The team at our affiliated broker-dealer, RM Securities, conducts diligence on of the issuer, including detailed background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to screening for any criminal background, we may also turn down sponsors due to poor reference checks, even if the background and criminal checks are satisfactory.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent.* When an investor makes an investment with such sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s contingency offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
* Unless otherwise disclosed, escrow accounts are not required for some investments that accommodate 1031 investments where the property is already acquired.
Our processes typically includes visiting certain properties (or a subset of properties if it's a fund) to confirm the real estate is what and where the real estate is supposed to be. For certain properties that accommodate 1031 exchange investments, the team will review third-party prepared due diligence reports in lieu of a site visit.
We have formalized processes and checklists for every private placement deal listed on the platform.
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Although Skyland operates under DC Rent Control, there is potential to increase rents through other avenues including DC’s Housing Choice Voucher Program (HCVP), converting to a Low-Income Housing Tax Credit (LIHTC) program, or organic rent growth tied to longer tenancy turnover, all of which the ROSS Companies is well-positioned to facilitate given their local experience. Secondly, the Property is located in a Qualified Opportunity Zone which could present long-term tax advantages in addition to fueling investment sales locally in the future. Finally, while the retail component of this investment represents approximately 6.1% of total income, the Real Estate Company noted the potential to redevelop some of this space into additional apartments.
Located six miles from the Washington DC CBD, Anacostia appears to be a fundamentally strong rental market. Per Axiometrics/RealPage, rent growth and vacancy in the submarket currently average 4.3% and 2.2%, respectively. Furthermore, average rents in Anacostia are among the cheapest in the D.C. metro, while gentrification in eastern D.C. neighborhoods is pushing residents into Anacostia further driving demand. Additionally, across from the Property is the development site of Skyland Town Center, which is currently under construction and will ultimately be the largest retail destination in Southeast Washington DC upon completion with an estimated 140,000 SF of retail and 120,000 SF of medical office space.
RealtyMogul has independently invested alongside Georgetown Partners and ROSS Companies on prior transactions and established strong working relationships with principals at both firms. While Georgetown Partners is vertically integrated and appears capable of asset, leasing, and property management functions, ROSS Management Services (RMS) has been engaged to oversee property and construction management at the Property. RMS was established in 1988 and is currently one of the most active multifamily property management companies in the Mid-Atlantic region.
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Georgetown Partners
Georgetown Partners is a private real estate investment and management firm focused on the Mid-Atlantic Region. The firm targets both stabilized and value-add opportunities and has over 20 years of commercial real estate experience. Georgetown Partners is vertically integrated and capable of all asset, leasing, and property management functions. RealtyMogul has previously invested alongside Georgetown Partners on Commonwealth Office in Richmond, VA.
http://www.gtownpartners.com/In this transaction, RealtyMogul investors are to invest in RealtyMogul 145, LLC ("The Company"), which is to subsequently invest in RM Skyland Apartments, LLC ("The Target"), a limited liability company that will hold title to the Property. Georgetown Partners ("The Real Estate Company") is under contract to purchase the Property for $25.1 million ($112,054 per unit) and the total project cost is expected to be $27.3 million ($121,964 per unit).
The Real Estate Company intends to implement a value-add strategy whereby it will acquire, renovate, and generally reposition the Property more favorably within the submarket and its competitive set over a five-year time horizon. The Real Estate Company has negotiated an acquisition price of $25.1 million, $4 million of which is attributed to the retail component, resulting in a relatively attractive basis of $94,000 per unit for the multifamily, and $112,964 per unit combined. The Real Estate Company plans to invest $1,747,746 and renovate 116 units over a five-year horizon (~2 units/month). In doing so, they also intend to reduce ongoing operating costs by addressing deferred maintenance and focusing on energy efficient improvements. The Real Estate Company has engaged ROSS Companies to oversee property and construction management at the Property.
Although the Property operates under DC Rent Control, there is potential to increase rents through other avenues, including DC’s Housing Choice Voucher Program (HCVP) or converting to a Low-Income Housing Tax Credit (LIHTC) program. As underwritten, the Real Estate Company conservatively assumes that they will not achieve heightened rents through either of these programs, although they do expect to pursue and retain tenants within these programs over time, which will be accretive to the returns illustrated. Long term, the Property stands to benefit from the delivery of an adjacent $180 million mixed-use development, which includes a LIDL grocery store and CVS. Upon completion of this project, the Real Estate Company intends to consider the feasibility of redeveloping the retail space into 30-35 multifamily units that will not be subject to rent control. While this strategy is also not contemplated in the current underwriting, it presents another opportunity.
Realty Mogul, Co. (“RM”) has the opportunity to invest $5.5 million in joint-venture, limited partner equity to facilitate the acquisition and renovation of Skyland Apartments (the "Property"), a 224-unit, Class C, garden-style apartment community located in the Anacostia submarket of Washington, DC. Georgetown Partners (the "Real Estate Company") is acquiring the Property for a total estimated cost of $25.1 million or $112,054/unit.
The primary objective of this investment is to implement exterior and interior improvements immediately after acquisition and sell the Property within five (5) years of acquisition.
Built in 1939 and renovated between 1991 and 1992, Skyland Apartments is comprised of one- (153) two- (65) and three-bedroom (6) floor plans combining to 224 units in suburban Washington DC, and operates under the Rental Housing Act of 1985 (i.e. rent control). The majority of units have received upgrades to appliances, cabinetry, countertops, and flooring on-turn, while exteriors and mechanical systems have been upgraded in recent years as well. The Property also includes a 10,666 SF retail component which is fully leased to seven tenants. Annual retail income averages $20 per square foot and comprises approximately 6.1% of total annual revenue over the projected hold period.
The Property is located east of the Anacostia River, six miles from the Washington, DC CBD, and is walking distance from Good Hope Market (which includes a Safeway and Starbucks), and 11th street bridge. The Property is less than two miles from I-295, I-695, Naylor Road Metro, and seven miles from Ronald Reagan National Airport.
Unit Type | # of Units | Avg SF/Unit | In-Place Rent | Post-Reno Rent |
---|---|---|---|---|
1 Bed, 1 Bath | 114 | 575 | $1,029 | $1,029 |
1 Bed, 1 Bath Duplex | 39 | 723 | $1,165 | $1,196 |
2 Bed, 1 Bath Duplex | 65 | 810 | $1,408 | $1,742 |
3 Bed, 1 Bath Duplex | 6 | 970 | $1,631 | $2,104 |
Total | 224 | 680 | $1,171 | $1,361 |
Retail
Tenant | Description | SF | $/SF |
Vision Hair Salon | Beauty Salon | 1,162 | $22.07 |
Erim Eyecare | Optometrist | 2,875 | $19.28 |
Like That Barber Shop | Barber Shop | 1,490 | $19.83 |
Capitol City Training | Government Office | 824 | $14.93 |
ACE Cash Express | Financial Solutions | 1,389 | $23.38 |
DRS Medical Supply | Medical Equipment Rental | 1,500 | $18.17 |
Elite Telecom | Telecommunications Provider | 1,426 | $26.85 |
Total | 10,666 | $20.71 |
Lease Comps
Park Naylor | Capital Crossing | Marlborough House | Carriage Hill | Total/Averages | Subject | |
Submarket | Southeast DC | Suitland/District Heights/Capitol Heights | Prince George's County | Suitland | Anacostia | |
Year Built | 1964 | 1966 | 1964 | 1965 | 1965 | 1939 / 1992 |
# of Units (1x1) | 51 | 102 | 217 | 175 | 136 | 153 |
Rent (1x1) | $1,390 | $1,345 | $1,410 | $1,380 | $1,381 | $1,223 |
SF (1x1) | 580 | 785 | 714 | 577 | 664 | 613 |
Rent/SF (1x1) | $2.40 | $1.71 | $1.97 | $2.39 | $2.12 | $2.00 |
# of Units (2x1) | 181 | 200 | 53 | 120 | 139 | 10 |
Rent (2x1) | $1,678 | $1,444 | $1,665 | $1,640 | $1,607 | $1,605 |
SF (2x1) | 1,000 | 906 | 940 | 858 | 926 | 810 |
Rent/SF (2x1) | $1.68 | $1.55 | $1.77 | $1.91 | $1.73 | $1.98 |
# of Units (3x1) | 2 | 75 | 39 | 6 | ||
Rent (3x1) | $1,671 | $1,740 | $1,706 | $1,655 | ||
SF (3x1) | 1,060 | 996 | 1,028 | 970 | ||
Rent/SF (3x1) | $1.58 | $1.75 | $1.66 | $1.71 | ||
Distance from Subject (mi.) | .3 miles | 1.2 miles | .6 miles | 1.3 miles | .9 miles | N/A |
Sales Comps
3930 Suitland | Ridgecrest Village | Regency Court | Dunhill South | Capital Crossing | Total/Averages | Subject | |
Date | Sep '19 | Feb '19 | Aug '18 | May '19 | Sep '19 | May '20 | |
Submarket | Capitol Heights | Anacostia | Anacostia | Anacostia | Anacostia | Anacostia | |
# Units | 351 | 272 | 115 | 116 | 351 | 241 | 224 Units |
Year Built | 1960 | 1951 | 1962 | 1965 | 1960 | 1,960 | 1939 / 1992 |
Average SF | 783 | 883 | 867 | 116 | 783 | 686 | 680 |
Purchase Price | $52,000,000 | $28,560,000 | $12,250,000 | $14,640,000 | $52,000,000 | 31,890,000 | $25,100,000 |
$/Unit | $148,148 | $105,000 | $106,522 | $126,207 | $148,148 | 126,805 | $112,054 |
Cap Rate | N/A | 4.80% | N/A | 5.80% | N/A | 5.30% | 5.60% |
Distance from Subject (mi.) | 1.5 miles | 1.1 miles | 2.7 miles | 3.4 miles | 1.2 miles | 2.0 miles | N/A |
Market Overview
Per CoStar, strong renter household formation, a healthy job market, and costly homeownership have been key drivers for apartment fundamentals in the Washington D.C. market. The unemployment rate in the Washington D.C. market on average has been 1.7% lower than that of the U.S. since 2000. Additionally, over twenty percent of the 3.4 million jobs in the metro are related to the government. Washington's dependence on the federal government acts as a stimulus in times of economic pullbacks and the apartment sector has traditionally been strong during recessionary periods. Though annual rent growth reached a low point of 0.6% in 2009, it did not fall negative during the Great Recession. Comparatively, annual rent growth in the U.S. plummeted to -4.3% in 2009. Ten-year historical annual rent growth for the Washington D.C. market is about 2.3% and rent growth in 2019 was 2.4%.
Anacostia has been a relatively stable rental market with little market-rate construction and low vacancy rates. At less than $40,000, the median annual household income is among the lowest in the metro. As a result, the submarket's population is a renter-by-necessity base with almost 70% of the submarket's residents renting, lending to historically low vacancy. These demographics create steady demand for Class C apartments in one of the metro's most affordable submarkets. At $1,220/month, average rents are the lowest of any neighborhood in D.C. and among the lowest in the metro. Average vacancy for Class C multifamily product in the Anacostia submarket hit a peak of 7.0% in 2008. Occupancy for Skyland Apartments' comparables has averaged 97.5% between 2005 and 2019, with the comps' lowest occupancy over the past twenty years hitting 94.1% in 2009. Moreover, the last recession did not appear to affect Skyland Apartments' fundamentals as occupancy at the property has averaged 96.7% over the past twenty years and occupancy at the property was 97.7% in 2009.
As of March 2020, 725 units were under construction, representing 4.9% of the total 15,000 units of multifamily space in the submarket. New construction is difficult to justify as rents in the submarket are so low. Many cities are considering construction halts, which would effectively push this construction timeline further into the future. This would increase construction lengths and costs for apartment developers, with the implications of that effect still uncertain. The market as a whole has been able to absorb thousands of new units each year and the demand pool has appeared resilient.
Demographics
Demographic Information (2019) | 1 Mile Radius | 3 Mile Radius | 5 Mile Radius | ||
Population | 36,893 | 264,012 | 599,718 | ||
Population Projection (2024) | 39,274 | 279,639 | 638,393 | ||
Average Age | 37.0 | 36.8 | 36.6 | ||
Median Household Income | $34,398 | $57,017 | $69,178 | ||
Average Household Size | 2.3 | 2.2 | 2.2 | ||
Median Home Value | $337,209 | $336,532 | $356,552 | ||
Population Growth 2019 -2024 | 6.45% | 5.92% | 6.45% |
Sources of Funds | Cost |
---|---|
Debt | $16,310,000 |
Equity | $11,009,942 |
Total Sources of Funds | $27,319,942 |
Uses of Funds | Cost |
Purchase Price | $25,100,000 |
Acquisition Fee | $300,000 |
Broker Dealer Fee | $160,000 |
CapEx | $782,498 |
Loan Fee | $181,255 |
Tax & Insurance Reserve | $104,244 |
Working Capital | $50,000 |
Closing Costs | $641,945 |
Total Uses of Funds | $27,319,942 |
The expected terms of the debt financing are as follows:
- Total Estimated Proceeds: $16,310,000
- Estimated Rate (Fixed): 3.49%
- Amortization: 30 years
- Term: 5 years
- Interest Only: 108 months
- Prepayment Penalty: TBD
- Extension Options: TBD
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:
- Pari passu, all excess operating cash flows to a 10.0% IRR to the Members;
- 90.0% / 10.0% (90.0% to Members / 10.0% to Real Estate Company) of excess cash flow and appreciation to a 14.0% IRR to the Members;
- 70.0% / 30.0% (70.0% to Members / 30.0% to Real Estate Company) 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).
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 | $300,000 | Real Estate Company | Capitalized Equity Contribution | 1.0% of the Property purchase price |
Broker-Dealer Fee | $160,000 | North Capital | Capitalized Equity Contribution | Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 145, 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) |
Asset Management Fee | 2.0% 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.
RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.
For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
No Approval, Opinion or Representation, or Warranty by RM Securities, LLCSponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.
Sponsor’s Information Qualified by Investment DocumentsThe information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.
Risk of InvestmentThis investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.
No Reliance on Forward-Looking Statements; Sponsor AssumptionsSponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.
Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.
No Reliance on Past PerformanceAny description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.
Sponsor’s Use of DebtA substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.
Sponsor’s Offering is Not RegisteredSponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.
No Investment AdviceNothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
1031 Exchange RiskInternal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.