General Partnership Structure
The Orion is a partnership between The GSH Group (GSH) and RM Communities. GSH is a private investment management company based in Clawson, MI. RM Communities is the direct acquisitions arm of RealtyMogul.
GSH and RM Communities will establish joint venture, of which GSH shall serve as Managing Member and Asset Manager and RM Communities shall serve as Administrative Member.
As Managing Member and Asset Manager, GSH shall control the acts and decisions of the general partnership and shall have the primary responsibility to manage the day-to-day affairs of the property. A principal of GSH will be the guarantor to the assumed loan.
As Administrative Manager, RM Communities shall be responsible for distribution of annual tax returns, processing distributions (determinations of distributable sums shall be determined by the Manager), and reporting to Investors, including, without limitation, responding to Member inquiries.
In addtion, MogulREIT II who is managed by an affiliate of RealtyMogul, RM Adviser, is the largest consolidated LP investor in the transaction and will have the right to force a sale of the property at any time.
RM Communities and GSH, the GP Members, will collectively own 100% of the general partnership.
About The GSH Group
The GSH Group (“GSH") is a real estate investment company focused on class B/workforce housing across the United States. The leadership team has over 40 years of combined experience and the company has over $400 million assets under management, made up of 5,500 multifamily units, inclusive of partner legacy assets.
With demonstrated experience as advisors, managers, and resolving problem loans, GSH is attuned to the needs and processing of Special Servicers for the quick disposition of assets.
GSH employs a tactical strategy for value creation. Value enhancement is approached from multiple angles and scenarios. These include, but are not limited to, organic rental growth due to market inefficiencies, rent premiums generated through unit upgrades, and decreasing expenses through management efficiencies.
GSH uses applicable, real-time software to help manage all assets on a minute-by-minute basis. Using real-time data, they can effectively keep all projects on track to ensure the business plan's proper implementation. Additionally, GSH is vertically integrated, employing an affiliated general contractor and construction team to ensure projects stay on budget and on time.
Property is a Class B+, 200-unit apartment community in Orion Township, MI. Orion Township is an incorporated village located northwest of Detroit proper. The Property is comprised of 13 residential buildings on 30.2 acres, and is currently 98% occupied. Built in 1995, the Property consists of 56 1B/1Bs, 96 2B/2Bs, and 48 3B/2Bs. Amenities include fitness center, playground, covered parking, clubhouse with sundeck, pool, and picnic/BBQ area. The units feature full-size washers and dryers, walk-in closets, and private entrances.
In-Place/Stabilized Unit Mix:
| Unit Type | # of Units | Unit Size (square feet) | In-Place Rent | Projected Post-Reno Rent |
| 1 Bed, 1 Bath | 56 | 807 | $962 | $1,125 |
| 2 Bed, 2 Bath | 96 | 1,043 | $1,099 | $1,305 |
| 3 Bed, 2 Bath | 48 | 1,294 | $1,341 | $1,490 |
| Total/Averages | 200 | 1,037 | $1,119 | $1,299 |
All rents are net effective
Occupancy and in-place rent are as of 3/12/2021.
| Pier 38 | Hillside Forest | Northville Woods | Subject | |
|---|---|---|---|---|
| Date | 3/1/2020 | 7/25/19 | 7/25/19 | 3/23/2021 |
| Year Built | 1997 | 1986 | 1972 | 1995 |
| # of Units | 141 | 252 | 274 | 200 |
| Total SF | 147,600 | 277,875 | 278,932 | 248,821 |
| Purchase Price | $19,400,000 | $32,500,000 | $35,150,000 | $27,375,000 |
| $/Unit | $137,589 | $128,968 | $128,284 | $136,875 |
| $/SF | $131 | $117 | $126 | $110 |
| Cap Rate | 5.85% | N/A | N/A | 6.42% |
| Legends Fox Creek | The Crossing at Auburn Hills | Auburn Gate Apartments | Heron Springs | Total/Averages | Subject | |
|---|---|---|---|---|---|---|
| Year Built | 1998 | 1998 | 2001 | 2014 | 1995 | |
| Rents (1x1) | $1,400 | $1,494 | $1,447 | $1,125 | ||
| SF (1x1) | 775 | 900 | 838 | 807 | ||
| Average $/SF (1x1) | $1.81 | $1.66 | $1.73 | $1.39 | ||
| Rents (2x2) | $1,500 | $1,249 | $1,440 | $1,650 | $1,460 | $1,305 |
| SF (2x2) | 1000 | 990 | 1,162 | 1,324 | 1,104 | 1,043 |
| Average $/SF (2x2) |
$1.50 |
$1.26 |
$1.31 | $1.25 | $1.32 | $1.25 |
| Rents (3x2) | $1,349 | $2,060 | $1,925 | $1,778 | $1,490 | |
| SF (3x2) | 1,189 | 1,532 | 1,743 | 1,488 | 1,294 | |
| Average $/SF (3x2) | $1.13 |
$1.34 |
$1.10 | $1.19 | $1.15 |
Sale and lease comps were obtained from CoStar and Axiometrics.
| Sources of Funds | Cost |
|---|---|
| Debt | $20,541,000 |
| Equity | $10,410,633 |
| Total Sources of Funds | $30,951,633 |
| Uses of Funds | Cost |
| Purchase Price | $27,375,000 |
| Loan Assumption Fee | $205,410 |
| Closing & Legal Costs | $290,000 |
| Seller Credit at Closing | $500,000 |
| CapEx Budget | $1,958,105 |
| Acquisition Fee | $397,500 |
| Taxes & Insurance Escrow | $175,618 |
| Working Capital | $50,000 |
| Total Uses of Funds | $30,951,633 |
The assumable terms of the debt financing are as follows:
- Lender: Fannie Mae
- Total Proceeds: $20,541,000
- Rate (Fixed): 4.92%
- Amortization: 30 years
- Term Remaining: 9.75 years
- Interest Only Remaining: 3.75 years
Note: Sponsor is expecting to add a supplemental loan at the end of year 3. Loan assumptions are 72% LTV at 4.0% interest rate, and it is expected to be co-terminus with the deal.
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.
A substantial portion of the total acquisition for the Property will be paid with borrowed funds. The use of borrowed money to acquire real estate is referred to as leveraging. Leveraging increases the funds available for investment or development purposes, on the one hand, but also increases the risk of loss on the other. If the Company were unable to pay the payments on the borrowed funds (called a "default"), the lender might foreclose, and the Company could lose its investment in its property.
Distributions to Orion Investors, LLC will be as follows:
Operating Cash Flow:
1. 8% Preferred Return
2. 70%/30% (70% to Members/30% to GP Entity) to a 15% IRR
3. 50%/50% (50% to Members/50% to GP Entity) thereafter
Capital Event:
1. 8% Preferred Return
2. Return of Capital
3. 70%/30% (70% to Members/30% to GP Entity) to a 15% IRR
4. 50%/50% (50% to Members/50% to GP Entity) thereafter
Note: 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). Distributions are expected to start in August 2021 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Manager, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | Reversion | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Effective Gross Revenue | $2,782,861 | $3,022,109 | $3,221,801 | $3,404,985 | $3,554,539 | $3,690,561 | $3,811,644 | $3,929,879 | $4,049,485 | $3,117,059 | $4,265,094 |
| Total Operating Expenses | $1,096,309 | $1,189,250 | $1,223,180 | $1,257,341 | $1,291,238 | $1,325,495 | $1,360,088 | $1,395,403 | $1,431,586 | $1,097,404 | $1,497,141 |
| Net Operating Income | $1,686,553 | $1,832,858 | $1,998,621 | $2,147,644 | $2,263,301 | $2,365,066 | $2,451,556 | $2,534,477 | $2,617,899 | $2,019,655 | $2,767,953 |
| Total Property Cash Flow | $610,076 | $752,570 | $5,512,257* | $657,523 | $584,045 | $683,215 | $767,320 | $847,885 | $928,916 | $21,052,842 |
* Supplemental loan proceeds in year 3.
| Year 0 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $2,908 | $3,593 | $26,453 | $2,849 | $2,591 | $2,910 | $3,173 | $3,412 | $3,647 | $76,429 |
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 | $397,500 (1.452% of Property purchase price) | RM Communities and The GSH Group | Capitalized Equity Contribution | |
| Construction Management Fee | 5.0% of Capital Expenditures | The GSH Group | Capitalized Equity Contribution |
| Type of Fee | Amount of Fee | Received By | Paid From |
|---|---|---|---|
| Asset Management Fee | 1.5% of Effective Gross Income | RM Communities and The GSH Group | Distributable Cash |
| Property Management Fee | 3.0% of Effective Gross Income and Incentive Fee if NOI Exceeds Budget | Village Green, Third Party Property Manager | Distributable Cash |
The above table is a summary and there may be additional fees and expenses associated with this offering. Please refer to the Private Placement Memorandum for further details.
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.