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.
Spirit Bascom Ventures
Spirit Bascom Ventures is a co-sponsorship joint venture between The Bascom Group and Spirit Investment Partners that invests in opportunistic and value-add multifamily throughout the eastern half of the United States.
Spirit Investment Partners (www.spiritinvestors.com) is a Connecticut-based real estate investment and development company, owned and operated by principals David Nachman, Scott Zwilling, and Ian Hafner. The company owns and operates a portfolio of multifamily assets ranging from New England to Florida, the Midwest and California. Spirit has closed over $350 million in transactions since inception, with over $40 million in renovations currently in process.
The Bascom Group (www.bascomgroup.com) is one of the most active and seasoned buyers and operators of apartment communities in the United States. Formed in 1996 by Jerome Fink, Derek Chen, and David Kim, The Bascom Group is a private equity firm that specializes in multifamily, commercial, non-performing loans, and real estate related investments and operating companies. The company has owned over 196 multifamily properties and 52,000 units (as of November 2015). In 2016, Bascom was awarded the prestigious Ernst & Young Entrepreneur Of The Year award.
-
David A. NachmanPrincipal, Spirit Investment Partners -
Scott D. ZwillingPrincipal, Spirit Investment Partners -
Ian M. HafnerPrincipal, Spirit Investment Partners -
Jerome A. FinkCo-Founder and Managing Partner, The Bascom Group -
David S. KimCo-Managing Partner, The Bascom Group -
Derek Ming-Dar ChenCo-Founder and Chairman, The Bascom Group
Prior to co-founding Spirit Investment Partners in 2009, Mr. Nachman was a founding partner and principal of AMS Real Estate Partners (‘AMSREP’), a New York based real estate investment fund formed to invest in both private and publicly traded real estate assets throughout the capital structure, across all asset types and primary US markets. Mr. Nachman was jointly responsible for all of AMS Real Estate Partners I, LP capital raising, investment decisions, and overall Fund management. From 2002 to 2007, Mr. Nachman was a Vice President of Hall Financial Group, a private investment company based in Dallas where he helped launch the company’s Structured Finance Group and had direct responsibility for originating, underwriting, and structuring of value added equity and debt real estate investments across all asset types and multiple geographic regions. In addition, Mr. Nachman maintained asset management responsibility for a $200 million structured loan portfolio as well as the Company’s approximately $1.0 billion real estate investment portfolio, including over 7,000 multifamily units. Mr. Nachman received a B.S. from Cornell University.
Prior to co-founding Spirit Investment Partners in 2009, Mr. Zwilling was previously the Director of Northeast Acquisitions for JPI, a large national multi-family developer, where he covered the territory from New York to Maine. Prior to JPI, he held a similar role as an Acquisitions Manager with Crescent Heights, one of the nation's premier condominium developers. Over the past ten years, Mr. Zwilling has been responsible for the acquisition, development and disposition of over $1.0 billion of property located throughout the Northeast. In addition, he currently serves as a Professor of Real Estate Finance at Columbia University. Prior to JPI and Crescent Heights, Mr. Zwilling was a real estate investment banker at Wells Hill Partners, Ltd., where he participated in numerous deals, including various residential, hotel and office assets. Other experiences include working as a consultant in the real estate groups of Arthur Andersen and Ernst and Young. Mr. Zwilling is a Certified Public Accountant and holds a Bachelor of Science in Business Administration from The Ohio State University, Columbus, OH and a Masters in Real Estate Development from Columbia University, New York, NY.
Prior to joining Spirit Investment Partners in 2011, Mr. Hafner co-founded MHF Real Estate Group a full service real estate investment firm. Prior to forming MHF, Mr. Hafner served as Director of Development and Investments at Equity One, Inc. where he managed investment opportunities throughout the United States. Equity One is a $3.7 billion publicly traded REIT that principally owns, manages, acquires and develops neighborhood and community shopping centers. Mr. Hafner’s thirteen years of experience in the real estate and finance industries includes serving as Acquisitions Director at Westrust, Acquisition Associate for Cornerstone Real Estate Funds, Inc., and President of his own residential development company, Hafner Realty Group, Inc. Mr. Hafner started his career working in fixed income sales and trading for Lehman Brothers, Inc. in New York City where he transacted in Government, Agency, Interest Rate Derivative and Commercial Mortgage Back Securities, successfully underwriting over $1.25 billion in new issues Agency Securities. Mr. Hafner holds a B.S. in City and Regional Planning from Cornell University’s College of Architecture, Art & Planning. Mr. Hafner is a Licensed Real Estate Broker in the State of California, License #01858890, and a Member of California Receivers Forum.
Mr. Fink is a co-founder & Managing Partner of The Bascom Group, LLC. Bascom has completed over $8.0 billion in multi-family and commercial value-added transactions since 1996 including more than 220 multifamily properties and 60,000 units. Bascom’s subsidiaries and joint ventures include the Southern California Industrial Fund, Rushmore Properties, Bascom Portfolio Advisors, Shubin Nadal Associates, Spirit Investors, REDA Bascom Ventures, MHF RM Holdings, and the Realm Group. Bascom’s subsidiaries also include Premier Business Centers, the largest privately held executive suite company in the US.
Prior to founding Bascom, Mr. Fink acted as Senior Acquisitions and Sales Manager from 1991 to 1995 for Pacific Mutual Life Insurance Company. His responsibilities included market assessment, property identification and negotiation, and the acquisition and disposition of real estate investments. Mr. Fink holds a Bachelor of Science in Electrical and Computer Engineering and a Master of Business Administration in Real Estate and Finance from the University of Wisconsin-Madison. He is a member of the Institute of Real Estate Managements (IREM) and Turnaround Management Association (TMA). Mr. Fink is a licensed real estate broker in the state of California, a Certified Commercial Investment Member (CCIM), a Certified Property Manager (CPM), a Certified Mergers & Acquisitions Advisor (CM&AA), and a Certified Turnaround Professional (CTP).
Mr. Kim oversees the development, portfolio management and overall operations for The Bascom Group. His responsibilities include supervising Bascom’s portfolio team in key revenue growth initiatives and expense programs, as well as lender and equity relationships, new ventures, market expansion, and business development. Prior to founding The Bascom Group, Mr. Kim served as a Senior Analyst and Development Associate, from 1989 to 1995, for the Disney Development Company, a wholly owned subsidiary of The Walt Disney Company, where he was responsible for business development and analysis of more than $400 million in retail, office, entertainment, and residential projects.
Mr. Chen oversees corporate finance and strategic development. Mr. Chen is the founder and Chairman of Chenco Holding Company, a firm specializing in real estate and venture capital investment as well as the founder of various subsidiaries investing in and managing assets in Greater China. Mr. Chen serves as the President of The International Leadership Foundation, as a member of the Finance Executive Advisory Board of the College of Business, University of Nevada Las Vegas, as a trustee of the Center for Real Estate at University of Wisconsin, Madison, and as a board member of National Asian Pacific Center on Aging. Mr. Chen studied Chemical Engineering at the National Taiwan University, holds a Bachelor of Science in Business Management, from Eastern Michigan University, and holds a Master of Business Administration degree in Real Estate and a Master of Science degree in Finance from the University of Wisconsin‐Madison.
Spirit Investment Partners Track Record
| Asset Name | Location | Purchase Date | Year Built | # of Units | Purchase Price | Total Capitalization | Price/Unit | CapEx Budget |
| Arlington Village | Fairborn, OH | 11-Aug | 1965 | 164 | $6,000,000 | $6,800,000 | $36,585 | $462,000 |
| Sheffield SONO | South Norwalk, CT | 12-Dec | 2007 | 138 | $43,250,000 | $50,136,333 | $313,406 | $4,290,908 |
| Arlington Flats | Fairborn, OH | 13-May | 1967 | 150 | $1,100,000 | $4,375,000 | $7,333 | $2,347,377 |
| The Henry | Pomona, NY | 13-Dec | 2001 | 168 | $33,050,000 | $38,931,033 | $196,726 | $3,300,000 |
| 946-954 Flushing Avenue | Brooklyn, NY | 14-Jun | 1931 | n/a | $6,000,000 | $7,000,000 | ||
| The Westcott | Tallahassee, FL | 14-Jul | 20,002,005 | 444 | $36,979,000 | $44,400,912 | $83,286 | $5,094,600 |
| The Adair | Sandy Springs, GA | 14-Oct | 2001 | 232 | $30,000,000 | $34,435,333 | $129,310 | $3,233,000 |
| 285 W 12th Street | New York, NY | 15-Jun | 1841 | 11 | $9,350,000 | $11,100,905 | $850,000 | $634,600 |
| Sheridan Edgewater | Chicago, NY | 15-Nov | 1920 | 223 | $21,600,000 | $38,978,613 | $96,861 | $14,015,000 |
| Bellevue West | Nashville, TN | 16-Feb | 1986 | 560 | $63,250,000 | $71,695,085 | $112,946 | $5,118,896 |
| Highlands at the Lake | Nashville, TN | 16-Feb | 1986 | 278 | $30,250,000 | $33,452,371 | $108,813 | $1,812,776 |
| Total/Average | 2,368 | $280,829,000 | $341,305,585 | $118,593 | $40,309,157 | |||
| Asset Name | Location | Purchase Date | Year Built | # of Units | Purchase Price | Total Capitalization | Sale Date | Sale Price |
| 2146-48 Second Avenue | New York, NY | Aug-06 | 1900 | 35 | $5,900,000 | $6,219,500 | May-12 | $8,756,000 |
| Winchester Square | Murrieta, CA | Oct-12 | 1987 | 7 (retail) | $1,400,000 | $1,637,129 | Dec-13 | $2,416,366 |
| 1818 Clay Avenue | Bronx, NY | May-10 | 1937 | 25 | $1,550,000 | $1,850,000 | Jun-14 | $2,400,000 |
| Total/Average | 1987 | 30 | $8,850,000 | $9,706,629 | $13,572,366 | |||
| Portfolio Total | 2,398 | 289,679,000 | 351,012,214 |
The Bascom Group Track Record
| Sale Yr. | # of Units | Avg. Yrs. Held | Total Cost Basis |
| 1999 | 58 | 3.60 | $456,189 |
| 2000 | 504 | 3.15 | $10,091,732 |
| 2001 | 1,049 | 3.05 | $15,654,528 |
| 2002 | 840 | 3.80 | $14,649,840 |
| 2003 | 2,508 | 2.77 | $48,261,908 |
| 2004 | 1,503 | 3.16 | $28,416,433 |
| 2005 | 1,097 | 2.84 | $36,340,001 |
| 2006 | 1,087 | 3.35 | $30,774,104 |
| 2007 | 7,292 | 2.48 | $121,284,998 |
| 2008 | 1,299 | 3.54 | $29,611,326 |
| 2009 | 3,734 | 3.33 | $39,477,443 |
| 2010 | 4,242 | 4.85 | $74,516,529 |
| 2011 | 5,550 | 4.65 | $105,514,167 |
| 2012 | 7,482 | 6.07 | $151,110,359 |
| 2013 | 4,902 | 6.43 | $107,294,343 |
| 2014 | 4,517 | 7.53 | $80,420,118 |
| 2015 | 4,585 | 7.15 | $69,256,592 |
| Total/Avg. | 52,249 | 4.22 | $963,130,610 |
*Sponsor information and track record were provided by the Sponsor and have not been independently verified by RealtyMogul.com
In this transaction, RealtyMogul.com investors will invest in Realty Mogul 56, LLC. Realty Mogul 56, LLC will subsequently invest in North Sheridan Property Investor, LLC (the "Company"), the entity that holds title to the Property. The Property was purchased in November 2015 for a price of $21.6 million ($96,861 per unit), negotiated from an original asking price of $25.0 million ($122,108 per unit). The Sponsor is syndicating $1.3 million of their initial investment through RealtyMogul.com, leaving them with approximately $1.0 million (about 16% of total equity) in the deal.
The Sponsor is planning a $14.0 million ($62,845 per unit) rehabilitation project that they believe should bring the Property in line with other renovated properties in the market that are currently achieving higher rents. The objective is to convert the Property to a Class A building by creating a wholly new and modern living environment while retaining the building’s historic design. Common area upgrades will include a remodeled lobby, leasing office, fitness center, resident lounge, new signage, and potentially a rooftop common area borrowing design and space planning inspiration from some of the hippest boutique hotels in Chicago and New York. To facilitate the transformation, the Sponsor has commissioned Julie Purpura, a Chicago-based designer who has developed an extensive background in numerous high-profile and award winning hospitality projects. Julie acted as Lead Designer in the historic renovation of the Fairmont Hotel in Vancouver, B.C., and was a designer of Brush Creek Ranch, ranked #1 Resort in the U.S. and #2 Hotel & Resort in the World by Conde Nast in 2015. Julie has held senior positions at Studio K and EDG Interior Architecture + Design in Chicago and was a 2014 "Boutique 18" award-winner, Boutique Design's yearly roster of on-the-rise designers of hospitality interiors. A sample of Julie’s work can be seen on her website at www.juliepurpura.com.
As part of the renovations, all deferred maintenance will be cured, including façade repair, windows, elevators, electrical, life safety and plumbing. A portion of the ground floor will be converted into indoor garage space to allow for up to 20 parking spaces which are projected to be leased for approximately $200/month, in line with prices being charged by other properties in the market. On-site parking is a luxury in the submarket. Of the two closest comps, only Somerset Apartments offers parking with a total of 18 spaces currently leasing at $200/month. The remaining 8,850 square feet of retail space will be leased to a service oriented retailer that will cater well to the new resident profile.
In addition to the exterior and common area improvements, the Sponsor has budgeted $19,800 per unit for interior unit renovations to update the units to a contemporary urban aesthetic that will include new stone countertops, stainless-steel appliances, original refinished hardwood flooring, modern lighting and fixtures, two-tone paint, modern cabinetry, and new bathroom vanity upgrades. Unit renovations will occur as the units vacate and are expected to be completed within 30 months (seven units per month). The Sponsor has budgeted a $1.2 million interest reserve to pay debt service on the senior loan during the renovation period. After the renovations are complete, the Sponsor plans to raise rents by 45-82% (depending on the unit type) to match rents of comparable properties in the market.
| Unit Mix | |||||||||||
| Unit Type | # of Units | % of Total | Average Size | Avg. Effective Rent | Rent / SF | Proforma Rent | Proforma Rent/ SF | % Lift | |||
| Studio | 42 | 19% | 300 | $657 | $2.19 | $950.00 | $3.17 | 45% | |||
| Studio | 67 | 30% | 456 | $750 | $1.64 | $1,110.00 | $2.41 | 48% | |||
| 1 BD / 1 BA | 109 | 49% | 675 | $892 | $1.32 | $1,625.00 | $2.41 | 82% | |||
| 2 BD / 1 BA | 4 | 2% | 900 | $1,040 | $1.16 | $1,850.00 | $2.06 | 78% | |||
| 2 BD / 2 BA | 1 | 0% | 1,350 | $1,180 | $0.87 | $1,995.00 | $1.48 | 69% | |||
| Total / Avg | 223 | 100% | 546 | $809 | $1.58 | $1,348.83 | $2.54 | 65% | |||
Two rent comparable properties within three blocks of the subject Property have recently completed similar business plans. Uptown Regency, which was renovated in 2011 with an estimated budget of $8,000 - 10,000 per unit for interior finishes (compared to $19,800 per unit at the subject Property) is 97% occupied and is achieving rents that are 67% higher than rents that were in place at the time of acquisition. Somerset Place, which began post-renovation leasing in October 2014, is currently 98% leased at rents that are over 75% higher than current rents at the subject Property. The third comparable, The Belmont by Reside, is located 2.9 miles to the south and is a simlar removated mid-rise brick construction. The property has similar finishes and amenities as proposed for the subject including ground floor parking but commands a locational rent premium being closer to Lincoln Park and downtown Chicago.
RealtyMogul.com, along with Spirit Bascom Ventures, LLC (the "Sponsor"), a joint venture between The Bascom Group and Spirit Investment Partners, is providing the opportunity to invest in the ownership and repositioning of a 223-unit Class B multi-family property in Chicago, IL (the "Property").
The primary objective of this investment is to implement an extensive renovation program, reposition, stabilize, and sell the property as quickly as construction and the market permits, estimated to be in approximately three to five years.
The Edgewater neighborhood and surrounding areas, such as Andersonville and Uptown, are in a period of transition attracting a young and active millennial demographic who seek the area's numerous walkable amenities. According to the Sponsor, the Property has been mismanaged by a non-institutional ownership group that was unwilling to invest the capital necessary to remain competitive within the changing market. Due to its condition, the Property has lagged the performance of institutional quality assets as the submarket is demanding more high-end, Class A rental housing. The Sponsor is planning a $14 million ($62,845/unit) renovation to improve the property to Class A finishes and amenities to compete with comparable assets within the market.
Sheridan-Edgewater Apartments is a 223-unit mid-rise apartment building with approximately 25,000 square feet of ground-floor retail space. Currently 97% occupied, the nine foot ceiling apartments are a mix of studio (49%), one-bedroom (49%), and two-bedroom (2%) units. Approximately 40% of the units have unobstructed and protected views of Lake Michigan. The first floor commercial space has been strategically vacated by the previous owners so that new ownership can re-purpose the space for new specialty commercial tenancy, parking, or additional amenities.
Originally built as an Art Deco luxury hotel in the 1920s, the eight-story building features classic design elements such as detailed exterior limestone ornamentation, terracotta tiled flooring, arched and Moorish style doorways with Solomonic columns, thick crown moldings and coffered ceilings. Although the units and current amenities are dated, some capital improvements have been performed at the property over the last six years including roof replacement, eighth floor window replacement, tuck-pointing and partial reconstruction of the façade.
Current community amenities include a common area laundry room, a fitness center, and a doorman. Unit finishes are typical of a Class B/B- property including linoleum countertops, oak cabinetry, and lower cost appliances and hardware. More marketable features of the current units are nine foot ceilings, real hardwood floors, and good natural light through large windows.
| Rent Comparables | ||||||||||
| Studio | 1 x 1 | 2 x 1 | 2 x 2 | |||||||
| Property | Dist. From Subj. | Built | Rents | PSF | Rents | PSF | Rents | PSF | Rents | PSF |
| Renovated | ||||||||||
| Somerset Place | 0.22 | 1920 | $1,350 | $2.74 | $2,100 | $2.51 | - | - | $2,170 | $2.20 |
| Uptown Regency | 0.14 | 1924 | - | - | $1,275 | $2.04 | $1,573 | $2.17 | - | - |
| Pensacola Place | 1.08 | 1982 | $1,288 | $2.30 | $1,560 | $1.86 | $1,870 | $1.82 | - | - |
| The Belmont by Reside | 2.90 | 1967 | $1,489 | $3.88 | $1,809 | $2.47 | $2,230 | $2.09 | $2,810 | $2.27 |
| Average | 1958 | $1,355 | $2.81 | $1,650 | $2.24 | $1,916 | $1.90 | $2,635 | $2.25 | |
| Subject - Post Reno | 1920 | $1,042 | $2.70 | $1,625 | $2.41 | $1,850 | $2.06 | $1,995 | $1.48 | |
| Variance | -23% | -4% | -2% | 7% | -3% | 8% | -24% | -34% | ||
| Unrenovated | ||||||||||
| The Wyndham | 0.10 | 1927 | $987 | $2.02 | $1,087 | $1.58 | - | - | - | - |
| Sheridan Towers | 0.60 | 1962 | $998 | $1.65 | $1,295 | $1.62 | - | - | $1,575 | $1.58 |
| The Sovereign | 1.30 | 1920 | $755 | $1.51 | $1,050 | $1.53 | $1,205 | $1.26 | - | - |
| Average | 1936 | $906 | $1.69 | $1,094 | $1.56 | $1,205 | $1.26 | $1,575 | $1.58 | |
| Subject - Un-reno | 1920 | $714 | $1.85 | $892 | $1.32 | $1,040 | $1.16 | $1,180 | $0.87 | |
| Variance | -21% | 10% | -18% | -15% | -14% | -8% | -25% | -45% | ||
| Sales Comparables | ||||||||
| Property | Dist. From Subj. | Built | Renovated | Stories | Units | Sale Date | Sale Price | Price / Unit |
| Elaine Place | 2.31 | 1924 | 2012 | 3 | 174 | Jun-15 | $50,500,000 | $290,230 |
| Pensacola Place | 1.08 | 1981 | 2008 | 18 | 264 | Apr-15 | $65,750,000 | $249,053 |
| 5731-5733 N Winthrop | 0.68 | 1887 | 1906 | 4 | 35 | Apr-15 | $10,500,000 | $300,000 |
| 4641 N Paulina | 1.05 | 1930 | - | 3 | 48 | Feb-15 | $5,800,000 | $120,833 |
| Atrium Village | 5.17 | 1978 | - | 9 | 309 | Jun-14 | $50,000,000 | $161,812 |
| Andersonville Apts | 0.61 | 1916 | - | 3 | 30 | Mar-14 | $5,225,000 | $174,167 |
| Park Lincoln | 3.48 | 1969 | 2000 | 15 | 139 | Jan-14 | $15,500,100 | $111,512 |
| 4739 N Hermitage Ave | 1.05 | 1932 | 2013 | 4 | 38 | Jan-14 | $5,375,000 | $141,447 |
| Total / Average | 1940 | 130 | $26,081,263 | $201,205 | ||||
| Subject | 1920 | 8 | 223 | Nov-15 | $21,600,000 | $96,861 | ||
| Subject Total Cost Basis | $39,030,613 | $175,025 | ||||||
The Property is located one block from Lake Shore Drive and Foster Beach on Lake Michigan, three blocks from the Berwyn “L” station on the Red Line, and across the street from a CTA bus stop and a new Mariano’s Fresh Market, a high-end specialty grocery store. Transit time to Chicago’s CBD is approximately 30 minutes by train and 15 minutes by car. The property is within walking distance to two major entertaining corridors – Argyle Street and Clark Street. Argyle Street, located in the Uptown neighborhood, is a regional destination for Asian food and shopping. Clark Street, a bustling restaurant and bar district, is filled with popular shops, cafes, restaurants and pubs.
Multiple universities are within a short commute of the Property. Loyola University Chicago, 1.5 miles north of the Property, is the largest Jesuit University in the US, with a total current enrollment of 15,902 and over 150,000 alumni. Northeastern Illinois University, a public college with 10,000 students, is 3.5 miles to the west. DePaul University, 3.8 miles away in Lincoln Park, has 24,000 students, and Northwestern University, a 30-minute ride via the "L", has 19,000 students among its Evanston and Downtown Chicago campuses.
Nearby major employers, aside from the universities, include Chicago Lakeshore Hospital, Weiss Memorial Hospital, and Downtown Chicago’s eight Fortune 500 companies.
Demographic Information
A driver of the Sponsor's decision to acquire the property was the growth of the city's millennial demographic. According to a Redfin survey, Chicago was ranked third in the U.S. for cities with the highest percentage of millennials, containing seven of the country’s 14 most densely millennial-populated zip codes. In 2014, Forbes named Chicago as the fourth best city in the U.S. for millennials, behind New York City, Austin, and Washington, D.C.
| Demographics | 1 Mile | 3 Miles | 5 Miles | |
| Population (2015) | 70,213 | 400,672 | 803,519 | |
| Growth (2010-2015) | 0.29% | 0.30% | 0.36% | |
| Growth (2015-2020) | 0.34% | 0.33% | 0.36% | |
| Median Age (2015) | 38.7 | 34.3 | 34.1 | |
| Median HH Income (2015) | $38,665 | $52,624 | $55,224 | |
Demographic information above was obtained from Esri Business Analyst
Market Overview
Chicago is the third largest city in the U.S. by population with approximately 2,722,400 residents per the U.S. Census Bureau. In 2015, the "Inc. 5000" list ranked Chicago second in the U.S. for fastest-growing small business. According to the Bureau of Labor Statistics, total nonfarm employment in the greater Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area stood at 4,613,800 in November 2015, up 47,000 or 1.0 percent over the year. World Business Chicago, a non-profit economic development organization focused on increasing jobs in Chicago, stated that the city of Chicago added 18,997 jobs in the year ending July 2015, with over 51% of these in the professional and business services sectors, with the transportation, education and health sectors significantly represented.
Submarket Overview
An Axiometrics Market Performance Summary report published in the Fourth Quarter of 2015 shows the Property’s Rogers Park/Uptown submarket to have the highest occupancy rate in the entire Chicago MSA along with the highest projected occupancy for the next four years. The report forecasts a 97.4% occupancy rate for the submarket for 2016-2019, compared to an average of 95.6% for all Chicago MSA submarkets over the same period. Axiometrics also forecasts average five year rent growth for the Rogers Park/Uptown submarket at 4.3%.
| Axiometrics Submarket Rent Growth and Vacancy Rate | |||||||||||
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
| Rent Growth | -0.83% | 1.67% | 0.82% | 4.01% | 1.79% | 4.26% | 4.11% | 4.67% | 3.79% | 4.07% | 4.75% |
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
| Vacancy Rate | 2.71% | 1.98% | 2.15% | 2.04% | 1.74% | 2.15% | 2.23% | 2.59% | 2.94% | 2.74% | 2.61% |
According to a CBRE survey, Chicago was reported as having the lowest cap rates in the Midwestern Region for infill and urban multifamily properties, with cap rates for Class A properties sitting between 4.0 - 4.5% and cap rates for Class B properties between 5.25 - 5.50%.
| CBRE Cap Rate Survey, Second Half 2014 | ||||
| Class A | Class B | |||
| City | Stabilized Cap Rates (%) | Return on Cost for Value-Add (%) | Stabilized Cap Rates (%) | Return on Cost for Value-Add (%) |
| Chicago | 4.00 - 4.50 | 4.50 - 4.75 | 4.75 - 5.25 | 5.25 -5.50 |
| Cincinnati | 5.50 - 6.00 | 6.00 - 7.00 | 6.00 - 6.50 | 7.00 -8.00 |
| Cleveland | 6.50 - 7.50 | N/A | 7.00 -8.00 | N/A |
| Columbus | 5.50 - 6.25 | 6.00 - 6.50 | 6.25 -7.25 | 7.00 -7.50 |
| Detroit | 7.25 - 8.00 | 7.75 - 8.50 | 7.50 - 8.25 | 8.25 - 9.25 |
| Indianapolis | 5.00 - 5.50 | 6.00 - 7.50 | 5.50 - 6.00 | 6.50 - 8.00 |
| Kansas City | 5.25 - 5.75 | 5.75 - 6.25 | 5.75 - 6.25 | 6.50 - 7.00 |
| Minneapolis | 4.50 - 4.75 | 4.75 - 5.25 | 5.00 - 5.50 | 5.50 - 6.00 |
| St. Louis | 5.50 - 6.25 | N/A | 6.50 - 7.25 | N/A |
| Total Capitalization | ||
| Senior Loan | $32,700,000 | |
| Equity | 6,330,613 | |
| Total Sources of Funds | $39,030,613 | |
| Purchase Price | $21,600,000 | |
| CapEx | 14,014,435 | |
| Closing Costs | 692,784 | |
| Working Capital | 613,000 | |
| Interest Reserve | 1,182,000 | |
| Acquisition Fee | 356,144 | |
| Loan Broker Fees | 245,250 | |
| Senior Loan Fees | 327,000 | |
| Total Uses of Funds | $39,030,613 | |
- Lender: MidCap Financial
- Principal Balance: $32,700,000
- Term: 48 Months, with a 12 month extension option
- Rate: Floating, 525 basis points over 30-day LIBOR. Borrower has purchased 2.25% interest rate cap for the 4 yr term
- Amortization: Interest only for term of loan. Extension option is amortized over 30 years
- Prepayment Penalty: The loan can be paid off any time subject to the Lender earning 24 months of interest
- Recourse: Non-recourse except a completion guaranty provided by the Managing Member of the Borrower.
North Sheridan Property Investor, LLC will make distributions to Realty Mogul 56, LLC per the priority order below. Realty Mogul 56, LLC will distribute 100% of its share of excess cash flow (after expenses) to the members of Realty Mogul 56, LLC (the RealtyMogul.com investors). The manager of Realty Mogul 56, LLC will receive a portion (up to 10%) of the Sponsor's promoted interest.
Order of Distributions to Realty Mogul 56, LLC (Operating Cash Flow)
- First, to the Members to pay a 10% cumulative non-compounded annual return;
- Second, 70% to the Members pro-rata and 30% to the Managing Member until cumulative distributions to each Member equal a 15% cumulative non-compounded annual return; and
- Thereafter, 60% to the Members pro rata and 40% to the Managing Member.
Order of Distributions to Realty Mogul 56, LLC (Refinance, and Sales Proceeds)
- First, to the Members to pay a 10% cumulative non-compounded annual return;
- Second, to the Members pro rata until all capital contributions have been returned
- Third, 70% to the Members pro-rata and 30% to the Managing Member until cumulative distributions to each Member equal a 15% cumulative non-compounded annual return; and
- Thereafter, 60% to the Members pro rata and 40% to the Managing Member.
Distributions are projected to start in March of 2018 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Sponsor, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Effective Gross Revenue | $1,678,666 | $2,772,593 | $3,782,015 |
| Total Operating Expenses | ($1,245,376) | ($1,297,811) | ($1,552,329) |
| Interest Reserve Release | $741,835 | $180,091 | $0 |
| Net Operating Income (including Interest Reserve) | $1,175,125 | $1,654,873 | $2,229,686 |
| Distributions to Realty Mogul 56, LLC Investors | $0 | $0 | $2,333,432 |
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 |
| One-Time Fees: | ||||
|---|---|---|---|---|
| Acquisition Fee | 1.0% | Sponsor | Capitalized Equity Contribution (Already Paid) | 1.0% purchase price plus hard costs |
| Broker-Dealer Fee | 4.0% | North Capital(1) | Capitalized Equity Contribution | 4.0% based on the amount of equity invested by Realty Mogul 56, LLC |
| Construction Management Fee | 5.0% | Sponsor |
Capitalized Equity Contribution |
5.0% of total hard costs |
| Recurring Fees: | ||||
| Property Management Fee | 2.75% | Third Party Property Manager | Operating Cash Flow | 2.75% of Effective Gross Income |
| Asset Management Fee | 0.5% | Sponsor | Operating Cash Flow | 0.5% of Effective Gross Income |
| Management and Administrative Fee | 2.0% |
RM Manager, LLC | Distributable Cash |
2.0% of amount invested in Realty Mogul 56, LLC. RM Manager, LLC is the Manager of Realty Mogul 56, LLC and a wholly-owned subsidiary of Realty Mogul, Co.(2) |
Notes:
(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 Sponsor or others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 56, LLC, 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.