2.0 / Unit
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
|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|
The above track record information was provided by the Real Estate Company and has not been independently verified by RealtyMogul.
In this transaction, Realty Mogul investors are to invest in Realty Mogul 104, LLC ("The Company"), which is to subsequently invest in Lofts at Midtown 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 $24.0 million ($130,435 per unit) and the total project cost is expected to be approximately $27.2 million ($148,027 per unit). The Property will be managed by First Communities, a third-party property management firm which also manages all of the Real Estate Company's other multifamily assets and has over 30,000 units under management in the SE, SW and Mid-Atlantic US.
The Real Estate Company anticipates acquiring the Property and implementing a significantly superior interior renovation plan on the 99 units which are currently unrenovated than the seller implemented on the 85 units it previously renovated. The Real Estate Company's projected interior renovation plan, which is approximately $16,200 per unit, inclusive of contingencies, will include all stainless-steel appliances, new cabinets, granite countertops, tile flooring in the kitchen and bathroom with vinyl plank flooring elsewhere, as well as all new lights, fixtures, and vanities. The Real Estate Company anticipates executing on this capital expenditure improvement plan over the course of three (3) years and the newly renovated units achieving a premium of approximately $357 per unit over currently unrenovated units. The Real Estate Company does not intend to further renovate the 85 units which had previously been renovated by the seller from 2016-2018 at an average renovation cost of approximately $5,600 per unit.
The Real Estate Company plans to implement this capital expenditure strategy in each unit type over the first year of the hold period and monitor the ability to push rents as expected. Should the market prove unwilling to pay up for the superior renovated units, the Real Estate Company will back renovations down to the level of renovations previously executed by the seller and distribute the excess capital expenditure money to investors.
The Real Estate Company plans to renovate the remaining 99 unrenovated units during the hold period and sell the Property in four (4) years at a 5.90% cap rate. A sample of the renovation planned for the two-bed, one and a half-bath unit type may be found in the table below.
|CapEx Item||$ Amount|
|Vinyl Plank Flooring (Common Area)||$2,425|
|Tile Flooring (Kitchen and Bathroom)||$938|
|Window Faux Wood Blinds||$563|
|Unit Demolition of Flooring||$500|
|Bathroom Lighting Fixtures||$438|
|Kitchen Tile Backsplash||$388|
|Kitchen Undermount Sink||$313|
|Curved Shower Rod||$125|
Realty Mogul investors previously invested with Willow Creek on the Triangle Park transaction in March 2018. The draft first quarter operation numbers show that investment is currently slightly outperforming Realty Mogul proforma on both a NOI and occupancy basis.
Built in 1975 and heavily renovated by the seller from 2016-2018, the Property consists of one, two and three-bedroom loft style floor plans comprising 184 units, 14 apartments buildings, 367 parking spaces (2.0 parking spaces per unit), and 205,615 rentable square feet. The weighted average unit size and rent per unit are 1,117 square feet and $1,034 ($0.93 per square foot), respectively (as of June 2018). The loft style floor plans of the Property create an open and uninterrupted feel. These uncommon floor plans make the units more attractive for prospective tenants. On-site amenities include a 24-hour fitness center, a cyber café, a dog park, and a business center.
|Unit Type||# of Units||% of Total||Unit (Square Feet)||Total Square Feet||Rent Per Unit||Rent Per Square Foot|
|1 Bed, 1 Bath||13||7%||800||10,400||$808||$1.01|
|1 Bed, 1 Bath PR||15||8%||800||12,000||$950||$1.19|
|2 Bed, 1 Bath Den||22||12%||1,035||22,770||$923||$0.89|
|2 Bed, 1 Bath Den PR||16||9%||1,035||16,560||$1,080||$1.04|
|2 Bed, 1 Bath||14||8%||1,045||14,630||$945||$0.90|
|2 Bed, 1 Bath PR||14||8%||1,045||14,630||$1,085||$1.04|
|2 Bed, 2 Bath||35||19%||1,250||43,750||$980||$0.78|
|2 Bed, 2 Bath PR||30||16%||1,250||37,500||$1,185||$0.95|
|3 Bed, 2 Bath||15||8%||1,335||20,025||$1,100||$0.82|
|3 Bed, 2 Bath PR||10||5%||1,335||13,350||$1,320||$0.99|
|Averelle North Hills||Olde Raleigh||Mission Triangle Point||Triangle Place||Regency Place||Averages||Subject|
|# of Units||228||228||224||216||180||215||184|
Sale Comparable information provided via the Property's appraisal, and the Subject's cap rate is based on trailing 12-month net operating income as of June 2018, not adjusted for reserves.
|Shellbrook||North Oaks Landing||Windsor Falls||Edwards Mill||Averages||Subject|
|# of Units||238||200||276||220||234||184|
|# of Units||152||50||120||30||88||28|
|# of Units||86||110||120||152||117||131|
|# of Units||-||40||36||38||38||25|
Lease Comparable information provided via Apartments.com asking rents.
The Property is located at 214 Loft Lane, Raleigh, NC, in North Raleigh and adjacent to the Raleigh-Durham Research Triangle (the "Research Triangle"). The Property provides tenants with a convenient commute to both Downtown Raleigh (5.5 miles away) and the Research Triangle (12.6 miles away).
The Property's location in North Raleigh lends it good access to Raleigh Durham International Airport (9.1 miles away), which at 11.6 million travelers in 2017 saw a 5.6% year over year traffic increase. The Property also is near retail amenities, with both the North Hills Shopping Center (1.6 miles) and the Crabtree Mall (2.4 miles) a short drive away.
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. Per the self-reported economic brochure attached to the Financials tab of this offering, 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.
Per Costar, Raleigh's strong demographics and rapid job creation continue to lure developers and migrants to the metro. Proximity to the renowned Research Triangle, home to a plethora of medical and technology firms, in addition to an educated local population contribute to the metro’s draw. Graduates from the metro’s local universities provide a consistent pipeline to Raleigh’s workforce, providing firms with educated and skilled labor. Paired with relative affordability and robust infrastructure, Raleigh compares favorably to other markets in the region.
Per the US Census Bureau, the population in Raleigh increased by 15% between April 2010 and July 2017, or approximately 2.1% annually for that period. Per the Bureau of Labor Statistics, the unemployment rate was was 3.2% as of May 2018, down from 4.0% as of January 2018.
Per Axiometrics, effective rent in Raleigh, NC grew by 2.6% in 2017. Annual effective rent growth is forecast to be 2.3% in 2018, and average 2.8% from 2019 to 2022. Annual effective rent growth averaged 4.0% from 2010 - 2017. The market's annual rent growth rate was above the national average of 2.3% for 2017. The market's occupancy rate was 94.5% as of year-end 2017, and is expected to average 94.7% during the Property's hold period. The market's occupancy rate has averaged 94.6% from 2010 - 2017.
Per CoStar, the North Raleigh submarket is among the largest and most dynamic Raleigh submarkets and has been the target of investment in the form of developments and acquisitions this cycle. North Hills is the hot spot in the submarket and arguably the most desirable area of Raleigh for apartment renters. Demand here is driven primarily by young professionals working in the submarket, which is home to some of Raleigh’s largest office-using employers. These relatively high-paying jobs support demand for luxury units from renters who for a multitude of reasons have not ventured into homeownership.
Per Axiometrics, effective rent in the North Central submarket increased 2.8% in 2017, which was above the Raleigh, NC overall market growth rate of 2.6%. The submarket's occupancy rate of 94.5% as of year-end 2017 was in-line with the market occupancy rate, and the average forecasted average occupancy of the submarket from 2018-2022 is 95.4%, which is 0.8% higher than the market forecast of 94.8%. For the period from 2011 to 2017 the submarket has averaged an occupancy of 94.5%.
|Distance from Property||1 mile||3 miles||5 miles|
|Average Household Income||$82,176||$99,092||$96,485|
|Median Household Income||$62,504||$73,451||$70,854|
|Median Home Value||$239,881||$294,144||$293,442|
|Population Growth 2018-2023||9.9%||10.8%||10.4%|
Demographic information above was obtained from CoStar.
|Sources of Funds||Cost|
|Total Sources of Funds||$27,237,000|
|Uses of Funds||Cost|
|Real Estate Company Acquisition Fee||$360,000|
|Lender Origination Fee||$133,616|
|Buyer's Broker Fee||$150,000|
|Tax and Insurance Reserve||$118,194|
|Other Closing and Pursuit Costs||$345,190|
|Total Uses of Funds||$27,237,000|
The expected terms of the debt financing are as follows:
- Lender: Berkeley Point Capital, LLC (Freddie Mac)
- Estimated Proceeds: $16,702,000
- Estimated Rate: One-Month LIBOR + 1.85% (3.92% all-in as of July 2018)
- Required Interest Rate Cap: Three-year cap with maximum interest rate of 6.50%
- Amortization: 30 years, with five (5) 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.
The Target will make distributions to the Company, WCP Lofts at Midtown LLC, and Midtown Holdings, LLC (together the "Members") as follows:
Operating Income, Refinance, and Sales Proceeds
- To the Members, pari passu until each has received an 8.0% IRR,
- 85.0% / 15.0% (85.0% to Members / 15.0% 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 March 2019 and are expected 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 One||Year Two||Year Three||Year Four|
|Effective Gross Revenue||$2,383,781||$2,539,004||$2,805,430||$3,009,810|
|Total Operating Expenses||$958,799||$985,925||$1,016,958||$1,046,714|
|Net Operating Income||$1,424,982||$1,553,078||$1,788,472||$1,963,096|
Realty Mogul 104, LLC Investors
|Net Earnings to Investor
- Hypothetical $50,000 Investment
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|
|Acquisition Fee||$360,000||Real Estate Company||Capitalized Equity Contribution||1.5% of the Property purchase price|
|Broker-Dealer Fee||$40,000||North Capital (1)||Investor Overraise||2.6% based on the amount of equity invested by Realty Mogul 104, LLC|
|Broker-Dealer Fee||$25,000||North Capital (1)||Real Estate Company||1.6% based on the amount of equity invested by Realty Mogul 104, LLC. This fee is paid outside of the transaction and has no bearing on Realty Mogul 104, LLC investors' economics.|
|Type of Fee||Amount of Fee||Received By||Paid From||Notes|
|Management and Administrative Fee||1.0% of amount invested in Realty Mogul 104, LLC||RM Manager, LLC||Distributable Cash||RM Manager, LLC is the Manager of Realty Mogul 104, 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.
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.
All funds from investors will be held in a non-interest-bearing escrow account with Broker-Dealer as escrow agent for the benefit of the investors in accordance with Rule 15c2-4 under the Exchange Act. All investor funds will be transmitted directly by wire or electronic funds transfer via ACH to the escrow account maintained by the escrow agent per the instructions in the Subscription Agreement. Upon certification by Broker-Dealer and acceptance by the Company that all contingencies have been met, the investor’s funds will be promptly transmitted to the Company. If the contingencies fail to be satisfied during the offering period, we will instruct the Broker-Dealer to return all funds to the investors without interest, deduction, or setoff, and all of the obligations of the investor hereunder shall terminate.
Interest-Only Loan Period
The loan being used to acquire the Property is expected to have an interest-only period during the first five (5) 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 Libor Rate. If the One-Month Libor Rate 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 Property lies an area which can be subject to frequent and sometimes destructive tornadoes. There is no guarantee that the Target will obtain tornado insurance. If no insurance is obtained, a tornado could have a material adverse impact on the Target, and thus the Company. Further, even if tornado insurance is obtained, there can be no assurance that a tornado will not cause significant damage to the Property or otherwise interrupt its operations in a manner not covered by the Property’s insurance, in which case the business and financial condition of the Company may be negatively affected.
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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