At A Glance

Investment Details

Birge & Held Asset Management, LLC (the "Sponsor") plans to acquire, renovate and reposition the Parc Bordeaux Apartments, a 208-unit Class B multifamily property located in Indianapolis, IN. Realty Mogul investors are being provided the opportunity to invest in Realty Mogul 33, LLC. Realty Mogul 33, LLC, will be making an investment in Parc Bordeaux Indy, LLC, the entity that will hold title to the property.

Through Parc Bordeaux Indy, LLC, the Sponsor will handle all aspects of the investment including acquiring the property, completing a renovation program, and ultimately selling the asset. 67 of the units were renovated in 2002 following a tornado, and those units are currently generating rental premiums of $40 over non-renovated units. An additional four (4) units were renovated in 2013/14 and those units are currently generating rental premiums of $80 over non-renovated units. The Sponsor plans to renovate the remaining 137 units over a 24-month period to capture the associated rental premiums. The Sponsor has budgeted $548,000 ($4,000 per unit to be renovated) for interior renovations which include new appliances, flooring, countertops, cabinets, vanities and light and plumbing fixtures. In addition to the interior renovations, $200,000 has been budgeted for exterior improvements and deferred maintenance (work required by HUD), which should help increase the overall appearance of the Property. Furthermore, since the Sponsor owns three (3) other properties in the market, they should be able to implement management efficiencies that may assist in reducing expenses at the Property.

The Sponsor intends to hold the property for five (5) to seven (7) years before exiting the investment, though the hold period could be longer or shorter. Realty Mogul investors have the opportunity to participate as equity stakeholders and earn a share of the cash-flow and appreciation. Investors can expect to receive quarterly updates and semiannual distributions starting August 2015.

This property represents a unique opportunity to invest in a well-occupied, cash-flowing multifamily property located in a strong market. The property has existing in-place cash flow while also offering investors value-add potential through a strategic renovation program.

Investment Highlights

• Experienced Local Sponsorship: Founded in 2008, Birge & Held is a national apartment real estate, private equity investment firm located in Carmel, IN. Since its inception, the Sponsor has acquired and managed over $130 million in multi-family assets across the country. Headquartered 25 miles from the property, the Sponsor has an in-depth knowledge of the market. They own four (4) other multifamily properties in the market, each of which are over 90% occupied. Ownership of several buildings in the same submarket may allow the Sponsor to implement management efficiencies that will assist in reducing expenses. The Sponsor has access to the legal, accounting, management and construction support system of Pedcor Commercial Development, a national real estate development company.
• Potential Favorable HUD Financing: The Sponsor will be acquiring the Property using an interest-only bridge loan which should be replaced with a permanent HUD loan approximately six (6) months post-closing. The HUD loan proceeds are expected to total $7,221,000. The period of interest-only payments should result in higher cash flows due to the lower debt service, while the amortizing debt in place for the remainder of the transaction should result in a reduction of the principal balance of approximately $685,000. HUD financing requires that large capital reserves be capitalized, as well as that regular property inspections be completed, each of which conditions would help to assure that the Property stays well-maintained over the life of any such HUD loan.
• Potential Rental Upside Through Renovation: Previously renovated units at the Property are currently generating rental premiums of $40-80 over non-renovated units. The renovations completed during 2013 and 2014 were done at a cost of $3,500 per unit.  The Sponsor has budgeted future renovations at $4,000 per unit, which may result in rental premiums above those currently being generated.
• No New Supply Planned: Although the Indianapolis multifamily housing market is reportedly performing well, and new construction is occurring in the North and Central Business District submarkets, the rent levels in the Property's submarket are currently not high enough to support new development. According to discussions with market participants, rents would have to rise to $1.05-1.20 per square foot per month in order to support new development (in-place rents at the Property are currently $0.79 per square foot). In addition, according to the Cassidy Turley Indianapolis Multifamily Market Snapshot, there are no new developments planned in the submarket.​

Risks and Risk Mitigation*

• 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 33, 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.
• Financing Risk: The Sponsor intends to acquire the Property with a bridge loan that will be replaced with long term HUD debt approximately six (6) months after acquisition. There is a possibility that if capital markets conditions significantly deteriorate over the next six months, the Sponsor will not be able to acquire a HUD loan under favorable terms. This risk is partially mitigated by the fact that the Sponsor has underwritten a loan interest rate of approximately 100 bps (1.0%) higher than pricing that would be available today, providing a cushion should interest rates rise significantly over the next six months while the Sponsor pursues a replacement HUD loan.  ​​
• Interest-Only Loan Payments: The Sponsor will be acquiring the Property with an interest-only bridge loan, which will result in no reduction in the principal balance during that time. The Sponsor intends to replace the bridge loan with fully amortizing debt within six (6) months of acquiring the Property, and the bridge loan does not carry a prepayment penalty. 
• Low Leverage for Prospective Buyer: The loan balance at the end of Year 7 is projected to equate to 61.5% leverage based on the total project cost. Given a potentially rising interest rate environment and prepayment penalties, it is likely that a prospective buyer would assume the HUD loan.  In addition, HUD financing generally allows a buyer to increase the amount of a loan to its original principal balance, as well as to place additional mezzanine/supplemental debt behind the senior HUD loan.
• Extensive Rehab Planned: The Sponsor intends to renovate 137 (66%) units at the Property. The Sponsor has assumed that each unit will take approximately one week to renovate, and has assumed a two-year timeline to complete the renovations, which equates to less than six (6) units being renovated per month. In addition, the underwriting assumes that of the six (6) units renovated per month, only half of those units will generate any revenue in that month.
• Decrease in Rents or Occupancy: One of the risks associated with this transaction is the possibility of a significant decline in rents or occupancy.  This risk is mitigated by three factors: 1) historical occupancy at the Property since 2011 has averaged 93%, and the Property is currently 95% occupied, 2) once completed, the renovations are expected to increase the attractiveness of the Property to potential renters, and 3) the Sponsor is an experienced local group that currently owns three other properties in the market, each of which are currently over 90% occupied. 
• Management Risk: Investors will be relying solely on the manager of Parc Bordeaux Indy, LLC for the execution of its business plan. That manager in turn may rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of Parc Bordeaux Indy, LLC (including Realty Mogul 33, 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 manager of Parc Bordeaux Indy, LLC has significant operating experience, Parc Bordeaux Indy, LLC is a newly formed company and has no operating history or record of performance. 
• Uncertain Distributions: The manager of Parc Bordeaux Indy, LLC cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 33, LLC) from either net cash from operations or proceeds from the sale of the asset. That manager, in its discretion, may retain any portion of such funds for property operations or capital improvements. 
• Risk of Interest Charges or Dilution for Capital Calls: The amount of capital that may be required by Parc Bordeaux Indy, LLC from the Company is unknown, and Parc Bordeaux Indy, LLC may from time to time request that its members contribute additional capital to it, although the Company can decline such request.  The Company does not intend to participate in a capital call if one is requested by Parc Bordeaux Indy, LLC, and in such event the manager of Parc Bordeaux Indy, LLC may accept additional contributions from other members of Parc Bordeaux Indy, LLC, borrow the funds, or admit new members contributing new cash to Parc Bordeaux Indy, LLC.  Amounts that the manager and/or the contributing members of Parc Bordeaux Indy, LLC advance on behalf of the Company may be deemed to be either loans to the Company at a simple interest rate not to exceed 10% annually, or else as additional capital contributions, in which case the Company's interest in Parc Bordeaux Indy, LLC will suffer a proportionate amount of dilution.
• 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 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 manager of Parc Bordeaux Indy, LLC .

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

Property Details

Address:	3410 Rue Chanel Indianapolis, IN 46227
Submarket:	South Indianapolis
Year Built:	1968
Current Occupancy:	95%
Number of Units:	208 units
Net Rentable Area:	176,783 square feet
Buildings:	25 total buildings 20 two-story townhome buildings 4 two-and-one-half-story buildings 1 single-story clubhouse building
Parking:	314 total spaces
In Place Rent Per Unit:	$633
Effective Rent Per Square Foot:	$0.76

Unit Mix and Rents

UNIT TYPE	TOTAL UNITS	UNIT SF	TOTAL SF	IN PLACE RENTS	PSF
Studio	11	400	4,400	$475	$1.19
1 x 1	53	710	37,630	$542	$0.76
1 x 1	6	780	4,680	$586	$0.75
1 x 1	47	820	38,540	$616	$0.75
2 x 1	52	972	50,544	$699	$0.72
2 x 1	39	1,051	40,989	$740	$0.70
TOTAL/AVG	208	850	176,783	$633	$0.76

Property Highlights

• The Property is located in close proximity to major transportation routes, commercial areas, retail amenities, employment centers and colleges. 
• The Property is proximate to both the University of Indianapolis and Indiana University - Purdue University, which allows it to serve as a viable housing option for students at both universities. An estimated 20-30% of the current tenants are college students.
• The Property underwent a $3.2 million rehab in 2002 following a tornado. The rehab included refurbishment of 67 units, renovation of the clubhouse and extensive landscaping. An additional four units were renovated in 2013/14 and are currently generating rental premiums of $80 over non-renovated units. 
• Amenities consist of a clubhouse with a community room, 24-hour fitness center, pool with sundeck, sauna, playground, basketball courts, tennis courts, storage, 24-hour emergency maintenance and laundry centers in each building.  
• The Property is comprised of studio, one and two bedroom units which is ideal for single individuals and small households. The average household size in the Property’s vicinity is 2.4 people.

Location

The Property is located in the South Indianapolis submarket in close proximity to retail amenities and major transportation routes which provide ease of access to downtown Indianapolis and the surrounding employment centers.

Indianapolis Market Overview

Indianapolis ranked as the nation’s 12th largest city in 2010 (per the US census). The population for Indianapolis-Marion County was 820,445 in 2010, an increase of 12% since 2000. The population of the Indianapolis Metropolitan Statistical Area ("MSA"), which includes Marion County, as well as Boone, Hamilton, Hancock, Hendricks, Johnson, Madison, Morgan and Shelby counties, totaled approximately 1,887,000 residents in 2010, making Indianapolis the 33rd largest MSA in the country at that time. The economy of Indianapolis is driven by a variety of business sectors, including government, education, manufacturing, life sciences, healthcare, logistics, and financial services.

Indianapolis Multifamily Overview

The market information below is provided by the 3Q2014 Cassidy Turley Indianapolis Multifamily Market Snapshot report:

The Indianapolis multifamily market absorbed 1,309 units during the third quarter, elevating net absorption for the year to 2,373 units and continuing a streak of five years of uninterrupted occupancy growth. As a result, the multifamily vacancy rate for all classes of product currently registers 5.8%, a decline of 30 bps from a year prior. Demand metrics continue to drive new development, with 1,771 units delivered thus far in 2014 and another 3,729 units under construction. Despite the delivery of new units, underlying demand metrics and demographics should be sufficient to translate into continued declines in vacancy rates in the majority of submarkets for the next 12 to 18 months.

In the investment arena, multifamily transaction volume remains active with over 4,500 units sold in the greater Indianapolis market in 2014. This investor interest in Central Indiana has compressed cap rates for Class A, suburban properties to the mid-to-low 6% range, nearly 100 bps below prior-year levels. Because cap rate compression in primary market cities has dropped into the mid-to-low 5% range, investors have sought higher yield opportunities in historically strong secondary multifamily markets such as Indianapolis.

Outlook:

• Absorption is forecasted to continue at a historically positive rate, and occupancy should remain stable over the balance of 2014.
• Despite the delivery of a large volume of new product, vacancy should remain lower than at any time since the mid-1990s and is projected to track in the mid-to-high 5% range.
• Expect to see piqued interest by out-of-state buyers who seek to take advantage of higher returns than those found in other gateway metros.
• The delivery and stabilization of new units may once again garner interest from REITs and other institutional investors.
• Private capital buyers should remain both engaged and focused upon Class A/B multifamily properties.

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