
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/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 |
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.
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:
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 |
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:
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 |
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.
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.
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.
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.
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.
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 |
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 |
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 |
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.

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.
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.
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:
- 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),
- 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.
- 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.
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 |
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.
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.