Productive Capital Associates
Productive Capital Associates ("PCA" or the "Sponsor") was founded in 2014 and acquires and operates large, off-market value-add apartment communities, located in stable or growing US markets, with a primary focus on Texas markets. PCA improves properties and their surrounding communities through vetted operational efficiencies supported by strategic capital expenditures that are led by curated business plans based on the location, demographics, condition, and comps of the target property. PCA’s goal is to drive value and exit relatively quickly so as to maximize return on equity and IRR for its investors, returning the properties to the market as nicer assets, and much better places to live and work. As of January 2022, PCA will have owned and operated nearly 2,000 multifamily units, with a value of over $175 million.
Some of PCA’s investment highlights include the following:
• Achieved 150%+ ROI within ~2 years for multiple commercial real estate projects, spanning multifamily, self-storage, and retail assets
• Tripled income within 12 months for a 220+ unit apartment community in Central Texas, adding millions of dollars of value in year one
• Doubled NOI in 7 months for a 250+ unit apartment community in Central Texas, adding millions of dollars in value in year one
• Repositioned a distressed self-storage facility in Central Texas, more than tripling occupancy, income, and value of the asset within 18 months
• Repositioned an apartment community in Columbus, OH, achieving 130%+ ROI within two years
• Repositioned a distressed retail strip center in Central Florida, more than doubling the value of the asset within two years
• Currently repositioning a large student housing project in Denver, in addition to multiple large apartment communities in AR and TX, with each asset projecting a deal-level equity multiple of ~2x on a 3-year hold
After buying his first investment property while in high school — a *tiny* condo near Aspen, CO — David was hooked, although it would be years before he would again invest in real estate.
Why? He'd sold his tiny condo during college for a nice profit and confidently rolled the gains into a red-hot stock market, which eventually crashed, eliminating both his hard-earned real estate gains and principal. It was a difficult lesson; however, he never forgot that real estate made him money and that the stock market took it away.
After spending time in Corporate America, where he had saved enough cash to buy income properties, David began investing in real estate full-time. Beginning with SFR’s, he parlayed cash flow from houses into down payments on more houses, eventually buying and repositioning self-storage, then retail, and now large multifamily (apartment complexes).
David is passionate about improving properties and their surrounding communities and thrives off of the sourcing, underwriting, negotiating, closing, repositioning, and eventually exiting projects, leaving them as much nicer assets, and much better places to live and work.
Named company-wide “Rookie of the Year” for the sales division of a $10+ billion company with over 60,000 employees, David has been recognized for sales, marketing, and finance accolades on a national level, and has led multiple commercial real estate projects to 150%+ ROI within ~2 years, spanning multifamily, self-storage and retail assets.
David holds a B.A. with High Honors from Emory University and studied Finance, Accounting, and Marketing at the UC Berkeley Haas School of Business via the BASE Program.
Specialties: Commercial Real Estate Investment and Repositioning, Strategic Deal-Structuring, Operations, Management, Finance, Sales, and Negotiation.
|City, State||Asset Type||Purchase Date||Units||Deal Status||Purchase Price||Sale Price/Est. Value|
|North Little Rock, TX||Multifamily||7/20/2020||242||Under Renovation||$6,150,000||$9,075,000|
|Killeen, TX||Multifamily||8/14/2020||250||Under Renovation||$6,500,000||$11,250,000|
|Killeen, TX||Multifamily||8/30/2021||148||Under Renovation||$6,145,000||$8,800,000|
|Denver, CO||Student Housing||9/17/2021||120||Under Renovation||$40,005,000||$45,000,000|
|Killeen, TX||Multifamily||12/16/2021||266||Under Renovation||$41,075,000||$42,000,000|
The management overview and track record detailed above were provided by Productive Capital Associates and have not been verified by RealtyMogul.
In this transaction, Realty Mogul investors are to invest in RealtyMogul 122, LLC ("The Company"), which is to subsequently invest in 2214 Andover Drive LLC ("The Target"), a limited liability company that will hold title to the Property. Productive Capital Associates (the "Real Estate Company") is under contract to purchase the Property for $6.45 million ($36,236 per unit) and the total project cost is expected to be $7.57 million ($42,552 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. The capital improvement budget addresses new appliances (as needed), light fixtures, two-tone paint, landscaping, signage, utility savings, and the installation of new amenities, such as benches and grills. This strategy assumes a renovation budget of $625,000, or $3,511 per unit, and schedule of 178 units over 24 months (~7.4 units per month), which the Real Estate Company states is a comfortable pace given their track record and experience in the market. The pro forma financials assume that renovated units will be able to achieve rental premiums of $67 per unit per month upon completion, in addition to an $11 mark-to-market adjustment.
|CapEx Item||$ Amount|
|Pergola, Benches, Grills||
|Asphalt Patching and Striping||
|Paint and Carpentry||
|Low Flow Toilets||
|Vents and Hoods||
(1) Realty Mogul added a contingency to the Real Estate Company's budget.
Colony Apartments is a Class-C, garden-style apartment community situated in the Killeen-Temple, TX metropolitan statistical area. Built in three phases, 1979 (Bonanza), 1972 (Eagle Hollow), and 1975 (Colony), the buildings are comprised of one (67 units), two (110 units), and three-bedroom (1) floor plans combining to 178 total units. The Property has one unit converted to a leasing office and is currently 98% occupied with in place net effective rents of $532 per unit, or $0.77 per square foot (per May 2018 rent roll).
|Unit Type||&# of Units||% of Total||Unit (SF)||Total SF||Rent (Mon.)||Mo Rent/SF|
|1 Bed, 1 Bath - Bonanza||22||12%||580||12,760||$491||$0.85|
|1 Bed, 1 Bath - Eagle Hollow||8||4%||580||4,640||$477||$0.82|
|1 Bed, 1 Bath - Colony||37||21%||620||22,940||$494||$0.80|
|2 Bed, 1 Bath - Bonanza||47||26%||720||33,840||$549||$0.76|
|2 Bed, 1 Bath - Eagle Hollow||40||22%||720||28,800||$558||$0.77|
|2 Bed, 1 Bath - Colony||23||13%||850||19,550||$567||$0.67|
|3 Bed, 1 Bath- Bonanza||1||1%||1,150||1,150||$610||$0.53|
|Hillcrest Apartments||Ashton Park||Commanders Palace||Century Plaza||Total/Averages||Subject|
|Date||Apr '18||Nov '17||Aug '17||Oct '17||Aug '18|
|Distance from Subject (mi.)||0.4||0.6||1.1||3.2||1.3||N/A|
|Grandon Manor||Hunters Glen||Waters Haven||Willows Apartments||El Dorado||Total/Averages||Subject|
|Average Rental Rate||$708||$679||$630||$705||$575||$660||$610|
|# of Units (1 BR)||32||96||37||118||56||68||67|
|Rents (1 BR)||$655||$625||$578||$539||$575||$594||$537|
|# of Units (2 BR)||92||56||79||59||72||110|
|Rents (2 BR)||$693||$772||$654||$724||$711||$653|
|# of Units (3 BR)||20||60||40||1|
|Rents (3 BR)||$860||$1,014||$937||$725|
|Distance from Subject (mi.)||1.4||1.1||1.1||1.1||1.6||1.3||N/A|
Lease and Sale Comparable information provided by Axiometrics, CoStar, and the Real Estate Company.
The Property is located along Andover Drive, approximately five miles southeast of Fort Hood, 27 miles west of Temple, TX, and 66 miles north of Austin, TX. The Property is conveniently located near I-14 and I-35, which collectively comprise a regional transportation network serving Austin, TX, Dallas, TX, and the Greater Killeen-Temple, TX MSA.
Per CoStar, population growth in Killeen has been drastically increasing and is up over 60% since 2000. This growth is expected to continue and is fed by Fort Hood, which employs roughly 40,000 people. Therefore, fundamentals should continue to strengthen. An uptick in supply and even more demand has produced healthy rent growth as of late. Despite several institutional assets trading in 2014, sales volume remains close to historical averages with trades typically occurring between local players. Population growth has translated into an increase in jobs as of late. Overall job growth was slow early on in the cycle but has been relatively strong since 2015. Year-over-year employment growth was close to 2% as of July, well ahead of the national average. After losing jobs from 2012 to 2014, the government sector is finally showing signs of growth up about 5% from the prerecession peak. Furthermore, the education and health services industries, which make up nearly 20% of the job market here, have also demonstrated strong expansion. Killeen has a low cost of living, compared with nearby metros such as Austin and Dallas, and average rents here only take up about 16% of the median household income. The Killeen metro also includes the nearby city of Temple, which is where most of the metro’s private sector employment is located. The largest employers here include Baylor Scott and White Healthcare (8,290 employees), McLane Company Inc. (1,600), and Wilsonart International (895).
|Distance from Property||1 Mile||3 Miles||5 Miles|
|Expected Growth (2018-2023)||4.31%||5.51%||5.64%|
|Median Household Income (2018)||$39,039||$44,252||$49,015|
|Median Home Value (2018)||$81,268||$120,419||$132,888|
Demographic information was obtained from CoStar.
|Sources of Funds||Cost|
|Total Sources of Funds||$7,574,195|
|Uses of Funds||Cost|
|Real Estate Company Acquisition Fee||$96,750|
|North Capital Broker Dealer Fee||$100,000|
|Total Uses of Funds||$7,574,195|
The expected terms of the debt financing are as follows:
- Lender: ReadyCap Commercial (Freddie Mac SBL)
- Estimated Proceeds: $4,837,500
- Estimated Rate: 4.8% Fixed
- Amortization: 30 years, with one (1) year of interest-only
- Term: Seven (7) years
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, pari passu until each has received an 8.0% IRR,
- 75.0% / 25.0% (75.0% to Members / 25.0% to promote) to a 12.0% IRR,
- 60.0% / 40.0% (60.0% to Members / 40.0% to promote) 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 of the promote. Distributions are expected to start in March 2019 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 One||Year Two||Year Three||Year Four||Year Five|
|Effective Gross Revenue||$1,201,941||$1,315,220||$1,391,760||$1,430,467||$1,469,805|
|Total Operating Expenses||$628,311||$666,635||$683,494||$699,383||$715,658|
|Net Operating Income||$573,630||$648,585||$708,266||$731,084||$754,147|
RealtyMogul 122, 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||$96,750||Real Estate Company||Capitalized Equity Contribution||1.5% of the Property purchase price|
|Broker-Dealer Fee||$100,000||North Capital (1)||Capitalized Equity Contribution||4.0% based on the amount of equity invested by RealtyMogul 122, LLC|
|Disposition Fee||$97,235||RM Manager, LLC||Distributable Cash||1.0% of Property gross sale proceeds|
|Marketing Fee||$35,000||RM Manager, LLC||Distributable Cash|
|Type of Fee||Amount of Fee||Received By||Paid From||Notes|
|Asset Management Fee||1.5% of effective gross income||Real Estate Company||Distributable Cash|
|Management and Administrative Fee||1.0% of amount invested in RealtyMogul 122, LLC||RM Manager, LLC||Distributable Cash||RM Manager, LLC is the Manager of RealtyMogul 122, 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.
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 12 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.
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.
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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