According to Axio, the San Diego market has experienced average annual rent growth of 4.3% since 2011; additionally, CoStar reports that the median household income within one mile of the Property is $73,337.
Latest loan terms suggest a loan-to-cost of 62.6%; lower leverage reduces volatility and mitigates downside risk.
The Property is being purchased at a favorable basis; the $444,444 per unit purchase price* represents a 34% discount to the median home value within one mile of the Property (according to CoStar).
*based on nine (9) post-renovation units
$4,000,000
DMJ Capital Partners
DMJ Capital Partners ("DMJ") was formed by three like-minded individuals, Doug Ceresia, Matt Midura, and Josh Buchholz, whose passion for real estate is fueled by a determination to seek new and innovative ways of practicing smart business and sound investment principles. Headquartered in San Diego, California, DMJ is a privately held real estate investment management and operating company whose goal is to create substantial returns for its investors.
Having demonstrated a superior track record for numerous years as commercial real estate brokers, the founders of DMJ were approached by various clients and investors who found it extremely challenging to participate in attractive real estate investments in Southern California. As a result, DMJ was formed to provide a platform for various types of investors to benefit from the stability of the commercial investment market.
Focused on acquiring value-add multifamily and office opportunities through select investing in submarkets with high barriers to entry, DMJ is dedicated to guiding its partners and investors to long-term prosperity by utilizing its extensive brokerage connections and local expertise in the marketplace.
The Principals have been partners in one of San Diego’s leading brokerage teams for more than a decade. All three of them were recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. In this approach to serving clients, it is no surprise that they have successfully closed over 900 sale and lease transactions totaling in excess of 600 million dollars throughout San Diego County. They are partners but more importantly friends who enjoy a work/life balance by engaging meaningfully with work, family, and the community.
The acquisition of Tiffany Apartments will represent RealtyMogul's second transaction with DMJ. The previous transaction, Riviera Marina, closed in October 2018 and has not yet gone full cycle. However, DMJ is tracking towards full, successful completion of their business plan.
Due to RealtyMogul's large equity interest, it has negotiated full control over the deal and will be very involved in the management and execution of the business plan.
https://www.dmjpartners.com/-
Doug Ceresia, CCIM, SIORPrincipal -
Matt MiduraPrincipal
-
Josh BuchholzPrincipal
Mr. Ceresia will primarily oversee property management and work with the property management company to maximize leasing. He has extensive experience in commercial real estate brokerage. His track record includes the sales and leasing of over 2.25 million square feet of commercial property. Prior to launching DMJ in 2018, Mr. Ceresia was recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. He holds a BS in Business and Public Administration from the University of Missouri.
Mr. Buchholz will lead construction through the renovation period. He has extensive experience in commercial real estate brokerage. His track record includes the sales and leasing of over 2.25 million square feet of commercial property. Prior to launching DMJ in 2018, Mr. Ceresia was recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. He holds a BA in International Business from San Diego State University.
| Address | Location | Asset Type | Date Acquired | Total SqFt | Purchase Price |
|---|---|---|---|---|---|
| DMJ Track Record | |||||
| Riviera Marina | San Diego, CA | Multifamily | Oct-18 | 10,432 | $5,500,000 |
| Notable Sales Brokered by DMJ Principals | |||||
| 9303 & 9323 Chesapeake Dr | San Diego, CA | Office | Feb-18 | 37,754 | $6,450,000 |
| 8787 Complex Dr | San Diego, CA | Office | Oct-17 | 55,500 | $12,100,000 |
| Valley Corporate Center | San Diego, CA | Office | Jan-17 | 175,826 | $42,125,000 |
| 2251 San Diego Ave | San Diego, CA | Office | Jan-17 | 64,000 | $13,825,000 |
| 232 West Ash | San Diego, CA | Office | Sep-16 | 20,000 | $8,258,160 |
| 1400 Front St | San Diego, CA | Retail | Sep-16 | 12,454 | $6,941,840 |
| 2051 Columbia St | San Diego, CA | Multifamily | Dec-16 | N/A | $11,800,000 |
| 330 A Street | San Diego, CA | Office | Dec-16 | 9,000 | $6,250,000 |
| 1620 5th Avenue | San Diego, CA | Office | Dec-15 | 80,650 | $18,500,000 |
| The Campus at Fashion Valley | San Diego, CA | Retail | Oct-15 | 69,895 | $17,000,000 |
| 600 B Street | San Diego, CA | Office | Aug-12 | 374,000 | $49,000,000 |
| 668 Sixth Avenue | San Diego, CA | Retail | Jun-12 | 32,124 | $8,000,000 |
| Total | 931,203 | $200,250,000 |
The management overview and track record detailed above were provided by the Real Estate Company and has not been verified by Realty Mogul or NCPS.
In this transaction, RealtyMogul investors are to invest in RealtyMogul 133, LLC ("The Company"), which is to subsequently invest in The Tiffany, LLC ("The Target"), a limited liability company that will indirectly own interest in the Property. DMJ Capital, LLC (the "Real Estate Company") is under contract to purchase the Property for $4.0 million ($444,444 per unit) and the total project cost is expected to be $5.3 million ($588,799 per unit).
The Real Estate Company plans to implement a value-add strategy in which it will capitalize $823,736 ($91,526 per unit) for capital improvements. Of this, $319,408 ($53,235 per unit) will be spent renovating the interiors of the six units on the first and second floors. $316,977 ($105,659 per unit) will be spent converting the 3,300 square foot penthouse into three two-bed-two-bath units. $59,466 will be spent on exterior improvements. The budget contains $53,000 for soft costs, as well as a $74,885 contingency (10%). The Real Estate Company will also mark rents to market, with current rents (excluding the owner-occupied penthouse) 23% below Axio's submarket rents. The Real Estate Company intends to hold the Property for 18 months, and then sell it at a 3.75% cap rate for $6.2 million ($692,090 per unit).
Below is a summary of the capital improvements budget:
| CapEx Item | $ Amount | Per Unit |
|---|---|---|
| Exterior Renovations | ||
| Paint | $21,000 | $2,333 |
| Driveway Slurry Coat | $3,000 | $333 |
| Porta Potty | $4,000 | $444 |
| Petty Bone Rental | $8,400 | $933 |
| Fencing | $3,000 | $333 |
| Dumpster | $5,000 | $566 |
| Scaffold | $8,500 | $944 |
| Overhead | $3,174 | $353 |
| Contractor Fee | $2,804 | $312 |
| Insurance | $589 | $65 |
| Exterior Subtotal | $59,466 | $6,607 |
| Interior Renovations | ||
| Demos | $24,300 | $2,700 |
| Electrical | $42,352 | $4,706 |
| Plumbing | $114,002 | $12,667 |
| Bathroom Fixtures | $30,120 | $3,347 |
| Drywall and Insulation | $33,950 | $3,772 |
| Ceiling | $47,750 | $5,306 |
| Flooring | $46,950 | $5,217 |
| Kitchen Backsplash | $6,390 | $710 |
| Cabinets | $35,865 | $3,985 |
| Appliances | $18,000 | $2,000 |
| Fire Caulking | $1,200 | $133 |
| Countertops | $26,550 | $2,950 |
| Air Conditioning | $16,650 | $1,850 |
| Baseboard | $3,435 | $382 |
| Paint | $13,650 | $1,517 |
| 3rd Floor Closets | $900 | $100 |
| Doors and Windows | $17,250 | $1,917 |
| Supervision, General Labor, and Materials | $76,059 | $8,541 |
| General Cleaning | $10,740 | $1,193 |
| Overhead | $33,967 | $3,774 |
| Contractor Fee | $30,004 | $3,334 |
| Insurance | $6,301 | $700 |
| Interior Subtotal | $636,385 | $70,709 |
| Soft Costs | $53,000 | $5,889 |
| Contingency | $74,885 | $8,321 |
| Total | $823,736 | $91,526 |
Built in 1979, The Tiffany (the "Property") is a seven-unit apartment complex comprised of six two-bed-two-bath units (each 1,145 square feet) and a 3,300 square foot penthouse, which has been occupied by the current owner, who is also the original developer, since construction. All units have panoramic views of San Diego Bay. The Property has immediate access to Interstate 5, is 1.9 miles from San Diego International Airport, and 0.5 miles from the seafront. It is only 0.4 miles from Balboa Park, a lushly planted 1,200 acre area of the city that includes 16 museums, several performing arts venues, gardens, trails, and the San Diego Zoo. Within one mile of the Property are a multitude of retail and dining options. There are currently two vacancies at the Property including the owner's penthouse, which has been vacated prior to sale.
| Unit Type (In-Place) | # of Units | Unit (Square Feet) | In-Place Rent | Post-Reno Rent |
|---|---|---|---|---|
| 2/2 (1st Floor) | 3 | 1,145 | $1,367 | $3,210 |
| 2/2 (2nd Floor) | 3 | 1,145 | $1,833 | $3,310 |
| 2/2 (PH) | 3 | 1,100 | $0 | $3,425 |
| Totals/Averages | 9 | 1,130 | $1,600* | $3,315 |
*Average in-place rent excludes owner's unit
| 2330 1st Ave. | 2330 1st Ave. | The Cathryn | Lofts on Laurel | Total/Averages | Subject | |
|---|---|---|---|---|---|---|
| Year Built | 2006 | 2006 | 2018 | 2010 | 1979 | |
| Rent (2x2) | $3,163 | $3,658 | $3,163 | $3,460 | $3,361 | $3,315 |
| Square Footage (2x2) | 1,101 | 1,102 | 1,045 | 1,045 | 1,073 | 1,130 |
| $/SF (2x2) | $2.87 | $3.32 | $3.03 | $3.31 | $3.13 | $2.93 |
| Distance from Subject | 0.1 miles | 0.1 miles | 0.6 miles | 0.1 miles | 0.2 miles |
All rents are net effective
| 3783 1st Ave. | 3657-3661 7th Ave. | 4069-4077 Brant St. | West Mission Hills Six | Averages | Subject | |
|---|---|---|---|---|---|---|
| Date | May-18 | Jan-17 | Jun-18 | Nov-17 | Jun-19 | |
| Year Built | 1953 | 1978 | 1920 | 1956 | 1952 | 1979 |
| # of Units | 5 | 5 | 3 | 6 | 5 | 9 |
| Purchase Price | $2,290,000 | $2,194,000 | $1,550,000 | $2,400,000 | $2,108,500 | $4,000,000 |
| $/Unit | $458,000 | $438,800 | $516,667 | $400,000 | $453,367 | $444,444 |
| Cap Rate | 2.36% | 3.35% | N/A | 4.23% | 3.31% | N/A* |
| Distance from Subject | 1.2 miles | 1.1 miles | 1.4 miles | 0.7miles | 1.1 miles |
*Cap rate not applicable as owner was occupying the entire top floor (equivalent of three units) and was likely expensing personal items
Sale and lease comps were obtained from CoStar, Axiometrics, Zillow, and Realty Mogul's site visit
Market Overview
Per CoStar, 2018 was a year of equilibrium for the San Diego apartment market, with vacancies remaining low, annual rent growth above the long-term average, and more than 4,200 market-rate units added for the first time since the recession. San Diego's economy is diversified among innovation, tourism, trade, and the military, meaning that the metro's apartment fundamentals are on firm footing. San Diego boasts one of the top high-tech and life science clusters in the country. The metro is home to more than 80 research institutes, including six universities. Venture capital poured into San Diego last year with life science and pharmaceutical companies receiving the bulk of the investment. The innovation economy in San Diego contributes almost 15% of San Diego's annual GDP, with these jobs paying on average $132,000 compared to $63,000 in the rest of the economy. This sector is set to grow, with Scripps Health announcing $2.6 billion of upgrades to its five campuses across the metro. Major San Diego defense contractors are a pillar of the metro's economy, and the Navy's renewed focus on the Pacific theatre of operation is set to galvanize the military presence in the area. Additionally, the port of San Diego supports more than 40,000 jobs locally.
Per Axiometrics, effective rent decreased 0.5% from $1,953 in 4Q18 to $1,944 in 1Q19, and annual effective rent growth was 4.2% in 2018. Annual effective rent growth is forecast to be 3.3% in 2019, and average 3.2% over the hold period. Annual effective rent growth has averaged 4.0% since 1Q95. The market's annual rent growth rate was above the national average of 2.7%. The market's occupancy rate decreased from 96.5% in 4Q18 to 96.0% in 1Q19, and was down from 96.3% a year ago. The market's occupancy rate is expected to be 96.0% in 2019, and average 95.6% over the hold period. The market's occupancy rate has averaged 95.9% since 1Q95.
Submarket Overview
Per CoStar, Balboa Park is an urban submarket with a plurality of residents in the prime renting cohort of 25-34 years old. It is filled with attractive neighborhoods, parks, and easy freeway access. Rents have traditionally been among the more affordable of San Diego's submarkets. Developers have targeted the redevelopment of older buildings and parking lots for apartment and condo additions over the past couple years. They are building smaller, boutique communities that accommodate the character of the many walkable neighborhoods that comprise the submarket. The area is on the front lines of efforts to build higher-density projects, but with that comes increasing levels of neighborhood opposition to almost every project that casts a shadow.
| 1 Mile | 3 Miles | 5 Miles | |
|---|---|---|---|
| Population | 27,461 | 210,222 | 500,264 |
| Population (2024) | 28,622 | 219,707 | 516,579 |
| Average Age | 41 | 37 | 36 |
| Median Household Income | $73,337 | $65,140 | $61,959 |
| Average Household Size | 1.5 | 2.0 | 2.3 |
| Median Home Value | $671,347 | $638,365 | $596,367 |
| Population Growth 2019-2024 | 4.23% | 4.51% | 3.26% |
Demographic information above was obtained from CoStar.
| Sources of Funds | Amount |
|---|---|
| Debt | $3,320,000 |
| Equity | $1,984,236 |
| Total Sources of Funds | $5,304,236 |
| Uses of Funds | Amount |
| Purchase Price | $4,000,000 |
| Real Estate Company Acquisition Fee | $120,000 |
| Broker Dealer Fee | $68,400 |
| Loan Fee | $58,100 |
| CapEx Budget | $823,736 |
| Working Capital | $25,000 |
| Interest Reserve | $164,000 |
| Closing Costs | $45,000 |
| Total Uses of Funds | $5,304,236 |
Please note that the Sponsor's equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor
The expected terms of the debt financing are as follows:
- Total Estimated Proceeds: $3,320,000
- Initial Estimated Funding: $2,500,000
- Future Estimated Funding: $820,000
- Estimated Rate (Fixed): 5.95%
- Amortization: 27 years
- Term: 15 years
- Interest Only: 3 years
- Exit Fee: 5.0% in months 1-12, 2.0% in months 13-24, and 1.0% in months 25-36
- Extension Options: None
There can be no assurance that a lender will provide debt on the rates and terms noted above, or at all. All rates and terms of the debt financing are subject to lender approval, including but not limited to possible increases in capital reserve requirements for funds to be held in a lender controlled capital reserve account.
The Target intends to make distributions to investors (the Company and Real Estate Company, collectively, the "Members") as follows:
- To the Members, pari passu, all excess operating cash flows to an 8.0% IRR to the Members;
- 70.0% / 30.0% (70.0% to Members / 30.0% to promote) of excess cash flow to an 18.0% IRR;
- 50.0% / 50.0% (50.0% to Members / 50.0% to promote) of excess cash flow and appreciation thereafter.
Note that these distributions will occur after the payment of the Company's liabilities (loan payments, operating expenses and other fees as set forth in the LLC agreement, in addition to any member loans or returns due on member loans).
The manager of The Company may receive a portion of the promote. Distributions are expected to start in December 2020 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Real Estate Company, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2* | |
|---|---|---|
| Effective Gross Revenue | $138,640 | $177,939 |
| Total Operating Expenses | $96,237 | $52,112 |
| Net Operating Income | $42,403 | $125,827 |
*Year two is only six months due to sale in month 18
| Year 0 | 2019 | 2020 | |
|---|---|---|---|
| Distributions to RealtyMogul 133, LLC Investors | ($1,750,000) | $0 | $2,183,645 |
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $0 | $62,390 |
Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
| Acquisition Fee | $120,000 | Real Estate Company | Capitalized Equity Contribution | 3.0% of the Property purchase price |
| Broker-Dealer Fee | $68,400 | North Capital | Capitalized Equity Contribution | Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 133, LLC |
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
| Management and Administrative Fee | 1.0% of amount invested in RealtyMogul 133, LLC | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of RealtyMogul 133, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
| Property Management Fee | 5.0% of Effective Gross Income | South Coast Commercial | Distributable Cash |
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.
(2) Fees may be deferred to reduce impact to investor distributions.
The above presentation is based upon information supplied by the Real Estate Company or others. Realty Mogul, Co., RM Manager, LLC, and The Company, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
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.
Non-Transferability of Securities
The transferability of membership interests in The Company 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. Moreover, the estimated investment holding period described herein is only a projection, and there can be no assurance when or if an investment may be liquidated. 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.
Escrow Contingency
All funds from investors will be held in a non-interest bearing escrow account with Broker-Dealer as escrow agent for the benefit of the investors in accordance with Rule 15c2-4 under the Exchange Act. All investor funds will be transmitted directly by wire or electronic funds transfer via ACH to the escrow account maintained by the escrow agent per the instructions in the Subscription Agreement. Upon certification by Broker-Dealer and acceptance by the Company that all contingencies have been met, the investor’s funds will be promptly transmitted to the Company. If the contingencies fail to be satisfied during the offering period, we will instruct the Broker-Dealer to return all funds to the investors without interest, deduction, or setoff, and all of the obligations of the investor hereunder shall terminate.
Capital Adequacy
The Target anticipates that present cash reserves, together with the net proceeds from the sale of Membership Interests in this offering, will be sufficient to finance operating costs and expenses for a period of at least 75 days following the closing of this offering, assuming that all of the Membership Interests offered hereby are sold in accordance with the terms hereof. However, the Target may need additional capital to continue and expand operations and to implement business plan and strategy, as contemplated in this offering. If operations expand faster or at a higher rate than currently anticipated or revenues generated by the Target are lower than projected, additional capital may be required sooner than expected to fund the business plan. There is no assurance or guarantee that additional capital will be available when needed by the Target, or that such capital will be available under terms acceptable to the Target or on a timely basis. If additional funds are raised through the issuance of equity, convertible debt, or similar Membership Interests of the Company, the percentage of ownership of the Company by the Company's Members will be reduced, the Company's Members may experience dilution, and such Membership Interests may have rights or preferences senior to those of the Company's Membership Interest issued pursuant to this offering. There is no assurance that additional financing will be available on terms favorable to Target or at all. If adequate funds are not available or are not available on acceptable terms, the ability to fund the business plan would be limited significantly. This limitation could harm substantially the business, results of operations, and financial condition.
Fluctuating Values of Real Property
Real estate valuation is an inherently inexact process, and depends on numerous factors, all of which are subject to change. Appraisals or opinions of value may prove to be insufficiently supported, and the Company’s review of the value of the Property and/or security may be based on information that is incorrect or opinions that are overly optimistic. The risk of default on any loan in such situations is increased, and the risk of loss to investors in the Company will be similarly increased.
Uncertain Exit Timing
Although it is anticipated that the Property will be sold at the end of the expected holding period, the Company may not have any meaningful control over the timing of the sale of the Property, and therefore we cannot offer assurances of when a sale of the Property may occur. If the Property is not sold during the expected holding period the Company may have certain rights (either at that point or at a later time), to force a sale of the Property or force a purchase of the interests of Company, however, if such rights exist they may be subject to other limitations such as the approval of the lender holding the loan secured by the Property and the requirements of the operating agreement of the Target.
California State Environmental Risks
The State of California is subject to various natural disasters, including severe drought, earthquakes, and fire seasons. The Property is vulnerable to damage or interruption from such natural disasters, power losses, telecommunication failures, terrorist attacks, human errors, break-ins and similar events. The occurrence of a natural disaster or other unanticipated problem could result in a strain on the Company’s financial condition. The is no guarantee that the Target will carry adequate insurance for the Property at the time of a loss. Because the Property is located in an earthquake fault zone, it is particularly sensitive to the risk of damage to, or total destruction of, the Property, which, if incurred, could adversely affect the Target’s results of operations and financial condition, and consequently have a material adverse effect to the Company’s financials and its investors.
The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Issuer Document Package for a discussion of additional risks. The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., RM Manager, LLC, and The Company, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.