New Standard Equities was formed in 2010 in an effort to capitalize on the extraordinary dislocation in the post‐financial crisis real estate investment market. With significant experience in buying and operating large, institutional-quality multifamily properties throughout the Western U.S., the company is deploying private and institutional capital to purchase and operate apartment assets that offer steady, long-term cash flow to its investors. New Standard Equities’ full-service real estate platform is actively engaged in property management, asset management, construction management and project consultation.
New Standard Equities has successfully operated multifamily assets in major markets throughout the Western U.S. There are inherent risks in the task of operating apartment assets, but the firm’s strict philosophy is to minimize those risks by targeting markets it knows and understands. In-fill, supply-constrained markets that offer long-term job growth potential are among the most important dynamics.
RealtyMogul.com has invested in two prior transactions with the Real Estate Company - Village Fair and Oak Harbor Apartments. As of Q2 2017, the Real Estate Company has renovated three units at Village Fair since inception and all three have been leased at proforma rents. In addition, the current average in-place rent is 5.1% higher than the in-place rent at acquisition. The Real Estate Company has been closely monitoring property expenses while efforts are being made to increase rents. As a result of lower than projected expenses, Net Operating Income since inception is 6.4% above proforma. As of Q2 2017, Oak Harbor is performing well as the Real Estate Company has been able to outperform proforma rents without doing any unit renovations. The current average in-place rent of $988/month is 6.8% above the proforma post-renovation rent of $928/month. Furthermore, the average in-place rent is 28.4% above the average rent at acquisition. Oak Harbor's performance is trending upwards as Q2 2017 experienced the highest Net Operating Income since acquisition, an increase of 52.2% year-over-year.
Built in 2004, the Property consists of 28 multifamily units and two retail units, combining to 34,994 square feet across five floors, all located on a 0.35-acre lot. The multifamily unit mix is comprised of 21 two-bedroom units and seven three-bedroom units with a weighted average size and rent per unit of 1,146 square feet and $2,108 per unit ($1.84 per square foot), respectively. The commercial rent roll is comprised of two suites totaling 2,915 square feet with a weighted average base rent of $3,516 ($2.39 per square foot). The Property is currently 100% occupied.
The Property features wood-frame construction on concrete slab foundations, with flat roofing, gas utilities, exterior breezeways, and an individual patio or balcony for each unit. Amenities at the Property include a landscaped outdoor courtyard, gated subterranean parking (56 resident spaces plus nine retail spaces), and side-by-side washers and dryers in each unit.
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| Unit Type | # of Units | Unit Square Feet | Total Square Feet | Rent per Unit | Rent per Square Foot |
|---|---|---|---|---|---|
| 2 Bed, 2 Bath (Section 8) | 2 | 1,116 | 2,232 | $1,154 | $1.03 |
| 2 Bed, 2 Bath | 19 | 1,063 | 20,197 | $2,125 | $2.00 |
| 3 Bed, 2 Bath (Section 8) | 1 | 1,322 | 1,322 | $1,300 | $0.98 |
| 3 Bed, 2 Bath | 6 | 1,388 | 8,328 | $2,500 | $1.80 |
| Total | 28 | 1,146 | 32,079 | $2,108 | $1.84 |
| Tenant | Square Feet | Rent | Rent per Square Foot | Lease Expiration |
|---|---|---|---|---|
| Project Beauty | 1,540 | $4,050 | $2.63 | August 31,2018 |
| EU World | 1,375 | $2,917 | $2.12 | October 31, 2018 |
| Total | 2,915 | $3,516 | $2.39 |
| Property | Transaction Date | Transaction Type | Units (#) | Year Built | Price | $ per Unit |
|---|---|---|---|---|---|---|
| Trio Pasadena | October-16 | Sale | 306 | 2005 | $154,000,000 | $503,268 |
| 144 N Michigan Avenue | August-17 | Sale | 15 | 1987 | $6,300,000 | $420,000 |
| 888 Magnolia Avenue | May-17 | Sale | 8 | 1965 | $2,850,000 | $356,250 |
| 4951 Rosemead Boulevard | May-17 | Refinance | 24 | 2008 | $8,030,000 | $334,583 |
| 1752 N Kingsley Drive | Nov-15 | Refinance | 13 | 2006 | $6,700,000 | $515,385 |
| 296 N Oakland Avenue | June-17 | Sale | 25 | 1957 | $6,100,000 | $244,000 |
| Average | 65 | 1988 | $30,663,333 | $395,581 | ||
| Subject | October-16 | 30 | 2004 | $14,000,000 | $466,667 |
| Property | Submarket | Occupancy | Units (#) | Year Built | Square Foot Per Unit | Rent per Unit | Rent per Square Foot |
|---|---|---|---|---|---|---|---|
| Avalon | Pasadena | 95% | 120 | 2004 | 855 | $2,673 | $3.13 |
| Trio Pasadena | Pasadena | 96% | 306 | 2005 | 888 | $2,547 | $2.87 |
| Andalucia | Pasadena | 75% | 118 | 2017 | 951 | $3,014 | $3.17 |
| Westgate | Pasadena | 99% | 480 | 2010 | 938 | $2,853 | $3.04 |
| Average | 97% | 256 | 2009 | 908 | $2,772 | $3.05 | |
| Subject - In-Place | 100% | 30 | 2004 | 1,146 | $2,108 | $1.84 | |
| Subject - Projected Post-Renovation | 100% | 30 | 2004 | 1,146 | $3,105 | $2.74 |
The comparables included in the above tables exclude all retail space at the Property and were either sourced from CoStar, Real Capital Analytics, or they were provided by the Real Estate Company.
| Sources of Funds | Cost |
|---|---|
| Debt | $11,250,000 |
| Equity | $3,902,062 |
| Total Sources of Funds | $15,152,062 |
| Uses of Funds | Cost |
| Purchase Price | $14,000,000 |
| CapEx Budget | $360,400 |
| Real Estate Company Acquisition Fee | $92,200 |
| North Capital Broker Dealer Fee | $47,800 |
| Lender Origination Fee | $240,000 |
| Prepaid/Expense Reserves | $39,650 |
| Interest Reserve | $150,000 |
| Closing Costs | $97,771 |
| Working Capital | $124,241 |
| Total Uses of Funds | $15,152,062 |
The terms of the debt financing are as follows:
- Lender: Resource Real Estate
- Estimated Proceeds: $11,250,000
- CapEx Reserve: $385,000
- Interest Reserve: $150,000
- Estimated Rate (Floating): 380 basis points over the 1-Month LIBOR (1.23% Floor), estimated to be 5.03% as of 10/13/17
- Amortization: None, three (3) years of interest-only
- Term: Three (3) years
- Extension Option: Two, one (1) year extension options
- Prepayment Penalty: None
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.
The Target will make distributions to investors (The Company and Real Estate Company, collectively, the "Members") as follows:
Operating Income, Refinance, and Sales Proceeds
- To the Members, in proportion to their respective percentage interests, until each Member has received aggregate distributions such that it has received a 6.0% Preferred Return;
- To the Members, in proportion to their respective percentage interests, until each Member has received aggregate distributions such that it has received a return of its capital contribution;
- 70.0% / 30.0% (70.0% to Members / 30.0% to the Real Estate Company) of excess cash flows 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 expected 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.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Effective Gross Revenue | $838,780 | $1,084,461 | $1,177,772 |
| Total Operating Expenses | $337,295 | $354,224 | $365,239 |
| Net Operating Income | $501,486 | $730,236 | $812,533 |
| Year 0 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Distributions to Realty Mogul 96, LLC Investors |
($1,215,000) | $0 | $4,046 | $22,244 | $1,862,753 |
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $0 | $166 | $915 | $76,656 |
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 | $92,200 | Real Estate Company | Capitalized Equity Contribution | 1.0% of the Property purchase price |
| Broker-Dealer Fee | $47,800 | North Capital (1) | Capitalized Equity Contribution | 4.0% based on the amount of equity invested by Realty Mogul 96, LLC |
| Construction Management Fee | $21,624 | Real Estate Company | Capitalized Equity Contribution | 6.0% of CapEx budget |
| Recurring Fees: | ||||
| Property Management Fee | 4.0% of Effective Gross Income | Real Estate Company | Operating Cash Flow | |
| Management and Administrative Fee | 1.0% of amount invested in Realty Mogul 96, LLC | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of Realty Mogul 96, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
Notes:
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.
(2) Fees may be deferred to reduce impact to investor distributions
The above presentation is based upon information supplied by the 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.
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.