Tuesday, December 10, 2019
Dec. 10, 2019

Linkedin Pinterest

Details emerge in update on Vancouver-based American Equities

Financial report gives investors more information about defunct mortgage investment funds

By , Columbian business reporter
Published: September 30, 2019, 6:48pm
2 Photos
The American Equities office at 4225 Northeast St. James Road in Vancouver, as seen Monday afternoon. (Amanda Cowan/The Columbian)
The American Equities office at 4225 Northeast St. James Road in Vancouver, as seen Monday afternoon. (Amanda Cowan/The Columbian) Photo Gallery

This story has been updated to correct the listed time of an investor meeting on Wednesday. The meeting is from 10 a.m. to noon.

Financial consulting firm Hamstreet and Associates delivered its second update earlier this month to investors in a series of defunct mortgage investment funds run by Vancouver-based American Equities.

Like the last update, this one did not offer much in the way of good news for investors, but it did provide a more detailed breakdown of some of the funds’ assets and expected recovery amounts. It also touched on the issue of who could face liability for mismanagement of the funds.

Hamstreet reported that it has received a large amount of investor feedback with concerns about the cost and slow pace of the receivership, but the company stated that the process is necessarily careful and deliberate.

“A situation rife with mismanagement that brewed for more than 15 years and that has now become subject to a cumbersome legal process cannot be responsibly sorted out by anybody without considerable time and expense,” Hamstreet wrote.

It’s been about four months since the investors were first notified that 15 mortgage investment funds managed by American Equities had become insolvent and placed into receivership with Clyde Hamstreet’s Portland-based firm that specializes in managing financial crisis, under the direction of the Clark County Superior Court.

A preliminary estimate showed that the funds’ collective assets were about $34 million against about $77 million in liabilities. The funds collectively had about 250 investors, a majority of whom appeared to be from the Portland area or Southwest Washington. Several investors who previously spoke to The Columbian said the investments represented a significant portion of their retirement savings.

Hamstreet began an assessment of all the funds’ financial histories and documentation, with the goal of selling the funds’ remaining assets and recapturing as much financial value as possible to be distributed back to investors.

The first update in early August detailed a disorganized and likely incomplete set of transaction records covering more than a decade. The funds’ managers routinely overestimated the value of the underlying assets, according to Hamstreet, and the company continued to solicit new investors even though all the funds were insolvent since at least 2012.

The 15 mortgage pools — whose names were all some variant of American Eagle, e.g. American Eagle Mortgage 100 LLC, American Eagle Mortgage 200 LLC, American Eagle Mortgage Mexico 100 LLC — listed real estate assets in multiple U.S. states as well as Mexico, with the majority of the assets on the West Coast.

American Equities operates additional investment funds that are not part of the receivership proceedings, and the company appears to still be in operation. The company’s website was offline as of Monday, but the Vancouver office still appeared to be in use.

In the second update, Hamstreet wrote that it had received court authorization to list 36 West Coast properties in an upcoming auction from real estate brokerage company Realty Marketing/Northwest. The auction was scheduled to begin on Sunday, with bids due Nov. 13 and sales to close by Feb. 15, 2020.

Hamstreet wrote that it hoped to recover approximately $3.4 million if all the properties sell. American Equities’ listed book value for the properties was $5.4 million. Some of the properties have a minimum sale price approved by the court, while others can be sold to the highest bidder at Hamstreet’s discretion.

Hamstreet also announced that it would request court approval to employ a company called DebtX to sell the funds’ mortgages and loans. DebtX told Hamstreet that it could expect to recover about 60 percent of the value of the contracts.

The listed book value of the contracts is about $6.7 million, but Hamstreet wrote that it does not yet know the actual value of all the contracts because American Equities did not always document them properly.

“The ownership chain according to pool balance sheets does not always match the ownership chain according to county and other records,” Hamstreet wrote. “We have also learned that the management company sometimes used contracts owned by the pools as collateral for its own loans.”

Hamstreet wrote that it has engaged a law firm that specializes in real estate transactions that cross national borders to assist with the liquidation of the assets in Mexico. Those assets have a book value of about $8 million, but Hamstreet did not list an estimate for how much of that money it expects to recover.

The update also touched on the issue of liability, in response to several questions that Hamstreet said it had received from investors concerning American Equities owners Ross Miles and Maureen Wile, who controlled the 15 insolvent funds through a subsidiary.

Hamstreet clarified that as the receiver, his firm can bring collection actions against entities that owe money to the pools and against the funds’ management companies and the people who controlled them, namely Mile and Wile.

The receiver could also assert claims of mismanagement or breach of fiduciary duty if it determines that such claims are warranted. However, Hamstreet wrote, the receiver does not have standing to bring claims for securities fraud; only the investors can do that.

The receiver could also pursue third-party entities that received money from the pools, although Hamstreet wrote that it would likely only do so in situations where the prospects for recovering financial value exceeded the cost of enforcement.

“As a general matter, we wish to help investors in their search for justice, but our specific task is to recover as much money as we can in an effort to improve the investors’ financial situation,” Hamstreet wrote.

Hamstreet will host a check-in and update meeting with investors from 10 a.m. to noon on Wednesday at the Red Lion Hotel at Jantzen Beach.

Loading...