Productive Capital Associates ("PCA" or the "Sponsor") was founded in 2014 and acquires and operates large, off-market value-add apartment communities, located in stable or growing US markets, with a primary focus on Texas markets. PCA improves properties and their surrounding communities through vetted operational efficiencies supported by strategic capital expenditures that are led by curated business plans based on the location, demographics, condition, and comps of the target property. PCA’s goal is to drive value and exit relatively quickly so as to maximize return on equity and IRR for its investors, returning the properties to the market as nicer assets, and much better places to live and work. As of January 2022, PCA will have owned and operated nearly 2,000 multifamily units, with a value of over $175 million.
Some of PCA’s investment highlights include the following:
• Achieved 150%+ ROI within ~2 years for multiple commercial real estate projects, spanning multifamily, self-storage, and retail assets
• Tripled income within 12 months for a 220+ unit apartment community in Central Texas, adding millions of dollars of value in year one
• Doubled NOI in 7 months for a 250+ unit apartment community in Central Texas, adding millions of dollars in value in year one
• Repositioned a distressed self-storage facility in Central Texas, more than tripling occupancy, income, and value of the asset within 18 months
• Repositioned an apartment community in Columbus, OH, achieving 130%+ ROI within two years
• Repositioned a distressed retail strip center in Central Florida, more than doubling the value of the asset within two years
• Currently repositioning a large student housing project in Denver, in addition to multiple large apartment communities in AR and TX, with each asset projecting a deal-level equity multiple of ~2x on a 3-year hold
Productive Capital Associates (PCA) is offering the opportunity to invest in a recently remodeled property in one of the hottest markets in the nation, pre-market at a low basis, providing day one cash flow with value-add upside through continuing to mark-to-market proven proforma post-renovated rents and implementing RUBS. The company plans to continue to renovate the remaining classic units, as well as to invest additional CapEx into the Property, including rebranding, upgrading the parking area, and adding additional reserved parking spaces (currently 100% occupied and leasing for $50/mo.), repainting the exterior of the property, adding stone grilling stations in the courtyards, and enhancing landscaping. Pro forma rents are already being achieved on remodeled units and RUBS is being implemented across each of the local comps managed by the highly experienced (25k+ units) management company that will continue to manage the Property.
| Unit Type | # of Units | Avg SF/Unit | Avg Rent (In-Place) | Avg Rent (Post-Reno) | Avg Rent Per SF (In-Place) | Avg Rent Per SF (Post-Reno) |
| Renovated | ||||||
| Studio | 1 | 396 | $755 | $775 | $1.91 | $1.96 |
| 1x1 | 143 | 531 | $865 | $899 | $1.63 | $1.69 |
| 2x1 | 3 | 827 | $1,150 | $1,150 | $1.39 | $1.39 |
| Non-Renovated | ||||||
| Studio | 2 | 396 | $775 | $799 | $1.96 | $2.02 |
| 1x1 | 22 | 531 | $869 | $899 | $1.64 | $1.69 |
| Total/Averages | 171 | 534 | $869 | $902 | $1.63 | $1.69 |
Lease Comparables
| In Place Apartments | Villa Encanto Apartments | Westwood Apartments | Averages | Subject (Post-Reno Rents) | |
| Year Built | 1973 | 1974 | 1964 | 1970 | 1974 |
| Building Class | C | C | C | C | C |
| # of Units | 80 | 72 | 103 | 85 | 171 |
| Average Rental Rate | $987 | $849 | $1,213 | $1,016 | $902 |
| Average Unit Size | 579 SF | 542 SF | 894 SF | 672 SF | 534 SF |
| Average $/SF | $1.70/SF | $1.56/SF | $1.36/SF | $1.54/SF | $1.69/SF |
| Levels | 2 | 2 | 2 | 2 | 2 |
| Occupancy | 100% | N/A | N/A | 100% | 95.9% |
| Distance from subject | 0.1 mi | 0.2 mi | 0.5 mi | 0.3 mi | |
| $/Unit (Studio) | $765 | $735 | $900 | $800 | $775 |
| SF (Studio) | 435 SF | 484 SF | 500 SF | 473 SF | 396 SF |
| $/SF (Studio) | $1.76/SF | $1.52/SF | $1.80/SF | $1.69/SF | $1.96/SF |
| $/Unit (1x1) | $896 | $920 | $1,095 | $970 | $899 |
| SF (1x1) | 550 SF | 528 SF | 615 SF | 564 SF | 531 SF |
| $/SF (1x1) | $1.63/SF | $1.74/SF | $1.78/SF | $1.72/SF | $1.69/SF |
| $/Unit (2x1) | $1,112 | $1,150 | $1,450 | $1,237 | $1,150 |
| SF (2x1) | 660 SF | 1,097 SF | 864 SF | 874 SF | 827 SF |
| $/SF (2x1) | $1.68/SF | $1.05/SF | $1.68/SF | $1.47/SF | $1.39/SF |
Sales Comparables
| The Ayva at Oakland | Trinity Apartments | Residence at Lake Highlands | Infinity on the Mark | Orchids of Carrollton | Teruko Springs Apartments | Averages | Subject (Going-in) | |
| Date Sold | 6/20/2021 | 9/24/2021 | 10/28/2021 | 6/9/2021 | 5/24/2021 | 4/21/2021 | Q1 2022 | |
| Year Built | 1972 | 1984 | 1969 | 1986 | 1984 | 1964 | 1977 | 1974 |
| Building Class | C | B | C | B | C | C | C | |
| # of Units | 121 | 496 | 247 | 373 | 131 | 71 | 240 | 171 |
| Average Unit Size | 716 SF | 850 SF | 870 SF | 760 SF | 858 SF | 831 SF | 814 SF | 534 SF |
| Sale Price | $11,600,000 | $66,500,000 | $30,000,000 | $46,350,000 | $20,800,000 | $5,725,000 | $30,162,500 | $14,900,000 |
| $/Unit | $95,868 | $134,073 | $121,457 | $124,263 | $158,779 | $80,634 | $119,179 | $87,135 |
| $/SF | $72/SF | $157/SF | $341/SF | $154/SF | $176/SF | $94/SF | $166/SF | $163/SF |
| Cap Rate | N/A | 4.16% | 4.30% | 5.65% | N/A | 5.00% | 4.78% | 4.83% |
| Building Size | 161,994 SF | 422,880 SF | 87,859 SF | 300,549 SF | 118,124 SF | 61,215 SF | 192,104 SF | 91,284 SF |
| Distance from subject | 5.5 mi | 9.4 mi | 10.9 mi | 11.9 mi | 11.9 mi | 12.5 mi | 10.4 mi |
Total Capitalization
| Sources of Funds | $ Amount | $/Unit |
| Debt | $12,300,000 | $71,930 |
| GP Investor Equity(2) | $556,344 | $3,253 |
| LP Investor Equity | $3,300,000 | $19,298 |
| Total Sources of Funds | $16,156,344 | $94,482 |
| Uses of Funds | $ Amount | $/Unit |
| Purchase Price | $14,900,000 | $87,135 |
| Acquisition Fee | $298,000 | $1,743 |
| Loan Fee | $246,000 | $1,439 |
| Closing Costs(1) | $200,000 | $1,170 |
| CapEx | $412,344 | $2,411 |
| Lender Reserves | $100,000 | $585 |
| Total Uses of Funds | $16,156,344 | $94,482 |
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 Platform and for Platform-related services. Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.
(2) Lender required that the Sponsor contribute an additional ~$110,000 of equity into the deal which is currently not reflected in the projected returns but is not anticipated to materially impact economic projections. The exact amount required by the lender will be reflected at closing.
The expected terms of the debt financing are as follows:
- Term: 3 years + 2 one-year extension options
- Loan-to-Cost: 76.1%
- Estimated Proceeds: $12,300,000
- Interest Type: Floating
- Spread Above One-Month LIBOR: 4% with a floor of 10 bps; 1% rate cap is purchased to protect the first two years of the loan
- Interest-Only Period: Full-term
- Amortization: N/A
- Prepayment Terms: 1% exit fee unless refinanced with Arbor into permanent loan
- Extension Requirements: The Extended Term may be extended for twelve (12) months (the “Second Extended Term”), provided that: (i) Arbor receives written notice of Borrower’s election to extend the Extended Term at least thirty (30) days prior to the expiration of the Extended Term (the “Second Notice of Extension”); (ii) along with the Second Notice of Extension, Borrower delivers to Arbor an extension fee in an amount equal to one percent (1%) of the maximum Loan Amount; (iii) no event of default shall have occurred and no event shall have occurred that with notice, passage of time or both would constitute an event of default; (iv) the Interest Reserve (defined below) is resized by Arbor in its sole discretion and is replenished by Borrower; (v) Borrower shall purchase a new Rate Cap in form and substance acceptable to Arbor; and (vi) the Property shall achieve a debt service coverage ratio of no less than 1.25:1.00, using the greater of (a) the then current Interest Rate, (b) the then prevailing market constant for Fannie Mae, and (c) the then prevailing market constant for conduit ten-year fixed rate loans (the “Second DSCR Extension Test”), provided that if the Property fails to meet the Second DSCR Extension Test, then, in order to qualify for the Second Extended Term, Borrower shall rebalance the Loan by making a payment in an amount necessary to cause the debt service coverage ratio, as determined by Arbor in its sole discretion, to satisfy the Second DSCR Extension Test.
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.
Productive Capital Associates intends to make distributions from 3001 Kendale Drive JV, LLC as follows:
- To the Investors, pari passu, all operating cash flows to a 9.0% IRR;
- 70% / 30% (70% to Investors / 30% to Promoted/Carried Interest) of excess cash flow to a 15.0% IRR;
- 50% / 50% (50% to Investors / 50% to Promote/Carried Interest) of excess cash flow thereafter.
Productive Capital Associates 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 August 2022 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Productive Capital Associates, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Productive Capital Associates 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 | ||||
| Effective Gross Revenue | $1,752,189 | $1,883,807 | $2,026,602 | |||
| Total Operating Expenses | $1,033,110 | $1,028,498 | $1,050,502 | |||
| Net Operating Income | $719,080 | $855,308 | $976,100 | |||
| Project-Level Cash Flows | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | |||
| Net Cash Flow | ($3,856,344) | $197,690 | $314,695 | $6,539,393 | ||
| Investor-Level Cash Flows(1) | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | |||
| Net Cash Flow | ($3,300,000) | $106,182 | $204,054 | $4,914,248 | ||
| Investor-Level Cash Flows - Hypothetical $50,000 Investment(1) | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | |||
| Net Cash Flow | ($50,000) | $1,609 | $3,092 | $74,458 | ||
(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 Productive Capital Associates' materials for details. The following fees and compensation will be paid(1)(2)(3)(4):
| One-Time Fees: | |||||
| Type of Fee | Amount of Fee | Received By | Paid From | ||
| Acquisition Fee | 2.0% of Purchase Price | Productive Capital Associates | Capitalized Equity Contribution | ||
| Recurring Fees: | |||||
| Type of Fee | Amount of Fee | Received By | Paid From | ||
| Asset Management Fee | 2.0% of EGI | Productive Capital Associates | Distributable Cash | ||
| Administrative Services Fee | 1.0% of Equity(1) | RM Admin, LLC(4) | Distributable Cash | ||
(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.