Staff Menu (IO ID#: 444706):
EDIT IO DOCUMENTS
Canceled
Multifamily
Deville Apartments
Beachwood, OH
INVESTMENT STRATEGY
INVESTMENT TYPE
Equity
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Offered By Next Level Equities, LLC
20.0%* TARGET IRR 19.0%-21.0%
5.0%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 3 years
Estimated First Distribution 12/2017
*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
Value-add acquisition of a multifamily asset with institutional-quality sponsorship and management.
Property at a glance
Year Built / Renovated 1964 / 2006
# of Units 246
Current Occupancy 95%
Parking Ratio 1.76/Unit
Acquisition Price

$31,250,000

Investment Highlights
Experienced Real Estate Company: Principals of the Real Estate Company have collectively owned and managed over $600 million in real estate overall, including 4,100 multifamily units in Ohio
Well Located: The Property is situated in a major market and adjacent to retail amenities, public transportation and public facilities
Value Add Potential: The opportunity exists to improve dated interior finishes throughout the Property and potentially realize significant rental premiums
Management
Cumulative Distributions

Next Level Equities, LLC

Next Level Equities is a private real estate investment and operating company founded through a joint venture between Banyan Capital Partners and BM Polaris with the mission to acquire opportunistic real estate assets. The Real Estate Company is managed by Phil Philippou (Banyan), Chad Kiner (BM), and Jeffrey Morris (BM). Banyan Capital Partners will be the operator; responsible for the execution of the business plan, while BM Polaris' role will include responsibility for the formulation of the debt-equity structure and capital partner contact. Banyan Capital Partners and BM Polaris​ have worked together on one prior transaction, a $33.20 million acquisition and renovation of a 292 unit apartment building in Westerville, OH. 
 
The Real Estate Company and its principals have been operating in Ohio since 2008 and, since inception, have acquired over 2,000 multifamily units in the state of Ohio alone, valued at over $200,000,000. In the last eighteen months, The Real Estate Company or its affiliates have closed on over $100,000,000 in transaction volume. A Banyan Capital affiliate, Banyan Living, LLC will be the Property Manager.
 
  • Phil Philippou
    Principal
  • Jeffrey Morris
    Principal
  • Chad Kiner
    Principal
Phil Philippou
Principal
Principal of Banyan Capital Partners LLC, Mr. Philippou has a BS in Finance and Economics from Fordham University and is licensed in New York, Connecticut, Georgia, and is certified to practice in Ohio. In 1996, Phillip Philippou formed Commercial Mortgage Funding LLC, a high service, boutique debt and equity placement firm based in New York City. At Commercial Mortgage Funding LLC, Mr. Philippou developed a track record of successful Real Estate Advisory consulting. Of particular note were Mr. Philippou’s successful string of 1031 exchange sales, purchases, and subsequent financings, in addition, Phillip excelled at creative Joint Venture structures, which have resulted in “win-win” situations, both for Developers and Property Owners.
 
Phillip’s unique Family Office/High Net Worth clientele of mostly Greek-Americans have resulted in Phillip being able to act in a unique advisory-manager capacity where he was solely responsible for the re-structuring, re-positioning of legacy portfolios into the modern, cash flowing asset base that you see today. In the past twenty years, Phillip Philippou/Banyan has had a proven track record in Finance, Management, Lease-up, Renovation and Repositioning of assets to optimize value. All of Banyan’s value enhancement strategies have an eye towards high overall return on investment through thoughtful risk adjusted, and tax optimization strategies.
Jeffrey Morris
Principal
After attending Marietta College, Jeff formed his own mortgage banking company, Morris Company Incorporated, in 1980. In 1984 Morris, Smith & Feyh, Incorporated was formed and since then Jeff has been directly involved in the placement of more than $6.0 billion of debt for all classes of commercial real estate properties. Since 2008 he has been instrumental in seeing Morris, Smith & Feyh double in size by diversifying its business lines to provide financing for all types of commercial and investment real estate properties located throughout the continental United States. Today, the company has been renamed MSF Real Estate Capital and Jeff oversees all aspects of MSF’s loan origination process, including the establishment of more than a dozen mortgage correspondent relationships and growth of a loan servicing portfolio that is nearly $1 billion. Jeff is also the President of JRM Equities, Inc., and numerous affiliated or related entities that are actively engaged in the purchase or construction of institutional grade multifamily, retail and office properties located in Ohio, Indiana and Florida. Through JRM, Jeff has been involved in the acquisition or construction of more than $250 million of real estate assets since 1994 and today has an aggregate fair market value in excess of $350 million. Jeff serves as a lead investor and managing member in all of these transactions. Additionally, he is a founder and principal shareholder of Horizons Asset Management, LLC, a large property and asset management firm headquartered in Columbus, Ohio.
Chad Kiner
Principal

Mr. Kiner is a Commercial Real Estate professional with more than 18 years of experience in a variety of roles primarily related to commercial real estate finance and ownership. In 2010, Chad joined MSF as Assistant Vice President of Loan Originations where his responsibilities initially included supporting upper management on the origination of new lending opportunities. Prior to joining MSF, Chad was with Exel, Inc., as an asset/portfolio manager, where he managed 300 owned and/or leased industrial building in the continental USA. At Developers Diversified Realty in Cleveland, Ohio, Chad was on the project team that worked on a $2.2 billion acquisition of over 100 retail properties purchased from Benderson Development. In 2005 he returned to Columbus and joined Collateral Mortgage Capital where he participated in financing activities on industrial, office, retail and multifamily properties as a Real Estate Analysis/Assistant Loan Officer. Since graduating from College, Chad has also acquired, divested and managed his own portfolio of real estate.

Track Record

SCHEDULE OF REAL ESTATE
PROJECT NAME LOCATION ROLE PROPERTY TYPE UNITS ACQUISITION DATE ACQUISITION PRICE
NEXT LEVEL EQUITIES - 2016 TO PRESENT          
VANGUARD OF POLARIS WESTERVILLE, OH PRINCIPAL MF 292 DEC-2016 $23,000,000
SUBTOTAL       292   $23,000,000
             
PHIL PHILIPPOU - 2003 TO PRESENT            
HEIGHTS OF WORTHINGTON PLACE WORTHINGTON, OH THIRD PARTY MANAGER MIXED USE 193 MARCH-2015 $37,500,000
SOMERSET APARTMENTS AVON LAKE, OH THIRD PARTY MANAGER MF 221 SEPT-2008 $17,600,000
PEBBLEBROOK APARTMENTS KENT, OH THIRD PARTY MANAGER MF 288 OCT-2012 $26,000,000
LINDEN LANE APARTMENTS CUYAHOGA FALLS, OH THIRD PARTY MANAGER MF 144 OCT-2012 $14,000,000
BRIGHTON PLACE STOW, OH THIRD PARTY MANAGER MF 82 MARCH-2013 $5,400,000
PARTRIDGE RUN APARTMENTS STOW, OH THIRD PARTY MANAGER MF 60 MARCH-2013 $1,800,000
CAMBRIDGE COURT BROOK PARK, OH THIRD PARTY MANAGER MF 120 MARCH-2015 $8,000,000
PORTSIDE APARTMENTS SCHEFFIELD LAKE, OH THIRD PARTY MANAGER MF 232 MARCH-2015 $15,000,000
THE RAVINES AT ROCKY RIDGE WESTERVILLE, OH THIRD PARTY MANAGER MF 136 MARCH-2015 $12,000,000
THE RESERVE AT WALNUT CREEK GAHANA, OH THIRD PARTY MANAGER MF 148 MARCH-2015 $14,000,000
CORTLANDVILLE CROSSING CORTLAND, NY THIRD PARTY MANAGER RETAIL - JAN-2006 $14,100,000
STAPLES PLAZA WALLINGFORD, CT THIRD PARTY MANAGER RETAIL - JUNE-2005 $9,250,000
SUBTOTAL       1,624   $174,650,000
             
JEFFREY MORRIS - 1990 TO PRESENT            
POLARIS CROSSINGS APTS COLUMBUS, OH PRINCIPAL MF 248 JAN-2015 $9,000,000
MADDENS POINTE APTS COLUMBUS, OH PRINCIPAL MF 72 JAN-2015 $6,000,000
EASTON VILLAGE APTS COLUMBUS, OH PRINCIPAL MF 1,064 JAN-2015 $55,000,000
LEVEQUE TOWER APTS COLUMBUS, OH PRINCIPAL MF 77 JAN-2015 $14,000,000
225 COMMONS COLUMBUS, OH PRINCIPAL MF/OFFICE 120 JAN-2016 $58,000,000
THE LANE COLUMBUS, OH PRINCIPAL MIXED 108 JAN-2013 $19,000,000
RIVER RIDGE CENTER DUBLIN, OH PRINCIPAL RETAIL - JAN-2016 $15,000,000
COURT HILL APTS LOS ANGELES, CA PRINCIPAL MF 49 JAN-2017 $11,500,000
THE GRAVITY COLUMBUS, OH PRINCIPAL MF/OFFICE 234 NOV-2016 $71,000,000
ECHO APTS LOS ANGELES, CA LIMITED PARTNER MF 49 JAN-2015 $10,000,000
2300 BEVERLY APTS LOS ANGELES, CA LIMITED PARTNER MF 49 JAN-2016 $10,200,000
TWENTY FIVE TEN APTS LOS ANGELES, CA LIMITED PARTNER MF 47 JAN-2014 $10,000,000
ASHLEY OAKS APTS W. LAFAYETTE, IL LIMITED PARTNER MF 128 JAN-2006 $4,500,000
BAYBERRY APTS BROWNSBURG, IN LIMITED PARTNER MF 152 JAN-2007 $9,500,000
ARBOR GLEN APTS MICHIGAN CITY, IN LIMITED PARTNER MF 253 JAN-2007 $10,500,000
FOUNTAIN LAKE APTS FT. WAYNE, IN LIMITED PARTNER MF 156 JAN-2008 $4,600,000
REFLECTIONS APARTMENTS MISHAWAKA, IN LIMITED PARTNER MF 116 JAN-2012 $5,000,000
RETREAT AT ELKHART APTS ELKHART, IN LIMITED PARTNER MF 170 JAN-2015 $7,800,000
HAWTHORNE COMMONS APTS DUBLIN, OH LIMITED PARTNER MF 86 JAN-2016 $19,000,000
REDBUD COMMONS APTS PICKERINGTON, OH LIMITED PARTNER MF 95 JAN-2017 $22,500,000
FLATS AT POLARIS COLUMBUS, OH LIMITED PARTNER MF 24 JAN-2017 $1,400,000
STONE CROSSINGS APTS SPRINGFIELD, OH THIRD PARTY MANAGER MF 142 JAN-2005 $9,500,000
GOLFVIEW OFFICE BLDG COLUMBUS, OH THIRD PARTY MANAGER OFFICE - JAN-1990 $1,200,000
SHOPPES AT MASON MASON, OH THIRD PARTY MANAGER RETAIL - JAN-2012 $8,500,000
SHOPPES AT STERKEL MANSFIELD, OH THIRD PARTY MANAGER RETAIL - JAN-2006 $2,500,000
ERIE COMMONS MENTOR, OH THIRD PARTY MANAGER RETAIL - JAN-2011 $15,075,000
SUBTOTAL       3,439   $410,275,000
             
TOTAL       5,355   $607,925,000
Business Plan

In this transaction, RealtyMogul.com investors are to invest in Realty Mogul XXXXXX, LLC, which is to subsequently invest in XXXXXX, LLC, a limited liability company that will hold title to the Property. The Real Estate Company will purchase the Property for $31,250,000 ($127,033 per unit) and the total project cost is expected to be $40,430,247 ($164,351 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 new appliances, granite counters, painted cabinetry with new handles, chrome / nickel ceiling fans, and new lighting packages. Exterior / amenity improvements will consist of painting, carpentry, new landscaping and drainage, a dog park, renovating pools, resealing parking lots, and a new signage package.

The Real Estate Company plans to renovate all 246 units over 24 months (10.3 units per month), which they state is a comfortable pace given their track record and construction team, however the pro forma financials in the Issuer Document Package attached to this offering assume only seven renovations are completed per month. The pro forma financials assume that renovated units will be able to achieve rental premiums of $142 per unit per month upon completion.  

Property
Property Details

Built in 1964 and renovated in 2006, the Property is comprised of one (29 units), two (164 units), three (51 units), and five-bedroom (2 units) floor plans across 246 units and five buildings totaling 313,014 rentable square feet. The weighted average unit size and rent per unit is 1,272 square feet and $1,307 ($1.03 per square foot), respectively. Amenities at the Property include laundry facilities, storage space, courtyards, heated pool, fitness center, walking trails, picnic and BBQ area, assigned parking, on-site bus stop, and 24-hour maintenance. The Property includes 433 on-site parking spaces (1.76 per unit). 

In-Place Unit Mix

 Unit Type   # of Units   % of Total   Unit (SF)   Total SF   Rent (Mon.)   Mo Rent/SF   Annual Rents 
 1 Bed, 1 Bath  28 11% 955 26,739 $1,096 $1.15 $368,153
 1 Bed, 2 Bath  1 0% 1,060 1,060 $1,466 $1.38 $17,588
 2 Bed, 1 Bath  11 4% 1,093 12,020 $1,183 $1.08 $156,178
 2 Bed, 2 Bath  153 62% 1,267 193,815 $1,272 $1.00 $2,334,925
 3 Bed, 2 Bath  51 21% 1,434 73,140 $1,478 $1.03 $904,281
5 Bed, 3 Bath  2 1% 3,120 6,240 $3,272 $1.05 $78,521
 Totals/Averages  246 100% 1,272 313,014 $1,307 $1.03 $3,859,645

 

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Comparables

Sale Comparables The Vue Hickory Hill Park Hill Remington Apartments Total / Averages Subject
             
Date August-16 August-17 June-17 December-16    
Submarket Beachwood Brunswick Fairlawn Westlake   Beachwood
Year Built/Reno 2015 1974 1995 1992 1994 1964/2006
# of Units 348 178 200 283 252 246
Building SF 456,240 195,800 216,000 248,757 279,199 290,236
Purchase Price $85,260,000 $8,200,000 $23,800,000 $31,000,000 $37,065,000 $31,250,000
$ per Unit $245,000 $46,067 $119,000 $109,541 $129,902 $127,033
Cap Rate N/A 7.00% 6.10% 5.50% 6.20% 6.30%

 

Lease Comparables
(Post Renovation)
The Vue Atrium in the Village Four Seasons IV  Total / Averages Subject 
           
Submarket Beachwood Beachwood Beachwood   Beachwood
Occupancy 95% 91% 93% 93% 95%
Units (#) 348 134 132 205 246
Year Built 2015 1987 2015 2006 1964
Average SF  1,283 1,441 1,358 1,361 1,272
Average Rental Rate  $2,258 $2,154 $1,895 $2,102 $1,748
Average $/SF $1.76 $1.49 $1.40 $1.55 $1.37
Distance (miles from subject) 0.2 3.5 2.5 2.1 -

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

 

Location

The Property is located in the Beachwood submarket within the greater Cleveland-Elyria MSA as defined by Axiometrics. Per CoStar, developers had previously shied away from the Beachwood submarket because the affluent population, but the area's excellent schools and an easy commute into the city have raised demand for apartments, and a two decade supply drought came to an end this cycle. Multiple high-quality projects have delivered since 2010, and while demand has kept up there have been adverse effects. Vacancies are currently under the historical average in spite of the recent construction, but have trended up over the last two years. This has hampered rent gains, and while investment activity spiked in 2016, much of the cycle has been fairly muted.

Market Overview

Per Axiometrics, effective rent remained 0.0% from $917 in 2Q17 to $917 in 3Q17, which resulted in an annual growth rate of 2.0%. Annual effective rent growth is forecast to be 1.7% in 2018, and average 2.8% from 2019 to 2021. Annual effective rent growth has averaged 1.3% since 4Q98. The market's annual rent growth rate was below the national average of 2.2%. Out of the 120 markets ranked by Axiometrics nationally, Cleveland-Elyria, OH Metro Area was 102nd for quarterly effective rent growth, and 66th for annual effective rent growth for 3Q17.  The market's occupancy rate increased from 95.3% in 2Q17 to 95.4% in 3Q17, but was down from 96.0% a year ago. The market's occupancy rate was above the national average of 95.0% in 3Q17. For the forecast period, the market's occupancy rate is expected to be 94.9% in 2018, and average 95.0% from 2019 to 2021. The market's occupancy rate has averaged 93.6% since 3Q95.

Submarket Overview

Effective rent decreased 3.3% from $1,601 in 2Q17 to $1,549 in 3Q17. The submarket's annual rent growth rate of -4.8% was below the market average of 2.0%. Out of the 13 submarkets in the market, the Beachwood submarket ranked 13th for quarterly effective rent growth and 13th for annual effective rent growth for 3Q17. Annual effective rent growth is forecast to be -2.9% in 2017, and average 0.0% through 2017 to 2019. The annual effective rent growth has averaged 1.2% per year since 2Q03. The submarket's occupancy rate increased from 88.4% in 2Q17 to 90.5% in 3Q17, and was down from 95.3% a year ago. The submarket's occupancy rate was below the market average of 95.4% in 3Q17. For the forecast period, the submarket's occupancy rate is expected to decrease to 89.0% in 2017 and average 91.3% from 2017 to 2019. The submarket's occupancy rate has averaged 94.2% since 2Q03.

Demographic Information

Demographics

Distance from Property 1 Mile 3 Miles 5 Miles
Population (2017) 4,758 80,596 250,754
Expected Growth (2017-2022) 0.50% -0.70% -1.10%
Median Household Income (2017) $105,260 $63,164 $48,868
Median Home Value (2017) $269,290 $176,412 $130,062

*Demographic information was obtained from CoStar.  

Photos

current
current
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $35,694,720
Equity $4,735,527
Total Sources of Funds $40,430,247
Uses of Funds Cost
Purchase Price $31,250,000
Broker-Dealer Placement Fee $100,000
Acquisition Fee $312,500
Loan Fee $356,947
Closing Costs $500,000
CapEx Reserve $6,660,800
Contingency $500,000
Start-Up Expense $200,000
Tax Settlement Reserve $550,000
Total Uses of Funds $40,430,247
Debt Assumptions

The projected terms of the debt financing are as follows:

• Lender: Protective Life Insurance Company
• Loan Type: Bridge
• Recourse: Non-recourse (Standard Carveouts)
• Loan Amount: $35,694,720 ($145,100/unit)
• CapEx Holdback: $6,660,800 ($27,076/unit)
• Interest Rate: 4.25% (Fixed)
• Loan-to-Purchase (Net of Future Funding): 92.3%
• Loan-to-Cost: 88.3%
• Term: 10 Years
• Amortization: 25 Years
• Interest Only: 18 Months
• Prepayment: 3.0% years 1-3, 2.0% years 4-6, 1% thereafter.
 
*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 intends to make distributions of operating cash flows to investors (The Company, Other LP investors and the Real Estate Company, collectively, the "Members") as follows:

Operating Income, Refinance, and Sales Proceeds

  1. To the Members, pari passu, all excess operating cash flows to a 10.0% IRR to the Members,
  2. 70.0% / 30.0% 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 and fees) to the members of The Company (the RealtyMogul.com investors).  The Manager of The Company will receive a portion (up to 10%) of The Real Estate Company's promote.

Distributions are expected to start in June 2018 and are expected to continue on a quarterly basis thereafter. These distributions are at the discretion of the The Real Estate Company, who may decide to delay distributions for any reason, including maintenance or capital reserves. 

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 $312,500 The Real Estate Company Capitalized Equity Contribution 1.0% of Property purchase price
Broker-Dealer Fee $120,000 North Capital (1) Capitalized Equity Contribution 4.0% based on the amount of equity invested by The Company
Construction Management Fee 10.0% of hard costs The Real Estate Company Capitalized Equity Contribution  
Recurring Fees:
Asset Management Fee 1.0% of effective gross revenues The Real Estate Company Operating Cash Flow  
Property Management Fee 4.0% of effective gross revenues The Real Estate Company Operating Cash Flow  
Management and Administrative Fee 1.0% of amount invested in The Company RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of The Company 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 Sponsor 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.

Documents
Offering Documentation

Disclaimers
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.


 

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 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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