Staff Menu (IO ID#: 223717):
EDIT IO DOCUMENTS
Completed Equity
Multifamily
City Heights & Montage at North Point
Multiple Locations
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By Comunidad Realty Partners
16.3%* TARGET IRR 16.3%-%
11.8%* TARGET AVG CASH ON CASH
1.9* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 years
Estimated First Distribution 12/2017
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Overview
Two well occupied multi-family properties being acquired at an attractive basis located near demand drivers such as major employment centers and retail amenities.
Property at a glance
Years Built City Heights: 1972 Montage: 1982
Number of Units City Heights: 272 Montage: 208 Total: 480
Current Occupancy City Heights: 96% Montage: 92%
Parking Ratio City Heights: 1.84/unit Montage: 1.05/unit
Acquisition Price

$29,515,000

Investment Highlights
Well Located Near Employment Centers and Retail Amenities
Experienced Sponsor That Owns Over 800 Multifamily Units in the Market
Well Occupied With In Place Cash Flow
Post-renovation Rents Compare Favorably to Comps
Repeat Sponsor to RealtyMogul.com
Management
Cumulative Distributions

Comunidad Realty Partners

Comunidad Realty Partners (CRP) is a dynamic real estate investment firm specializing in multifamily apartment communities in densely-populated Hispanic neighborhoods. Core to its investment strategy is creating culturally-relevant, inclusive communities that are tailored to the various ethnicities living at its communities. The company specializes in acquiring and repositioning apartments in infill locations and implementing its proprietary cultural management platform which includes specific cultural upgrades and community-oriented resident services and programs. CRP uses its multifamily lifestyle brand “Buena Vida Community” at its properties to represent its mission of delivering an unparalleled experience of enhanced multifamily living by providing more than just a home but a lifestyle. The firm was founded on a simple principle: enrich lives through enhancing communities while creating value for all stakeholders involved. The firm takes a holistic approach to its investments through symbiotic stakeholder integration of residents, staff, vendors, the greater community, the environment, and investors in order to truly maximize economic and social returns. Its investment philosophy is predicated on fostering innovative lifestyle improvements that align with its residents wants and needs and differentiate the living experience in order to create long-term value for residents and communities in a socially responsible way. Additionally, the firm is focused on “green” environmental improvements that reduce its properties’ energy footprint while reducing utility costs for residents. RM has invested in three prior transactions with the Real Estate Company (Villas de Serenada, Villas del Cabo & Villas de Santa Fe, and Metrocrest Village), all of which have performed well.

http://www.comunidadpartners.com/
  • J. Antonio Marquez
    Managing Partner
  • Santiago Rivera Torres
    Managing Director
J. Antonio Marquez
Managing Partner

J. Antonio Marquez serves as Principal and Managing Partner of Comunidad Realty Partners, a Quez Capital company. He is responsible for strategic planning, capital raising efforts, and sourcing acquisition opportunities for the firm. He is involved in business plan formation on new acquisitions, value-add strategy implementation, and Hispanic marketing efforts. Mr. Marquez has 15 years of experience with his family’s group of companies targeting the Hispanic demographic. He has been involved in over $130 million in commercial/multifamily real estate transactions working with GE Capital, Goldman Sachs, and Principal Real Estate Investors. He has over 10 years of experience managing his family’s commercial portfolio totaling over 1.5 million square feet of office, retail, and industrial space and valued over $110 million. Mr. Marquez graduated cum laude from California Polytechnic – San Luis Obispo and attended the University of Southern California’s Lusk Center for Real Estate where he focused his postgraduate studies in urban real estate with emphasis in affordable/workforce housing through the Stan Ross Program in Real Estate.

Santiago Rivera Torres
Managing Director

Santiago Rivera Torres is a Managing Director at Comunidad Realty Capital. He oversees day to day operations across the portfolio including capital improvement projects, ancillary income services and cultural services & programs implementation. He also is involved in establishing and developing the firm’s commercial partnerships and strategic alliances as well as supporting capital raising efforts and investor relations. Mr. Rivera Torres has worked in the Real Estate and Construction sector in Mexico and U.S. for the last 12 years; his experience ranges from working on family-owned projects on beachfront developments in Baja to residential and low income housing projects in Northern Mexico and retail development in Cabo San Lucas. The Rivera Torres family has been involved in $3 billion USD in housing (400,000 units), hotels & resorts, industrial parks, retail/mall development, and infrastructure development throughout Mexico. In addition, he headed the sales effort for GlobalSolar, a Mexican green technology company specializing in energy-efficient and environmentally sustainable equipment for housing developments throughout Mexico. While he led the sales effort, the company quickly grew to become the largest provider of green technologies to the construction sector in Northern Mexico. Mr. Rivera Torres has a long lineage of real estate experience joined Quez Capital Interests in the early summer of 2012 after learning of their philosophy and Hispanic based multi-family business model.

Track Record

Schedule of Real Estate Owned
Property Name Location Asset Units Cost Basis Occupancy
Villas de la Luz Apartments Austin, TX MF 240 $10,865,000 89%
Villas de la Cascada Apartments San Antonio, TX MF 268 $18,265,000 94%
Villas del Zocalo Phase 1 Dallas, TX MF 206 $5,344,828 96%
Villas del Zocalo Phase 2 Dallas, TX MF 192 $4,810,345 95%
Villas del Zocalo Phase 3 Dallas, TX MF 224 $5,344,828 98%
Villas de Estancia Apartments Irving, TX MF 206 $12,667,724 95%
Villas de Serenada Apartments Euless, TX MF 208 $13,625,000 96%
Villas del Encanto Apartments San Antonio, TX MF 334 $15,580,000 95%
The Vive Apartments Dallas, TX MF 248 $14,836,104 90%
Cantera Creek Ph. 1 Apartments Dallas, TX MF 200 $11,038,800 90%
Cantera Creek Ph. 2 Apartments Dallas, TX MF 272 $15,012,768 90%
The Lantern Apartments Dallas, TX MF 340 $20,943,660 90%
Villas de Santa Fe Apartments San Antonio, TX MF 208 $13,172,676 90%
Azura Apartments Phoenix, AZ MF 387 $24,000,000 93%
Colinas Ranch Apartments Irving, TX MF 160 $10,418,000 98%
Villas del Solamar Dallas, TX MF 212 $5,800,000 96%
Villas del Cabo San Antonio, TX MF 272 $19,613,324 93%
Parkview on Hollybrook Longview, TX MF 209 $31,588,000 80%
Total     4,386 $252,926,057  

 

Full Cycle Transactions
Property Name Location Asset Units Cost Basis Occupancy
Villas de Sendero Apartments  San Antonio, TX MF 209 $8,750,000 97%
Villas de las Colinas Apartments  Austin, TX MF 178 $4,700,000 98%
Villas del Sol Apartments  Austin, TX MF 294 $9,650,000 93%
Villas de Palmas Apartments  Houston, TX MF 659 $22,425,687 98%
Villas de la Colonia Apartments  Carrollton, TX MF 143 $6,055,000 99%
The Current Apartments Austin, TX MF 302 $22,650,000 95%
Total     1,785 $74,230,687  

The above track record information was provided by the Sponsor and has not been independently verified by RealtyMogul.com​.

 

Business Plan

In this transaction, RealtyMogul.com investors will invest in Realty Mogul 73, LLC. Realty Mogul 73, LLC will subsequently invest in Montage Portfolio CRP, LLC, the entity that will indirectly hold title to the Properties.  

Within the first six to eight months of acquiring the Property, the Sponsor intends on implementing a $2.7MM capital improvement plan. Approximately $1.4MM has been budgeted for exterior improvements to address deferred maintenance, structural issues and make improvements to the common areas and amenities to increase the Property's curb appeal. The exterior capital improvements include painting the building exteriors, office/clubhouse renovations, upgrading the landscaping, renovating the pool, dog park, sports court, signage and BBQ/Picnic area. The Sponsor has also budgeted for interior renovations of ~$3,500 per unit, for 51% of the rentable units, which is expected to include new black on black appliances, energy conservation devices, new faux-wood flooring, nickel brushed fixtures, and new lighting package. The Sponsor estimates that upon renovation, the renovated units should be able to achieve rental premiums of approximately 10.6% above the average in-place rents.

Per review of the August 2016 rent roll, recent leasing at the Properties have already achieved rents above or near the targeted post-renovation rents across most unit types. Refer below for a comparison of the underwritten post renovation rents to the highest in-place rents at the Properties by unit type:

City Heights
Unit Type  U/W Post-Renovation Rent   Highest In-Place Rent
1/1 $630 $679
1/1 $740 $755
2/2 $860 $817
2/2 $945 $869
3/2 $1,075 $1,070
Montage at North Point
Unit Type  U/W Post-Renovation Rent   Highest In-Place Rent
1/1 $700 $649
1/1 $750 $809
2/2 $920 $869
2/2 $1,005 $989

It is expected that all interior renovations will be completed in approximately 23 months at City Heights and 19 months at Montage at North Point, with an average of six (6) units being renovated per month. Upon completion of all renovations, the Sponsor intends on selling the Property within five years, although if the renovations are successfully implemented ahead of schedule and market conditions allow for a favorable sale, the hold period could be shorter. However, the hold period is not guaranteed and could also extend beyond the five year expected hold period. 

A summary of the capital expenditures planned at the Properties is as follows:

City Heights - Capital Expenditures Budget
CapEx Item $ Amount Per Unit
Interior Rehab ($3,529 each for 136 units) $480,000 $1,764
Exterior Paint/Carpentry $100,000 $368
Solar Screens $50,000 $184
Office/Clubhouse Renovations $100,000 $368
Drainage Remediation $35,000 $129
Signage $25,000 $92
Pool Upgrades $25,000 $92
Sports Court $15,000 $55
BBQ/Picnic Area $15,000 $55
Parking Lot $35,000 $129
Miscellaneous $30,000 $110
Roof & Foundation Repairs $391,412 $1,439
Subtotal $1,301,412 $4,785
Contingency 10.0% $130,141 $478
Construction Services 10.0% $130,141 $478
Total $1,561,694 $5,742
Montage at North Point - Capital Expenditures Budget
CapEx Item $ Amount Per Unit
Interior Rehab ($3,518 each for 108 units) $380,000 $1,827
Exterior Paint/Carpentry $75,000 $361
Office/Clubhouse Renovations $100,000 $481
Dog Park $5,500 $26
Landscaping $25,000 $120
Signage $25,000 $120
Pool Upgrades $15,000 $72
Sports Court $25,000 $120
BBQ/Picnic Area $17,500 $84
Parking Lot $20,000 $96
Miscellaneous $20,000 $96
Roof & Foundation Repairs $245,898 $1,182
Subtotal $953,898 $4,586
Contingency 10.0% $95,390 $459
Construction Services 10.0% $95,390 $459
Total $1,144,678 $5,503

In addition to implementing a capital improvement plan, the Sponsor plans to leverage its ownership of over 800 units in the market to create management efficiencies to bring down expenses at both Properties. The trailing 12 month expense ratios at both Properties are currently 64% which is high when compared to other similar properties in the market (e.g. the trailing 12 month expense ratio at the Sponsor-owned Villas de Sendero Apartments is 50%). RM has underwritten minimal expense reductions from trailing 12 expenses for purposes of presentation, so any further expense reductions achieved by the Sponsor should be accretive to returns. 

Property

RealtyMogul.com, along with Comunidad Realty Partners (“CRP” or the “Sponsor”), is providing the opportunity to invest in the acquisition and ownership of the City Heights & Montage at North Point Apartments (the "Portfolio" or "Properties"), two garden-style apartment properties totaling 480 units in San Antonio, TX. This will be the Sponsor's third transaction with RealtyMogul.com. 

The primary objective of this investment is to acquire the Property at an attractive basis, implement exterior and interior capital improvements to increase rental rates, tighten operations, and sell the Property within five (5) years.

Property Details

City Heights

City Heights is a 272-unit garden-style apartment complex located at 9400 Fredericksburg Rd., San Antonio, Texas. Built in 1972, the unit mix consists of 124 one (1) bedroom, one (1) bathroom units, 120 two (2) bedroom, two (2) bathroom units, and 28 three (3) bedroom, two (2) bathroom units across 35 buildings. Current occupancy is 96% with in-place rents averaging $739 and ranging from $589 for one bedrooms and $1,007 for three bedrooms.

Amenities at the Property include two swimming pools, a fitness center, limited access gates, two laundry facilities, BBQ grills, a cabana, sports court, renovated clubhouse and mature landscaping. There are 500 parking spaces for a parking ratio of 1.84 spaces/unit. Exteriors at the Property were recently renovated in 2014-2015, but the unit interiors have not undergone a substantial renovation. 

City Heights Unit Mix
Unit Type # of Units Avg SF/Unit In-Place Rent Rent/SF Post-Reno Rent Rent/SF % Variance*
1 Bed, 1 Bath 56 525 $589 $1.12 $630 $1.20 7.0%
1 Bed, 1 Bath 68 705 $652 $0.92 $740 $1.05 13.5%
2 Bed, 2 Bath 80 905 $778 $0.86 $860 $0.95 10.5%
2 Bed, 2 Bath 40 1,032 $833 $0.81 $945 $0.92 13.4%
3 Bed, 2 Bath 28 1,253 $1,007 $0.80 $1,075 $0.86 6.8%
Total 272 831 $739 $0.89 $817 $0.98 10.6%

*Note: This figure is representative of the expected achievable rents for post-renovation units as a percentage of in-place rents.

Montage at North Point

Montage at North Point is a 208-unit garden-style apartment complex located at 3601 Magic Dr., San Antonio, Texas. Built in 1982, the unit mix consists of 136 one (1) bedroom, one (1) bathroom units and 72 two (2) bedroom, two (2) bathroom units across 12 buildings. Current occupancy is 92% with in-place rents averaging $729 and ranging from $611 for one bedrooms two $928 for two bedrooms.

Amenities at the Property include a swimming pool, limited access gates, shaded picnic space, BBQ area, a dog park, modernized leasing center and clubhouse, two laundry facilities, on site maintenance, on site parking, a business center and sports court. There are 219 parking spaces for a parking ratio of 1.05 spaces/unit. Exteriors at the Property were recently renovated in 2014-2015, but the unit interiors have not undergone a substantial renovation. 

Montage at North Point Unit Mix
Unit Type # of Units Avg SF/Unit In-Place Rent Rent/SF Post-Reno Rent Rent/SF % Variance*
1 Bed, 1 Bath 48 500 $611 $1.22 $700 $1.40 14.6%
1 Bed, 1 Bath 88 700 $687 $0.98 $750 $1.07 9.2%
2 Bed, 2 Bath 48 900 $826 $0.91 $920 $1.02 11.4%
2 Bed, 2 Bath 24 1,000 $928 $0.93 $1,005 $1.00 8.3%
Total 208 735 $729 $0.99 $807 $1.10 10.7%

*Note: This figure is representative of the expected achievable rents for post-renovation units as a percentage of in-place rents.

Comparables

City Heights Rental Comparables
  Bent Tree Abode San Antonio Station Ashler Oaks City Summit Total / Averages City Heights
Units 272 104 172 150 269 193 272
Year Built 1975 1977 1979 1972 1979 1976 1972
1x1 Rent $685 $617 $767 $700 $750 $704 $690
1x1 Avg SF 522 512 697 720 678 626 624
1x1 Rent PSF $1.31 $1.21 $1.10 $0.97 $1.11 $1.12 $1.11
2x2 Rent $927 $825 $950 $850 $950 $900 $888
2x2 Avg SF 949 850 844 929 1,078 930 947
2x2 Rent PSF $0.98 $0.97 $1.13 $0.91 $0.88 $0.97 $0.94
3x2 Rents N/A $1,107 N/A $1,050 $1,375 $1,177 $1,075
3x2 Avg SF N/A $1,417 N/A 1,320 1,441 1,393 1,253
3x2 Rent PSF N/A $0.78 N/A $0.80 $0.95 $0.85 $0.86
Distance 1.1 mi 3.0 mi 1.8 mi 0.9 mi 1.2 mi   N/A

 

Montage Rental Comparables
  Park Hill Altitude Morgan Manor Fifth Avenue City Summit Total / Averages Montage
Units 288 226 156 180 269 213 208
Year Built 1984 1977 1963 1982 1979 1977 1982
1x1 Rents $800 $709 $765 $900 $750 $785 $732
1x1 Avg SF 648 700 720 720 678 693 629
1x1 Rents PSF $1.23 $1.01 $1.06 $1.25 $1.11 $1.13 $1.16
2x2 Rent $1,000 $919 $860 $1,000 $950 $946 $948
2x2 Avg SF 948 900 940 925 1,078 958 933
2x2 Rent PSF $1.05 $1.02 $0.91 $1.08 $0.88 $0.99 $1.02
Distance 3.2 mi 0.8 mi 0.9 mi 4.0 mi 2.2 mi   N/A

 

Sales Comparables
  SummerCreek Salado Crossing Avesta Summit City Summit Vizcaya Apartments Total / Averages Subject
Date April-16 May-16 August-15 December-15 July-16   October-16
Units 180 164 284 269 256 231 480
Year Built 1975 1986 1984 1981 1983 1982 1972/1982
Purchase Price $12,500,000 $16,400,000 $18,200,000 $20,600,000 $17,650,000 $17,446,823 $29,515,000
$/Unit $69,444 $100,000 $64,085 $76,580 $68,945 $75,658 $61,490
Cap Rate N/A 5.34% 6.42% 5.63% 5.72% 5.78% 5.49%
Distance 5.5 mi 5.2 mi 4.7 mi 1.7 mi 5.4 mi   N/A
Location

The Properties are located two and a half miles apart, approximately nine miles northwest of the San Antonio central business district and approximately seven miles from the San Antonio International Airport in the Far Northwest submarket of San Antonio. City Heights is located within walking distance of the USAA headquarters and two miles from the South Texas Medical Center, both major local employers. Additionally, the asset is located one mile from Interstate 10 which provides access to downtown San Antonio and the surrounding areas. Montage at North Point is located two and a half miles southeast of City Heights/USAA and three miles from the South Texas Medical Center.  There are numerous retail amenities adjacent to both Properties and both Properties are afforded ease of access due to their proximity to major local thoroughfares and highways. 

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The South Texas Medical Center 

The Property is located within the 900 acre South Texas Medical Center (STMC), the largest concentration of healthcare facilities in San Antonio. The South Texas Medical Center is the city’s second largest employment center and directly serves 38 counties as well as patients from Mexico and Latin America. The STMC is home to the largest for-profit hospital in the country - Methodist Hospital (HCA), the country’s 8th largest hospital - Baptist Hospital (Tenet) and the University of Texas Health Science Center. The STMC contains 13 hospitals with over 4,200 beds, 45 medically related institutions, five higher education institutions and numerous other specialty and research institutions. The San Antonio Medical Foundation controls about 280 acres within the STMC, representing the vast majority of the remaining undeveloped medical center land. The Foundation’s multi-generational plan should facilitate the development of institutional medical facilities that support education and research. 

Market Overview 

Per Axiometrics, effective rent increased 1.3% from $904 in 1Q16 to $916 in 2Q16, which resulted in an annual growth rate of 1.9%. Annual effective rent growth is forecast to be 2.3% in 2017, and average 3.3% from 2018 to 2020. Annual effective rent growth has averaged 1.7% since 3Q96. The market's annual rent growth rate was below the national average of 3.7%. Out of the 120 markets ranked by Axiometrics nationally, San Antonio-New Braunfels, TX Metro Area was 92nd for quarterly effective rent growth, and 97th for annual effective rent growth for 2Q16. The market's occupancy rate increased from 93.3% in 1Q16 to 94.0% in 2Q16, and was up from 93.9% a year ago. The market's occupancy rate was below the national average of 95.2% in 2Q16. For the forecast period, the market's occupancy rate is expected to be 93.4% in 2017, and average 94.3% from 2018 to 2020. The market's occupancy rate has averaged 93.2% since 3Q95.​

Submarket Overview

Per Axiometrics, effective rent increased 1.4% from $845 in 1Q16 to $857 in 2Q16. The submarket's annual rent growth rate of 2.3% was above the market average of 1.9%. Out of the 16 submarkets in the market, the Far Northwest submarket ranked 7th for quarterly effective rent growth and 8th for annual effective rent growth for 2Q16. Annual effective rent growth is forecast to be 2.7% in 2016, and average 2.1% through 2016 to 2018. The annual effective rent growth has averaged 1.9% per year since 3Q96. The submarket's occupancy rate increased from 93.4% in 1Q16 to 93.7% in 2Q16, which was the same rate as a year ago. The submarket's occupancy rate was below the market average of 94.0% in 2Q16. For the forecast period, the submarket's occupancy rate is expected to increase to 93.8% in 2016 and average 93.9% from 2016 to 2018. The submarket's occupancy rate has averaged 94.8% since 3Q96

​Market and Submarket information provided by Axiometrics. 

Demographic Information

 
Distance from Properties 1 Mile 3 Miles 5 Miles
Population 24,378 141,868 375,855
Projected Growth (2016-2021) 9.24% 9.03% 8.72%
Average HH Size  2.1 2.2 2.4
Median HH Income  $38,286 $44,621 $45,128
Median Home Value $124,181 $154,878 $148,485
Owner Occupied Households 1,361 23,175 69,358
Renter Occupied Households 9,981 41,204 84,465

Demographic information above was obtained from CoStar.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $25,786,000
Equity $7,024,000
Total Sources of Funds $32,810,000
Uses of Funds Cost
Purchase Price $29,515,000
Sponsor Acquisition Fee $440,000
North Capital Broker Dealer Fee $60,000
CapEx* $2,706,372
Closing Costs and Fees $634,850
Working Capital $203,778
Roof & Foundation Repair Credit ($750,000)
Total Uses of Funds $32,810,000

* - Note that the construction budget for the CapEx Reserve is inclusive of a 10% contingency

Debt Assumptions

The projected terms of the debt financing are as follows:

  • Lender: Prudential
  • Loan Type: Agency (Fannie Mae - DUS)
  • Proceeds: $25,786,000
  • Term: 12 years
  • Rate: 10-Year Treasury Rate plus 214 basis point spread, 3.97% (as of November 1, 2016)
  • Amortization: 30 years
  • Interest Only Period: 48 months
  • Prepayment Fee: 11.5 years yield maintenance, then 1.0% for the three month period prior to maturity
  • 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.

Distributions

Montage Portfolio CRP, LLC intends to make distributions to investors (Realty Mogul 73, LLC - 21.3%, Sponsor co-invest - 11.4%, Other LP Investors - 67.3%. collectively, the "Members")  as follows:

  1. To the Members, pari passu, all excess cash flows and appreciation to an 8.0% IRR to the Members (which will include return of principal),
  2. 70.0% / 30.0% (70.0% to Members / 30.0% to the Sponsor) of excess cash flows and appreciation to a 16.0% IRR to Members. 
  3. 60.0% / 40.0% (60.0% to Members / 40.0% to the Sponsor) 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).

Realty Mogul 73, LLC will distribute 100% of its share of excess cash flow (after expenses and fees) to the members of Realty Mogul 73, LLC (the RealtyMogul.com investors). 

Distributions are expected to start in December 2017 and are expected 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. 

Cash Flow Expectations
  2016 2017 2018 2019 2020 2021
Effective Gross Revenue $715,111 $4,541,151 $4,793,271 $4,945,836 $5,111,274 $5,270,421
Total Operating Expenses $429,664 $2,628,857 $2,696,522 $2,761,644 $2,828,757 $2,897,131
Net Operating Income $285,447 $1,912,294 $2,096,749 $2,184,191 $2,282,517 $2,373,290
Annual Debt Service $170,402 $1,022,415 $1,022,415 $1,022,415 $1,097,186 $1,471,039
Distributions to Realty Mogul 73, LLC Investors $0 $109,360 $237,480 $214,719 $219,262 $2,114,218
Fees

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 $440,000 Sponsor Capitalized Equity Contribution 1.5% of the Protfolio purchase price
Broker-Dealer Fee $60,000 North Capital (1) Capitalized Equity Contribution 4.0% of the amount of equity raised by RealtyMogul.com
Recurring Fees
Construction Management Fee 10.0% of Total Costs Sponsor Capital Expenditure Budget  
Asset Management Fee 1.5% of Effective Gross Income Sponsor Operating Cash Flow  
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 73, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of Realty Mogul 73, 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 73, 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.

Disclaimers
Disclaimers

Apartment Complex - Competition

Competition in the Properties' local market area is significant and may affect the Properties' occupancy levels, rental rates and operating expenses. The Properties 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 Properties could intensify. If the Properties are 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 Portfolio, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.


Lease-up Risks

The Properties currently have occupancy levels of 96% (City Heights) and 92% (Montage), 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 units at the Properties, 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 Properties in order to be able to demand the significantly higher rents it is projecting to receive at the Properties following such renovations. Such renovations are expected to include ~$3,500/unit in interior upgrades, in addition to approximately $1.4MM 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 Properties. Any delays or adverse effects of such renovation work could adversely affect the Properties' 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 10.6% 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 Properties, there can be no assurance that such increased rental rates will be achieved. Failure to realize such increased rental rates could adversely affect the Properties' financial results or business operations and thus the value of the Company’s investment.


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.


Interest-Only Loan Period

The loans being used to acquire the Property are expected to have an interest-only period during the first 48 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.


Texas Tornado Risk

San Antonio, Texas lies in the southern 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.


Minority Interest

The Company plans to invest in Montage Portfolio CRP, LLC (the “Sponsor Entity”), whose primary purpose will be to acquire, own, encumber, improve, operate, lease, sell and/or transfer the Property. Although the Company may have certain voting rights regarding certain decisions for the Sponsor Entity, the Company will have a minority interest in the Sponsor Entity resulting in the Company having a lack of control of the underlying investment.


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 73, 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 Properties 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 Properties, 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 Montage Portfolio​ CRP, LLC (including Realty Mogul 73, 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, Montage Portfolio​ CRP, LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 73, LLC is pursuing a venture capital strategy through its investment in Montage Portfolio CRP​, LLC,  and the manager of Realty Mogul 73, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.


Uncertain Distributions

The Sponsor cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 73, 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 quarterly.


Risk of Dilution for Sponsor Capital Calls

The amount of capital that may be required by Sponsor Entity from the Company is unknown, and although Sponsor Entity does not require that its members contribute additional capital to it, Sponsor Entity may from time to time request additional funds in the form of additional capital. The Company may decide to participate in the capital call, but currently the Company does not believe it is likely that the Company will participate in a capital call if one is requested by Sponsor Entity, and in such event the manager of Sponsor Entity may accept additional contributions from other members of Sponsor Entity, or admit new members contributing new cash to Sponsor Entity. If the Company does not participate in any such capital call, the manager of Sponsor Entity may accept additional contributions from other members of Sponsor Entity or admit new members contributing new cash to Sponsor Entity. Amounts contributed by new members in Sponsor Entity shall be treated as the sale of additional interests to such participating members. Such contributed amounts shall be treated as additional capital, and the Company’s Sponsor Entity Membership Interest will suffer a proportionate amount of dilution. Alternatively, if the Company does participate in the Sponsor Entity capital call, and a Member does not participate in a capital call by the Company, such Member would likely suffer dilution of its membership interest percentage in the Company.


Uncertain Exit Timing

Although it is anticipated that the Property will be sold at the end of the expected five (5) year hold period, Realty Mogul 73, 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 Properties 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 73, 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.

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