We run extensive background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to never allowing a sponsor with a criminal history / any securities related issue to use the platform, we may also turn down sponsors due to poor reference checks even if background and criminal checks come back clear.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent. When an investor makes an investment with unaffiliated sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
Our controls include visiting every property (or a subset of properties if it’s a fund) to confirm the real estate is what and where the real estate is supposed to be.
We have robust quality controls with detailed checklists and a review of third-party reports.
Spirit Bascom Ventures
Spirit Bascom Ventures is a co-sponsorship joint venture between The Bascom Group and Spirit Investment Partners that invests in opportunistic and value-add multifamily throughout the eastern half of the United States.
Spirit Investment Partners (www.spiritinvestors.com) is a Connecticut-based real estate investment and development company, owned and operated by principals David Nachman, Scott Zwilling, and Ian Hafner. The company owns and operates a portfolio of multifamily assets ranging from New England to Florida, the Midwest and California. Spirit has closed over $350 million in transactions since inception, with over $40 million in renovations currently in process.
The Bascom Group (www.bascomgroup.com) is one of the most active and seasoned buyers and operators of apartment communities in the United States. Formed in 1996 by Jerome Fink, Derek Chen, and David Kim, The Bascom Group is a private equity firm that specializes in multifamily, commercial, non-performing loans, and real estate related investments and operating companies. The company has owned over 196 multifamily properties and 52,000 units (as of November 2015). In 2016, Bascom was awarded the prestigious Ernst & Young Entrepreneur Of The Year award.
Prior to co-founding Spirit Investment Partners in 2009, Mr. Nachman was a founding partner and principal of AMS Real Estate Partners (‘AMSREP’), a New York based real estate investment fund formed to invest in both private and publicly traded real estate assets throughout the capital structure, across all asset types and primary US markets. Mr. Nachman was jointly responsible for all of AMS Real Estate Partners I, LP capital raising, investment decisions, and overall Fund management. From 2002 to 2007, Mr. Nachman was a Vice President of Hall Financial Group, a private investment company based in Dallas where he helped launch the company’s Structured Finance Group and had direct responsibility for originating, underwriting, and structuring of value added equity and debt real estate investments across all asset types and multiple geographic regions. In addition, Mr. Nachman maintained asset management responsibility for a $200 million structured loan portfolio as well as the Company’s approximately $1.0 billion real estate investment portfolio, including over 7,000 multifamily units. Mr. Nachman received a B.S. from Cornell University.
Prior to co-founding Spirit Investment Partners in 2009, Mr. Zwilling was previously the Director of Northeast Acquisitions for JPI, a large national multi-family developer, where he covered the territory from New York to Maine. Prior to JPI, he held a similar role as an Acquisitions Manager with Crescent Heights, one of the nation's premier condominium developers. Over the past ten years, Mr. Zwilling has been responsible for the acquisition, development and disposition of over $1.0 billion of property located throughout the Northeast. In addition, he currently serves as a Professor of Real Estate Finance at Columbia University. Prior to JPI and Crescent Heights, Mr. Zwilling was a real estate investment banker at Wells Hill Partners, Ltd., where he participated in numerous deals, including various residential, hotel and office assets. Other experiences include working as a consultant in the real estate groups of Arthur Andersen and Ernst and Young. Mr. Zwilling is a Certified Public Accountant and holds a Bachelor of Science in Business Administration from The Ohio State University, Columbus, OH and a Masters in Real Estate Development from Columbia University, New York, NY.
Prior to joining Spirit Investment Partners in 2011, Mr. Hafner co-founded MHF Real Estate Group a full service real estate investment firm. Prior to forming MHF, Mr. Hafner served as Director of Development and Investments at Equity One, Inc. where he managed investment opportunities throughout the United States. Equity One is a $3.7 billion publicly traded REIT that principally owns, manages, acquires and develops neighborhood and community shopping centers. Mr. Hafner’s thirteen years of experience in the real estate and finance industries includes serving as Acquisitions Director at Westrust, Acquisition Associate for Cornerstone Real Estate Funds, Inc., and President of his own residential development company, Hafner Realty Group, Inc. Mr. Hafner started his career working in fixed income sales and trading for Lehman Brothers, Inc. in New York City where he transacted in Government, Agency, Interest Rate Derivative and Commercial Mortgage Back Securities, successfully underwriting over $1.25 billion in new issues Agency Securities. Mr. Hafner holds a B.S. in City and Regional Planning from Cornell University’s College of Architecture, Art & Planning. Mr. Hafner is a Licensed Real Estate Broker in the State of California, License #01858890, and a Member of California Receivers Forum.
Mr. Fink is a co-founder & Managing Partner of The Bascom Group, LLC. Bascom has completed over $8.0 billion in multi-family and commercial value-added transactions since 1996 including more than 220 multifamily properties and 60,000 units. Bascom’s subsidiaries and joint ventures include the Southern California Industrial Fund, Rushmore Properties, Bascom Portfolio Advisors, Shubin Nadal Associates, Spirit Investors, REDA Bascom Ventures, MHF RM Holdings, and the Realm Group. Bascom’s subsidiaries also include Premier Business Centers, the largest privately held executive suite company in the US.
Prior to founding Bascom, Mr. Fink acted as Senior Acquisitions and Sales Manager from 1991 to 1995 for Pacific Mutual Life Insurance Company. His responsibilities included market assessment, property identification and negotiation, and the acquisition and disposition of real estate investments. Mr. Fink holds a Bachelor of Science in Electrical and Computer Engineering and a Master of Business Administration in Real Estate and Finance from the University of Wisconsin-Madison. He is a member of the Institute of Real Estate Managements (IREM) and Turnaround Management Association (TMA). Mr. Fink is a licensed real estate broker in the state of California, a Certified Commercial Investment Member (CCIM), a Certified Property Manager (CPM), a Certified Mergers & Acquisitions Advisor (CM&AA), and a Certified Turnaround Professional (CTP).
Mr. Kim oversees the development, portfolio management and overall operations for The Bascom Group. His responsibilities include supervising Bascom’s portfolio team in key revenue growth initiatives and expense programs, as well as lender and equity relationships, new ventures, market expansion, and business development. Prior to founding The Bascom Group, Mr. Kim served as a Senior Analyst and Development Associate, from 1989 to 1995, for the Disney Development Company, a wholly owned subsidiary of The Walt Disney Company, where he was responsible for business development and analysis of more than $400 million in retail, office, entertainment, and residential projects.
Mr. Chen oversees corporate finance and strategic development. Mr. Chen is the founder and Chairman of Chenco Holding Company, a firm specializing in real estate and venture capital investment as well as the founder of various subsidiaries investing in and managing assets in Greater China. Mr. Chen serves as the President of The International Leadership Foundation, as a member of the Finance Executive Advisory Board of the College of Business, University of Nevada Las Vegas, as a trustee of the Center for Real Estate at University of Wisconsin, Madison, and as a board member of National Asian Pacific Center on Aging. Mr. Chen studied Chemical Engineering at the National Taiwan University, holds a Bachelor of Science in Business Management, from Eastern Michigan University, and holds a Master of Business Administration degree in Real Estate and a Master of Science degree in Finance from the University of Wisconsin‐Madison.
Spirit Investment Partners Track Record
|Asset Name||Location||Purchase Date||Year Built||# of Units||Purchase Price||Total Capitalization||Price/Unit||CapEx Budget|
|Arlington Village||Fairborn, OH||11-Aug||1965||164||$6,000,000||$6,800,000||$36,585||$462,000|
|Sheffield SONO||South Norwalk, CT||12-Dec||2007||138||$43,250,000||$50,136,333||$313,406||$4,290,908|
|Arlington Flats||Fairborn, OH||13-May||1967||150||$1,100,000||$4,375,000||$7,333||$2,347,377|
|The Henry||Pomona, NY||13-Dec||2001||168||$33,050,000||$38,931,033||$196,726||$3,300,000|
|946-954 Flushing Avenue||Brooklyn, NY||14-Jun||1931||n/a||$6,000,000||$7,000,000|
|The Westcott||Tallahassee, FL||14-Jul||20,002,005||444||$36,979,000||$44,400,912||$83,286||$5,094,600|
|The Adair||Sandy Springs, GA||14-Oct||2001||232||$30,000,000||$34,435,333||$129,310||$3,233,000|
|285 W 12th Street||New York, NY||15-Jun||1841||11||$9,350,000||$11,100,905||$850,000||$634,600|
|Sheridan Edgewater||Chicago, NY||15-Nov||1920||223||$21,600,000||$38,978,613||$96,861||$14,015,000|
|Bellevue West||Nashville, TN||16-Feb||1986||560||$63,250,000||$71,695,085||$112,946||$5,118,896|
|Highlands at the Lake||Nashville, TN||16-Feb||1986||278||$30,250,000||$33,452,371||$108,813||$1,812,776|
|Asset Name||Location||Purchase Date||Year Built||# of Units||Purchase Price||Total Capitalization||Sale Date||Sale Price|
|2146-48 Second Avenue||New York, NY||Aug-06||1900||35||$5,900,000||$6,219,500||May-12||$8,756,000|
|Winchester Square||Murrieta, CA||Oct-12||1987||7 (retail)||$1,400,000||$1,637,129||Dec-13||$2,416,366|
|1818 Clay Avenue||Bronx, NY||May-10||1937||25||$1,550,000||$1,850,000||Jun-14||$2,400,000|
The Bascom Group Track Record
|Sale Yr.||# of Units||Avg. Yrs. Held||Total Cost Basis|
*Sponsor information and track record were provided by the Sponsor and have not been independently verified by RealtyMogul.com
In this transaction, RealtyMogul.com investors will invest in Realty Mogul 61, LLC. Realty Mogul 61, LLC is to subsequently invest in 6807 N. Sheridan Investor, LLC, a limited liability company that is to (through another wholly-owned entity) hold title to the Property.
Spirit Bascom Ventures (the "Sponsor") believes that rents at the Property are currently below market, and plans to implement approximately $9.6 million ($60K per unit) of interior and exterior renovations to achieve rental increases averaging $653/unit, an 82% increase. $19.6K/unit has been budgeted for interior renovations which will create modern open floor plans that include brand new gourmet kitchens, stone countertops, tile backsplashes, stainless steel appliances, dishwashers, refinished hardwood floors, crown molding, contemporary lighting and plumbing fixtures, fully remodeled bathrooms, new HVAC systems, and fully upgraded electrical systems. Exterior and common area renovations of $4.9 million have been budgeted and are to include a fully redesigned and remodeled management and leasing office, a boutique hotel inspired resident lounge, a modern fitness center with a virtual trainer, a rooftop common area with an outdoor kitchen and games, a bike room with a mechanics table, private on-site storage, automated package delivery cabinets, free wifi access in common areas, and a laundry room with mobile device alerts. Common area and exterior improvements are to also include new freight and passenger elevators, roof and façade repairs, and and new signage.
The Sponsor also intends to enhance the overall operations of the Property through improved management and marketing efforts, drawing from their ownership experience of over 54,000 multifamily units to date (see Management page). Upon completion of the business plan, the Sponsor intends on selling the Property within four years.
|Total Cost of Interior:||$3,137,175||$19,607/U|
|Exterior/ Common Area|
|Base Building Utilities||$1,296,390||$8,102/U|
|Total Cost of Exterior:||$4,902,820||$30,643/U|
|Construction Management Fee (5% of renovation cost)||$437,000||$2,731/U|
|Permits, Fees and Legal||$45,000||$281/U|
|Architecture, Engineering and Design||$281,100||$1,757/U|
|Retail Leasing Costs||$50,000||$313/U|
|Contingency (8.5% of hard costs)||$695,905||$4,349/U|
|Total General Costs||$1,539,005||$9,619/U|
|Total Capital Improvement Budget||$9,579,000||$59,869/U|
RealtyMogul.com, along with Spirit Bascom Ventures, a co-sponsorship joint venture between The Bascom Group and Spirit Investment Partners (the "Sponsor"), is providing the opportunity to invest in the acquisition and renovation of a 160-unit multifamily property located in Chicago, IL (the "Property").
The primary objective of this investment is to implement an extensive renovation program, reposition, stabilize, and sell the property as quickly as construction and the market permits, estimated to be in approximately four years.
The Sponsor sees this investment as an opportunity to capitalize on a well-located asset that has been mismanaged by a non-institutional ownership group that was unwilling to invest the resources necessary to remain competitive within the changing market.
Sheridan Court Apartments is a 160-unit mid-rise apartment building with 10,156 square feet of ground-floor retail space. Currently 98.8% occupied, the Property offers a mix of studio (65%) and one-bedroom (35%) units. Originally built as a luxury hotel in the 1920’s, Sheridan Court Apartments features an art deco façade with classic design elements such as exterior brick and limestone ornamentation and high coffered ceilings with carved moldings. With nine stories and a useable rooftop space, approximately 25% of the units have an unobstructed view of Lake Michigan.
The ground-floor retail space is leased to 7-Eleven, Asahi Sushi and Noodle, Internet Superstar, Twisted Tapas, and Oasis Bar. Approximately 60% of the commercial space has prime frontage along the retail corridor of N. Sheridan Road. With an average in-place rent of $13.97 per square foot, the Sponsor believes that the commercial space is currently leased at below market rates which may create an opportunity to increase commercial rents. The Property also leases a rooftop antenna to T-Mobile that currently contributes $21,453 of income annually.
Community amenities at the Property include a 24-hour emergency maintenance staff, key card entry with intercom and CCTV, and a bicycle storage room.
|Unit Type||# of Units||% of Total||Average Size||In-Place Avg. Rent||In-Place Avg Rent/ SF|
|1 Bedroom / 1 Bathroom||56||35%||610||$885||$1.45|
|Property Name||Dist From Subject||Built||Renovated||Total Units||Studio||1 x 1|
|The Morgan at Loyola Station||0.4||2009||-||152||28||$1,584||665||$2.38||69||$1,647||714||$2.31|
|Somerset Place||2.3||n/a||Yes ('14)||160||24||$1,355||462||$2.93||103||$1,442||576||$2.50|
|Pensacola Place||3.1||1981||Yes ('08)||264||56||$1,390||560||$2.48||112||$1,718||840||$2.05|
|The Belmont by Reside||5.0||1924||Yes||317||47||$1,367||384||$3.56||48||$1,769||634||$2.79|
|Comp Set Average||1983||234||$1,504||502||$3.07||$1,727||669||$2.62|
|Subject - Post Renovation||1922||160||104||$1,387||401||$3.46||56||$1,550||610||$2.54|
|Variance from Comp Set||-8%||-25%||11%||-11%||-10%||-3%|
*For Lawrence House, square footages are estimated based on floor plans that have been provided, since actual square footages are not advertised or available. Furthermore, Costar shows an average unit size for this building of 247 SF.
Rent comps were obtained from Axiometrics and the properties' leasing offices
|Property||Miles From Subj.||Year Built||Renovated||Stories||# Of Units||Sale Date||Sale Price||Price / Unit|
|6000 N. Kenmore Ave||1.3||1968||-||4||15||Aug-14||$3,162,000||$210,800|
|5731-5733 N. Winthrop||1.4||1887||-||4||35||Apr-15||$10,500,000||$300,000|
|5073 N. Wolcott Ave||3.0||1929||-||4||17||Mar-14||$2,636,000||$155,059|
|4641 N Paulina||3.3||1930||-||3||48||Feb-15||$5,800,000||$120,833|
|900 W Sunnyside Ave||3.5||1911||-||3||19||Feb-15||$2,707,000||$142,474|
|4739 N Hermitage Ave||3.7||1932||2013||4||38||Jan-14||$5,375,000||$141,447|
|Total / Average||3.0||1931||5||71||$16,850,556||$198,229|
|Subject Total Cost Basis||$31,215,459||$195,097|
Sales comps were obtained from Real Capital Analytics and the Sponsor
The Property is situated less than two blocks from Lake Michigan in the Rogers Park neighborhood of Chicago, approximately eight miles from downtown. In March of 2016, Trulia.com ranked Roger’s Park as the #1 neighborhood in Chicago and #11 in the country on their list of "America's best neighborhoods for living well." Known as one of Chicago’s most diverse neighborhoods (over 80 languages are spoken among the community’s residents), Rogers Park is home to a very active cultural scene. The Greenleaf Art Center, Lifeline Theatre, numerous galleries, and the Mayne Stage Theatre and restaurant are all located near the Property. The Property is a 4-block walk from the Loyola Station stop on the Red Line of the CTA and has a bus stop directly in front of the building providing access both south to downtown Chicago and north to Evanston in approximately 30 minutes.
The Property is in close proximity to Loyola University’s Lake Shore Campus, the primary residential campus for the school. The Lake Shore Campus houses the College of Arts & Sciences (largest of the 10 schools and colleges), the Marcella Niehoff School of Nursing, and several Graduate Schools. Additionally, the School of Education also offers academic courses and programs at the Lake Shore Campus. Loyola University of Chicago is one of the largest Jesuit, Catholic universities in the country with over 150,000 alumni and a total enrollment of 16,437 undergraduate and graduate students (www.luc.edu).
Recent growth of the city's millennial demographic has been a major driver of the Sponsor's decision to acquire the Property. According to a Redfin survey, Chicago was ranked third in the U.S. for cities with the highest percentage of millennials, containing seven of the country’s 14 most densely millennial-populated zip codes. In 2014, Forbes named Chicago as the fourth best city in the U.S. for millennials, behind New York City, Austin, and Washington, D.C.
|Demographics||1 Mile||3 Miles||5 Miles|
|Growth Rate 2010-2016||9.40%||4.92%||1.69%|
|Growth Rate 2016-2021||2.40%||1.60%||0.91%|
|Average Age (2016)||36.3||37.9||37.2|
|Average Household Inc (2016)||57,721||68,253||83,430|
|Median Household Inc (2016)||39,784||46,588||57,644|
Demographic information was obtained from CoStar
Chicago is the third largest city in the U.S. by population with approximately 2,722,400 residents per the U.S. Census Bureau. In 2015, the "Inc. 5000" list ranked Chicago second in the U.S. for fastest-growing small business. According to the Bureau of Labor Statistics, total nonfarm employment in the greater Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area stood at 4,613,800 in November 2015, up 47,000 or 1.0 percent over the year. World Business Chicago, a non-profit economic development organization focused on increasing jobs in Chicago, stated that the city of Chicago added 18,997 jobs in the year ending July 2015, with over 51% of these in the professional and business services sectors, with the transportation, education and health sectors significantly represented.
According to Axiometrics, the Rogers Park submarket has the second highest occupancy in the entire MSA (out of 21 submarkets), with a 3Q2016 average occupancy of 96.2%. Axiometrics predicts a 2.76% average vacancy rate over the next five years for the submarket, along with an average effective annual rent growth of 4.08% over the same period.
|Axiometrics Annual Submarket Trend Report - Rogers Park/ Uptown|
|Avg Rent Growth||1.7%||0.7%||4.0%||1.9%||4.3%||0.2%||3.8%||5.1%||4.4%||3.4%||3.7%|
According to the First Half 2016 CBRE Cap Rate Survey, Chicago was reported as having the lowest cap rates in the Midwestern Region for infill and urban multifamily properties, with cap rates for Class A properties sitting between 4.35 - 4.60% and cap rates for Class B properties between 4.85 - 5.10%.
|Class A||Class B|
|City||Cap Rates for Stablized Properties (%)||Cap Rates for Stablized Properties (%)|
|Boston||4.25 - 4.75||4.50 - 5.00|
|Chicago||4.35 - 4.60||4.85 - 5.10|
|Oakland||4.00 - 4.50||4.25 - 4.50|
|San Francisco||3.50 - 4.00||3.75 - 4.25|
|San Jose||3.75 - 4.25||4.00 - 4.50|
|Northern New Jersey||4.00 - 4.50||4.50 - 5.00|
|New York City||3.75 - 4.50||4.25 - 5.00|
|Stamford||4.50 - 5.00||5.50 - 6.00|
|Inland Empire||4.75 - 5.25||5.00 - 5.50|
|Los Angeles||3.50 - 4.00||4.00 - 4.75|
|Orange County||3.85 - 4.40||4.35 - 5.15|
|Fort Lauderdale||4.25 - 4.75||4.50 - 5.00|
|Miami||4.00 - 4.50||4.25 - 4.75|
|West Palm Beach||4.00 - 4.50||4.25 - 4.75|
|San Diego||3.75 - 4.25||4.25 - 4.75|
|Seattle||4.00 - 4.50||4.75 - 5.25|
|Washington, D.C.||4.25 - 5.00||5.00 - 5.75|
|Sources of Funds|
|Total Sources of Funds||$31,215,459|
|Uses of Funds|
|BD Placement Fee (4.0%)||$46,000|
|Capital Improvement Budget||$9,579,000|
|Legal and Third Parties||$516,000|
|Loan Broker Fee||$255,205|
|Interest Rate Cap||$100,000|
|Total Uses of Funds||$31,215,459|
The projected terms of the debt financing are as follows:
- Lender: First Midwest Bank
- Total Loan Amount: $20,694,000
- Initial Funding: $11,115,000
- Future Advance: $9,579,000
- Term: Three Years
- Extension Options: Two (2) one-year extension options
- Rate: 30-Day LIBOR + 290 bps
- Amortization: Interest only for the first three years, with a 30-year amortization schedule during the two extension periods
- Loan to Purchase Price (Initial Funding): 59%
- Loan to Cost (Total Loan Amount): 66%
- Lender: Hillcrest Finance, LLC
- Total Loan Amount: $5,000,000
- Initial Funding: $5,000,000*
- Term: Three Years
- Extension Options: Two (2) one-year extension options
- Rate: 30 Day LIBOR + 11.25% (7.00% paid current, remainder due at maturity. Excess operating cash flow after reserves is to be applied to paying down accrued interest prior to any distributions to investors)
- Amortization: Interest only for initial term, with a 30-year amortization during extension periods
- Loan to Purchase Price (Senior Loan Initial Funding + Mezzanine Loan): 85%
- Loan to Cost (Senior Loan + Mezzanine Loan): 82%
*$475,000 of loan proceeds will be held by the lender as an interest reserve
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.
6807 N. Sheridan Investor, LLC is to make distributions to Investors (Realty Mogul 61, LLC, other LP investors, and Sponsor, collectively, the "Members") per the priority order below. Realty Mogul 61, LLC is to distribute 100% of its share of excess cash flow (after expenses) to the members of Realty Mogul 61, LLC (the RealtyMogul.com investors). The manager of Realty Mogul 61, LLC is to receive a portion (up to 10%) of the Sponsor's promoted interest.
Order of Distributions to Members (Operating Cash Flow)
- First, to the Members to pay a 10% cumulative non-compounded annual return;
- Second, 70% to the Members pro-rata and 30% to the Sponsor until cumulative distributions to each Member equal a 15% cumulative non-compounded annual return; and
- Thereafter, 60% to the Members pro rata and 40% to the Sponsor.
Order of Distributions to Members (Refinance, and Sales Proceeds)
- First, to the Members to pay a 10% cumulative non-compounded annual return;
- Second, to the Members pro rata until all capital contributions have been returned;
- Third, 70% to the Members pro-rata and 30% to the Sponsor until cumulative distributions to each Member equal a 15% cumulative non-compounded annual return; and
- Thereafter, 60% to the Members pro rata and 40% to the Sponsor.
The first distribution is projected in March of 2021 following the sale of the Property. 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||Year 4|
|Effective Gross Revenue||$1,279,732||$1,890,298||$2,609,200||$3,212,616|
|Total Operating Expenses||$931,429||$973,667||$1,104,940||$1,151,089|
|Net Operating Income||$348,303||$916,632||$1,504,260||$2,061,527|
|Distributions to Realty Mogul 61, LLC Investors||$0||$0||$0||$2,541,346|
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|
|Acquisition Fee||1.0%||Sponsor||Capitalized Equity Contribution||1.0% of Property purchase price plus capital improvement hard costs|
|Broker-Dealer Fee||4.0%||North Capital(1)||Capitalized Equity Contribution||4.0% based on the amount of equity invested by Realty Mogul 61, LLC|
|Construction Management Fee||5.0%||Sponsor||
Capitalized Equity Contribution
|5.0% of total capital improvement hard costs|
|Property Management Fee||2.75%||Third Party Property Manager||Operating Cash Flow||2.75% of Effective Gross Income|
|Asset Management Fee||1.0%||Sponsor||Operating Cash Flow||1.0% of Effective Gross Income|
|Management and Administrative Fee||
|RM Manager, LLC||
1.0% of amount invested in Realty Mogul 61, LLC. RM Manager, LLC is the Manager of Realty Mogul 61, LLC and a wholly-owned subsidiary of Realty Mogul, Co.(2)
(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 61, 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.
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 61, 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-Only Loan Periods
The mortgage loan and mezzanine loan being used to acquire the Property are expected to have interest-only periods during the first 36 months of the loan terms, which means that there will be no reduction in the principal balance during those interest-only periods.
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).
A mezzanine loan is expected to exist on the Property. The mezzanine loan is intended to be subordinate to the senior mortgage loan and senior to any other interests in the Property, including the interests of Sponsor Entity. Therefore the Company, which has an equity interest in the Sponsor entity, shall have its interests to the cash flows from the Property be subordinate to the mezzanine lender. The mezzanine loan will be secured by a pledge of 100% of the Sponsor Entity’s ownership interests in the Property, which will include the Company’s interest in the Sponsor Entity. In the event of a default under the terms of the mezzanine loan the mezzanine lender may foreclose on their interest in the Sponsor Entity to take full ownership and control of the Property, which would result in the Company losing all of its interest in the Sponsor Entity and investors in the Company losing all of their investment in the Company. The mezzanine loan is anticipated to have a floating interest rate tied to 30-Day LIBOR. Interest rates may be significantly affected by economic downturns or general economic conditions beyond the Company’s control and beyond the control of the Sponsors. In particular, loss rates on loans may increase due to factors such as (among other things) local real estate market conditions, prevailing interest rates, the rate of unemployment, the level of consumer confidence, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors. Any change in interest rates may drastically affect the value of your investment in the Company. Financing risk is inherent in the lending industry, and there can be no assurance that the mezzanine lender will complete financing on the rates and terms included in the underwriting being presented in the model for this investment opportunity. Should the terms of the mezzanine loan change materially and adversely, investors will be notified. If the mezzanine loan does not occur as anticipated and the Sponsor needs an extension on the purchase contract, the seller of the Property may not so extend and the transaction may be cancelled. The mezzanine loan is expected to involve a prepayment penalty. The Sponsor Entity may therefore be unable to take advantage of more favorable financing terms that may become available to it during the term of any the mezzanine loan. If the Sponsor Entity seeks alternative mezzanine financing, there can be no assurance that the Sponsor Entity will be able to obtain such financing on a timely or favorable basis.
Co-Terminus Debt Risk
The loans on the Property have a term of three (3) years plus two one (1) year extensions, potentially creating a refinancing risk should market conditions deteriorate over the next five years.
Local Market Conditions May Impact Rental Rates
Local conditions may significantly affect occupancy, rental rates, and the operating performance of a property. Such risks include (but are not limited to): (i) plant closings, industry slowdowns and other facts that affect the local economy; (ii) an oversupply of, or a reduced demand for, similar properties; (iii) a decline in household formation or employment or lack of employment growth, (iv) laws that could inhibit the ability to raise rents or to sell a property; and (v) other economic conditions that might cause an increase in operating expenses, such as increases in property taxes, utilities, compensation of on-site personnel and routine maintenance.
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 6807 N. Sheridan Investor, LLC (including Realty Mogul 61, 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, 6807 N. Sheridan Investor, LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 61, LLC is pursuing a venture capital strategy through its investment in 6807 N. Sheridan Investor, LLC, and the manager of Realty Mogul 61, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.
Manager of Realty Mogul 61, LLC Will Participate in Sponsors' Promote Interest
The manager of Realty Mogul 61, 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 61, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.
No Assurance of Cash Distributions or Liquidation of Interest
Cash flow distributions will only be available to the extent that there is distributable cash flow from rentals and other operations of the Property. Additionally, even if there is available cash flow from the Property’s operations, the manager of Sponsor Entity may, in its discretion, cause Sponsor Entity to retain some or all of such funds for working capital purposes, additional renovation, and other purposes. There can be no assurance as to when or whether there will be any cash distributions from Sponsor Entity to its members (including the Company), and thus no assurance that the Company will be able to make any distributions to owners of Membership Interests.
Risk of Interest Charges for Sponsor Capital Calls
The amount of capital that may be required by 6807 N. Sheridan Investor, LLC from Realty Mogul 61, LLC is unknown, and although 6807 N. Sheridan Investor, 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 61, LLC does not intend to participate in a capital call if one is requested by 6807 N. Sheridan Investor, LLC, and in such event the manager of 6807 N. Sheridan Investor, LLC may accept additional contributions from other members of 6807 N. Sheridan Investor, LLC. Amounts that the manager of 6807 N. Sheridan Investor, LLC advances on behalf of Realty Mogul 61, 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 61, LLC's interest in 6807 N. Sheridan Investor, 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 four (4) year hold period, Realty Mogul 61, 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.
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.
Apartment Complex Competition Risks
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 other apartment units that are available for rent, as well as new and existing apartment residences. 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. Competitive apartment residences in a particular area 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.
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 cost approximately $59,869 per unit and are projected to take around 36 months to complete. 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 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.
The Property currently has a 98.8% 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 maintain that occupancy level. 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 maintaining 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.
The manager of the Sponsor Entity (“Sponsor Manager”) is expected to invest certain equity in the Sponsor Entity. However, the principals of the Sponsor Manager may have raised some of this equity from third parties and the principals of the Sponsor Manager may be permitted to sell a portion of their equity interest at a later time. Thus, either at closing or at a later time, the principals of the Sponsor Manager may not have a significant portion of their own personal funds invested in this transaction.
No Operating Agreement Changes
Although the Company may prefer to have certain provisions inserted in the existing operating agreement of the Sponsor Entity, the operating agreement for the Sponsor Entity is likely to remain unchanged (except to reflect a change in ownership). All potential investors should review the operating agreement of the Sponsor Entity to determine if it is acceptable to them.
Sponsor’s Agreements with Affiliates
The Company’s operating agreement does not prohibit, nor require member consent for, agreements between the Sponsor and its affiliates. This could result in such agreements having non-market terms, which may negatively impact the investment’s performance and the returns to investors.
Sponsor’s Prior Transactions
One of the principal investors in the managing member has sponsored one or more prior transactions that have been foreclosed upon and/or involved loss of principal to investors. Investors should consider the track record of Sponsor and its investors prior to making an investment decision. Past results may not be indicative of future performance.
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 61, 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.