ClearWorth Capital is a vertically integrated, Texas-based multifamily owner and operator with offices in Dallas and Houston. The company serves as a deal sponsor providing acquisition, investment management, and disposition functions. ClearWorth Residential provides property and construction management services. ClearWorth seeks to maximize returns for investment partners through physical property enhancements and operational improvements. They enhance their business through joint venture partnerships, creative deal structuring, sophisticated approaches to finance, and the implementation of transformative technologies.
ClearWorth has a track record of delivering consistent, superior returns. Its managing partner, Matthew Stone, has been a principal in development and renovation projects totaling over $2 billion in value. Development experience includes thirty-seven (37) projects, twenty-eight (28) of which were multifamily, with 5,000+ multifamily units, as well as senior housing, student housing, townhomes, hotels, condominiums, and office buildings. He has also acquired and renovated thirty (30) multifamily projects with a combined value approaching $1 billion.
The Sponsor plans to acquire the subject property for $37 million or $135k per unit. This price is slightly higher than the current loan of roughly $36 million but is still 14% lower per unit compared to the comps, which average $156k. Plans for the property entail comprehensive improvements to both its interior and exterior, as well as operational enhancements. A total budget of $2.9 million, or $10,585 per unit, has been allocated, with approximately $1.5 million designated for interior renovations and approximately $1.4 million for exterior enhancements. The sponsor aims to capitalize on the premium achieved by the renovated units, which command a $200 rent premium reflecting a 23% ROC. To achieve this, $13,388 per unit has been earmarked for upgrades in 40% of the total 274 units, totaling 110 units. Enhancements will encompass lighter paint colors, granite countertops with undermount sinks, backsplashes, and updated component packages. Additionally, washer/dryer sets will be procured for approximately 70 units. For the building's exterior, attention will be directed toward rectifying deferred maintenance, exterior painting, rebranding efforts, and reactivating the common laundry room. Operational improvements will be facilitated by the sponsor's in-house property management arm, aimed at reducing various expense items such as turnover costs, administrative expenses, maintenance, and painting. This initiative is expected to yield cost savings, aligning with the sponsor's portfolio average. Under the current underwriting, a bridge loan with a 3-year initial term and two 1-year extensions at a floating interest rate of SOFR+3.25% is assumed, with a budgeted rate cap maintaining the overall interest rate at or below 7.25% throughout the 3-year hold period. The renovation is projected to be completed in month 18 or early 2026.
Lease Comparables
| Galleria Townhomes | The Place at Briarcrest | Trinity Mills Apartments | Orchids of Carrollton | Holden | Villa Sienna | Tallows | Averages | Subject (In-Place) |
Subject (Post-Reno) |
|
| Year Built | 1984 | 1983 / 2016 | 1982 | 1984 | 1981 | 1979 | 1983 | 1982 | 1983 | 1983 |
| Class | B | B | C | C | C | C | B | B | - | - |
| # of Units | 174 | 238 | 208 | 131 | 320 | 256 | 252 | 226 | 274 | 274 |
| Average Unit Size | 1,049 SF | 961 | 783 SF | 858 SF | 840 SF | 821 SF | 866 SF | 876 SF | 804 SF | 804 SF |
| Levels | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| Distance from Subject | 0.6 mile | 2.0 miles | 2.7 miles | 1.8 miles | 1.9 miles | 0.50 mile | 0.90 mile | 1.5 miles | 0.0 mile | 0.0 mile |
| $/Unit (1x1) | $1,000 | $1,185 | $1,155 | $1,113 | $1,070 | $1,178 | ||||
| SF (1x1) | 618 SF | 655 SF | 730 SF | 668 SF | 672 SF | 672 SF | ||||
| $/SF (1x1) | $1.62 | $1.81 | $1.58 | $1.67 | $1.66 | $1.93 | ||||
| $/Unit (2x1) | $1,385 | $1,573 | $1,479 | $1,318 | $1,449 | |||||
| SF (2x1) | 866 SF | 787 SF | 827 SF | 830 SF | 830 SF | |||||
| $/SF (2x1) | $1.60 | $2.00 | $1.80 | $1.68 | $1.90 | |||||
| $/Unit (2x2) | $1,300 | $1,460 | $1,745 | $1,655 | $1,540 | $1,422 | $1,549 | |||
| SF (2x2) | 963 SF | 1000 SF | 919 SF | 975 SF | 964 SF | 960 SF | 960 SF | |||
| $/SF (2x2) | $1.35 | $1.46 | $1.90 | $1.70 | $1.60 | $1.56 | $1.79 | |||
| $/Unit (2x2.5) - Townhome | $1,625 | $1,625 | $1,544 | $1,649 | ||||||
| SF (2x2.5) | 1,056 SF | 1,056 SF | 1,100 SF | 1,100 SF | ||||||
| $/SF (2x2.5) | $1.54 | $1.54 | $1.46 | $1.74 | ||||||
| Property Address | 1737 E Frankford Rd, Carrollton, TX 75007 | 1330 Mac Arthur Dr, Carrollton, TX 75007 | 2750 E Trinity Mls Rd, Carrollton, TX 75006 | 2240 E Trinity Mls Rd, Carrollton, TX 75006 | 2500 Guerrero Dr, Carrollton, TX 75006 | 3022 N Josey Ln, Carrollton, TX 75007 | 1602 E Frankford Rd, Carrollton, TX 75007 | 1811 E Frankford Rd, Carrollton, TX 75007 | 1811 E Frankford Rd, Carrollton, TX 75007 |
Sales Comparables
| Bella Vista Apartment | Savannah at North Dallas | The Holden | Tides on Timberglen | The Place at Briarcrest | Gardens of Josey Lane Apartments | Bridges at Deer Run Apartments | Windsong | Tiburon | The Vines Apartments | Rise Heather Ridge | Morrison Apartment Homes | Lakeland Apartments | Averages | Subject (Going-in) |
Subject (Exit) |
|
| Date Sold | May-22 | Jul-22 | Apr-22 | Apr-22 | May-22 | Jan-23 | May-22 | Apr-22 | Oct-23 | Dec-23 | Oct-23 | Mar-23 | Oct-23 | Nov-22 | May-24 | May-27 |
| Year Built | 1982 | 1986 | 1981 | 1984 | 1983 | 1973 | 1984 | 1986 | 1982 | 1984 | 1986 | 1978 | 1985 | 1983 | 1983 | 1983 |
| # of Units | 400 | 192 | 320 | 580 | 238 | 208 | 304 | 264 | 362 | 300 | 252 | 144 | 61 | 279 | 274 | 274 |
| Average Unit Size | 922 SF | 601 SF | 839 SF | 870 SF | 961 SF | 881 SF | 680 SF | 652 SF | 995 SF | 814 SF | 735 SF | 876 SF | 804 SF | 818 SF | 804 SF | 804 SF |
| Sale Price | $69,033,060 | $29,150,945 | $47,079,325 | $97,999,936 | $60,200,000 | $33,625,748 | $45,326,266 | $39,362,284 | $50,680,000 | $42,500,000 | $29,150,954 | $21,000,000 | $8,000,000 | $44,198,659 | $37,000,000 | $56,047,374 |
| $/Unit | $172,583 | $151,828 | $147,123 | $168,965 | $252,941 | $161,662 | $149,100 | $149,100 | $140,000 | $141,667 | $121,528 | $145,833 | $131,148 | $158,506 | $135,036 | $204,552 |
| $/SF | $186 | $252 | $175 | $194 | $263 | $187 | $219 | $228 | $141 | $174 | $165 | $166 | $163 | $193 | $168 | $254 |
| Cap Rate | 5% | 5.11% | 4.30% | 3.75% | 4.75% | 4.58% | 5.5%¹ | 5.80% | ||||||||
| Building Size | 404,371 SF | 115,300 SF | 344,080 SF | 535,162 SF | 228,674 SF | 179,775 SF | 206,720 SF | 203,656 SF | 371,836 SF | 250,334 SF | 197,450 SF | 122,572 SF | 51,801 SF | 247,056 SF | 322,975 SF | 322,975 SF |
| Distance from subject (miles) | 0.4 mile | 1.4 miles | 1.4 miles | 1.8 miles | 1.9 miles | 2.4 miles | 2.5 miles | 2.5 miles | 5.7 miles | 5.9 miles | 18.0 miles | 6.2 miles | 8.8 miles | 3.9 miles | 0.0 miles | 0.0 miles |
| Property Address | 1834 E Peters Colony Rd, Carrollton, TX 75007 | 17910 Kelly Blvd, Dallas, TX 75287 | 2500 Guerrero Dr, Carrollton, TX 75006 | 3550 Timberglen Rd, Dallas, TX 75287 | 1330 Mac Arthur Dr, Carrollton, TX 75007 | 1937 N Josey Ln, Carrollton, TX 75006 | 3637 E Trinity Mls Rd, Dallas, TX 75287 | 17717 Vail St, Dallas, TX 75287 | 15411 Preston Rd, Dallas, TX 75248 | 247 E Corporate Dr, Lewisville, TX 75067 | 706 Heather Hill Ct, Arlington, TX 76006 | 6069 Belt Line Rd, Dallas, TX 75254 | 322 Lake Park Rd, Lewisville, TX 75057 | 1811 E Frankford Rd, Carrollton, TX 75007 | 1811 E Frankford Rd, Carrollton, TX 75007 |
(1) The going-in cap rate reflects T12 Revenue minus Controllable T12 Exp & UW Noncontrollable Exp divided by the purchase price.
Total Capitalization
| Sources | $ Amount |
| Senior Loan | $29,400,000 |
| LP Equity | $12,720,412 |
| GP Equity | $1,413,379 |
| Total | $43,533,792 |
| Uses | $ Amount |
| Purchase Price | $37,000,000 |
| Equity Fees | $470,603 |
| Soft Costs | $2,110,218 |
| Hard Costs | $2,726,273 |
| HC Contingency | $174,017 |
| Interest Rate Cap | $849,660 |
| Construction Management | $203,020 |
| Total | $43,533,792 |
(1) The Sponsor’s equity contribution may consist of friends and family equity and equity from funds controlled by the Sponsor.
The expected terms of the debt financing are as follows:
|
Lender |
Voya Investment Management |
|
Loan Type |
Bridge Loan |
|
Loan Amount (2) |
$29,400,000 |
|
Initial Loan Term |
36 Months |
|
Extension Options |
Two (2) 1-Year Extension Options |
|
Extension Terms |
Extension Options subject to the following conditions - (i) a fee of 0.25% of the then Loan balance for each extension; (ii) the Property having a physical occupancy of at least 91% for each extension; (iii) the Property generating a debt yield of at least 9.50% based on the NOI for the first extension and a debt yield of at least 10.0% based on the NOI for the second extension; and (iv) the purchase of an interest rate cap agreement acceptable to Lender for the extension period, with a notional amount equal to the maximum Loan amount, and with a Floating Rate strike price determined by Lender. |
|
Interest Rate Type |
Floating |
|
Interest Rate |
1-Month SOFR + 3.25% (subject to a SOFR Floor Rate of 3.25%) |
|
Interest Rate Cap |
Rate cap to be purchased at a strike rate of 4.00% |
|
Interest-Only Period |
Full Term |
|
Prepayment Penalty |
15-Month Yield Maintenance |
(1) A substantial portion of the total acquisition for the Property will be paid with borrowed funds, i.e., debt. Please carefully review the Disclaimers section below for additional information concerning the Sponsors use of debt.
(2) An additional $600,000 of loan proceeds may become available, subject to the successful completion of a tax appeal with the local jurisdiction prior to Closing. The availability of these funds is not guaranteed, however, and subject to the Lender's approval.
ClearWorth Capital intends to make distributions as follows:
- Pari-passu all cash flow available for distribution to the Equity Investors until the Equity Investors receive a Preferred Return of 9.0% IRR.
- 70% / 30% (70% to Equity Investors / 30% to Promoted/Carried Interest) of all cash flow available for distribution thereafter.
ClearWorth Capital intends to make distributions to investors after the payment of the company's liabilities (loan payments, operating expenses, and other fees as more specifically set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in September 2024 and are projected to continue on a quarterly basis thereafter. Distributions are at the discretion of ClearWorth Capital, who may decide to delay distributions for any reason, including maintenance or capital reserves.
ClearWorth Capital will receive a promoted/carried interest as indicated above.
You will pay certain fees and compensation over the life of the transaction; please refer to ClearWorth Capital's materials for details. The following fees and compensation will be paid(1)(2):
| One-Time Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Acquisition Fee | 1.50% of Purchase Price | ClearWorth Capital | Capitalized Equity Contribution |
| Construction Management Fee | 7.00% of any Renovation-Related Costs | ClearWorth Capital | Capitalized Equity Contribution |
| Due Diligence Fee | Flat, One-Time Fee of $240,000 | Prevail Real Estate | Capitalized Equity Contribution |
| Platform Fee | Flat, One-Time Fee of $15,000 | RM Securities, LLC | Capitalized Equity Contribution |
| Placement Fee(2) | 4.00% of the Raised Amount up to $2 million, plus 3.50% of the Raised Amount in excess of $2 million. | RM Securities, LLC | Capitalized Equity Contribution |
| Recurring Fees: | |||
| Type of Fee | Amount of Fee | Received By | Paid From |
| Asset Management Fee | 1.50% of Gross Collections | ClearWorth Capital/Prevail Alternate Assets, LLC | Cash Flow |
| Property Management Fee | 3.00% of Gross Collections | ClearWorth Capital | Cash Flow |
| Administration Solution Licensing Fee(2) | 1.00% per annum of the aggregate capital contributions of the RM platform investor for whom RM Technologies provides the Administration Solution | RM Technologies, LLC | Cash Flow/Capitalized Equity Contribution |
(1) Fees may be deferred to reduce impact to investor distributions.
(2) Please see the Fees and Disclaimers sections below for additional information concerning fees paid to RM Technologies, LLC.
RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.
For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
No Approval, Opinion or Representation, or Warranty by RM Securities, LLCSponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.
Sponsor’s Information Qualified by Investment DocumentsThe information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.
Risk of InvestmentThis investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.
No Reliance on Forward-Looking Statements; Sponsor AssumptionsSponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.
Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.
No Reliance on Past PerformanceAny description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.
Sponsor’s Use of DebtA substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.
Sponsor’s Offering is Not RegisteredSponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.
No Investment AdviceNothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
1031 Exchange RiskInternal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.