After CEO’s Passing, Prodigy Network Goes Dark

Rodrigo Niño's crumbling crowdfunding company leaves thousands of investors without answers

reprints


In the month before he died, Rodrigo Niño led a daily meditation series over Zoom. Dressed in a different striped caftan each morning, a grey-bearded Niño led the early-morning sessions for viewers confined at home at the height of the pandemic in late April.

SEE ALSO: The Counselor: Laurie Grasso is a Lawyer Who Means Business

Working off the teachings of consciousness guru Richard Rudd, Niño spoke about mortality, self-reflection, and the expanded self. “We forgot that we forgot that we don’t know who we really are,” he said on Day 16. 

Less than two weeks later, Niño—once a luxury real estate broker to rich Latin Americans, then a pioneer peddling the wonders of crowdfunding, and finally the enlightened founder of The Assemblage, a center for the consciousness community in New York—passed away from melanoma cancer. 

When he died, the empire he’d built over two decades was crumbling. The assets he had amassed with his crowdfunding company, Prodigy Network, were facing financial ruin, he was facing a string of lawsuits, and The Assemblage had been reduced to a skeleton crew, with its staff furloughed, and members scattered by the pandemic. 

In a final message to the thousands of investors that had placed their money in Niño’s hands,  he provided a video update that doubled as a farewell. “It] felt like the implosion of my identity, and who I really was, so much more than a business failing,” he said about Prodigy’s failures. “Because I was the business.”

The implosion of Niño’s identity and the apparent implosion of Prodigy has left those thousands of investors in the dark over the fate of their investments. 

Multiple investors, lawyers and Assemblage members have reached out to the company in the last several weeks, but they have heard nothing back. Both phone numbers on Prodigy’s website are no longer working, The Assemblage ceased operations in June, and two of Prodigy’s assets sold several days later at a loss.

It’s a steep fall from the early days of Prodigy, which made waves as a pioneering crowdfunding platform, raising hundreds of millions of dollars. Within the space of a few years, Prodigy launched three AKA-branded hotels, two coworking properties for The Assemblage and a live-work hotel in Manhattan’s hottest markets, including Nomad, the Financial District and Tribeca. 

Both sets of properties touted the flexible lifestyle—residential extended-stay in the AKA properties, and coworking in The Assemblage properties—with the assumption that the higher margins from the flexible model would make the buildings they acquired quickly appreciate in value. 

But by 2019, it all started to unravel. Early rumblings from lawsuits were confirmed when Prodigy sent notice to its investors in June 2019 that it was halting distributions and that it was facing shortfalls at multiple properties. By early 2020, things got even more dire, and Prodigy made desperate capital calls and warned investors they were in danger of losing some of their properties.

That included Prodigy’s first asset, the 19-story hotel known as AKA Wall Street, which had lost $36 million in value by June 2019, with an appraisal of $153 million. By March, the highest of five bidders for the property offered $105 million, a number that would wipe out all the equity investors.

In addition, Niño stepped down as CEO in September, after learning that an earlier bout with cancer had returned, leaving no clear successor. Much of the staff was laid off, while lawsuits kept piling up, and most communications with investors ceased. 

Jeff Holzmann, the CEO of crowdfunding company IIRR Management Services, said he reached out to Prodigy in March when he heard they were in trouble. “We never got anywhere, never got a response from anyone,” he said. “That’s the first indication that nobody’s minding the store.”

For years, Prodigy had proudly touted its many investors, having been founded on the notion of spreading the wealth of real estate to small-time investors. Prodigy had raised $690 million from 6,500 investors in 40 countries, distributing the gains of real estate to everybody from Mexican businessmen to middle-class Argentinians bureaucrats and American seniors.

But the reality is quite different.

“I lost the savings of my life,” said one such investor, who’s given up hope of recouping the $100,000 he bet on AKA Wall Street.

“I’m not a sophisticated investor,” he said. “But what I read from other more sophisticated investors, is that all the statements that the company presented were not very detailed. They were aimed at people like me.”

Nino Prodigy ORIG e1595270136139 After CEOs Passing, Prodigy Network Goes Dark
Rodrigo Niño. Photo: WILL RAGOZZINO/PatrickMcMullan.com==

The Late Rodrigo Niño

Rodrigo Niño grew up in Bogota, Colombia, but spent his childhood summers on the beaches of Miami—and he would spend much of his career acting as a bridge between those two worlds.

Niño flipped his first piece of real estate, a four-story rental in Bogota, while still a college student. But his real estate career really started a few years later, in the late nineties, when he moved to Miami to sell condos to rich Colombians. In the early 2000s, he worked as a residential broker for the brokerage Fortune International Realty, specializing in selling luxury American real estate to foreign buyers, according to various interviews with Niño and reporting from the Miami Herald. 

Also in the early 2000s, he launched the first iteration of Prodigy and began dabbling in development as the Miami market heated up. In one case, he agreed to buy land for $22.5 million a year after it sold for $8.8 million, with plans to build a condo tower called Lynx, according to the Miami Herald. Before closing, he agreed to flip the land to a young developer, but later reneged on the deal, and the developer sued, according to court records. The suit wasn’t dismissed until 2009, and the Lynx project never materialized. 

Meanwhile, in New York, a pre-presidential Donald Trump was announcing his newest project, a 46-story condo tower in Soho. “When it’s completed in 2008, this brilliant $370 million work of art will be a one-of-a-kind masterpiece,” Trump promised on The Apprentice.

In 2007, the Trump Organization tapped Niño to sell the Trump Soho condos, which were being marketed to an international audience, according to Niño’s telling in Worth magazine. With a co-exclusive on the glitzy Trump Soho, and another contract at the equally lavish William Beaver House in the Financial District, Niño moved to New York.

By the time the financial crisis hit, he had 29 projects going, between sales listings and development projects in Miami and New York, Panama and Bogota, he said in the Worth interview.

A few of these projects ended disastrously. Both Trump Soho and William Beaver House (now rebranded as 15 William Street) were embroiled in separate scandals, and each faced disappointing sales during the great recession. Niño was sued alongside Trump for inflating sales numbers at Trump Soho, according to court documents; while Blackstone sued the developers of the William Beaver house, which Curbed called a “sexed-up party palace,” over a defaulted loan. 

In 2011, CIM Group bailed out the developers of the project—SDS Development, a partnership between the Sapir Organization’s Alex Sapir and S. Lawrence Davis—and took ownership of the 200 unsold units in the building, turning them into rentals, according to reporting from The New York Times. 

Nevertheless, the relationships Niño built would prove useful as he perfected a different kind of sales pitch in the wake of the recession.

Crowdfunding Pioneer

In April 2012, Darren Powderly sat at his kitchen table in Oregon, wondering about the possibility of combining crowdfunding with real estate. The notion was so new that when the soon-to-be Crowdstreet founder Googled the term “real estate crowdfunding,” only one result showed up. It was from Ben Miller, who would go on to found Fundrise. 

The JOBS Act, which would be approved the following year, opened the door to crowdfunding, by carving an exception to SEC guidelines that require investment offers to remain private. It was designed to give a class of investors access to wealth-building investments, facilitated by online platforms and marketplaces. 

Niño had a head start on Powderly and Miller and all the others just starting out. While crowdfunding was new in the United States, it was an established and regulated model in Colombia. And starting in 2009, Niño began working to crowdfund Bogota’s first skyscraper in 40 years, raising $175 million from thousands of small investors in the course of a few years. “When we first came into the market in 2009, we took it massively,” Niño said in an interview in 2013. “We have the world record for crowdfunding.” 

With a network of brokers and business tycoons across Latin America eager to own a piece of New York, Niño was perfectly positioned to capitalize on this new model. So when the JOBS Act passed in 2013, Niño launched Prodigy Network as a crowdfunding firm, and began marketing several offerings right away.

And the money began pouring in. 

“In 2014, all of the companies were nascent, or just ideas, with bold ambitions,” Powderly said.

Powderly’s Crowdstreet was conceived as a marketplace that connected investors with developers, and was not party to the agreements between them, but Prodigy’s model was very different. “Prodigy’s nothing more than a developer,” Powderly said. “With all due respect to Rodrigo, he was a developer.”

He was a developer without a real track record of development in 2012. The Bogota skyscraper was not yet off the ground, and while he had partnered on multiple projects in Miami, he was primarily a broker. (BD Bacata in Bogota remains unfinished as of July.)

One reason for Prodigy’s early success, said Holzmann, whose firm purchased the defunct Realty Shares in 2019, was because it capitalized on the early excitement for crowdfunding and its image as a pioneer. “Prodigy was one of the first,” he said. “This was brand new, it was the Wild West. You didn’t have anyone who had done it for decades, because it didn’t exist.”

In addition, Prodigy had connections. From the beginning, Niño teamed up with Larry Davis, with whom he’d worked during his days at the William Beaver house. Davis founded Shorewood Real Estate in 2012 to structure the Prodigy deals, and helped connect Prodigy with equity partners and lenders, while Prodigy managed its ever-growing network of equity investors.

Prodigy proceeded to purchase a portfolio of six assets in New York between 2013 and 2017, and has two projects in Chicago under development. Prodigy estimated up to 23 percent returns on its projects, and planned to turn around some of them on a timeline of roughly five years, an aggressively short window for success.

Prodigy purchased four of its properties from Metroloft, which also helped develop two of the properties, and Korman Communities had JV equity in at least two assets. (When contacted for this story, Shorewood first denied its involvement with Prodigy, then later declined to comment. Korman did not respond to a request for comment. Metroloft confirmed that it had sold and developed the properties, but had no further involvement.) 

Shorewood also helped connect Prodigy with lenders like Arbor Realty Trust and ACORE Capital, who provided the senior loans on the Assemblage projects, and the Vanbarton Group which provided mezzanine lending on AKA Wall Street and two Assemblage properties.

Prodigy acquired its first asset, a prewar 17-story building at 84 William Street in the Financial District for $58 million in 2013, with plans to turn it into an extended-stay hotel under Korman’s AKA brand. It acquired 234 East 46th Street, later branded AKA United Nations, shortly after. 

When AKA United Nations opened its doors in 2016, it was heralded as the first crowdfunded commercial real estate project in New York. AKA Wall Street opened soon after. 

With its first two projects in operation, and a hefty marketing budget, Prodigy Network continued to attract investors. 

The investor in AKA Wall Street said after he saw an ad in an Argentinian newspaper for Prodigy, he started researching them, and their success with AKA United Nations seemed to suggest they were trustworthy. 

Another investor, a Florida resident who manages his father’s estate, invested $65,000 on behalf of his mother in the 17 John Street project. He had seen an ad in Worth magazine in 2014 and followed Prodigy’s progress from the beginning. By 2018, with several of their projects operational, he felt comfortable taking the plunge. “I did some due diligence, and after asking all the questions I could think of, we invested,” he said.

At the time, Prodigy never mentioned any financial difficulties.

The Guru

Back in 2011, Niño was a 41-year-old father of two with a highrolling professional life in New York real estate. But that life was upended when he was diagnosed with stage 3 metastatic melanoma cancer, with a bleak prognosis: He had a roughly 33 percent chance of living for another five years. 

Niño found that traditional medicine could not provide him with what he needed to face his own mortality in such stark terms, so he took a trip to the Peruvian jungle, where he tried ayahuasca, a hallucinogenic for the first time. 

It was a transformative experience, revealing to him how much of the world was unknown to him, and how limited the rational Western worldview was. “I really couldn’t find the answers in a secular world,” Niño says in a video about the origins of The Assemblage. “I had no choice but to venture into the unknown.”

He began to associate with members of the consciousness community, a vaguely defined term that encompasses a wide variety of practices, traditions and methods of embracing alternative lifestyles.

Around 2016, as his crowdfunding company grew, Niño decided to combine his real estate business with the world of spiritual self-discovery, by creating a space where people can gather to “help one another in finding this higher expression of themselves.” That became The Assemblage, a coworking space for the consciousness community. 

This was at the height of Manhattan’s development frenzy, as well as peak coworking phase. In 2015, WeWork—still viewed as a plucky startup—was valued at the then-astronomical $10 billion, specialty coworking companies like the women-focused Wing cropped up every few months, and a flexible, decentralized future of the office seemed imminent. 

The Assemblage was founded in that environment, combining the ethos of community and the elements of design, to create what was supposed to be a winning business strategy. “What we are really doing is creating a community of like-minded people who want to work together,” Shorewood’s Davis said in a 2016 interview with the Commercial Observer.

The spaces, two in Nomad and one at 17 John Street in the Financial District, were handsomely renovated pre-war buildings, with indiginous motifs and holistic artwork bathed in light and greenery. They included meditation and yoga rooms, an Elixir Bar that served non-alcoholic tonics, and classes in meditation, mysticism, breathwork and esoteric dance.

One early member, an artist and breathwork instructor, said Prodigy marketed heavily to people like him, leading up to the opening of the first Assemblage property in 2017. “There wasn’t any central point in New York to meet, so when The Assemblage opened up, it was like, ‘Wow, now we have a place,’” he said.

But where the message of The Assemblage was one of unity and inclusion, its pricing suggested exclusivity. The Assemblage charged $495 for a hot desk, $1,200 for a dedicated desk, and $3,900 for an office at its locations at 114 East 25th Street and 331 Park Avenue South.

It was the only way to make the financials work. 

In its initial presentation for 17 John, which includes both The Assemblage and extended-stay floors, Prodigy estimated it would sell the building in 2021. For the coworking portion, the expectation was to hit an 8 percent cap rate, with a value of $2,900 per square foot.

But by the summer of 2019, it became clear that the reality didn’t match up. In August, shortly after sending notice to investors that they would be suspending payments, Prodigy sent financial updates on each of its assets for the first half of 2019. Commercial Observer reviewed those financials for five of Prodigy’s six assets in New York which said the John Street property became profitable in the first half of 2019 but missed its budget estimate by more than half. It was one of the only two properties to have increased the value of the members’ equity, by $3.2 million. While at 331 Park Avenue South, one of the other Assemblage properties that had only recently opened, investor equity had declined by $11 million. 

“We definitely saw they’re not hitting their targets for coworking,” said one investor in 17 John. “And coworking was the main driver for this project.”

But Prodigy assured them that they were on their way to success at the East 25th Street Assemblage, which was the first to have entered operation, and then they’d soon shift their marketing budget to 17 John.

“The marketing was mostly focused on Nomad, their priority was to stabilize and get Nomad to break even, or where they were trying to get to. And after that, they were moving their marketing budget to John Street,” the investor said. 

The East 25th Street property broke even in June 2019, according to Prodigy’s statements, but was also underperforming. While the building had closed for $52 million in 2016, by June 2019, it had a capital stack that amounted to $120 million. That stack included a $41 million senior loan from Arbor Realty, $65 million from the first round of Prodigy investors, $16 million from a second round of Prodigy investors, and two manager loans. 

A similar pattern played out at 17 John and the Park Avenue South property, where over time, Prodigy added various investor series, manager loans, and bridge or mezzanine loans to fund the redevelopment of the properties, while extending terms at higher interest rates to meet debt obligations. 

And it wasn’t only The Assemblage. At least two of three AKA properties were losing money, the two Chicago projects were facing delays, and Prodigy was looking to sell land it had purchased upstate, where Niño had planned to develop a retreat called The Sanctuary. 

It all falls down

In a company update in September 2019, Niño informed his investors that his cancer had returned, and he was stepping away from operations at both Prodigy and The Assemblage. He assured the investors that he was working to save their money and had left the properties in good hands, though he did not name a successor. He was optimistic about the Assemblage. He said: “It’s a perfectly winning concept. All we need is time and capital.”

But time was not on Niño’s side. 

On June 10, 2020, the senior loan on 331 Park Avenue South came due. The property, appraised at $83 million in June 2019, had $41 million in senior and mezzanine debt, and $81 million in equity from private investors. 

On June 16, it sold for $41 million, according to property records, wiping out the equity members. The East 25th street property, with had $41 million in senior debt, sold for the same amount, wiping out another $81 million in investor equity.

Neither set of investors were informed of the sale, according to a Venezuelan lawyer who is working with a group of Prodigy investors.

Several days later, Assemblage members at those two locations received notice that The Assemblage had ceased operations and new management was taking over. 

It is so far unclear who bought the buildings and who took over operations. Emails to the new management company from Assemblage members and from CO went unanswered. 

Prodigy’s phone numbers no longer work, and emails to numerous addresses associated with Prodigy, and with one of its executives, Cary Fieldchamp, went unanswered.

Prodigy has been sued six times since October 2019, four times since the start of the pandemic, all by investors who sought to redeem their options early. Lawyers for Prodigy have responded to the first suit only, which is related to one of the Chicago developments. On July 13, a judge entered a ruling against Prodigy, ordering them to pay $1.9 million to the plaintiffs. It’s anyone’s guess where that money might come from.

“My identity was based on this paradigm of access for all, the decentralized network of capital to fund the future,” Niño said in his final update to investors.

“I stand behind my ideas,” Niño added. “It’s just a question of time.”

Whether 6,500 investors from whom he raised $690 million agree is another matter.