Victims of Success: When the Phoenix Real Estate Market Went South, It Took Some of the Biggest Players With It
3 commentsReal Estate Power Player, Ron Barness, Talks About the Dismissed Investor Lawsuits
The real estate market crash has devastated many around the U.S., especially in Phoenix, where prices had been drastically inflated until the real estate bubble exploded a few years ago. For Ron Barness, one of the biggest players in the Phoenix commercial real estate market, the crash meant losing everything.
In 2008 & 2009, a number of civil lawsuits were filed against Ron Barness, principal and CEO of Barness Papas Investments (the parent company of Retail Brokers, Inc.) and his business partner at the time, Alex Papakyriakou. Those judgments were filed by a handful of investors who alleged that Ron and his partner did not accurately report earnings and the sales of property. At the time of this report, all but one of the investor lawsuits has been successfully dismissed by the Maricopa County Superior Court. The single outstanding investor lawsuit is working its way through the legal system and will likely be dismissed soon.
Any other outstanding lawsuits against Ron Barness are from lenders related to the personal guarantees that he made on his real estate investments. Barness says he is working diligently to clear his name of the suits, which came about after those few investors lost money in other real estate transactions and were hoping to take advantage of the legal system in a down market.
Barness’ 27-year real estate career includes acquisition, development and disposition of more than 300 shopping center investment properties, almost all of which included the involvement of nearly 1,000 individual investors or partners. Until the collapse of the Phoenix real estate market in 2007, not a single investor had ever lost a dollar with Barness. In fact, for nearly 15 years, investors enjoyed returns ranging from 15% – 30% every year.
When the market did begin to take a turn for the worse, all of Barness’ projects were negatively affected; each property suffered extreme vacancies that impacted cash flow. In an effort to protect each investor’s monies and to salvage his huge investment portfolio, Barness began to inject his family’s personal savings into the suffering projects.
“The sheer magnitude of the market collapse and the size of the portfolio I controlled ultimately led to the demise of my business and the loss of the projects,” said Barness.
Each of Barness’ projects were financed through a total of 27 different lenders, and most of the transactions were personally guaranteed by Barness and his wife, a testament to how deeply he believed in each deal. No investor ever had personal liability for any of Barness’ real estate loans.
“It has been a devastating ride that has taken everything I have made for myself out from under me and my family, but more than 99% of the investors I have worked with over the years have stood by my side, believing that I have done the best I could do,” said Barness. “Although I have been forced to start over, I am fortunate that I have a wonderful family who believes in me and gives me strength. And, I know that whatever any individual investor lost through investing with me pales in comparison with what I have lost trying to protect their investment.”
Barness is now working hard to re-establish his career by turning the hard truths of what happened in the real estate market into valuable lessons that make him a much more cautious operator.