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Funded
Mixed-Use
Kings Landing
Creve Coeur, MO
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By RM Communities
15.5%* TARGET IRR 14.5%-16.5%
9.0%* TARGET AVG CASH ON CASH
1.84X* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 Years
Estimated First Distribution 2/2022
Minimum Investment 35000
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Explore this Project
Overview
Kings Landing is a 2005 built, 152-unit multifamily asset with four ground-floor retail spaces located in Creve Coeur, an affluent suburb of St. Louis, MO.
Value-Add

As the only property constructed in the submarket between 2001-2015, Kings Landing is uniquely positioned for a renovation. The business plan is to spend approximately $12,000 per unit to upgrade in the interior of the units to include quartz counters, vinyl flooring, modern finishes, and a tech package.

Asset Quality

Kings Landing's construction as a mid-rise asset provides a significant contrast to the majority of Creve Coeur multifamily, which is primarily comprised of 1990s and older vintage, and largely garden-style units, with some high-end construction beginning in 2016. Additionally, the Property is the only property in the comparable set with ground-floor retail spaces.

Market

Kings Landing is in Creve Coeur, MO, an affluent suburb of St. Louis. Creve Coeur is one of the most educated suburbs in St. Louis, with higher education attainment of 68%. It has one of the highest median area incomes in the MSA at $96K, and an unemployment rate of 5.1% compared to 6.1% nationally.

Property At A Glance
Year Built 2005
# of Units 152
Current Occupancy 98%
Acquisition Price

$40,100,000

Investment Highlights
RM Communities is acquiring the Property for $40.1 million, which represents a going-in cap rate of 4.47% on expected year one net operating income.
Kings Landing is primed for a renovation, as it is the only property in the submarket built between 2001-2015. A capital improvement budget of $3.7 million (or $24,401 per unit) has been capitalized for interior and exterior renovations.
RM Communities intends to increase rents to an average of $1,799 /unit, an increase driven by a full high-end renovation, which includes vinyl flooring, hard surface countertops, updated cabinets, modern fixtures and hardware, new lighting, and a tech package. Exterior and common area expenditures include painting and carpentry, hallway refresh, roof repairs, landscaping, signage, and upgrading the fitness center, clubhouse, and barbeque area. Post-renovated rent figures will remain well below newer built rent comps.
RM Communities will retain property manager Village Green, a nationally recognized property management company. Village Green's expertise and familiarity with the market provide higher assurance of projected performance.
Due to the favorable financing environment, the Property is projected to have solid cash flow out of the gate with a projected year one cash-on-cash of 5.7%. Year two cash-on-cash projection is 8.2% as the renovation program accelerates and the one vacant retail space is leased up.
The exit strategy is to sell the Property in five years at an anticipated blended cap rate of 5.10% (5.0% from the residential revenue and 6.5% from the retail revenue).
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
  • Todd Hanson
    Managing Director
  • 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.

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.  

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 152 units and increase average in-place rents from $1,415 to $1,799. The renovation plan aims to spend approximately $12,000 per unit to upgrade the residential units to include quartz counters, vinyl flooring, refaced cabinets, updated lighting and fixtures, and a modern tech package. Additionally, the Real Estate Company plans to lease out the vacant retail unit at $26/SF NNN, which is projected to be leased in year 2. They also plan to convert two empty spaces into two studios. Amenity and exterior upgrades include painting and carpentry, hallway refresh, roof repairs, landscaping, signage, and upgrading the fitness center, clubhouse, and barbeque area. Total interior CapEx is $1.57 million and exterior, common area, and deferred maintenance CapEx is $1.65 million; total CapEx including construction management fee and contingency is $3.71 million.

RM Communities plans to finance the Property with bridge debt with a 3+1+1 term, 75% LTC, and 3.15% + LIBOR (initial all-in 3.40% with LIBOR floor of 0.25%). At the end of year three when most of the renovations and repositioning have been completed, they plan to refinance with long-term agency debt. The plan is to exit in year five at a blended cap rate of 5.10% (5.0% on residential revenue and 6.5% on retail revenue).

Capital Improvement Budget

Interior Upgrades Total Per Unit No. of Units Cost of Upgrade
Appliances $334,400 $2,200 152 $2,200
Countertops $360,000 $2,368 150 $2,400
Backsplashes $60,800 $400 152 $400
Cabinet Doors / Pulls $76,000 $500 152 $500
Hardware $45,600 $300 152 $300
Plumbing Fixtures $45,600 $300 152 $300
Ceiling Fans $22,800 $150 152 $150
Flooring $135,000 $888 54 $2,500
Bathroom $121,600 $800 152 $800
Paint $76,000 $500 152 $500
Tech Package $76,000 $500 152 $500
General $220,400 $1,450 152 $1,450
Total $1,574,200 $10,357   $12,000
         
Exterior, Common Area Upgrades and Repairs Total Per Unit    
Amenity $150,000 $987    
TI and Commission $117,000 $770    
HVAC Replacements $50,000 $329    
Paint / Carpentry $200,000 $1,316    
Model Unit $25,000 $164    
Landscaping & Drainage $25,000 $164    
Roofs $150,000 $987    
Hallway $180,000 $1,184    
Two New Units $180,000 $1,184    
Roof Deck $15,000 $99    
Dryer Vent Cap $10,000 $66    
Retaining Wall $6,000 $39    
Fire Panel $38,000 $250    
Washers and Dryers $25,000 $164    
Fitness Center $20,000 $132    
Clubhouse / Business Center $25,000 $164    
Signage $25,000 $164    
Hot Water Heaters $50,000 $329    
Pergola, Benches, & Grills $10,000 $66    
Future Retail TI / Commission $50,000 $329    
Other $300,000 $1,974    
Total $1,651,000 $10,862    
         
Summary Total Per Unit    
Interior Upgrades $1,574,200 $10,357    
Exterior and Common Area $1,651,000 $10,862    
Construction Management Fee (5%) $161,260 $1,061    
Contingency  (10%) $322,520 $2,122    
Total $3,708,980 $24,401    

These amounts are subject to change at the discretion of the Real Estate Company.

Property
Property Details

Kings Landing is a one-of-a-kind multifamily mixed-use asset located in Creve Coeur, an affluent suburb of St. Louis, MO. Creve Coeur has one of the highest median area incomes in the MSA at $96K.

The Property features unique one, two, and three-bedroom floor plans. Kings Landing has four stories and an adjacent parking structure with 275 spaces. The Property offers amenities such as a 24-hour fitness center, courtyard, and veranda with a grilling station, community clubhouse, business center, and off-leash dog park. The Property is currently 98% occupied.

Unit Mix:

Units Type Unit SF Total SF In-Place Rent Stabilized Rent Rent /SF
4 1 Bed / 1 Bath (Small) 670 2,680 $1,079 $1,300 $1.94
27 1 Bed / 1 Bath (Medium) 814 21,978 $1,224 $1,450 $1.78
8 1 Bed / 1 Bath (Large) 965 7,720 $1,233 $1,550 $1.61
16 1 Bed / 2 Bath Loft 1,313 21,010 $1,479 $1,825 $1.39
1 1 Bed / 2 Bath Loft (Large) 1,490 1,490 $1,671 $2,000 $1.34
55 2 Bed / 2 Bath (Small) 1,113 61,215 $1,413 $1,860 $1.66
31 2 Bed / 2 Bath (Medium) 1,228 38,068 $1,456 $1,895 $1.54
2 2 Bed / 2 Bath (Large) 1,270 2,540 $1,522 $2,000 $1.57
8 3 Bed / 2 Bath 1,740 13,920 $2,076 $2,550 $1.47
152   1,121 170,621 $1,415 $1,799 $1.61
             
2 Additional Studios 500 1,000 $0 $1,200 $2.40

Retail Units and Rent Schedule:

Unit Tenant Unit SF Rent/SF NNN Annual Rent Lease Term / Expiration Lease Type
1 Walgreens Community 1,855 SF 30.0 $55,742 10.1 years – 4/30/2027 NNN
2 Poke Munch Restaurant 1,000 SF 30.3 $30,259 4.8 years – 10/31/2022 NNN
3 Mulqueeny Eye Center 3,098 SF 36.3 $112,406 10 Years – 7/31/2024 NNN
4 Vacant/Proposed 3,276 SF 26.0 $85,176 10 Years NNN
Comparables

Lease Comparables

  Vanguard Heights The Vue at Creve Coeur The Alinea At Town Comp Averages Kings Landing (Subject)
Year Built 2016 2017 2016 2014 2005
$ (1x1) M $1,745 $1,564 $1,400 $1,570 $1,450
SF (1x1) M 805 843 754 801 814
$/SF (1x1) M $2.17 $1.86 $1.86 $1.96 $1.78
           
$ (2x2) S $2,391 $2,125 $2,355 $2,290 $1,860
SF (2x2) S 1,100 1,084 1,103 1,096 1,113
$/SF (2x2) S $2.17 $1.96 $2.14 $2.09 $1.67
           
$ (2x2) M $2,391 $2,295 $2,345 $2,344 $1,895
SF (2x2) M 1,100 1,257 1,103 1,153 1,228
$/SF (2x2) M $2.17 $1.83 $2.13 $2.03 $1.54
           
$ (3x2) $3,169   $2,655 $2,912 $2,550
SF (3x2) 1,509   1,365 1,437 1,740
$/SF (3x2) $2.10   $1.95 $2.03 $1.47

*Rents shown are post-renovation

Sales Comparables

Property Name Submarket Property Address City, State Sale Date Sale Price # of Units Building SQFT* Price Per Unit Price Per SQFT Year Built Building Class
Kings Landing (subject) Creve Coeur 618 N. New Ballas Rd Creve Coeur, MO 7/1/2021  $40,100,000 154 217,688 $263,816 $184 2005 A
Vanguard Heights North Outlying Mid 10362 Old Olive Street  Creve Coeur, MO 4/4/2017  $39,600,000 174 75,946 $227,586 $521 2016
Cortona at Forest Park Cheltenham 5800 Highlands Plz Saint Louis, MO 1/27/2021  $71,100,000 278 222,908 $255,755 $319 2014 A
Clayton on the Park Downtown Clayton 8025 Bonhomme Ave Clayton, MO 4/11/2019  $71,500,000 213 267,375 $335,681 $267 2000 B
Lofts at the Highlands Cheltenham 1031 Highlands Plaza Saint Louis, MO 3/28/2018  $44,400,000 200 343,656 $222,000 $129 2005 A
Alinea Town and Country North Outlying Mid 1283 Daylight Dr Des Peres, mo 9/19/2017  $58,400,000 254 310,000 $229,921 $188 2016 A

* Based on gross building area (GBA) per CoStar

Sale and lease comps were obtained from CoStar and Axiometrics.

Location

Market Overview

As the most populated metro area in Missouri, the St. Louis metro is a vibrant cultural destination boasting a wide array of museums, music/theatre venues, and fine dining. The expansion of employment opportunities and an affordable cost of living are supporting a net migration to Greater St. Louis as well as major development in Downtown. Most well-known is the 2018 completion of the Gateway Arch grounds renovation followed by the $260 million development of Ballpark Village at Busch Stadium. With Phase II scheduled to arrive in summer 2020, the metro will be home to over 700,000 square feet of new office space, the first high-end office space to be delivered to the downtown area since the late-1980s.

One of the biggest drivers of the economy is education and health services, which represent nearly 19% of metro-wide employment. Centene Corporation is underway on a $770 million expansion at its headquarters. When complete, Centene is expected to add 2,000 new positions.

Submarket Overview

Located 15 miles from Downtown St. Louis, Creve Coeur, MO is an established and affluent suburban community of over 18,000 people with a daytime population of more than 53,000. The city is recognized as a key node for technology and life sciences in the St. Louis region due to its concentration of life and bio-science, technology and healthcare facilities, and businesses.

Commercial Growth – With nearly 8.5 million square feet of office space, Creve Coeur is the third-largest commercial-office submarket in the region, behind only downtown St. Louis and Clayton. Creve Coeur boasts some of the metro area’s top Class A space and campuses.

Housing and Education – Creve Coeur offers a variety of housing options ranging from traditional single-family to attached residential, lofts, and multifamily. The city is home to a dozen premier educational facilities including private elementary and secondary schools, private colleges, and two nationally recognized public school districts.

Workforce Expansion – Educational attainment of Creve Coeur residents is well above average, with 68 percent attaining a Bachelor’s degree or higher. About one-fourth of the city’s residents also work in Creve Coeur.

Photos
Financials
Sources & Uses

Total Capitalization

Sources of Funds Amount $/Unit
Senior Loan $33,335,501 $219,313
Equity $12,323,031 $81,073
Total Sources of Funds $45,658,532 $300,385
Uses of Funds Amount $/Unit
Purchase Price $40,100,000 $263,816
Loan Fee $333,355 $2,174
Closing & Legal Costs $305,000 $2,007
CapEx Budget $3,708,980 $21,844
Acquisition Fee $802,000 $5,276
Taxes & Insurance Escrow $225,297 $1,813
Working Capital $130,000 $855
Total Uses of Funds $45,658,532 $300,385

The numbers represented above can change prior to closing depending on final loan proceeds, property condition assessments, appraisals, final closing costs, and other lender-mandated expenses.

Debt Assumptions

The expected terms of the debt financing are as follows:

  • Loan Type: Bridge
  • Total Loan Amount: $33,335,501
  • Estimated Rate (Floating): LIBOR* + 3.15%
  • Amortization: 30 years
  • Term: 5 Years
  • Interest Only: 3 years
  • Initial Loan-to-Value: 73.9%
  • Loan-to-Cost: 75.0%
  • Extension Options: Two 12-Month Options

*LIBOR floor of 0.25% and rate cap of 2.00%

NOTE:  RM Communities is expecting to refinance with long-term agency debt at the end of year 3. The refinance is assumed to be a 7-year term at 70% LTV, 4.00%, and with 3 years of interest only.

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"), thelender might foreclose, and the Company could lose its investment in its property.

Distributions

RM Communities will make distributions from Kings Landing Investors, LLC to investors as follows:

Operating Cash Flow

  1. 8% Preferred Return
  2. 70%/30% (70% to Members/30% to RM Communities) to a 15% IRR
  3. 50%/50% (50% to Members/50% to RM Communities) thereafter

Capital Event

  1. 8% Preferred Return
  2. Return of Capital
  3. 70%/30% (70% to Members/30% to RM Communities) to a 15% IRR
  4. 50%/50% (50% to Members/50% to RM Communities) 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 February 2022 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of RM Communities, 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    Reversion 
 Effective Gross Income (EGI)   $3,032,602 $3,489,486 $3,763,723 $3,986,986 $4,148,491 $4,299,365
 Expenses  $1,240,686 $1,281,655 $1,310,595 $1,386,491 $1,421,230 $1,456,013
 Net Operating Income (NOI)  $1,791,917 $2,207,831 $2,453,128 $2,600,495 $2,727,261 $2,843,352
 Total Property Cash Flow  $699,046 $1,015,894 $3,128,795* $1,107,967 $19,779,473  

*Proceeds include refinance in year 3

Projected Investor Cash Flows

  Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Net Earnings to Investor
- Hypothetical $50,000 Investment
($50,000) $2,818 $4,104 $12,677 $4,101 $68,376

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(1):

One-Time Fees:
Type of Fee Amount of Fee Received By Paid From
Acquisition Fee 2.0% of Purchase Price RM Communities Capitalized Equity Contribution
Construction Management Fee 5.0% of Capital Improvement Budget Village Green, Third Party Property Manager 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 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.

(1) Fees may be deferred to reduce impact to investor distributions

Disclaimers/FAQs
Disclaimers

* 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.

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.

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