Axiom Realty Capital releases $30M of Luxury Real Estate

Stay away from Axiom Realty Capital!! A friend of mine invested with them and the deal turned out to be bogus. They basically are just a bunch of sales guys who take your money UPFRONT (sometimes $10k+) on top of a "down payment" of $40k -$80k.

They keep on telling you that the developer is about to get their funding for about a year or so and then, suddenly, out of the blue, they tell you that the project was cancelled and that they won't give your money back and offer you to invest in yet another project, with a "credit" for the money already sunk in the first bogus deal, AND they ask for more money to get you into the second one.

My friend told me that a lot of their investors are seriously angry and are now talking of a class action law suit.

Axiom Realty Capital is a FRAUD. STAY AWAY!!

Absolutely incorrect... all buyers run the risk in a pre-construction project that the developer will not build the project; in the case of Axiom, when that happens, 100% of the deposit is returned to the buyer / investor. The fees charged to participate in a project are nominal; most projects do get built, and it is a gross misrepresentation to imply that if one doesn't that it somehow is a "scam." (I'm a consultant to this company and know they do their best to protect their buyers.)

As a follow up note, Axiom doesn't receive / touch / have access to any of the deposit money... it is all held in a third party escrow company, and is returned to the buyer / investor if the developer doesn't follow the strict terms of their agreement.

If most projects do get built, then why did Michael Connelly, CEO of Axiom, refuse to answer that same question that was posed to him
by Axiom investors on the Kavison Row conference call last week? And why did he also refuse to answer the question as to what Axiom investors, if any, have ever made money? When he was asked those questions, he said that Axiom was not there to discuss anything but Kavison Row. He refused to answer them both, as well as the question regarding fraud that one investor asked. Both of these questions have also been directed to sales people in the company -- no one from Axiom has answered them (which are fair questions that any investor would ask) in a satisfactory fashion.

Additionally, many real estate professionals would say that a $13-15,400 origination fee on this type of project is unreasonably high.

The 'options' for the Kavison Row investors - who all gave Axiom approximately $13-15,400 in origination fees - include 1/rolling over your origination fee into Atlanta condos (which requires that you also give them $6-9K MORE of your money, and possibly taking on a mortgage); 2/leaving your money with Axiom until 12/31/2008, after which they have the right to keep all of that fee or 3/agreeing to having 50% of your origination fee returned to you, over a 6-month period.

As was stated in the Wall Street Journal on 11/16/2007, Atlanta has the second highest inventory of unsold homes. It would seem, therefore, highly likely that an Axiom investor rolling their money into the Atlanta condos, will most likely ending up closely on a mortgage with a very low chance of resale in the near feature. Axiom advertises their properties as 'flippers'- closing on a mortgage is not what most people would expect when they enter in this kind of an investment. The idea is to never have to take on a mortgage in the first place.

If 'most projects' do get built, then please give us a complete detail of what those projects are, where they are, and when they were completed. Axiom investors would be very interested in that information.

Also: Axiom Realty Capital, LLC is not currently listed in the California Real Estate Department's database of licensed real estate brokers. Robert Simmons, Deputy Commissioner confirmed that this morning in my phone call to him.

They do also not appear to be licensed in the state of Utah. It is possible that the databases are not up to date, of course, but not likely.

Michael Connelly told me this morning that Axiom is indeed licensed. I'd like Axiom to show proof of that. And I'm sure their other investors would too.

I was am an investor, and I concur with the first post. This company is a scam! My project went the exact same way, I kept being told the funding was pending, and then we we were told of developer not being able to get financed. The company doesn't care about the investors, because they take more than 50% of the investors money in origination fees, and then claim that these funds are used for managing the deal. What a bunch of crap! I am going to make it my mission to bring this fraudulent company down. To the person who is defending this company, you have no idea what this company is like until they have taken your hard earned money. Until then save the BS for yourself and your Axiom cronies, and pray I never meet you in dark alley somewhere!

Here's more info on Axiom: they were investigated by Utah Department of Real Estate for Securities fraud in January of 2007. They were not found to be in violation, but seems a good idea to question why anyone would have them investigated for that. A woman in the Securities department told me today that if they aren't registered to sell securities (which they aren't) or real estate (which they don't appear to be either), then it is a scam. If Axiom return 50% of the investors origination fees, they will be keeping approximately $250,000 to $300,000 (at least) and no property was built, ground was not even dug. A reasonable fee? Seems very questionable, at best, espeically when Michael Connelly told investors on the KR conference call that part of that fee goes towards 'paying the light bill, etc.'. We didn't hire Axiom to pay for their light bill. We hired them to deliver accurate, professional, reliable due diligence. To suggest that we ran any risks by trusting them to do that is what is gross misrepresentation here.

Axiom is definitely conducting fraud. They are trying to take money from investor and then tell you the project defaults and that "the origination fee you paid to us is our working capital, so we can't give all your money back." How radiculous it is!!!
STAY AWAY from AXIOM!!!

My experience with Axiom has been several changes in my sales agent (they seem to come and disappear quickly with no notice or advisement). Verbal and written promises (deposit held in interest bearing account) go unanswered - "where is my deposit interest?" The answer was "that was our mistake" and "we did not receive any of the interest".'Real' business professionals pay for their mistakes to re-earn trust from their clients.
Unanswered e-mails are the norm with the higher ups. The only response you get is with a sales Manager who simply pitches for/on the next project. And agrees with all my concerns and complaints, but does nothing to remedy them.
It was represented, told to me that Axiom did 10mil in 2005 and 20mil in 2006. Yet they do not seem to have the capital to remedy their 'mistake' on Kavison Row for their investors to come out whole or even and consider investing in another project.
Their policy is to rush, rush - 48 hours to return your Contract and money because it will be sold out. Yet they are still marketing Units a month or two later.
It would seem holding on to the clients would be the first order of business, instead of losing them and finding new ones. First order of moral business - make it right and keep the customer. Make him money and he will make YOU money.
They are evasive and non-responsive. They have changed their "business model" without notice. Now it is buy and Close - most of us wanted to get in, get out and re-invest in the "next". They represented a new offering once a month. That has not happened. And now they are selling Long Term, buy a lot and build a house you will need to close on and hope, wait.
Their Teton project has apparently fizzled also, so all the due diligence and protections we were brought in with has evaporated.
We were told they expanded their personnel from 8 last year to 40 and new, expanded offices (which apparently we paid for), but the Web Site shows about a dozen staff - the rest must be "consultants" or Strategic Partners bringing in deals but not really employees.
I would suppose or imagine if they had successful projects and received 40% of the deals and closings, they should have sufficient funds to pay out a small group of unhappy investors just to keep them happy enough to stick with the program. How could they spend 30mil made in the last two years?

and to "consultant", please name the successful projects that have completed and returned profits for investment to the Buyers. We are all curious and get no response from the higher ups. how many happy, returning Investors does Axiom have to date?

what happened to the defending Consultant? he has declined to respond to honest queries?

I just spent twenty minutes typing a lengthy response to all the questions in this 'thread' only to learn that there's a maximum length of 4000 characters (and my response was probably ten times that.) So I'll chop this up in to a handful of posts.(I just saw this thread this morning, so haven't answered for a few weeks.)

In no particular order, here's a few answers that I have personal knowledge of-

A big issue is 'origination fees.' When Axiom puts a deal together, they charge their joint venture partners (their 'co-buyers') a fee to offset the cost of sourcing and distributing a deal. The single biggest complaint, and most likely the root of all other complaints, is that when a project doesn't proceed (and in the pre-construction world, that happens from time to time), the j v partner wants his deposit back (which he gets, no problem; it's been sitting in an escrow account the whole time) and he also wants his origination fee back (unless he's a 'serial investor' doing a string of deals with Axiom, in which case he just 'leaves it on account' for the next deal.)

The main issue / complaint in all of this is that someone who has done a deal that has failed, and isn't going to 'roll the dice' again, wants their fee back. Axiom charges the fee to begin with to offset their costs (they make their real money the same way their co-buyer does... when the real estate is 'flipped' to an end buyer, usually a year or two later), so the only way they can refund it is to dip in their company's pockets, which of course the company is reluctant to do. If you're one of the co-buyers, you say 'give me my money back or you're a scam / dishonest / don't care about your clients" / Axiom's point of vies is 'we care about our clients, but we're not going to eat 100% of the cost of a deal that doesn't proceed while you eat zero; we we're going to share the profits if it worked out, let's share the (modest) cost since it didn't. So they have said that they will refund half the fee (these fees are usually 10k, so we're talking about Axiom returning 5k of the 10.)

There is no way to reconcile the two positions... if you're an investor, you blame Axiom if a deal doesn't proceed (they should have done more / better 'due diligence'), so you want all your money back - not just your deposit.

From working directly with the company (which I have done for two years now, primarily in the marketing / sales area), my observation is that Axiom did in fact focus very heavily on 'doing deals' and very little on 'customer service' for most of it's history. It has recently (four months ago) formed a customer service department, staffed with one person (and more recently, last month, two, when an executive with Axiom moved full time in to running the department) to focus full time on 'customer service.' Prior to that, getting info out of the company about a particular deal was a slow / frustrating process.

I can say point blank that anyone who would spend a day in their offices would come away 100% certain that the company was not a 'scam', and that no one in it was in any way trying to take advantage of buyers / investors. On the other hand, between the real estate bubble and developers who failed to honor the terms of their contract with the company, Axiom is definitely in a position of getting slammed with a lot of 'externals' they can't control, that lead to angry people when a deal doesn't end well (and I know of two that haven't.)

I also have personally referred people to the company that have invested in deals that got 'flipped'(one of which was a project in florida two years ago.)

Someone mentioned that they are not licensed to sell real estate; that is correct, they don't. They buy real estate, which doesn't require a license in any state. The developer's have a listing agent, the listing agent for the developer typically 'co-brokers' deals with other agents (including agents that introduce Axiom buyers to the developer's listing agent), but there is no law of any kind requiring Axiom (or any of the other pre-construction companies listed in this blog, who are also not licensed real estate brokers, for the same reason) from having a broker's license. As a side note, neither Axiom nor any of the other companies in the 'pre-construction /bulk sale' business are selling securities either - the purchase of real estate is specifically excluded from being a security.

Poking over the posts to find other questions / issues, it's news to me that Axiom has 'made' 30 million dollars. I think what they have mostly done is maintained future profit interests in deals that are in various stages, and will make a return on those deals if / when the co-buyers do. Again, the core problem for people who have done a deal which has failed is that they probably have an assumption that their 'fee' is sitting around like their deposit check in an account somewhere. The reason Axiom charged the fee to begin with was to offset the costs involved in putting these projects together. Their new contracts (the joint venture agreements that a co-buyer signs) are even more clear that those fees are non-refundable, that they are used to cover the costs of the deal, etc... Had I invested in a project that failed, I would be screaming for ALL of my money back (if I wasn't planning on rolling the dice again on a new deal), but I would also be happy if the company split that fee with me (especially if I got 100% of the 'capital' back to boot.) I've done investments where I lost ALL of the money, as has everyone; I think Axiom is trying to do the right thing by splitting the difference on the origination fee and offering half of it back. I also assume that there are plenty of people who will not be happy with anything less than 100% refund, and will continue 'yelling' in one way or the other, hoping to change the company's mind.

I tried to answer as many questions as I could; feel free to post back anything I left out, and I will respond to that ASAP.

Modest cost?$13-15K origination fee is a MODEST cost? what are you smoking? It's outrageously high for an origination fee, and they didn't earn ONE CENT of it, not even half. Please, don't insult our intelligence with that. And wake up and smell the coffee yourself, before you lose more money with these clowns.

And btw, you didn't answer the most important question here: which deals have been completed with Axiom to date? Who has made money with these people? I'm not surprised to see that you didn't answer that one, and I'm going to wager that you won't be able to. LMAO!

"the purchase of real estate is specifically excluded from being a security."

It most definitely is not excluded. Check with the UT Dept. of RE, not to mention the SEC. Axiom was investigated for RE Securities fraud in January 2007. Check your facts. And frankly, that you don't even know that RE is not excluded from being sold as a security is proof that any of your comments here are highly questionable, at best.