Tore Steen Out As CEO At CrowdStreet
Tore Steen is no longer the CEO at CrowdStreet, the popular real estate crowdfunding platform that has come under fire after more than $50M went missing from deals in Atlanta and Miami that never closed.
Jack Chandler, who joined the CrowdStreet Investment Committee as a voting member in 2020, is stepping in as CEO, CrowdStreet President Scott Mackley announced in an email Monday night.
Chandler is also joining the board of directors and will “oversee the company’s transition and growth into a financial institution,” according to the email. Steen and CrowdStreet representatives didn't respond to Bisnow’s requests for comment. The Real Deal first reported Steen's ouster.
“CrowdStreet’s evolution from an online marketplace to a financial institution would not have been possible without CEO Tore Steen, who will continue to serve on CrowdStreet’s Board of Directors,” Mackley wrote. “He and the Board recognized that a leader with a more traditional real estate background was needed and that Jack, given his extensive experience and affiliation with CrowdStreet, is the right person to take on the role at this time.”
Steen, who had previously worked at tech firms Janrain, WebTrends and EarthLink, co-founded CrowdStreet along with Darren Powderly in 2012. Chandler is the founder of Majesteka Investments Holdings and former global head and chairman of real estate at BlackRock.
“My career has been focused in commercial real estate, an alternative asset that has proven over time to be one of the best ways to diversify investment portfolios and build wealth,” Chandler said in a statement. “I’ve advised CrowdStreet’s leaders for more than three years and have seen the value the platform delivers to investors and sponsors. The company’s mission has been and will continue to be to provide investors with the best online real estate investing experience, with tools and resources typically reserved for an institutional audience. Our evolution to a registered FINRA broker-dealer allows us to do that even better.”
CrowdStreet has been mired in scandal in recent weeks since it said investor money raised on its platform for proposed real estate deals had gone missing. New York real estate firm Nightingale Properties had raised $54M on the platform to acquire the 915K SF Atlanta Financial Center in Buckhead and $9M for an office building in Miami Beach called Lincoln Place. An independent fiduciary appointed by CrowdStreet said most of the money was untraceable, and that the company believed Nightingale and its CEO, Elie Schwartz, misappropriated the funds.
The fiduciary, auditor Anna Phillips, put the entities into bankruptcy July 14.
CrowdStreet is also seeking to appoint an independent manager to oversee 200 West Jackson Blvd. in Chicago, an office property Nightingale acquired last year after raising $25M on the platform. It told investors in that deal that it was concerned Nightingale “had acted inappropriately,” but taking over an operating asset was more complicated than the actions taken for the Atlanta and Miami Beach deals.
In an interview with Bisnow July 18, Steen described the missing millions as a result of “simple, illegal behavior by a real estate developer.” He said the botched deals had nothing to do with crowdfunding but with the “type of individual that chose to blatantly disregard the law and ethical behavior and, in this case, fiduciary responsibility."
But investors for Nightingale’s deal — who had to put in a minimum of $25K — questioned why CrowdStreet didn’t do more to protect their funds and vet Nightingale, which hadn't disclosed losses on previous deals. A spokesperson for CrowdStreet described those omissions as “benign,” The Wall Street Journal reported last year.
And although an operating agreement stated funds would go into an LLC managed by the sponsor, multiple investors told Bisnow they had assumed their funds were put into escrow, not a bank account. CrowdStreet said as of June it is placing all fundraised equity into an escrow account, which can only be accessed by the sponsor after a deal closes.
“You have to rely on [CrowdStreet] and rely on their due diligence,” Eli Johnson, an accredited investor out of Chicago who put $25K in for Nightingale’s Atlanta deal, previously told Bisnow. “How well did they vet them? Obviously, we’ll find out coming up.”
In his message to investors, Mackley touted several “enhancements” to CrowdStreet's process as part of becoming a FINRA-registered broker-dealer. In addition to starting to use escrow accounts, the company said it has added “operational improvements” including additional review, vetting and approval processes for sponsors and deals, more rigorous diligence requirements, enlisting a closing attorney and adding a licensed investor relations staff.
Nightingale has also experienced a shake-up in its executive team in the wake of the investigation. Will Hutton, its director of acquisitions, on July 18 announced on LinkedIn he is “embarking on a new journey.”
The same day, an email to Avi Kollenscher, who was hired from Related last summer as an executive vice president at Nightingale, returned an automated response saying he is no longer with the company. His LinkedIn profile has no mention of his time at Nightingale.