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.
As of March 2020, the U.S. Retail cannabis market is expected to generate between $15.5 and $18.9 billion by the end of 2020, an increase of ~40% over 2019. Total U.S. sales could rise as high as $37 billion by 2024.
Limited access to equity capital or traditional bank lending has driven operators to seek alternative sources of financing to complete commitments, which allows lenders to demand strong risk-adjusted returns backed by significant collateral.
AFC's lending structure provides more security and flexibility to redeploy capital than owning the land or property directly.
AFC Gamma Inc.
AFC was founded in 2020 by a veteran team of investment professionals to pursue activities in financing senior secured loans and other investments for established cannabis industry operators in states that have legalized medicinal and/or adult-use cannabis. As states continue to legalize cannabis for medical and even adult use, more and more cannabis operators currently need debt capital to complete infrastructure projects and further expand their business due to the constrained cannabis equity market environment, and AFC believes it is the financing partner of choice given its size and scale of operations, incumbency and institutional infrastructure. As of September 1, 2020, members of AFC’s management have sourced deals worth approximately $2.9 billion across the cannabis industry in various states while maintaining a robust pipeline of potentially actionable opportunities.
AFC Gamma is lead by CEO Leonard Tannenbaum. Leonard is formerly the Founder and CEO of Fifth Street Asset Management, a $5 billion credit asset manager which he took public and eventually sold to Oaktree in 2017. Leonard started Fifth Street in 1998. The firm completed approximately $10 billion of loans since inception.
*Len and Jonathan have had prior litigation that was disclosed to RealtyMogul. There is no outstanding litigation against Len. The two outstanding litigations against Jonathan pertain to a deed in lieu of foreclosure and a former employee suing him.
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Leonard TannenbaumPartner, Chief Executive Officer of AFC -
Jonathan KalikowPartner, Head of Real Estate -
Thomas GeoffroyChief Financial Officer -
Robyn TannenbaumPartner, Head of Originations, Marketing, IR
- 20+ years experience as a CPA with expertise in financial reporting and internal controls for the financial services industry including investment fund experience
- Formerly, was CFO and Finance Operations Principal for United Capital Markets, as well as Vice President, Controller at Ares Management and Vice President of Fund Administration at S.A.C. Capital Advisors
Investors will be investing into AFCG RM 1, LLC which will subsequently invest into AFC Gamma, Inc. The Investment objective of AFC Gamma, Inc., an externally managed commercial mortgage REIT, is to achieve an 18.38% gross IRR from interest and fees by lending to the cannabis industry, secured by real estate, cash flows, and licenses. The Manager’s rigorous investment process on behalf of AFC will enable AFC to provide senior secured loans to established cannabis industry players in states that have legalized medicinal and/or adult-use cannabis. AFC’s management team and Board are attuned to the macro-environment and political environment as they relate to the lending and cannabis industry. AFC intends to list on the NASDAQ or NYSE as soon as practicable, once either exchange begins approving applications for cannabis-linked companies. If AFC is not a publicly-traded company with equity securities listed on a securities exchange by the five-year anniversary of the Initial Closing Date, September 2020, the Company will automatically begin the process of dissolution and winding up, with the intention of completing the process in 3-5 years.
| Borrower | Status | Date | AFC Loan, net of Syndication | % of Total AFCW | Total Funded Debt Issuance | AFCW % of the Total Loan | Est Real Estate Value (1) | Real Estate Collateral Coverage | Implied Real Estate Collateral for AFCW | AFCW Real Estate Collateral Coverage |
| Public Co. A(2) | Funded | 8/5/2019 | $6,940,000 | 6.1% | $50,000,000 | 13.9% | $107,000,000 | 2.14x | $14,851,600 | 2.14x |
| Public Co. B(3) | Funded | 1/14/2020 | $7,000,000 | 6.2% | $300,000,000 | 2.3% | $109,904,000 | 0.37x | $2,564,427 | 0.37x |
| Public Co. C(4) | Funded | 1/31/2020 | $5,000,000 | 4.4% | $20,000,000 | 25.0% | $53,100,000 | 2.66x | $13,275,000 | 2.66x |
| Sub. of Public Co. D(5) | Funded | 2/12/2020 | $15,000,000 | 13.3% | $15,000,000 | 100.0% | $24,678,600 | 1.65x | $24,678,600 | 1.65x |
| Sub of Public Co. D - Bridge(6) | Funded | 4/17/2020 | $5,000,000 | 4.4% | $5,000,000 | 100.0% | $6,500,000 | 1.30x | $6,500,000 | 1.30x |
| Private Co. A(7) | Funded | 5/8/2020 | $32,000,000 | 28.3% | $40,000,000 | 80.0% | $51,384,281 | 1.28x | $41,107,425 | 1.28x |
| Private Co. B(8) | Anticipated | 9/2/2020 | $8,000,000 | 7.1% | $8,000,000 | 100.0% | $10,983,164 | 1.37x | $10,983,164 | 1.37x |
| Private Co. C(9) | Anticipated | 9/11/2020 | $12,000,000 | 10.6% | $12,000,000 | 100.0% | TBD | n/a | TBD | n/a |
| Private Co. D(10) | Anticipated | 10/1/2020 | $22,000,000 | 19.5% | $22,000,000 | 100.0% | $26,713,833 | 1.21x | $26,713,833 | 1.21x |
| $112,940,000 | 100% | $472,000,000 | 23.9% | $390,263,878 | 0.83x | $140,674,049 | $1.25 |
Note: Information as of August 31, 2020
1 - Real estate value based on appraised cannabis value, where available. In addition, if loan funds acquisition and/or construction, figure includes expected total basis on future construction and/or acquisitions plus appraised value
2 - Public Company A real estate based on cost basis
3 - Public Company B Real Estate Collateral is from the Company's 3Q19 quarterly report for PP&E
4 - Public Company C real estate is shown at basis
5 - Subsidiary of Public Company D real estate based on completed, stabilized value of to be built facility
6 - Bridge Advance for existing client to help fund their business plan more rapidly. Additional collateral, namely the Company's primary cultivation property, was added to the collateral pool. Draws on the Company's other facility from AFC are paused until the Bridge Advance is paid off
7 - Private Company A Real Estate based on appraised value plus future basis
8 - Real Estate collateral value based on total cost basis, as completed
9 - Real Estate appraisals in process
10 - Real Estate collateral value based on total cost basis of owned properties only. Leased property TI’s were not included
| Historical Return Breakdown | |
| Gross historical IRR* | 21.15% |
| Management Fee | -1.75% |
| Estimated Agent & Structuring Fee Add-Back | 1.00% |
| Direct REIT Expenses | -1.00% |
| Admin Cost | -1.00% |
| Structuring & Other Expenses | -1.00% |
| Gross Return on Equity | 17.40% |
| Incentive Fee** | -3.48% |
| Net Unlevered Return on Equity | 13.92% |
| Net Leverage Benefit | 4.46% |
| Net Levered Return on Equity | 18.38% |
1 - Note: As of 8/31/2020. Weighted average IRR of 6 closed loans and 3 loans anticipated to be closed. Past performance is not indicative of future results.
2 - 20% allocation of profits above a hurdle rate of 7% with a 50% catch up
3 - Assumes 0.5x leverage with 8% cost of debt
Certain fees and compensation will be paid over the life of the transaction; please refer to AFC materials for details. The following fees and compensation will be paid(1)(2)(3).
| Type of Fee | Amount of Fee | Received By | Paid From |
|---|---|---|---|
| Management Fee |
1.75% gross annual management fee on equity to the Manager, payable quarterly, which shall be reduced by any additional fees that the Manager earns, including any Co-Investment Management Fees, syndication fees or agency fees. |
AFC Management, LLC | AFC Gamma Inc. |
| Incentive Fee | 20% allocation of net income, computed in accordance with generally accepted accounting principles (“GAAP”), to the Manager, payable quarterly, above a hurdle rate of 7%, with a 50% catch up. | AFC Management, LLC | AFC Gamma Inc. |
| Administrative Services Fee | 1.0% of the amount invested into AFC(3) | RM Admin(2) | Distributable Cash |
(1) Fees may be deferred to reduce the impact to investor distributions
(2) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage based fee for real estate companies to use the marketplace. This fee may be capitalized into the transaction at the discretion of the Manager.
(3) RM Admin will be providing the following services:(a) responding to inbound investor inquiries regarding how to subscribe to the Project, (b) distribution of all annual tax forms (after receipt of same from Project Sponsor), (c) processing distributions that are payable from AFCG RM1, LLC to Investors, however, RM Admin will not be deemed to have custody of client funds, (d) distribution of all quarterly reports (after receipt of same from Project Sponsor) and (e) summarizing sponsor information on property performance, responding to investor inquiries regarding sponsor performance information as well as the real estate market generally.
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.