Con artists have seemingly limitless scams and schemes at their disposal to pick the pockets of honest, hard working people, and they continue to modify their scams to remain undetected. They even resort to calling obviously illegal transactions by other names to make them seem acceptable.
I met Ricky Stokes through my friend Craig. Ricky wrote me an email letter outlining the specifics of buying a Cay Club unit. Here is the email he sent to me in September 2006:
I want to make sure that I tell you as much as I know concerning Clear Crystal Companies/Sunvest Communities and this way of investing. I’m only telling you about this because you were recommended as a friend of Craig. I’ll see if I can get you into this opportunity. I know the developer, Dave Clark, he’s a friend I met singing in the church choir. I’ll talk to him and see if he will let you into this investment but don’t worry I’ll put in a good word for you.
The minimum amount any investor has made per year in the last 7 years is 48%, the most anyone has made is over 300% and the average year over year for everyone is 164%. I have never found any investment to yield this return on my money year after year. To show you how secure this investment is, you may use your IRA or 401 account to do the investing for you tax deferred (at least until you retire). To do this, one needs to transfer the portion needed to invest of their IRA to a different, self directed custodian. After looking at the information, I feel very sure you will agree it is the best investment going, and if you decided to invest now, you could be totally independent very soon.
There are two ways to invest with this company. First is condo/townhouse conversion. This is by far the most profitable, and the easiest to accomplish. Currently, this is the only available investment vehicle available. A conversion is where the developer/company has purchased what use to be a hotel or townhouse rentals, renovates, upgrades, and adds amenities to the project, and then they are put on the market to the end retail buyer. Only 70% of the available units at a particular project are available to the investors. The remaining 30% is sold by the retail sales people onsite. While the sales team is selling their 30%, the renovations begin. Renovations include all tile/marble floors and granite counter tops, full $30,000 furniture package, etc. Once the renovations are completed, the sales team then resells our units to the end retail buyers. For the investor, these units are always made available to us at $100/SF below replacement cost which equals about .70 on the dollar. You have to close/own when investing in conversions. Please don’t let closing scare you because it is very low risk and is more of a paper shuffle than anything else.
First the conversion is offered to you at below replacement cost. Since you are purchasing for below cost, their lenders will give you 100% financing. Conversions do require a 10% deposit which is given back to you at closing if you choose the 100% financing option. Here is the kicker… at closing as the investor, you get a 15% kick back they call a “guaranteed lease back.” They make this legal by calling it a lease back instead of a kick back. These kickbacks more than cover your out of pocket expenses for two years! This also allows them to have free will to renovate and then rent it to vacationers/snow birds.
Your profit taking is when the unit is sold to the end retail buyer and it is quite substantial. There are sizeable tax advantages owning investment property. You may sell your unit at anytime, however I would play their game and let them sell it for me after 18 months.
Example: In Clearwater, let’s say you buy a townhouse conversion for…
[Editor’s Note: To read the rest of Ricky Stokes’ letter to this investor, please click here.]
After reading the above four-page email, I called the 239 phone number and spoke with Ricky Stokes, who told me he was a pilot for American Airlines. He went through the entire Cay Club concept of purchasing condo conversions with nothing down at a wholesale pricing structure, getting a 15% leaseback, and then letting the appreciation in the property grow while the developer transforms the property into a world class 5-star resort. He talked of the principals of the company and stories of how Dave Clark broke off from Earthmark because of conflicts of interest in the partners getting too greedy and cutting out incentives for investors which were necessary in order for investors to continue to back Earthmark.
Sept 2005 through February 2006
I did my due diligence and researched Sunvest Communities, Cay Clubs International, and Waterfront Resort Realty. I scheduled a trip out to Clearwater to visit the property and to meet with Ricky Stokes. Ricky’s schedule was very tight when we were out in Clearwater. I brought a girlfriend and we stayed onsite at the Clearwater project the night before meeting him. While at the sales office, we took a tour of the grounds and then Ricky did a full multimedia presentation in the clubhouse. All the while he continued telling us of the wonderful integrity of everyone in the company.
He constantly reiterated the importance of not going through the retail “sales” side of the house. If that side of the house were to ever get our contact information in their database, we would not be able to get the wholesale pricing offered to the investors.
He also talked to us about Cay Clubs and the privileges of being a member in this elite group. There was a $15,000 membership fee that was paid as part of the equity investment. This Cay Club fee was a mandatory part of the transaction. As an incentive for us to close quickly, this membership was fee was cut in half. We were told that the investment would appreciate at the same rates as the properties and that when the properties were sold the memberships would also be sold and that we would get all of our initial investment back as well as 80% of the increase in value. Supposedly the retail side of the house was selling the same memberships for $30,000.
I continued in close contact with Mr. Stokes. He had given us a history of his real estate investing, business ventures, and his educational history, which included a Masters degree in finance and a license as a CPA. He also told us of numerous units he owned in Clearwater Cay Clubs. He repeatedly mentioned that he was an investor, just like us. Our confidence in Cay Clubs and in Ricky Stokes was very high. He was attentive, returned calls and emails within a day, and befriended me. He referred me to a friend of his, a preferred lender — Jose at TransAtlantic Mortgage. Jose was disorganized and expensive and I refused to do business with him. I searched for my own lender.
Ricky assured me that with the built-in equity and the exit strategy, he would help me sell and get me out of the loans and turn a profit of $100 per square foot within the next two years, because I was buying at preconstruction pricing.
While the mortgage was being processed, Ricky told me about the Las Vegas project. I was told that this was nearly sold out but that he could get me on the waiting list for units. He said that he personally had 16 units there, that the property was across from the Rio Suites Hotel, and that there would be a relationship between the properties. An elaborate CD ROM was given that showed renderings of the property, showed five towers with roof top pools, a tram/rail between Rio and Cay Club, and descriptions of world class spa facilities, concierge services, fine dining, room service… all comprising a “world class resort.” I was assured that these units were “keepers” and that they would be “cash cows.” Given what I saw in Clearwater and the trust I had developed in Ricky Stokes, we decided to move forward.
Meanwhile, I was waiting for my leaseback from Clearwater and after multiple delays, and plausible explanations, my 15% lease back monies arrived after 60 days, although promised to arrive after 30 days.
Ricky “found” me a unit in Las Vegas and again tried to get me to use his “preferred lender,” Ross Pickard. His rates and fees were exorbitant and I refused to do business with him. Ricky put pressure but I continued to refuse.
I found another lender for much less money, closed on the Las Vegas property, and waited for my leaseback money in order to pay the mortgage. The lease back came through 4 months later after multiple phone calls. Ricky offered to pay me himself, which I accepted. Obviously he never came through and he never returned my calls for weeks at a time.
After multiple threatening calls from me, I got my check. By now I’d sent $25K for a retainer for an Orlando unit because the Clearwater property was gorgeous, the Las Vegas site was outstanding, and Orlando was going to be the site of an elite sports academy called IMG.
October 2006
All the while Ricky was befriending me and would call me “a friend” and in the inner circle and telling me he was getting me special access to properties. Most of the people allowed to buy these properties were a part of block buying groups such as ICG and were paying a premium of 6% to the buying group for access to these units.
As this investor points out, she performed her due diligence (again, see the rest of the story please click here). She researched Sunvest Communities, Cay Clubs International, and Waterfront Resort Realty. She even traveled to Clearwater to visit the property and meet with Ricky Stokes. I think just about anyone could have been taken in by the apparent professionalism and integrity of these companies and their promoters.
Still, this operation had several warning signs that should have warned investors to steer clear of it. Here, I point out some of the warning signs:
Whenever you are about to invest a great deal of money in real estate, it is always wise to have an attorney or Realtor who represents you and you alone and who is aware of the real estate market in the area look over the paperwork and research the company and the property. In other words, get a second, expert opinion from a reliable source.