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.
StoryBuilts Rise to Fame to Recievership in the Summer of 2023
NOVEMBER 2024
Legal Actions against StoryBuilt's former executives
CEO Anthony V. Siela - CFO J. Ryan Diepenbrock - COO Chad Alan Shepler
In early 2024, the Stapleton Group, acting as the court-appointed receiver for StoryBuilt, filed a lawsuit against the company's former executives—CEO Anthony V. Siela, CFO J. Ryan Diepenbrock, and COO Chad Alan Shepler—alleging severe mismanagement and misuse of investor funds. The key allegations include:
Misapplication of Investor Funds: Approximately $6.7 million was raised from investors to acquire a property referred to as "Dayton." However, the property was never purchased; instead, the funds were commingled with other accounts and used for unrelated expenses. A minimal portion was spent on due diligence and legal fees for unrelated projects, with no funds returned to investors.
Acceptance of Unaccredited Investors: Between 2019 and 2022, investments were accepted from 320 unaccredited investors, contrary to regulations requiring verification of accredited status.
Financial Mismanagement in Joint Ventures: Funds designated for specific projects were misallocated. For instance, $478,000 intended for the Ellie May Condominiums in Austin was diverted to cover costs at an adjacent property, resulting in mechanics liens against the project.
Negligence in Project Oversight: The George project in Austin experienced budget overruns amounting to millions, significant delays, and misdirection of over $1.5 million in buyer deposits and $1.2 million in construction loans, necessitating third-party intervention.
Failure to Maintain Financial Integrity: Violations of operating agreements, filing of incorrect tax returns, and failure to produce accurate financial statements obscured the company's true financial health.
These allegations have drawn the attention of federal and state agencies, including the FBI, IRS, SEC, and the Texas State Securities Board, all of which are investigating StoryBuilt's operations.
Potential Legal Consequences if Convicted
If convicted of offenses such as misapplication of fiduciary property and securities fraud, the former executives could face severe penalties under Texas law:
Misapplication of Fiduciary Property: Under Texas Penal Code §32.45, this offense ranges from a Class C misdemeanor to a first-degree felony, depending on the value misapplied. For example, misapplication involving $300,000 or more constitutes a first-degree felony, punishable by 5 to 99 years in prison and a fine of up to $10,000.
Securities Fraud: Convictions can lead to both criminal and civil penalties, including imprisonment, fines, and restitution to victims. The severity depends on factors such as the amount defrauded and the number of victims involved.
Additionally, the executives may face civil lawsuits from investors seeking compensation for losses, potentially resulting in substantial financial liabilities.
The legal proceedings are ongoing, and the outcomes will determine the specific consequences for the individuals involved.
October 2024
Explosive Lawsuit Exposes Greed and Deception: StoryBuilt Co-founder Accuses Receivership of Crushing $2 Billion Revival Dreams
In a startling turn of events, the saga of StoryBuilt's collapse takes a new twist as co-founder Ryan Diepenbrock files a lawsuit against the Stapleton Group, the firm overseeing the troubled developer’s receivership. The lawsuit alleges that Stapleton Group not only thwarted efforts to save the company but also prioritized its own financial gain over the interests of investors and the company’s future.
Key Allegations in the Lawsuit:
Recapitalization Interference: Diepenbrock accuses Stapleton of blocking his attempts to recapitalize StoryBuilt’s portfolio, crucial actions that could have potentially saved the company from its financial woes.
Asset Mismanagement: The suit claims that once Stapleton was brought on board, they mismanaged StoryBuilt's assets and misled investors about their intentions, focusing on extracting high fees instead of stabilizing the company.
Conflict of Interest and Self-Serving Tactics: The lawsuit details how Stapleton proposed itself as the receiver and maneuvered to push Diepenbrock out, replacing him with a new executive committee to cement its control.
Financial Missteps Highlighted:
Excessive Fees: Shortly after taking over, Stapleton allegedly planned to charge $1.1 million in professional expenses over just 13 weeks, consuming over 40% of the funds it requested from investors.
Destructive Decisions: The lawsuit also points to a specific case where Stapleton’s mismanagement led to the foreclosure of the Charley project at 1907 Webberville Road in East Austin, resulting in significant losses for investors.
Broader Implications:
Lack of Transparency: Diepenbrock’s claims suggest that Stapleton hid significant financial maneuvers from investors, including a potential recapitalization deal with Global Mutual Properties that could have provided a lifeline to StoryBuilt.
Regulatory Scrutiny: As the receivership unfolds, Stapleton’s actions are under the microscope, with multiple federal and state agencies involved, indicating the serious nature of the allegations against them.
This lawsuit sheds light on the complex and often murky world of corporate restructuring and raises serious questions about the practices of entities appointed to rescue failing companies. As this case progresses, it will undoubtedly influence how receiverships are perceived and managed in the real estate development industry, particularly in high-stakes environments like Austin’s booming market.
As an expert in commercial real estate, my advice to investors is to remain vigilant and informed. The unfolding StoryBuilt controversy serves as a cautionary tale about the potential pitfalls in real estate investments and the importance of transparency and integrity in financial dealings. Keep an eye on this space for further updates as we continue to track this significant development.
May 2024
LEGAL Problems FOR STORYBUILT
, the receivership of Austin-based developer StoryBuilt, led by receiver Mike Bergthold of the Stapleton Group, entered a pivotal phase. The process, initiated to address the company's financial turmoil, has involved asset liquidation, legal actions, and efforts to repay creditors—a process expected to span several years.
Key Developments:
Asset Liquidation Efforts: The receivership has focused on selling StoryBuilt's real estate assets, once valued at $2 billion. This includes properties such as the Frank development at 900 South First Street in Austin, which faced foreclosure on its commercial segment.
Legal Actions Against Former Executives: A lawsuit was filed against StoryBuilt's former principals—Anthony Siela, Ryan Diepenbrock, and Chad Shepler—alleging "egregious mismanagement" and misuse of investor funds. The accused have denied these charges, emphasizing that most developments were joint ventures with institutional firms.
Property Sales and Construction Resumption: The receiver filed a motion to sell the Charley development at 1907 Webberville Road in Austin, anticipating proceeds of "several million dollars." Construction has also resumed on two Austin projects: Lucy at 3412 Pennsylvania Avenue and North Bluff at 813 North Bluff Drive.
Foreclosure of the Bruno Project: The Bruno development at 2001 South First Street in Austin was foreclosed upon by Moody National Bank. The property, intended as a 42-unit rental project, was auctioned for $3.2 million, significantly less than the $9.5 million loaned for its development.
Ongoing Investigations: The receiver is cooperating with multiple agencies, including the FBI, IRS, SEC, and Texas State Securities Board, indicating extensive investigations into StoryBuilt's operations.
CIVIL LAWSUITS
In addition to the lawsuit filed by the Stapleton Group against StoryBuilt's former executives—CEO Anthony V. Siela, CFO J. Ryan Diepenbrock, and COO Chad Alan Shepler—alleging severe mismanagement and misuse of investor funds, the company has faced multiple civil lawsuits from investors and condominium associations. These legal actions have further illuminated the financial challenges and operational issues within the company.
Notable Civil Lawsuits:
Eastline Condominium Community Inc. v. StoryBuilt (January 2023):
Plaintiff: Eastline Condominium Community Inc., managing an Austin condominium complex.
Allegations: The association discovered water damage in 28 units, attributing it to construction defects and negligence by StoryBuilt.
Relief Sought: Over $1 million in damages, including interest, attorney fees, and court costs.
Outcome: As of the latest reports, the case is ongoing, with no final judgment rendered.
Joseph Thweatt v. StoryBuilt Co-Founders (Date Not Specified):
Plaintiff: Joseph Thweatt, a Class A shareholder in StoryBuilt.
Allegations: Breach of contract and fraud related to a March 2022 settlement, accusing the co-founders of failing to uphold agreed-upon terms and misrepresenting financial information.
Relief Sought: Specific damages are unspecified, but the plaintiff seeks compensation for financial losses incurred due to the alleged misconduct.
Outcome: The lawsuit is pending, with proceedings ongoing.
Partners Group v. StoryBuilt (October 2023):
Plaintiff: Partners Group, a Swiss investment firm that invested in 17 StoryBuilt projects.
Allegations: The firm claimed it was blindsided by an announcement that StoryBuilt would sell its assets, asserting that the properties were joint ventures and not wholly owned by StoryBuilt.
Relief Sought: Clarification of ownership rights and prevention of unauthorized asset sales.
Outcome: The court's decision is pending, with ongoing legal discussions.
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.
“StoryBuilt borrowed $3 million+ from hard-money lenders at ”
NOVEMEBR 2024
In November 2024, Houston-based Radom Capital expanded into the Austin market by acquiring the retail portion and two levels of underground parking of the Willa mixed-use condominium development, located at 1600 South First Street. This acquisition followed the property's foreclosure by its senior lender, Guaranty Bank & Trust. The purchase price was not disclosed.
About Willa
Completed in 2020, Willa comprises 59 residential condominiums and approximately 25,000 square feet of ground-floor retail space. Radom Capital's acquisition includes only the retail component and the subterranean parking, leaving the residential units unaffected. The retail space is fully leased to a diverse mix of tenants, including:
Dish Society: A farm-to-table restaurant offering locally sourced dishes.
Underdog: A popular eatery known for its innovative menu.
Blue Suede: A retailer specializing in fashion and accessories.
Ulu Recovery & Wellness: A wellness center providing recovery therapies.
Method Pilates: A fitness studio focusing on Pilates classes.
Glint Dental: A dental practice offering comprehensive services.
Additionally, the property houses offices for BSA LifeStructures and Code D’Azur.
Radom Capital's Expansion
This acquisition marks Radom Capital's entry into the Austin market. The firm, recognized for its mixed-use developments, plans to enhance the property's signage and lighting to attract more customers. Founder and Managing Principal Steve Radom expressed personal fulfillment in investing in Austin, a city where he spent over seven years attending the University of Texas for both undergraduate and law school.
StoryBuilt's Financial Challenges
The sale of Willa's retail portion is part of a broader trend involving StoryBuilt's assets amid financial difficulties. Earlier, in April 2024, the incomplete Bruno project at 2001 South First Street was foreclosed upon by Moody National Bank. StoryBuilt, legally known as PSW Real Estate LLC, has been in receivership for over a year, facing lawsuits from investors and condominium owners. The U.S. District Court of Travis County appointed Los Angeles-based Stapleton Group as the receiver to manage the company's financial restructuring, a process that could extend for several years.
MAY 2024
In May 2024, the receivership of Austin-based developer StoryBuilt, led by receiver Mike Bergthold of the Stapleton Group, entered a pivotal phase. The process, initiated to address the company's financial turmoil, has involved asset liquidation, legal actions, and efforts to repay creditors—a process expected to span several years.
Key Developments:
Asset Liquidation Efforts: The receivership has focused on selling StoryBuilt's real estate assets, once valued at $2 billion. This includes properties such as the Frank development at 900 South First Street in Austin, which faced foreclosure on its commercial segment.
Legal Actions Against Former Executives: A lawsuit was filed against StoryBuilt's former principals—Anthony Siela, Ryan Diepenbrock, and Chad Shepler—alleging "egregious mismanagement" and misuse of investor funds. The accused have denied these charges, emphasizing that most developments were joint ventures with institutional firms.
Property Sales and Construction Resumption: The receiver filed a motion to sell the Charley development at 1907 Webberville Road in Austin, anticipating proceeds of "several million dollars." Construction has also resumed on two Austin projects: Lucy at 3412 Pennsylvania Avenue and North Bluff at 813 North Bluff Drive.
Foreclosure of the Bruno Project: The Bruno development at 2001 South First Street in Austin was foreclosed upon by Moody National Bank. The property, intended as a 42-unit rental project, was auctioned for $3.2 million, significantly less than the $9.5 million loaned for its development.
Ongoing Investigations: The receiver is cooperating with multiple agencies, including the FBI, IRS, SEC, and Texas State Securities Board, indicating extensive investigations into StoryBuilt's operations.
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.
MARCH 2024
$4.5 Million in Loses on Winston townhome project in Seattle
In March 2024, further allegations emerged against StoryBuilt, revealing significant financial mismanagement and misuse of investor funds. A forensic accounting investigation uncovered that the company diverted funds designated for specific projects to pay returns on unrelated developments. Notably, StoryBuilt incurred approximately $4.5 million in losses on the Winston townhome project in Seattle. Despite these losses, the company paid limited partners a 35% return, potentially using funds raised for a separate Denver project to cover these payments.
Key Findings:
Misallocation of Funds: StoryBuilt raised over $6 million for a Denver project in late June 2022. During the same period, the company disbursed $4.3 million to limited partners of the Seattle project, despite having sold only $3.5 million worth of townhomes at that time. This suggests that funds from the Denver project were used to pay returns to Seattle investors.
Inflated Returns: The company provided a 35% return to investors of the Winston project, even though the project suffered substantial financial losses. This raises concerns about the legitimacy and sustainability of such high returns in the face of project underperformance.
Commingling of Investor Funds: The forensic analysis indicated that StoryBuilt blended funds across various projects without proper accounting, leading to a lack of transparency and potential breaches of fiduciary duty.
Violation of Operating Agreements: The company's actions contravened established operating agreements, undermining investor trust and exposing the company to legal liabilities.
Inaccurate Financial Reporting: StoryBuilt failed to produce accurate financial statements, complicating efforts to assess the company's true financial health and hindering stakeholders' ability to make informed decisions.
These revelations have intensified scrutiny of StoryBuilt's financial practices, prompting legal actions and regulatory investigations to address the alleged misconduct.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.”
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In October 2023, the court-appointed receiver for StoryBuilt, Los Angeles-based Stapleton Group, announced plans to sell 28 of the developer's properties, aiming to recover funds for investors and creditors. This move has sparked significant legal disputes, particularly involving Partners Group, a Swiss investment firm, and the Craddick family of Texas.
Partners Group's Objections
Partners Group, which invested in 17 StoryBuilt projects across Austin, Dallas, Denver, and Seattle, expressed strong objections to the receiver's announcement. The firm, managing $142 billion in assets, claimed it was not consulted prior to the October 9 press release about the asset sale. Partners Group argued that the announcement misleadingly suggested that the properties were wholly owned by StoryBuilt, whereas they are actually joint ventures requiring Partners Group's consent for any sale. The firm has invested at least $180 million in these developments.
The press release, picked up by over twenty publications, caused substantial confusion in the market. Partners Group received numerous inquiries from potential buyers and concerned investors, prompting the firm to demand a retraction clarifying that StoryBuilt was only selling its minority interests in the joint ventures, not the actual real estate assets. Additionally, Partners Group emphasized that, according to the joint venture agreements, StoryBuilt's membership interests cannot be sold without its consent.
Craddick Family's Concerns
Simultaneously, the Craddick family—former Texas House Speaker Tom Craddick, his son Tommy, and daughter Christi, chair of the Texas Railroad Commission—raised issues regarding a planned sale of a StoryBuilt property in Dallas. The family had facilitated a $10.7 million deal with Stillwater Capital Investments for a 36-home single-family development at 9601 White Rock Trail, known as "Project Goose." This agreement required the Craddicks and another investor to roll over approximately $4 million of their existing investment into the new development.
However, the receiver's plan to withhold proceeds from asset sales during a forensic accounting review threatens this arrangement. Without immediate access to their funds upon closing, the investors cannot reinvest in the project, potentially causing Stillwater to withdraw from the deal. The Craddicks expressed frustration, stating that the receiver's actions have delayed the sale and increased costs due to additional fees and expenses.
Receiver's Position
The Stapleton Group, overseeing the receivership, has reported discovering financial irregularities within StoryBuilt, including the misuse of funds designated for specific projects. The receiver is conducting a forensic accounting analysis to address these issues and has indicated that proceeds from asset sales will be held until this analysis is complete. This approach aims to ensure an equitable distribution of funds among all stakeholders.
Ongoing Legal Proceedings
These disputes have led to ongoing legal proceedings, with the next court hearing scheduled for November 16. The outcomes of these cases will significantly impact the resolution of StoryBuilt's financial challenges and the recovery of investments for all parties involved.
The situation remains complex, with multiple stakeholders asserting their rights and interests. The resolution of these disputes will play a crucial role in determining the future of StoryBuilt's assets and the financial recovery of its investors and creditors.
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