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Funded
Multifamily
Village Fair Apartments
Bremerton, WA
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By New Standard Equities, Inc.
14.3%* TARGET IRR 14.3%-%
8.8%* TARGET AVG CASH ON CASH
1.78* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 years
Estimated First Distribution 6/2017
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Project Summary
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Explore this Project
Overview
Multi-family property being acquired by a repeat Realty Mogul Sponsor in the Pacific Northwest.
Property At A Glance
Year Built 1984
Number of Units 120
Occupancy 90%
Parking Ratio 1.6 spaces per unit
Acquisition Price

$13,100,000

Investment Highlights
Repeat RealtyMogul.com Sponsor Experienced in the Bremerton Market and with Military Housing
In-Place Cash Flow with Recent Leasing of Unrenovated Units Achieving 99% of Expected Post-Renovation Rents
Well Located Near Demand Drivers with Diverse Tenant Roster
Management
Cumulative Distributions

New Standard Equities, Inc.

NSE was formed in 2010 in an effort to capitalize on the extraordinary dislocation in the post‐financial crisis real estate investment market. With significant experience in buying and operating large, institutional-quality multifamily properties throughout the Western U.S., the company is deploying private and institutional capital to purchase and operate apartment assets that offer steady, long-term cash flow to its investors. New Standard Equities’ full-service real estate platform is actively engaged in property management, asset management, construction management and project consultation.

NSE has successfully operated multifamily assets in major markets throughout the Western U.S. There are inherent risks in the task of operating apartment assets, but the firm’s strict philosophy is to minimize those risks by targeting markets it knows and understands. In-fill, supply-constrained markets that offer long-term job growth potential are among the most important dynamics.

http://www.newstandardequities.com/
  • Edward Ring – Founder & CEO
  • Cyrus Blourtchi – Executive Vice President & Chief Financial Officer
  • Lisa Moore - Executive Vice President of Operations
  • Todd Weiss – Managing Director of Construction Management
  • Pauline Imamura – Director of Training and Compliance
Edward Ring – Founder & CEO

With over 24 years of real estate and financial consulting experience, Ring’s expertise includes providing strategic leadership for all aspects of the investment process, including sourcing new projects, business plan development, optimizing capital structures and actively overseeing each project’s execution phase from soup to nuts.

Previously, Ring was chief operating officer at Kennedy Wilson Multifamily Management Group, where he was responsible for the acquisition and operation of approximately 13,000 apartment units. At the time of his departure, roughly half of those acquisitions had been sold for a project level profit of over $100 million and had achieved a 1.80 multiple on equity, a 28.5 percent IRR, and an ROI of 55.4 percent. Ring also forged key partnerships with institutional investors, such as The Dubai Investment Group, General Electric, Mitsubishi Corporation, General Motors, AIG, RREEF and Wachovia Securities, among others.

In addition to his background as a real estate professional, Ring is an Emeritus member of the Writers Guild of America (WGA). He wrote for a variety of television comedies for NBC, UPN, Saban Entertainment, VH1 and HBO, where he earned a Cable ACE nomination for his work on “The Larry Sanders Show.”

A graduate of U.C. Berkeley in 1988, Ring went on to earn his MFA from New York University in 1992 and his MBA from UCLA Anderson in 2003. Ring served on the Executive Committee of the Anderson School’s Alumni Association and currently serves on The Board of Governors at Cedars Sinai Medical Center in Los Angeles. He is also a member of Mensa.

Cyrus Blourtchi – Executive Vice President & Chief Financial Officer

Cyrus Blourtchi brings 26 years of financial accounting and senior management experience to the company, including 19 years in the multifamily industry. Prior to joining New Standard Equities, Cyrus served as Director of Accounting/Controller with Kennedy Wilson Multifamily for seven years.  Prior to that, Cyrus held accounting positions at Welk Real Estate and RCMI in Southern California.

Mr. Blourtchi is responsible for maintaining all aspects of the accounting records for New Standard Equities' assets and management assignments.  He is highly trained in GAAP accounting procedures and professional protocols, including a strict adherence to Sarbanes-Oxley regulatory compliance standards for public investors.​  Cyrus also provided financial accounting services for organizations outside the real estate sector, including spending two years as a finance officer for the United Nations. ​

Lisa Moore - Executive Vice President of Operations

Lisa brings over 25 years of experience in multifamily property management on the West Coast. Prior to joining NSE, she was a regional manager for the Laramar Group, JB Partners, Pinnacle, Legacy Partners and AIMCO. Ms. Moore is an industry-recognized leader in the property management space and has a first-class reputation for integrity and responsiveness to rapidly changing market dynamics. Ms. Moore is responsible for all aspects of property operations, including business plan implementation, asset management and investor reporting.

Todd Weiss – Managing Director of Construction Management

Todd Weiss joined New Standard Equities in 2013 and is primarily responsible for NSE's acquisitions, asset management and construction management activities. In addition, he is involved with sourcing new debt and equity for all of NSE’s acquisitions. 

Prior to joining New Standard Equities, Todd was an independent commodities trader at The Chicago Board of Trade where he specialized in agricultural commodities. Todd received his BA from The University of Arizona’s College of Agriculture in 2000.  Todd co-chaired the 2007 Maccabi USA golf team to successful gold medal victories in the youth, open and senior divisions.

Pauline Imamura – Director of Training and Compliance

Pauline Imamura has served NSE since its inception, following 15 years of site and multi-site management for Fore Properties, Kennedy Wilson Multifamily, and FPI Management.  She has supervised over $3,000,000 in unit-level property improvements, spearheaded successful marketing and repositioning programs in properties throughout California, and produced same-store income growth of above 6% on stabilized assets, and nearly 20% on value-add repositioning projects.

At New Standard Equities, Ms. Imamura is responsible for all site-level operations, including enforcing standard operating procedures, preparing week and monthly operational reports, conducting quarterly asset inspections and conducting regular safety training seminars to ensure properties are compliant with company policies, Fair Housing Standards and OSHA regulations.​

Track Record

The below track record for Edward Ring includes all the apartment acquisitions completed by New Standard Equities, as well as those Mr. Ring was responsible for while at Kennedy Wilson Multifamily.

Address Location Date Acquired # of Units Purchase Price
New Standard Equities (2011 - Present)      
Fountain at Curson Hollywood, CA Jun-11 20 $4,000,000
Crossings at the Bay Long Beach, CA Nov-11 235 $34,500,000
Villa Olivos Canoga Park, CA Aug-12 53 $4,950,000
Parke Pasadena Pasadena, CA Aug-13 22 $3,400,000
Asana at North Park San Diego, CA Oct-14 132 $18,470,000
Anchor Pointe Oak Harbor, WA Aug-15 107 $7,500,000
Rancho Azul San Diego, CA Aug-15 74 $14,000,000
SeaGlass Village Bremerton, WA Mar-16 182 $13,000,000
Venue Renton, WA Jun-16 284 $41,500,000
Subtotal     1,109 $141,320,000
         
Kennedy Wilson Multifamily (2002 - 20008)      
Woodstone Lompoc, CA Mar-05 204 $20,600,000
Rutherford Townhomes Napa, CA Aug-05 66 $7,400,000
College Square Davis, CA Aug-05 240 $24,000,000
Bayside Pinole, CA Aug-05 148 $19,600,000
Villas at La Mesa La Mesa, CA Dec-05 86 $11,100,000
Arbor Creek Beaverton, OR Mar-06 440 $32,800,000
The Courtyards Norwalk, CA Mar-06 153 $18,200,000
Bay Village Vallejo, CA Mar-06 260 $32,000,000
Shorepark at Riverlake Sacramento, CA Mar-06 393 $51,250,000
Mariposa Anaheim, CA Jun-06 286 $46,000,000
Hidden Creek Martinez, CA Sep-06 168 $21,500,000
Cascade Ridge Federal Way, WA Nov-06 518 $58,000,000
The Enclave Paramount, CA Dec-06 306 $51,500,000
Chadwick Los Angeles, CA Feb-07 687 $120,000,000
The Reserve Federal Way, WA Mar-07 401 $46,500,000
The Mill at Mill Creek Mill Creek, WA Jul-07 516 $80,000,000
The Grove San Jose, CA Jul-07 331 $45,750,000
James Street Crossing Kent, WA Feb-08 300 $35,720,000
Indigo Springs Kent, WA Jun-08 278 $36,000,000
Avalon at Redmond Redmond, WA Jun-08 400 $81,250,000
The Lexington Montclair, CA Aug-08 165 $29,250,000
Saybrook Pointe San Jose, CA Sep-08 324 $84,000,000
Plaza del Sol Santa Ana, CA Jan-02 196 $16,675,000
Windwood West Covina, CA Dec-02 116 $11,250,000
Rancho Solana Oxnard, CA Mar-03 168 $22,750,000
La Serena Santa Ana, CA Dec-02 188 $18,000,000
Lakewood Manor Lakewood, CA Aug-04 661 $68,000,000
Andorra & Andalucia Indio & Palm Springs, CA Sep-03 362 $26,200,000
Arrowhead Apartments Stanton, CA Jan-04 168 $19,750,000
Waterbrook Rancho Cucamonga, CA May-04 624 $66,600,000
The Crest Grand Terrace, CA Mar-04 228 $19,305,000
Verona Woods West Covina, CA Mar-04 196 $22,000,000
Somerset on Garfield Montebello, CA Dec-04 256 $31,750,000
Country Oaks Santa Maria, CA May-05 208 $22,800,000
Windscape Village Lompoc, CA Sep-03 328 $27,000,000
Creekside San Jose, CA Nov-05 200 $26,600,000
Westwood Portfolio Westwood Village, CA Mar-05 153 $32,100,000
Summer House Alameda, CA Sep-05 615 $86,750,000
Subtotal     11,337 $1,469,950,000
         
Total     12,446 $1,611,270,000

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

Business Plan

In this transaction, RealtyMogul.com investors are to invest in Realty Mogul 75, LLC. Realty Mogul 75, LLC is to subsequently invest in Fairgrounds Investors, LLC, a limited liability company that will (through another wholly-owned entity) hold title to the Property.  

The Sponsor intends on implementing a $665,000 exterior capital improvement plan to enhance the Property's curb appeal and improve the common areas. The exterior capital improvements include new signage, landscaping, hardscape, lighting and facade treatments, and the remodel and expansion of the current clubhouse and fitness center. The Sponsor has also capitalized $1,020,000, or $8,500/unit, for interior unit renovations for all 120 units. The Sponsor plans to repaint the interiors, lay vinyl plank flooring, and upgrade the cabinets, countertops, appliances and bathroom lighting. 

Per review of the October 2016 rent roll, recent leasing for unrenovated units at the Property has already achieved rents that are on average 99% of the expected rents post-renovation for each of the unit types. Refer below for a comparison of the underwritten post-renovation rents to the highest in-place rents at the Property by unit type:

Post-Renovation vs. Highest In-Place
Unit Type # of Units Post-Renovation Rent   Highest In-Place Rent % of Post-Renovation Rent
1/1 26 $1,075 $1,025 95%
2/1 30 $1,220 $1,199 98%
2/2 36 $1,290 $1,249 97%
3/2 28 $1,550 $1,599 103%
Total 120 $1,287 $1,270 99%

The Sponsor intends to begin completing the exterior capital improvements immediately upon acquiring the Property, followed by the interior renovation work starting in month three with projections assuming four units being renovated per month over a 30-month period. Upon completion of all renovations, the Sponsor plans on selling the Property. While the Sponsor targets selling the Property in five years, 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 expectation as well.

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

Rehab Costs
CapEx Item $ Amount Per Unit
Interior Rehab ($8,500 each for 120 units) $1,020,000 $8,500
General Site Woodwork $375,000 $3,125
Exterior Paint & Architectural Elements $150,000 $1,250
Clubhouse/Office & Finishes $65,000 $542
Sign Package & Capitalized Marketing $34,000 $283
Wood Rot/Balcony Repair $20,000 $167
Pool Re-plaster $10,000 $83
Concrete Repair $5,000 $42
Railroad Tie Retaining Wall $5,000 $42
ADA Compliance $1,000 $8
Total Rehab Costs $1,685,000 $14,041
Construction Management Fee (9%) $151,650 $1,264
Total Capital Expenditure Reserve $1,836,650 $15,305

Kitsap Naval Base - Basic Allowance for Housing ("BAH")

The asset's tenant roster is diverse with the following primary industry concentrations: 47% retail/services/sales; 19% military/law enforcement; 12% professional; and 7% manufacturing/construction. However, given the naval base's importance to the local economy, RealtyMogul.com has performed a comparative analysis of the Kitsap Naval Base's basic allowance for housing with the expected post-renovation rents at the Property. 

The below table depicts Kitsap Naval Base's 2016 basic allowance for housing (BAH). With E1 to E4 ranked military personnel typically living on-base, those personnel ranked E5 or higher represent the majority of the Property's renter pool who serve in the military. As shown in the table, all ranks from E5 and up without dependents receive a BAH greater than the expected rents post-renovation for all one and two bedroom units. For the three bedrooms, all military personnel ranked E5 or higher with dependents receive a BAH greater than the expected rents post-renovation

2016 BAH Rates
Rank E1 - E4 E5 E6 E7 E8 E9
With Dependents $1,413 $1,551 $1,617 $1,686 $1,758 $1,869
Without Dependents $1,137 $1,227 $1,293 $1,422 $1,566 $1,584
Property

RealtyMogul.com, along with New Standard Equities (“NSE” or the “Sponsor”), is providing the opportunity to invest in the acquisition and ownership of the Village Fair Apartments (the "Property"), a 120 unit, garden-style apartment complex located in Bremerton, WA. This will be the Sponsor's second transaction with RealtyMogul.com.

The primary objective of this investment is to acquire the Property at an attractive going-in yield and basis, implement exterior and interior capital improvements, increase rental rates, and sell the Property within five years.

Property Details

Built in 1984, the Property is a Class B, 120-unit garden-style apartment complex that is currently 90% leased to a diverse tenant roster. The asset has a balanced mix of one, two and three bedroom units that allow it to cater to a variety of tenants including singles, couples and families. Unit interiors include both vinyl and carpeted floors, dishwashers and patios or balconies. All three (3) bedroom units at the Property have full-size washer/dryers. Each unit is individually metered for electricity, with water and sewer reimbursed by tenants based on occupancy using a ratio utility billing system ("RUBS").

Unit Mix
Unit Type # of Units Avg SF/Unit In-Place Rent Rent/SF Post-Renovation Rent Rent/SF
1 Bed, 1 Bath 26 623 $848 $1.36 $1,075 $1.73
2 Bed, 1 Bath 30 800 $988 $1.24 $1,220 $1.53
2 Bed, 2 Bath 36 913 $1,060 $1.16 $1,290 $1.41
3 Bed, 2 Bath 28 1,100 $1,289 $1.17 $1,550 $1.41
Total 120 866 $1,050 $1.21 $1,287 $1.49

The Property is situated on 9.4 acres, providing for low density of only 12.8 units per acre. Property amenities include a pool, clubhouse, fitness center and multiple laundry rooms. The Property's 197 parking spaces equates to 1.6 spaces per unit. The Property consists of wood-frame construction with wood siding and concrete slab foundation. Roofs are pitched composition shingle with copper plumbing, copper electrical and cadet wall heaters. 

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Comparables

Tracyton-Meadowdale/Bremerton Leasing Comps
Property Subject (Post-Renovation) Olympic Village The Vineyards Weatherstone Total / Averages
# of Units 120 340 150 144 211
Occupancy 95% 97% 93% 97% 96%
Year Built 1984 1995 1988 1986 1990
1 Bedroom 1 Bathroom         
# of Units 26 48 88 26 54
Average SF (1/1) 623 698 612 576 632
Rental Rate (1/1) $1,075 $1,180 $1,056 $979 $1,080
Average $/SF (1/1) $1.73 $1.69 $1.73 $1.70 $1.71
2 Bedroom 1 Bathroom        
# of Units 30 72 22 50 48
Average SF (2/1) 800 890 898 893 892
Rental Rate (2/1) $1,220 $1,303 $1,211 $1,179 $1,246
Average $/SF (2/1) $1.53 $1.46 $1.35 $1.32 $1.40
2 Bedroom 2 Bathroom        
# of Units 36 87 22 20 43
Average SF (2/2) 913 980 949 1,054 986
Rental Rate (2/2) $1,290 $1,380 $1,301 $1,279 $1,351
Average $/SF (2/2) $1.41 $1.41 $1.37 $1.21 $1.37
3 Bedroom 2 Bathroom        
# of Units 28 65 18 28 37
Average SF (3/2) 1,100 1,200 1,138 1,193 1,188
Rental Rate (3/2) $1,550 $1,565 $1,540 $1,529 $1,552
Average $/SF (3/2) $1.41 $1.30 $1.35 $1.28 $1.31
Quality - Superior Inferior Inferior -
Distance from Subject (miles) - 0.6 0.3 0.3 0.4
Silverdale Leasing Comps
Property Subject (Post-Renovation) Reserve at Bucklin Hill The Wellington The Trillium Total / Averages
# of Units 120 154 240 225 206
Occupancy 95% 97% 93% 98% 96%
Year Built 1984 1988 1988 1989 1988
1 Bedroom 1 Bathroom         
# of Units 26 60 58 24 47
Average SF (1/1) 623 612 736 596 660
Rental Rate (1/1) $1,075 $1,201 $1,250 $1,244 $1,228
Average $/SF (1/1) $1.73 $1.96 $1.70 $2.09 $1.86
2 Bedroom 1 Bathroom        
# of Units 30 48 8 45 34
Average SF (2/1) 800 850 976 776 827
Rental Rate (2/1) $1,220 $1,363 $1,481 $1,334 $1,359
Average $/SF (2/1) $1.53 $1.60 $1.52 $1.72 $1.64
2 Bedroom 2 Bathroom        
# of Units 36 22 68 135 75
Average SF (2/2) 913 920 1,017 914 946
Rental Rate (2/2) $1,290 $1,433 $1,599 $1,410 $1,469
Average $/SF (2/2) $1.41 $1.56 $1.57 $1.54 $1.55
3 Bedroom 2 Bathroom        
# of Units 28 24 40 21 28
Average SF (3/2) 1,100 1,160 1,211 1,028 1,151
Rental Rate (3/2) $1,550 $1,640 $1,660 $1,629 $1,647
Average $/SF (3/2) $1.41 $1.41 $1.37 $1.58 $1.43
Quality - Superior Superior Superior -
Distance from Subject (miles) - 2.4 3.8 4.2 3.5
Sale Comps
Property Subject Silverdale Ridge Santa Fe Ridge Treetops The Wellington Ridgetop Total / Averages
Sale Date - May-16 Jan-16 Dec-15 Sep-15 Sep-15 -
# of Units 120 118 240 270 240 221 218
Year Built 1984 2009 1993 1992 1988 1988 1994
Purchase Price $13,100,000 $20,100,000 $37,380,000 $40,250,000 $38,130,000 $31,500,000 $33,472,000
$/Unit $109,167 $170,339 $155,750 $149,074 $158,875 $142,534 $153,682
Cap Rate 6.58% - 5.90% 5.80% 6.00% 6.00% 5.93%
Quality - Superior Superior Superior Superior Superior -
Distance from Subject (miles) - 3.6 3.6 4.0 3.8 3.4 3.7

Sale and Leasing Comp information provided by Axiometrics and Real Capital Analytics.

Location

The Property is located in Bremerton, Washington between downtown Silverdale (3.5 miles) and downtown Bremerton (5.6 miles). The subject is located just west of Highway 303 which is the primary thoroughfare and commercial corridor in the area. There is a Walmart located approximately 1.5 miles east in Meadowdale, and both Silverdale and Bremerton contain numerous retail amenities. Bremerton is approximately an hour and fifteen minutes away from Downtown Seattle by either car or ferry, with a higher speed ferry option expected to be available in the upcoming year which would cut the commute time in half. Additional local demand and employment drivers include the Naval Base Kitsap (4.9 miles), Olympic College (4.1 miles), and the Kitsap Mall (2.7 miles). 

Bremerton is the largest city on Kitsap Peninsula, which has a total population of 254,438 as of 2015*Kitsap County comprises the Bremerton-Silverdale, WA Metropolitan Statistical Area, which is also included in the Seattle-Tacoma, WA Combined Statistical Area. Kitsap County ranks 36th in size among Washington counties and is the third most densely populated county in the state of Washington*. The economy of Kitsap County is primarily driven by the Department of Defense and the Naval Base Kitsap which employs over 31,000 employees. Other top employers for the County include Harrison Hospital (2,442 employees), and the Washington State Government (1,746). 

- Per Business Analyst Online (BAO Online)

The Naval Base Kitsap

Operated by the United States Navy, the Naval Base Kitsap is the third-largest Navy base in the U.S and is home to the Navy's West Puget Sound fleet. The base provides support to nuclear submarines and surface ships, including two aircraft carriers, along with being one of only two strategic nuclear weapons facilities. The base is considered highly strategic, and was formed by the merging of the Naval Station Bremerton and the Naval Submarine Base Bangor in 2004. Naval Base Kitsap – Bangor specializes in working with submarines and Naval Base Kitsap – Bremerton specializes in working with surface ships. The Puget Sound Naval Shipyard is connected to Naval Base Kitsap and specializes in major ship and submarine overhauls. Located in between the two bases is Naval Hospital Bremerton, which offers a variety of specialty clinics. The Naval Base Kitsap - Bangor population is 57,496 consisting of Active Duty Military, Civilian Employees, Family Members, and Retirees (1). There are 1,278 housing units on Naval Base Kitsap – Bangor. Naval Base Kitsap – Bremerton provides an additional 41 housing units to the military population. Jackson Park and Naval Base Kitsap – Keyport provide the military with an additional 892 units (2). 

The Naval Base Kitsap just recently had more than $90 million approved for multiple improvement projects to be completed in 2018. The base is home to two aircraft carriers, the USS Stennis and the USS Nimitz (3).

(1) - Per Military Installations

(2) - Per Military Installations

(3) - Per the Kitsap Sun

Market Overview

According to the 3Q 2016 Costar Bremerton Apartment market report, Bremerton's two largest job sectors are the Government sector (35.6% of employment) and the Trade, Transportation, and Utilities sector (15.6% of employment). The Government sector added 2,000 jobs over the past six months while the Trade, Transportation, and Utilities sector added 8,000 jobs over the same period of time. According to the September 2016 figures from the Bureau of Labor Statistics, the Bremerton-Silverdale MSA has an unemployment rate of 5.7%. This is slightly higher than the national unemployment rate of 5.0% and state unemployment rate of 5.6% as of September 2016. 

According to the 3Q 2016 Costar Bremerton Apartment market report, employment and population growth are both accelerating after years of sluggish growth. Vacancies have compressed as they were aided by supply constraints as well as the release of pent-up demand for housing. The vacancy rate for the market stands at 3.7% and rent growth over the past 12 months (as of the end of Q3) was 11.8% for the market. Average rents for the market are $1,189/unit and the market has a total inventory of 7,946 units. Only 71 units were delivered over the past 12 months. 

Submarket Overview

According to the 3Q 2016 Costar Tracyton/Meadowdale Apartment market report, the submarket has experienced effective annual rent growth of 11.6% over the past 12 months and ranks as one of the fastest growing markets in the United States in terms of rent growth. The vacancy rate sits at 2.3% at the end of the third quarter and there were zero units delivered to the submarket over the past 12 months. Ranking third of the seven submarkets, the vacancy rate of 2.3% is below the market average of 3.7% as of the third quarter. Average rents for the submarket are $1,232 /unit, which ranks fourth of the seven submarkets. 

Demographic Information

 
Distance from Property 1 Mile 3 Miles 5 Miles
Population 10,580 46,825 108,292
Population Growth (2010-2016) 10.1% 5.1% 3.6%
Expected Growth (2016-2021) 2.0% 1.1% 0.8%
Average Household Income  $72,177 $72,452 $73,294
Median Household Income  $64,932 $60,340 $56,890
Median Home Value $195,243 $225,934 $236,286
Owner Occupied Households 2,746 11,724 24,655
Renter Occupied Households 1,244 6,908 17,311

Demographic information above was obtained from CoStar.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $10,600,000
Equity $5,075,000
Total Sources of Funds $15,675,000
Uses of Funds Cost
Purchase Price $13,100,000
Acquisition Fee $132,500
Broker-Dealer Fee $50,000
Other LP Equity Fees $74,550
Capital Expenditure Reserve $1,836,650
Loan Fee & Interest Rate Cap Fee $152,600
Closing Costs & Prepaid Expense Reserves $328,700
Total Uses of Funds $15,675,000
Debt Assumptions

The projected terms of the debt financing are as follows:

  • Lender: CBRE
  • Loan Type: Agency (Freddie Mac - DUS)
  • Proceeds: $10,600,000
  • Loan to Cost: 68%
  • Term: Seven years
  • Rate: One-Month LIBOR plus 291 basis points (3.52% as of November 28, 2016) 
  • Interest Rate Cap: One-Month LIBOR cap of 3.09%
  • Amortization: 30 years
  • Interest-Only Period: 24 months
  • Recourse: None except bad-boy carve-outs
  • Yield Maintenance: Open to prepay after 12 months for a 1% exit fee

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

Fairgrounds Investors, LLC intends to make distributions to investors (Realty Mogul 75, LLC, Other LP investors and Sponsor, collectively, the "Members") as follows:

  1. To the Members, pari passu, all excess cash flows and appreciation to a 8.0%% IRR to the Members.
  2. 66.9% / 33.1% (66.9% to the Members, not including the Sponsor / 33.1% to the Sponsor) of excess cash flows and appreciation to a 15.0% IRR to the Members not including the Sponsor. 
  3. 56.9% / 43.1% (56.9% to the Members, not including the Sponsor / 43.1% 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 75, LLC will distribute 100% of its share of excess cash flow (after expenses and fees) to the members of Realty Mogul 75, LLC (the RealtyMogul.com investors). 

Distributions are expected to start in June 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 Projections
  Year 1 Year 2 Year 3 Year 4 Year 5
Effective Gross Revenue $1,644,687 $1,864,535 $1,978,087 $2,048,214 $2,085,793
Total Operating Expenses $775,713 $795,946 $818,357 $843,716 $859,735
Net Operating Income $868,973 $1,068,589 $1,159,730 $1,204,497 $1,226,058
Annual Debt Service $401,780 $449,090 $655,058 $676,179 $690,228
Distributions to Realty Mogul 75, LLC Investors $95,599 $133,112 $104,830 $110,654 $1,801,914
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 $132,500 Sponsor Capitalized Equity Contribution 1.01% of the property purchase price
Broker-Dealer Fee $50,000 North Capital (1) Capitalized Equity Contribution 4.00% of equity raised by RealtyMogul.com or a minimum of $50,000
Other LP Equity Fees $74,550 Various non-Sponsor affiliated parties Capitalized Equity Contribution 2.36% of equity raised from other LP investors
Recurring Fees
Property Management Fee 4.0% of Effective Gross Income Sponsor Distributable Cash  
Construction Management Fee 9.0% of Total Rehab Costs Sponsor Capital Expenditure Reserve  
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 75, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of Realty Mogul 75, 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 75, 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/FAQs
Disclaimers

Apartment Complex - Competition

Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. The Property will compete with other residential alternatives to attract tenants, including but not limited to other apartment units that are currently available for rent, new apartments that are built and condominiums/houses that are for rent or sale. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify. If the Property is not able to successfully compete with the competitive residential alternatives in the local or regional area this could adversely affect the ability of Sponsor Entity to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.


High Military Tenant Concentration and Base Dependency

With 19% of the tenant base related to employment at local military facilities, the operations and financial results of Fairgrounds Investors, LLC are dependent to a significant degree on the stability of those military facilities. The closure of one or more of such facilities, or a significant reduction in their operations, could result in vacancy risk that could adversely affect the rental income realized by Fairgrounds Investors, LLC and thus the business operations and financial results of Fairgrounds Investors, LLC and Realty Mogul 75, LLC.


Lease-up Risks

The Property currently has a 90% occupancy level, and the Sponsor intends to implement a capital improvement plan involving the renovations of certain units and a leasing program in its effort to significantly increase that occupancy level. The Sponsor intends to renovate the common areas and unit interiors at the Property, and then to offer prospective tenants an attractive leasing package and to use both external and internal leasing resources in its efforts to lease up vacant space at the Property. There can be no assurance that such renovations will be consummated on a timely basis, that such work will not materially adversely affect other aspects of the operation of the Property, or that the planned lease-up program will result in the Property increasing its occupancy level at rental rates in line with those projected. Any delays or adverse effects of such renovation work or lease-up efforts could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment. Although the Sponsor believes that comparable properties are currently achieving rental rates that are in line with those expected from the Property, there can be no assurance that such increased occupancy levels or rental rates will be achieved. Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.


Renovation Risks

The Sponsor intends to renovate the Property in order to be able to demand the significantly higher rents it is projecting to receive at the Property following such renovations. Such renovations are expected to include $8,500 in interior upgrades per unit, in addition to approximately $665,000 in exterior improvements and projected to take up to 32 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 approximate 22.6% increase over the existing average 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.


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.


Coastal Washington Earthquake and Tsunami Risk

The Property lies on the Washington coast of the Pacific Ocean, which is subject to occasional and sometimes destructive earthquakes and tsunamis emanating from various Pacific Rim disturbances. There can be no assurance that a sizable earthquake or tsunami will not cause significant damage to the Property, in which case the business and financial condition of Fairgrounds Investors, LLC, and thus Realty Mogul 75, LLC, would be materially adversely affected.


Interest-Only Loan Period

The loan being used to acquire the Property is expected to have an interest-only period during the first 24 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.


Sponsor's 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.


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 75, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.


Uncertainty Surrounding Future Sales Price

There is risk associated with the Sponsor being unable to sell the Property as projected.


Interest Rate Risk

The Federal Reserve has methodically reduced the amount of stimulus it was earlier injecting into the U.S. economy, and has signaled that increases in the federal funds rate may be forthcoming. This could potentially lead to rising interest rates offered by other lenders and could have a negative effect on the future value of the Property (since higher loan interest rates might mean that potential buyers would face proportionately higher debt service expenses).


Mortgage Risk

The Sponsor has a signed term sheet with a lender to provide the debt financing for the acquisition of the Property, but there can be no assurance that the lender will complete financing on the rates and terms included in the underwriting being presented in the model for this investment opportunity. All rates and terms of the debt financing are subject to final lender committee approval, including but not limited to a modification in lender held capital reserve requirements that may result in a corresponding movement of certain funds currently projected as being held in a Sponsor controlled capital escrow account.


Management Risk

Investors will be relying solely on the Sponsor for the execution of its business plan. The Sponsor may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of Fairgrounds Investors, LLC (including Realty Mogul 75, 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, Fairgrounds Investors, LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 75, LLC is pursuing a venture capital strategy through its investment in Fairgrounds Investors, LLC, and the manager of Realty Mogul 75, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.


Manager of Realty Mogul 75, LLC Will Participate in Sponsors' Promote Interest

The manager of Realty Mogul 75, 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 75, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.


Uncertain Distributions

The Sponsor cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 75, LLC) from either net cash from operations or proceeds from the sale or refinancing of the asset. Sponsor, in its discretion, may retain any portion of such funds for tenant improvements, tenant refurbishments and other lease-up costs or for working capital reserves. Sponsor has chosen to make distributions semi-annually.


Risk of Interest Charges for Sponsor Capital Calls

The amount of capital that may be required by Fairgrounds Investors, LLC from Realty Mogul 75, LLC is unknown, and although Fairgrounds Investors, 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 75, LLC does not intend to participate in a capital call if one is requested by Fairgrounds Investors, LLC, and in such event the manager of Fairgrounds Investors, LLC may accept additional contributions from other members of Fairgrounds Investors, LLC. Amounts that the manager of Fairgrounds Investors, LLC advances on behalf of Realty Mogul 75, 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 75, LLC's interest in Fairgrounds Investors, 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 five year hold period, Realty Mogul 75, 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. The Sponsor's decision to hold the Property for longer than five years will require a vote of a majority of the then current members of Fairgrounds Investors, LLC. If the Property is not sold after five years, Realty Mogul 75, LLC may have the right (either at that point or at a later time), subject to other contractual limitations such as the loan on the Property and the requirements of the operating agreement of Fairgrounds Investors, LLC, to force a sale of the Property or force a sale of the interests of Realty Mogul 75, LLC in Fairgrounds Investors, LLC.


General Economic and Market Risks

While the Sponsor has conducted significant research to justify the intended rental rates and sales price relative to comparable properties in the market, its best efforts to forecast economic conditions cannot state for certain whether or not rental rates will be achieved or investor sentiment and the capital markets will be favorable to the Property at the intended disposition date. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand for real estate investments, all of which are beyond the control of the Sponsor​​.


The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Issuer Document Package for a discussion of additional risks.

The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 75, 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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