The team at our affiliated broker-dealer, RM Securities, conducts diligence on of the issuer, including detailed background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to screening for any criminal background, we may also turn down sponsors due to poor reference checks, even if the background and criminal checks are satisfactory.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent.* When an investor makes an investment with such sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s contingency offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
* Unless otherwise disclosed, escrow accounts are not required for some investments that accommodate 1031 investments where the property is already acquired.
Our processes typically includes visiting certain properties (or a subset of properties if it's a fund) to confirm the real estate is what and where the real estate is supposed to be. For certain properties that accommodate 1031 exchange investments, the team will review third-party prepared due diligence reports in lieu of a site visit.
We have formalized processes and checklists for every private placement deal listed on the platform.
As East Austin is being developed, most notably with Tesla announcing the move of their headquarters, the area is expected to see significant population growth in the coming years, making the Property more valuable as a result.
The demographic of the current residents at the Property is young and predominantly white collar with an average household income over $100,000.
Austin is the fastest-growing major city in the US growing 3% alone in Q4 2020. Q1 2022 is expected to see 22,000 new jobs as many major headquarters complete the development of their campuses.
Prism Multi Family Group
Prism Multi Family Group is a Canadian-based real estate investment and asset management company specializing in acquiring value-add multifamily residences in the United States. The goal of the Company is to bring these properties up to par operationally for tenants while maximizing the NOI of the Property, thereby increasing value for investors. They do this by hiring best-in-class management companies, eliminating unnecessary expenses, and maximizing potential market rent. The Company currently has ~$268M in AUM with properties spanning the southern United States, in Florida, Arizona, Texas, Nevada, and California.
https://prismmf.com/-
Mark ZoltyPresident -
Mitch ZoltyPartner -
Bernard HeitnerPartner
Mark Zolty has extensive residential real estate experience, having been in the industry for over 15 years. Prior to founding Prism, Mark held the title of Principal and Managing Director at Brass Enterprises Inc., a real estate investment company focused exclusively on multifamily properties. He was responsible for overseeing all of Brass’s asset management, acquisitions, and financing functions totaling $450,000,000 in AUM. Prior to joining Brass in 2009, Mark served as a Property Manager at MetCap Living Management, one of Canada’s largest private property management firms.
Since co-founding Prism 4 years ago Mitch has been instrumental in the acquisition of over $250 million in properties. Mitch harnesses his keen business acumen and operational knowledge, overseeing the company’s asset management, acquisition closings, and the implementation of Prism’s signature value-add strategy across the portfolio. A third-generation property operator, Mitch has spent much of his life learning from his family’s 65 years in the multifamily industry.
Bernard is a seasoned businessman with global experience. He founded Cambridge Global Payments in 1992 and turned it into the largest private foreign exchange house in North America. With his business acumen, he grew Cambridge from a 4-person office to a 400-person company with offices in North and South America, Europe, Asia, and Australia. He expanded the company from its roots in forex to a global payment service. In 2017 he sold the company for $900M. At Prism, Bernard is focused on growing the portfolio by enabling strategic partnerships.
Prism Multi Family Group Track Record
| Property | City, State | Asset Type | Acq Date | Units | Purchase Price | Sale Price |
| Las Vegas Portfolio (3 properties) | Las Vegas, NV | Multifamily | 12/1/2018 | 390 | $43,000,000 | $72,000,000 |
| Spectra at Reno | Las Vegas, NV | Multifamily | 12/2/2018 | 90 | $9,000,000 | $12,250,000 |
| Latitude 33 | Palm Springs, CA | Multifamily | 1/1/2018 | 121 | $16,625,000 | N/A |
| 72 West | Tamarac, FL | Multifamily | 10/1/2019 | 291 | $47,000,000 | N/A |
| Hamlet & Continental | Plantation and Lauderhill, FL | Multifamily | 5/1/2020 | 399 | $53,500,000 | N/A |
| Lakehouse Apartments | Lake Elsinore, CA | Multifamily | 12/1/2020 | 128 | $23,500,000 | N/A |
| Ridgeway Village | Glendale, AZ | Multifamily | 8/1/2021 | 200 | $28,500,000 | N/A |
| Spectra Parks (formally Citizen House Decker) | Austin, TX | Multifamily | 12/8/2021 | 324 | $77,100,000 | N/A |
| Spectra Paradise | Las Vegas, NV | Multifamily | 3/1/2022 | 205 | $22,500,000 | N/A |
| Total | 2,148 | $320,725,000 |
The above bios and track record were provided by Prism Multi Family Group and have not been independently verified by RealtyMogul.
Prism plans to stabilize the Property at the aggressively growing market rent prices. Currently, the priority of the sellers is to lease the Property with concessions at discounted prices. Current rents are roughly $500/month on average cheaper than high-end properties a few miles west closer to the city. The room to raise rents while still being the cheapest Class A rents in the market is significant. The Sponsor will be aggressive in renewal and new rents in the second generation and allow the market rent growth of Austin and the developing area surrounding to take over as more and more jobs come to the market.
Prism plans to take advantage of the rapid growth of the Austin market overall, which is expected to fill 22,000 new jobs in Q1 2022 alone. This significant growth and subsequent demand have led to considerable rent increases across the market.
CapEx Breakdown
| Exterior Renovations | |||
| Flex room furniture | $40,000 | ||
| Rebranding | $25,000 | ||
| Additional amenities such as outdoor internet and additional garages | $185,000 | ||
| Grand Total | $250,000 |
Citizen House Decker is a newly built, Class A property that is only 4 miles from the new Tesla headquarters. Current pricing during lease-up has increased 23% since it began and is still $500 less than the closest similar quality property 5 miles away. There is room to increase rents significantly and still be cheaper than the market.
| Unit Type | # of Units | Avg SF/Unit | Avg Rent (In-Place) | Avg Rent (Stabilized) | Post-reno rent per SF |
| 1x1 | 156 | 780 | $1,230 | $1,460 | $1.87 |
| 2x2 | 168 | 1125 | $1,650 | $1,845 | $1.64 |
| Total/Averages | 324 | 959 | $1,448 | $1,660 | $1.75 |
Lease Comparables
| Laurel | The Mont | Radius On Grove | The Aspect | Averages | Subject | |
| Year Built | 2021 | 2021 | 2017 | 2017 | 2019 | 2021 |
| # of Units | 300 | 288 | 156 | 308 | 263 | 324 |
| Average Rental Rate | $1,683 | $1,739 | $2,056 | $1,801 | $1,820 | $1,502 |
| Average Unit Size | 869 | 859 | 1054 | 966 | 937 | 957 |
| Average $/SF | $1.94 | $2.02 | $1.95 | $1.86 | $1.94 | $1.57 |
| Occupancy | 33% | 93% | 99% | 92% | 79% | 61.3%* |
| Distance from subject | 2.5 mi | 5.8 mi | 5.7 mi | 6.2 mi | 5.9 mi | |
| $/Unit (1x1) | $1,493 | $1,554 | $1,675 | $1,519 | $1,560 | $1,232 |
| SF (1x1) | 704 | 736 | 828 | 679 | 737 | 775 |
| $/SF (1x1) | $2.12 | $2.11 | $2.02 | $2.24 | $2.12 | $1.59 |
| $/Unit (2x2) | $2,171 | $2,023 | $2,467 | $1,784 | $2,111 | $1,650 |
| SF (2x2) | 1,195 | 1,048 | 1,298 | 978 | 1,130 | 1,130 |
| $/SF (2x2) | $1.82 | $1.93 | $1.90 | $1.82 | $1.87 | $1.46 |
*Occupancy as of November 15, 2021
Sales Comparables
| The Monroe | Arise Riverside | The Copeland | Averages | Subject | |
| Date Sold | 12/23/2020 | 12/14/2020 | 10/15/2019 | 12/08/2021 | |
| Year Built | 2020 | 2020 | 2019 | 2020 | 2021 |
| # of Units | 223 | 275 | 328 | 275 | 324 |
| Average Unit Size | 813 | 806 | 748 | 789 | 957 |
| Sale Price | $47,500,000 | $58,000,000 | $72,300,000 | $59,266,667 | $77,100,000 |
| $/Unit | $213,004 | $210,909 | $220,427 | $214,780 | $237,963 |
| $/SF | $262 | $262 | $295 | $273 | $249 |
| Cap Rate | 3.38% | 3.68% | 3.75% | 3.60% | 3.71% |
| Building Size | 181,522 SF | 221,650 SF | 245,344 SF | 216,172 SF | 310,068 SF |
| Distance from subject | 9.0 mi | 7.5 mi | 11.2 mi | 9.2 mi | |
Market Overview
Austin is one of the hottest multifamily markets in the US due to its exceptional economic and population growth. As the fastest-growing metro in the country with at least 1M residents, in Q4 2020 alone, the population grew over 3%. This has resulted in high occupancy rates with an ever-growing demand. The growth is primarily fueled by the expanding employment market, with companies such as Tesla, Oracle, Samsung, and Google establishing a large presence in the city. With many of these companies yet to hire for the facilities and offices they are currently building, the demand for rental units will only become stronger, translating into more significant increases in rent and renewals. At 0.4%, foreclosure rates in Austin are historically low, especially compared to the national average of 1.1%. This is a sign of a healthy real estate market, with high property values and strong employment.
Submarket Overview
East Austin, where Citizen House Decker is located, is a dynamic, urban destination. The average household income within 5 miles of the Property is $79,284. The neighborhood is proving increasingly attractive to young professionals who appreciate its convenient location, with access to the employment and amenities of central Austin, and more attainable rents as compared to the Central Business District and East Central submarkets. Due to the growth remaining in the area, Prism is acquiring this property at an extremely attractive cost basis.
Total Capitalization
| Sources of Funds | $ Amount | $/Unit |
| Debt | $57,825,000 | $178,472 |
| GP Investor Equity | $4,800,000 | $14,815 |
| LP Investor Equity | $18,200,000 | $56,173 |
| Total Sources of Funds | $80,825,000 | $249,460 |
| Uses of Funds | $ Amount | $/Unit |
| Purchase Price | $77,100,000 | $237,963 |
| Acquisition Fee | $1,156,500 | $3,569 |
| Loan Fee | $867,375 | $2,677 |
| Closing Costs(1) | $492,200 | $1,519 |
| CapEx | $250,000 | $772 |
| Loan Reserve | $796,318 | $2,458 |
| Other Costs | $162,607 | $502 |
| Total Uses of Funds | $80,825,000 | $249,460 |
The Sponsor’s equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
(1) RM Technologies, LLC, an affiliate of RealtyMogul, operates the RealtyMogul Platform. RM Technologies, LLC charges a fixed, non-percentage-based fee for real estate companies and their sponsors to use the RM Technologies LLC’s proprietary Platform and receive Platform-related services. Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC. An estimate of this fee, in addition to estimated due diligence, travel, legal and other fees associated with the formation of the company and the related securities filings, in the amount of $230,000 is not included in the Sources and Uses above; however, this estimated fee has been factored into the calculation of projected economic returns. Please thoroughly review the Sponsor’s relevant offering documents and operating agreement(s) for additional detail concerning these fees. RM Technologies LLC’s receipt of fees creates a conflict of interest between RealtyMogul and its affiliates, and investors or prospective investors.
The expected terms of the debt financing are as follows:
- Lender: ACRE
- Term: 3+1+1
- Loan-to-Value: 75.0%
- Estimated Proceeds: $57,825,000
- Interest Type: Floating
- Spread Above One-Month LIBOR: 3.15%
- Interest-Only Period: Full Term
- Amortization: N/A
- Prepayment Terms: Loan may be prepaid in whole on any monthly payment date, subject to yield maintenance calculated through the 15th monthly payment date
- Extension Requirements:
(i) delivery of an extension notice to Lender 60 days prior to the extension;
(ii) no uncured default or event of default shall exist at the time of such extension;
(iii) payment of an extension fee of 0.50% of the Loan Amount for each extension (the “Extension Fee”);
(iv) purchase of an interest rate cap in accordance with the terms hereof;
(v) a Maximum LTV of 75%; and
(vi) a Minimum Debt Yield of not less than 6.50%, and 6.75%, respectively, at the time of each extension.
There can be no assurance that the Sponsor will secure debt on the rates and terms noted above, or at all. All of the Sponsor’s estimated 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 risk of loss. If the Sponsor were unable to pay the payments on the borrowed funds (called a "default"), the lender might foreclose, and the Sponsor could lose its investment in its property.
Prism Multi Family Group intends to make distributions from Prism Decker Holdings, LP as follows:
- To the Investors, pari passu, all operating cash flows to an 8.0% IRR;
- 80% / 20% (80% to Investors / 20% to Promote/Carried Interest) of excess cash flow to a 12.0% IRR;
- 70% / 30% (70% to Investors / 30% to Promote/Carried Interest) of excess cash flow thereafter.
Prism Multi Family Group intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in June 2022 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Prism Multi Family Group, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Prism Multi Family Group will receive a promoted/carried interest as indicated above, and a portion of this promoted/carried interest may be received by RM Admin, LLC.
| Cash Flow Summary | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
| Effective Gross Revenue | $6,065,739 | $6,889,845 | $7,313,182 | $7,527,549 | $7,748,246 | |
| Total Operating Expenses | $3,208,130 | $3,317,029 | $3,353,393 | $3,440,464 | $3,511,027 | |
| Net Operating Income | $2,857,609 | $3,572,816 | $3,959,789 | $4,087,085 | $4,237,219 | |
| Project-Level Cash Flows | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Cash Flow | ($21,680,893) | $1,567,166 | $1,641,461 | $1,999,521 | $2,097,905 | $44,774,304 |
| Investor-Level Cash Flows(1) | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Cash Flow | ($5,230,000) | $270,888 | $287,039 | $364,878 | $386,266 | $8,577,810 |
| Investor-Level Cash Flows - Hypothetical $50,000 Investment(1) | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Cash Flow | ($50,000) | $2,590 | $2,744 | $3,488 | $3,693 | $82,006 |
(1) Returns are net of all fees. Such Fees include fees paid to RM Admin, an affiliate of RealtyMogul, who charges an annual fixed administrative fee for providing certain ongoing administrative services to the Sponsor. Please see the Fees and Disclaimers sections and Disclaimers sections below for additional information concerning fees paid to RM Admin.
RM Technologies, LLC and its affiliates does not provide any assurance of returns. The content on this Page, including Sponsor’s pro forma projections, was provided by the Sponsor or an affiliate thereof. Although RM Technologies, LLC believes the Sponsor reliably produced this content, RM Technologies, LLC makes no representations or warranties as to the accuracy of such information and accepts no liability therefor. The assumptions and projections included in the content on this Page, including the Sponsor’s pro forma projections, are not reflective of the position of RM Technologies, LLC or any other person or entity other than the Sponsor or its affiliates. There can be no assurances that all or any of the Sponsor’s assumptions will be true, that actual performance will bear any relation to these hypothetical illustrations, or that the Sponsor’s investment objectives will be achieved. For additional information concerning the Sponsor’s assumptions and projections, and the significant risks involved in investing in real estate, please see the Disclaimers section below.
Certain fees and compensation will be paid over the life of the transaction; please refer to Prism Multi Family Group's materials for details. The following fees and compensation will be paid(2)(3)(4):
| One-Time Fees: | |||||
| Type of Fee | Amount of Fee | Received By | Paid From | ||
| Acquisition Fee | 1.5% of Purchase Price | Prism | Deal Capitalization | ||
| Recurring Fees: | |||||
| Type of Fee | Amount of Fee | Received By | Paid From | ||
| Asset Management Fee | 1.5% of Gross Receipts | Prism | Cash Flows | ||
| Administrative Services Fee | 1.0% of Equity(1) | RM Admin(3) | Cash Flows | ||
(1) Only applies to equity raised through the RealtyMogul Platform
(2) Fees may be deferred to reduce impact to investor distributions.
(3) RM Technologies, LLC, an affiliate of RealtyMogul, operates the RealtyMogul Platform. RM Technologies, LLC charges a fixed, non-percentage-based fee for real estate companies and their sponsors to use the RM Technologies, LLC’s proprietary Platform and receive Platform-related services. An estimate of this fee is included in the Closing Costs above and is intended to be capitalized into the transaction at the discretion of the Sponsor. The Platform fees received by RM Technologies, LLC are disclosed in the relevant operating agreement(s). RM Technologies LLC’s receipt of Platform fees creates a conflict of interest between RealtyMogul and its affiliates, and investors or prospective investors.
(4) RM Admin, an affiliate of RealtyMogul, charges an annual fixed administrative fee for providing certain ongoing administrative services to the Sponsor. RM Admin’s administrative services and fees are disclosed in the relevant operating agreement(s). RM Admin’s receipt of administrative fees creates a conflict of interest between RealtyMogul and its affiliates, and investors or prospective investors.
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.