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Real Estate Developer Files For Bankruptcy Amid Swirling Investigations, Investors Seeking Repayment

National Realty Investment Advisors has declared bankruptcy in an attempt to avoid crumbling under the weight of its debt, investors asking for their money back, and multiple federal and state investigations.


Brian Casey, founder of real estate financial advisory firm The Casey Group, filed for Chapter 11 bankruptcy protection on behalf of NRIA in the U.S. Bankruptcy Court for the District of New Jersey, the company's home state, on Tuesday. Casey has been in charge of nearly every aspect of the company's operations since October, he said in the filing. 

In addition to about $250M of property-backed debt, Casey estimates NRIA owes vendors and other creditors approximately $10M.

That number may be contested in court, however, as Philadelphia-based contractor and project management firm U.S. Construction sued NRIA in March for breach of contract and asked for nearly $30M in damages over a stalled project in South Philadelphia. That lawsuit is "dead in the water," as U.S. Construction has joined a pool of various creditors and claimants that will await the outcome of bankruptcy proceedings, Hankin Sandman Palladino Weintrob & Bell partner John Palladino told Bisnow Thursday. Palladino is U.S. Construction's attorney.

“There’s a whole slew of cases," Palladino said, referring to the dozens of LLCs wholly owned by NRIA that all filed for bankruptcy on Tuesday and will likely be combined into one joint bankruptcy proceeding. "We’re not listed as a creditor, so we’ll be filing a proof of claim that lists what we think we’re owed, and then determine how to proceed.”

NRIA's operations began to come under fire after the Philadelphia Inquirer reported in late September that the company is under active investigation by the FBI and the Securities and Exchange Commission, in addition to state financial regulators in New Jersey, Alabama and Illinois.

The company's bankruptcy filing confirmed the existence and ongoing nature of the investigations and disclosed that since September, many of its investors have submitted requests to pull their money out despite their initial capital placement agreements containing language prohibiting them from redeeming their equity shares for at least five years.

NRIA is seeking Chapter 11 protection to give itself a "breathing-spell to prevent a disorderly liquidation of their estates through subscriber redemption requests and to reject and/or terminate disadvantageous contracts and other arrangements," the filing says.

NRIA has completed and commenced projects in New York, Northern New Jersey, Philadelphia and Palm Beach County, Florida. Since 2018, it has done so primarily through a private equity fund, NRIA Partners Portfolio Fund, which raised $540M from over 2,000 investors. It stopped taking new investments in January, according to the filing. 

National Realty Investment Advisors' property at the corner of 1401 South Christopher Columbus Blvd. in South Philadelphia, for which it terminated an agreement with U.S. Construction to develop.

One of NRIA's most notable efforts to solicit investments was through a multiyear blitz of advertisements on Fox News and conservative radio networks touting double-digit annualized returns on investment — claims that Barry Minkow, himself convicted of financial crimes on multiple occasions, flagged as outlandish in a whistleblower complaint to the SEC in 2020.

“In [the whistleblower complaint], we said that NRIA uniquely locks up people [in five-year contracts] intentionally, because they learned from Bernie Madoff that the way a Ponzi scheme implodes is from a run on redemptions," Minkow told Bisnow. "So for the very technique they used, they’re asking the bankruptcy court to give them a break, when that was part of the scheme in the first place.”

NRIA denied Minkow's claims to the Inquirer in September, claiming Minkow was motivated by the prospect of a financial whistleblower reward from the SEC. Some of the claims the company denied, such as its inability to cover its debt service payments with the income from its properties — and, by extension, its inability to deliver profits to investors on top of debt payments — are now a matter of public record.

“[NRIA] exhibited the two components of every white-collar crime: lying about what they owe and lying about what they earn," Minkow said.

The Partners Portfolio Fund has been paying investors between 6% and 10% of their principal investments on an annualized basis, the bankruptcy filing claimed. In a 2021 investor prospectus, NRIA disclosed it was paying investor returns with equity from new investors rather than the sale of properties. It had been doing so since at least 2019, the Inquirer reported.

The fund owns 31 completed properties, three that are nearing completion and 16 that are in either earlier construction or planning phases, with a current aggregate value of over $255M and a potential value over $1B if every unfinished project delivers and stabilizes.

NRIA has around $72M in total cash on hand but expects that number to dwindle to just over $52M by the end of August, as its operations have lost between $1.3M and over $2.3M every week over that time frame, according to a financial statement Casey included in the bankruptcy filing. Neither Casey nor representatives for NRIA responded to requests for comment.

Since NRIA brought on the Casey Group, Casey has instituted a swath of sweeping changes to bring costs down and correct improprieties, he claimed in the filing. Among the changes listed in court documents are:

— Removing NRIA Managing Director Coley O'Brien and suspending the salary of founder and CEO Rey Grabato before eventually removing Grabato from his post.

— Laying off 60 employees and reducing compensation for eight more.

— Firing everyone involved with maintaining NRIA's accounting books, hiring replacements and bringing in a third-party accounting firm to overhaul the company's financial reporting.

— Investigating and assessing "over 1,200 alleged 'joint venture' and other agreements" made under the previous leadership.


One of NRIA's most damaging previous relationships ended before Casey joined the picture. Thomas Nicholas Salzano, a businessman previously accused of fraud on multiple occasions, had operated as an executive of the company before he was arrested and indicted on federal charges of securities fraud and identity theft in March 2021 for allegedly forging a loan document in Grabato's name to secure an investment. NRIA terminated its relationship with Salzano immediately, according to the court filing, but still had its office raided and some of its documents seized by agents of both the U.S. Attorney of New Jersey and the SEC. 

NRIA's development deal with U.S. Construction in South Philly could be one of the 1,200 agreements to which Casey referred in the court filing, as the two companies had worked together on multiple development projects going back years before the formation of the Partners Portfolio Fund, Palladino said. U.S. Construction Chief Financial Officer Dustin Salzano, who has worked for the company since 2007, is Thomas Salzano's son. 

After years of open communication between the two companies, the hiring of the Casey Group was abruptly followed by a shift to sparse, formal communication done exclusively through Casey. Two months later, NRIA terminated its agreement with U.S. Construction and refused to pay several outstanding and/or ongoing fees, U.S. Construction's lawsuit claimed.

“Dustin Salzano is still an integral part of U.S. Construction," Palladino told Bisnow in late May. “He’s completely involved, but my understanding is that his father is not. The only person we talk to anymore [from NRIA] is Casey."

In demonstrating that NRIA is on an improved trajectory that requires court protection to follow through, Casey specifically referenced ending previous business relationships that he suspected of being less than fully above board, including some contractor agreements and salaries well above market rate.

"[NRIA’s] internal process for the selection of contractors was irregular and reflected a preference for entities associated with former insiders and their affiliates," the bankruptcy filing says. "As a result, within the first thirty (30) days of the Casey Group’s appointment, Casey Group prioritized tightening up formal and now industry standard accounting practices to ensure the accuracy of the books and records, oversaw reductions in compensation and workforce, and streamlined the contractor selection process."

U.S. Construction hasn't received any communication from Casey or NRIA indicating that it was one of the partners or contractors that Casey purged, nor if Casey believed that its partnership had been in any way illegitimate, Palladino said.

“They really haven’t ever said anything about that to us," he said. “If they said something like that, we would definitely contest it [in court].”