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Completed Equity
Multifamily
CF Towson Multifamily, DST
Towson, MD
INVESTMENT STRATEGY
INVESTMENT TYPE
Equity
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100% funded
Offered By Cantor-Fitzgerald Investors, LLC - Hamilton Zanze
%* TARGET IRR %-%
4.89%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 7 years
Estimated First Distribution 10/2018
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Explore this project
Overview
1031 eligible DST offering featuring a 94.2% leased class A multifamily property that was built in 2009. Managed by an Institutional Real Estate Company.
Property at a glance
Year Built 2009
Number of Units 430
July 2018 Occupancy 94%
Leverage 60% Loan-to-Purchase/ 53.53% Loan-to-Cost
Parking Ratio 1.76 / unit
Acquisition Price

$100,000,000

Investment Highlights
Joint Venture between Cantor Fitzgerald, an Institutional Real Estate Company, and Hamilton Zanze, an experienced Operator which currently operates 84 apartment properties totaling approximately 19,400 apartment units across 13 states, and has approximatly $2.2 billion in assets under management
Low leveraged Property (53.53% LTC) with 2.67x debt service coverage ratio based on the Year One proforma
Core asset in the Baltimore-Columbia-Towson apartment market, which is centrally located between 3 major East coast metropolitan areas: Baltimore, Washington, D.C., and Philadelphia
Hamilton Zane and its affiliates are retaining 23% equity interest in the deal representing significant "skin in the game"
Class A, mid-rise apartment community with high-quality finishes, attractive amenities, and a 5-year average submarket occupancy of 97.4% (Appraisal, 2017)
Management

Cantor-Fitzgerald Investors, LLC - Hamilton Zanze

The Sponsor is a joint venture between Cantor Fitzgerald, an institutional real estate company, and Hamilton Zanze, an experienced operator which currently operates 84 apartment properties totaling approximately 19,400 apartment units across 13 states.

Cantor Fitzgerald and its Affiliates are a diversified organization specializing in financial services and real estate services and finance for institutional customers operating in the global financial and commercial real estate markets. As of December 31, 2016, Cantor Fitzgerald and its Affiliates had approximately 10,000 employees operating in most major financial centers throughout the world. Cantor Fitzgerald maintains credit ratings of ‘BBB-’ from Standard & Poor’s and ‘BBB-’ from Fitch.

Cantor Fitzgerald and its Affiliates operate through four business lines: Capital Markets and Investment Banking; Inter-Dealer Brokerage; Real Estate Brokerage and Finance; and Private Equity. The Real Estate Brokerage and Finance business principally consists of commercial real estate brokerage and finance services, conducted by Newmark Grubb Knight Frank (“NGKF”) and Cantor Commercial Real Estate (“CCRE”).

Cantor Fitzgerald is a preeminent capital markets investment bank, recognized for its strengths in the equity and fixed income capital markets, its global distribution model, and for its expanding presence as the leading independent middle market investment bank serving the marketplace with investment banking services, prime brokerage, and commercial real estate financing. Affiliates of Cantor Fitzgerald have been involved with eleven (11) real estate programs with similar investment objectives since November 2014. These prior real estate programs involved the Acquisition of 102 properties for an aggregate purchase price of approximately $629 million. As of May 30, 2018, these prior programs have raised more than $238 million from approximately 900 investors.*

Hamilton Zanze is a private, San Francisco-based real estate investment company that acquires, repositions, and manages apartment communities throughout the United States. Through affiliated entities, Hamilton Zanze currently has an ownership interest in and operates 84 properties totaling approximately 19,400 apartment units across 13 states. Hamilton Zanze principals have nearly 100 years of combined experience in multifamily real estate investment, finance and operations.

Operating through its integrated professional teams — including transactions, operations, accounting, and executive — Hamilton Zanze has acquired an interest in and managed more than $3.3 billion in multifamily investments since it was founded in 2001. Within the operational group, Hamilton Zanze’s construction management division specializes in value enhancement including unit renovations and overall community improvements. Property management is conducted through its affiliate, Mission Rock Residential. Hamilton Zanze employs a disciplined approach to acquisitions, dispositions, asset management, and construction management and is a Preferred Borrower with Fannie Mae and a Select Sponsor with Freddie Mac.

During its 17 years of operation, Hamilton Zanze has joint ventured with a number of institutional equity partners and maintains a private capital platform focused on 1031 exchange transactions.*

*Per the Sponsors 

http://www.cantor.com
  • Aaron Wessner
    Managing Director
  • Kenneth Carpenter
    Managing Director
  • Anthony Zanze
    Chief Operating Officer
  • Kurt Houtkooper
    Chief Investment Officer
  • Mark Hamilton
    Chief Executive Officer and Founder
  • James Buccola
    Senior Managing Director Global Head of Fixed Income
Aaron Wessner
Managing Director

Mr. Wessner has more than 14 years of institutional commercial real estate investment, capital markets and advisory experience. Mr. Wessner joined Cantor Fitzgerald in 2011 to assist with the development of Cantor Commercial Real Estate, where he held senior positions on the Capital Markets and Corporate Finance teams. Mr. Wessner also was a senior member of the Real Estate Acquisitions team, focused on net lease transactions in the United States. Prior to joining Cantor Fitzgerald, Mr. Wessner was a co-founder of Park Bridge Financial, a privately-held commercial real estate debt and equity advisory firm headquartered in New York, where he provided strategic advisory services to real estate owners and lenders on distressed debt and equity matters. Prior to Park Bridge, Mr. Wessner was a member of Merrill Lynch’s Global Commercial Real Estate Group, where he was an offering manager on a team responsible for issuing commercial real estate debt securities. While at Merrill Lynch, Mr. Wessner also focused on the distribution of commercial real estate debt via the sale of whole-loans, B-notes and mezzanine positions. Prior to Merrill Lynch, Mr. Wessner was a credit analyst within the CMBS group at Fitch Ratings and worked within Ernst & Young LLP’s Structured Finance Advisory practice.

Kenneth Carpenter
Managing Director

Mr. Carpenter joined Cantor Fitzgerald in January 2013 with an initial focus on the acquisition, management and financing of net lease properties after being affiliated with a commercial real estate advisory, financing and asset management firm. Immediately prior, Mr. Carpenter was the Head of Americas for Deutsche Bank’s Asset Finance and Leasing group where he had overall responsibility for the strategy and execution of the group’s financing, advisory and principal investing activities (debt and equity) across various asset classes. Prior to joining Deutsche Bank, Mr. Carpenter spent nine years at Wachovia (later Wells Fargo) rising to Managing Director, Global Head of Structured Asset Finance where he led a team in the United States and Europe investing both debt and equity capital in various hard asset classes including commercial real estate. Mr. Carpenter’s commercial real estate acquisition and finance experience spans most property types including office, industrial, retail and healthcare. Prior to joining First Union (later Wachovia), he was a Vice President with Deutsche Bank in their real estate finance group where he originated sale/leaseback and other real estate financing transactions. Prior to Deutsche Bank, Mr. Carpenter worked at Nations Bank providing strategic advisory and financing solutions, including commercial loans, syndicated bank debt, subordinated debt, and mergers and acquisitions, to middle market corporations.

Anthony Zanze
Chief Operating Officer

Anthony O. Zanze, Chief Operating Officer and Founder, Hamilton Zanze. Prior to co-founding Hamilton Zanze, Mr. Zanze’s experience in real estate included capital markets, asset management, leasing, development, investment, and brokerage of multifamily and commercial properties. Immediately prior to the formation of Hamilton Zanze, Mr. Zanze worked at RREEF Real Estate Investment Managers overseeing asset disposition. Before joining RREEF, he was manager of the San Francisco office of GE Capital Real Estate, where he was responsible for production of mortgage backed securities, structured finance and equity investments. From 1986 to1997, Mr. Zanze originated long term fixed rate loans and joint ventures for Northwestern Mutual Life Insurance Company. Mr. Zanze began his career as a sales investment broker with Cushman & Wakefield and holds a Bachelor of Arts in Psychology from Dartmouth College and a Master of Business Administration in Real Estate from the University of Wisconsin.

Kurt Houtkooper
Chief Investment Officer

Kurt E. Houtkooper, Chief Investment Officer and President, Hamilton Zanze. Mr. Houtkooper has 22 years of real estate experience in asset management, capital markets, leasing, and acquisition and disposition of income producing properties. Before joining Hamilton Zanze, Mr. Houtkooper was with Tishman Speyer Properties in San Francisco, the Silicon Valley and Chicago, where he was involved in marketing and leasing, negotiating contracts, forecasting and budgeting, managing personnel and third party vendors, and establishing asset direction of over 7 million square feet of Class A and Class B office space. Prior to joining Tishman Speyer Properties, Mr. Houtkooper was Vice President of Investment Sales at Grubb & Ellis Company in San Francisco, where he represented clients in the leasing, acquisition and disposition of commercial property. Mr. Houtkooper graduated with a Bachelor of Arts in Political Science from the University of California at Berkeley.

Mark Hamilton
Chief Executive Officer and Founder

Mark R. Hamilton, Chief Executive Officer and Founder, Hamilton Zanze. Prior to co-founding Hamilton Zanze, Mr. Hamilton sponsored the acquisition, ownership and development of nearly 40 properties in the Bay Area. Mr. Hamilton’s main focus has always been locating value-added properties in changing urban neighborhoods, and then re-working them into higher quality buildings, with higher incomes, improved tenant profiles, and higher resale values. Mr. Hamilton has developed considerable experience in partnership formations and operations, project planning and implementation, asset management and management oversight, landlordtenant/ rent control issues, and zoning and building department matters. Before forming his own commercial brokerage and investment business in 1994, Mr. Hamilton worked in the San Francisco office of Marcus & Millichap, subsequently co-founding Property Resource Group (real estate brokerage) and Quantum Land Company (development). Mr. Hamilton earned a Bachelor of Arts with High Honors in English Literature from San Francisco State University and a Master of Arts in English and American Literature from Brandeis University, where he attended as a University Scholar and Fellow.

James Buccola
Senior Managing Director Global Head of Fixed Income

James Buccola, Senior Managing Director Global Head of Fixed Income, Cantor Fitzgerald & Co. Mr. Buccola is currently the Global Head of Fixed Income at Cantor Fitzgerald, which he joined in December 2017. In this capacity, Mr. Buccola leads all Fixed Income Sales & Trading globally, as well as oversees CCRE, Cantor Fitzgerald’s Commercial Mortgage Securities business. Prior to joining Cantor Fitzgerald, Mr. Buccola was the Head of Securitized Products Trading at Credit Suisse Group AG. He previously served as that firm’s Head of Non- Governmental Guaranteed Trading, and before that, as its Head of Residential Mortgage Trading. Mr. Buccola holds a B.S. in Finance from Lehigh University’s College of Business & Economics.

Track Record

Currently Owned DST Portfolio - Cantor Fitzgerald
Program Locations Property Type Property Count % Equity Financed % Debt Financed
WG DST 1 AR, IA, KS & OH Single Tenant 8 34% 66%
WG DST 2 IN, MO & TN Single Tenant 9 34% 66%
WG DST 3 KY, MO & WI Single Tenant 8 34% 66%
WG DST 4 AL, AR, TN & WI Single Tenant 8 35% 65%
WG DST 5  MI, MS, MT, OK, SD & WV Single Tenant 8 35% 65%
CF Retail Properties DST VI CT, OH, OK, PA & SD Single Tenant 12 40% 60%
CF Net Lease Portfolio DST 7 FL, KY, LA, MN, NE, SD & TN Single Tenant 19 42% 58%
CF Net Lease Portfolio DST 8 AZ, CO, TX, WI & WY Single Tenant 17 42% 58%
CF Net Lease Portfolio DST 9 IN, IA, KS, LA & WI Single Tenant 10 42% 58%
CF Nortera Canyon Multifamily DST NV Multifamily 1 56% 44%
CF Star Multifamily Portfolio DST FL, LA Multifamily 2 47% 53%
Total     102    

*The above was provided by the Sponsor and has not been verified by Realty Mogul.

 
Business Plan

On August 23, 2018 CF Towson Multifamily DST acquired the Property from a third-party seller. The Trust was formed by CFHZ Towson, LLC (the "Sponsor") which is a joint venture between affiliates of Cantor Fitzgerald Investors, LLC and Hamilton Zanze & Company. The Property is master leased by the Trust to CF Towson Master Tenant, LLC ("Master Lessee" or "Master Tenant"), an affiliate of the Sponsor. The Master Tenant sub-leases the apartment units to the end-user tenants pursuant to residential leases. The Trust is a passive owner of the Property and will not be involved in any manner in the active management of the Property. CF Towson Manager, LLC (the "Manager") has been appointed to manage the Trust pursuant to the Trust Agreement. Concurrently with the acquisition of the Property, the Trust assumed a loan from PNC Multifamily Mortgage LLC. 

The Trust expects to provide the Beneficial Owners a return on their investment in two primary ways: (i) in the form of monthly cash distributions to the Beneficial Owners; and (ii) upon any disposition of the Property. The Trust intends to dispose of all of the assets in the Trust in a single sale of the Property. This strategy is anticipated to provide investors with the opportunity to perform a 1031 exchange following the disposition.

Property
Property Details

The Property consists of 5.75 acres improved with a 430-unit, mid-rise apartment community located in Towson, Maryland. According to the Appraisal, the Property is located in the Towson/Timonium/Hunt Valley submarket of the greater Baltimore metropolitan area. The Property's address is 900 and 960 Southerly Road, Towson, Baltimore County, Maryland 21204. The Project was constructed in 2 phases in 2008 and 2009. The apartment units are contained within two 4-5 story residential buildings totaling approximately 477,939 net rentable square feet. The Property contains 757 parking spaces within 2 structured parking garages. The Property has a mix of 1-bedroom, 2-bedroom and 3-bedroom units with an average unit size of 1,111 square feet. According to the Rent Roll, the Property was 94.18% occupied with an average contract rent of $1,570 per occupied unit per month as of July 26, 2018.

Community amenities include an outdoor swimming pool, 2 fitness centers, group classroom and yoga studio, business center with conference center, 2 club rooms, private courtyards with grills, tenant storage units, guest suite, controlled access and garage parking.

Unit amenities include fully-equipped kitchens with maple cabinetry and granite countertops (select units), in-unit washers and dryers, walk-in closets, mini-blinds, high-speed internet access, 9-foot ceilings, fireplaces, sunrooms, breakfast bars, double vanities, and balconies and patios in select units.

 

Unit Mix
Unit Type - Floorplan # of Units Avg SF/Unit Avg Rent/Unit Avg Rent/SF
1 BR / 1 BA 147 776 $1,356 $1.75
2 BR / 2 BA 236 1,249 $1,772 $1.42
2 BR / 2.5 BA / DEN 30 1,560 $2,085 $1.34
3 BR / 2 BA 17 1,315 $2,115 $1.61
Total 430 1,111    
Comparables

Rental Comparables
   The Winthrope  The Southerly  20 Lambourne   Towson Promenade   The Palissades of Towson   Averages    Subject 
 # of Units  295 175 264 379 357 294 430
 Year Built  2014 2017 2003 2009 2010 2010 2009
 Occupancy  88% 73% 85% 78% 99% 84% 96%
 Average Rental Rate (Per Unit)  $1,954 $1,733 $1,595 $1,288 $1,184 $1,551 $1,003
 Dsitance from Subject   115 Feet   115 Feet   .3 Miles   .4 Miles   .9 Miles   .3 Miles   - 

Source: Cushman & Wakefield Appraisal dated May10, 2018

Sales Comparables
  The  Winthrop Novus Odenton Station The Fenestra at Rockville Town Square Azure Oxford Square Hanover Brewers Hill Subject
Date Oct-17  Aug-17 Aug-17 Aug-17 Sep-16 May-18
# of Units 295 244 492 248 440 430
Year Built 2014 2015 2007 2015 2013 2009
Occupancy 9% 95% 95% 95% 92% 96%
Purchase Price $84,000,000 $73,000,000 $129,000,000 $65,720,000 $142,000,000 $100,000,000
$/Unit $284,746 $299,180 $262,195 $265,000 $322,727 $232,558
Cap Rate 5.18% 4.90% 4.95% 5.35% 4.68% 5.5%

Source: Cushman & Wakefield Appraisal dated May 10, 2018

Property Appraisal available upon request. Please email investor-help@realtymogul.com.

Location

The Property is conveniently located at the interchange of I-695 and I-83, two major interstate highways that provide excellent accessibility for residents to major employment centers consisting of corporate headquarters, schools, and three major healthcare facilities. Towson University is a 328-acre campus that is located 1 mile south of the property, and is the largest public university in the Baltimore area with an enrollment of more than 22,000 students. According to the Appraisal, approximately 70% of the student population lives off-campus, which is a primary demand generator for apartments and retailers in the area.  

Market Overview

The Property is located at the northwest quadrant of Fairmount Avenue and Dulaney Valley Road, approximately one-half mile south of I-695 in the Towson community of north-central Baltimore County. Towson is an unincorporated municipality and has been the Baltimore County Government seat since 1854. According to the Appraisal, Towson is the center of local government and professional, educational and financial service firms. Cushman & Wakefield estimates the government workforce in Towson at between 3,500 and 4,000 people, noting that the government center attracts professional and commercial businesses to the area that are primary demand generators for office and retail space in the Towson market. In addition, according to the Appraisal, many national and international corporations have headquarters and regional offices in Towson, as well as local firms and entrepreneurs. Major employers in Towson include Black and Decker, Lafarge, Allied Bendix, AT&T Capital Corporation, VIPS Inc. and the Whiting Turner Construction Company. Cushman & Wakefield notes that Towson has approximately 4,100 businesses with 62,000 daytime employees. As shown below, the 2017 population within a 3-mile radius of the Project was 104,401.  The average number of households within a 3-mile radius for the same period was 41,412.  According tot he Appraisal, Cushman & Wakefield further noted that the 2017 median household income within a 3-mile radius was $108,644. 

Demographic Information

Demographics
Distance from Property 1 Mile 3 Miles 5 Miles
Population      
      2022 Total Population 16,527 104,290 282,543
      2017 Total Population 16,331 104,401 282,667
      2000 Total Population 14,376 97,120 271,821
      Annual Growth 2017 - 2022 0.24% -0.02% -0.01%
      Annual Growth 2000 - 2017 0.75% 0.43% 0.23%
Households      
      2022 Total Households 6,574 41,627 114,481
      2017 Total Households 6,439 41,412 113,529
      2000 Total Households 5,878 40,188 111,670
      Annual Growth 2017 - 2022 0.42% 0.13% 0.17%
      Annual Growth 2000 - 2017 0.54% 0.18% 0.10%
Income      
      2022 Average Household Income $110,391 $125,402 $117,407
      2017 Average Household Income $93,988 $108,644 $101,775
      2000 Average Household Income $54,829 $71,246 $68,113
      Annual Growth 2017-2022 3.27% 2.91% 2.9%
      Annual Growth 2000-2017 3.22% 2.51% 2.39%

Demographic information above was obtained from the PPM and ESRI via the Appraisal

According to the Appraisal, the Baltimore MSA is the 21st largest metropolitan statistical area in the United States and had an estimated 2017 population of 2.8 million, which represented an average annual increase of 0.5% from 2007 through 2017, which was approximately 0.3% below the national annual growth rate of 0.8% over the same time period. According to the table above, as provided in the Appraisal, the population growth in the 1- mile radius around the Project is projected to have modest growth over the next 5 years, with moderate declines in the 3- and 5-mile radii. In addition, it is projected that the number of households will continue to have modest growth in the area immediately surrounding the Project, but which will be outpaced by the State of Maryland and the nation. However, average household income growth in the 1-mile radius around the Project is projected to exceed that of the Baltimore area, the State of Maryland and the nation.

Cushman & Wakefield concluded in the Appraisal that Baltimore’s mature economy continued to expand through the end of 2017 as strong port activity, coupled with healthy wage gains, continued to spur economic growth. Further, the Project’s location proximate to area colleges, employment and institutional centers with good accessibility and a substantial number of households with middle-income levels are positive locational factors for multifamily residential use, and the Project’s locale should remain desirable to most market participants.

Cushman & Wakefield noted 6 competing apartment rentals located within a 1-mile radius of the Project as of the date of the Appraisal, including (i) The Winthrop (located across the street from the Project), (ii) The Southerly (located across the street from the Project), (iii) 20 Lambourne, (iv) Towson Promenade, (v) The Palisades of Towson and (vi) Flats@703.

Market Overview information above was obtained from the PPM.

This content does not constitute an offer to sell or a solicitation of an offer to buy any securities. RealtyMogul.com and North Capital Private Securities are in the process of screening, performing due diligence, and verifying information for the offering. The content is presented to gauge interest only and is subject to change without notice.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $46,200,000
Equity $40,100,000
Total Sources of Funds $86,300,000
Uses of Funds Cost
Purchase Price $77,000,000
Closing Costs $1,275,512
Lender and Loan Expenses $485,396
Reserves $1,939,942
Amount Retained by Depositor $1,848,000
Selling Commissions $2,406,000
Marketing and Due Diligence $401,000
Placement Fee $601,500
Organizational & Offering Costs $284,900
Due Diligence Expenses $57,750
Total Uses of Funds $86,300,000
Debt Assumptions

The Property has existing debt: 

  • Origination Date: 8/28/2015
  • Lender: PNC Multifamily Mortgage LLC
  • Loan Proceeds: $60,000,000
  • Loan to Cost: 60%
  • Interest Rate: 3.37% Fixed
  • Interest Only: 84 months 
  • Recourse: Non-recourse to the Trust, but recourse to the Trust and principals of the Sponsor for certain (i) "bad acts", (ii) environmental indemnification, and (iii) springing recourse events
  • Term: 10 years 
  • Yield Maintenance Period: 84 months with a minimum 1%of outstanding loan floor
  • Prepayment Penalty: 1% if repaid after the expiration of the yield maintenance period but before August 1, 2025

 

Distributions

The Sponsor is to make distributions directly to investors who own a beneficial interest in the DST on a pro-rata basis.

Distributions are expected to start for each investor within 45 days of the completion of that investors purchase of beneficial interest in the DST. Distributions are targeted to continue on a monthly basis thereafter. These distributions are at the discretion of the Sponsor and made directly by the Sponsor, neither Realty Mogul Co. nor any of its affiliates have any control or discretion on the timing or amount of distributions.

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
Selling Commission 6.00% of offering proceeds Broker Dealers Capitalized Equity Contribution Paid to North Capital (1) or other licensed broker-dealers that are Selling Group Members based on the amount of equity capital raised. An Affiliate of the Real Estate Company is also a broker-dealer who is eligible to get paid this fee.
Marketing and Due Diligence Fee 1.00% of offering proceeds Broker Dealers Capitalized Equity Contribution 1.00% based on the amount of equity invested by investors through RealtyMogul.com, third-party Broker Dealers (including North Capital(1)) are entitled to additional fees based on equity they originate. Surplus fees retained by the Real Estate Company.
Placement Fee 1.50% of offering proceeds Broker Dealers Capitalized Equity Contribution Managing Broker-Dealer will receive a fee up to 1.50% of the Total Sales, which it may at its sole discretion partially re-allow to Selling Group Members for non-accountable marketing expenses in addition to any other allowances.
Organization and Offering Expenses $284,900 Sponsor Capitalized Equity Contribution The Sponsor and its affiliates will be entitled to reimbursement for Organization and Offering Expenses, on an accountable basis, estimated at $284,900.
Due Diligence Expense $57,750 Sponsor Capitalized Equity Contribution  
Disposition Fee 1.00% Sponsor Sale Proceeds 1.00% of Sales Price 
Recurring Fees:
Type of Fee Amount of Fee Received By Paid From Notes
Project Management Fee 5.0% of Total Capital Improvment Costs HZ DST Asset Management, Inc Operating Cash Flow HZ DST Asset Management, Inc. is an affiliate of the Sponsor.
Trust Manager Fee $90,000 annually Trust Manager Operating Cash Flow Trust Manager is an affiliate of the Sponsor.
Property Management Fee 2.5% of Effective Gross Income Property Manager Operating Cash Flow Property Manager is an affiliate of the Sponsor.
Property Revenues in Excess of Rent N/A Master Lessee Operating Cash Flow The Master Tenant will retain revenues from the Property that exceed the total rent payable to the Trust under the Master Lease.
Financing Fee 1% of loan amount Trust Manager Operating Cash Flow In the event the Property is refinanced the Trust Manager will receive a financing fee equal to 1% of the principal amount of the new loan.

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.

The above presentation is based upon information supplied by the Sponsor or others.  Realty Mogul, Co. along with its 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.

This content does not constitute an offer to sell or a solicitation of an offer to buy any securities. RealtyMogul.com and North Capital Private Securities are in the process of screening, performing due diligence, and verifying information for the offering. The content is presented to gauge interest only and is subject to change without notice.

Disclaimers
Disclaimers

Review of PPM

Before making any investment decision, potential investors should carefully review the Private Placement Memorandum prepared by Sponsor (the "PPM"), including but not limited to, the Risk Factor section of the PPM and all exhibits of the PPM. The PPM contains additional risk factors and information regarding the DST that are not contained herein.  


Real Estate Investment Risk

Any investment in real estate carries certain inherent risks, and there is no guaranty as to the future occupancy of the Property or operating results.  Factors which might influence outcome include:

  • Changes in national or local economic conditions
  • Changes in the local market, including the entry of new competitors
  • Changes in the financial condition of the major tenant or tenants
  • The occurrence of casualties or natural disasters
  • The enactment of unfavorable laws

1031 Risk

Although it is intended that interests will be acquired on a tax-deferred basis under Code Section 1031, each investor must satisfy a number of technical requirements to qualify for tax deferral under Section 1031. Also, no assurance can be given that investors will be able to complete a qualifying Section 1031 exchange in the future when the Property is sold.


DST Risk

IRS established seven prohibitions over the powers of the DST Trustee, which include the following:

  • Once the offering is closed, there can be no future equity contribution to the DST by either current or new co-investors or beneficiaries
  • The DST Trustee cannot renegotiate the terms of the existing loans, nor can it borrow any new funds from any other lender or party
  • The DST Trustee cannot reinvest the proceeds from the sale of its investment real estate
  • The DST Trustee is limited to making capital expenditures with respect to the property to those for a) normal repair and maintenance, (b) minor non-structural capital improvements, and (c) those required by law
  • Any liquid cash held in the DST between distribution dates can only be invested in short-term debt obligations
  • All cash, other than necessary reserves, must be distributed to the co-investors or beneficiaries on a current basis, and
  • The Trustee cannot enter into new leases or renegotiate the current leases

Risks of Investing in Multifamily Rental Properties; Competition

The rental of multifamily residential space is a highly competitive business. Ownership of the Property could be adversely affected by competitive properties in the real estate market, which could affect the operations of the Property and the ultimate value of the Property. Success in owning the Property, therefore, will depend in part upon the ability of the Master Tenant, the Property Manager and the Property Sub-Manager (i) to retain current tenants at favorable rental rates; (ii) to attract other quality tenants upon the termination of existing leases if the existing tenants fail to renew or as otherwise needed; and (iii) to provide an attractive and convenient living environment for the tenants.


Competition from Apartment Communities in the Surrounding Geographic Area

A number of apartment communities of similar size and amenities are located in the Property’s immediate apartment sub-market. See “Risk Factors - Real Estate Risks - Competition” in the PPM. There are a number of Class A apartment communities in the surrounding region that may be more attractive to renters. Competing apartment communities may reduce demand for the Property, increase vacancy rates, decrease rental rates and impact the value of the Property itself. There may also be additional real property available in the general vicinity of the Property that could support additional multifamily properties. If newer housing is built, it may siphon demand away from the Property, as newer housing tends to be more attractive to prospective tenants. It is possible that tenants from the Property will move to existing or new apartment communities in the surrounding area, which could adversely affect the financial performance of the Property. Competition from nearby apartment communities could make it more difficult to attract new tenants and ultimately sell the Property on a profitable basis. The Property could also experience competition for real property investments from individuals, corporations and other entities engaged in real estate investment activities. Other properties and real estate investments may be more attractive than the Property. There is no assurance that the property managers will be able to attract residents to the Property given these facts.


The Property is Subject to Risks Relating to its Local Real Estate Market

Weakness or declines in the local economy and real estate market could cause vacancy rates at the Property to increase and could adversely affect the Trust’s ability to sell the Property under favorable terms. The factors which could affect economic conditions in the market generally include business layoffs, industry slowdowns, relocations of businesses, changing demographics, infrastructure quality and any oversupply of or reduced demand for real estate. Declines in the condition of the market could diminish your investment in and value of the Property.


Interest-Only Loan

The loan used to acquire the Property is expected to have an interest-only period for the entire 120 months of the loan term, which means there will be no reduction in the principal balance during the loan.


Performance of the Master Tenant Under the Master Lease

The ability of the Trust to meet its obligations is dependent upon the performance of the Master Tenant and its payment of Rent and other payments required under the Master Lease. ​


Conflict of Interest Risk

There are various potential conflicts of interest among the Sponsor, the Trust, the Managers, the Master Tenant, the Property Managers, and others engaged in the management and operation of the Property, one or more of whom may be affiliated with the others. 


Forward-Looking Statements

The PPM has based these forward-looking statements on its current expectations and predictions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Property, including, among other things, factors discussed below:

  • General economic performance of the local and national economy;
  • Required capital expenditures at the Property
  • Competition from properties similar to and near the Property
  • Adverse changes in local population trends, market conditions, neighborhood values, and local economic and social conditions
  • Supply and demand for property such as the Property
  • Interest rates and real estate tax rates
  • Governmental rules, regulations and fiscal policies
  • The enactment of unfavorable real estate, rent control, environmental, zoning or hazardous material laws
  • Uninsured losses
  • Anticipated market capitalization rates at the time of sale

Limited Transferability of Securities

Each Beneficial Owner will be required to represent that he is acquiring the Interests for investment and not with a view to distribution or resale, that such Beneficial Owner understands the Interests are not freely transferable and, in any event, that such Beneficial Owner must bear the economic risk of investment in the Interests for an indefinite period of time because: (i) the Interests have not been registered under the Act or applicable state “Blue Sky” or securities laws; and (ii) the Interests cannot be sold unless they are subsequently registered or an exemption from such registration is available. There will be no market for the Interests and the Beneficial Owner cannot expect to be able to liquidate their investment in case of an emergency. See “Restrictions on Transferability” in the PPM. Finally, the sale of the Interests may have adverse federal income tax consequences. See “Federal Income Tax Consequences” in the PPM.


Sale of the Property

The proceeds realized from the sale of the Property will be distributed among the Beneficial Owners, but only after satisfaction of the claims of other third-party creditors and Affiliates of the Sponsor. The ability of a Beneficial Owner to recover all or any portion of its investment, accordingly, will depend on the amount of net proceeds realized from such sale and the amount of claims to be satisfied therefrom. There can be no assurance that the Beneficial Owners will realize gains on sale of the Property.


No Representation of Beneficial Owners

Each Beneficial Owner acknowledges and agrees in the Purchase Agreement and Escrow Instructions that legal counsel representing the Trust, the Sponsor, the Manager, the Master Tenant, the Depositor and their Affiliates do not represent, and shall not be deemed under the applicable codes of professional responsibility to have represented or to be representing, any or all of the Beneficial Owners.​


Environmental Risk

Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at or affecting the Property. The Property has been evaluated for environmental hazards on behalf of the Lender pursuant to a noninvasive Phase I Environmental Site Assessment Report, dated January 19, 2018 prepared by AEI Consultants, based on a site visit conducted on December 7, 2017. The Phase I Report revealed no evidence of recognized environmental conditions (“RECs”) in connection with the site and no further investigation was recommended.


Performance of the Master Tenant Under the Master Lease

The ability of the Trust to meet its obligations is dependent upon the performance of the Master Tenant and its payment of Rent and other payments required under the Master Lease. ​


Trustee and the Manager Have Limited Duties to Beneficial Owners

The Trustee of the Trust and the Manager will not owe any duties to the Beneficial Owners other than those duties set forth in the Trust Agreement. In performing its duties under the Trust Agreement, the Trustee will only be liable to the Beneficial Owners for its own willful misconduct, bad faith, fraud or gross negligence. Similarly, the Manager will only be liable to the Beneficial Owners for its own fraud or gross negligence.

Hurricane Risk

The Property is located near the Atlantic Ocean, which is subject to frequent and sometimes destructive hurricanes.  There can be no assurance that a sizable hurricane will not cause significant damage to the Property, in which case the business and financial condition of the Trust would be materially adversely affected. There is no guarantee that the Trust or the tenants will procure adequate hurricane insurance for the Property.


No Realty Mogul Site Visit

The Property has not been physically inspected by a representative of Realty Mogul or any of its affiliates.


The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Private Placement Memorandum for a discussion of additional risks. To receive a copy of the Private Placement Memorandum please contact your Investor Relations Representative.

The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., along with its 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.

This content does not constitute an offer to sell or a solicitation of an offer to buy any securities. RealtyMogul.com and North Capital Private Securities are in the process of screening, performing due diligence, and verifying information for the offering. The content is presented to gauge interest only and is subject to change without notice.

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