankruptcy for several reasons, as each option offers different advantages and outcomes based on the specific circumstances of the business and its financial distress. Here are some reasons why a company might opt for receivership:
**Preservation of Business Operations:** In receivership, the appointed receiver typically aims to continue or restore the company's operations, provided it is financially viable. This can be particularly beneficial if the business's core operations still have the potential to generate revenue and eventually recover.
**Stakeholder Control:** In receivership, the company's existing management team may retain some control over the business's operations, albeit under the supervision of the receiver. This can be appealing to business owners who want to maintain a level of involvement in managing the company's affairs.
**Flexibility:** Receivership allows for more flexibility in terms of restructuring the business, negotiating with creditors, and potentially reaching agreements outside of a formal bankruptcy process. This flexibility can be advantageous when there's a possibility of reaching consensual solutions with stakeholders.
**Asset Management:** Receivers are appointed to manage and protect the company's assets, which can help in maximizing the value of those assets. This can be particularly relevant if the company has valuable assets that could be sold or utilized to repay creditors.
**Avoiding Bankruptcy Stigma:** Bankruptcy can carry a negative stigma that may affect a company's reputation and relationships with customers, suppliers, and partners. Opting for receivership might help the company avoid some of the negative perceptions associated with a formal bankruptcy filing.
**Less Disruption:** Bankruptcy can be a more complex and lengthy process, involving more stringent legal requirements and court oversight. Receivership, while still subject to court oversight, might be seen as a less disruptive and faster alternative for resolving financial issues.
**Customized Solutions:** Receivership provides more room for tailoring solutions to the specific needs and circumstances of the business, as opposed to adhering to the standardized procedures and rules of bankruptcy.
More info per Austin Business Journal article from January 2022:
“StoryBuilt now operates in Austin, Dallas, San Antonio, Seattle and Denver, with more than 40 communities under its belt. The recent $1 billion joint venture with Swiss private market investor Partners Group AG will help develop 17 projects across the country, six of which will be in Austin. The partnership was the company’s first joint venture of that scale.
The most recent partnership (as of Jan 2022), with California-based IHP Capital Partners, will channel $44 million toward developing the Ellie May mixed-use community, which will bring 84 condos as well as office and restaurant space to East Austin. The joint venture helped purchase the land, which formerly housed Springdale Farms. The developer expects to break ground in the second quarter.
The company has grown into one of the top homebuilders in the area. It closed a $7 million funding round in 2020, led by California-based investor Hearthstone. StoryBuilt sold $28 million worth of housing in 2020, according to Austin Business Journal’s data on volume homebuilders.”
Storybuilt “Coming Soon” Projects
ARE THEY ABANDONED? What comes next?
Austin
Bruno- 2001 S 1st St, Austin, TX 78704
Charley-1907 Webberville Rd, Austin, TX 7872
Dallas
Goose- 9601 White Rock Trail, Dallas, TX 75238
Jolene- 507 W Commerce St, Dallas, TX 75208
Ruby- 1690 I Avenue, Plano, TX 75074
Denver
Archie-2137 Glenarm Place, Denver, CO 80205
Ozzie- 4190 W Colfax Ave, Denver, CO 80204
Judy-5785 W 38th Avenue, Wheat Ridge, CO 80212
Seattle
Scout- 1321 North 185th St, Shoreline WA, 98133
Callie-6308 41st Ave SW, Seattle, WA 98136
Stanley-6600 Carleton Ave S, Seattle, WA 98108
Josephine- 5250 Rainier Ave South, Seattle, WA 98118
Sumie-2123 18th Ave S, Seattle, WA 98144
RECAP
In April '19: StoryBuilt (legally PSW Real Estate, co-founders Ryan Diepenbrock, Anthony Siela) announces it's looking to raise equity.
Claims '18 revenues at $113M (up from $71M in '17)
Oct '20: Gets $7M eq infusion from Hearthstone (Mark Porath)
Dec '21: Lands investor Partners Group AG and declares a $1B JV
Fall '22: The Swiss drop neutrality, allegedly stop funding the developer (per class-action suit)
Spring '23: StoryBuilt COO Chad Shepler uses Teams () to tell staffers payroll will be delayed; furloughs employees
Summer '23: Announces restructuring, co-founder Diepenbrock out, Shepler out, oversight committee comes in.
Fall '23: selling portfolio, brokers getting cute w valuations