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Funded
Multifamily
The Orion
Orion Township, MI
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By RM Communities
15.2%* TARGET IRR 14.2%-16.2%
11.0%* TARGET AVG CASH ON CASH
2.56X* TARGET EQUITY MULTIPLE
Estimated Hold Period 9.75 Years
Estimated First Distribution 10/2020
Minimum Investment 35000
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Overview
Value-add acquisition of a well-maintained multifamily property with further upside potential in Oakland County, MI.
Value-Add

The business plan is to implement a value-add program and renovate all 200 units and update exterior and common areas. Interior renovation scope includes granite countertops, new cabinet fronts, plank flooring, lighting, and plumbing fixtures.

Management

The property’s current management is local and not very sophisticated. We plan to hire Village Green as our property manager. They have an institutional approach which we believe will allow us to push rents and maximize revenue.

Market

The Orion is in Orion Township, a suburban township in Oakland County. Oakland County is a highly affluent county with median area income of $90K.

Property At A Glance
Year Built 1995
# of Units 200
Current Occupancy 98%
Acquisition Price

$27,375,000

Investment Highlights
The Sponsor (a partnership between The GSH Group (GSH) and RM Communities) is acquiring the Property for $27.375 million, which represents a going-in cap rate of 6.16% on expected year one net operating income.
The Sponsor believes there is opportunity to create value for investors as current in-place rents of $1,119/unit are listed at a discount to the market. Increased rents at the property should be further supported by robust rent growth in the market which averaged greater than 5% in 20Q1, a significant increase from the 4.2% growth rate reported in 19Q2.
A capital improvement budget of $2.3 million (or $11,541 per unit) is budgeted for interior and exterior renovations, with $1.96 million to be funded at closing and $350 thousand to be funded by a supplemental loan underwritten at year 3. The Sponsor intends to increase rents to an average of $1,299/unit, a 16% increase driven by a renovation program that includes new cabinet fronts, granite countertops, lighting, plumbing fixtures, and vinyl flooring.
The Sponsor will install Village Green, a nationally recognized property management company. Village Green’s institutional approach may allow us to increase value through maximizing rents and other income. Village Green plans to implement a RUBS and trash reimbursement program, which replaces the in-place flat fee utility charge.
Lake Orion Community Schools is a highly rated public school district that was ranked 22nd of 555 for Best School Districts in Michigan according to Niche.
Since 2010, Amazon has been a major player in Southeast Michigan with more than 13 thousand jobs created and $2.5 billion invested in the area. Amazon has nine other sites in the metro that are operating, under construction, or planned including the construction of a $272 million regional distribution center just 10 minutes away from the property which is expected to bring 1,500 jobs.
The exit strategy is to sell the Property in 9.75 years at an anticipated cap rate of 6.30%.
Management
Cumulative Distributions

RM Communities

RM Communities is the direct acquisition arm of RealtyMogul, which, through its subsidiary, operates an online technology platform which has been utilized by its members to invest in affiliated and unaffiliated real estate companies that have acquired approximately $5.5 billion of real estate assets, including historical investments in over 26,000 apartment units. 

  • Jilliene Helman
    Chief Executive Officer
  • Gideon Pfeffer
    Managing Partner
  • Todd Hanson
    Managing Director
  • Shmuel Cohen
    Partner
  • Hannan Lis
    Partner
  • Derek Jensen
    Director of Acquisitions, West
  • Zach Karr
    Director of Acquisitions, Mountain Region and Texas
Jilliene Helman
Chief Executive Officer

Jilliene Helman is Chief Executive Officer of RealtyMogul and its wholly owned subsidiaries, RM Manager, RealtyMogul Commercial Capital, RM Adviser, RM Technologies, RM Admin and RM Communities. She has been involved in investments with property values over $5 billion, including over 26,000 apartment and single-family units, and is a pioneer in real estate crowdfunding.

Gideon Pfeffer
Managing Partner

Gideon is responsible for strategic partnership initiatives and ventures, financing and debt opportunities, overseeing investment performance, strategic partner’s performance, and approving decisions on investments and acquisitions. He also oversees daily operations. Prior to GSH, Gideon operated a highly successful aggregation and renovation firm focused on single-family homes in the Midwest and Southeast.

Todd Hanson
Managing Director

Todd Hanson is the Managing Director for RM Communities across the US and has responsibility for planning and execution of overall strategy and directing the investment and financing activities of the company. He is actively involved in maintaining existing client relationships and developing new capital and partnership opportunities for the company.  Mr. Hanson was previously EVP and Head of Investments at The ConAm Group, a private equity multifamily investment firm.  

Shmuel Cohen
Partner

Shmuel is responsible for asset management and Israeli Investor relations. An Israeli citizen, Shmuel also owns a separate  portfolio of over 1,300 units in multifamily properties in Michigan and North Carolina. His experience as an owner and operator is an invaluable resource and he is responsible for the continued success of raising private capital in Israel for The GSH Group.

Hannan Lis
Partner

Hannan is responsible for banking, investor relations, and branding. He is an experienced real estate investor, owns several businesses, and is an active member of a prominent family office in Michigan. Hannan is president of WW Group, which holds Weight Watchers franchises for Michigan and Ontario, Canada. The company was formerly the largest franchisee in the Americas.

Derek Jensen
Director of Acquisitions, West

Derek Jensen is a Director of Acquisitions for RM Communities, the direct acquisition arm of RealtyMogul, and has responsibility for overseeing direct acquisitions of multifamily opportunities in the western half of the United States. Mr. Jensen has over 20 years of real estate experience, concentrated in the acquisition, management and disposition of over 10,000 multifamily units including market rate, value-add, affordable housing and fractured condominiums. Mr. Jensen has held positions at several private and institutional firms including Pacifica Companies and GFI Partners.

Zach Karr
Director of Acquisitions, Mountain Region and Texas

Zach Karr is a Director of Acquisitions for RM Communities, and has responsibility for sourcing and acquiring multifamily assets in the Mountain West region of the United States and Texas. Mr. Karr has nearly a decade's worth of experience in real estate, primarily in the acquisition, financing, development, and investment management of multifamily properties valued at over $2 billion. Mr. Karr has held positions at several private and institutional firms including GCM Grosvenor, Geringer Capital, and Continental Partners.  

Track Record

Property Name Location Multifamily Class No. of Units Year Built Purchase Price CapEx Budget Status
Terrace Hill El Paso, TX B 310 1983 $18,700,000 $4,095,000 Full Cycle. 22% deal-level IRR, 18% LP-level IRR*
La Privada El Paso, TX B 240 1982 $11,700,000 $1,867,000 Closed
The Hamptons Virginia Beach, VA B 212 1973 $19,051,000 $3,792,000 Closed
Pohlig Box Factory & Superior Warehouse Richmond, VA A- 93 & 7,700 Retail SF 2004 $15,900,000 $1,348,000 Closed
Lubbock Medical Office Building Lubbock, TX B 20,880 SF 1966 $8,350,000 $0 Closed
Turtle Creek Fenton, MO A- 128 2018 $24,875,000 $596,000 Closed
The Orion Orion Township, MI B+ 200 1995 $27,375,000 $2,308,000 Closed
Kings Landing Creve Coeur, MO A- 152 & 9,229 Retail SF 2005 $40,100,000 $3,885,850 Closed
Minnehaha Meadows Vancouver, WA A 49 2021 $16,450,000 $83,950 Closed
Roosevelt Commons Vancouver, WA A 36 2020 $12,550,000 $78,200 Closed
Bentley Apartments Grove City, OH A- 138 2020 $30,200,000 $650,000 Closed
Sherwood Oaks Riverview, FL B 199 1984 $35,000,000 $1,266,725 Closed
Haverford Place Georgetown, KY A- 160 2001 $31,050,000 $2,836,734 Closed
Edison Apartments Gresham, OR A 64 2020 $19,500,000 $203,390 Closed
Total     1,981   $310,801,000 $23,010,849  

The acquisitions of the Terrace Hill Apartments, La Privada, The Hamptons, and Pohlig Box Factory & Superior Warehouse properties preceded the formation of the RM Communities, LLC.  Consequently, these real estate assets are managed by an affiliate of RM Communities, LLC.  They are included as part of the RM Communities, LLC portfolio because these real estate assets were acquired and are managed under the same executive leadership in Jilliene Helman and according to the same investment strategy employed by RM Communities, LLC.

Note: Totals include Terrace Hill (sold).

*Past performance is not indicative of future performance.

Business Plan

The business plan is to implement a value-add program and renovate all 200 units and increase average in-place rents from $1,119 to $1,299. The renovation program includes new cabinet fronts, granite countertops, lighting, plumbing fixtures, and vinyl flooring. Average interior renovation is $8K/unit. Additionally, the Sponsor plans to implement a RUBS and trash reimbursement program; currently the property is charging a flat fee. Other expenditures include repairing vinyl siding and parking lot, upgrading the clubhouse, bbq and pool area, and adding a dog park and volleyball court. Total interior and exterior CapEx is $2.3 million or $11.5 thousand per unit. A portion of the CapEx ($350 thousand) will be funded by the supplemental loan underwritten at the end of year 3. The property currently has an assumable loan of $20.5 million with 3.75 years of interest only and 9.75 years term. At the end of year 3, the plan is to obtain a supplemental loan at 72% of then-current LTV. The Sponsor plans to exit in 9.75 years at a cap rate of 6.30%.

Investors will be investing into Orion Investors, LLC which will subsequently invest into RM Orion, LLC which will hold title to the property.

Below is a summary of the capital improvement budget:

Capital Improvement Budget - The Orion
Interior Upgrades Total Per Unit
Appliances $286,000 $1,430
Countertops $352,000 $1,760
Cabinet Doors/Pulls $76,544 $383
Lighting $57,200 $286
Plumbing Fixtures $67,200 $336
Flooring $372,816 $1,864
Bathroom $97,088 $485
Paint $146,400 $732
Other $156,800 $784
Subtotal Interior Upgrades $1,612,048 $8,060
     
Exterior, Common Area Upgrades and Repairs Total Per Unit
Vinyl Siding $80,000 $400
Pool Renovation Incl. Furniture $10,000 $50
Dog Park Addition $15,000 $75
Playground $30,000 $150
Sport Court (Volleyball Court) $10,000 $50
Parking Lot Repairs $50,000 $250
Clubhouse (Incl. Business Center) $20,000 $100
Signage $35,000 $175
Pergola, Benches, and Grills $10,000 $50
Miscellaneous $75,000 $375
Irrigation System $60,000 $300
Subtotal Common Area Upgrades and Repairs $395,000 $1,975
     
Construction Management Fee (5%) $100,352 $502
Contingency (10%) $200,705 $1,004
     
TOTAL $2,308,105 $11,541
Property
Property Details

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.

Comparables

Sale Comparables
  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%
Lease Comparables
  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.

Location

The Orion is in Orion Township, a suburban township in Oakland County, Michigan. Oakland County is home to 1.3 million residents and ranked in the top 10 for most affluent big counties in the entire nation. Major employers include – Beaumont Health Systems (18,260 employees), Fiat Chrysler (12,900 employees), and General Motors (8,500 employees). Oakland County continues to be a sought-after place to call home which is why year-over-year it is highly rated by news sources across the globe. Thus, The Orion is perfectly located to capture the strong momentum that continues to build in southeast Michigan.

Market Overview

With a $1.3 billion asset value and over 15,000 apartments, Northwest Oakland County is the fifth largest submarket in Detroit that appeals to baby boomers and empty nesters seeking a more rural environment. The market takes advantage of strong suburban population growth, which captures workers who are employed in the suburbs of Detroit and allows for a greater market share of renters than in other parts of Michigan. The vacancy rate has been averaging below 4% for the past several quarters and has only risen to 5%, due to the delivery of 100 units at The Marquette in 19Q4. Market rents are some of the most affordable in the region, sitting at a little more than $950/month. Annual rent growth remains robust, averaging above 5% in 20Q1, a significant increase from 2019, when the highest growth rate, 4.2%, was reported in 19Q2

Prior to the COVID-19 pandemic, Detroit was undergoing a late revival from the 2008 financial crisis. The metro has undergone significant changes, including major development in its urban center. Reuters analyzed 378 metropolitan areas in the US from 2010 to 2017 and found that Detroit was among the top 20 cities to experience significant job growth. Detroit’s economy has diversified from its manufacturing background.

Since 2010, Amazon has created more than 13 thousand jobs and invested more than $2.5 billion in southeast Michigan. Amazon currently has nine other sites in Metro Detroit that are operating, under construction or planned. At nearby Pontiac, which is 10 minutes from the property, Amazon is constructing a regional distribution centerat the former Pontiac Silverdome. The $272 million project is expected to bring more than 1,500 jobs to the area. Another major project is planned at the Palace at Auburn Hills site, formerly the home of the Detroit Pistons,which is 10 mins northwest of the property. The project is expected to house corporate offices and tech firms.

Photos
Financials
Sources & Uses

Total Capitalization
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
Debt Assumptions

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

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.

Cash Flow Summary
  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.

Projected Investor Cash Flows
  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
 
NO ASSURANCE OF RETURN: The Company's pro-forma projections are based on assumptions regarding future events, such as the timing and extent of the recovery of the residential market and the stabilization of the debt markets. While the Manager believes that these assumptions are reasonable and achievable, the likelihood of its occurrence is subject to many factors that are not within the control of the Company or its Manager and that could impair the ability of the Company to meet its projections.
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 $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  
Recurring Fees
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.

 

Disclaimers/FAQs
Disclaimers

The purchase of the Units involves substantial risks and is suitable only for persons who have no need for liquidity in their investment and who can bear the risk of potential loss of their entire investment.  You should carefully consider the risk factors set forth below as well as the other information contained in this Memorandum before purchasing the Units.  We may encounter risks in addition to those described below.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect your investment. 

Investors should consider the risks described below, as well as the other information contained in this Memorandum or incorporated by reference hereto, before making a decision to invest in the Company.  Investors should be aware that an investment in the Company is speculative in nature and involves a high degree of risk.  The possibility of partial or total loss of capital exists and Investors must be prepared to bear capital losses that might result from such an investment.  If any of the following risks actually occur, the Company’s financial condition and the results of its operations could be materially and adversely affected.  In addition, there will be occasions when the Manager and its affiliates, on the one hand, and the Members, on the other hand, may encounter potential conflicts of interest in connection with the Company.  The considerations described below, among others, should be evaluated carefully before making an investment in the Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect your investment.

Risks Related to the COVID-19 Coronavirus Worldwide Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 coronavirus outbreak a worldwide pandemic (the “Pandemic”).  On March 13, 2020, President Trump declared a national emergency in the United States.  Various cities and states have also declared emergencies.  The Pandemic and the reactions of various governments and citizens is causing (and any future outbreaks of the coronavirus disease may cause) massive disruptions in economies, financial markets, supply chains, businesses and daily life on a worldwide scale never seen in recent history.  Such disruption may continue for an extended period or indefinitely, may lead to a recession or depression in the United States and/or globally, and may adversely impact the Company.  As of August 2020, the Pandemic has caused a near total cessation of all non-essential economic activities in many U.S. cities and states.  Many businesses have temporarily suspended operations and laid off employees.  In the United States, persons have been diagnosed with COVID-19 in each of the 50 states.  While the Company has a business continuity plan, it may be materially affected by the Pandemic.  The Pandemic and reactions by governments and citizens, and the impact of the Pandemic and such reactions on businesses and the economy, are creating and are likely to continue to create various issues for the economy that are impossible to fully predict or list here but all or many could, and are likely to be, material, with such likelihood of materiality increasing the longer the duration of the Pandemic (and whether or not there is a recurrence of coronavirus even after the current Pandemic improves).  The Pandemic may worsen substantially before it improves, and the entirety of the United States will continue to be impacted. There is little certainty as to when the Pandemic will abate, or to what extent the Unites States economy will recover from the disruption caused by the Pandemic.  In addition to the severe impact of the Pandemic on financial markets and economies, other things that may impact the Company in connection with the Pandemic include the closure of courts and state governments, which among other things, can directly affect the ability to complete or enforce evictions, and the lack of in-person walk-throughs of the Property (both for the Manager and appraisers).  The closure of certain businesses or limitations in the ability of certain businesses to function, as well as declarations of states of emergency, and “shelter at home” measures in certain areas, have and could affect the ability of the staff of the Manager  and/or applicable property managers to function properly.  A reduction in liquidity and increase in volatility in financial markets could affect the valuation of real estate, the health of the Company’s financing partners or other persons necessary for the Company to implement its strategy and the ability to find third party financing.  Also, the Principals and staff members of the Manager could become infected with COVID-19, develop symptoms, and not be able to work, or not be able to work effectively. Of course, this crisis may also create opportunities for the Manager for targeted investments and the Company will endeavor to position itself well to take advantage of these opportunities and mitigate the risks above inasmuch as they can be mitigated.

You will not have any control over the Property Owner or the Company or their respective operations. Rather, such control will be exercised solely by the Manages and the Principals.

You will not have any control over the Property Owner, the Company, or their respective operations.  Rather, all such decisions will be made by the Manager and the Principals.  Although the Principals have, to date, had a successful operating history in the real estate industry, there can be no guarantee that this will continue in the future.  Further, if the Property Owner, and therefore, the Company, does not achieve certain levels of performance, your investment would be adversely affected or lost entirely.

Because the Company intends to invest solely in the Property Owner, the sole asset of which will be the Property, your investment will not be diversified, thus subjecting your investment to greater risk should the Property prove not to be a profitable investment.

The Company will be treated as a partnership for United States federal income tax purposes.  As such, the Company will not be subject to United States federal income tax.  Rather, such taxes will be paid by the Company’s Members based on their respective shares of the Company’s taxable income.  Each Member will be allocated his or her share of items of income, gain, loss, deduction, and credit attributable to the Company each year in accordance with the terms set forth in the Company LLC Agreement, and will be required to include this allocable share of the Company’s taxable income in computing such Member’s federal income tax liability for that year.  This will be the case even though the Company may not have made any cash distributions to its Members in that year or may not have made cash distributions in that year that are sufficient to satisfy the incremental income tax liabilities incurred by the Members as a result of having to report their share of the Company’s taxable income on their income tax returns.  Thus, it is possible that your investment will increase your federal income tax burden, without a corresponding cash distribution with which to pay such taxes, in which case you would be required to satisfy tax liabilities attributable to your share of Company income with cash from sources other than the Company.

The Company’s revenues will indirectly depend on the ability of the Property Owner to lease the Property at low vacancy rates.

The Property Owner’s, and therefore the Company’s, revenues from the Property will be dependent upon the creditworthiness of the Property’s tenants and would adversely be affected by the loss of or default by lessees.  Lease payment defaults by tenants could indirectly cause the Company to reduce the amount of distributions to the Members and force the Property Owner to find an alternative source of revenue to pay any mortgage loan on the Property.

In the event of a tenant default, the Property Owner may also experience delays in enforcing their rights as landlord and may incur substantial costs in protecting their investment and re-leasing the Property.  If a lease for a unit on the Property is terminated or expires, the Property Owner may be unable to lease units in the Property for the rent previously received.  Furthermore, the Property may have some level of vacancy from time to time.  In addition, the resale value of the Property could be diminished because the market value may depend principally upon the value of the leases of the Property. As a result of the foregoing, the Property Owner, and therefore, the Company, may suffer reduced revenues resulting in the Company making lower or no cash distributions to the Members. 

The existence of debt secured by the Property creates special risks to the Property Owner, which could have an adverse effect on the Company’s performance.

The presence of mortgage financing on the Property creates special risks.  If there is a shortfall between the cash flow from the Property and the cash flow needed to service mortgage debt on the Property, then the amount of cash that flows up to the Company and is available for distributions to the Members may be reduced. In addition, there is increased risk of loss since defaults on indebtedness secured by the Property may result in the Property lenders initiating foreclosure actions. In that case, the Property Owner could lose the Property if the loan is in default, thus indirectly reducing the value of the Members’ investments to virtually nothing.  If the Property is foreclosed upon due to a default, it is highly unlikely that the Company would be able to pay cash distributions to the Members, and your investment would be partially lost or lost entirely. In addition, the Property Owner may be unable to refinance mortgage debt on the Property at appropriate times, which may require the Property Owner to refinance such mortgage debt on terms that are not advantageous to the Property Owner, or could result in the foreclosure of the Property which, in turn, would have a material adverse effect on your investment.

Increased government regulations could have the effect of increasing the Property Owner’s expenses and adversely affecting the Company’s operating results.

Governmental authorities at all levels are actively involved in the promulgation and enforcement of regulations relating to land use and zoning restrictions, environmental protection and safety and other matters affecting the ownership, use and operation of real property. Regulations may be promulgated which could restrict or curtail usages of existing structures, or require that such structures be renovated or altered in some manner. The enforcement of such regulations could have the effect of increasing the expenses, and lowering the income or rate of return, as well as adversely affecting the value of the Property, and therefore, indirectly, the operating results of the Company.

The Company’s returns to the Investors will depend largely on the ability of the Property Owner to keep operating expenses low.

The Property will be subject to increases in certain operating expenditures associated with real estate, such as tax rates, fuel, utility costs, insurance costs, labor, repairs and maintenance, building materials and supplies, debt service, administrative and other operating expenses.  These costs are not generally decreased by events generally adversely affecting rental revenues, such as an unforeseen downturn in the real estate market, a lack of investor confidence in the market or a softening of demand.  If the Property Owner is unable to lease units on the Property on a basis requiring the tenants to pay all or some of the expenses, it would be required to pay those costs, and the cost of operating the Property may exceed the rental income derived from the Property.  In addition, the Property Owner will generally be responsible for real property taxes related to the Property.  If the Property Owner fails to pay any such expenses payable to a governmental entity, such as taxes, the applicable taxing authorities may place a lien on the Property and the Property may be subject to a tax sale.  The foregoing could have a material and adverse effect on the operating results of the Property Owner, and therefore, your investment.

The short-term nature of our residential leases may adversely impact our income. 

If the residents of the Property decide not to renew their leases upon expiration, the Property Owner may not be able to re-let their units.  Because the Property Owner’s residential leases will be for apartments, they will generally be for terms of no more than one or two years.  If the Property Owner is unable to promptly renew the leases or re-let the units, then the Property Owner’s results of operations and financial condition will be adversely affected, which will, in turn, affect the Company’s financial condition.  In addition, certain significant expenditures associated with the Property Owner’s business (such as mortgage payments, real estate taxes and maintenance costs) is generally not reduced when circumstances result in a reduction in rental income.  This may have an adverse effect on the Property Owner’s and, in turn, the Company’s financial condition.

Capital improvements and capital replacements could be costly to the Property Owner, and failure to make such improvements and replacements on a timely basis could hinder the Property Owner’s ability to fill vacancies.

The Property Owner may be required to expend funds to correct defects or to make improvements before the Property can be sold.  If the Property Owner does not establish sufficient reserves for working capital or obtain adequate secured financing to supply necessary funds for capital improvements or similar expenses, the Property Owner may be required to defer necessary or desirable improvements to the Property.  If the Property Owner defers such improvements, the Property may decline in value, and it may be more difficult for it to attract or retain tenants to the Property, or the amount of rent the Property Owner can charge for a unit on the Property may decrease. The Company cannot assure the Members that the Property Owner or the Company will have any sources of funding available for repair or reconstruction of damage to the Property in the future or to make such tenant improvements.  The foregoing could have a material and adverse effect on the operating results of the Property Owner and, therefore, your investment.

Investments in real estate are inherently risky, and there are no assurances that the Company will generate positive returns.

The assets underlying the Company’s investment in the Property Owner will consist solely of real estate, namely, the Property.  The Company is therefore subject to risks generally inherent in the investment in and ownership of real property, including changes in global, national, regional or local economic, social, demographic or real estate market conditions and other factors particular to the location of the Property.  The Company is unable to predict future changes in these market conditions. For example, a prolonged recession or rise in interest rates could make it more difficult to lease or dispose of the Property. In addition, rising interest rates could also make alternative interest bearing and other investments more attractive and therefore potentially lower the relative value of the Property.

Other risks generally associated with the ownership of real property include, without limitation: changes in the number and financial condition of buyers and sellers of properties; increases in the availability of supply of property relative to demand; the quality and philosophy of the managers of the properties; competition based on rental rates, attractiveness and location of the properties; financial condition of tenants; tenant vacancies; rent strikes; quality of maintenance; insurance services; increases in real property taxes and tax rates, energy prices and other operating expenses; changes in interest rates and the availability of mortgage financing; changes in the relative popularity of properties; risks due to dependence on cash flow; risks and operating problems arising out of the presence of certain construction materials; and acts of God, uninsurable losses, terrorist acts and other factors beyond our control.  Such risks also include fluctuations in occupancy rates, rent schedules and operating expenses, which could adversely affect the value of Property.

The Property may be subject to economic, political, regulatory and social risks, which may affect the liquidity of the investment.  There may be significant local government rules, regulations and fiscal policies relating to land use and permit restrictions (including those governing usage, improvements, zoning and rent control), local taxes and other transaction costs, and potential liability under changing environmental and other laws and regulations, which may adversely affect the returns sought by the Company.  In addition, real estate is subject to long-term cyclical trends that give rise to significant volatility in real estate values. 

All of these and other risks may adversely affect operating results or make the sale or refinancing of the Property difficult or unattractive. 

Based on the factors described above and elsewhere in this Memorandum, among other factors, the possibility of partial or total loss of capital exists, and investors in the Company should not invest unless they can readily bear the consequences of such a loss. Neither the Manager nor any of its affiliates, partners, officers or employees will be liable for the return to any Member of its capital contributions to the Company.  Such distributions and returns, if any, will be made solely from the Company’s assets.

The content on this detail page was provided by the Sponsor or an affiliate thereof. The Sponsor is under no obligation to update this detail page. None of the opinions expressed on this detail page are the opinions the RealtyMogul platform and they are not endorsed by the RealtyMogul platform. Assumptions and projections included in this detail page are not reflective of the position of the RealtyMogul platform or any other person or entity other than the Sponsor’s investment vehicle (“Investment Entity”) or its affiliates.

The preceding summary of principal terms of the offering is qualified in its entirety by reference to the more complete information about the offering contained in the offering documents, including, without limitation, the Private Placement Memorandum, Operating Agreement, Subscription Agreement and all exhibits and other documents attached thereto or referenced therein (collectively, the "Investment Documents"). This summary is not complete, and each prospective investor should carefully read all of the Investment Documents and any supplements thereto, copies of which are available by clicking the links above or upon request, before deciding whether to make an investment. In the event of an inconsistency between the preceding summary and the Investment Documents, investors should rely on the content of the Investment Documents.

There can be no assurance that the methodology used for calculating targeted IRR is appropriate or adequate. Target IRR is presented solely for the purpose of providing insight into the Investment Entity’s investment objectives, detailing its anticipated risk and reward characteristics and for establishing a benchmark for future evaluation of the Investment Entity’s performance. Targeted IRR is not a predictor, projection or guarantee of future performance. There can be no assurance that the Investment Entity’s targets will be met or that the Investment Entity will be successful in identifying and investing in investment opportunities that would allow the Investment Entity to meet these return parameters. Target returns should not be used as a primary basis for an investor’s decision to invest in the Investment Entity. Please see the applicable Investment Documents for disclosure relating to forward-looking statements.

All forward–looking statements attributable to the Sponsor or persons acting on its behalf apply only as of the date of the offering and are expressly qualified in their entirety by the cautionary statements included elsewhere in this summary and the Investment Documents. Any financial projections are preliminary and subject to change; the Sponsor undertakes no obligation to update or revise these forward–looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections may be inaccurate in any material respect. Therefore, the actual results achieved may vary significantly from the forecasts, and the variations may be material.

The interests in the Investment Entity will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon exemptions contained in Rule 506(b) or 506(c) of Regulation D as promulgated under the Securities Act. In addition, the interests will not be registered under any state securities laws in reliance on exemptions from registration. Such 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 investing activities risk the loss of capital. There can be no assurance that investors will not suffer significant losses. No guarantee or representation is made that investment objectives of the Investment Entity will be achieved. You should not subscribe to purchase interests in the Investment Entity unless you can readily bear the consequences of such loss.

Interests in the Investment Entity are listed on the RealtyMogul Platform. RealtyMogul may receive fees from the Sponsor or the Investment Entity partially based on the number of investors investing in such Investment Entity through the RealtyMogul Platform. This arrangement could create a conflict of interest between the RealtyMogul platform and investors.

 

 

 

 

 

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