Staff Menu (IO ID#: 392085):
EDIT IO DOCUMENTS
Funded
Multifamily
Gazebo Park Apartments
Acworth, GA
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By Comunidad Realty Partners
17.4%* TARGET IRR 16.4%-18.4%
12.3%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 7 years
Estimated First Distribution 6/2018
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Explore this Project
Overview
Value-add acquisition of a well located multifamily property by an experienced, repeat Real Estate Company.
Property At A Glance
Year Built 1988
# of Units 216
# of Buildings 12
Current Occupancy 96.3%
Parking Ratio 1.44/Unit
Acquisition Price

$16,000,000

Amenities

Leasing center, cascading pool, tennis court, fitness center, game room, laundry facility, picnic pavilion, walking trail, dog park, and mature landscaping.

Investment Highlights
Experienced Repeat Real Estate Company: The Real Estate Company owns and manages over $250 million in multifamily assets overall, comprising over 4,000 units
Attractive Basis: The Real Estate Company is acquiring the Property for $74,074 per unit, which compares favorably to comparable transactions in the market
Well Located: The Property is situated in a major market with favorable fundamentals; in close proximity to retail amenities, public transportation and public facilities
Management
Cumulative Distributions

Comunidad Realty Partners

Comunidad Realty Partners (CRP) is a dynamic real estate investment firm specializing in multifamily apartment communities in densely-populated Hispanic neighborhoods. Core to its investment strategy is creating culturally-relevant, inclusive communities that are tailored to the various ethnicities living at its communities. The company specializes in acquiring and repositioning apartments in infill locations and implementing its proprietary cultural management platform which includes specific cultural upgrades and community-oriented resident services and programs. CRP uses its multifamily lifestyle brand “Buena Vida Community” at its properties to represent its mission of delivering an unparalleled experience of enhanced multifamily living by providing more than just a home but a lifestyle. The firm was founded on a simple principle: enrich lives through enhancing communities while creating value for all stakeholders involved. The firm takes a holistic approach to its investments through symbiotic stakeholder integration of residents, staff, vendors, the greater community, the environment, and investors in order to truly maximize economic and social returns. Its investment philosophy is predicated on fostering innovative lifestyle improvements that align with its residents wants and needs and differentiate the living experience in order to create long-term value for residents and communities in a socially responsible way. Additionally, the firm is focused on “green” environmental improvements that reduce its properties’ energy footprint while reducing utility costs for residents. RM has invested in three prior transactions with the Real Estate Company (Villas de Serenada, Villas del Cabo & Villas de Santa Fe, and Metrocrest Village), all of which have performed well.

http://www.comunidadpartners.com/
  • J. Antonio Marquez
    Managing Partner
  • Santiago Rivera Torres
    Managing Director
J. Antonio Marquez
Managing Partner

J. Antonio Marquez serves as Principal and Managing Partner of Comunidad Realty Partners, a Quez Capital company. He is responsible for strategic planning, capital raising efforts, and sourcing acquisition opportunities for the firm. He is involved in business plan formation on new acquisitions, value-add strategy implementation, and Hispanic marketing efforts. Mr. Marquez has 15 years of experience with his family’s group of companies targeting the Hispanic demographic. He has been involved in over $130 million in commercial/multifamily real estate transactions working with GE Capital, Goldman Sachs, and Principal Real Estate Investors. He has over 10 years of experience managing his family’s commercial portfolio totaling over 1.5 million square feet of office, retail, and industrial space and valued over $110 million. Mr. Marquez graduated cum laude from California Polytechnic – San Luis Obispo and attended the University of Southern California’s Lusk Center for Real Estate where he focused his postgraduate studies in urban real estate with emphasis in affordable/workforce housing through the Stan Ross Program in Real Estate.

Santiago Rivera Torres
Managing Director

Santiago Rivera Torres is a Managing Director at Comunidad Realty Capital. He oversees day to day operations across the portfolio including capital improvement projects, ancillary income services and cultural services & programs implementation. He also is involved in establishing and developing the firm’s commercial partnerships and strategic alliances as well as supporting capital raising efforts and investor relations. Mr. Rivera Torres has worked in the Real Estate and Construction sector in Mexico and U.S. for the last 12 years; his experience ranges from working on family-owned projects on beachfront developments in Baja to residential and low income housing projects in Northern Mexico and retail development in Cabo San Lucas. The Rivera Torres family has been involved in $3 billion USD in housing (400,000 units), hotels & resorts, industrial parks, retail/mall development, and infrastructure development throughout Mexico. In addition, he headed the sales effort for GlobalSolar, a Mexican green technology company specializing in energy-efficient and environmentally sustainable equipment for housing developments throughout Mexico. While he led the sales effort, the company quickly grew to become the largest provider of green technologies to the construction sector in Northern Mexico. Mr. Rivera Torres has a long lineage of real estate experience joined Quez Capital Interests in the early summer of 2012 after learning of their philosophy and Hispanic based multi-family business model.

Track Record

Schedule of Real Estate Owned
Property Name Location Asset Units Cost Basis Occupancy
Villas de la Luz Apartments Austin, TX MF 240 $10,865,000 89%
Villas de la Cascada Apartments San Antonio, TX MF 268 $18,265,000 94%
Villas del Zocalo Phase 1 Dallas, TX MF 206 $5,344,828 96%
Villas del Zocalo Phase 2 Dallas, TX MF 192 $4,810,345 95%
Villas del Zocalo Phase 3 Dallas, TX MF 224 $5,344,828 98%
Villas de Estancia Apartments Irving, TX MF 206 $12,667,724 95%
Villas de Serenada Apartments Euless, TX MF 208 $13,625,000 96%
Villas del Encanto Apartments San Antonio, TX MF 334 $15,580,000 95%
The Vive Apartments Dallas, TX MF 248 $14,836,104 90%
Cantera Creek Ph. 1 Apartments Dallas, TX MF 200 $11,038,800 90%
Cantera Creek Ph. 2 Apartments Dallas, TX MF 272 $15,012,768 90%
The Lantern Apartments Dallas, TX MF 340 $20,943,660 90%
Villas de Santa Fe Apartments San Antonio, TX MF 208 $13,172,676 90%
Azura Apartments Phoenix, AZ MF 387 $24,000,000 93%
Colinas Ranch Apartments Irving, TX MF 160 $10,418,000 98%
Villas del Solamar Dallas, TX MF 212 $5,800,000 96%
Villas del Cabo San Antonio, TX MF 272 $19,613,324 93%
Parkview on Hollybrook Longview, TX MF 209 $31,588,000 80%
Total     4,386 $252,926,057  

 

Full Cycle Transactions
Property Name Location Asset Units Cost Basis Occupancy
Villas de Sendero Apartments  San Antonio, TX MF 209 $8,750,000 97%
Villas de las Colinas Apartments  Austin, TX MF 178 $4,700,000 98%
Villas del Sol Apartments  Austin, TX MF 294 $9,650,000 93%
Villas de Palmas Apartments  Houston, TX MF 659 $22,425,687 98%
Villas de la Colonia Apartments  Carrollton, TX MF 143 $6,055,000 99%
The Current Apartments Austin, TX MF 302 $22,650,000 95%
Total     1,785 $74,230,687  

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

 

Business Plan

In this transaction, RealtyMogul.com investors are to invest in Realty Mogul 93, LLC ("The Company"), which is to subsequently invest in Gazebo Park MF Ventures, LLC ("The Target"), a limited liability company that will hold title to the Property. Comunidad Realty Partners (the "Real Estate Company") is under contract to purchase the Property for $16.0 million ($74,074 per unit) and the total project cost is expected to be $17.5 million ($81,208 per unit).

The Real Estate Company’s business plan is to implement a value-add strategy by completing interior and exterior renovations at the Property. Unit interior upgrades will include a combination of black-on-black appliances, faux-wood flooring, nickel-brushed fixtures, resurfaced countertops, utility saving devices, and a new lighting package. Exterior and amenity improvements will consist of painting, carpentry, new landscaping, a BBQ/picnic area, pool upgrades, parking lot upgrades, and a new signage package.

The Real Estate Company plans to renovate 75 units over 12.5 months (six units per month), which they state is a comfortable pace given their track record, and sell the Property in seven (7) years at a 6.50% cap rate. The pro forma financials assume that renovated units will be able to achieve rental premiums of $50 per unit per month upon completion. 

Gazebo Park Apartments - Capital Expenditures Budget
CapEx Item $ Amount Per Unit
Interior Rehab ($4,000 each for 75 units) $300,000 $1,389
Exterior Paint and Carpentry $75,000 $347
Landscaping $35,000 $162
Office and Clubhouse Renovations $100,000 $463
Signage $25,000 $116
Pool Upgrades $35,000 $162
Sports Court $30,000 $139
BBQ and Picnic Area $15,000 $69
Dog Park $6,500 $30
Parking Lot $35,000 $162
Contingency 5.0% $32,825 $152
Subtotal $689,325 $3,191
Construction Management Fee 10.0% $65,650 $304
Total $754,975 $3,495

RM has invested in three prior transactions with the Real Estate Company (Villas de Serenada, Villas del Cabo & Villas de Santa Fe, and Villas de la Colonia), all of which have performed well. As of Q2 2017: NOI is 12.0% above pro forma at Villas de Serenada, and 2.7% above pro forma at Villas del Cabo & Villas de Santa Fe. Villas de la Colonia went full cycle in Q2 2017 and resulted in an IRR to RM investors that exceeded pro forma. 

 

Property
Property Details

Built in 1988, the Property consists of a 216-unit, 147,600-net rentable square foot apartment complex with 12, two to three-story apartment buildings and one clubhouse/leasing office building, all located on a 18.03-acre lot. The unit mix is comprised of nine efficiency, 168 one-bedroom, and 39 two-bedroom units with a weighted average size and rent per unit of 683 square feet and $784 per unit ($1.15 per square foot), respectively (per the 09/22/2017 rent roll). The Property is currently 96.3% occupied and includes 312 on-site parking spaces (1.44 per unit).

The Property features wood-frame construction on concrete slab foundations, with pitched asphalt roofs, all electric utilities (with outside gas fireplace starter), exterior breezeways, cedar siding, and an individual patio or balcony for each unit. Amenities at the Property include a leasing center, cascading pool, tennis court, fitness center, game room, laundry facility, picnic pavilion, walking trail, dog park, and mature landscaping.

 
In-Place Unit Mix
Unit Type # of Units % of Total Unit (Square Feet) Total Square Feet Rent per Unit Rent per Square Foot
 Studio  9 4% 408 3,672 $665 $1.63
 1 Bed, 1 Bath  16 7% 420 6,720 $685 $1.63
 1 Bed, 1 Bath  16 7% 438 7,008 $698 $1.59
 1 Bed, 1 Bath  16 7% 463 7,408 $702 $1.52
 1 Bed, 1 Bath  8 4% 476 3,808 $715 $1.50
 1 Bed, 1 Bath  8 4% 490 3,920 $709 $1.45
 1 Bed, 1 Bath  40 19% 680 27,200 $753 $1.11
 1 Bed, 1 Bath  64 30% 728 46,592 $783 $1.08
 2 Bed, 1.5 Bath  16 7% 912 14,592 $903 $0.99
 2 Bed, 1.5 Bath  22 10% 1116 24,552 $925 $0.83
 2 Bed, 2 Bath  1 0% 2128 2,128 $1,200 $0.56
 Totals/Averages  216 100% 683 147,600 $773 $1.13


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Comparables

Lease Comparables
Post-Renovation Lease Comparables  Landing At Acworth Legacy At Acworth Walden Ridge Shiloh Green Greenhouse Total / Averages Subject
Submarket Marietta Marietta Marietta Marietta Marietta Marietta Marietta
Occupancy 92% 97% 94% 99% 94% 95% 96%
Units (#) 234 192 210 235 489 272 216
Year Built 2001 1998 2002 1996 1985 1996 1988
Average SF (per unit) 948 1,103 1,079 1,357 893 1,076 683
Average Rental Rate (unit) $1,132 $983 $1,263 $1,217 $1,039 $1,127 $817
Average $/SF $1.19 $0.89 $1.17 $0.90 $1.16 $1.06 $1.20
Distance from Subject 0.7 mi 0.8 mi 2.8 mi 3.8 mi 4.8 mi 2.6 mi -
Sale Comparables
Sale Comparables Mountain Park Estates ARIUM Kennesaw  Bridges of Kennesaw Waldan Pond The 1800 At Barrett Lakes Total / Averages Subject Property
Date March-16 September-15 August-15 August-15 November-14    
Submarket Marietta Marietta Marietta Marietta Marietta Marietta Marietta
# of Units 450 324 296 124 500 339 216
Year Built 1999 1989 1996 1986 1988 1992 1988
Average SF (per Unit) 1,181 925 1,162 957 1,080 1,061 683
Purchase Price $64,000,000 $29,250,000 $35,008,500 $7,800,000 $49,000,000 $37,011,700 $16,000,000
$/Unit $142,222 $90,278 $118,272 $62,903 $98,000 $102,335 $74,074
Cap Rate - - 5.70% 6.50% - 6.10% 7.84%
Distance 4.0 mi 6.1 mi 2.5 mi 4.7 mi 8.6 mi 5.18 mi -

The Subject Property's going-in cap rate is based on 08/31/2017 trailing 12 month net operating income. 

Lease and Sale Comparable information provided by Axiometrics and Real Capital Analytics.

Location

The Property is located in Cobb County, in the Marietta Submarket within the greater Atlanta-Sandy Springs-Roswell, MSA as defined by Axiometrics. Bisected by Interstate 75 and parallel U.S. 41, Cobb County has long been a favorite for business site selection and is home to employment heavyweights such as IBM, Home Depot, Coca-Cola Enterprises, Lockheed Martin Aeronautical Systems, NAPA Genuine Parts, and GE Energy. The County also features the Cumberland and Town Center regional malls. In 2013, a Cobb site was chosen for the Atlanta Braves’ $672 million stadium (SunTrust Park), and mixed-use complex (The Battery Atlanta) now under construction on 60 acres bordered by I-75, I-285, and U.S. 41. The Property is approximately 1.0 mile south of I-75 which is the critical spinal corridor of both Cobb County and northwest Atlanta. The Property is just 1.5 miles north of 260-acre Lake Acworth, which features boating, fishing, and a white-sand beach, and the 18-hole Cobblestone Golf Course, which is ranked among the “Top 100 Courses” by Golf magazine. The Property is 0.5 miles south of Cowan Road’s intersection with Baker Road which boasts a Publix-anchored center, Walgreens, numerous retailers and restaurants all within walking distance. This intersection also has a Park & Ride lot for Cobb County Transit.

Market Overview 

Per CoStar, Atlanta’s economy is producing an abundance of new jobs. As a result of its above-average recovery, Atlanta has nearly 200,000 (7.6%) more jobs through 2016 than it did at the height of the last cycle. Further, figures from the Bureau of Labor Statistics show Atlanta remains out in front of other major metros in regards to its growth rate in the first half of 2017, adding 80,000 net jobs year-over-year through May 2017. One of the biggest drivers of growth has been white-collar employment, especially tech, IT, and R&D positions, with major recent job announcements that include Comcast’s new innovation lab underway in SunTrust Park (19 miles southeast of the Property) and a strong presence from the IT operations of GM, Microsoft, and Verizon in North Fulton (30 miles southeast of the Property). More impressively, the growth of tech jobs in Midtown is expected to continue to drive demand for high-end housing, particularly near Tech Square (29 miles southeast of the Property). During the recovery, Atlanta’s concentration of high-tech jobs has increased from about 10% above the US average to more than 20%. The education and health services sector has also fared well and will contribute significantly to economic expansion over the forecast. Emory University Hospital is underway with a new 450,000 square foot tower on its Clifton Campus that will complete in 2017. Although some blue-collar sectors such as construction (especially housing-related) and manufacturing are still below pre-recession levels, warehouse and distribution employment has bounced back as large companies like Kroger, Smucker’s, and Shaw Industries have expanded their logistics operations presence here.

Structurally low living and business costs may help sustain outsized job and population growth. In recent decades, Atlanta’s balance of big-city (or suburban) living and affordable housing has drawn some of the strongest in-migration in the country. Now that home prices in many markets have recovered from their Great Recession lows, would-be residents are cashing out of their homes in other parts of the country and fueling in-migration to Atlanta. An essential characteristic of this metro-its warm weather and generally snowless winters-is certainly a draw for citizens from the Northeast and Midwest. The top states fueling in-migration are Virginia, New York, New Jersey, and Illinois. When comparing housing costs as a percentage of income, the average discount in Atlanta compared to the average among the top 12 metros in the United States is only 4.5% less expensive according to the Bureau of Labor Statistics. Yet the nominal cost of living in Atlanta is 20% below the average of the top 12 metros in the U.S., with nominal housing costs around 25% lower. Further, Atlanta’s increasing national representation in film, music, and television has influenced the positive perceptions of this as a place worth moving to. Business costs here are below the national average (10% cheaper), and companies of all types consider Atlanta when making location decisions. The presence of the well-connected Hartsfield-Jackson International Airport helps seal the deal for potential residents and companies, including Mercedes-Benz and State Farm, who have relocated their U.S. headquarters to the metro. Given its structural advantages, Atlanta remains in a solid position to attract even more growth in the future.

Submarket Overview

Per Axiometrics, effective rent increased 2.0% from $1,062 in 1Q17 to $1,083 in 2Q17. The submarket's annual rent growth rate of 3.9% was above the market average of 3.8%. Out of the 20 submarkets in the market, the Marietta submarket ranked 14th for quarterly effective rent growth and 13th for annual effective rent growth for 2Q17. Annual effective rent growth is forecast to be 3.6% in 2017, and average 3.5% from 2017 to 2019. The annual effective rent growth has averaged 1.9% per year since 3Q96.

The submarket's occupancy rate increased from 94.5% in 1Q17 to 94.6% in 2Q17, and was down from 94.9% a year ago. The submarket's occupancy rate was above the market average of 94.4% in 2Q17. For the forecast period, the submarket's occupancy rate is expected to increase to 94.7% in 2017 and average 94.7% from 2017 to 2019. The submarket's occupancy rate has averaged 93.0% since 3Q96. Median household income within 1, 3, and 5 mile radii are $49,149, $69,266, and $68,085 respectively. Population within a 5-mile radius is 131,560.

Demographic Information

Demographics
Distance from Property 1 Mile 3 Miles 5 Miles
Population (2017) 10,277 57,887 131,560
Population (2022) 11,071 62,238 141,271
Population Growth (2017-2022) 7.7% 7.5% 7.4%
Median HH Income  $49,149 $69,266 $68,085
Median Home Value $151,981 $170,597 $174,461
% of Renter Households 37.6% 23.2% 25.2%

Demographic information above was obtained from CoStar.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $13,784,000
Equity $3,756,840
Total Sources of Funds $17,540,840
Uses of Funds Cost
Purchase Price $16,000,000
CapEx Reserve $750,000
Real Estate Company Acquisition Fee $240,000
North Capital Broker Dealer Fee $72,000
Lender Origination Fee $137,840
Closing Costs $240,700
Working Capital $100,300
Total Uses of Funds $17,540,840
Debt Assumptions

The expected terms of the debt financing are as follows:

  • Lender: Freddie Mac
  • Estimated Proceeds: $13,784,000
  • Estimated Rate (Floating): 232 basis points over the 1-Month LIBOR (estimated to be 3.57% as of 10/02/17)
  • Amortization: 30 years, with four years of interest-only
  • Term: 10 years
  • Prepayment Penalty: One year lock-out followed by a 1% prepayment thereafter. No prepayment premium applies during the last three (3) months of the loan term.

The maximum lifetime interest rate ceiling is 5.75%. An interest rate cap with a 3-year term is required and included in the transaction capitalization (within closing costs).

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

The Target will make distributions to investors (The Company and Real Estate Company, collectively, the "Members") as follows:  

  1. To the Members, in proportion to, and to the extent of, their accrued but unpaid preferred returns (8.0%).
  2. To the Members, in proportion to, and to the extent of, their unreturned capital.
  3. 70.0% / 30.0% (70.0% to Members / 30.0% to the Real Estate Company) of excess cash flows and appreciation to a 16.0% IRR to Members. 
  4. 60.0% / 40.0% (60.0% to Members / 40.0% to the Real Estate Company) 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).

The Company will distribute 100% of its share of excess cash flow (after expenses) to the members of The Company (the RealtyMogul.com investors). The manager of The Company will receive a portion (up to 10% pro-rata) of the Real Estate Company's promote interest. Distributions are projected to start in June 2018 and are projected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Real Estate Company, who may decide to delay distributions for any reason, including maintenance or capital reserves. 

Cash Flow Summary
  Year 1 Year 2 Year 3 Year 4   Year 5   Year 6 Year 7
Effective Gross Revenue $2,025,290 $2,172,620 $2,246,007 $2,315,729 $2,385,201 $2,456,757 $2,530,460
Total Operating Expenses $934,495 $1,005,964 $1,039,078 $1,064,770 $1,091,098 $1,118,163 $1,145,986
Net Operating Income $1,090,794 $1,166,656 $1,206,929 $1,250,960 $1,294,103 $1,338,594 $1,384,474
Realty Mogul 93, LLC Cash Flows
  Year 0 2017 2018 2019 2020 2021 2022 2023 2024
Distributions to
Realty Mogul 93, LLC Investors
($1,820,000) $36,100 $225,600 $239,481 $252,453 $248,347 $176,066 $186,373 $3,073,943
Net Earnings to Investor
- Hypothetical $50,000 Investment
($50,000) $992 $6,198 $6,579 $6,936 $6,823 $4,837 $5,120 $84,449
Fees

Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:

One-Time Fees:
Type of Fee Amount of Fee Received By Paid From Notes
Acquisition Fee $240,000 Real Estate Company Capitalized Equity Contribution 1.5% of the Property purchase price
Broker-Dealer Fee The greater of 4.0% or $50,000 North Capital (1) Capitalized Equity Contribution 4.0% based on the amount of equity invested by Realty Mogul 93, LLC
Construction Management Fee 10.0% of hard costs Real Estate Company Capitalized Equity Contribution  
Recurring Fees
Type of Fee Amount of Fee Received By Paid From Notes
Property Management Fee 3.5% of effective gross revenues Strategic Management Partners, a third party property management firm Operating Cash Flow  
Asset Management Fee 2.0% of effective gross revenues Real Estate Company Operating Cash Flow  
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 93, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of Realty Mogul 93, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2)

(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 Real Estate Company or others.  Realty Mogul, Co., RM Manager, LLC, and The Company, 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

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.


Non-Transferability of Securities

The transferability of membership interests in The Company 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. Moreover, the estimated investment holding period described herein is only a projection, and there can be no assurance when or if an investment may be liquidated. 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.


Credit Risk

The Company's investment in The Target will relate to a Property that will undergo some degree of renovation, a situation that does not always meet the financing criteria for conventional financing from institutional sources. Credit risk is inherent in the real estate financing industry, and there can be no assurance that the credit worthiness of the Real Estate Company will be sufficient to assure the full repayment of the The Company's common equity investment and thus The Company's ability to provide returns (or even repayment of principal) to investors.


Mortgage Risk

The Real Estate Company 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 Real Estate Company controlled capital escrow account.


Management Risk

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


Manager of The Company May Participate in Real Estate Company's Promote Interest

The manager of The Company may 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 The Company. Investors must recognize and agree to waive and bear the risk of this conflict of interest.


Capital Call Risk

The amount of capital that may be required by The Target from The Company is unknown, and although The Target 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. The Company does not intend to participate in a capital call if one is requested by The Target, and in such event the manager of The Target may accept additional contributions from other members of The Target. Amounts that the manager of The Target advances on behalf of The Company 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 The Company's interest in The Target will suffer a proportionate amount of dilution.


Real Estate Market Risk

The Target's economic performance and value, and thus the value of investors’ investment in The Company, is subject to various risks associated with the Property. Real estate markets are affected by many factors, such as general economic conditions, supply and demand for real estate investments, interest rates, the availability of financing, and other factors. Investments related to real estate are also subject to market valuation risks that may be caused by changing economic and local market conditions such as local real estate market conditions. The Property’s economic performance and value, and thus the value of investors’ investment in The Company, is subject to such risks, all of which are beyond the control of both The Company and The Target.


Flood Risk

The Property is located in a flood zone which is subject to frequent and potentially destructive flooding.  There can be no assurance that a flood will not cause significant damage to the Property, in which case the business and financial condition of the Property, and thus the Company, would be materially adversely affected.


Interest-Only Loan

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


Floating Interest Rate

The loan being used to acquire the Property is expected to have a floating rate based on the one-month London Interbank Offered Rate (“LIBOR”). If LIBOR increases the interest payments due on the loan are expected to increase as well. This could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.


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 Real Estate Company and others. Realty Mogul, Co., RM Manager, LLC, and The Company, 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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