A new lawsuit filed in Texas state court accuses syndicator Alan Stalcup of “cooking the books” at his company GVA, packaging bad debt as assets and bonds.
The plaintiffs accuse Stalcup, his wife Loren and GVA’s former vice president David Graham Bass of an “egregious criminal pattern of fraud, theft, and deceit.”
Stalcup responded by calling the suit an “extortion attempt from a disgruntled investor” and said he would seek to countersue. Bass did not respond to a request for comment.
Stalcup and his firm GVA gained prominence as a syndicator, compiling funds from individual and institutional investors to buy up and manage underperforming apartment complexes. An investment would buy a management interest in one of the shell companies GVA used to buy property. Investors also paid management fees to GVA, according to the lawsuit.
Stalcup’s bet that he could fix up the multifamily buildings worked out while interest rates were low. But when rates surged, syndicators broadly struggled to keep up with their loans.
Stalcup and the other defendants then conspired to inflate rental income and profits, plaintiffs allege. They re-packaged bad debt, concessions and operating expenses as assets and capital expenses, making the properties look more profitable, and thus valuable.
“In 2023 alone, the GVA Defendants falsely overstated the reported rental income across its entire portfolio by over $20.6 million, which in turn served to inflate values of the properties in its portfolio by hundreds of millions of dollars,” plaintiffs wrote in their petition.
In one example cited in the suit, financial documents purportedly show one property’s monthly net operating income boosted by $133,558. GVA oversaw approximately 150 properties.
The alleged fraud also entitled the defendants to charge higher management fees, according to the lawsuit. The petition excerpts internal GVA financial documents that show instructions to move money out of concessions and delinquency categories.
The suit was filed by a group of investment entities: Hill Country Hillside, Ltd, River Retreat 1228 LLC, Hill Country Meridian LLC and Sierra HC LLC. At least two of the plaintiff companies are connected to Texas commercial real estate investor Bryan Kastleman. They claim they lost more than $15 million after being fraudulently induced to invest in GVA-managed companies connected to ten real estate projects and portfolios.
The plaintiffs claim Stalcup resorted to another scheme to keep the company going when things got tight. After interest rates surged and GVA’s debt obligations became unmanageable, Stalcup made capital calls, plaintiffs allege. Those calls led plaintiffs to believe that the funds Stalcup and his codefendants were requesting would be used to stabilize properties and meet debt obligations.
But after they invested, they say that wasn’t the case. Instead of stabilizing the properties, the defendants allegedly made up their own personal losses. In one instance, Stalcup misappropriated about $3.4 million to repay GVA’s own bridge loans, according to the lawsuit.
The lawsuit is just the latest for Stalcup and GVA.
In February, lender Benefit Street Partners alleged GVA misappropriated insurance proceeds and commingled tenant security deposits. Those “bad boy” acts activate the personal guarantees that Stalcup signed on a $346 million loan from Benefit Street, backed by 19 multifamily properties, the lender argued in court. Stalcup denied the lender’s allegations, calling them “farcical and utterly outrageous.” He said the loans had been paid back or were performing. The suit is still pending.
This summer, Barry Sternlicht’s Starwood slapped Stalcup with a trio of lawsuits. The lender said the sponsor let liens pile up on several properties and failed to pay interest, triggering personal recourse guarantees. Those suits are also pending.
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