Startup Focused On 'Democratizing Real Estate' Ordered To Hand Over 119 Properties To Lender

More than 100 properties owned by fractional real estate investing platform Landa are in the hands of an independent manager, who claims the startup's owner has still been trying to collect rents in defiance of a judge's order.

A long-simmering dispute between Landa and two of its lenders has escalated into a lawsuit in New York State Supreme Court over $35M in loans tied to single-family rental houses. The manager appointed to oversee the properties said in court filings that many are vacant and in a state of disrepair and neglect. 

A judge issued an injunction in December, ordering Landa to turn over rents, bank accounts and operations of 119 houses to a manager appointed by the lenders, Viola Credit and L Finance. Late last month, the manager said Landa's executives had disregarded the injunction and drained $724K from the properties while directing tenants to pay their rents to a new bank account.

“Defendants brazenly have acted as if no restraints whatsoever have been imposed upon them and, in fact, actively have taken steps to circumvent and flout the Injunction,” attorneys for Viola Credit wrote in a Jan. 21 court filing. 

Judge Jennifer Schecter the following day issued an order threatening to hold the Landa companies that are defendants in the suit in contempt of court if they don't submit to a deposition and agree to stop violating the injunction. 

Last week, Landa agreed to turn over financial documents, accounts and control of the 119 properties in hopes of unfreezing their bank accounts. Israel-based CEO Yishai Cohen agreed to appear in court next month. While Cohen is named numerous times in the lawsuit, he isn't a defendant in the suit.

“My clients dispute the allegations set forth in the Complaint and the other filings, and we expect the court process to bear out their version of events,” Lee Bergstein, an attorney who began representing Landa in late January, told Bisnow via email.

The lawsuit is just the latest problem for Landa, which was founded in 2019 with the hopes of making real estate investment accessible by creating a user-friendly app and selling fractional shares of rental properties for as little as $5. 

But six years after its founding, Landa’s tenants have told Bisnow they live in squalor, and some investors fear a total loss of their money.

Landa owns more than 200 single-family rentals in the Atlanta area and dozens more throughout the Southeast, as well as a handful of Brooklyn apartment buildings. Cohen is an Israeli entrepreneur in his late 20s with no real estate experience who managed to secure $33M of venture capital funding to launch the platform.

Financial disclosures show Landa’s portfolio — amassed amid the low-interest-rate real estate buying frenzy in 2021 and 2022 — is now bleeding cash, and lenders are looking to collect on the short-term debt the company used to finance it. 

Dane Moreton, who invested $7K in 13 Landa properties starting in August 2023, told Bisnow he started having misgivings about Landa's operations almost from the start. The dividends he would be paid didn't seem to correlate with properties' performance disclosed on the app, he said. He now doubts he will get his money back.

“We shall see what happens with Mr. Cohen in court, but if he has indeed flouted court orders and absconded with investor funds, then he needs to be hunted down and made to pay for his crimes,” Moreton said. 

Viola first invested in Landa in 2021, providing debt while highlighting how the firm was “democratizing real estate investment” with the promise of dividend income through its online platform.

Over the next two years, Landa amended its loan agreements various times with both Viola and L Finance, guaranteeing that the lenders would be able to seize rents and take control of the involved properties if the online platform defaulted on its loans.

Landa quickly began to violate loan covenants by failing to make interest payments, Viola said in its lawsuit.

Throughout 2023, Viola and L Finance informed Landa three times that the startup was in default on the loan terms, according to court documents. The situation boiled over that November when Viola and L Finance demanded control of the company’s voting rights and operation of the properties.

In November 2024, Viola and L Finance filed the lawsuit and quickly obtained a temporary restraining order and a preliminary injunction before the end of the year from Schecter after Landa failed to respond to the complaint, which was submitted along with dozens of exhibits.

Cohen finally acknowledged the lawsuit on Nov. 25 in an email to the court, claiming he hadn't obtained a lawyer and asking the court to extend the time to answer its request for reponse. Schecter refused and slapped Landa with the preliminary injunction.

Through the TRO and injunction, Schecter ordered Landa to turn over control of the 119 properties and the bank accounts associated with them to an independent manager. Viola hired Anna Phillips for the task.

Phillips has also been serving as the independent manager working on behalf of hundreds of jilted investors on another online real estate investment platform. She was tapped to manage entities set up by Nightingale Properties that raised more than $50M for commercial real estate investments through crowdfunding platform CrowdStreet before Nightingale CEO Elie Schwartz allegedly misappropriated nearly all of it. 

Federal prosecutors charged Schwartz with wire fraud, a charge he is expected to plead guilty to this year. Phillips has been coordinating with the Department of Justice for more than a year and is still attempting to claw back the missing millions. 

Phillips worked with B. Riley Financial on the Nightingale-CrowdStreet scandal and tapped the firm again when she was named independent manager of the Landa properties.

More than a month after Schecter's injunction ruling, Viola Credit and L Finance accused Landa and its employees of covertly opening new accounts and attempting to collect rents directly from its residents and keeping its financial records under wraps.

B. Riley's John Sordillo, appointed as chief restructuring officer for the properties at issue, wrote last month in sworn court testimony that Landa had drained nearly $750K of commingled funds from the properties' bank accounts over the course of three December days. 

Sordillo wrote that Landa had refused to turn over its books and had told tenants to pay rents to newly set up bank accounts. He also said Cohen was attempting to sell or refinance properties that the court had ordered Landa to turn over to Phillips.

The day after Sordillo's testimony was filed, Schecter ordered Landa to appear in court or face fines or imprisonment. Bergstein was hired shortly thereafter, and he struck a deal with Viola Credit’s attorneys last week. The arrangement requires Cohen to give a deposition on March 5 and attend a hearing eight days later, according to court documents.

Landa's disclosures to investors during the legal battles have been inconsistent. Its largest fund, Landa App LLC, filed its semiannual financial report for the first half of 2024 on Jan. 3 of this year. The filing revealed that Landa lost $1.8M during the first six months of last year, more than quadrupling its loss of $404K over the same period in 2023. 

The filing shows that nearly all of its properties were losing money and disclosed that a contractor placed liens for unpaid work on 12 of the properties involved in the series LLCs.

Landa's three independent board members, Israeli venture capital investors Yaniv Sarig, Gigi Levy-Weiss and Arnon Dinur, resigned from its board in late December, according to a filing with the Securities and Exchange Commission.

Brian Glick, a partner at private real estate group BRL Group, was appointed to the board in January. Glick established, managed and divested a portfolio of more than 200 single-family residences in Atlanta, according to the filing.

When reached by Bisnow, Glick said he couldn't comment on the legal proceedings.

“I truly was put on the board maybe two weeks ago, four weeks ago. I know nothing about any litigation,” Glick said.

“I’d rather not discuss anything with you,” he added before hanging up.

The Feb. 4 agreement for Cohen to be deposed and attend a March hearing also indicates that Landa has turned over all the documents requested by the lenders. Sordillo's team will review the documents and decide which, if any, of Landa’s bank accounts can be unfrozen. If the accounts are unfrozen, Landa agreed it will turn over all rent, security deposits and other income related to the series LLC to the new management.

Landa's attorneys agreed to send a message to all tenants in the 119 properties in the suit notifying them that “B. Riley is the new property manager” for the homes and would provide new information for where they should pay rent.

The new management has the right to sell the 119 properties, and Landa won't be allowed to object, according to the filing. 

Those sales would likely be used to satisfy the $35M in outstanding debt Landa owes to Viola and L Finance. That leaves investors like Moreton once again in the dark about the state of the money they have tied up in Landa.

Moreton said he hasn't heard anything from Landa or B. Riley — it has always been hard to get in touch through the app, he pointed out — and he doesn’t expect to see his $7K ever returned to him. 

“What I hope for is that whomever takes control over Landa is able to right the ship to some degree so that all the investors aren't trapped in the hold, drowning because of the possible criminal behavior of Mr. Yishai Cohen and his abject failure of a business,” he said.