Staff Menu (IO ID#: 1050402):
EDIT IO DOCUMENTS
Completed Equity
Multifamily
Brannon Park Apartments
Greensboro, NC
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
Add to Watchlist
100% funded
Offered By Willow Creek Partners
16.0%* TARGET IRR 15.0%-17.0%
5.5%* TARGET AVG CASH ON CASH
1.55x* TARGET EQUITY MULTIPLE
Estimated Hold Period 3 years
Estimated First Distribution 3/2020
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
Project Webinar
View The Webinar
Project Summary
current
current
current
current
current
current
current
current
current
current
Explore this Project
Overview
Value-add acquisition of a multifamily asset with institutional-quality sponsorship and management.
Partner

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.

Basis

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.

Value-Add

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.

Property At A Glance
Year Built 1985
# of Units 299
# of Buildings 13
Current Occupancy 87.0% as of July 2019
Parking Ratio 1.68 per unit
Acquisition Price

$16,900,000

Amenities

Basketball court, fitness center, pool, playground, grills, laundry facilities, and a clubhouse.

Investment Highlights
The Real Estate Company is purchasing the Property for $56,522 per unit, which represents a going-in cap rate of 5.5% on estimated year one net operating income
The Real Estate Company has budgeted for interior unit renovations of $3,300 per unit, and $1,386,500 for exterior improvements
The exit strategy is to sell the Property in three years at an expected cap rate of 6.0%
Management
Cumulative Distributions

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
  • Matthew Brady
    Managing Partner
  • Giuliano Salvo
    Managing Partner
  • Phat Dang
    Partner
  • Alex Gregory
    Managing Director
Matthew Brady
Managing Partner
Giuliano Salvo
Managing Partner
Phat Dang
Partner
Alex Gregory
Managing Director
Track Record

Willow Creek Properties Owned
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​.

 

Business Plan

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. 

Brannon Park Apartments - Capital Expenditures Budget
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

 

Property
Property Details

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.

In-place/Stabilized Unit Mix
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
Comparables

Lease Comparables - Post Renovation
  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
Sale Comparables
  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.

Location

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.

Photos
Financials
Sources & Uses

Total Capitalization
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.

 
Debt Assumptions

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.

Distributions

The Target will make distributions to investors (The Company and Real Estate Company, collectively, the "Members") as follows:  

Operating Income, Refinance, and Sales Proceeds

  1. To the Members, pari passu, all excess operating cash flows to a 8.0% IRR to the Members;
  2. 80.0% / 20.0% (80.0% to Members / 20.0% to Promote) to a 16% IRR
  3. 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. 

Cash Flow Summary
  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
RealtyMogul 136, LLC Cash Flows
  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
Fees

Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:

One-Time Fees
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
Recurring Fees
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.

Documents
Disclaimers/FAQs
Disclaimers

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.


 


INVEST TODAY

Questions?

(877) 781-7062

Contact Investor Relations
Join RealtyMogul
Gain access to commercial real estate deals across the country
Easily review, compare and invest in deals that meet your criteria
Build the real estate portfolio that’s right for you
Potential benefits include diversification, growth and passive income
ARE YOU AN ACCREDITED INVESTOR?
Password should be at least 8 characters, contain an uppercase character, a lowercase character, a number and a symbol.
By clicking "JOIN REALTYMOGUL" you are agreeing to our Terms of Service and Privacy Policy.
Sign In
Don’t have an account yet? Join RealtyMogul
Please enter your email and password below.

Forgot Password?

Forgot Password
Enter your email address to receive a code to reset your password.
Enter the code sent to your email address below and your new password.

Resend Code