Pearlmark Real Estate
Pearlmark Real Estate ("Pearlmark") is a real estate private equity firm specializing in middle-market commercial real estate with a focus on office, industrial, and multifamily properties. It also seeks to invest in high-yield real estate debt opportunities throughout the United States. Pearlmark was founded in 1996 and is headquartered in Chicago, Illinois. Pearlmark operates as a boutique real estate manager and principal investor, allowing the company to be nimble, decisive, and creative in executing direct equity and debt investment strategies. Pearlmark’s expertise stretches across various property types in both primary and secondary markets, where the firm is dedicated to creating value via core-plus and value-add areas of the risk-return spectrum. Pearlmark’s principals invest personally alongside the firm’s investors in order to best align interests. Pearlmark has sponsored more than a dozen real estate equity and debt investment programs and completed 560 real estate equity and debt transactions on behalf of investors, representing approximately $5.3 billion in equity capital commitments and $13.8 billion in gross investment value.
BoundTrain Real Estate
BoundTrain Real Estate (“BoundTrain”) was founded in 2018 by Michael Klein and is led by principals Michael Klein, Jeff Tarae, and Kyle Wood. Headquartered in Falls Church, VA, BoundTrain pursues value-add and opportunistic office, residential, and retail; focused on Washington, DC along with select east coast markets. BoundTrain is in the process of their first office redevelopment in Falls Church, VA. Most of the major upgrades have been completed and they are working on the second phase of the spec suite program as of 2Q22. Prior to BoundTrain, Michael Klein was a Managing Director and Principal at Penzance and Vice President of Acquisitions and Finance at Akridge. Prior to BoundTrain, Jeff Tarae was a Managing Director at Newmark Knight Frank, responsible for leasing an average portfolio of 7mm SF in Northern Virginia. In this role, he executed on behalf of global real estate organizations such as The Blackstone Group, J.P. Morgan, ADIA, New York Life, and Prudential. Prior to BoundTrain, Kyle Wood was a Vice President at Penzance where he was responsible for the financial performance of an office and multifamily portfolio. Additionally, Kyle oversaw leasing strategy and execution, capital improvements, dispositions and refinancing, and managed joint venture relationships.
BoundTrain purchased the Property in July 2020 and has spent almost 2 years planning and designing the redevelopment. The Property has seen few updates since construction in 1970 aside from elevator modernization and roof replacement. The Sponsor plans to complete a full gut renovation down to steel/concrete on each floor with spec suites on floors three through seven, upgrades to the building façade and roof, new mechanical, electrical, storefront/entrance, main lobby, exterior plaza, common areas, shared conference room, restrooms, elevator cabs, and deliver new technology updates and security enhancements.
Sponsor plans to capitalize on providing a well-amenitized, boutique office option that will cater to local, private sector tenants who have limited options at a reasonable rent for this type of product (15-20% below competition according to Costar) in the Arlington, Virginia office market, which is currently the most sought-after market in the D.C. Metro.
Rent Roll
| Tenant | SF | % of Total | Rent/SF | Lease Start | Lease Expiration | Lease Type |
| In-Place Tenants and Fully Executed Leases | ||||||
| Performance Care Clinics | 1,903 | 3% | $35.00 | 7/1/2022 | 6/30/2033 | Base Year Stop Net of Electric |
| Washington Workplace | 1,686 | 2% | $26.00 | 1/1/2020 | 10/31/2022 | Base Year Stop |
| TMG Construction | 3,396 | 5% | $17.52 | MTM | Base Year Stop | |
| Harner and Sarli (LAB) | 647 | 1% | $27.00 | MTM | Base Year Stop | |
| SBDA | 1,222 | 2% | $21.00 | MTM | Base Year Stop | |
| Blue Land Media | 810 | 1% | $24.00 | MTM | Base Year Stop | |
| Alan Dobson, Attorney | 860 | 1% | $27.00 | MTM | Base Year Stop | |
| Capitol Bridge, LLC | 3,842 | 6% | $20.00 | MTM | Base Year Stop | |
| 21% | ||||||
| In Negotiations/Under LOI | ||||||
| LEDC | 440 | 1% | $39.20 | 9/1/2022 | 11/30/2027 | Base Year Stop |
| National Residential Realtor | 7,355 | 11% | $38.75 | 10/1/2022 | 9/30/2034 | Base Year Stop |
| Total | 22,161 | 32.2% | $28.64 | |||
Lease Comparables
| Connexus Corporation | Stg International | Radiance Technologies | Brown & Root Industrial Services | American Association for Homecare | Silicon Valley Bank | Monument Economics Group | Averages | Subject | |
| Date Signed | Q4 2020 | Q2 2019 | Q1 2022 | Q3 2021 | Q2 2021 | Q1 2022 | Q3 2021 | ||
| Year Built | 1985 | 2001 | 1980 | 1990 | 1970 | 1981 | 1981 | 1984 | 1970 |
| Tenant Lease Size | 2,354 SF | 8,078 SF | 7,909 SF | 3,798 SF | 1,516 SF | 4,563 SF | 4,790 SF | 4,715 SF | |
| Building NRSF | 221,389 SF | 233,446 SF | 451,572 SF | 398,329 SF | 316,353 SF | 559,479 SF | 559,479 SF | 391,435 SF | 68,156 SF |
| Rental Rate | $33.00/SF | $35.00/SF | $46.50/SF | $47.00/SF | $54.00/SF | $55.50/SF | $56.42/SF | $46.77/SF | $40.79/SF |
| Lease Type | Modified Gross | Modified Gross | Modified Gross | Modified Gross | Modified Gross | Modified Gross | Modified Gross | Modified Gross | |
| Address | 2800 Shirlington Rd | 2900 South Quincy | 1550 Crystal Drive | 2451 Crystal Drive | 1400 Crystal Drive | 1000 Wilson Blvd | 1000 Wilson Blvd | 2300 9th Street South | |
| Distance from Subject | 1.5 miles | 1.7 miles | 1.8 miles | 2.0 miles | 1.8 miles | 2.2 miles | 2.2 miles | 1.8 miles |
Source: Compstak and Costar
Sales Comparables
| 1300 Wilson Blvd | 1400 Crystal | 2100-2120 S Washington Blvd | Presidential Tower | 1300 17th St N | Averages | Subject (Total Budget) |
|
| Date Sold | 2/1/2022 | 12/1/2021 | 9/1/2021 | 5/1/2019 | 1/1/2018 | ||
| Year Built | 1968 | 2013 | 1987 | 1972 | 1980 | 1984 | 1970 |
| NRSF | 363,112 SF | 316,353 SF | 369,215 SF | 383,524 SF | 398,000 SF | 366,041 SF | 68,786 SF |
| Sale Price | $245,000,000 | $203,000,000 | $204,400,000 | $123,230,000 | $250,000,000 | $205,126,000 | $34,361,553 |
| $/SF | $675/SF | $642/SF | $554/SF | $321/SF | $628/SF | $564/SF | $501/SF |
| Cap Rate | 5.25% | 5.45% | 5.50% | 5.75% | 5.60% | 5.51% | 7.10% |
| Address | 1300 Wilson Blvd | 1400 Crystal Drive | 2100-2120 S Washington Blvd | 2550 S Clark | 1300 17th St N | 2300 9th Street South | |
| Distance from Subject | 2.1 miles | 1.8 miles | 0.6 miles | 1.9 miles | 2.1 miles | 1.7 miles |
Source: Costar
Total Capitalization
| Sources of Funds | $ Amount | $/SF |
| Debt | $21,975,000 | $319 |
| GP Investor Equity(1) | $2,477,310 | $36 |
| LP Investor Equity | $9,909,242 | $144 |
| Total Sources of Funds | $34,361,553 | $500 |
| Uses of Funds | $ Amount | $/SF |
| Purchase Price | $6,500,000 | $94 |
| Acquisition Fee | $87,874 | $1 |
| Loan Fees | $715,183 | $10 |
| Closing Costs | $605,073 | $9 |
| Capitalized Costs Spent to Date | $1,682,317 | $24 |
| Future TI/LC | $3,747,090 | $54 |
| Future CapEx | $15,150,275 | $220 |
| Future Spec Suites Floors 4-7 | $3,730,721 | $54 |
| Working Capital | $231,289 | $3 |
| Interest/Operating Reserves | $1,600,000 | $23 |
| Other Reserves | $311,731 | $5 |
| Total Uses of Funds | $34,361,553 | $500 |
(1) The Sponsor’s equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
The expected terms of the debt financing are as follows:
- Lender: Forbright Bank
- Term: 3 years + two 12-month extensions (Senior); 20 years (C-PACE Term)
- LTC: 64.0%
- Estimated Proceeds: $18,275,000 (Senior Loan); $3,700,000 (C-PACE Loan). Amounts subject to change.
- Interest Type (Senior): Floating
- Spread above SOFR (Senior): 4.50%
- Interest Type (C-PACE): Fixed
- Annual Interest Rate (C-PACE): 4.70%
- Interest-Only Period: 36 months (Senior); 60 months (C-PACE)
- Amortization: 30 years (Senior); 15 years (C-PACE)
- Prepayment Terms: $1,318,000 minimum interest on Senior loan; C-PACE prepayment penalty of 5% in year 1, 4% in year 2, 3% in year 3, 0% thereafter.
- Extension Requirements: 0.25% extension fee; maximum 50% LTV on the then "as-is" value; minimum DSCR of 1.50x and DY of 11.0%
- Modeled Refinance: No
(2) A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. Please carefully review the Disclaimers section below for additional information concerning the Sponsor's use of debt.
Pearlmark and BoundTrain intend to make distributions as follows:
- To the Investors, pari passu, all net cash flows to an 8.0% IRR;
- 20% promote over an 8.0% IRR;
- 30% promote over a 12.0% IRR;
- 40% promote over a 16.0% IRR.
Pearlmark and BoundTrain intend 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 4Q24 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Pearlmark and BoundTrain, who may decide to delay distributions for any reason, including maintenance or capital reserves.
Pearlmark and BoundTrain will receive a promoted/carried interest as indicated above.
| Projected Cash Flow Summary | ||||
| Year 1 | Year 2 | Year 3 | ||
| Effective Gross Revenue | $162,097 | $1,343,776 | $3,176,132 | |
| Total Operating Expenses | $492,886 | $691,219 | $803,819 | |
| Net Operating Income | ($330,789) | $652,557 | $2,372,313 | |
| Project-Level Cash Flows | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Net Cash Flow | ($12,386,552) | $0 | $0 | $20,608,997 |
| Investor-Level Cash Flows - Hypothetical $50,000 Investment(3)(4) | ||||
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Net Cash Flow | ($50,000) | $0 | $0 | $76,488 |
(3) RM Technologies, LLC and its affiliates do not provide any assurance of returns. Returns presented are net of all fees. Please carefully review the Fees and Disclaimers sections below for additional information concerning Sponsor’s use or projected returns and fees paid to Sponsor and RM Technologies, LLC.
(4) Sponsor is projecting a 16.1% IRR and a 1.56x equity multiple net of all fees and carried interest payments to Sponsor. Net of the Administration Solution Fee to RealtyMogul, and assuming a $50,000 commitment, Sponsor is projecting a 15.2% IRR and 1.53x equity multiple to investors.
Certain fees and compensation will be paid over the life of the transaction; please refer to Pearlmark and BoundTrain's private placement memorandum (PPM) and LLC agreement for details. The following fees and compensation will be paid(5)(6)(7)(8):
| One-Time Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Acquisition Fee | 1.0% of Purchase Price, capital spent prior to closing, and closing costs | Pearlmark | Upfront Capitalization |
| Base Building Construction Management Fee(7) | 5% on cumulative costs up to $1,000,000; 4% on cumulative costs between $1,000,000 and $2,000,000; 3.5% on cumulative costs over $2,000,000. Maximum $290,000 | BoundTrain | Upfront Capitalization |
| Spec Suite/TI/LC Construction Management Fee(7) | 5% on cumulative costs up to $250,000; 4% on cumulative costs between $250,000 and $500,000; 3.5% on cumulative costs over $500,000 | BoundTrain | Upfront Capitalization |
| Leasing Oversight Fee(8) | 1% on gross rent due over initial lease term (up to 10 years) on new leases; 0.50% on renewals; 0.75% on expansions | BoundTrain | Upfront Capitalization |
| Other LP Fee | $125,000, equal to 1.0% of Other LP Commitment, which is expected to be $5,000,000 | Other LP | Upfront Capitalization |
| Technology Solution Licensing Fee(6) | Flat one-time licensing fees of $15,000 plus $1,500 per each prospective investor onboarded by Sponsor through its license and use of RM Technologies’ Technology Solution | RM Technologies, LLC |
Upfront Capitalization |
| Recurring Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Administration Solution Licensing Fee(6) | Flat quarterly licensing fee of $125 per investor serviced by Sponsor through the license and use of RM Technologies’ Administration Solution | RM Technologies, LLC | Distributions to investors sourced through the RealtyMogul Platform. |
| GP Cost Reimbursement | $10,000 annually | Pearlmark | Cash Flow |
| Accounting Fee | $10,000 annually | Pearlmark | Cash Flow |
| Asset Management Fee | 1% of contributed equity | 50% Pearlmark, 50% BoundTrain | Cash Flow |
| Property Management Fee | The greater of 2.5% of effective gross revenue and $3,250/month (grown 3.0% annually) | Colliers | Cash Flow |
(5) See Investment Documents for more information on fees.
(6) Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.
(7) If the tenant elects not to use BoundTrain (or an affiliate of BoundTrain) for construction management, BoundTrain will receive a one percent (1%) oversight fee of the total tenant improvements budget for such project, such fee to be deducted from the tenant improvement allowance.
(8) Underwriting assumes a leasing fee of 7% to a third-party broker.
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.