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Funded
Office
544 Lakeview Parkway
Vernon Hills, IL
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By Ravinia Capital Group
16.59%* TARGET IRR 16.6%-%
10.2%* TARGET AVG CASH ON CASH
1.6x* TARGET EQUITY MULTIPLE
Estimated Hold Period 3 years
Estimated First Distribution 6/2019
*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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Overview
Value-add acquisition of a Class A office building in suburban Chicago.
Property at a glance
Year Built 1994
Total SF 139,324
Current Occupancy 73%
Parking Ratio 5 spaces per 1,000 square feet
Acquisition Price

$14,200,000

Investment Highlights
Experienced Real Estate Company: A Chicago-based real estate investment firm, the Principals have owned and managed over $2 billion in commercial real estate overall, including 1.4 million square feet of commercial property in the Chicago MSA owned and/or managed.
Attractive Basis: The Real Estate Company acquired the Property for $102 per square foot which compares favorably to comparable transactions in the market. Year 1 cap rate is expected to be 8.61%. Realty Mogul will invest on a post-close basis, at the Sponsor's acquisition terms.
Strong Tenancy: The tenant roster includes Mercer, Option Care, Brunswick, Wonderlic and Housing Headquarters.
Management
Cumulative Distributions

Ravinia Capital Group

Ravinia Capital Group, founded in 2013, is a Chicago-based real estate investment and ownership firm. Founded by seasoned real estate professionals with 50 years of combined investment, asset management and redevelopment experience, the Ravinia team currently owns over $290 million of commercial real estate. Ravinia focuses exclusively on middle market transactions with asset values ranging between $5 million and $100 million in targeted US submarkets. They seek to acquire properties at prices below replacement cost with in-place cash flow and value-add upside. This approach is based upon the principals' real estate experience through various economic cycles.

RealtyMogul investors previously invested alongside Ravinia Capital Group in the acquisition of 544 Lakeview Parkway in Vernon Hills, IL in Q4 2018.  Though it is early in the deal cycle, Ravinia has begun the capital improvement program and increased occupancy at the Property by 5%.

http://www.raviniagroup.com/
  • James R. Solomon
    Principal and Chief Investment Officer
  • Antonio Bismonte
    Senior Vice President
James R. Solomon
Principal and Chief Investment Officer

Mr. Solomon, with 27 years of public and private market real estate experience, has been responsible for the investment, financing or sale of more than $5 billion of office, industrial, retail and multi-family real estate. Prior to 2013, Mr. Solomon had founded one real estate investment firm and held top investment positions at Trizec Properties, Inc., Heico Realty Capital (family office) and Soros Fund Real Estate. During  2010-2012, Mr. Solomon co-founded the U.S. Capital Markets Group of Avison Young, at which time the firm tripled in size within the US and Canada. Mr. Solomon is an MBA graduate of University of Pennsylvania’s The Wharton School and a Foreign Service School graduate of Georgetown University.

Antonio Bismonte
Senior Vice President

Mr. Bismonte has 35 years of public and private market real estate experience and has been responsible for acquisition, financing, development, management, leasing and disposition of office, industrial, retail and multi-family real estate assets located throughout the United States, Canada and France. Prior to joining Ravinia Capital Group in 2016, he served an interim COO / CFO for Next Generation Development, a Chicago area residential developer, and has cultivated his real estate experience through 18 years of combined tenure at Trizec Office Properties, Inc. (NYSE: TRZ), Jones Lang LaSalle (formerly LaSalle Partners) and JMB Realty. Mr. Bismonte is responsible for portfolio management at Ravinia Capital Group. His daily responsibilities include interaction with the company’s leasing / management teams, budgeting, financial reporting, compliance and overall operational oversight. As a member of the firm’s investment committee, he is also involved in new investment due diligence as well as new investment financing.


Mr. Bismonte possesses a Masters in Management from the Executive Masters Program at the Kellogg School of Business at Northwestern University and a Bachelor of Arts in Accounting from Michigan State University, and is a CPA in the State of Illinois.

Track Record

 
Address Location Asset Type Date Acquired Total SqFt Purchase Price Sale Price
544 Lakeview Vernon Hills, IL Office Jun-18 139,324 $14,200,000 --
One Hartsfield Centre Atlanta, GA Office May-18 150,835 $20,100,000 --
Meridian 589 Tampa, FL Office Mar-17 252,235 $18,500,000 --
Mansell III Alpharetta, GA Office Feb-17 126,717 $16,600,000 --
Meridian Crescent Center Tampa, FL Mixed Use Jun-16 89,440 $5,100,000 $12,181,000
TT Ravinia Portfolio  TX, FL, CA Retail Mar-16 1,072,594 $188,600,000 --
DFW Airport Office Portfolio Dallas, TX Office Sep-15 188,595 $14,000,000 --
Kramer Place Apartments Columbus, OH Multifamily Sep-15 50,258 $5,500,000 --
Gresham Lakes (540 North) Raleigh, NC Industrial Nov-13 235,308 $9,000,000 --
Total -- -- -- 2,305,306 $291,600,000 --

Real Estate Company's bio and track record were provided by the Real Estate Company and have not been independently verified by RealtyMogul or NCPS.

Business Plan

In this transaction, RealtyMogul investors will invest in Realty Mogul 111, LLC ("The Company").  The Company will subsequently invest in Ravinia 544 Lakeview, LLC ("The Target"), the entity that will directly or indirectly hold title to the Property. Ravinia Capital Group (the "Real Estate Company") acquired the Property for $14,200,000 ($102 per square foot) on 6/12/18.

The Real Estate Company's business plan consists of the following: (1) leveraging the building's above market quality and amenities to increase occupancy to 88% or greater (market occupancy). Targeted underwriting calls for additional leasing of roughly 10% of additional vacancy (12,500 sq. ft.), divided between four suites of 3,000 to 5,000 suites each and accomplished within a 12-month period. (2) Perform immediate repairs as well as aesthetic improvements, including elevator cab upgrades, bathroom upgrades, first floor corridor and outdoor patio improvements. The Real Estate Company intends to exit approximately 36 months from acquisition.

544 Lakeview - Capital Expenditures Budget (Excluding Leasing Capital)
CapEx Item $ Amount
Building Automation System (BAS)
$45,000
Boiler
$45,000
Roof
$315,000
Elevator Cabs (x4)
$80,000
1st Floor Half Corridor
$30,000
Patio Repair
$40,000
Bathrooms (x8)
$160,000
Grand Total
$715,000

 

Property

Realty Mogul, Co., along with Ravinia Capital Group (the "Real Estate Company") is providng the opportunity to invest in the acquisition of of 544 Lakeview Parkway (the ''Property''), a three-story, Class A office building building in Vernon Hills, IL. The Real Estate Company acquired the Property for $14,200,000 ($102/SF) in June, at roughly 50% of replacement cost, according to JLL.  

The primary objective of this investment is to implement a moderate capital plan and lease-up strategy to improve common areas and vacant tenant suites, re-lease vacant space at market rates, and sell the Property within approximately three (3) years. 

The Real Estate Company believes that the strong existing tenancy can be further improved with lease-up of a portion of the vacant space and improvement of the common space can potentially create value at the Property.

Property Details

The Property is a three-story, Class A office building totaling 139,324 rentable square feet with 696 parking spaces (4.8 spaces per 1,000 square feet) and situated on 12.43 acres. The Property is located within the Continental Executive office park, approximately one eighth of a mile south of the intersection of Milwaukee Avenue and Route 60 (Townline Road), approximately 35 miles north of the Chicago CBD and adjacent to approximately 4 million square feet of retail. 

As of 9/17/18, 544 Lakeview’s tenancy is comprised of five tenants (73% total in addition to 5% to kitchen and gym amenities), two of which (44% of the building) are either publicly traded companies or are subsidiaries of publicly traded companies. They each maintain Moody’s investment grade ratings ranging from Baa1 – Baa3. The weighted average lease term of the rent roll is 6.8 years.

The Property was built in 1994 for Allstate, which occupied the building until 2011, and vacated as part of a campus consolidation. Given the building’s original use, 544 Lakeview Parkway has inherited amenities and a higher parking ratio not typically available in similarly sized local office buildings.

Major Tenants:

Mercer - Founded in 1945, Mercer is a subsidiary of the Marsh McLennan Companies, and provides talent, health, retirement, and investment consulting. Credit Rating - Moody's: Baa1

OptionCare - Option Care, partially-owned by Walgreens Boots Alliance, is a national leader in providing home infusion services. 

Wonderlic - Wonderlic, founded over 85 years ago, provides assessments and surveys for over 75,000 companies (including the NFL), helping hire and select new employees and students. 544 Lakeview is their company headquarters.

Brunswick - Brunswick, established in 1845, is a major producer in the marine, fitness, and billiards industries and employs over 14,000 people. 544 Lakeview is the headquarters of the boating division. Credit Rating - Baa3

Credit ratings as of 6/30/2018

Major Tenants Summary: 

Tenant Square Footage % of Total Rent per SqFt Lease Expiration Lease Type
Mercer 49,162 35% $13.85 2/28/2023 Net
Option Care 22,470 16% $14.50 12/31/2026 Net
Wonderlic 15,060 10% $13.00 12/31/2027 Net
Brunswick 12,100 9% $13.00 8/30/2028 Net
Total 97,889 70% $13.77 -- --
Comparables

Lease Comps 
  475 Half Day Rd 150 N. Field Dr 100 N. Field Dr 400 N. Lakeview Pky 175 E. Hawthorn Pky Total / Averages Subject
Submarket Central North Central North Central North Central North Central North -- Central North
Costar Rating 4-star 4-star 4-star 3-star 4-star -- 4-star
Date Signed May-17 Aug-16 Jun-15 Aug-15 Apr-18 -- --
Square Footage 6,400 13,443 12,323 5,763 1,843 7,954 139,324
Year Built 1999 1998 1986 2000 1986 1994 1993
Tenant Rivkin & Rivkin PharmMEDium Healthcare Not disclosed Mercury Insurance Nexus Pharma -- --
Average Rental Rate $27.00 $28.82 $27.85 $24.50 $26.50 $27.49 $27.05
Parking Ratio per 1,000 SqFt 2.81 3.70 3.10 4.48 3.60 3.48 4.8
Distance from Subject (mi.) 2.7 2.5 2.5 0.2 0.8 1.7 --

 

Sales Comps
  100 N. Field 3 Overlook Point 25-300 Tri State Total / Averages Subject
Date Signed Nov-16 Aug-16 Sep-17 -- Jun-18
Submarket Central North Central North Central North -- Central North
Costar Rating 4-star 4-star 4-star -- --
Square Footage 105,000 283,257 559,204 271,696 139,324
Year Built 1986 1991 1984 1988 1993
Tenant N/A Essendant N/A -- --
Purchase Price $19,350,000 $60,150,000 $73,250,000 $41,737,500 $14,200,000
Price per SqFt $184.29 $212.35 $130.99 $153.62 $101.92
Cap Rate 8.50% 6.80% 7.51% 7.60% --
Distance from Subject (mi.) 2.6 3.3 5.6 3.8 --
Location

 

Market Overview

Chicago’s office market remains healthy despite a slowdown in 2016 that included three consecutive quarters of minimal or negative net absorption and a halt to the vacancy recovery. This was largely a result of AT&T's move from its 1.3 million square feet campus in Hoffman Estates, in which employees moved to several other existing Chicago offices, thus severely impacting net absorption. Fortunately, demand has regained steam in recent quarters, and net absorption in 2017 was about 3 million square feet. Market vacancy is 12.1% and year-over-year rent growth was 2.7%.

Submarket Overview

Central North is located along Lake Michigan, and spans across several of Chicago's affluent northern suburbs. The submarket is home to a long list of corporate campuses, with an orientation toward financials and biopharma/healthcare: W.W. Grainger (industrials), Discover Financial Services (consumer credit), and Baxter International (biopharmaceuticals), among many others, are all headquartered here, with about two million square feet of space in total. Submarket vacancy is 15.3% and year-over-year rent growth was 1.9%.

Demographic Information

Demographics

Demographic Information (2018) 1 Mile Radius 3 Mile Radius 5 Mile Radius
Population 3,432 54,390 129,254
Population Projection (2023) 3,479 54,390 129,562
Average Age 42 39 40
Median Household Income $123,014 $107,706 $115,121
Average Household Size 2.6 2.7 2.7
Median Home Value $136,115 $364,500 $395,869
Population Growth 2018-2023 1.4% 0.5% 0.2%
Photos
Financials
Sources & Uses

Sources of Funds
  $ Amount  Per SqFt %
Senior Loan $13,388,886 $96 80%
RM Equity (59%) $2,000,000 $14 12%
Sponsor Equity (41%) $1,394,257 $10 8%
Total $16,783,143 $121 100%
Uses of Funds
  $ Amount  Per SqFt %
Purchase Price $14,200,000 $102 85%
Acquisition Fee (1.0%) $142,000 $1 1%
BD Placement Fee (4.0%) $80,000 $1 0%
CapEx, TI, LC $1,501,064 $11 9%
Working Capital $171,042 $1 1%
Debt Placement Fee $134,344 $1 1%
Financing Fee $213,752 $2 1%
Closing Costs & Fees $340,941 $3 2%
Total $16,783,143 $121 100%
Debt Assumptions

The Real Estate Company closed on a senior loan upon acquisition of the Property. The terms of the debt financing are as follows:

  • Lender: Hines Realty Income Fund LLC
  • Estimated Initial Proceeds: $11,887,822
  • Maximum Additional Funding: $1,501,064
  • Estimated Interest Rate: 1 Month LIBOR + 4.00% with an index floor of 1.90%
  • Interest Only Period: 36 Months and two (2) one-year extension options
  • Amortization Period: N/A
  • Loan Term: 36 Months 
  • Extension Options: Two (2) one-year extension options
  • Prepayment Penalty: 12-months minimum interest and 0.50% exit fee
  • Interest Rate Cap: Index cap of 3.00% for the initial 18 months of the loan
  • Recourse: No
Distributions

The Target intends to make distributions of all available cash and capital proceeds to investors (The Company, Other LP investors and Real Estate Company, collectively, the "Members") as follows:

  1. Pro rata share of cash flow to an 9% preferred return hurdle;
  2. Return of capital;
  3. Excess balances will be split pro rata 80% to Members (pro rata in accordance with and in proportion to their respective Company Percentages) and 20% to Real Estate Company to a 12% IRR;
  4. Excess balances will be split pro rata 70% to Members (pro rata in accordance with and in proportion to their respective Company Percentages) and 30% to Real Estate Company to an 18% IRR;
  5. Excess balances will be split pro rata 60% to Members (pro rata in accordance with and in proportion to their respective Company Percentages) and 40% to Real Estate Company.

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 operating agreement, in addition to any member loans or returns due on member loans).

Targeted Cash Flows
  Year 1 Year 2 Year 3
Effective Gross Revenue $2,548,806 $2,796,346 $2,901,443
Total Operating Expenses $1,275,871 $1,392,535 $1,428,230
Net Operating Income $1,272,935 $1,403,811 $1,473,213
Company Cash Flows
  Year 0 2018 2019 2020 2021
Distributions to Company ($2,020,000) $8,278 $185,951 $231,471 $2,731,361
Net Earnings to Investor - Hypothetical $50,000 Investment ($50,000) $205 $4,603 $5,729 $67,608
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 $142,000 Real Estate Company Capitalized Equity Contribution 1.0% of the Property purchase price
Broker-Dealer Fee $80,000 North Capital 1 Capitalized Equity Contribution 4.0% of equity raised by RealtyMogul ($50,000 minimum)
Marketing Fee $20,000 RM Manager, LLC Investor Overraise --
Recurring Fees
Type of Fee Amount of Fee Received By Paid From Notes
Asset Management Fee $30,000 Real Estate Company Distributable Cash --
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 111, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of The Company 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.

Documents
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.


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 loan being used to acquire the Property is expected to have an interest-only period during the first 3 years of the loan term in addition to the 2 one-year extension options, which means that there will be no reduction in the principal balance during that interest-only period.


Renovation Risks

As of September 2018, the Property had a 73% occupancy level, and the Target intends to implement a capital improvement plan involving the interior and exterior renovation of the Property, and a leasing program in its effort to add value to the Property. The Target intends to renovate all or some of the units within the Property and increase the current rental rates of such renovated units. There can be no assurance that, (i) the renovations will be consummated on a timely basis, (ii) the renovations will be completed satisfactorily, (iii) such work will not materially adversely affect other aspects of the operation of the Property, and (iv) the planned rental rate increase will have favorable results to meet the goals the Target projected. Any delays or negative results of the renovation work or rental increase efforts could adversely affect the Property’s financial results or occupancy levels, including its business operations and thus the value of the Company’s investment.


Escrow Contingency

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.


Office Building - Competition

Office buildings are subject to market forces affecting supply and demand just like other types of commercial space, but the economic drivers for office space are sometimes different than those for other real estate investments. Rents and valuations for offices are primarily influenced not just by employment growth but also by a region’s economic focus. Office properties are especially influenced by specific types of employment -- namely, sectors with very high proportions of office use. These economic segments are generally those that utilize service and professional employees such as attorneys, accountants, engineers, insurance personnel, real estate brokers and related service providers (like title and escrow providers), and people working in banking, financial services, consulting, medical, dental, and pharmaceutical fields. Office space tends to be leased for relatively long periods, with tenants often having the option to renew leases for additional terms. This means that office properties often have leases that can lag current market lease rates, and an appropriate “step-up” of rental rates may not be able to be imposed until a lease expires. Economic downturns can affect office buildings more than residential buildings since businesses can go bankrupt even while people continue to need housing. Re-leases of office space can often require significant lead time to consummate.


*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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