Property investors recruited by a Springfield-based company that pitched a big-time payoff from low-risk investments are speaking out now that those deals have gone south and their personal credit is on the line.
Greenleaf Cos. LLC, sister company to The Real Estate Co., is in financial straits, and jilted investors want to know why the company failed to remit payments collected from third-party tenants living in the Springfield-area homes the investors own.
Investors enlisted at Greenleaf seminars in Missouri and other states, including Iowa, Virginia and Colorado, agreed to obtain mortgage loans for newly constructed homes in subdivisions in southwest Missouri and northwest Arkansas. The homes were then marketed to third-party buyers with poor credit who agreed to make monthly payments to Greenleaf, which, in turn, cut checks to investors to cover the mortgages.
But earlier this year, dozens of investors stopped receiving checks from Greenleaf - which is not affiliated with Springfield-based Greenleaf Marketing - when the company diverted money for bills and business-related expenses.
Some investors have dug into their pockets to make the mortgage payments and protect their credit, while others were left no choice but to default on the loans, prompting lenders to foreclose.
Greenleaf President Scott Dasal said the company doesn't intend to close its doors.
"Our intention's to honor the contracts," he said. "When you can't send somebody a check and you owe them money, that's not a fun thing but facing it is important. I understand their frustration. ... Nothing is going to change their frustration other than our success."
But investors who spoke with Springfield Business Journal were skeptical of Dasal's promise, given the company's cash flow problems and record of ignoring inquiries.
"If they told me that they'd pay off my mortgages right now, I'd say, 'Yeah right. Let me see the cash,'" said Iowa investor Barry Speidel, who, with wife Tammy, owns five properties - four in Missouri and one in Arkansas - in various stages of foreclosure.
Investors baffled
The Speidels stood to make more than $50,000 on the properties they owned as Greenleaf investors, and the couple had hoped to put the money toward a college fund for their teenage son.
In most cases, Greenleaf agrees to pay investors $10,000 per property when a third-party buyer refinances after two to three years of making interest-only payments, Dasal said. If a buyer is unable to obtain a conventional loan, Greenleaf takes over the mortgage payments for the investor.
Company officials said investors signed "private placement memorandums" that transferred equitable title to Greenleaf and explained the risks associated with the investment. In executing the memos, Greenleaf created several limited liability companies to meet Securities and Exchange Commission regulations governing the sale of securities to "unaccredited" investors.
Dasal said Greenleaf officials were honest with investors who asked what would happen if the company went under.
"What's the worst-case scenario? Greenleaf goes out of business, and you own a house," he said, reciting the standard response.
But Greenleaf didn't go belly up; it just abruptly stopped paying investors, though Dasal said the company previously made payments to investors even when their homes were unoccupied. Both the Speidels and Nigel Allen, a Greenleaf investor in Virginia, stopped receiving checks from the company without explanation in April.
Allen, a U.S. Army property book officer stationed at Fort Eustis, has used his personal savings to keep three properties - one in Nixa and two in Arkansas - from foreclosure. But at $6,000 a month, he said he can no longer sustain the mortgage payments.
"My credit is about to get ruined," he said. "I don't really care about the $20,000 (fee per property)."
Barry Speidel said he and his wife simply could not absorb the mortgage payments on the properties they bought. The couple was forced to file for personal bankruptcy protection in October.
The aftermath
The securities division of the Missouri secretary of state's office is investigating Greenleaf in response to complaints from investors, according to department spokesman Ryan Hobart. Hobart said Greenleaf has filed the required SEC exemption notices that allow the company to sell securities without registering with the secretary of state's office.
Dasal said Greenleaf is keeping investors posted on the company's new direction, which involves joint investment ventures in real estate projects throughout the country. He said the company sends out e-mail updates twice a week to investors and has held seven conference calls. Both Allen and Speidel said the calls, which don't allow investors to interact with company officials, aren't encouraging.
"You could listen and that's all you could do," Speidel said. "You had no input whatsoever."
Dasal said he understands why investors are fed up, but he pleaded with them to sit tight until the company taps into new revenue streams. "Every waking and sleeping moment of my life is spent solving this problem," he said, noting that family members and friends also are investors.
One option for investors who haven't received payment from Greenleaf is to cancel their contracts with the company and assume management of the property or properties they own, Dasal said.
"We're more than willing to do that, and that has been done," Dasal said.
Speidel said investors are faced with a range of unattractive options when Greenleaf fails to keep its end of the bargain. Trying to sell the homes amid the economic slump was a losing proposition, so the Speidels sacrificed their credit.
"We had excellent credit, but now we don't have credit worth a darn," Speidel said, recalling the sales pitch from Greenleaf officials. "I loved the way it sounded, but it turned around to bite us in the backside."
