Nearly a year since his public profile peaked with a starring role in a reality TV series pilot, a local house rehabber is now trying to salvage what’s left of his real estate business amid financial and legal troubles that have been mounting for months.
Josh Romano, whose Cobblestone Development Group was featured in last year’s HGTV “Richmond Rehabbers” pilot, says he is working to pay back money he owes subcontractors while his real estate holdings have been significantly reduced, with at least nine properties deeded back to lenders in lieu of foreclosure proceedings in recent weeks.
At least one other property has gone through foreclosure and back to the lender after a public sale. That property, a house in Richmond’s Northside, is the subject of an active lawsuit from a pair of former clients who are seeking compensation for costs they say they incurred when Romano didn’t complete their renovation.
Multiple vendors and subcontractors who have done work for Romano have gone after him for money through lawsuits and liens, and Romano has moved out of his rented Scott’s Addition office and warehouse space in an effort to cut costs. He also recently moved his real estate license from one brokerage to another – his third such move in the past two years.
He said he has moved his family six times in that same time period, and sold off personal property to cover expenses and help sustain the business.
Months earlier, they had closed out 2016 having completed the renovation and sale of nearly 30 homes, according to Romano, who had previously told BizSense he was aiming to finish about two dozen more that year. He said his property count, which topped 20 properties at his busiest, is now down to less than five.
Romano, 35, attributes the turn of events to growing his business and real estate holdings too fast, in part in an attempt to keep up with a spike in business that resulted from the show’s exposure.
He also points to what he describes as a “cash-flow problem” after borrowing funds from hard-money lenders, which charged interest fees that Romano said have added to his financial troubles.
“I am dealing with some setbacks,” Romano said in a recent interview. “There are some people I do owe money, and I’m going to pay them. It just takes a bit longer when you’re talking about cash flow and restructuring a company.
“We’re a small business that got some TV notoriety, and I think people, they see you on HGTV and they think there’s a war chest of money that came with it, and that’s not the case at all,” he said. “Every dollar I made, I put back into the business. Everybody that worked for me came from whatever profits I made.”
By “restructuring,” Romano said he doesn’t intend to file for bankruptcy, rather focusing his efforts on paying back subs by securing more work to generate income – an effort he said is slow-going and challenging with fewer properties to sell and less business coming in.
“I’ve got to pay attorneys when I want to be paying subs. At some point, you don’t have enough money to keep fighting everybody,” Romano said.
Romano said he currently has four properties left to work with and sell after the bulk of his holdings were sold or deeded back to lenders. He said he expects new business to come from selling properties as a real estate agent and assisting established clients with land acquisitions.
“This is a workable, solvable problem,” he said. “It just takes time, and people have to be realistic. I’m just one guy.”
Last month, deeds in lieu of foreclosure were recorded at the city courthouse for seven properties Romano had purchased through his acquisition arm, CNJ Ventures LLC. The properties, which stretch from Church Hill to Chesterfield, were deeded March 1 to Tuckahoe Funding LLC, an entity registered with the State Corporation Commission by William Everette Starke Jr.
Two weeks later, Tuckahoe Funding purchased another Romano property at 4 N. Robinson St. in the Fan. City property records show it paid $250,000 for the boarded-up townhouse, which Romano’s Cobblestone Real Estate Group bought last June for $215,000.
Another property, a house on West Lancaster Road in Northern Barton Heights, was foreclosed on and defaulted back to the lender, a local hard-money lending firm called Friendly Rehab Funds run by Nick Kapetanis.
Reached last week, Kapetanis said the Lancaster house is the only property for which he lent money to Romano in the past 12 months. Before that, he said he funded Romano multiple times and never had any problems.
Bill Bayliss, a Williams Mullen attorney who represents Starke, said the deeds in lieu of foreclosure involving Starke’s properties were agreed to with Romano’s legal counsel to avoid the costs involved with foreclosures.
“He didn’t pay what he owed, he defaulted, and we either had to foreclose or do it the easy way with a deed in lieu,” Bayliss said.
The Lancaster property, the one that was foreclosed on, is the subject of an active lawsuit from John and Sharon Coombs, former Romano clients who are seeking just over $23,000 in costs they say they incurred when Romano didn’t finish their renovation according to their contract, preventing them from closing on the house, which they ultimately never purchased.
The house – a 2,500-square-foot 1920s rehab – has since been completed by local house-flipping firm Xtreme Homes, which listed it in late March through Brad Ruckart Real Estate Group with an asking price of $429,000. That’s nearly four times the $112,000 that Romano’s CNJ Ventures paid for the property in late 2016, according to city property records.
After a couple weeks on the market, the house was put under contract earlier this month.
The Coombses are suing the Romanos, CNJ Ventures and Romano’s Falling Water Construction and Design LLC, claiming that CNJ failed to fulfill their contract and could not return their earnest money deposit, totaling $12,750, when they requested it.
The suit claims that CNJ offered to reimburse the couple for storage costs, monthly pet fees and living expenses incurred due to project errors and delays, but the money was never paid. The suit states that CNJ knew or should have known it could not complete their house on time but failed or refused to communicate that.
In an interview, the Coombses said Romano was recommended to them by their real estate agent but came to regret working with him as the project dragged on past the timeframe in their contract.
“There was zero sharing of information,” Sharon Coombs said. “Josh just completely dropped the ball at every single point. There was never a point where he did what he said he was going to do or what he was supposed to do.”
“He is serially dishonest,” John Coombs added, “in terms of things about timeframe and progress.”
The couple said they offered to walk away from the project in exchange for their deposit but Romano would not agree, causing them to suspect that he didn’t have the money available.
While he acknowledges he did not finish their renovation on time, Romano said his take on the situation was the Coombses wanted out of the contract due to buyer’s remorse.
“We did not deliver on time. I own that. But that’s why I offered them a concession, $10,000,” he said, adding that the contract didn’t require him to do so.
The Coombses, who are under contract to purchase a different house, are represented in the suit by Robin Morgan of Richmond law firm Blackburn, Conte, Schilling & Click. The suit was served to attorney Stephen Scarce of Parker, Pollard, Wilton & Peaden, who has been representing Romano in his recent land dealings. A hearing in the case is scheduled this week.
Romano said a challenge he’s faced with some clients since the TV show aired is a higher expectation than what’s agreed upon at the start of a project, often resulting in change orders and disagreements that can push a project behind schedule.
“A big misconception is clients come in and think their house should be like the HGTV house, and that’s an unrealistic expectation,” Romano said. “If I failed in that, then I own it, but we also have to apply a home’s worth and common sense to that too. Not every remodel is a brand new house. I think that’s something all builders fight everywhere.”
Two other lawsuits are active against Romano from vendors seeking monies owed: national paint supplier Sherwin-Williams Co. and Richmond-based Siewers Lumber & Millwork. Several other vendors have filed liens seeking payments, including Glen Allen-based Coastal Contracting and Midlothian-based Howdyshell Flooring.
Romano said he was connected with Scarce, the attorney he’s been working with, through Lloyd Poe, a veteran local builder and frequent collaborator with Romano. Poe, who Romano describes as a mentor, founded LifeStyle Home Builders and Craftmaster Homes, before selling both companies in 2016.
Until recently, Romano had been expecting to solve some of his problems by going into business with Poe on a new venture. That business, called Richmond Hill Design Build, was registered April 4 with the SCC.
But last week, Poe informed Romano he plans to go ahead with the venture as sole owner, with Romano no longer sharing ownership but still involved, Poe said, in sales and land acquisition on a commission basis.
Poe said he had planned to share ownership with Romano and a to-be-determined builder but changed his mind – in part to ensure more flexibility in how the business is run, but also in light of Romano’s circumstances, he said.
“His life has gotten so complicated, legally and time-wise, that putting him inside of another company right now is just not prudent,” Poe said.
“I don’t think Josh is in a place right now where owning anything makes much sense, but we’re still doing work together where he brings me something as an outside real estate agent. As long as that continues to be positive and work, then it will be good for both of us.”
Poe is among those to whom Romano has owed money, taking back two properties he had funded for Romano through deeds in lieu of foreclosure last month. He and Romano’s collaborations include a house rehab and five new townhomes planned for a property along Ellwood Avenue, though Poe said Romano’s role in that project has likewise been reduced and restricted to sales.
Earlier this month, Romano resigned his seat on the board of the Home Building Association of Richmond, and he said he could lose his Class A contractor license due to asset requirements and was awaiting word from the state last week.
He recently switched real estate brokerages for the third time in two years, transferring his real estate license from Long & Foster, where Breese is still an agent, to Oakstone Properties’ Henrico office. He was previously at One South Realty Group, which he joined in 2016 from Joyner Fine Properties.
Romano said he is winding down the Cobblestone brand he has built since 2012, when he went out on his own after four years as an acquisition manager with Trustworth Properties. Romano, a Monacan High School grad, has said he learned facets of the house-flipping business while at Trustworth from principal Mark Gans.
Initially funding projects by maxing out credit cards and working second jobs, Romano said he grew the business by putting money made on one house toward the next one, and so on.
When he didn’t turn enough of a profit or expenses got too high, he said he often moved his family and sold off personal property – his car, his motorcycle, a washer and dryer – to pay workers and keep the business going. In the early days, he said he slept on a mattress in one of his first houses to save money.
“I have one house that I bought about eight years ago, a duplex in Jackson Ward, and last year I sold it just to take the cash out to put more money into the company to keep paying for incidentals, to try to help keep the company growing and try to do right by people,” he said.
Romano said he got into the business because he liked restoring houses and helping revitalize neighborhoods, but he said the “business” side of the business took him away from that and got to be too much.
“It seems like it’s more about everything else than the building of the house or the good stuff,” he said. “We went in thinking that this was going to be this cool thing, redoing a neighborhood and all that stuff, and it just created more chaos.”
Romano said the past year and last few months in particular have put a strain on his family and left him doubting whether he wants to stay in the business.
“Once I pay these people off, I’m done. I’m out,” Romano said. “I don’t know if I can stomach it. It’s just really ugly, and I don’t know why and I don’t understand it.”
Poe said he still stands by Romano because he knows he did not set out to harm anyone. He said he wants to see Romano through a difficult time because he’s been through his own struggles in his career.
“At heart, he’s a very good guy,” Poe said. “He established an excellent brand, and he’s a great acquisition and salesperson.He just ran out of capital as he grew too fast. He got himself way in over his head and got in a lot of trouble, owes people money, and that’s never a good place to be.”
Romano said he’s committed to paying back people he owes, and he offered an apology.
“I’m sorry for anyone I put in a position,” he said. “Not that it’s intentional. I own every mistake.
“If there was a checklist for an entrepreneur starting out, I checked every box for every mistake you can make: hired the wrong people, grew too fast, poorly capitalized, borrowing really expensive money on top of all that. That I acknowledge, but you learn that as you go,” he said. “You don’t know that until it happens, until there’s a problem, and then all you can do is remedy it.”