FORMALIZED DUE DILIGENCE PROCESS 
Sponsors

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Confidentiality Agreement
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By clicking the ‘I Agree’ button below:
Funded
Estimated Hold Period 3 Years
Estimated First Distribution 7/2023
FUNDED 100%
...
View Our Due Diligence Process
Offered By
Innovo Development Group
Investment Strategy Value-Add
Investment Type Equity
Minimum Investment 35000
Overview
Gateway Industrial Center is a 1,441,834 SF, multi-tenant industrial campus in the heart of Metro Detroit that benefits from current cash flow and a newly developed manufacturing and assembly facility that will be delivered in December 2022.
New Construction

The Sponsor is on schedule to deliver a new, 421,000-square-foot manufacturing and assembly center in December 2022, which will coincide with the equity closing date. Based on interest from prospective tenants the Sponsor anticipates the new spec building to be leased at the time of delivery, with a target rent of $6.95 - $7.50 PSF NNN. 

As of June 2022, there are over 20 tenants in the Property's submarket seeking space for occupancy by year-end 2022. Those tenants require between 3.9M - 5.4M SF, which is 2.5x - 3.5x more demand than the total Class A manufacturing and assembly space set to be delivered in the competing market by year-end 2022. This supply-demand imbalance allows investors to achieve immediate leasing success at top of the market rents. 

Management

The Sponsor’s track record is proven by their historical performance with the Property. At the time of acquisition, in January 2020, the Property consisted of two (2) buildings totaling 1.1M SF that were less than 50% occupied. Within 12 months, the Sponsor fully leased the buildings and grew cash flow by approximately $2.8M.  

More recently, in August 2022, the Sponsor executed a lease extension with one of the largest tenants at the Property, Lear Corporation, who occupies 154,925 SF and will be paying a new rent of $1.6M ($10.15 PSF), compared to their current rent of $552K ($3.56 PSF). Further, the Sponsor is evaluating RFPs from prospective tenants to occupy the 421,000 SF spec building that will bring an added $3.2M ($7.50 PSF) to revenue.  

Location

Gateway Industrial Center is located in Detroit, Michigan – the second-largest regional economy in the Midwest. The Property is ideally positioned on the corner of I-96 and Southfield Freeway, offering tenants easy access to Canada, Chicago, and the broader Michigan areas.

Its central location is surrounded by the "Big Three" OEMs in Detroit, which consist of General Motors, Fiat Chrysler Automobiles, and Ford Motor Company. Additionally, Gateway Industrial Center is connected to one of five intermodal terminals in the city of Detroit and has direct rail access to the Canadian Pacific Oak terminal.

Property at a glance
Year Built 1968 / 2020 / 2022
NRSF 1,441,834 SF
Project Stabilization Q1 2023
# of Buildings 2 existing, 1 spec shell
Current Occupancy (Existing Buildings) 100%
Acquisition Price $125,000,000
Investment Highlights
Gateway Industrial Center offers investors the opportunity to acquire a highly sought-after multi-tenant industrial product that benefits from current cash flow and immediate upside with the delivery of a newly-built, 421,000 SF manufacturing and assembly facility. The asset is cash-flowing and offers an average cash-on-cash return of 4.3% (assuming expansion space income begins May 2023). When contemplating a refinance in year 2 and disposition in year 3, the average cash-on-cash returns increase to 9.7% all else equal.
The Offering includes a newly constructed, 421,000-square-foot manufacturing and assembly building, allowing future owners a significant yield-enhancement opportunity through immediate lease-up of the space. With unprecedented rent growth and burgeoning user demand in the area, Gateway Industrial Center offers both a stable yield and a unique growth opportunity for investors. Additionally, investors will be entering this deal at a basis of $87 per square foot, which represents a significant discount to today's replacement cost of $95-$105 per square foot.
The Detroit industrial submarket has a glaring lack of supply in a highly sought-after region in the Midwest by logistics and manufacturing users. As of June 2022, there are over 20 tenants in the market for industrial space by end of year. Those tenants require between 3.9M - 5.4M SF, which is 2.5x - 3.5x more demand than the total Class A manufacturing and assembly space set to be delivered in the competing market.
Gateway Industrial Center provides investors the opportunity to partner with a highly experienced developer with a significant local presence. Innovo Development Group is a Michigan-based firm with longstanding ties to local and national investor communities. Their acquisition and development pipeline currently totals over $300 million of projects that are primarily sourced on an off-market basis.
The Portfolio is ideally positioned in a central Detroit location, proximate to the industrial market's most significant economic drivers and transportation infrastructure. Gateway Industrial Center is surrounded by the "Big Three" OEMs in Detroit, which consist of General Motors, Fiat Chrysler Automobiles, and Ford Motor Company. Additionally, the Properties' are connected to one of five intermodal terminals in Detroit and proximate to I-696, I-96, and I-275.
Current underwriting projects a 24.14% IRR for New Investors on a three-year hold of the Gateway Industrial Center portfolio.
Management
Cumulative Distributions

Innovo Development Group

Innovo Development Group's vision is to be a forerunner in innovative real estate development, focused on developing and owning unique assets where they can be market leaders in design, development, capital, management, marketing, sales, and performance. They specialize in projects where their energy, expertise, and capital can deliver new opportunities and benefits in higher growth markets that create more value for their communities, customers, team, partners, and owners.

Innovo's Team is currently engaged in development opportunities in markets across the country, including multiple projects in the Midwest and Florida. Current real estate holdings under ownership and management include a combination of multifamily, industrial, and retail.

Innovo is active in the marketplace with a robust pipeline. Notably, the Sponsor is currently developing The Godfrey - a development of 97 market-rate multifamily units in Traverse City, MI, adjacent to Innovo's existing Breakwater Apartments. The Group also recently closed on two, market-rate apartment buildings in Midtown Detroit and are currently negotiating terms on the acquisition and development of several additional opportunities.

https://innovodev.com/
  • Jay Gudebski
    President and Co-Founder
  • Richard "Trae" Allman
    Principal and Co-Founder
  • Brian Mullally
    Principal and Co-Founder
Jay Gudebski
President and Co-Founder

Jay is responsible for Innovo's overall business results and team leadership, working on new site acquisition, design, development, and financing. Over his career, Jay has negotiated over $500 million in syndicated debt deals, numerous mergers, acquisitions, divestitures, and several start-up enterprises. Jay and his family have generations of experience owning commercial real estate.

Jay's other investments include early-stage formation and strategic ownership interests in the Grand Rapids Drive, the minor "Gatorade League" affiliate of the NBA's Detroit Pistons; Zivo Biosciences, Inc., a publicly traded research and development company commercializing natural nutritional compounds and bioactive molecules for the animal and human health industries from proprietary algal strains; and Sierra Oncology Inc., a clinical-stage drug development company focused on advancing targeted therapeutics for the treatment of patients with significant unmet needs in hematology and oncology.

Richard "Trae" Allman
Principal and Co-Founder

Richard "Trae" Allman leads Innovo's development efforts from the initial review of opportunities into zoning and entitlement, through the final development stages and construction. His 20 years of experience in development includes commercial projects, across all asset types representing nearly $1+ billion, 2,000+ units, and 20+ million SF.

Brian Mullally
Principal and Co-Founder

Brian leads Innovo's operations and growth strategies, bringing 20+ years of experience in acquisitions, capital, operations, legal, and business development partnerships. Prior to co-founding Innovo, he previously worked for Goldman Sachs and Greenleaf Trust, a $7 billion global wealth manager. Brian is also Co-Founder and CEO of TruNorth Capital Management, a $215 million assets under management registered investment advisory company. Brian is also an attorney and member of the State Bar of Michigan.

Track Record

Property City, State Asset Type Acq Date Units or SF Purchase Price Equity Multiple Current Value/Sale Price Status
Port St. Lucie Retail Port St. Lucie, FL Suburban Retail 2017 13,067 SF $3,685,243 2.14x $7,900,000 Stabilized
Royal Oak Retail Royal Oak, MI Urban Retail 2016 14,000 SF $3,789,574 1.61x $6,110,000 Stabilized
Breakwater Traverse City, MI Multifamily 2020 78 units $28,600,000 1.00x $28,600,000 Stabilized
St. Louis Retail(1) St. Louis, MO Urban Retail 2017 10,565 SF $4,836,575 1.24x $6,000,000 In Lease-Up
Gateway Industrial Center Detroit, MI Industrial 2022 1,441,834 SF $94,500,000 1.32x $125,000,000 In Development/In Lease-Up
(Existing SF 100% leased. Expansion SF is under construction - expected delivery date of Q4 2022)
Hall St. (mixed-use multifamily site)(1) Traverse City, MI Land / Development 2021 45,738 SF land / 1.05 acres $2,100,000 2.38x $5,000,000 In Development
(Expected delivery date of Q4 2024)
The Godfrey Traverse City, MI Mixed Use 2022 98 units $40,000,000 N/A $40,000,000 In Development
(Expected delivery date of Q4 2024)
Michigan State University Development East Lansing, MI MF/Student Housing 2022 1,100 units $300,000,000 N/A $300,000,000 In Development
(Expected delivery date of Q3 2024)
Confidential - MI Urban Infill Redevelopment Confidential, MI Multifamily 2022 400 units $140,000,000 N/A $140,000,000 In Development
(Expected delivery date of Q2 2025)
Traverse City Portfolio Traverse City, MI Multifamily 2022 280 units
(159 built / 72 in development)
$40,000,000 N/A $40,000,000 In Development (32% complete)
(Expected delivery date of Q4 2023)
Midtown Detroit Development Detroit, MI Multifamily 2022 100+ units $40,000,000 N/A $40,000,000 In Development
(Expected delivery date of Q3 2025)
Total       2,287 units & $1,512,604 SF $697,511,392   $738,610,000  

 

Richard "Trae" Allman's Relevant Experience Prior to Innovo:

Property Name City, State Asset Type Project Delivered Units or SF Appx. Project Cost Type of Experience
JLND (19 bank branches) Lansing, MI Office 2003-2004 114,000 SF $28,500,000 Developer at Jackson National Life
Eastwood Town Center Lansing, MI Mixed Use 2002 332,000 SF $166,000,000 Owner's Rep at Eyde Family / Land One, LLC (Michigan Firm)
Various MF Properties (15) various, MI Multifamily 2003 300 units $90,000,000 Owner's Rep at Eyde Family / Land One, LLC (Michigan Firm)
Various Retail Properties (7) various, MI Retail 2003 N/A N/A Owner's Rep at Eyde Family / Land One, LLC (Michigan Firm)
Holiday Inn Express & Hampton Inn various, MI Hotel 2003 90 units $54,000,000 Owner's Rep at Eyde Family / Land One, LLC (Michigan Firm)
Parker's Landing Portland, MI Multifamily 1999 112 units $16,800,000 Owner's Rep at Gillespie Group (Michigan Firm)
The Abbey Ionia, MI Multifamily 2002 56 units $3,360,000 Owner's Rep at Gillespie Group (Michigan Firm)
Legacy Parke Charlotte, MI Multifamily 2001 126 units $10,080,000 Owner's Rep at Gillespie Group (Michigan Firm)
Catalina Shores Muskegon, MI Multifamily 2003 88 units $7,040,000 Owner's Rep at Gillespie Group (Michigan Firm)
Chesapeake Landing Muskegon, MI Multifamily 2004 88 units $7,040,000 Owner's Rep at Gillespie Group (Michigan Firm)
The Hamptons of Norton Shores Muskegon, MI Multifamily 2001 104 units $16,640,000 Owner's Rep at Gillespie Group (Michigan Firm)
Victoria Pointe Jackson, MI Multifamily 2002 54 units $12,960,000 Owner's Rep at Gillespie Group (Michigan Firm)
Springbrook Meadows Jackson, MI Multifamily 1998 152 units $7,296,000 Owner's Rep at Gillespie Group (Michigan Firm)
Westbury Lake Lansing, MI Multifamily 1996 166 units $11,800,000 Owner's Rep at Gillespie Group (Michigan Firm)
Townsend on the Park Grand Ledge, MI Multifamily 2004 92 units $6,600,000 Owner's Rep at Gillespie Group (Michigan Firm)
The Beaumont East Lansing, MI Multifamily 2007 89 units $10,000,000 Owner's Rep at Gillespie Group (Michigan Firm)
Stadium District Lansing, MI Multifamily 2007 40 units $8,000,000 Owner's Rep at Gillespie Group (Michigan Firm)
The Willis Apartments & Duplexes Lansing, MI Multifamily 2016 3 units $720,000 Owner's Rep at Gillespie Group (Michigan Firm)
Total       1,560 units & 446,000 SF $456,836,000  

 

(1) Both as-is values are derived by a sales comparison approach.

The above bios and track record were provided by Innovo Development Group and have not been independently verified by RealtyMogul.

 

The Property was acquired by the Sponsor in January 2020, for $94.5M, with less than a 50% occupancy rate. The existing two (2) industrial buildings now total 1,020,834 square feet and are 100.0% leased to four tenants at below-market rents, with a weighted-average remaining lease term of 4.3 years measured from 1/1/2023. On the northeast corner of the site will be a newly built, 421,000-square-foot manufacturing, assembly, and logistics facility. The expansion will include 62 dock positions and have a clear height of 36 feet and is on target to receive a certificate of occupancy by year-end 2022, at which time investors will be permitted to invest in the Project.

Gateway Industrial Center presents investors with an opportunity to invest in an industrial campus comprised of 1,020,834 square feet of stabilized footprint and 421,000 square feet of new construction that is currently in the pre-leasing process. The Sponsor has engaged JLL's Detroit Industrial Leasing team as the Landlord's representative and is evaluating RFPs from prospective tenants. To date, they've received three (3) serious RFPs ranging from 100,000 SF to 421,000 SF and rent offers from $6.95/SF to $8.00/SF per annum. The Sponsor intends to select a tenant by year-end 2022 coinciding with the Certificate of Occupancy and investor equity closing. Since the Sponsor's acquisition of the asset, Innovo has de-risked the business plan, with only the lease-up of the new speculative building remaining prior to the asset's stabilization. 

The existing in-place debt fully capitalizes all tenant improvement and leasing commission expenses associated with the lease-up of the spec building. Upon completion of the new facility, the Property will total 1,441,834 square feet. After completion and stabilization of the spec building, the Sponsor's business plan includes a refinance in Year 2 of the analysis period (commencing 1/1/2023) and a disposition of the asset in Year 3.

 

Tenant Overview

Detroit Manufacturing Systems (DMS)
Detroit Manufacturing Systems (DMS) is a customer-focused automotive manufacturing, assembly, and sequencing company that is committed to and is constantly striving for manufacturing excellence and perfect quality through meticulous mistake-proofing and a culture of continuous improvement. The firm employs a workforce of 1,200 employees who use state-of-the-art technology to manufacture and assemble injection-molded components such as cockpits for global brands with an unparalleled commitment to quality and efficiency. Last year, the team built more than 1 million parts.

Houghton International, Inc.
Houghton International is a global leader in delivering advanced metalworking fluids and services for the automotive, aerospace, firearms, metals, mining, machinery, offshore, and beverage industries. With headquarters in Valley Forge, PA, Houghton operates research, manufacturing, and office locations in 33 countries around the world delivering fluid solutions that increase profitability, improve product quality, and minimize risks to customers.

Quality Team 1
Quality Team 1 is owned and operated by automotive professionals with extensive OEM and Tier I/II experience. The firm's leadership team has a diverse international business background comprising over 200 years of product development, manufacturing, and quality experience across various industries. The team's strengths allow Quality Team 1 to leverage the vast departmental knowledge to form pillars of strength that are the foundation for the company's overall mission vision and values. This strategic combination of business diversity intertwines political savvy with the energy and drive of lean manufacturing techniques to foster an environment that strives for a relentless pursuit of integrity and continuous improvement.

Lear Corporation
Lear Corporation is an American company that manufactures automotive seating and automotive electrical systems. In 2020, it ranked #166 and in 2019 it ranked #147 on the Fortune 500 list. With over 100 years of experience, Lear has earned a legacy of operational excellence while building its future on innovation. Their talented team is committed to creating products that ensure the comfort, well-being, convenience, and safety of consumers.

Parsec, Inc.
Parsec is the leading provider of contracted terminal management services in intermodal rail transportation. Since starting in 1949, the firm has built an integrated network consisting of the industry's most qualified people, state-of-the-art equipment, and comprehensive resources. Currently, Parsec operates in over 30 locations throughout the U.S. and Canada. According to estimates, its operations are responsible for handling approximately 45% of the nation's TOFC / COFC traffic each year.

Summary

Property Information

Gateway Industrial Center is a 1,441,834-square-foot industrial campus located in the Detroit industrial market, which has experienced unprecedented rent growth while maintaining one of the lowest vacancy rates in the Midwest. The Property is immediately adjacent to I-96, Southfield Freeway, and regional railway and offers tenants easy access to I-94 and I-75, making it a truly institutional asset. The Property includes two (2) existing buildings totaling 1,020,834 square feet that are 100% leased to four tenants with a weighted average rent PSF of $3.81 and a weighted average lease term of 4.3 years as of 1/1/2023. On the northeast corner of the site, a new, 421,000-square-foot manufacturing and assembly building facility is under construction. The new spec building is scheduled to be delivered by December 2022, with a prospective tenant expected to enter into a lease prior to such time and take occupancy by March 2023 at a target rent of $7.50 PSF NNN.

For real-time updates on the progress of the spec building please visit the Property website: https://www.gatewayindustrialcenter.com.

Rent Roll

Tenant Building SF Lease Start Lease Expiration WALT (as of 1/1/2023) Rent/SF Lease Type
Detroit Manufacturing Systems North 484,609 10/1/2020 9/30/2027 4.7 $3.80 NNN
Detroit Manufacturing Systems South 56,900 1/1/2021 9/30/2027 4.7 $3.78 NNN
Detroit Manufacturing Systems South 31,100 5/1/2021 9/30/2027 4.7 $4.96 NNN
Houghton International, Inc. South 117,700 3/1/2022 9/30/2028 5.7 $4.19 NNN
Lear - IMA(1)(2) South 154,925 1/1/2013 3/31/2024 1.3 $3.56 Gross
Quality Team (RGP, Inc.) South 175,600 7/1/2020 5/31/2027 4.4 $3.61 NNN
Parsec, Inc.(3) Railyard 0 12/1/2005 11/30/2026 - $165,240/yr. -
Spec Space Spec 421,000 4/1/2023 3/31/2028 5.3 $7.50 NNN
Total   1,441,834     4.3 $4.89  

(1) Tenant exercised a 12-month lease renewal commencing April 1, 2023 to March 31, 2024, with a $10.15 PSF Gross rent.

(2) "% of Lease Total" consists of only legacy space, new space is expected to be leased to a prospective tenant currently in negotiations.

(3) Parsec pays $165,240 annually for use rights to the railyard located in the southwest of the Property. The tenant's footprint is not included in the total SF

Comparables

Lease Comparables

  General Motors Renaissance Global Logistics Nations Benefits Magna Powertrain Mayco Plastics Penske Logistics Advanced Nutrients Wayfair Inc. Averages Subject
Date Signed Q3 2022 Q2 2022 Q2 2022 Q2 2022 Q2 2022 Q1 2022 Q1 2022 Q4 2021    
Year Built 2022 2022 2022 2022 2022 2022 2022 2022 2022 1968 / 2020 / 2022
Tenant Lease Size 711,360 SF 741,993 SF 50,252 SF 190,000 SF 332,186 SF 159,968 SF 50,252 SF 83,520 SF 289,941 SF 65,712 SF
Building NRSF 711,360 SF 741,993 SF 133,722 SF 359,226 SF 332,186 SF 364,812 SF 133,722 SF 133,722 SF 363,843 SF 1,445,834 SF
Rental Rate $6.75/SF $6.85/SF $8.10/SF $7.43/SF $7.35/SF $7.50/SF $7.28/SF $7.35/SF $7.33/SF $3.74/SF
Lease Type NNN NNN NNN NNN NNN NNN NNN NNN NNN NNN
Property Oakland Logistics Center Wixom Commerce Center A Wixom Commerce Center B Shelby Commerce Center 2 Shelby Commerce Center 3 Livonia West Commerce Center 2 Wixom Commerce Center B Wixom Commerce Center B   12601 Southfield Freeway, Detroit, MI
Distance from Subject 16.9 mi 20.6 mi 20.6 mi 27.8 mi 27.8 mi 11.7 mi 20.6 mi 20.6 mi 20.7 mi  

 

Sales Comparables

  51901 Shelby Pkwy 2430 E Walton Blvd 12600 Oakland Pkwy 18450 15 Mile Rd 25295 Guenther Dr 39000 Amrhein Rd Averages Subject (Going-in)
Date Sold 1/1/2022 1/12/2022 12/30/2021 6/10/2021 6/1/2021 4/4/2019    
Year Built 2019 1984 2016 1964/1988 1997 2017 2007 1968 / 2020 / 2022
NRSF 110,833 SF 125,063 SF 2,061,528 SF 186,443 SF 233,900 SF 1,009,292 SF 621,177 SF 1,445,834 SF
Sale Price $15,300,000 $10,500,000 $267,000,000 $7,600,000 $22,220,500 $86,750,000 $68,228,417 $125,000,000
$/SF $138/SF $84/SF $130/SF $41/SF $95/SF $86/SF $96/SF $86/SF
Cap Rate 5.40% 6.30% 5.60% 5.90% 6.00% 5.33% 5.76% 5.15%
Address 51901 Shelby Pkwy 2430 E Walton Blvd 12600 Oakland Pkwy 18450 15 Mile Rd 25295 Guenther Dr 39000 Amrhein Rd   12601 Southfield Freeway, Detroit, MI
Distance from Subject 30.4 mi 26.2 mi 7.6 mi 22.4 mi 15.9 mi 11.6 mi 19.0 mi  
Location Information

Market Overview

Situated in Southeast Michigan, the Detroit MSA currently has over 4.9 million residents and is the second-largest metropolitan area in the Midwest, trailing only Chicago. Known as the "Motor City", Detroit is home to Stellantis, General Motors, and Ford Motor Company, the three (3) largest automotive manufacturers in the U.S. The city is located directly across the Detroit River from Canada, and its Ambassador Bridge is the busiest international border crossing between the U.S. and Canada.

With four (4) major sports teams and the internationally recognized Detroit Institute of Arts, the city is a vibrant cultural destination that attracts nearly 16 million people a year. The city is also within 50 miles of 28 colleges and universities which educate over 242,000 students, making it one of the most educationally rich metropolitan areas in the U.S. and a premier destination for students. Detroit's downtown business district has blossomed in recent years with developments including the Shinola Hotel and the revitalized Michigan Central Station giving new life to the city's iconic skyline.

Submarket Overview

Detroit's automotive and manufacturing backbone has positioned the Detroit industrial market amongst the strongest in the Central U.S. In recent years, Detroit has been bolstered by an influx of logistics providers, who have expanded their presence to support the surge in e-commerce. These demand trends have helped Detroit's vacancy rate steadily decline over the past decade, as evidenced by a 9.5% decrease in vacancies across the market since 2011. 

The second quarter of 2022, saw continued levels of unrelenting demand for Class A warehouses in the Detroit market. Year-to-date net absorption is just shy of 4.0 million SF, driven by strong leasing activity and new construction deliveries pushing total vacancy below 5.0%. Average asking rents market-wide are currently $6.50 PSF, a 6.2% increase year-over-year, while asking rents in new Class A construction are closer to the $7.50 PSF mark.

Looking ahead, demand is expected to continue to outpace supply in the short term. There is over 4.4 million SF under construction and Hillwood is set to break ground on an additional building at the State Fair site. With over 4.0 million SF in tenant requirements in the market, Detroit should see strong preleasing activity in the construction pipeline through the end of the year.

Cap Stack
Sources & Uses

Total Capitalization

Sources of Funds $ Amount $/SF
Debt(3) $79,600,000 $55
Principals of Sponsor(2) $23,800,400 $17
Sponsor Entities and Related Affiliates(2) $14,599,600 $10
New Investor Equity (Class B Interests)(1) $7,370,000 $5
Total Sources of Funds $125,370,000 $87
     
Uses of Funds $ Amount $/SF
Valuation at Close(4) $125,000,000 $87
Closing Costs(5) $370,000 $0
Total Uses of Funds $125,370,000 $87

 

(1) With a $7M equity raise and $370,000 allocated to closing costs, the total Equity Raise on RM's Platform totals $7.37M.

(2) The equity categorized as "Principals of Sponsor" and "Sponsor Entities and Related Affiliates" hold Class A Interests. Refer to the PPM for additional detail.

(3) The current principal loan balance is $52,560,162 as of November 2022. With the spec building estimated to deliver prior to end of year 2022, all future funding from the existing loan, including funds allocated for TIs and LCs, are expected to be drawn down. The existing loan provides for $2,519,250 reserved for TIs and LCs. For simplicity, the loan is estimated to be fully drawn in Year 1 of the underwriting, and TIs and LCs reserves do not decrease net cash flows.

(4) Per a Broker Opinion of Value ("BOV") dated June 2022, which concluded a total value of $125M for an as-complete Property with expansion space not yet leased. This represents $87/SF, a discount compared to a $95-105/SF replacement cost estimate as of October 2022.

(5) Includes RM Technology Solution Licensing Fee of approximately $236,100.

Debt Assumptions

The in-place debt terms are as follows:

  • Lender: Claros Mortgage Trust, Inc. (affiliate of Mack Real Estate Credit Strategies, LP)
  • Term: 3+1+1
  • LTV: 63.7%
  • Loan Amount(1): $79,600,000
  • Interest Type(2)Floating
  • Spread above LIBOR: 3.70%
  • Interest-Only Period: Full Term
  • Amortization: 30 years
  • Prepayment Terms: 15 months spread maintenance
  • Extension Requirements: 
    • 1st Ext.: completion of spec building, 6.25% DY, 72.5% As-Stab. LTV
    • 2nd Ext.: 7.00% DY, 70% As-Stab. LTV
  • Modeled Refinance: Yes
  • Refinance Information: Proforma assumes proceeds based on year 3 NOI at a 7.5% debt yield
  • Lender: TBD
  • Term: 3 years
  • Estimated Loan Amount: $119,303,359
  • Interest Type: Floating
  • Spread above one-month SOFR: 3.15%
  • Interest-Only Period: 36 months
  • Amortization: 30 years

(1) The current principal loan balance is $52,560,162. With the spec building estimated to deliver prior to end of year 2022, all future funding from the existing Mack loan, including funds allocated for TIs and LCs, is expected to be drawn down.

(2) Rate Cap was purchased on June 3, 2021, with SMBC Capital Markets, Inc., and expires on June 1, 2024. The strike rate is 2.50% based on a 30-day LIBOR.

(3) 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 Sponsors use of debt. 

Distributions

Innovo Development Group intends to make distributions as follows:

  1. To the Investors, pari passu, all excess cash flows to an 8.0% annually compounded rate of return;
  2. Return of Investor Capital;
  3. 20% Promote (80% to Investors / 20% to Promoted/Carried Interest) of excess cash flow to a 15.0% IRR;
  4. 35% Promote (65% to Investors / 35% to Promoted/Carried Interest) of excess cash flow thereafter.

Innovo Development 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 July 2023 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of Innovo Development Group, who may decide to delay distributions for any reason, including maintenance or capital reserves.

Innovo Development Group will receive a promoted/carried interest as indicated above.

Cash Flow Summary(1)
    Year 1 Year 2 Year 3
Effective Gross Revenue   $10,608,826 $12,147,189 $12,588,209
Total Operating Expenses   $3,471,192 $3,517,343 $3,625,162
Net Operating Income   $7,137,633 $8,629,846 $8,963,047
         
Project-Level Cash Flows
  Year 0 Year 1 Year 2 Year 3
Net Cash Flow ($45,400,000) $1,298,160 $39,523,391 $54,124,905
         
Investor-Level Cash Flows(2)
  Year 0 Year 1 Year 2 Year 3
Net Cash Flow ($7,370,000) $200,157 $6,023,915 $6,312,430
         
Investor-Level Cash Flows - Hypothetical $50,000 Investment(2)
  Year 0 Year 1 Year 2 Year 3
Net Cash Flow ($50,000) $1,358 $40,868 $42,825

 

(1) Assumes a Refinance in Year 2. The Target Average Cash-on-Cash over the hold period with a refinance is 9.7%. The Target Average Cash-on-Cash over the hold period without a refinance is 4.3%.

(2) 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.

Fees

Certain fees and compensation will be paid over the life of the transaction; please refer to Innovo Development Group's materials for details. The following fees and compensation will be paid(1)(2):

One-Time Fees:
Type of Fee Amount of Fee Received By Paid From
Technology Solution Licensing Fee(2) 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

Capitalization (at Sponsor’s discretion)

       
Recurring Fees:
Type of Fee Amount of Fee Received By Paid From
Property Management Fee 3% of Effective Gross Income Third-Party Manager Cash Flow
Administration Solution Licensing Fee(2) Flat quarterly licensing fee of $125 per investor serviced by Sponsor through the license and use of  RM Technologies’ Administration Solution RM Technologies, LLC Cash Flow

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

(2) Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.

.

The following offering documents have been prepared and are being delivered by the Sponsor of this investment opportunity, and not by RM Securities, LLC. RM Securities, LLC and its associated persons did not assist in preparing, do not explicitly or implicitly adopt or endorse, and are not otherwise responsible for, the Sponsors offering documents posted below or any content therein.
RM Securities, LLC and its Affiliates Compensation

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, LLC

Sponsor 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 Documents

The 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 Investment

This 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 Assumptions

Sponsor 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 Performance

Any 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 Debt

A 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 Registered

Sponsor’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 Advice

Nothing 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 Risk

Internal 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.

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