Real estate firm that raised money through IBDs blows up

investmentnews.com:

iCap Enterprises Inc., a real estate investor and manager that raised $245 million from investors by selling through independent broker-dealers, declared bankruptcy near the end of September, and now clients who bought the high-risk securities are suing those firms.

Based in Bellevue, Washington, iCap was founded in 2007 by Chris Christensen, according to court papers that are part of the Chapter 11 bankruptcy, which iCap filed Sept. 29 in U.S. Bankruptcy Court for the Eastern District of Washington.

Starting in 2014, iCap grew quickly, raising $245 million and “deploying” that money toward real estate investments, according to a court filing. The company had 35 employees at the time it declared bankruptcy. iCap owned or controlled at least 13 real estate properties, according to court filings, and had investments and interests in others. About 1,800 investors bought iCap securities.

Christensen resigned from iCap on Sept. 28. He did not return a call to comment about the matter on Wednesday. Paladin, a third-party management group, has taken over the management of the properties.

The bankruptcy comes at a time when the commercial real estate market is hurting from rising interest rates, which make it more expensive for developers to do business, as well as from workers not returning to the office.

iCap created investment vehicles that were private placements and at least one publicly registered security, according to attorneys familiar with the matter. Private placements are illiquid, carry high risk and typically charge investors 7% commissions.

It’s not clear how many broker-dealers were involved in the sale of the iCap securities.

“In the iCap cases I have, brokers said, ‘We know the CEO personally,’” said