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Completed Equity
Multifamily
Montclair Estates
Garland, TX
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By ParaWest Group
16.1%* TARGET IRR 15.1%-17.1%
8.6%* TARGET AVG CASH ON CASH
1.5x* TARGET EQUITY MULTIPLE
Estimated Hold Period 3 Years
Estimated First Distribution 4/2019
Minimum Investment 40000
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Project Summary
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Explore this Project
Overview
Acquisition of an amenitized senior-living community alongside a strong Real Estate Company with extensive experience in Texas.
Potential Efficiencies

Returns are not solely dependent upon a renovation premium or mark-to-market, but because the business plan is predicated on expense reduction, RealtyMogul has simply applied market rent growth to in-place rents going forward.

Partner

The Real Estate Company is highly experienced; its Principals have successfully owned and operated more than 5,000 multifamily units in Texas over the course of multiple real estate cycles.

Management

Because the Real Estate Company has been the property manager for years, it has unique insight into operational upside that the seller has been unwilling or unable to capitalize on.

Property At A Glance
Year Built 1983
# of Units 113
# of Buildings 9
Current Occupancy 95%
Parking Ratio 1.8 spaces per unit
Acquisition Price

$9,040,000

Investment Highlights
The Real Estate Company is purchasing the Property for $80,000 per unit, which represents a going-in cap rate of 6.37% on year one net operating income
The Real Estate Company has budgeted for interior unit renovations of $4,204 per unit, and $376,735 for exterior and common area improvements
The Property will be managed by an affiliate of the Real Estate Company, ParaWest Management
The exit strategy is to sell the Property in three years at an expected cap rate of 6.75%
Management
Cumulative Distributions

ParaWest Group

ParaWest Group (PWG)(1) brings together the collective experience of Curtis Haines, Michael Salkeld, Delane Salkeld, and CRSC Residential, Inc. through its President and CEO, Bryan Krizek. These principals bring to the table decades of experience in multi-family investments and operations both individually and collectively resulting in in-depth knowledge and experience that is unsurpassed in the industry. PWG focuses solely on multi-family properties in select markets. As an investment arm of these principals, PWG is an investment platform that includes ParaWest Management(2), thus creating a fully integrated platform for multi-family investments. This platform extends from sourcing and acquisitions to financing and equity structuring, renovation and operations, and ultimately disposition. ParaWest Group, through its principals, has created a strategic advantage in sourcing, underwriting, and closing opportunistic value-add multi-family properties and since its inception in 2012, has participated in the acquisition and investment in twenty-three properties totaling more than 4,000 units.

As a repeat Sponsor on the RealtyMogul Platform, Bay Island at Lake Ray Hubbard will be ParaWest Group’s fifth transaction with Realty Mogul. The first two deals have now gone full cycle (i.e. through sale) with the first having closed in June 2022, and generated an IRR to Investors of 27%, and the second, currently in escrow and scheduled to close during the third quarter, generating a projected Investor IRR of 24%. Both deals had proforma returns of 15.9% each.

Notes:
1) ParaWest Group, LLC  is a pass-through entity and its principals invest as individuals in single ownership entities on each transaction. 
2) ParaWest Management has been in business since 2003 and is solely owned by Michael and Delane Salkeld.         

http://www.parawestgroup.com/
  • Michael Salkeld
    Co-Founder / Managing Partner
  • Delane Salkeld
    Co-Founder / Partner
  • Curtis Haines
    Partner
  • CRSC Residential, Inc.
    Principal
Michael Salkeld
Co-Founder / Managing Partner

Prior to cofounding ParaWest in 2003, Mr. Salkeld served as Regional Vice President of Pinnacle Realty Management's Arizona Office between 1990 and 2001, where he developed and supervised a fee management portfolio of more than 6,000 units in Arizona, Nevada, California, and New Mexico.  Before that (1982-1989) he served as Executive V.P. of Property Management and Development for Urban Investment Corporation.

Delane Salkeld
Co-Founder / Partner

Prior to serving as principal for ParaWest, Mrs. Salkeld served as Senior Investment Manager for Pinnacle Realty Management, Inc. (1990-2000).  Mrs. Salkeld is certified as a Licensed Real Estate Broker in AZ, and as a Property Manager (CPM).  She is also a member of the Arizona Multi-Housing Associate Board of Directors.

Curtis Haines
Partner

As of January 2021, Mr. Haines is invested in more than 100 multifamily properties as Key Principal with an aggregate value of more than $1.9 billion. Prior to engaging in multifamily investing, Mr. Haines founded, developed, and sold one of Houston's largest Permanent Placement Firms designated by Inc. Magazine as one of the "Fastest-Growing Private Companies in the U.S." before moving into Apartment Investment and applying the same diligence, fortitude, and insightfulness that has made him one of Houston's most prodigious apartment owner-operators.

CRSC Residential, Inc.
Principal

CRSC Residential, Inc. as an affiliate of CRS, Inc. owns and operates multi-family properties in Virginia, Kansas, and Arizona, and has investment interests in properties in Texas. Total wholly-owned properties together with Investments in Property Operating interests exceed $100 million.

Track Record

ParaWest Group's Track Record

ParaWest Group Principals - Managing Members - Current SREO
Property Units Location Built  Value   Value/Unit   Debt   Total Equity  Lender Date Acquired MMR2
Idlewood Park1 268 Houston, Texas 1984  $24,460,000  $91,269  $16,710,000  $7,750,000 Berkeley Point Capital (FNMA) Nov-13 MS
Fountain Park 176 Stafford, Texas 1969  $14,960,000  $85,000  $7,100,000  $7,860,000 Berkeley Point Capital (FNMA) Oct-13 CH
Plantation at Quail Valley 124 Missouri City, Texas 2004  $16,415,886  $132,386  $8,118,612  $8,297,274 Keybank Nov-13 CH
Springfield 100 Missouri City, Texas 1977  $8,846,615  $88,466  $2,553,573  $6,293,042 Arbor (FNMA) Sep-14 CH
Briar Court 201 Houston, Texas 1973  $28,200,000  $140,299  $15,200,000  $13,000,000 MF1 Jun-19 MS
Lexington at Champions 89 Houston, Texas 2003  $13,500,000  $151,685  $10,878,750  $2,621,250 Arbor Sep-21 MS
Total/Avg 958      $106,382,501  $689,105  $60,560,935  $45,821,566      
 
ParaWest Group Principals - Managing Members - Exited Deals
Property Units Location Built  Sales Price   Price/Unit   Date Sold  Date Acquired MMR2    
Mirabella Galleria 160 Houston, Texas 1965  $14,700,000  $91,875 Aug-18 Jun-12 CH    
Beverly Palms 362 Houston, Texas 1968  $31,338,000  $86,569 May-18 Aug-12 MS    
Stoney Brook 113 Houston, Texas 1966  $11,550,000  $102,212 Apr-18 Jan-10 CH    
Legacy at Westchase 324 Houston, Texas 1977  $25,000,000  $77,160 Aug-17 Jun-14 MS    
Idlewood Park1 268 Houston, Texas 1981  $22,258,000  $83,052 Jun-17 Oct-13 MS    
Jacinto Palms 128 Houston, Texas 1972  $6,765,000  $52,852 Jan-16 Jun-14 CH    
Barcelona 118 Houston, Texas 1963  $6,500,000  $55,085 Dec-13 Jul-09 CH    
Carrington Court 111 Houston, Texas 1963  $11,000,000  $99,099 Apr-19 Mar-11 CH    
Watermill 192 Houston, Texas 1970  $17,477,000  $91,026 Apr-19 Aug-11 CH    
Quail Valley 176 Missouri City, Texas 1978  $16,192,000  $92,000 Aug-19 Sep-14 CH    
Colonade 192 Grand Prairie, Texas 2001  $22,000,000  $114,583 Dec-18 Oct-15 Other    
Somerset 264 Fort Worth, Texas 1985  $24,245,000  $91,837 Jan-22 Oct-16 Other    
Stratton Park 264 Fort Worth, Texas 1985  $24,245,000  $91,837 Jan-22 Oct-16 Other    
Valencia 263 Fort Worth, Texas 263  $22,345,000  $84,962 Jan-22 Jul-17 Other    
Corners 242 Dallas, Texas 242  $21,250,000  $87,810 Jan-22 Nov-17 Other    
Landmark at Laurel Heights 286 Mesquite, Texas 286  $37,915,000  $132,570 Jan-22 Dec-17 Other    
Briarstone2 97 Rosenberg, Texas 1997  $12,500,000  $128,866 Mar-21 Oct-18 MS    
Tiffany Square 84 Houston, Texas 1971  $7,896,000  $94,000 Feb-22 Dec-12 CH    
Residences 2727 171 Houston, Texas 1995  $23,350,000  $136,550 May-21 Oct-17 CH    
Palms on Westheimer 798 Houston, Texas 1974  $70,224,000  $88,000 Dec-21 Jul-15 CH    
Montclair Estates 113 Garland, Texas 1983  $17,050,000  $150,885 June-22 Oct-19 MS    
Total/Avg 4,726      $445,800,000  $244,982          
 
ParaWest Group Principals -  Co-Managing Member Investors - Current SREO
Property Units Location Built  Value   Value/Unit   Debt   Total Equity  Lender Date Acquired MMR2
Park on Spring Creek 278 Plano, Texas 1983  $45,935,467  $       165,235  $    32,500,000  $13,435,467 NXT Capital Dec-17 Other
Total/Avg 278      $45,935,467  $       165,235  $    32,500,000  $13,435,467      
 
ParaWest Group Principals -  Investors - Current SREO3
Property Units Location Built  Value   Value/Unit   Debt   Total Equity  Lender Date Acquired MMR2
Forest Oaks 164 Arlington, Texas 1980  $24,600,000  $150,000  $8,925,000  $15,675,000 Berkadia (Freddie Mac) Aug-16 Other
Braesridge 542 Houston, Texas 1982  $70,460,000  $130,000  $23,280,000  $47,180,000 Freddie Mac Jun-15 Other
Summer Cove 376 Houston, Texas 1983  $43,240,000  $115,000  $18,160,000  $25,080,000 Holliday Fenoglio Fowler Sep-15 Other
Highland Bluffs 357 Dallas, Texas 1984  $30,345,000  $85,000  $7,631,000  $22,714,000 FNMA Dec-14 Other
Total/Avg 1,439      $168,645,000  $120,000  $57,996,000  $110,649,000      

Notes

1) Idlewood Park was restructured in 2021.

2)"MMR" denotes Managing Member.  CH - Curtis Haines; MS - Michael Salkeld; Other - Non ParaWest Group Managing Member.

3) Individual Principals SREO's (attached) may include properties invested in separately from ParaWest Group.

4) Values are derived from estimated market-based capitalization rates applied to net operating income. Actual values as determined by any future appraisal or sale may vary.

The bio and track record reflect those of ParaWest Group Principals, and were provided by the Sponsor and have not been verified by RealtyMogul

Business Plan

In this transaction, RealtyMogul investors are to invest in RealtyMogul 139, LLC ("The Company"), which is to subsequently invest in Montclair Estates Apartments LLC ("The Target"), a limited liability company that will directly or indirectly own interest in the Property. ParaWest Group (the "Real Estate Company") is under contract to purchase the Property for $9.0 million ($80,000 per unit) and the total project cost is expected to be $10.7 million ($94,472 per unit).

The Real Estate Company plans to implement an expense-saving strategy over the course of the hold period. The major components of this strategy are the closure of a kitchen that is currently only used by 30 of the 113 units, a reduction in payroll expense through reducing the number of employees at the Property, and utility savings through individual metering. There are currently 12 employees, which command a total cost (including benefits) of $335k per year. Upon acquisition, the Real Estate Company intends to reduce this number to seven, lowering payroll expense to $261k per year. In addition to the payroll savings from closing the kitchen, G&A is projected to drop from the T-12 figure of $142k to $51k by year two as food and supplies associated with the kitchen will no longer be needed. Further, because electrical meters were recently installed in all units, significant utility savings are expected, projected to drop from $203k to $80k in year two.  Electrical bills are currently being transferred to the residents upon move-out or renewal, with the number of units not being billed for electricity burning off over the next 10 months. Additionally, there is currently a studio unit that is being used as a leasing office that the Real Estate Company intends to convert to a rentable unit, and has budgeted $11.3k to do so. In order to maintain the quality of the Property and push reversion value, the Real Estate Company will capitalize $1,000,000 ($8,850 per unit) for capital improvements. Interior unit renovations of $475k ($4,204 per unit) are to include interior fixtures, black appliances, new flooring and new doors. Additionally, $377k ($3,334 per unit) has been capitalized for common area and exterior improvements, which will include carpentry repairs, amenity upgrades, and the studio conversion. The CapEx budget also contains a $101k contingency (~11%), and a $48k construction management fee (5%). The Real Estate Company does not anticipate a renovation premium or mark-to-market rental increase as part of the business plan. The business plan calls for a 3 year hold, at which point the Property is intended to be sold at a 6.75% cap rate for $12.9 million ($113,807 per unit).

Below is a summary of the capital improvements budget:

Capital Improvements Budget Summary
Exterior/Common Area Renovations Amount Per Unit
Carpentry Repairs $25,600 $227
Studio Conversion $11,275 $100
Stamped Concrete Repairs $2,380 $21
Breezeway Carpet Replacement $83,875 $742
Trip Hazards $52,531 $465
Roof Replacement $201,074 $1,779
Exterior/Common Area Subtotal $376,735 $3,334
Interior Renovations  $475,052 $4,204
Contingency $100,594 $890
Construction Management Fee $47,619 $421
Grand Total $1,000,000 $8,850

These amounts are subject to change at the discretion of the Real Estate Company

Property
Property Details

Montclair Estates ('The Property') is a 113-unit Class B active senior living community located in Garland, TX, approximately 11.5 miles Northeast of central Dallas.  The owner has chosen to run the Property as senior housing, but there are no regulations stipulating that it has to be.  The Property consists of nine low-rise structures, with studio (three units), small one-bedroom (21 units), large one-bedroom (65 units), and two-bedroom (24 units) floorplans.  The Property has immediate access to Interstate-635, which provides convenient access throughout the metro.  Within one mile of the Property is a drug store, a bakery, a bar, a church, an elementary school, and a park.  According to Trulia, the area has the lowest crime relative to the rest of Dallas County.

In-place/Stabilized Unit Mix
Unit Type # of Units % of Total Unit Size (square feet) In-Place Rent Post-Reno Rent
Studio 3 3% 539 $1,190 $1,190
1 Bed, 1 Bath Small 21 19% 539 $1,190 $1,190
1 Bed, 1 Bath Large 65 58% 734 $1,222 $1,222
2 Bed, 2 Bath 24 21% 944 $1,427 $1,427
Total 113 100% 737 $1,259 $1,259
Comparables

Lease Comparables

  Christian Care Center Waterford Senior Living Brookdale Club Averages Subject
Units 229 168 134 177 113
Year Built 1973 N/A 1980 1977 1983
$ (Studio) $1,125 $1,888   $1,507 $1,190
SF (Studio) 422 343   383 539
$ (1x1) $1,691   $2,780 $2,236 $1,214
SF (1x1) 693   623 658 686
$ (2x2) $1,916   $3,528 $2,722 $1,427
SF (2x2) 845   1,002 924 944
Distance 1.4 miles 3.6 miles 2.2 miles 2.4 miles  

All rents are net effective

Sale Comparables

  South Pointe Oates Creek Lake Village North The Elise Averages Subject
Date May '19 Dec '18 Apr '18 Apr '19    
Units 372 280 848 341 460 113
Year Built 1983 1984 1983 1987 1984 1983
Average SF 680 716 720 598 679 737
Purchase Price $34,000,000 $24,200,000 $70,500,000 $24,500,000 $38,300,000 $9,040,000
$/Unit $91,398 $86,429 $83,137 $71,848 $83,203 $80,000
Cap Rate 5.50% 5.11% N/A 6.20% 5.60% 6.37%
Distance 3.4 miles 0.6 miles 3.1 miles 4.5 miles 2.9 miles  

Sale and lease comps were obtained from CoStar, Axiometrics, and Real Estate Company 

Location

Market Overview

According to CoStar, the Dallas-Fort Worth apartment market has performed well over the past few years. This is largely thanks to exceptional demand driven by some of the best in-migration and employment growth in the country. Last year, the region added 130,000 new residents, more than any other metro in the country. The same can be said for employment; North Texas added just over 100,000 new jobs, second only to the NYC metro. For a sense of scale, with just over 700,000 units, Dallas-Fort Worth is the third largest market in the United States, with assets valued at just over $95.8 billion dollars.

Dallas-Fort Worth’s diversified economy should continue to hum right along. Abundant job opportunities have spurred significant population growth due to in-migration. Population growth in the metroplex is more than double the U.S. average and has topped the nation over the past few years. Net migration continues to rank among the highest in the country, exceeding the highs from the past cycle. This in-migration continues to help spur growth in office-using and industrial-based employment growth alike. Employment growth should remain stronger than the national benchmark over the next five years. D-FW's affordability, location, and quality of labor continue to attract major employers. The cost of business is an obvious consideration for any company looking to expand or relocate, and for companies weighing the metroplex against major coastal cities like Boston or San Francisco, the price differential can be substantial. Business costs in D-FW are roughly even with the national average, while costs in many coastal cities are more than 20% above that.

Per Axiometrics, effective rent increased 1.7% from $1,148 in 1Q19 to $1,167 in 2Q19, and annual effective rent growth was 1.4% in 2018. Annual effective rent growth is forecast to be 2.3% from 2019 to 2022. Annual effective rent growth has averaged 2.2% since 1Q95. The market's annual rent growth rate was below the national average of 2.7%. The market's occupancy rate increased from 94.4% in 1Q19 to 94.7% in 2Q19, and was down from 94.8% a year ago. The market's occupancy rate is expected to be 94.6% in 2019, and average 93.8% from 2020 to 2022. The market's occupancy rate has averaged 93.9% since 1Q95.

Submarket Overview

Garland is a primarily blue-collar submarket, just east of the path of demographic and office-using employment growth north from Dallas. Nevertheless, from a development or investment perspective, the submarket offers plenty to like. Population growth has mirrored the metro average, the recently completed LBJ TEXpress Lanes give commuters better access to employment nodes to the west, and both Garland and Rowlett are working with developers to build up their respective downtown areas.

Per Axiometrics, effective rent increased 5.5% from $989 in 1Q19 to $1,043 in 2Q19. The submarket's annual rent growth rate of 4.0% was above the market average of 1.4% in 2018. Annual effective rent growth is forecast to be 3.9% from 2019 to 2022. The annual effective rent growth has averaged 2.9% per year since 1Q95. The submarket's occupancy rate increased from 95.1% in 1Q19 to 95.2% in 2Q19, and was down from 96.2% a year ago. The submarket's occupancy rate was above the market average of 94.7% in 2Q19. For the forecast period, the submarket's occupancy rate is expected to be 95.2% in 2019 and average 94.8% from 2020 to 2022. The submarket's occupancy rate has averaged 94.8% since 1Q95.

Demographic Information

Demographics
  1 Mile 3 Miles 5 Miles
Population (2019) 14,353 138,354 310,978
Population (2024) 14,758 144,729 326,360
Average Age 36 35 35
Median Household Income $54,199 $51,462 $51,807
Average Household Size 2.6 2.9 2.8
Median Home Value $138,097 $128,730 $147,643
Population Growth 2019-2024 2.82% 4.61% 4.95%

Demographic information above was obtained from CoStar.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Amount
Debt $7,000,000
Equity $3,675,346
Total Sources of Funds $10,675,346
Uses of Funds Amount
Purchase Price $9,040,000
Real Estate Company Acquisition Fee $135,600
Broker Dealer Fee $128,000
Loan Fee $70,000
CapEx Budget $1,000,000
Working Capital $50,000
Tax & Insurance Reserve $101,746
Closing Costs $150,000
Total Uses of Funds $10,675,346

Please note that the Sponsor's equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor

Debt Assumptions

The expected terms of the debt financing are as follows:

  • Estimated Proceeds: $7,000,000
  • Initial Funding: $6,000,000
  • Future Funding: $1,000,000
  • Estimated Rate (Floating): One Month Libor plus 3.20%
  • Amortization: 30 years
  • Term: 3 years
  • Interest Only: 3 years
  • Exit Fee: 1.5% of loan proceeds, 21 months yield maintenance
  • Extension Options: Two (2) one-year extension options (0.5% fee for each)

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

  1. To the Members, pari passu, all excess operating cash flows to a 10.0% IRR to the Members;
  2. 70.0% / 30.0% (70.0% to Members / 30.0% to promote) of excess cash flow to a 15.0% 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 June 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 $1,579,210 $1,646,872 $1,696,278
Total Operating Expenses $1,003,347 $835,949 $857,245
Net Operating Income $575,863 $810,923 $839,033
RealtyMogul 139, LLC Cash Flows
  Year 0 2019 2020 2021 2022
Distributions to RealtyMogul 139, LLC Investors ($3,240,000) $0 $236,168 $342,375 $4,397,838
Net Earnings to Investor
- Hypothetical $50,000 Investment
($50,000) $0 $3,645 $5,284 $67,868
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 $135,600 Real Estate Company  Capitalized Equity Contribution 1.5% of the Property purchase price
Broker-Dealer Fee $128,000 North Capital (1) Capitalized Equity Contribution Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 139, LLC
Construction Management Fee 5.0% of costs Real Estate Company Capitalized Equity Contribution  
Recurring Fees
Type of Fee Amount of Fee Received By Paid From Notes
Management and Administrative Fee 1.5% of amount invested in RealtyMogul 139, LLC RM Manager, LLC Distributable Cash RM Manager, LLC is the Manager of RealtyMogul 139, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2)
Asset Management Fee 1.1% of Effective Gross Income Real Estate Company Distributable Cash  
Property Management Fee 3.5% of Effective Gross Income ParaWest Management 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.


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.


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 Entity to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.


Renovation Risks

The Property was 95% occupied as of September 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.


Texas Hurricane Risk

Texas 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 caused 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.


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.


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.

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