Yieldstreet investors are taking more losses as the company is renamed Willow Wealth

As Yieldstreet tries to distance itself from a difficult past with a new name and a new advertising campaign, its clients are dealing with a current reality that is becoming increasingly dire.

The private markets investing startup, newly renamed Willow Wealth, notified clients last week of new defaults at real estate projects in Houston, Texas, and Nashville, Tennessee, CNBC has learned.

The letters, which were obtained and verified by CNBC, represent new losses of about $41 million. These come on the heels of $89 million in offshore loan sweeps revealed in September and $78 million in losses revealed by CNBC in an August report.

In total, Willow Wealth investors lost at least $208 million, CNBC reports.

Willow Wealth also removed a decade of historical performance data from public view in recent weeks. A chart on the company’s website showing negative 2% annual returns for property investments from 2015 to 2025 has been removed – down from a 9.4% gain just two years ago.

“They had to change their name,” said Mark Williams, a professor at Boston University’s Questrom School of Business. “Their old name had a negative value, so they’re trying to do 2.0 to restart things. They’re also making it harder to detect their poor performance by removing stats, which is worrying.”

The high-risk rebranding is the latest chapter for a company that sought to empower individual investors, but instead left some of them saddled with huge losses and years of uncertainty.

Under its former name, Willow Wealth — backed by prominent venture firms and backed by aggressive online marketing — was the most well-known among a wave of American startups that promised to expand access to alternative investments that are the domain of institutions and wealthy families.

But the still-unfolding collapse of its real estate funds illustrates the risks that private markets hold for individual investors. By their nature, private investments are not traded on exchanges and lack standardized disclosures. This leaves investors particularly dependent on private fund managers for information and to protect their interests for years while their money remains locked in trades.

Private markets gained prominence this year after President Donald Trump signed an executive order to allow investments in retirement plans.

While critics say opaque and illiquid investments with high management fees are not suitable for ordinary investors, asset managers including… Black Rock and Apollo Global Management Look at retail as a large, untapped pool of capital. Retirement giant Empower said in May it would allow private assets to be rolled into 401(k) plans of participating employers with the help of companies including Apollo and Goldman Sachs.

Against this backdrop, Willow Wealth CEO Mitch Kaplan, a former e-commerce head who took over in May, said the company is moving toward a new model. Instead of offering only the deals the startup takes, it will also sell private market funds from Wall Street giants including Goldman and Bank Carlyle Group.

The company no longer provides historical performance of its offerings due to a focus on funds managed by a third party, according to a person familiar with the situation who requested anonymity to discuss internal strategy.

A Willow Wealth spokeswoman said: “Transparency is crucial to us, and we continually provide strategy-specific performance information to each manager at the offering level to support informed decision-making.”

As for CNBC’s reporting on new mortgage defaults and rising numbers of losses, a Willow Wealth spokeswoman called it a “rehash” of news about “investments from five years ago.”

“The investments in question represent a very small portion of our overall portfolio and do not reflect the current nature of our offering or our business focus,” it said.

The company refused to disclose the amount of assets it manages.

The startup — founded in 2015 by Michael Wise and Milind Mehre, who remain on Willow Wealth’s board — told clients that private investments would provide higher returns and lower volatility than traditional assets.

Willow Wealth’s offering hasn’t changed much, despite the rebranding.

In a new ad campaign, a guy named Hampton Dumpty says he’s “learned a thing or two about breakdowns” so he’s using Willow Wealth to diversify his investment portfolio with private market assets including real estate.

The mascot, a play on the Humpty Dumpty song, tells viewers that “portfolios including private markets have outperformed traditional portfolios over the past 20 years.”

On its revamped website, the company has a chart showing a hypothetical portfolio made up of private equity, private credit and real estate outperforms traditional stocks and bonds over the decade to 2025.

But the chart doesn’t include the impact of fees, which are typically much higher for private investments than for stock ETFs and mutual funds. The company also notes in its disclosure that clients cannot actually invest in listed private market indices.

While most stock ETFs carry fees of less than 0.2%, Willow Wealth typically charges 10 times that, or 2% annually on unredeemed funds, for its real estate offerings, according to product documents.

Willow Wealth also charged a range of one-time fees associated with setting up the funds, including structuring the deal and arranging loans.

Fees for new Willow Wealth products are even higher. The company charges about 1.4% annually for access to portfolios made up of private funds from Goldman Sachs, Carlyle and US Investment Bank. Stepstone Collectionaccording to its website.

These companies also charge their own fees, resulting in overall annual costs ranging from about 3.3% to 6.7% per fund, according to the providers’ documentation.

This makes Willow Wealth products among the most expensive in the world of retail investing.

For clients still coming to terms with their losses and still in limbo about funds the company says are on a “watch list” for possible default, Yieldstreet’s switch to Willow Wealth appears like an attempt to evade accountability, clients told CNBC.

After last week’s disclosures, nine out of 30 real estate deals reviewed by CNBC since August are in default. Boston University’s Williams said a 30% failure rate is high, even by the standards of the private equity world.

Although the field of private credit is more opaque, which makes it difficult to determine average default rates, some in the industry estimate typical failure rates at between 2% and 8%.

Whether they were apartments in hot downtown areas or established cities, or single-family homes scattered in booming Southern cities, the projects Willow Wealth placed its clients in struggled to meet revenue goals and fell behind on loan payments.

Willow Wealth blamed the failure on the Federal Reserve’s rate-hiking cycle in 2022, which made repaying variable-rate debt more difficult.

Among the newly disclosed defaults are a pair of funds tied to a 268-unit luxury apartment building in East Nashville called Stacks on Main.

Investors hoping for the advertised 16.4% annual return put a combined $18.2 million into the two funds, according to documents reviewed by CNBC. They later added another $2 million in a member loan aimed at stabilizing the deal.

“It is expected that your investment in the stock will incur a complete loss” following the sale of Stacks on Main on November 25, Willow Wealth told clients in a letter dated the same day. Investors in the member loan will lose up to 60%, the company said.

“We realize this is difficult news to receive,” Willow Wealth told clients. “We share your disappointment”

2022 transaction documents listed Nazare Capital, the family office of former WeWork CEO Adam Neumann, as a sponsor of the deal. Real estate sponsors typically originate, acquire and manage deals on behalf of investors.

In 2022, after his tenure at WeWork ended, Neumann founded real estate startup Flow, which handled some real estate deals from his family office.

In public comments to the media over the past year, Flow representatives sought to distance the company from the troubles of then-Yieldstreet.

But according to a 2022 investment note, Nazari purchased Stacks on Main in July 2021 for $79 million and then offloaded a majority stake to Yieldstreet members through a joint venture.

More importantly, the deal saddled the joint venture with $62.1 million in debt, a burden that would later prove instrumental in the deal’s failure, CNBC found.

“This building was majority owned by YieldStreet and the property was never operated by Flow or anyone associated with Adam,” a Newman spokeswoman told CNBC. “In any case, the building has been sold and Flow no longer has a minority interest or any involvement in this property.”

Nazare is also listed as a sponsor of another project in Nashville that went sideways for retail investors, an apartment complex at 2010 West End Ave. The venture resulted in $35 million in losses across two funds, surveys previously reported by CNBC.

Besides the deals linked to Nazaré, there have been other defaults.

A project called the Houston Multifamily Equity Fund, which consists of apartments in suburban Texas, resulted in the loss of all $21 million in client funds, the startup told investors in a Nov. 25 letter.

“The property was unable to generate sufficient revenue to pay monthly debt service and operating expenses” and went into foreclosure, resulting in a “total loss of equity,” Willow Wealth said.

The number of losses for Willow Wealth investors is likely to rise further.

For example, an $11.6 million loan made by Willow Wealth clients to a multifamily project in Portland, Oregon, is “currently in default” after an appraisal found the borrower owed more than the property was worth, the company told investors.

Willow Wealth is trying to restructure the borrower’s loan to avoid selling the property at a loss, the company said in a letter to investors.

The company also warned investors that an apartment complex in Tucson, Arizona, and two projects consisting of single-family rental homes across Southern states would likely result in future losses of unspecified amounts, according to separate letters. Investors put more than $63 million combined into those deals.

Williams, a Boston University professor and former Federal Reserve examiner, said he taught a class this fall on how Willow Wealth and other fintech companies fail to protect their clients.

“They claimed they would democratize access to the kinds of deals that only the rich have,” Williams said. “In effect, they have created a high-risk trap for investors.”