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Completed Equity
Commercial Real Estate
Duke University-Anchored Portfolio
Multiple Locations
INVESTMENT STRATEGY
Core Plus
INVESTMENT TYPE
Equity
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100% funded
Offered By The Seng Company
15.1%* TARGET IRR 15.1%-%
7.2%* TARGET AVG CASH ON CASH
1.8* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 years
Estimated First Distribution 8/2017
*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
Historic, Duke University-anchored mixed-use office and retail portfolio in Downtown Durham, North Carolina.
Property At A Glance
Year Built / Renovated 1930 & 1932 / 2001 & 2005
Total Square Feet 27,691
Current Occupancy 93%
Number of Tenants 5
Parking Ratio 1.66 spaces per 1,000 square feet
Acquisition Price

$6,100,000

Investment Highlights
Main tenant is Duke University (S&P AA+)
The downtown Durham office market has a current vacancy of 1.7% according to CoStar
Historic buildings with high visibility recently renovated in the early 2000s
Experienced Sponsors who have partnered to acquire multiple properties representing more than $32 million in total capital
Attractive going-in yield may produce an average cash return of 6.8% in year one
Management
Cumulative Distributions

The Seng Company

The Seng Company is a private investment firm that is active in acquiring commercial real estate across the Southeast. The firm seeks opportunistic and value‐add transactions across most major property types including office, industrial, retail and mixed‐use projects. The firm looks to create attractive risk‐adjusted returns by identifying inefficient areas of the market. Since its founding in 2009, the company reports having concluded over 14 investments representing more than $60 million of total capital.

  • Jay Weaver
    President
  • Andrew Seng
    President
Jay Weaver
President

The founding principal of Weaver Capital Partners, Jay Weaver has for the last 14 years developed, repositioned and operated dozens of diverse office, industrial, retail, and residential projects throughout the Southeast. Jay has also served as an investment director for the Brookdale Group, where he was involved in the analysis of $275 million of suburban office properties in the Southeast.

Upon graduating from the University of Georgia, Mr. Weaver became the Development Manager for Dan Cowart, Inc., and was responsible for the development of a 150,000 square foot retail center on 17 acres in North Fulton, north of Atlanta. He has also served as an investment director for the Brookdale Group, where he was involved in the analysis of $275 million of suburban office properties in the southeast. As a development manager with Winter Properties, Inc., his projects included the successful acquisition of a 5.5 acre, 150,000 square‐foot office redevelopment in Midtown Atlanta, formerly known as the Baptist Home Mission Board Headquarters (Midtown Heights). Prior to forming Weaver Capital Partners, Mr. Weaver was a founding principal of Weaver & Woodbery Company, during which time he developed, owned and repositioned numerous projects including such notable properties as White Provision and Puritan Mill. Since forming Weaver Capital Partners, Mr. Weaver has concluded a number of successful acquisition and redevelopment projects.

Andrew Seng
President

Mr. Seng has been active in the investment management industry for his entire career. Since 2003, Mr. Seng has worked in commercial real estate gaining experience across all major asset classes including office, industrial, retail, residential, hotel and mixed‐use projects. Prior to beginning his firm, Mr. Seng was involved in arranging and concluding more than $1.6 billion in capital placements for real estate ranging from senior‐secured debt investments to subordinate capital such as mezzanine financing, preferred equity and joint ventures.

Mr. Seng began his career focusing mainly on busted residential subdivision deals. His only other office deal besides what was is listed in the “Sponsor Track Record” is Barrett Park in Kennesaw, GA. Mr. Seng bought that property with a different partner and it is still active and has returned about 30% annually to date.

Mr. Seng began his investment career with Putnam Investments and the Investment Office at the University of Notre Dame, which manages the school’s endowment. He served as Executive Vice President of the First Fidelity Companies for several years and subsequently served as Managing Director with HFF, LP. He’s been active in several organizations including the CFA Institute, NAIOP and the Urban Land Institute. In 2006, Andrew was selected as a member of the inaugural Future Leaders program for NAIOP Atlanta, and he was subsequently awarded the Emerging Leader award nationally by NAIOP in that program’s first year. He is a full member of ULI, and he previously served as a Vice Chair for one of the Urban Development & Mixed‐Use Councils. Andrew earned his MBA from the Goizueta Business School at Emory University where he was a Dean’s Scholar. He graduated with honors from the University of Notre Dame where he received his BBA.  Andrew is a CFA charterholder.

Track Record

The Seng Company/Weaver Capital Partners - Partnership Track Record

Property Location Product Type Total SF Purchase Date Purchase Price Sale Date Sale Price
315 Decatur Decatur, GA Mixed-Use 125,000 Jan-13 $9,250,000 N/A N/A
200 Arizona Atlanta, GA Office 25,416 Aug-13 $1,800,000 Dec-14 $4,575,000
1572 Piedmont Atlanta, GA Retail 1,250 Sep-15 $830,000 Nov-16 $1,300,000
Guardian Self Storage Chamblee, GA Mixed-Use 330,000 Dec-15 $21,000,000 N/A N/A
Total     481,666   $32,880,000    

*Sponsor information and track record were provided by the Sponsor and have not been independently verified by RealtyMogul.com.

Business Plan

In this transaction, RealtyMogul.com investors will invest in Realty Mogul 74, LLC. Realty Mogul 74, LLC will subsequently invest in Foster Retail, LLC, the entity that is to hold title to the Property.

The Sponsor plans to add value by leasing the currently and soon to be vacant space at the Property, while rolling under market rents to market upon lease expirations. Duke University has occupied the Property since 2008, and the Sponsor believes that it is likely that they will exercise their second extension option due to the length of their tenure, as well as the approximately $4 million investment made in their space by Duke and the current property owner in robust lab infrastructure. The soon-to-be vacant space should be attractive to potential tenants given the street level visibility and location of the Property in downtown Durham.

The Sponsor’s current plan is to self-manage the Property. For leasing, they have been in discussions with a local broker as well as CBRE and Cushman & Wakefield.

Upon completion of the business plan, the Sponsor intends on selling the Property within five years, although the timing of the sale is at the discretion of the Sponsor and the hold period could be shorter or longer than five years depending on market conditions.

Property

RealtyMogul.com, along with The Seng Company and Weaver Capital Partners (“Sponsor” or "Sponsors"), is providing the opportunity to invest in the acquisition and ownership of the Duke University-Anchored Portfolio (the "Property"), two stabilized office/retail properties in downtown Durham, North Carolina totaling 27,691 square feet.

The Sponsor sees this investment as an opportunity to acquire a well located, well occupied asset that benefits from a strong anchor in Duke University (S&P AA+), with additional upside potential through leasing of the to be vacated space.

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

Property Details

The Property is a two-building portfolio of adjacent buildings located in downtown Durham, less than two miles from Duke University. The buildings were originally built in 1930 and 1932, then renovated in 2001 and 2005.

Triangle Biotechnology Center, or 323 Foster Street, was originally built in 1932 as Clark & Sorrell Garage, and was the oldest repair garage still in operation in the city when it was closed in 2000. The functional brick and concrete building is listed on the National Register of Historic Places and benefits from a 50% abatement on property taxes. In 2001, after extensive renovations, Triangle Biotechnology Center was opened to address a need for R&D facilities in downtown Durham with lab space. The historic building with modern lab and office space are designed to meet the functional requirements of a broad range of different types of research. The laboratories are designed around a central utility spine that provides easy access to all major building services.

401 Foster Street was originally constructed as a warehouse likely used by Liggett and Myers Tobacco Company. In the 1940s, the building was converted to auto service and sales at which time the interior posts were removed, the roof re‐supported by steel trusses and the front façade was converted to stucco. Later, the building became home to Southeastern Radio Supply and the land continues to be owned by a trust that evolved from Southeastern Radio. The redevelopment of 401 Foster Street into the destination spot it is today commenced in 2005 with new plumbing, electrical, HVAC, storefronts, exterior stucco and signage transforming the building while striving to maintain historical integrity.

Major Tenants

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Duke University (S&P AA+) has been a tenant at 323 Foster Street ("Triangle Biotechnology Center") since 2009. They recently exercised their first renewal option to extend the lease through 2020 and still have a second, five‐year renewal option remaining.

Duke University is a private research university with over 14,850 students as of Fall 2014. Duke consistently ranks as one of the top universities in the United States. In September 2015, CollegeFactual.com named Duke the 3rd best college for four‐year undergraduate programs ‐ beating out Stanford, Harvard and Princeton. Duke ranked eighth for best graduate school and medical programs by US News & World Report.

Duke’s research expenditures in the 2013 fiscal year were approximately $993 million, the eighth largest in the nation. In addition to its campuses spanning over 8,600 acres, Duke University occupies an estimated 1 million SF of space in downtown Durham according to Duke's head of real estate, including space at American Tobacco, Carmichael building (within Durham ID) and Triangle Biotechnology Center.

The Duke space within Triangle Biotechnology Center was designed to accommodate research which is currently led by Dr. Levin, as the Chief of the Neurobehavioral Research Lab in the Psychiatry Department, who rides his bike to work. The three main research components of his laboratory are focused on the themes of the basic neurobiology of cognition and addiction, neurobehavioral toxicology and the development of novel therapeutic treatments for cognitive dysfunction and substance abuse. Funding for Dr. Levin’s research comes from multiple sources including the EPA and NIEHS. The lab is used by both undergraduate and graduate students.

Site Plan

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Surrounding Developments

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1. Liberty Warehouse

Previously the location of a historic tobacco warehouse, Liberty Warehouse contains 246 luxury apartments including a pool and fitness center, over 24,000 SF of retail/commercial space and a bowling alley/entertainment complex.

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2. The Chesterfield

Located by West Village on W. Main Street, The Chesterfield is a 7-story, 284,000 SF adaptively reused historic building, which will focus on life science and technology and include office, lab and retail space with a large atrium to encourage collaboration and networking. The project is expected to be completed in first quarter 2017.

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3. City Center

City Center will be located in the heart of the City Center District of downtown Durham. It is a planned 28-story mixed use tower anticipated to include residential condos, luxury apartments, Class A office space and street level retail. The proposed building would be the tallest building in Durham, and is expected to be completed in second quarter 2017.

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4. Durham Innovation District (“Durham.ID”)

Durham Innovation District is a master planned research hub for downtown Durham led by Longfellow Real Estate Partners, Hank Scherich (CEO of Measurement Inc.) and Duke University. Durham.ID covers 15 acres and eventually will include over 1.48 million SF of both new and existing office and lab space as well as 50,000 SF of retail, 300 new residential units and three parking decks. Duke University is already located in the Carmichael Building and is expected to lease additional space within Durham.ID. The development plans to function as a research hub with emphasis on life science companies and researchers looking to collaborate with each other and Duke University. The project is estimated to cost $400-$500 million.

Source: Cushman & Wakefield

Comparables

Sales Comps

Property Sale Date Size (Square Feet) Price $/Square Foot Cap Rate
Rogers Alley Dec-14 30,000 $6,100,000 $203 6.30%
American Tobacco Hall Dec-14 71,600 $14,400,000 $201 7.25%
Venable Center Jan-16 85,886 $18,000,000 $210 N/A
211 Rigsbee Avenue Oct-15 7,920 $1,435,000 $181 6.50%
Average   48,852 $14,182,539 $204 6.68%
Subject   27,691 $6,100,000 $220 8.29%

Leasing Comps

Property Size (Square Feet) Rental Rate Year Built Lease Type
405 E. Chapel Hill Street 1,395 $24.00 1920 NNN
206-208 Rigsbee Avenue 3,882 $26.00 1912 NNN
401 E. Chapel Hill Street 3,000 $24.50 1922 NNN
125 E. Parish Street 1,636 $23.47 1910 NNN
353 W. Main Street 577 $22.88 1920 NNN
Average 2,098 $24.17 1917 NNN
Subject - Pro Forma Rents N/A $21.00 1930 & 1932 NNN

The comparables included in the above tables were either sourced from CoStar, Real Capital Analytics or they were provided by the Sponsor 

Location

The Property is located along Foster Street in Downtown Durham. The Property is adjacent to an estimated $500 million of new development including Durham.ID. Durham Innovation District (aka Durham.ID) is a master planned research hub for downtown Durham led by Longfellow Real Estate Partners, Hank Scherich (CEO of Measurement Inc.) and Duke University (number 5 on the “Surrounding Developments” map). Durham.ID covers 15 acres and eventually is to include over 1.48 million SF of both new and existing office and lab space as well as 50,000 SF of retail, 300 new residential units and three parking decks. Duke University is expected to lease additional space within Durham.ID. The development plans to function as a research hub with emphasis on life science companies and researchers looking to collaborate with each other and Duke University.

Duke’s increased presence and commitment downtown has spurred economic activity. Duke occupied 70,000 SF in 2004, just over 1 million SF in 2014 and is expected to occupy 1.5 million SF in 2018, according to Duke's head of real estate. The Property is highly visible along Foster Street which connects Downtown Durham with Geer Street, an area with bars/restaurants and new multifamily/condo development. During the site visit, numerous construction sites were observed, which is expected to increase population density over the next few years. The area has experienced robust gentrification over the recent years with many young professionals moving into the area. Over the past few years, 941 apartment units have been added in the immediate area. The surrounding population has grown by almost 15% annually over the past five years and is expected to grow by over 10% annually over the next five years according to CoStar.

Market Overview

According to CoStar, the Durham office market fundamentals continued to improve at the end of the third quarter of 2016. Vacancy rates decreased 170 basis points year-over-year, ending the quarter at 8.5%. Average direct asking rental rates increased slightly finishing the quarter at $20.33, an increase of 2.8% from one year ago. The third quarter experienced 576,000 square feet of absorption. Durham office metrics remain positive as we approach the close of 2016.

Submarket Overview

Per CoStar market research, the Downtown Durham office submarket totals almost 5.5 million square feet and is the market's third largest office submarket. Vacancy rates have decreased by 390 basis points since the end of 2013 to 1.7% today which has provided buoyancy to rental rates as prospective tenants vie for prime space in the area.

Demographic Information

Demographics 1 Mile 3 Miles 5 Miles
Population (2016)   16,573 97,031 188,136
Growth (2010-2016) 15.35% 12.40% 13.22%
Growth (2016-2021) 10.45% 10.06% 10.18%
Average HH Income (2016)  $51,852 $48,652 $57,760

Demographic information above was obtained from CoStar

Photos
Financials
Sources & Uses

Total Capitalization

Sources of Funds
Debt $4,500,000
Equity $1,975,000
Total Sources of Funds $6,475,000
Uses of Funds
Purchase Price $6,100,000
Acquisition Fee $61,000
Broker-Dealer Fee $40,000
Closing Costs and Fees $122,250
Hard Costs $30,750
Tenant Improvement/Leasing Commission Reserve $121,000
Total Uses of Funds $6,475,000
Debt Assumptions

The projected terms of the debt financing are as follows:

  • Lender: AloStar Bank of Commerce
  • Proceeds: $4,500,000
  • Interest Rate: One-Month Libor + 325 bps Floating
  • Amortization: 25 years, with three (3) years of interest only
  • Term: Five (5) years
  • Extension Option: None
  • Recourse: 7% of the loan amount ($315,000) to the Sponsors
  • Exit Fee: $15,000  

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

Foster Retail, LLC intends to make distributions to Investors (Realty Mogul 74, LLC, other LP investors, and Sponsor, collectively, the "Members" or "Member") per the priority order below.

  • First, 100% of all distributable cash flow to Members pari passu until return of capital contributions;
  • Second, 100% pari passu to Members until each Member receives cash in the aggregate to constitute an 8% internal rate of return (“IRR”);
  • Third, 30% to Members and 70% to the Sponsor until the Sponsor has received cash in the aggregate equal to 30% of the amount by which all distributable cash exceeds all capital contributions (the “Catch Up”);
  • Thereafter, 70% to the Members pro rata and 30% to the Sponsor.

Distributions are expected to start in August 2017 and are anticipated to continue on a quarterly basis thereafter. Note that the return of initial capital occurs only upon a capital event (sale or refinance). These distributions are at the discretion of the Sponsor, who may decide to delay distributions for any reason, including maintenance or capital reserves. Realty Mogul 74, LLC is to distribute 100% of its share of excess cash flow (after expenses and fees) to the Members of Realty Mogul 74, LLC (the RealtyMogul.com investors).

Targeted Cash Flows

  Year 1 Year 2 Year 3 Year 4   Year 5  
Effective Gross Revenue $779,639 $879,026 $910,118 $936,434 $963,006
Total Operating Expenses $312,880 $349,092 $357,771 $375,956 $385,827
Net Operating Income $466,759 $529,934 $552,347 $560,478 $577,179
Distributions to Realty Mogul 74, LLC Investors $71,843 $75,819 $76,375 $37,665 $1,512,844
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 $61,000 Sponsor Capitalized Equity Contribution 1.0% of the Property purchase price
Broker-Dealer Fee  $40,000 North Capital (1) Capitalized Equity Contribution 4.0% based on the amount of equity invested by Realty Mogul 74, LLC with a minimum of $40,000
Leasing Commissions  3% New / 2% Renewal  Sponsor  Operating Cash Flow   
Recurring Fees
Property Management Fee 3.0% of effective gross income Sponsor Operating Cash Flow 3.0% of effective gross income
Asset Management Fee $19,750 per year Sponsor Operating Cash Flow 1.0% of invested equity
Management and Administrative Fee 1.0% of investment assets in Realty Mogul 74, LLC RM Manager, LLC Distributable Cash RM Manager, LLC is the Manager of Realty Mogul 74, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2)

Notes:
(1) Certain employees of Realty Mogul, Co. are also registered representatives of, and are paid commissions by, North Capital Private Securities Corporation, 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, 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 Sponsors. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 74, 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

Office Properties

Office buildings are subject to market forces affecting supply and demand just like other types of commercial space, but the economic drivers for office space are sometimes different than those for other real estate investments. Rents and valuations for offices are primarily influenced not just by employment growth but also by a region’s economic focus. Office properties are especially influenced by specific types of employment - namely, sectors with very high proportions of office use. These economic segments are generally those that utilize service and professional employees such as attorneys, accountants, engineers, insurance personnel, real estate brokers and related service providers (like title and escrow providers), and people working in banking, financial services, consulting, medical, dental, and pharmaceutical fields. Office space tends to be leased for relatively long periods, with tenants often having the option to renew leases for additional terms. This means that office properties often have leases that can lag current market lease rates, and an appropriate “step-up” of rental rates may not be able to be imposed until a lease expires. Economic downturns can affect office buildings more than residential buildings, since businesses can go bankrupt even while people continue to need housing. Re-leases of office space can often require significant lead time to consummate.


Hurricane Risk

Durham, North Carolina is located near the Atlantic Ocean, which is subject to frequent and sometimes destructive hurricanes. There can be no assurance that a sizable hurricane will not cause significant damage to the Property, in which case the business and financial condition of the Sponsor Entity, and thus the Company, would be materially adversely affected. There is no guarantee that the Sponsor Entity has or will obtain hurricane or flood insurance for the Property.


Ground Lease

A ground lease is typically defined as the lease of land for a relatively long term (e.g., 50 to 99 years), where all expenses of the property are the obligation of the tenant (e.g., taxes, repair and maintenance expenses, insurance costs, and financing costs). A tenant’s leasehold interest under a ground lease may be considered a “diminishing asset” in that the value and marketability of the project will diminish as the end of the term nears. This risk is partially mitigated by the fact that the property will be subject to a 54-year ground lease. Furthermore, there will be a purchase option currently projected to commence in 2030 through 2035.


Relationship of Manager and Deadlock Resolution Procedures

The Sponsor Entity is managed by two principals, each owning a fifty percent share of the Sponsor of the Property. The approval of both entities is required for all key decisions regarding the Property. There are deadlock resolution procedures that have been put in place if the parties cannot agree. The deadlock procedures include the ability to escalate the decision to a major decision which will be go a vote of the full ownership.


Retail Center Competition

Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. In addition, internet-based retailing presents significant competition to certain types of retailers. If development of retail centers by other operators were to increase due to increases in availability of funds for investment or other reasons, or if internet-based retailing continues to draw consumers away from making purchases of goods and/or services of the types offered by tenants of the Property (or if it decreases the prices that such consumers are willing to pay for such goods and/or services), then this competition with the Property and its tenants could cause the value of the Property and the cash flow from the Property to decrease.


Local Market Conditions May Impact Rental Rates

Local conditions may significantly affect occupancy, rental rates, and the operating performance of a property. Such risks include (but are not limited to): (i) plant closings, industry slowdowns and other facts that affect the local economy; (ii) an oversupply of, or a reduced demand for, similar properties; (iii) a decline in household formation or employment or lack of employment growth, (iv) laws that could inhibit the ability to raise rents or to sell a property; and (v) other economic conditions that might cause an increase in operating expenses, such as increases in property taxes, utilities, compensation of on-site personnel and routine maintenance.


Vacancies and Tenant Defaults May Reduce the Property’s Revenues

A vacancy or default of a tenant on its rent will cause the Property to lose the revenue from that unit and, if enough effective vacancies occur, it could cause the Property 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 Realty Mogul 74, LLC may be adversely affected.


Interest Only Loan

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


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 74, 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 Foster Retail, LLC (including Realty Mogul 74, 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, Foster Retail, LLC will be a newly formed company and has no operating history or record of performance. Realty Mogul 74, LLC is pursuing a venture capital strategy through its investment in Foster Retail, LLC, and the manager of Realty Mogul 74, 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 74, 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 Interest Charges for Sponsor Capital Calls

The amount of capital that may be required by Foster Retail, LLC is unknown, and although Foster Retail, 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 74, LLC does not intend to participate in a capital call if one is requested by Foster Retail, LLC, and in such event the manager of Foster Retail, LLC may accept additional contributions from other members of Foster Retail, LLC. Amounts that the manager of Foster Retail, LLC advances on behalf of Realty Mogul 74, 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 74, LLC's interest in Foster Retail, 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 holding period, the Company may not have any meaningful control over the timing of the sale of the Property, and therefore we cannot offer assurances of when a sale of the Property may occur. If the Property is not sold during the expected holding period the Company may have certain rights (either at that point or at a later time), to force a sale of the Property or force a purchase of the interests of Company, however, if such rights exist they may be subject to other limitations such as the approval of the lender holding the loan secured by the Property and the requirements of the operating agreement of the Sponsor Entity.


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 74, 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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