Orion Real Estate Partners, LLC ("OREP") is a real estate investment company formed in 2017 by Marc Venegas, Kyle Henrickson and Mark Limpert (together, the "Principals") to acquire multifamily assets in major markets in the Western United States. OREP focuses on well located apartment properties with strong current cash flow and value add potential in markets expected to experience above average job growth. OREP employs a disciplined and consistent underwriting process based upon macroeconomic trends, submarket factors and property fundamentals.
Prior to the formation of OREP, Marc Venegas and Kyle Henrickson operated in a partnership known as ColdWater Partners, LLC. Through that entity, Marc Venegas and Kyle Henrickson acquired Parkwood Plaza Apartments, with RealtyMogul investors being involved in that transaction. Since such time, the Principals have entered into a joint-venture agreement with other investors to create OREP. However, while other investors are involved in the OREP entity, Marc Venegas and the Principals oversee all of OREP's day-to-day operations and maintain decision making rights within OREP. Since the formation of OREP, RealtyMogul investors have invested in another transaction, Triple Crown 2, alongside OREP.
As noted above, RealtyMogul investors previously invested alongside OREP in the Parkwood Plaza acquisition in March 2017 and the Triple Crown 2 acquisition in December 2018.
As of the end of Q3 2018, Parkwood Plaza had successfully undergone rezoning approvals with the City of Denver to allow for five existing units that were previously not permitted to be rented to be brought online and rented to prospective tenants. This income was not anticipated in the Estimated Financials for that property throughout the hold period, which could lead to an increase in revenues for that property above those in the Estimated Financials. From its acquisition through Q3 2018, that property is outperforming Estimated Financials on a net operating income basis by approximately 12% and is slightly underperforming on a cash on cash basis, with actual average cash on cash of 6.0% since inception, whereas the Estimated Financials targeted 6.5%. The Real Estate Company has closed on a supplemental loan for the Parkwood Plaza property as of November 1, 2018, and the additional loan proceeds from that supplemental loan are expected to return approximately 40% of initially invested equity to the RealtyMogul investors in that transaction. During the supplemental loan process the lender for Parkwood Plaza, CBRE, got an updated appraisal which valued that property at $15.3 million, which represents an approximately 31% increase in value over the all-in basis of approximately $11.7 million from its March 2017 acquisition.
As of the end of Q2 2018, Triple Crown 2 was well into the capital expenditure portion of its business plan, with 60 units having undergone interior renovations since its acquisition. In addition to the execution of the business plan to-date, the change in management executed by OREP after its acquisition of Triple Crown 2 seems to be well received by tenants, as the property's Google reviews increased from 2.8 stars at its acquisition to 4.1 out of 5.0 possible stars as of the end of Q3 2018. From its acquisition through Q2 2018, that property is outperforming Estimated Financials in the Issuer Document Package for that offering on a net operating income basis by approximately 22%, while its actual cash on cash is 6.6% since inception, whereas the Estimated Financials targeted 4.4%.
Built in 1960 and heavily renovated by the seller from 2015-2018, the Property consists of one, two, three and four-bedroom floor plans comprising 93 units, four (4) apartments buildings and one (1) standalone house, 160 parking spaces (1.7 parking spaces per unit), and 95,325 rentable square feet. The weighted average unit size and rent per unit are 1,025 square feet (well above the average unit size in the submarket of 851 square feet, per Axiometrics) and $1,187 ($1.16 per square foot), respectively (as of August 2018). The units offer large common living spaces, eat-in kitchens with dishwashers, full-size washer/dryer hookups, ceiling fans, and ample closet space. On-site amenities include a pool, a playground, and a dog park.
| Unit Type | # of Units | Unit (Square Feet) | Total Square Feet | Rent Per Unit | Rent Per Square Foot |
|---|---|---|---|---|---|
| 1 Bed, 1 Bath | 4 | 650 | 2,600 | $947 | $1.46 |
| 2 Bed, 1 Bath | 42 | 950 | 39,900 | $1,050 | $1.11 |
| 3 Bed, 1 Bath | 40 | 1,100 | 44,000 | $1,392 | $1.27 |
| Standalone Home | 1 | 1,200 | 1,200 | $1,400 | $1.17 |
| 4 Bed, 1 Bath | 6 | 1,268 | 1,268 | $1,631 | $1.29 |
| Totals/Averages | 93 | 1,025 | 95,325 | $1,234 | $1.20 |
| Lamar Station | Falls at Lakewood | Mountain Vista | Lime | Averages | Subject | |
|---|---|---|---|---|---|---|
| Submarket | North Lakewood | South Lakewood | South Lakewood | North Lakewood | North Lakewood/Wheat Ridge | |
| Axio Grade in Market | B- | B | B+ | B | C+ | |
| Axio Grade in Submarket | B- | B+ | B+ | B | B | |
| Axio Submarket Grade | B- | B- | B- | B- | 1,843 | B- |
| Units | 138 | 96 | 257 | 60 | 138 | 93* |
| Year Built | 1940 | 1974 | 1973 | 1960 | 1974 | 1960 |
| Average SF | 639 | 912 | 548 | 1,050 | 787 | 1,025 |
| Average Rental Rate | $1,040 | $1,559 | $1,108 | $1,448 | $1,289 | $1,476 |
| # of Units (1x1) | 87 | 12 | 172 | 90 | 4 | |
| Rent (1x1) | $978 | $1,210 | $1,085 | $1,091 | $1,180 | |
| Average SF (1x1) | 522 | 650 | 500 | 557 | 650 | |
| Average $/SF (1x1) | $1.87 | $1.86 | $2.17 | $1.97 | $1.82 | |
| # of Units (2x1) | 27 | 48 | 54 | 30 | 40 | 42 |
| Rent (2x1) | $1,292 | $1,535 | $1,181 | $1,245 | $1,313 | $1,284 |
| Average SF (2x1) | 902 | 850 | 670 | 900 | 830 | 950 |
| Average $/SF (2x1) | $1.43 | $1.81 | $1.76 | $1.38 | $1.60 | $1.35 |
| # of Units (3x1) | 3 | 24 | 30 | 19 | 40 | |
| Rent (3x1) | $1,220 | $1,645 | $1,650 | $1,505 | $1,690 | |
| Average SF (3x1) | 1,333 | 1,050 | 1,200 | 1,194 | 1,100 | |
| Average $/SF (3x1) | $0.92 | $1.57 | $1.38 | $1.29 | $1.54 | |
| # of Units (4x1) | 12 | 12 | 6 | |||
| Rent (4x1) | $1,832 | $1,832 | $1,631 | |||
| Average SF (4x1) | 1,150 | 1,150 | 1,268 | |||
| Average $/SF (4x1) | $1.59 | $1.59 | $1.29 | |||
| Distance from Subject (mi.) | 2.4 | 4.1 | 4.2 | 1.9 | 3.2 | - |
Lease Comparable information provided per Axiometrics.com
*The Property is 93 total units and 63 non-government-subsidized units. One of the 93 units is a stand-alone single family home and is not picked-up in this comparable table. The Subject rents in this table are representative of the underwritten post-renovation rents for the units which are not occupied by government-subsidized tenants.
| Silver Leaf Apartments | McKenzie Apartments | 915 Carr Street | Westhill Apartments | 9493 W 14th Ave | Averages | Subject | |
|---|---|---|---|---|---|---|---|
| Date | Sep '17 | Dec '16 | Nov '17 | Sep '16 | Oct '17 | Dec '18 | |
| Submarket | Lakewood | Lakewood | Lakewood | Lakewood | Eiber | North Lakewood/Wheat Ridge | |
| Costar Rating | 3 stars | 2 stars | 3 stars | 3 stars | 2 stars | 3 stars | |
| Units | 19 | 24 | 24 | 400 | 8 | 95 | 93 |
| Year Built | 1969 | 1961 | 1968 | 1972 | 1957 | 1965 | 1960 |
| Average SF | 855 | 1,000 | 842 | 963 | 913 | 915 | 1,025 |
| Purchase Price | $3,165,000 | $3,750,000 | $4,150,000 | $66,000,000 | $1,475,000 | $15,708,000 | $15,650,000 |
| $/Unit | $166,579 | $156,250 | $172,917 | $165,000 | $184,375 | $169,024 | $168,280 |
| Cap Rate | 5.88% | 5.49% | 5.06% | 5.75% | 5.46% | 5.53% | 4.87%* |
| Distance from Subject (mi.) | 1.9 | 0.8 | 0.1 | 3.7 | 0.5 | 1.4 | - |
Sale Comparable information provided per CoStar.com
*The Property cap rate is based on T-12 net operating income, adjusted for taxes.
| Sources of Funds | Cost |
|---|---|
| Debt | $9,671,000 |
| Equity | $7,972,210 |
| Total Sources of Funds | $17,643,210 |
| Uses of Funds | Cost |
| Purchase Price | $15,650,000 |
| CapEx Reserve | $1,450,000 |
| Sponsor Legal & DD Costs | $160,800 |
| Sponsor Acquisition Fee | $156,500 |
| North Capital Broker Dealer Fee | $79,200 |
| Lender Origination Fee | $96,710 |
| Working Capital | $50,000 |
| Total Uses of Funds | $17,643,210 |
The blended loan terms of the existing assumable debt financing and the expected supplemental are as follows:
- Lender: Midland Loan Services, a Division of PNC Bank, NA
- Loan Type: Freddie Mac Fixed-Rate
- Estimated Proceeds: $9,671,000
- Estimated Interest Rate: 4.35%
- Amortization: None
- Remaining Loan Term: Approximately 6.5 years remaining at the time of the acquisition of the Property
- Remaining Interest Only: Full initial loan term of 6.5 years
- Prepayment Penalty: Through January 2024, the greater of (i) yield maintenance or (ii) 1.0% of total loan proceeds. Thereafter, the loan may be paid off at par.
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 intends to make distributions of operating cash flows to investors (The Company, Other LP investors and the Real Estate Company, collectively, the "Members") as follows:
Operating Income, Refinance, and Sales Proceeds
- To the Members, pari passu, all excess operating cash flows to an 8.0% IRR to the Members,
- 80.0% / 20.0% (80.0% pro rata to the Members / 20.0% to the Real Estate Company) of excess operating cash flows to a 14.0% IRR,
- 65.0% / 35.0% 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 and fees) to the members of The Company (the RealtyMogul investors). The Manager of The Company will receive a portion (up to 10%) of The Real Estate Company's promote.
Distributions are expected to start in June 2019 and are expected to continue on a quarterly basis thereafter. These distributions are at the discretion of the the Real Estate Company, who may decide to delay distributions for any reason, including maintenance or capital reserves.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Effective Gross Revenue | $1,546,927 | $1,685,714 | $1,823,258 | $1,920,456 | $1,992,863 |
| Total Operating Expenses | $580,661 | $594,730 | $609,010 | $626,909 | $639,749 |
| Net Operating Income | $966,266 | $1,090,984 | $1,214,248 | $1,293,546 | $1,353,115 |
| Year 0 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Distributions to RealtyMogul 125, LLC Investors |
($2,000,000) | $107,759 | $138,390 | $168,662 | $188,116 | $3,175,009 |
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $2,694 | $3,460 | $4,217 | $4,703 | $79,375 |
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 | $156,500 | The Real Estate Company | Capitalized Equity Contribution | 1.0% of Purchase Price |
| Broker-Dealer Fee | $79,200 | North Capital (1) | Capitalized Equity Contribution | 4.0% based on the amount of equity invested by The Company |
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
|
Asset Management Fee |
1.0% of effective gross income | The Real Estate Company | Operating Cash Flow | |
| Construction Management Fee | 4.0% of capital expenditure budget | The Real Estate Company | Capitalized Equity Contribution | |
| Management and Administrative Fee | 1.0% of amount invested in the Company | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of The Company and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
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.
RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.
For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
No Approval, Opinion or Representation, or Warranty by RM Securities, LLCSponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.
Sponsor’s Information Qualified by Investment DocumentsThe information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.
Risk of InvestmentThis investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.
No Reliance on Forward-Looking Statements; Sponsor AssumptionsSponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.
Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.
No Reliance on Past PerformanceAny description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.
Sponsor’s Use of DebtA substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.
Sponsor’s Offering is Not RegisteredSponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.
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1031 Exchange RiskInternal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.