$6,225,000
NAPA Ventures, LLC
NAPA Ventures, LLC also known as NAPA, is a multifamily and commercial real estate investment company focused on the acquisition, rehabilitation and operation of value-add and core asset investment properties in Texas. NAPA is currently continuing to aggressively and profitably expand their real estate holdings within Texas and other growth markets of the USA.
NAPA currently has ownership in over 3,700 existing units. Realty Mogul investors have previously invested with NAPA on the Woodbridge Townhomes and Ravenwood Apartments transactions.
http://napa-ventures.com/-
Shravan ParsiPrincipal and Co-Founder -
Glenn GonzalesPrincipal and Co-Founder
Shravan Parsi is an entrepreneur and an innovator with a background in two diversified professional fields: real estate investments and pharmaceutical research.
Shravan is the Co-CEO & Co-Founder of NAPA, LLC, which has acquired 7 apartment complexes and 2 commercial properties in the past 18 months. NAPA will continue to aggressively grow with a forecasted pipeline of $150MM in planned acquisitions in 2016. Shravan is a featured speaker at Texas CEO Magazine’s 2015 Enlightened Speaker series event & was recently featured as a value investor in the Austin American Statesman for the commercial real estate investment he purchased adjacent to the Formula 1 Race Track prior to the inaugural US Grand Prix in Austin, Texas.
By education, Shravan is a Pharmaceutical Scientist, owns investments in Medical Device & Health-Tech space. Shravan has published articles in the academic journals and made presentations to FDA and American Association of Pharmaceutical Scientists (AAPS).
With 11 years of RE Investment experience and 12 years of Pharma industry scientific and management experience, Shravan brings a unique skill set and strategic business vision to NAPA investments. He is currently a member of prestigious entrepreneur network TIGER 21, Central Texas Angel Network (CTAN), and the Austin Technology Council (ATC), and a past member of Entrepreneurs Org (EO).
Mr. Glenn Gonzales is an entrepreneurial individual able to leverage 25 years of commercial real estate experience. Glenn served as Treasurer on the Board of Directors for the Washington Multi-family Housing Association, and was elected as President of the association in 2006. From 1994 to 1998, Glenn was a board member for the Utah Apartment Association. He also served a two-year term as the Chairman of the Public Relations Committee and a one-year term as the Secretary-Treasurer for the Institute of Real Estate Management (IREM). Since 1994, Glenn has also been an instructor for the Apartment Associations in his local markets.
| Property Name | Location | Asset Type | Date Acquired |
# of Units |
Purchase Price |
|||
|---|---|---|---|---|---|---|---|---|
| Encinal | San Antonio, TX | Multifamily | 12/19/2013 | 201 | $4,818,750 | |||
| Lakeview Apartments | Killeen, TX | Multifamily | 4/4/2014 | 62 | $1,175,000 | |||
| Morgan Manor | San Antonio, TX | Multifamily | 9/26/2014 | 157 | $3,650,000 | |||
| Summerlyn | Killeen, TX | Multifamily | 1/6/2015 | 200 | $6,300,000 | |||
| Sante Fe | San Antonio, TX | Multifamily | 6/30/2015 | 327 | $7,300,000 | |||
| Montecito Creek | Dallas, TX | Multifamily | 9/30/2015 | 650 | $34,000,000 | |||
| Oates Creek | Mesquite, TX | Multifamily | 6/30/2016 | 280 | $15,700,000 | |||
| Parkside Townhomes | Arlington, TX | Multifamily | 7/14/2016 | 144 | $11,500,000 | |||
| Woodbridge Townhomes | Arlington, TX | Multifamily | 8/24/2016 | 91 | $6,225,000 | |||
| Westwood Apartments | Dallas, TX | Multifamily | 8/31/2016 | 187 | $7,400,000 | |||
| Ravenwood Apartments | Fort Worth, TX | Multifamily | 10/12/2016 | 122 | $4,900,000 | |||
| Brandon Mill | Dallas, TX | Multifamily | 9/26/2016 | 300 | $12,160,000 | |||
| Eagle Point | Dallas, TX | Multifamily | 11/15/2016 | 156 | $6,961,100 | |||
| Pleasant Creek | Lancaster, TX | Multifamily | 12/30/2016 | 159 | $8,580,000 | |||
| Oyster Creek | Lake Jackson, TX | Multifamily | 2/28/2017 | 201 | $15,900,000 | |||
| Treasure Bay | Lake Jackson, TX | Multifamily | 2/28/2017 | 200 | $15,100,000 | |||
| Prescott Woods | Tulsa, OK | Multifamily | 5/12/2017 | 256 | $8,300,000 | |||
| Totals | 3,749 | $169,969,850 | ||||||
The Sponsor's bio and track record were provided by the Sponsor and have not been verified by RealtyMogul.com or NCPS
In this transaction, RealtyMogul.com investors are to invest in Realty Mogul 68, LLC. Realty Mogul 68, LLC is to subsequently invest in NAPA Ventures Woodbridge, LLC, the entity that will hold title to the Property.
Within the first three to five months of acquiring the Property, the Sponsor intends on implementing an approximately $550,000 exterior capital improvement plan to address deferred maintenance and mechanical issues, make improvements to the common areas, and increase the Property's curb appeal. The Sponsor has also budgeted for interior renovations of $7,500 per unit for approximately 50% of the units, which will include new countertops, new appliances, refreshing of cabinetry, new paint and new carpet. The Sponsor estimates that upon renovation, the renovated units will be able to achieve rental premiums of approximately 23.5% above in place rents. It is expected that all interior renovations will be completed in approximately 16 months, with an average of three (3) units being renovated per month. Upon completion of all renovations, the Sponsor intends on selling the Property within three years, although if if the renovations are successfully implemented ahead of schedule and market conditions allow for a favorable sale, the hold period could be shorter.
A summary of the capital expenditures planned at the Property is as follows:
| CapEx Item | Cost |
|---|---|
| Interior Rehab ($7,500 each for 46 units) | $345,000 |
| Exterior Painting | $90,000 |
| Roofing | $80,000 |
| Siding and Fascia | $70,000 |
| Wood Rot | $55,000 |
| HVAC | $39,000 |
| Patio Enclosures | $35,000 |
| Landscaping | $30,000 |
| Concrete and Striping | $30,000 |
| Rail Road Ties | $25,000 |
| Signs | $25,000 |
| Leasing Office | $20,000 |
| Pool Leak | $10,000 |
| Contingency 5.0% | $42,700 |
| Subtotal | $896,700 |
| Construction Management Fee 3.0% | $26,901 |
| Total | $923,601 |
Sponsor Case Study - Montecito Creek Apartments
Per discussions with the Sponsor, the Montecito Creek Apartments complex, which was purchased approximately nine months ago, recently received an unsolicited offer to purchase at approximately the year three underwritten exit value for the property. The Sponsor stated that the business plan for Montecito, which is located in Dallas, TX, was effectively similar to that of the Property, with the Sponsor intending to renovate approximately 50%-60% of the units and then sell the asset with additional value add potential left for the buyer. Instead, the Sponsor has renovated approximately two thirds of the total intended units (about 40% of all units at the property), and has already received an offer to buy Montecito which they expect they will accept. The Sponsor anticipates accepting this purchase offer should yield a net return to investors in excess of their initial underwritten projections.
Before and after pictures of the Montecito property are as follows:
Note: The above case study details were provided by the Sponsor and have not been independently verified by RM, though RM did tour the Montecito property with the Sponsor.
RealtyMogul.com, along with Network Acquisition Partnership Alliance, LLC (“NAPA” or the “Sponsor”), is providing the opportunity to invest in the acquisition and ownership of Woodbridge Townhomes (the "Property"), a 91 unit, garden-style apartment complex in Arlington, TX. The Property is comprised of 24 buildings which are almost entirely two-story townhomes, although the leasing office and one residential building are a single story.
The primary objective of this investment is to acquire the Property at an attractive basis, implement exterior and interior capital improvements, increase rental rates, and sell the Property within three (3) years.
The Property is a 91 unit garden-style apartment complex located at 2403 Brown Boulevard, Arlington, Texas. The Property was built in 1981 and is 90% leased as of May 2016. The unit mix consists of 41 one (1) bedroom, 1.5 bathroom units and 50 two (2) bedroom, 2.5 bathroom units. Almost all the units are two-story townhomes, which is a desirable, atypical trait when compared to other comps in the area. Average in-place rents for one bedroom units are $791 per month, with two bedroom units averaging $933 per month.
Amenities at the Property include one storage closet per townhome unit, a swimming pool, and one laundry facility. Interior finishes include ceiling fans, microwave ovens, dishwashers, wood-burning fireplaces, and patios/balconies with exterior storage closets.
| Unit Type | # of Units | Avg SF/Unit | In-Place Rent | Rent/SF | Post-Reno Rent* | Rent/SF | % Variance** |
|---|---|---|---|---|---|---|---|
| 1 Bed, 1.5 Bath | 2 | 642 | $780 | $1.12 | $905 | $1.41 | 16.0% |
| 1 Bed, 1.5 Bath | 19 | 795 | $770 | $0.97 | $940 | $1.18 | 22.1% |
| 1 Bed, 1.5 Bath | 20 | 997 | $813 | $0.82 | $1,085 | $1.09 | 33.5% |
| 2 Bed, 2.5 Bath | 35 | 1,080 | $900 | $0.83 | $1,120 | $1.04 | 24.5% |
| 2 Bed, 2.5 Bath | 15 | 1,268 | $1,010 | $0.80 | $1,140 | $0.90 | 12.8% |
| Total | 91 | 1,024 | $869 | $0.85 | $1,073 | $1.05 | 23.5% |
Note: Only 46 of 91 units at the Property are anticipated to be fully renovated during the hold period.
*Note: These projected post-renovation rent assumptions are used in the Estimated Financials of this offering and are consistent with projections made in the PNC appraisal attached to this offering.
**Note: This figure is representative of the projected achievable rents for post-renovation units as a percentage of in-place rents.
| Address | Sale Date | # of Units | Year Built | Purchase Price | $ per Unit |
|---|---|---|---|---|---|
| 1705 Big Sur Dr., Arlington, TX | March 2016 | 68 | 1984 | $5,000,000 | $73,529 |
| 513 W Dickey Ave., Grand Prairie, TX | October 2015 | 100 | 1980 | $7,000,000 | $70,000 |
| 2015 Randy Snow Rd, Arlington, TX | January 2015 | 408 | 1984 | $28,000,000 | $68,627 |
| Average | August 2015 | 192 | 1983 | $13,333,333 | $70,719 |
| Subject | July 2016 | 91 | 1981 | $6,225,000 | $68,407 |
| Address | Year Built | Avg. Sq. Ft. / Unit (1 bed) | Avg. Rent / Sq. Ft. (1 bed) | Avg. Rental / Sq. Ft. (1 bed) | Avg. Sq. Ft. / Unit (2 bed) | Avg. Rent / Unit (2 bed) | Avg. Rent / Sq. Ft. (2 bed) |
|---|---|---|---|---|---|---|---|
| 500 Tish Circle, Arlington, TX | 1980 | 709 | $800 | $1.12 | 980 | $924 | $0.94 |
| 2121 Madison Dr, Arlington, TX | 1979 | 690 | $720 | $1.04 | 1,096 | $925 | $0.84 |
| 2624 Southern Hills Blvd, Arlington, TX | 1983 | 721 | $701 | $0.97 | 917 | $837 | $0.91 |
| 2506 North Forty Circle, Arlington, TX | 1980 | 657 | $703 | $1.07 | 1,002 | $825 | $0.82 |
| 707 Washington Dr, Arlington, TX | 1978 | 698 | $765 | $1.10 | 1,003 | $957 | $0.95 |
| Average | 1980 | 695 | $738 | $1.06 | 1,000 | $894 | $0.89 |
| Subject - In-Place | 1981 | 886 | $791 | $0.89 | 1,136 | $933 | $0.82 |
| Subject - Projected Post-Renovation | 1981 | 886 | $1,008 | $1.14 | 1,386 | $1,138 | $0.82 |
Note: Leasing comparables are almost all smaller per unit on a per square foot basis than the Property, and do not have townhome style units as does the Property. After renovations at the Property are completed, renovated units at the Property should be superior to these comps.
The Property is located on Brown Boulevard directly off of State Highway 360, approximately two (2) miles from Six Flags Over Texas, Six Flags Hurricane Harbor and the Globe Life Park in Arlington where the Texas Rangers play. AT&T Stadium, where the Dallas Cowboys play, is another half mile down the road from the Property. AT&T Stadium is a $1.2 billion, 101,000 seat, state-of-the art facility which was built in 2009. Trammell Crow recently received approval for the development of Stadium View, a project that could bring up to one million square feet of Class A office space to the areas adjacent to the Cowboys and Rangers stadiums. Looking into the more distant future, the city of Arlington has initially approved a new $1 billion baseball stadium for the Texas Rangers as well, and it is anticipated it would be constructed south of the existing baseball stadium, approximately three (3) miles from the Property. The Cordish Companies have also announced “Texas Live!,” a $200 million mixed-use development adjacent to the Rangers’ Globe Life Park expected to open sometime during the 2017-2018 baseball season.
Much of the area surrounding the Property is comprised of similar apartment communities and single family home neighborhoods. There are several restaurants located south of the Property, near the intersection of I-30 and Highway 360. This area is directly adjacent to Six Flags, and is also home to several hotels. The Property is located within a mile of both the local elementary and high school. Additionally, the Property is within a six-minute drive of both Riverside Golf Club and Chester W. Ditto Golf Course.
Market Overview
According to the 2015 Census Bureau, the Dallas-Fort Worth metroplex includes over 7.1 million people. Population growth from the period of April 2010 to July 2015 was 11.5% (2.3% annualized).
Per CoStar, while other major markets in Texas, such as Houston and Austin, have struggled with declining energy prices, the Dallas-Fort Worth market has remained fairly stable with an economy not centered around oil and energy. Instead, the metroplex is home to many corporate headquarters and houses a fair amount of electronics and telecommunications companies. The area is also home to several major U.S. defense contractors.
Also via CoStar, while the 4.5% market vacancy in the greater Dallas-Fort Worth metroplex is not quite as low as the Arlington multifamily submarket, it still significantly below the historical market average of 7.2%. Vacancy in the market has been within 0.50% of its current level since the beginning of 2014 despite the market adding over 30,000 new units in that timeframe, with almost half of that new product being delivered over the past twelve months. With the glut of construction and the tight but stable levels of vacancy in the market rent growth has remained robust, with rents increasing 7.0% over the preceding twelve months and the forward projections remaining high at 5.6% for the coming twelve months.
Submarket Overview
According to CoStar, post-recession vacancies in Arlington have fallen significantly, to levels well below their historical average. Vacancy was at 3.5% as of the first quarter of 2016, up from but still near the all-time low of 3.2% seen in the third quarter of 2015. New high-quality supply delivering in nearby submarkets has not been drawing renters away from Arlington since renters in this submarket usually cannot afford these premium rents. Arlington has flown beneath developers’ radars for years, which should buffer it from the higher risk of volatility due to new construction felt by other submarkets. With a relatively low percentage of new supply expected, Arlington’s vacancy rate is expected to remain relatively tight over the next few years.
Demographic Information
| Distance from Property | 1 Mile | 3 Miles | 5 Miles |
| Population | 17,636 | 76,439 | 240,558 |
| Projected Growth (2015-2020) | 8.44% | 9.11% | 8.24% |
| Median HH Income | $46,290 | $43,033 | $41,329 |
| Average HH Income | $67,905 | $61,110 | $56,996 |
| Median Home Value | $181,406 | $149,008 | $118,319 |
| % of Renter Households | 75.35% | 72.76% | 62.76% |
Demographic information above was obtained from CoStar.
| Sources of Funds | Cost |
|---|---|
| Debt | $5,000,000 |
| Equity | $2,550,048 |
| Total Sources of Funds | $7,550,048 |
| Uses of Funds | Cost |
| Purchase Price | $6,225,000 |
| CapEx Reserve | $923,601 |
| Sponsor Acquisition Fee | $62,250 |
| Sponsor Legal Costs | $65,000 |
| North Capital Broker Dealer Fee | $68,850 |
| Lender Origination Fee | $54,750 |
| Title and Due Diligence | $46,500 |
| Legal Fees paid to Outside Counsel | $10,000 |
| Operating Reserve | $35,000 |
| Taxes and Insurance Escrows | $56,597 |
| Other Pursuit Costs | $2,500 |
| Total Uses of Funds | $7,550,048 |
The projected terms of the debt financing are as follows:
- Lender: PNC
- Loan Type: Agency (Fannie Mae)
- Proceeds: $5,000,000
- Term: 12 Years
- Rate: 4.43% as of June 21, 2016
- Amortization: 30 years
- Interest Only Period: 24 months
- Prepayment Fee: 11.5 Years Yield Maintenance; Followed by 1.0%, with last 90 days at Par
- Assumption Fee: 1.0%
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.
NAPA Ventures Woodbridge, LLC intends to make distributions to Realty Mogul 68, LLC as follows:
- To the Members, pari passu, all excess cash flows and appreciation to a 10.0% IRR to the Members,
- 81.0 / 19.0 (81.0% to Realty Mogul 68, LLC / 19.0% to the Sponsor) of excess cash flows and appreciation to a 17.0% IRR to Realty Mogul 68, LLC,
- 67.5 / 32.5 of excess cash flow and appreciation to a 20.0% IRR to Realty Mogul 68, LLC, and
- 54.0 / 46.0 of excess cash flow and appreciation thereafter.
Note that 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).
Please note, the language defining the distribution structure has been updated to mirror the language in the legal agreement between Realty Mogul 68, LLC and Network Acquisition Partnership Alliance, LLC. There are no material changes as a result of this update.
Realty Mogul 68, LLC will distribute 100% of its share of excess cash flow (after expenses and fees) to the members of Realty Mogul 68, LLC (the RealtyMogul.com investors).
Distributions are projected to start in December 2016 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Sponsor, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Effective Gross Revenue | $973,837 | $1,171,795 | $1,215,215 |
| Total Operating Expenses | $610,893 | $629,980 | $643,596 |
| Net Operating Income | $362,943 | $541,815 | $571,619 |
| Annual Debt Service | $220,500 | $220,500 | $301,521 |
| Distributions to Realty Mogul 68, LLC Investors | $146,339 | $251,582 | $3,361,804 |
Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
| One-Time Fees | ||||
|---|---|---|---|---|
| Acquisition Fee | $62,250 | Sponsor | Capitalized Equity Contribution | 1.0% of the property purchase price |
| Disposition Fee | 0.5% of Gross Sales Price | Sponsor | Sales Proceeds | |
| Broker-Dealer Fee | $68,850 | North Capital (1) | Capitalized Equity Contribution | 3.0% of Realty Mogul 68, LLC invested equity |
| Recurring Fees | ||||
| Property Management Fee | 3.5% of Effective Gross Income | Sponsor-Affiliated Party | Distributable Cash | |
| Construction Management Fee | 3.0% of Total Costs | Sponsor | Capital Expenditure Reserve | |
| Asset Management Fee | 1.0% of Effective Gross Income | Sponsor | Operating Cash Flow | |
| Management and Administrative Fee | 1.0% of amount invested in Realty Mogul 68, LLC | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of Realty Mogul 68, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
Notes:
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.
(2) Fees may be deferred to reduce impact to investor distributions.
The above presentation is based upon information supplied by the Sponsor or others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 68, LLC, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
Financial Past of Sponsor’s Principal
Investors should consider that one of the Sponsor’s principals experienced personal bankruptcy in 2002 and a foreclosure on his primary residence in 2009. It should be noted that past financial events are not necessarily indicative of future performance or management ability.
Apartment Complex - Competition
Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. The Property will compete with other residential alternatives to attract tenants, including but not limited to other apartment units that are currently available for rent, new apartments that are built and condominiums/houses that are for rent or sale. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify. If the Property is not able to successfully compete with the competitive residential alternatives in the local or regional area this could adversely affect the ability of Sponsor Entity to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.
Lease-up Risks
The Property currently has a 90% occupancy level, and the Sponsor intends to implement a capital improvement plan involving the renovations of certain units and a leasing program in its effort to significantly increase that occupancy level. The Sponsor intends to renovate the common areas and some of the vacant units at the Property, and then to offer prospective tenants an attractive leasing package and to use both external and internal leasing resources in its efforts to lease up vacant space at the Property. There can be no assurance that such renovations will be consummated on a timely basis, that such work will not materially adversely affect other aspects of the operation of the Property, or that the planned lease-up program will result in the Property increasing its occupancy level at rental rates in line with those projected. Any delays or adverse effects of such renovation work or lease-up efforts could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment. Although the Sponsor believes that comparable properties are currently achieving rental rates that are in line with those expected from the Property, there can be no assurance that such increased occupancy levels or rental rates will be achieved. Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.
Renovation Risks
The Sponsor intends to renovate the Property in order to be able to demand the significantly higher rents it is projecting to receive at the Property following such renovations. Such renovations are expected to include $7,500 in interior upgrades, in addition to approximately $550,000 in exterior improvements. There can be no assurance that such renovations will be consummated on a timely basis or that such work will not materially adversely affect other aspects of the operation of the Property. Any delays or adverse effects of such renovation work could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment. Following the renovations, the Sponsor expects to be able to rent the apartment units at average rates that would represent an approximate 13.5% increase over the existing rental rates. Although the Sponsor believes that comparable properties are currently achieving rental rates that are greater than the future rental rates expected from the Property, there can be no assurance that such increased rental rates will be achieved. Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.
Tenants’ Loss of Revenues Could Reduce the Sponsor Entity’s Cash Flow
Tenants of the Property may encounter significant macroeconomic, governmental and competitive forces. Adverse changes in consumer spending or consumer preferences for particular goods, services or store-based retailing could severely impact these tenants’ ability to pay rent. The default, financial distress, bankruptcy or liquidation of one or more of the Property’s tenants could cause substantial vacancies, which would likely reduce the Sponsor Entity’s revenues, increase property expenses and could decrease the value of the Property. Upon the expiration of a lease, the tenant may choose not to renew the lease and/or the Sponsor Entity may not be able to re-lease the vacant space at a comparable lease rate or without incurring additional expenditures in connection with such renewal or re-leasing.
Vacancies and Tenant Defaults May Reduce the Property’s Revenues
A vacancy or default of a tenant on its rent will cause the Sponsor Entity to lose the revenue from that unit and, if enough effective vacancies occur, it could cause the Sponsor Entity to have to find an alternative source of revenue to meet any loan payments and other operating expenses for a particular property and it may not be possible to have to find a viable alternative source of revenue. If the company managing the investment property does not employ sufficiently aggressive marketing campaigns and/or lease incentive programs, vacancies may increase and an investment in the Company may be adversely affected.
Sponsor’s Scalability in Light of Acquisition
Acquisition of the Property, along with the associated portfolio, will approximately double the number of units in the Sponsor’s portfolio. The transaction may strain current management and resources, and pose associated financial and management risks.
Interest-Only Loan Period
The loan being used to acquire the Property is expected to have an interest-only period during the first 24 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.
Sponsor’s Acquisition of Seller’s Property Management Company
The Sponsor is currently under contract to purchase the seller’s property management company. This may potentially cause a disruption in the management of the Property as control of the property management company transitions.
Texas Tornado Risk
Arlington, Texas lies in the northern part of the state of Texas, in an area which can be subject to frequent and sometimes destructive tornadoes. There is no guarantee that the Sponsor Entity will obtain tornado insurance. If no insurance is obtained, a tornado could have a material adverse impact on the Sponsor Entity, and thus the Company. Further, even if tornado insurance is obtained, there can be no assurance that a tornado will not cause significant damage to the Property or otherwise interrupt its operations in a manner not covered by the Property’s insurance, in which case the business and financial condition of the Sponsor Entity.
Forward-Looking Statements
Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will” and similar expressions to identify these forward-looking statements
Illiquid Investment - Transfer Restrictions & No Public Market
The transferability of membership interests in Realty Mogul 68, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.
Uncertainty Surrounding Future Sales Price
There is risk associated with the Sponsor being unable to sell the Property as projected.
Interest Rate Risk
The Federal Reserve has methodically reduced the amount of stimulus it was earlier injecting into the U.S. economy, and has signaled that increases in the federal funds rate may be forthcoming. This could potentially lead to rising interest rates offered by other lenders and could have a negative effect on the future value of the Property (since higher loan interest rates might mean that potential buyers would face proportionately higher debt service expenses).
Mortgage Risk
The Sponsor has a signed term sheet with a lender to provide the debt financing for the acquisition of the Property, but there can be no assurance that the lender will complete financing on the rates and terms included in the underwriting being presented in the model for this investment opportunity. All rates and terms of the debt financing are subject to final lender committee approval, including but not limited to a modification in lender held capital reserve requirements that may result in a corresponding movement of certain funds currently projected as being held in a Sponsor controlled capital escrow account.
Management Risk
Investors will be relying solely on the Sponsor for the execution of its business plan. The Sponsor may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of NAPA Ventures Woodbridge, LLC (including Realty Mogul 68, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the Sponsor has significant operating experience, NAPA Ventures Woodbridge, LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 68, LLC is pursuing a venture capital strategy through its investment in NAPA Ventures Woodbridge, LLC, and the manager of Realty Mogul 68, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.
Manager of Realty Mogul 68, LLC Will Participate in Sponsors' Promote Interest
The manager of Realty Mogul 68, LLC will be entitled to a participation in the value of any excess distributable cash flow and any appreciation of the Property realized upon its sale. This could lead to a potential conflict of interest between the manager and Realty Mogul 68, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.
Uncertain Distributions
The Sponsor cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 68, LLC) from either net cash from operations or proceeds from the sale or refinancing of the asset. Sponsor, in its discretion, may retain any portion of such funds for tenant improvements, tenant refurbishments and other lease-up costs or for working capital reserves. Sponsor has chosen to make distributions semi-annually.
Risk of Interest Charges for Sponsor Capital Calls
The amount of capital that may be required by NAPA Ventures Woodbridge, LLC from Realty Mogul 68, LLC is unknown, and although NAPA Ventures Woodbridge, LLC does not require that its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or additional capital. Realty Mogul 68, LLC does not intend to participate in a capital call if one is requested by NAPA Ventures Woodbridge, LLC, and in such event the manager of NAPA Ventures Woodbridge, LLC may accept additional contributions from other members of NAPA Ventures Woodbridge, LLC. Amounts that the manager of NAPA Ventures Woodbridge, LLC advances on behalf of Realty Mogul 68, LLC will be deemed to be a manager loan at an expected interest rate of 10%. Amounts that are contributed by existing or new members will be deemed to be additional capital contributions, in which case Realty Mogul 68, LLC's interest in NAPA Ventures Woodbridge, LLC will suffer a proportionate amount of dilution.
Uncertain Exit Timing
Although it is anticipated that the Property will be sold at the end of the expected two (2) year hold period, Realty Mogul 68, LLC will not have full control over the timing of the sale of the Property, and therefore we cannot offer assurances of when the exit will occur. If the Property is not sold after ten (10) years, Realty Mogul 68, LLC may have the right (either at that point or at a later time), subject to other contractual limitations such as the loan on the Property and the requirements of the operating agreement of NAPA Ventures Woodbridge, LLC, to force a sale of the Property or force a sale of the interests of Realty Mogul 68, LLC in NAPA Ventures Woodbridge, LLC.
General Economic and Market Risks
While the Sponsor has conducted significant research to justify the intended rental rates and sales price relative to comparable properties in the market, its best efforts to forecast economic conditions cannot state for certain whether or not rental rates will be achieved or investor sentiment and the capital markets will be favorable to the Property at the intended disposition date. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand for real estate investments, all of which are beyond the control of the Sponsor.
The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Issuer Document Package for a discussion of additional risks.
The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 68, LLC, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.