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Some investors suicidal following firm’s default

November 25th, 2009, 1:00 pm · 25 Comments · posted by Jeff Collins

ppa-logo4Suspension of a real estate firm’s monthly payments to its investors has hit some of them hard, a fellow investor said.

Many have had to move out of their homes and now live with relatives. Some are eating less to save money. A few are suicidal.

Jim Brawner of San Diego is one of 674 people who have invested with Irvine-based Pacific Property Assets. After investing an undisclosed sum in that firm’s new Opportunity Fund, he served until recently as chairman of a creditor’s committee in bankruptcy court.

Some investors questioned PPA’s fund-raising practices, saying that PPA was soliciting cash up to two weeks before it ended up defaulting on $500,000 in monthly interest payments.

Letters soliciting investments in the company’s Opportunity Fund were issued in January, stating that because of the credit crunch, sales of commercial properties have plummeted.

“For the lucky few buyers that are able to buy properties now, the result is extremely favorable pricing,” the letter said.

Investors would receive 12% in interest if collecting payments monthly and 15% if collecting interest annually.

As an added incentive to invest, the firm offered to pay double interest through June — 24% to 30% — to anyone who made a deposit by April 30.

Company officials maintain that they had no idea they were headed for default and bankruptcy at the time they raised $7 million for its Opportunity Fund, which hasn’t made any of the intended investments.

Brawner said many investors believe that PPA knew it faced default even as it raised cash, although no one has proof that they did.

About 70% of the investors are over age 60, Brawner said. Many depended on the monthly interest check for their daily expenses.

“I know people who are eating less, living in relatives’ back rooms (and are) contemplating suicide,” he said.

PPA CEO Michael Stewart said there’s a very good chance investors will get their money back — if the company can just hold onto its assets until the market bounces back.

Brawner, the creditor’s committee past chairman, agreed, saying that may be the only hope for investors.

“We’re working very hard to restructure a company so that years from now, … there’s something of value there,” he said. “What we’re trying to do is protect the majority of their money.”

(Update: Brawner no longer is the chairman of the PPA creditor’s committee, although he continues to serve on that committee. This post has been updated to reflect that change.)

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 25 Comments

  • shockg says:
    November 25, 2009 at 1 pm

    The bears are also suicidal because prices are not cooperating with their agenda.

    • SC2 says:
      November 25, 2009 at 2 pm

      shockg’s comments irrelevant once again.

      People who didn’t buy into RE when fools did saved lots of $ and have lots of cash (and are alive and doing very well) in contrast to those committing suicide b/c RE investments are so bad or resorting to desperate measures.

    • stfu_shockg says:
      November 25, 2009 at 2 pm

      Realturds are suicidal because the only job skills they posses is flipping burgers.

    • ed says:
      November 25, 2009 at 4 pm

      schockg

      This may come as a surprise to you but I don’t feel bad about not buying a home since 2004. Case Schiller said that the price of homes dropped almost 10% last year, YOY and I haven’t lost a dime from my CD’S. My rent went down $261 a month but I think that I can live with that.

      • shockg says:
        November 25, 2009 at 5 pm

        I bet you feel bad about not buying a home in 2009! And guess what….Case Schiller reported that prices are going up this year. Always living in the past.

        • ishdakuteb says:
          November 25, 2009 at 7 pm

          ed! i am on the same boat with you though… i have put all of my money in a long term CD accounts. however, i still have 5% interest :) paid interest is good enough to rent an apartment. how much is yours interest rate? hope it is not low… however, if rate is still low when in grace, then i will put all of them back into savings again and wait for another high interest rate to put back in… but it is not now ’cause i signed long term agreements…

  • Linguistical says:
    November 25, 2009 at 1 pm

    suckg is suicidal because nobody cares about him.

  • pink_ponies_for_investors! says:
    November 25, 2009 at 1 pm

    “I know people who are eating less, living in relatives’ back rooms (and are) contemplating suicide”

    Bail out!!! Cash for infestors!!! We need to make losing money illegal!!!

  • rants says:
    November 25, 2009 at 1 pm

    dang, gotta go now - my time on the public library computer is up

  • Josh says:
    November 25, 2009 at 2 pm

    Fortunately, the law allows these unregistered investments to be sold only to so-called “sophisticated” investors. Sophisticated is defined as “having a lot of money”, and nothing else. I think the phrase “more dollars than sense” describes the target for these investment pitches.

    Anyway, if you want to be a slumlord, the best way to do it is firsthand.

  • SoCo Dave says:
    November 25, 2009 at 2 pm

    “As an added incentive to invest, the firm offered to pay double interest through June — 24% to 30% — to anyone who made a deposit by April 30.” P.T. Barnum was right.

    • wheresthebeef says:
      November 25, 2009 at 4 pm

      Anything that has a guaranteed 30% return is a Ponzi scheme…plain and simple. I guess people will always be greedy!

  • LGT says:
    November 25, 2009 at 2 pm

    Wah wah wah.

  • bobbyc says:
    November 25, 2009 at 2 pm

    I made over $2,000.00 in interest this year on my FDIC protected savings account!

  • Troy says:
    November 25, 2009 at 3 pm

    These people had every dime they owned invested in this one commercial RE firm? They were invested so heavily in this one firm that just by stopping interest payments for a few months has forced them out of house and home and driven them to the brink of suicide and reduced food intake? They were literally living interest paycheck to interest paycheck from this one Irvine RE firm?

    If that is truly the case, these people are horribly uneducated investors who don’t deserve much pity from anyone with more than a 10th grade education. In short…. WHAT WERE THEY THINKING???

    Not to mention that Commercial Real Estate is heading off the cliff in 2010, and that market is not “coming back” any time soon.

  • ocobserver says:
    November 25, 2009 at 4 pm

    Sorry. That is the risk of participating in capitalism. You want the big returns??? Then you take the big risks. If you didn’t understand the risks then that’s your mistake. Maybe you will be wiser next time around. But don’t blame anyone else. No one else forced you to invest with PPA. If they did you should have contacted the police a long time ago. Too late now. The money’s gone. You developed a relationship with crooks. Do you due diligence next time. Sorry.

  • Gunner says:
    November 25, 2009 at 8 pm

    I have this great investing opportunity that will pay 18%!!! Anybody want in? Come on…I know there is at least 674 of you out there.

  • robert says:
    November 25, 2009 at 10 pm

    like i feel sorry for these poeple? liquidate the firm, give back as much as possible and move on. i have my own high performing investing schedual to worry about, and my life for that matter.

  • meltdown says:
    November 25, 2009 at 10 pm

    so they went ‘all-in’ on RE.

    There are deals out there. The problem is, not everything is a deal. You can say that those that got in the last few months got caught trying to catch that falling knife. yikes.

    Looks like someone fell for the, ‘Now’s the time to buy’ pitch.

    btw,,. anyone dabble a little on that gold breakout at 1000? I say sell at 1200 and take some profits.

    Happy Thanksgiving!

  • Manassas VA Homes says:
    November 26, 2009 at 9 am

    “They higher the return… the higher the risk” I guess everyone just forgot this. Oh well, that is a problem with greed. A little is not enough.

  • Meta says:
    November 29, 2009 at 8 pm

    My parents came to this country as teenage immigrants from Eastern Europe during WWII. I remember sitting around the very frugal dinner table and my dad talking about residential real estate as an investment. I did not understand at the time, but now I realize that he was never greedy, just made smart decisions for his and our future. Very proud of him today. Sure some of the property values have decreased, but he has positive rent flow. I screen all prospective tenants to make sure they are capable of paying rent and bills. Keep it in the family people!! If something sounds to good to be true….well, you know the ending.

  • Liar Loan says:
    December 1, 2009 at 11 am

    OC real estate has returned an annualized 50% this year. Too bad they didn’t have the foresight to buy in earlier this year.

  • shockg says:
    November 25, 2009 at 6 pm

    Maybe SC2 can help clean you.