Staff Menu (IO ID#: 477060):
EDIT IO DOCUMENTS
Completed Equity
Multifamily
Raleigh-Durham Research Triangle Apartments
Durham, NC
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
Add to Watchlist
100% funded
Offered By Willow Creek Partners
16.5%* TARGET IRR 15.5%-17.5%
6.9%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 3 years
Estimated First Distribution 9/2018
*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 property by a North Carolina focused Real Estate Company.
Property At A Glance
Year Built 1986
# of Units 120
# of Buildings Nine (9)
Current Occupancy 98% as of December 2017
Parking Ratio 2.0 / Unit
Acquisition Price

$11,500,000

Amenities

Clubhouse, swimming pool, fully-equipped kitchens, fitness center, and on-site coin operated laundry machines.

Investment Highlights
Location: The Property is located in the Raleigh-Durham Research Triangle of North Carolina. Anchored by Duke University, The University of North Carolina at Chapel Hill, and North Carolina State University, the Research Triangle comprises 7,000 acres, is home to over 260 companies such as IBM Corporation, Cisco Systems, Inc. and Credit Suisse, and employs approximately 48,000 skilled workers.
Achievable Post-Renovation Rents: In-place rents are trailing the submarket by approximately 15% per Axiometrics, and post renovated rents are still marginally below average submarket rents.
Demographics: The Raleigh-Durham Research Triangle Park micromarket boasts average incomes significantly above those necessary to afford living at the Property. Expected population growth of over 10% in each of a one, three and five-mile radius from the Property over the course of the next five years.
Excellent Physical Condition of Property: The third-party Property Condition Report for the Property recognized no immediate repair items, suggesting the Property is in sound physical condition, which could lower necessary capital expenditure and repairs and maintenance during the hold period.
Management
Cumulative Distributions

Willow Creek Partners

Willow Creek Partners ("Willow Creek" or the "Real Estate Company"), is a privately-held, vertically integrated multifamily investment and management firm based in Reston, VA. Over the past three years, Willow Creek has acquired ten assets, nine of which are in North Carolina, four of which are in Greensboro, NC. Willow Creek has also recently opened an office in Raleigh, NC and upsized their team from seven employees to twelve, including a VP of Property Management, two VPs of Construction, and two Regional Managers. Willow Creek primarily targets multifamily, both conventional and student housing, in markets where economic conditions provide for increased real estate demand and aims to be long term investors in income-producing real estate. Willow Creek executes their business plans by employing a proven investment strategy comprised of three major elements: identifying markets with built-in demand drivers, focusing on secondary and tertiary markets where local knowledge can potentially create a competitive advantage, and unlocking value through rigorous underwriting and proactive asset management. RealtyMogul previously invested with Willow Creek in Hawthorne North Ridge, Lofts at Midtown, and Triangle Park Apartments. 

An investment overview of Hawthorne North Ridge can be found here: https://www.realtymogul.com/investment-opportunity/905616

An investment overview of Lofts at Midtown can be found here: https://www.realtymogul.com/investment-opportunity/633421

An investment overview of Triangle Park can be found here: https://www.realtymogul.com/investment-opportunity/477060

 

http://willowcreekpartners.co
  • Matthew Brady
    Managing Partner
  • Giuliano Salvo
    Managing Partner
  • Phat Dang
    Partner
  • Alex Gregory
    Managing Director
Matthew Brady
Managing Partner
Giuliano Salvo
Managing Partner
Phat Dang
Partner
Alex Gregory
Managing Director
Track Record

Willow Creek Properties Owned
Property Name Location Asset Units Beds Purchase Price Date Acquired
Madison Woods Greensboro, NC Multifamily 180 - $13,350,000 June 2017
Terrace at Olde Battleground Greensboro, NC Multifamily 156 - $13.608.000 June 2017
Terrace Oaks Greensboro, NC Multifamily 120 - $9,924,000 June 2017
Campus East Greensboro, NC Student Housing - 36 $2,150,000 November 2017
Blue Ridge  Raleigh, NC Student Housing - 48 $6,500,000 September 2017
Hunt Club  Winston-Salem, NC Multifamily 128 - $7,680,000 December 2017
Triangle Park  Raleigh, NC Multifamily 120 - $11,500,000 March 2018
Azalea Hill Greenville, SC Multifamily 160 - $19,000,000 June 2018
Lofts at Midtown Raleigh, NC Multifamily 184 - $24,000,000 August 2018
Stonegate & Carlton Scott  Blacksburg, VA Student Housing - 196 $10,948,000 August 2018
Hawthorne North Ridge Raleigh, NC Multifamily 600   $70,000,000 April 2019
Total     1,648 280 $175,052,000  

The above track record information was provided by the Real Estate Company and has not been independently verified by RealtyMogul​.

 

Business Plan

In this transaction, RealtyMogul.com investors are to invest in Realty Mogul 110, LLC ("The Company"), which is to subsequently invest in Triangle Park Partners LLC ("The Target"), a limited liability company that will, through a 100% wholly owned subsidiary, hold title to the Property. Willow Creek Partners (the "Real Estate Company") is under contract to purchase the Property for $11.5 million ($95,833 per unit) and the total project cost is expected to be approximately $13.2 million ($110,375 per unit). The Property will be managed by Middleburg Management, a third-party property management firm with an existing local presence in Durham, NC.

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 are expected to include installing laminate wood flooring and refinishing countertops and cabinets as necessary, replacing light fixtures, adding a tile kitchen back-splash above the sink in all units and replacing faucets, fridges, dishwashers and stoves, as necessary. Exterior and amenity improvements are expected to include repainting all the building exteriors and railings, adding shutters to the windows of all units, updating landscaping across the Property and updating the leasing clubhouse.

In addition to executing on the capital expenditure plan in order to push rents, the Real Estate Company intends to be aggressive in boosting Other Income generated by the Property. The Property currently does not take pet fees, which the Real Estate Company intends to do, and the Real Estate Company also intends to market washer and dryer leasing to tenants while using a third party vendor to oversee their installation and upkeep. The pro forma financials anticipate this additional Other Income being achieved in equal increments over the course of three (3) years.

The Real Estate Company plans to renovate all 120 units during the hold period and sell the Property in three (3) years at a 5.75% cap rate. The Real Estate Company anticipates being able to increase rents approximately $160 per unit, to a post-renovated average rent of $998 per unit, which still trails the Axiometrics average submarket rent of $1,006 per unit.  A summary of all capital expenditures planned by the Real Estate Company for the Property may be found in the table below.

Triangle Park Apartments - Capital Expenditures Budget
CapEx Item $ Amount Per Unit
Interior Rehab ($2,675 each for 120 units) $321,000 $2,675
Replace Five HVAC Units Over Hold Period $80,000 $667
Landscaping $70,000 $583
Repaint Building Exteriors and Handrails $65,000 $542
Parking Lot Sealcoat and Restripe $60,000 $500
Update Leasing Clubhouse $50,000 $417
Install Exterior Shutters Throughout Property $20,000 $167
Resurface Property Pool $20,000 $167
Other Exterior Capital Items $100,410 $834
Contingency 10.0% $78,590 $655
Total $865,000 $7,208
Property
Property Details

Built in 1986, the Property consists of one, two and three-bedroom floor plans comprising 120 units, nine apartments buildings, 241 parking spaces (2.0 parking spaces per unit), and 93,680 rentable square feet. The weighted average unit size and rent per unit is 781 square feet and $838 ($1.08 per square foot), respectively (per the December 2017 rent roll). Amenities across the Properties include a community pool, gym, and coin operated laundry machines. The Property was 98% occupied as of December 2017 and has an average historical occupancy from 2011 to 2017 of 97%, per Axiometrics.

In-Place Unit Mix
Unit Type # of Units % of Total Unit (Square Feet) Total Square Feet Rent Per Unit Rent Per Square Foot
1 Bed, 1 Bath 48 40% 671 32,208 $765 $1.14
2 Bed, 2 Bath 64 53% 834 53,376 $873 $1.05
3 Bed, 2 Bath 8 7% 1,012 8,096 $993 $0.98
Totals/Averages 120 100% 781 93,680 $838 $1.08

 


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Comparables

Sale Comparables
  Sommerset Place Triangle Place Governors Point The Summit at Avery Ferry Concord Averages Subject
Date Dec-17 Jul-17 Jun-17 Jun-17 May-17   Mar-18
# of Units 144 216 344 222 228 231 120
Year Built 1983 1985 1986 1986 1991 1986 1986
Purchase Price $14,250,000 $22,000,000 $35,250,000 $23,500,000 $22,750,000 $23,550,000 $11,500,000
$/Unit $98,958 $101,852 $102,471 $105,856 $99,781 $101,784 $95,833
Cap Rate 5.75% 5.75% 5.35% 6.45% 5.57% 5.77% -
Lease Comparables
  Arboretum at Southpoint The Hampton at RTP Heights at Meridian Averages Subject (Post-Renovation)
# of Units 360 286 339 328 120
Year Built 1996 1999 2004 2003 1986
Occupancy 78% 95% 96% 90% 98%
Average SF 945 953 1,000 966 781
Average Rental Rate $1,143 $1,201 $1,203 $1,182 $998
Average $/SF $1.21 $1.26 $1.20 $1.22 $1.28
Distance (miles from subject) 2.0 1.7 2.3 2.0  

Lease and Sale Comparable information provided by Axiometrics and the Property's appraisal.

Location

The Property is located at 5011 South Alston Avenue, in the heart of the Raleigh-Durham Research Triangle (the "Research Triangle"). 

The Research Triangle was founded in 1959 and placed in between Duke University (10 miles), the University of North Carolina at Chapel Hill (12 miles), and North Carolina State University (14 miles), with an intention of keeping educated talent leaving those universities within the state of North Carolina.  Today the Research Triangle employs over 48,000 skilled workers in fields such as: (i) biotechnology and life sciences, (ii) information technologies, (iii) business and professional services and (iv) foundation think tanks, among other industries.  There are over 260 companies in the Research Triangle, with major employers including names such as IBM Corporation, Cisco Systems, Inc., Credit Suisse and Biogen, among many others.  Since its inception the Research Triangle has been home to companies which have been awarded over 3,200 patents and received approximately 2,000 trademarks for their work therein, and over $1 billion of investment into the Research Triangle has occurred over the past five years.

The Property's location in the southern portion of the Research Triangle paces it directly next to AgBiome and Novozymes North America, a pair of biotechnology companies.  The Property is located approximately one mile away from Research Triangle High School, approximately five miles from The Streets at Southpoint, a 2002 construction mall with over 1.3 million rentable square feet and 150 stores, and approximately seven miles from the Raleigh-Durham International Airport.  


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Market Overview 

Per Axiometrics, effective rent in Durham-Chapel Hill, NC grew by 1.7% in 2017. Annual effective rent growth is forecast to be 2.8% in 2018, and average 2.5% from 2019 to 2021. Annual effective rent growth averaged 3.5% from 2010 - 2017. The market's annual rent growth rate was below the national average of 2.3%.  The market's occupancy rate was 94.4% as of year-end 2017, and is expected to average 95.0% during the Property's hold period.  The market's occupancy rate has averaged 94.9% from 2010 - 2017.

Submarket Overview

Per Axiometrics, effective rent in the South Durham submarket increased 2.8% in 2017, which was slightly below the Durham-Chapel Hill overall market growth rate of 3.3%.  However, the submarket had the highest occupancy in 2017 of any submarkets in the Durham-Chapel Hill market, and the forecasted average occupancy of the submarket from 2018-2021 is 95.4%, which is 0.8% higher than the market forecast of 94.6%.  For the period from 2011 to 2017 the submarket has averaged an occupancy of 94.9%.

Demographic Information

Demographics

Distance from Property 1 mile 3 miles 5 miles
Population (2017) 1,552 32,583 109,570
Population (2022) 1,716 36,025 121,945
Average Age 33 35 35
Median Household Income $72,990 $85,809 $93,916
Median Household Income $46,657 $74,013 $73,187
Average Household Size 2.1 2.2 2.3
Median Home Value $194,525 $223,429 $235,816
Population Growth 2017-2022 10.6% 10.6% 11.3%

Demographic information above was obtained from CoStar.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $8,091,000
Equity $5,199,000
Total Sources of Funds $13,290,000
Uses of Funds Cost
Purchase Price $11,500,000
CapEx Reserve $865,000
Real Estate Company Acquisition Fee $172,500
North Capital Broker Dealer Fee $50,600
Lender Origination Fee $80,910
Buyer's Broker Fee $150,000
Tax and Insurance Reserve $113,270
Other Closing and Pursuit Costs $218,510
Overfund Cash Escrows $89,210
Working Capital $50,000
Total Uses of Funds $13,290,000
Debt Assumptions

The expected terms of the debt financing are as follows:

  • Lender: Berkeley Point Capital, LLC
  • Estimated Proceeds: $8,091,000
  • Estimated Rate: One-Month LIBOR + 2.22% (3.93% all-in as of March 2018)
  • Required Interest Rate Cap: Three-year cap with maximum interest rate of 6.25%
  • Amortization: 30 years, with four years of interest-only
  • Term: 10 years
  • Prepayment Penalty: One-year lockout period, 1.0% prepayment premium thereafter if paid off after the lockout period. No prepayment premium for last (3) three months of loan term.

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 The Company and WCP Triangle Park LLC (together the "Members") as follows:  

Operating Income, Refinance, and Sales Proceeds

  1. To the Members, pari passu until each has received a 9.0% IRR,
  2. 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 Realty Mogul 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 September 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 One Year Two Year Three
Effective Gross Revenue $1,257,064 $1,400,304 $1,490,813
Total Operating Expenses $553,856 $570,566 $585,723
Net Operating Income $703,208 $829,738 $905,091
Realty Mogul 110, LLC Cash Flows
  Year 0 2018 2019 2020 2021
Distributions to
Realty Mogul 110, LLC Investors
($1,275,000) $48,254 $86,978 $102,280 $1,748,702
Net Earnings to Investor
- Hypothetical $50,000 Investment
($50,000) $1,892 $3,411 $4,011 $68,577
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 $172,500 Real Estate Company  Capitalized Equity Contribution 1.5% of the Property purchase price. 
Broker-Dealer Fee $50,600 North Capital (1) Capitalized Equity Contribution 4.0% based on the amount of equity invested by Realty Mogul 110, LLC.
Recurring Fees
Type of Fee Amount of Fee Received By Paid From Notes
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 110, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of Realty Mogul 110, 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.


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 the Company and its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or sell additional equity.  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 Target or from new members.  In the event that the manager of Target advances any capital on behalf of the Company, it will be deemed to be a manager loan at an interest rate that cannot be determined at this time.  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 Target will potentially suffer a proportionate amount of dilution.


Interest-Only Loan Period

The Target is expected to obtain a senior loan (the “Loan”) to, in part, acquire the apartment community.  The Loan is anticipated to have an interest-only period during the first four years of the loan 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.


Different Waterfall Terms Offered to Third-Party Investor

The Target has accepted investment terms from a third-party investor for substantially different economic terms than are being offered to The Company. The third-party investor is receiving better waterfall terms for providing a greater portion of the overall equity needed to acquire the project than The Company is providing.


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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