The team at our affiliated broker-dealer, RM Securities, conducts diligence on of the issuer, including detailed background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to screening for any criminal background, we may also turn down sponsors due to poor reference checks, even if the background and criminal checks are satisfactory.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent.* When an investor makes an investment with such sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s contingency offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
Unless otherwise disclosed, escrow accounts are not required for some investments that accommodate 1031 investments where the property is already acquired.
Our processes typically includes visiting certain properties (or a subset of properties if it's a fund) to confirm the real estate is what and where the real estate is supposed to be. For certain properties that accommodate 1031 exchange investments, the team will review third-party prepared due diligence reports in lieu of a site visit.
We have formalized processes and checklists for every private placement deal listed on the platform.
Evolution Real Estate Partners & Triumph Management Group
Evolution Real Estate Partners and Triumph Management Group, (together "the Sponsors") are serving as co-GPs with respect to the Property.
Evolution Real Estate Partners ("EREP") is a minority-owned emerging manager featuring a diversified investment platform, an experienced management team and over $63,000,000 in assets currently under management. Additionally, EREP's management team has been involved in closing $3.5+ billion in aggregate real estate transactions throughout their careers.
EREP employs a disciplined value-add investment methodology that seeks to maximize risk-adjusted returns across most major property types, including office, multifamily, hospitality, industrial, retail, mixed use, and land. EREP’s investment methodologies are to:
- Purchase assets “off-market” and at deep discounts to replacement cost
- Concentrate on small-to-medium sized assets in supply-constrained markets
- Exercise a prudent and disciplined use of leverage
- Establish portfolio aggregation / disaggregation designed to provide diversification by geographic footprint, property type, tenant credit-worthiness and economic segment
- Exploiting market inefficiencies and/or information asymmetries
- Having multiple exit strategies formulated at the time of acquisition
Triumph Management Group ("TMG") is a full-service institution designed for the acquisition, financing, construction, rehabilitation, development, and property management of real estate assets, particularly multi-family housing. TMG specializes in conventional, low income housing tax credit, HUD financed/insured, HUD Section 8, and cooperative housing communities. TMG (through its affiliate Triumph Housing Management) currently has approximately 46 buildings and 4,200 HUD / HAP units under management across nine states.
The below track record for EREP and TMG includes only acquisitions completed by the Sponsors as GPs:
http://www.evorepartners.com/At A Glance
Investment Strategy: | Buy and Hold |
Hold Period: | 5 years |
Total Project Capitalization: | $10,692,778 |
Acquisition Price: | $10,125,000 |
Implied Bristol Park Acquisition Value: | $9,265,000 ($82,723 per existing unit) |
Bristol Park Number of Units: | 112 units |
Entitled Excess Land Size: | 7.6 acres / 120 units |
Est. Entitled Excess Land Basis: | $860,000 ($7,167 per entitled unit) |
Distributions to Realty Mogul 43, LLC: | 10% IRR Hurdle 77.5/22.5 split thereafter |
Projected First Distribution: | March 2016 |
Distribution Schedule: | Quarterly |
Investor Funding Deadline: | October 23, 2015 |
Estimated Closing Date: | October 29, 2015 |
Investment Details
Evolution Real Estate Partners and Triumph Management Group ("EREP" and "TMG" respectively, and together the "Sponsors"), plan to acquire the Property, a 112-unit apartment community located in Fayetteville, NC approximately 6 miles southwest of US Army base Fort Bragg.
The Property's existing owner H&H Homes, an institutional home builder headquartered in North Carolina, acquired the unfinished Property from the original developer in 2013. Upon completing construction in 2014, the seller was successful in attracting tenants to the Property as seen by its current occupancy level of approximately 95%. To achieve this occupancy level, the seller gave tenants a lease concession package equivalent to approximately 1.1 month's rent (9.3% of potential rent revenue) per year.
While the seller completed the development of the Property and has achieved greater than 95% occupancy, the Sponsors believe there is remaining upside potential through the gradual reduction of the in-place lease concessions. With the Property having reached an occupancy in excess of 95%, the Sponsors do not intend to continue to offer significant concession packages as long as existing occupancy at the Property is maintained. The Sponsors intend to "squeeze down" concessions packages in light of this flexibility, trending towards eliminating/minimizing concession packages at the end of the hold period.
With the acquisition of the Property the Sponsors also acquired approximately 7.6 acres of land which is entitled for the development of an additional 120 units of multifamily. The land is located at the back of the Property and away from the street, making it a slightly inferior site to the Bristol Park Apartments site. The Sponsors do not intend to develop the site during the hold period. Instead, the Sponsors project to sell the land with the Property for $860,000, which is equivalent to approximately $2.60 per square foot of land or approximately $7,167 per entitled door. There could be additional upside if market conditions are favorable and the excess land is disbursed of earlier or for a higher selling price than is underwritten.
The Sponsors, after visiting the Property's operations, were impressed with the existing property manager, Wellington Advisors, which manages several similar properties in the Fayetteville market, and have elected to retain its services. However, should the Sponsors deem that Wellington Advisors is underperforming at any point the Sponsors will be able to replace Wellington Advisors with Triumph Housing Management.
The Sponsors intend to hold the Property for five (5) years before exiting the investment, though the hold period could be longer or shorter as it will largely be dictated by execution of the business plan and market conditions. RealtyMogul.com investors have the opportunity to participate as equity stakeholders and potentially earn a share of the cash flow and asset appreciation. RealtyMogul.com investors will invest in Realty Mogul 43, LLC. Realty Mogul 43, LLC will invest in Bristol Real Estate Holdings I, LLC (BREH I), which will hold a 100% ownership interest in Bristol Real Estate Holdings, LLC which will hold title to the Apartment Property (BREH I will hold a 99.5% interest directly and a 0.5% interest indirectly through Bristol Real Estate Holdings, Inc.). BREH I will also own a 100% ownership interest in Bristol Real Estate Holdings II, LLC which will hold title to the adjacent vacant land. Investors can expect to receive quarterly updates and distributions, with the first distribution expected in March 2016 and continuing on a quarterly basis thereafter.
Investment Highlights
- Newly Constructed Apartment Community with Upside Potential Through the Reduction of Lease Concessions and the Disposition of Additional 7.6 Acre Lot
- Military Basic Allowance for Housing Supports Property's Market Rent
- Effective Rents per square foot are Priced Competitively Relative to Other New Apartments in the Market
- Sales Price per Unit is Lower Relative to Most Other New Apartments in the Market
Risk Factors*
- Forward-Looking Statements: Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated,” “projected”, “forecasted”, “estimated”, “prospective”, “believes,” “expects,” ”plans” “future” “intends,”, “should,” “can”, “could”, “might”, “potential,” “continue,” “may,” “will,” and similar expressions to identify these forward-looking statements.
- Illiquid Investment - Transfer Restrictions & No Public Market: The transferability of membership interests in Realty Mogul 43, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.
- High Military Tenant Concentration and Base Dependency: With approximately half of the tenant base directly related to the local military base there is risk associated with mass deployment or some other change occurring at the base and the impact it would have on the military-related population in town and the subsequent impact on the Property's operations.
- New Development: There is risk associated with potential new development and the impact it would have on the Property's operations.
- Lack of Operating History: There is risk associated with the lack of historical operating detail at the Property due to its newer construction.
- Uncertainty Surrounding Future Sales Price: There is risk associated with the Sponsor being unable to sell the Property as projected.
- Uncertainty Surrounding the Ability to Exit the Additional 7.6 Acres: There is risk associated with the Sponsor being unable to sell the 7.6 acres attached to the Property as projected.
- Interest-Only Loan Period: The loan being used to acquire the Property is expected to have an interest-only period during the first 36 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.
- Rising Interest Rates: The Federal Reserve has methodically reduced the amount of stimulus it was earlier injecting into the U.S. economy, and has signaled that increases in the federal funds rate may be forthcoming. This could potentially lead to rising interest rates offered by other lenders and could have an effect on the future value of the Property (since higher loan interest rates might mean that potential buyers would face proportionately higher debt service expenses).
- Mortgage Risk and Prepayment Penalty: The Sponsor has a signed loan application with a lender to provide the debt financing for the acquisition of the Property, but there can be no assurance that the lender will complete financing on the rates and terms included in the underwriting being presented in the model for this investment opportunity. Should the terms of the debt financing change materially and adversely, investors will be notified. If the debt financing does not close as anticipated and the Sponsor needs an extension on the purchase contract, the seller of the Property may not so extend and the transaction may be canceled. The lender's due diligence may result in modifications of the proposed terms indicated in the executed loan application, which may result in the transaction being canceled. The Sponsor expects that the loan used to acquire the Property will be subject to a prepayment penalty and has underwritten that such a penalty is paid upon the disposition of the Property. However, should the prepayment penalty be more expensive than is underwritten it would be diminutive to investor returns compared to the Sponsor's projections.
- Potential Conflict of Interest Risk Regarding Debt Financing: An affiliate of Realty Mogul 43, LLC (“Lender Affiliate”) expects to originate the debt financing (“Loan”) for the acquisition of the Property. The Lender Affiliate expects to earn certain fees including a fee at closing and a fee if/when the Loan is securitized. Although the manager of Realty Mogul 43, LLC believes the fees and interest rate for the Loan will be in-line with market rates, if the fees or interest rate, at closing, are above-market rates this would decrease returns on equity as compared to current projections. The Lender Affiliate will sell the Loan at closing to an unaffiliated third party, at which point the Lender Affiliate will have no ownership of the Loan or decision making authority with regard to the Loan.
- Management Risk: Investors will be relying solely on the manager of Bristol Real Estate Holdings I, LLC for the execution of its business plan. That manager in turn may rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of Bristol Real Estate Holdings I, LLC (including Realty Mogul 43, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the manager of Bristol Real Estate Holdings I, LLC has significant operating experience, Bristol Real Estate Holdings I, LLC was recently formed and has no significant operating history or record of performance.
- Sponsors have a Limited History Serving as Co-GPs on Projects: While Evolution is the majority partner in the GP entity and the operating agreement between the Sponsors provides for all major decisions to be made by Evolution, should the Sponsors have a dispute it could adversely affect the operations and/or cash flow characteristics of the Property.
- Manager of Realty Mogul 43, LLC Will Participate in Sponsor's Promote Interest: The manager of Realty Mogul 43, LLC (or one of its affiliates) will be entitled to a participation in the value of any excess distributable cash flow and any appreciation of the Property realized upon its sale. This could lead to a potential conflict of interest between the manager and Realty Mogul 43, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest. Realty Mogul 43, LLC itself is pursuing a venture capital strategy through investments in operating companies that manage and develop real estate; under this strategy, the manager of Realty Mogul 43, LLC is expected to be treated as an investment adviser exempt from federal or state registration.
- Uncertain Distributions: The manager of Bristol Real Estate Holdings I, LLC cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 43, LLC) from either net cash from operations or proceeds from the sale of the asset. That manager, in its discretion, may retain any portion of such funds for property operations or capital improvements.
- Risk of Interest Charges or Dilution for Capital Calls: The amount of capital that may be required by Bristol Real Estate Holdings I, LLC from Realty Mogul 43, LLC is unknown, and although Bristol Real Estate Holdings I, LLC does not require that its members contribute additional capital to it, it may from time to time request additional funds in the form of additional capital. Realty Mogul 43, LLC does not intend to participate in a capital call if one is requested by Bristol Real Estate Holdings I, LLC and in such event the Manager of Bristol Real Estate Holdings I, LLC may accept additional contributions from other members of Bristol Real Estate Holdings I, LLC. Amounts that the manager or other members of Bristol Real Estate Holdings I, LLC advance on behalf of Realty Mogul 43, LLC will be deemed to be either a loan at an interest rate of 10% or an additional capital contribution, in which case Realty Mogul 43, LLC's interest in Bristol Real Estate Holdings I, LLC will suffer a proportionate amount of dilution.
- General Economic and Market Risks: While the Sponsor has conducted research to justify the intended rental rates and sales price relative to comparable properties in the market, there can be no assurance that investor sentiment will be favorable, or that purchase financing to a buyer will be readily available, when the Sponsor attempts to sell the Property. The real estate market is affected by many factors, such as general economic conditions, supply and demand for real estate investments, interest rates, the availability of financing, and other factors, all of which are beyond the control of both RealtyMogul.com and Bristol Real Estate Holdings I, LLC.
*The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Investor Document Package for a discussion of additional risks.
Address: | 1141 Glen Iris Drive, Fayetteville, NC 28314 |
Years Built: | 2013-2014 |
Property Type: | Multifamily |
Number of Units: | 112 units |
Occupancy: | 95% |
Major Amenities: | Fitness Center Swimming Pool Dog Park Playground Private Patios/Balconies |
The Property is located in Fayetteville, North Carolina, near the intersection of Cliffdale Road and Buhmann Road, approximately six miles from the US Army base Fort Bragg and two miles from US Route 401. There is a local grocery store and gas station within half a mile of the Property, along with numerous dining, entertainment, and shopping options available at Cross Creek Mall less than five miles away.
The city has a local population of approximately 200,000, with the greater metropolitan area having an estimated population of approximately 350,000. Fayetteville citizens enjoy a solid overall quality of life with its low cost of living, strong military-based job market, and several higher education opportunities.
Fort Bragg Overview
The population information listed above and the market information listed below are from the Military Installation's website, the Fort Bragg website and the Fayetteville City-Data website.
Operated by the United States Army, Fort Bragg is home of the 82nd Airborne. Fort Bragg was established in 1918 and is located just west of Fayetteville, North Carolina. It is the nation's largest military installation and one of the largest military installations in the world. Fayetteville is a "Community of History, Heroes, and a Hometown Feeling" with a total metropolitan population of approximately 350,000.
With approximately 52,300 active duty Soldiers, 12,600 Reserve Components and Temporary Duty students, 8,800 civilian employees, 3,500 Contractors, and 63,000 active duty family members, Fort Bragg is the largest US Army base by population. Additionally, there are approximately 98,500 Army retirees and family members in the area.
As the U.S. military continues to downsize after pulling out of Afghanistan and Iraq, Fort Bragg avoided deep cuts from Army force reductions. According to an official announcement in July 2015, Fort Bragg will see a net loss of 842 soldiers by the end of 2018, which is well below the worst-case scenario originally presented by Army officials. George Breece, board chairman of the Fayetteville Regional Chamber, said the 842 net loss was great news considering what could have been. "While we are disappointed for any losses at Fort Bragg, the small reduction we will see versus original estimates is further reinforcement that our community continues to be a blueprint of how a community supports its military neighbors," Breece said (Fayetteville Observer, 2015). Despite Fort Bragg's status as the largest military base in the world, seven installations will see deeper cuts than Fort Bragg from the July 2015 military cuts: Fort Benning (3,402) and Fort Stewart (947) in Georgia; Fort Bliss (1,219) and Fort Hood (3,350) in Texas; Joint Base Elmendorf-Richardson, Alaska (2,631); Joint Base Lewis-McChord, Washington (1,251); and Schofield Barracks, Hawaii (1,214). In the aftermath of the announcement, local leaders said they believed the relatively small troop reduction at Fort Bragg cements the post's position as one of the nation's most important military installations. With regional stability due to the notable importance of the base to the U.S. military, the Property may benefit from resistance to possible economic fluctuations.
Fayetteville, NC Apartment Market Overview
While overall vacancy levels for apartments in Fayetteville average around 11%, which is approximately double the average vacancy rate in major US markets per Costar Portfolio Strategy, newer product in the market has achieved high stabilized occupancy, as can be seen in the occupancy levels of the Property's leasing comps on the "Investment" tab.
RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.
For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
No Approval, Opinion or Representation, or Warranty by RM Securities, LLCSponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.
Sponsor’s Information Qualified by Investment DocumentsThe information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.
Risk of InvestmentThis investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.
No Reliance on Forward-Looking Statements; Sponsor AssumptionsSponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.
Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.
No Reliance on Past PerformanceAny description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.
Sponsor’s Use of DebtA substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.
Sponsor’s Offering is Not RegisteredSponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.
No Investment AdviceNothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
1031 Exchange RiskInternal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.