We run extensive background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to never allowing a sponsor with a criminal history / any securities related issue to use the platform, we may also turn down sponsors due to poor reference checks even if background and criminal checks come back clear.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent. When an investor makes an investment with unaffiliated 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 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.
Our controls include visiting every property (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.
We have robust quality controls with detailed checklists and a review of third-party reports.
The Real Estate Company has acquired nine assets in North Carolina since 2017, four of which are in Greensboro, NC. In addition, they have meaningfully upsized their team and opened an office in Raleigh, NC to facilitate local management efforts. RealtyMogul previously invested with the Real Estate Company in Hawthorne North Ridge, Lofts at Midtown, and Triangle Park Apartments.
The Real Estate Company is purchasing the Property for $56,522 per unit which compares favorably to comparable transactions in the market. This is reportedly due to the off-market nature of this transaction and a Seller with a limited presence and track record locally.
There is precedence and demand for deep renovations of comparable product in the immediate submarket. The Property’s closest and truest competitor, Summit Village, underwent a similar renovation and has reportedly achieved monthly premiums in excess of $150 per unit per month. The Real Estate Company assumes an average renovation premium of $148 per unit per month.
Willow Creek Partners
Willow Creek Partners ("Willow Creek" or the "Real Estate Company"), is a privately-held, vertically integrated multifamily investment and management firm based in Reston, VA. Over the past three years, Willow Creek has acquired ten assets, nine of which are in North Carolina, four of which are in Greensboro, NC. Willow Creek has also recently opened an office in Raleigh, NC and upsized their team from seven employees to twelve, including a VP of Property Management, two VPs of Construction, and two Regional Managers. Willow Creek primarily targets multifamily, both conventional and student housing, in markets where economic conditions provide for increased real estate demand and aims to be long term investors in income-producing real estate. Willow Creek executes their business plans by employing a proven investment strategy comprised of three major elements: identifying markets with built-in demand drivers, focusing on secondary and tertiary markets where local knowledge can potentially create a competitive advantage, and unlocking value through rigorous underwriting and proactive asset management. RealtyMogul previously invested with Willow Creek in Hawthorne North Ridge, Lofts at Midtown, and Triangle Park Apartments.
An investment overview of Hawthorne North Ridge can be found here: https://www.realtymogul.com/investment-opportunity/905616
An investment overview of Lofts at Midtown can be found here: https://www.realtymogul.com/investment-opportunity/633421
An investment overview of Triangle Park can be found here: https://www.realtymogul.com/investment-opportunity/477060
http://willowcreekpartners.co
Property Name | Location | Asset | Units | Beds | Purchase Price | Date Acquired |
---|---|---|---|---|---|---|
Madison Woods | Greensboro, NC | Multifamily | 180 | - | $13,350,000 | June 2017 |
Terrace at Olde Battleground | Greensboro, NC | Multifamily | 156 | - | $13.608.000 | June 2017 |
Terrace Oaks | Greensboro, NC | Multifamily | 120 | - | $9,924,000 | June 2017 |
Campus East | Greensboro, NC | Student Housing | - | 36 | $2,150,000 | November 2017 |
Blue Ridge | Raleigh, NC | Student Housing | - | 48 | $6,500,000 | September 2017 |
Hunt Club | Winston-Salem, NC | Multifamily | 128 | - | $7,680,000 | December 2017 |
Triangle Park | Raleigh, NC | Multifamily | 120 | - | $11,500,000 | March 2018 |
Azalea Hill | Greenville, SC | Multifamily | 160 | - | $19,000,000 | June 2018 |
Lofts at Midtown | Raleigh, NC | Multifamily | 184 | - | $24,000,000 | August 2018 |
Stonegate & Carlton Scott | Blacksburg, VA | Student Housing | - | 196 | $10,948,000 | August 2018 |
Hawthorne North Ridge | Raleigh, NC | Multifamily | 600 | $70,000,000 | April 2019 | |
Total | 1,648 | 280 | $175,052,000 |
The above track record information was provided by the Real Estate Company and has not been independently verified by RealtyMogul.
In this transaction, Realty Mogul investors are to invest in Realty Mogul 136, LLC ("The Company"), which is to subsequently invest in Brannon Park Partners, LLC ("The Target"), a limited liability company that will, through a 100% wholly owned subsidiary, hold title to the Property. Willow Creek Partners (the "Real Estate Company") is under contract to purchase the Property for $16.9 million ($56,522 per unit) and the total project cost is expected to be approximately $20.6 million ($69,055 per unit). The Property will be managed by Willow Creek Partners.
The business plan is to implement a value-add strategy whereby the Real Estate Company will acquire, renovate, lease up, and generally reposition the Property more favorably within the submarket and its competitive set over a three-year target time horizon. Willow Creek has negotiated an acquisition price of $16,900,000 ($56,522 per unit), which compares favorably to other recent trades in the market, and intends to spend $2,373,200 ($7,937 per unit) on interior ($3,300 per unit) and exterior ($4,637 per unit) renovations. The Real Estate Company plans to enhance curb appeal with new vinyl siding, window trim, window trim paint, breeze way flooring, breeze way lighting, breeze way painting, pool renovations, landscaping, and clubhouse renovations. Interiors are to receive refinished countertops, vanity mirrors, bathroom fixtures, wet area flooring, plumbing fixtures, lighting fixtures, and new appliances as needed (50% estimated). This transaction was secured on an off-market basis, obtained through local broker relationships, and is under contract with an estimated closing date of 10/25/19.
Exterior Improvements | $ Amount | $/Unit |
---|---|---|
Vinyl Siding | $560,000 | $1,873 |
Breeze Way Flooring | $220,500 | $737 |
Window Trim | $110,600 | $370 |
Landscaping | $100,000 | $334 |
Pool Renovation | $75,000 | $251 |
Clubhouse Renovation | $75,000 | $251 |
Window Paint | $56,000 | $187 |
Breeze Way Lighting | $50,400 | $169 |
Breezeway Paint | $49,000 | $164 |
HVAC Reserves | $40,000 | $134 |
Roof Repairs | $15,000 | $50 |
Air Handler Reserves | $15,000 | $50 |
Pond Treatment | $10,000 | $33 |
Patio Door Flashing | $10,000 | $33 |
Exterior Subtotal | $1,386,500 | $4,637 |
Interior Improvements | $ Amount | $/Unit |
---|---|---|
Appliances(1) | $328,900 | $1,100 |
Wet Area Flooring | $239,200 | $800 |
Countertop Refinishing | $119,600 | $400 |
Plumbing Fixtures | $89,700 | $300 |
Lighting Fixtures | $89,700 | $300 |
Bath Accessories | $59,800 | $200 |
Vanity Mirrors | $44,850 | $150 |
Miscellaneous | $14,950 | $50 |
Interior Subtotal | $986,700 | $3,300 |
Grand Total | $2,373,200 | $7,937 |
(1) Replacing approximately half of the appliances, depending on the condition of the existing appliances
Brannon Park Apartments is a class-C, three-story, low-rise multifamily asset situated in the North Greensboro Submarket within the Greensboro/Winston-Salem, NC MSA. Built in 1985, the Property is comprised of studio (13 units), one- (132 units) and two-bedroom (154 unit) floor plans combining to 299 units across 23.7 acres. The Property is located just north of Downtown Greensboro and Moses H. Cone Memorial Hospital, the central facility of Cone Health and one of Greensboro’s largest employers. Additionally, The Village at North Elm, a retail destination home to restaurants, grocers, and newly constructed luxury apartments, sits less than a mile from the Property. Amenities include a basketball court, fitness center, pool, playground, grills, laundry facilities, and a clubhouse. The Property is currently 87.0% occupied with in place rents of $594 per unit.
Unit Type | # of Units | % of Total | Unit Size (square feet) | In-place Rent | Post-reno Rent |
---|---|---|---|---|---|
Studio | 13 | 4% | 478 | $522 | $600 |
1 Bed, 1 Bath | 132 | 44% | 618 | $557 | $700 |
2 Bed, 1 Bath | 154 | 52% | 824 | $632 | $790 |
Total/Averages | 299 | 100% | 718 | $594 | $742 |
Summit Village | Margate on Cone | Pointe at Irving Park | Total/Averages | Subject | |
---|---|---|---|---|---|
Submarket | North Greensboro | North Greensboro | North Greensboro | North Greensboro | |
Units | 276 | 233 | 198 | 236 | 299 |
Year Built | 1985 | 1968 | 1988 | 1980 | 1985 |
# Units (Studio) | 12 | 12 | 13 | ||
SF (Studio) | 418 | 418 | 478 | ||
Rent (Studio) | $625 | $625 | $600 | ||
Rent/SF (Studio) | $1.50 | $1.50 | $1.26 | ||
# Units (1x1) | 120 | 77 | 78 | 92 | 132 |
SF (1x1) | 618 | 673 | 773 | 688 | 618 |
Rent (1x1) | $725 | $705 | $725 | $718 | $700 |
Rent/SF (1x1) | $1.17 | $1.05 | $0.94 | $1.05 | $1.13 |
# Units (2x1) | 144 | 33 | 12 | 63 | 154 |
SF (2x1) | 824 | 673 | 915 | 804 | 824 |
Rent (2x1) | $825 | $730 | $839 | $798 | $790 |
Rent/SF (2x1) | $1.00 | $1.08 | $0.92 | $1.00 | $0.96 |
Distance from Subject (mi.) | 0.2 miles | 1.5 miles | 1.0 miles | 1.3 miles | N/A |
Village 1373 | Summit Village | Kensington Place | 5939 W Friendly Ave | Total/Averages | Subject | |
---|---|---|---|---|---|---|
Date | Dec '18 | Oct '18 | Aug '16 | Jan '18 | ||
Units | 332 | 276 | 128 | 502 | 310 | 299 |
Year Built | 1987 | 1985/2006 | 1985 | 1973 | 1982 | 1985 |
Average SF | 943 | 717 | 944 | 944 | 887 | 718 |
Purchase Price | $21,250,000 | $16,500,000 | $9,310,000 | $28,100,000 | $18,790,000 | $16,900,000 |
$/Unit | $64,006 | $59,783 | $72,734 | $55,976 | $63,125 | $56,522 |
Cap Rate | 5.10% | 5.96% | N/A | 5.80% | 5.62% | 5.58%(1) |
Distance from Subject (mi.) | 1.1 miles | 0.2 miles | 6.1 miles | 8.4 miles | 4.0 miles | N/A |
(1) Subject cap rate reflects trailing 12 months of operations.
Sale and Lease Comparable information provided by CoStar, Axiometrics, and the Real Estate Company.
Market Overview
Per CoStar, Greensboro's strong population growth has increased housing demand in the metro, and increased apartment leasing. Vacancies have fallen considerably in recent quarters as new residents moved into apartments. Rents have appreciated well, climbing 5.4% in the past year. Investment in the metro has also increased this cycle, partially contributed to by the appreciation of assets by more than 50% since 2010. Greensboro northern and western submarkets are currently in the midst of a construction wave. New construction has predominantly been higher-end garden-style communities, often near the metro's urban core. Rents have been able to climb in recent quarters, especially in high and mid-end properties. Investors have taken notice of the metro's recent growth and have responded by increasing their holdings in Greensboro.
Per Axiometrics, effective rent increased 1.2% from $751 in 4Q18 to $802 in 1Q19. The submarket's annual rent growth rate of 3.9% was below the market average of 5.3%. Out of the seven submarkets in the market, the North Greensboro submarket ranked 4th for quarterly effective rent growth and 7th for annual effective rent growth for 1Q19. Annual effective rent growth is forecast to be 3.2% in 2019, and average 2.4% through 2020 to 2022. The annual effective rent growth has averaged 1.3% per year since 2Q96. The submarket's occupancy rate decreased from 95.1% in 4Q18 to 94.9% in 1Q19, and was up from 93.8% a year ago. The submarket's occupancy rate was above the market average of 94.8% in 1Q19. For the forecast period, the submarket's occupancy rate is expected to decrease to 94.2% in 2019 and average 92.9% from 2020 to 2022. The submarket's occupancy rate has averaged 92.2% since 2Q96.
Sources of Funds | Cost |
---|---|
Debt | $13,380,000 |
Equity | $7,267,320 |
Total Sources of Funds | $20,647,320 |
Uses of Funds | Cost |
Purchase Price | $16,900,000 |
Real Estate Company Acquisition Fee | $253,500 |
Broker Dealer Fee | $120,000 |
CapEx Budget | $2,373,200 |
Senior Loan Fee | $200,700 |
Tax & Insurance Escrows | $164,947 |
Operating & CapEx Reserves | $237,320 |
Working Capital | $22,616 |
Closing Costs & Fees | $375,037 |
Total Uses of Funds | $20,647,320 |
Please note that the Real Estate Company's equity contribution may consist of friends and family equity and equity from funds controlled by the Real Estate Company.
The expected terms of the debt financing are as follows:
- Lender: The Bancorp
- Estimated Proceeds: $13,380,000
- Estimated Rate (Floating): 5.0% (30-Day LIBOR + 295 basis points)
- Amortization: N/A
- Term: 3 years
- Interest Only: 3 Years
- Prepayment Penalty: 18-months spread maintenance
- Extension Options: Two, one-year options
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 will make distributions to investors (The Company and Real Estate Company, collectively, the "Members") as follows:
Operating Income, Refinance, and Sales Proceeds
- To the Members, pari passu, all excess operating cash flows to a 8.0% IRR to the Members;
- 80.0% / 20.0% (80.0% to Members / 20.0% to Promote) to a 16% 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 March 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 | Year 3 | |
---|---|---|---|
Effective Gross Revenue | $2,196,128 | $2,528,711 | $2,745,971 |
Total Operating Expenses | $1,260,379 | $1,298,756 | $1,334,406 |
Net Operating Income | $935,749 | $1,229,955 | $1,411,565 |
Year 0 | 2019 | 2020 | 2021 | 2022 | |
---|---|---|---|---|---|
Distributions to RealtyMogul 136, LLC Investors | ($3,030,000) | $0 | $101,998 | $207,047 | $4,397,419 |
Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $0 | $1,683 | $3,417 | $72,565 |
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 | $253,500 | Real Estate Company | Capitalized Equity Contribution | 1.5% of the Property purchase price |
Broker-Dealer Fee | $120,000 | North Capital (1) | Capitalized Equity Contribution | Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 136, LLC |
Type of Fee | Amount of Fee | Received By | Paid From | Notes |
---|---|---|---|---|
Management and Administrative Fee | 1.0% of amount invested in RealtyMogul 136, LLC | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of RealtyMogul 136, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
Asset Management Fee | 1.0% of Effective Gross Income | Real Estate Company | Distributable Cash | |
Property Management Fee | 3.0% of Effective Gross Income | Real Estate Company | Distributable Cash |
(1) North Capital Private Securities Corporation (“NCPS”), a registered broker-dealer who will act as placement agent for interests in the Company will be paid a fee as outlined above. NCPS will pay a referral fee to Mogul Securities, LLC (“MS”), an affiliate of the Manager and RealtyMogul, Co., for referring the transaction pursuant to a referral agreement between NCPS and MS. Certain employees of Realty Mogul, Co., an affiliate of Manager are registered representatives of, and are paid commissions by, NCPS.
(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.
Floating Interest Rate
The loan being used to acquire the Property is expected to have a floating rate based on the London Interbank Offered Rate (“LIBOR”). If LIBOR increases the interest payments due on the loan are expected to increase as well. This could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.
Apartment Complex - Competition
Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. The Property will compete with other residential alternatives to attract tenants, including but not limited to other apartment units that are currently available for rent, new apartments that are built and condominiums/houses that are for rent or sale. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify. If the Property is not able to successfully compete with the competitive residential alternatives in the local or regional area this could adversely affect the ability of Target to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.
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 Call Risk
The amount of capital that may be required by the Target from the Company is unknown, and although the Target does not require that the Company and its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or sell additional equity. The Company does not intend to participate in a capital call if one is requested by the Target, and in such event the manager of the Target may accept additional contributions from other members of Target or from new members. In the event that the manager of Target advances any capital on behalf of the Company, it will be deemed to be a manager loan at an interest rate that cannot be determined at this time. Amounts that are contributed by existing or new members will be deemed to be additional capital contributions, in which case the Company's interest in Target will potentially suffer a proportionate amount of dilution.
Renovation Risks
The Property was 87.0% occupied as of July 2019, and the Target intends to implement a capital improvement plan involving the interior and exterior renovation of the Property, and a leasing program in its effort to add value to the Property. The Target intends to renovate all or some of the units within the Property and increase the current rental rates of such renovated units. There can be no assurance that, (i) the renovations will be consummated on a timely basis, (ii) the renovations will be completed satisfactorily, (iii) such work will not materially adversely affect other aspects of the operation of the Property, and (iv) the planned rental rate increase will have favorable results to meet the goals the Target projected. Any delays or negative results of the renovation work or rental increase efforts could adversely affect the Property’s financial results or occupancy levels, including its business operations and thus the value of the Company’s investment.
Interest-Only Loan Period
The loan being used to acquire the Property is expected to have an interest-only period during the first 3 years of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.
Tenant-in-Common Interests in Properties (TICs)
The transaction is being structured as tenant-in-common (“TIC”) investment. Therefore, instead of acquiring full equity ownership of the Property, the Sponsor will acquire TIC interest that will be subject to certain agreements with one or more other TIC interest equity owners, which may be either affiliates of the Sponsor or independent third-party investors. The Sponsor’s business plan relies on maintaining control of the Property using a TIC interest agreement and/or asset management agreement. TIC interest agreements typically cover such areas as the: (i) selling or refinancing of the property; (ii) managing the property; (iii) distributions of the property’s net revenues, if any; and (iv) operating the property, including leasing guidelines and rent levels. Under TIC interest agreements, an owner of an undivided TIC interest in a property is generally obligated only for its share of expenses, and is entitled only to its share of income, from the property. Thus, as a TIC interest owner in a property, the owner would be required to pay only their share of expenses, including real estate taxes and management fees, and generally will share all profits and losses generated by the property pro rata in proportion to respective TIC interest. There is no assurance the Sponsor will maintain asset management control over the Property. If the Sponsor fails to maintain asset management control, the ability to execute the business plan would be limited significantly. This limitation could harm substantially the business, results of operations, and financial condition of the Sponsor and the Company.
North Carolina Hurricane Risk
North Carolina is subject to frequent and sometimes debilitating natural disasters including but not limited to coastal hurricanes. There can be no assurance that hurricanes and flooding within the state, or any other environmental factor, will not cause significant difficulties and disruptions in the daily operation of the Property, or that Real Estate Company and the Target are properly insured for any such damage cause to the Property or its business operations. As a result, the business and financial condition of the Target, and thus the Company and its investors may be materially adversely affected.
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 Real Estate Company 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.