Troubled Austin developer StoryBuilt didn't follow typical accounting practices, report says
Struggling Austin real estate developer StoryBuilt may have used funds it raised for certain projects and funneled the money toward other projects.
That's according to a report from court-appointed receiver Stapleton Group, which said in a filing that StoryBuilt did not follow "typical accounting practices."
StoryBuilt, one of Austin’s most active urban developers, agreed to enter a voluntary receivership in July as it said it was addressing deep financial issues.
Los Angeles-based Stapleton Group shared its recent findings in a status report filed in a Travis County civil court.
In July, StoryBuilt sent a letter to shareholders announcing a major reorganization, which included the departure of top leaders and laying off workers.
On Oct. 9, StoryBuilt said it was putting 28 commercial and residential properties up for sale. The properties owned by StoryBuilt and its joint venture partners span 17 projects in Austin, five in Seattle, three in Dallas and three in Denver.
Here is the latest on StoryBuilt, which was founded in 2001 as PSW Real Estate
"Funds invested for specific projects may have instead been utilized for different projects, to pay PSW fees in excess of agreed upon, or for other expenses," Stapleton Group said in its report. "Thus, some entities benefitted and some suffered financially disproportionately in relation to that specific entities’ economic performance. This comingling of assets and liabilities will be the subject of the Receiver’s forensic accounting analysis, which is ongoing.”
The receiver plans to use proceeds from the sale of StoryBuilt's assets to pay secured debt obligations and expenses until the forensic analysis is complete, according to the court filing.
In a court hearing, Mike Bergthold said he had met in person with the FBI, the Internal Revenue Service and the Texas State Securities Board regarding StoryBuilt. Bergthold declined a request by the Statesman on Wednesday to comment further.
The back story on StoryBuilt
The firm specializes in infill projects, building mixed-use developments with apartments, condos, town homes and single-family homes as well as shops, restaurants and retail space.
In Austin, StoryBuilt has been a driving force behind the latest wave of development on South First Street along Bouldin Creek. The corridor has seen a surge of growth in recent years with the arrival of restaurants, boutiques, food trucks and high-end housing.
On July 31, the company agreed to enter receivership as it addressed deep financial issues. A receivership is a court-appointed tool that can assist creditors in recovering funds in default and can help troubled companies avoid bankruptcy.
More: Former StoryBuilt executives and employees launch new marketing and sales firm
The receivership came after a previous letter StoryBuilt sent to shareholders announcing a major reorganization, which included the departure of top executives and furloughing most of its staff. In the weeks that followed, the firm laid off dozens of employees, many of whom are now seeking back pay and other financial compensation from StoryBuilt.
In the letter, StoryBuilt co-founder and former CEO Anthony Siela said: "As you are aware, StoryBuilt has recently struggled with focused growth, reporting/financial controls and liquidity. This has materially affected our performance as a business and our partners."
This article originally appeared on Austin American-Statesman: Austin developer StoryBuilt may have misused funds, per court filings
