The properties are situated one block from the beach in Pacific Beach in San Diego, California.
There is an opportunity to renovate the properties and increase rental income. $25,425 is budgeted per unit for interior renovations.
Median household income in a 5-mile radius is $79,633 per CoStar.
DMJ Capital Partners
DMJ Capital Partners ("DMJ") was formed by three like-minded individuals, Doug Ceresia, Matt Midura, and Josh Buchholz, whose passion for real estate is fueled by a determination to seek new and innovative ways of practicing smart business and sound investment principles. Headquartered in San Diego, California, DMJ is a privately held real estate investment management and operating company whose goal is to create substantial returns for its investors.
Having demonstrated a superior track record for numerous years as commercial real estate brokers, the founders of DMJ were approached by various clients and investors who found it extremely challenging to participate in attractive real estate investments in Southern California. As a result, DMJ was formed to provide a platform for various types of investors to benefit from the stability of the commercial investment market.
Focused on acquiring value-add multifamily and office opportunities through select investing in submarkets with high barriers to entry, DMJ is dedicated to guiding its partners and investors to long-term prosperity by utilizing its extensive brokerage connections and local expertise in the marketplace.
The Principals have been partners in one of San Diego’s leading brokerage teams for more than a decade. All three of them were recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. In this approach to serving clients, it is no surprise that they have successfully closed over 900 sale and lease transactions totaling in excess of 600 million dollars throughout San Diego County. They are partners but more importantly friends who enjoy a work/life balance by engaging meaningfully with work, family, and the community.
The acquisition of Tiffany Apartments will represent RealtyMogul's second transaction with DMJ. The previous transaction, Riviera Marina, closed in October 2018 and has not yet gone full cycle. However, DMJ is tracking towards full, successful completion of their business plan.
Due to RealtyMogul's large equity interest, it has negotiated full control over the deal and will be very involved in the management and execution of the business plan.https://www.dmjpartners.com/
Mr. Ceresia will primarily oversee property management and work with the property management company to maximize leasing. He has extensive experience in commercial real estate brokerage. His track record includes the sales and leasing of over 2.25 million square feet of commercial property. Prior to launching DMJ in 2018, Mr. Ceresia was recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. He holds a BS in Business and Public Administration from the University of Missouri.
Mr. Midura will be the main point of contact for RealtyMogul Asset Management. He has extensive experience in commercial real estate brokerage. His track record includes the sales and leasing of over 2.25 million square feet of commercial property. Prior to launching DMJ in 2018, Mr. Ceresia was recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. He holds a BS in Economics from the United States Naval Academy.
Mr. Buchholz will lead construction through the renovation period. He has extensive experience in commercial real estate brokerage. His track record includes the sales and leasing of over 2.25 million square feet of commercial property. Prior to launching DMJ in 2018, Mr. Ceresia was recognized as NAI San Diego's Top Producer of the Year in 2012, 2014, and 2017. He holds a BA in International Business from San Diego State University.
|Address||Location||Asset Type||Date Acquired||Total SqFt||Purchase Price|
|DMJ Track Record|
|Riviera Marina||San Diego, CA||Multifamily||Oct-18||10,432||$5,500,000|
|Notable Sales Brokered by DMJ Principals|
|9303 & 9323 Chesapeake Dr||San Diego, CA||Office||Feb-18||37,754||$6,450,000|
|8787 Complex Dr||San Diego, CA||Office||Oct-17||55,500||$12,100,000|
|Valley Corporate Center||San Diego, CA||Office||Jan-17||175,826||$42,125,000|
|2251 San Diego Ave||San Diego, CA||Office||Jan-17||64,000||$13,825,000|
|232 West Ash||San Diego, CA||Office||Sep-16||20,000||$8,258,160|
|1400 Front St||San Diego, CA||Retail||Sep-16||12,454||$6,941,840|
|2051 Columbia St||San Diego, CA||Multifamily||Dec-16||N/A||$11,800,000|
|330 A Street||San Diego, CA||Office||Dec-16||9,000||$6,250,000|
|1620 5th Avenue||San Diego, CA||Office||Dec-15||80,650||$18,500,000|
|The Campus at Fashion Valley||San Diego, CA||Retail||Oct-15||69,895||$17,000,000|
|600 B Street||San Diego, CA||Office||Aug-12||374,000||$49,000,000|
|668 Sixth Avenue||San Diego, CA||Retail||Jun-12||32,124||$8,000,000|
The management overview and track record detailed above were provided by the Real Estate Company and has not been verified by Realty Mogul or NCPS.
In this transaction, RealtyMogul investors are to invest in RealtyMogul 124, LLC ("The Company"), which is to subsequently invest in Riviera Marina, LLC ("The Target"), a limited liability company that will hold title to the Property. DMJ Capital Partners (the "Real Estate Company") is under contract to purchase the Property for $5.5 million ($458,333 per unit) and the total project cost is expected to be $6.4 million ($535,000 per unit).
The Real Estate Company plans to implement a value‐add strategy, in which it will capitalize $575,942 ($47,995 per unit) to renovate the Property in the first 12 months. $305,100 ($25,425 per unit) has been budgeted for interior unit upgrades, which include quartz countertops, new appliances and faucets in the kitchens, ceiling fans and fresh carpet in all bedrooms, plank flooring in all living and dining rooms, and new tile, cabinets, fixtures, toilets, and shower fixtures in all bathrooms along with new arch panel doors and brushed nickel hardware throughout. Additionally, $218,484 has been budgeted for deferred maintenance and exterior improvements including the replacement of rotted wood, new roofing, stucco repair, plumbing, electrical and painting. Upon stabilization, the Real Estate Company expects to achieve gross rents of $3,064 per unit, which represents a 50% premium over in‐place rents but a 17% discount to Pacific Beach's average rent, according to Trulia. The business plan calls for a 20 month hold, at which point the Property is projected to be sold at a 3.75% cap rate.
Below is a summary of the capital improvements budget:
|CapEx Item||$ Amount||Per Unit|
|Interior Unit Renovations||$305,100||$25,425|
|Windows, Doors and Trim||$53,259||$4,438|
|New Entry Gate||$3,750||$313|
Built in 1977, the Property is a combination of seven townhouses, three apartment units and two free-standing units spread across five adjacent buildings. Located less than one block from Sail Bay Beach, the Property offers easy access to the water and Bayside Walk pathway. Although it has been well-maintained, the Property has not undergone any significant renovation since construction.
|Unit Type||# of Units||% of Total||Unit (Square Feet)||In-Place Rent Per Unit||Post-Reno Rent Per Unit|
*These units will be converted to two-bedrooms
|1760 Oliver Ave||853 Felspar St||Narragansett||1449 Felspar St||Averages||Subject|
|# of Units||4||5||16||8||8||12|
|Distance||0.6 miles||1.2 miles||4.0 miles||0.7 miles||1.6 miles|
|924 Hornblend||812 Law||Emerald at Dawes||3790 Riviera||1118 Thomas||Averages||Subject (Proforma)|
|# of Units (2 BR)||1||1||1||16||1||4||11|
|Rent (2 BR)||$3,095||$3,795||$3,500||$3,066||$3,295||$3,350||$2,989|
|Sq. Ft. (2 BR)||1,200||1,100||1,160||1,310||1,000||1,154||850|
|Dist. from Sub.||1.0 miles||1.5 miles||1.0 miles||0.2 miles||0.7 miles||1.0 mile|
|4981 Crystal||1023 Thomas||Felspar at Bayard||3790 Riviera||Averages||Subject (Proforma)|
|# of Units (3 BR)||2||1||1||8||3||1|
|Rent (3 BR)||$4,500||$3,500||$3,895||$3,529||$3,856||$3,889|
|Sq. Ft. (3 BR)||N/A||1,844||1,440||1,525||1,603||1,974|
|Dist. from Sub.||1.9 miles||0.8 miles||1.2 miles||0.2 miles||1.0 mile|
Lease and Sale Comparable information provided by Axiometrics, CoStar, and the Real Estate Company
The Property is located 0.1 miles from the beach, in the Mission Valley / North Central submarket within the greater San Diego-Carlsbad MSA, as defined by CoStar. According to the Bureau of Labor Statistics, the MSA had an unemployment rate of 3.4% as of August 2018, which was lower than the nation's 3.9%.
According to CoStar, as San Diego's housing shortage shows no signs of mitigating, San Diego's residents will continue to bear the brunt of housing price and rental increases. The submarkets where renters by necessity have moved to escape the escalating rent levels along the coast and in employment nodes have only increased that burden. Annual growth is typically strongest in these areas in north, south and east county. Annual rent growth picked up notably along the coast this past summer, too. While builders have spread out across the metro, developers have largely focused their attention on luxury units—at the expense of mid-tier product—primarily because of the high costs associated with construction, the cost of which continues to escalate. New supply is expected to sit above 3,000 units annually through 2020, perhaps peaking near 4,000 units in 2018. With San Diego's economy diversified among innovation fields, tourism, trade and the military, the metro's apartment fundamentals are on firm footing, and demand remains largely inelastic. Investors have taken notice, and they continue to pour money into San Diego, even if the level of investment has fallen in 2018 compared with last year.
Per CoStar, Mission Valley / North Central continues to attract national developers and investors due to its central location, arterial freeways, and expanding employment base. Compared to other submarkets in San Diego, Mission Valley has more developable land for high-density projects, making it one of the most active submarkets for builders. Developers have spread out across the entirety of Mission Valley (from Grantville to Kearny Mesa), as it's one of the few submarkets able to take advantage of a substantial trolley route. Although the bevy of deliveries has added some pressure to fundamentals, demand has held firm. Mission Valley was the focal point for big investors in 2017 in the metro, making it the largest‐volume year this cycle and buttressing San Diego's investment volume for the year. And while not quite rising to last year's level, institutional interest remains strong in 2018.
|Distance from Property||1 mile||3 miles||5 miles|
|Median Household Income||$68,869||$77,353||$79,633|
|Average Household Size||1.8||2.0||2.2|
|Median Home Value||$776,560||$800,833||$740,153|
|Population Growth 2018-2023||4.6%||4.3%||4.3%|
Demographic information above was obtained from CoStar.
|Sources of Funds||Cost|
|Total Sources of Funds||$6,420,000|
|Uses of Funds||Cost|
|Real Estate Company Acquisition Fee||$110,000|
|North Capital Broker Dealer Fee||$106,400|
|Total Uses of Funds||$6,420,000|
The expected terms of the debt financing are as follows:
- Lender: Seller Carryback
- Estimated Proceeds: $3,450,000
- Estimated Rate (Fixed): 5.0%
- Amortization: None
- Term: 8 years
- Interest Only: 8 years
- Prepayment Penalty: None
- Deferred Payment: No payments will be due for the first year (unpaid interest will accrue and be added to principal)
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, all excess operating cash flows to an 8.0% IRR to the Members;
- 70.0% / 30.0% (70.0% to Members / 30.0% to promote) of excess cash flows and appreciation to an 18.0% IRR to Members;
- 50.0% / 50.0% (50.0% to Members / 50.0% to promote) of excess cash flow 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 RealtyMogul investors). The manager of The Company will receive a portion of the promote. Distributions are expected to start in March 2020 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 1||Year 2*|
|Effective Gross Revenue||$296,994||$290,020|
|Total Operating Expenses||$127,991||$95,762|
|Net Operating Income||$169,003||$194,257|
*Year two is only eight months due to sale in month 20
RealtyMogul 124, 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||$110,000||Real Estate Company||Capitalized Equity Contribution||2.0% of the Property purchase price.|
|Broker-Dealer Fee||$106,400||North Capital (1)||Capitalized Equity Contribution||Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 124, LLC.|
|Type of Fee||Amount of Fee||Received By||Paid From||Notes|
|Management and Administrative Fee||1.0% of amount invested in RealtyMogul 124, LLC||RM Manager, LLC||Distributable Cash||RM Manager, LLC is the Manager of RealtyMogul 124, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2)|
|Property Management Fee||5.0% of Effective Gross Income||South Coast Commercial||Distributable Cash|
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.
(2) Fees may be deferred to reduce impact to investor distributions.
The above presentation is based upon information supplied by the Real Estate Company or others. Realty Mogul, Co., RM Manager, LLC, and The Company, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will” and similar expressions to identify these forward-looking statements.
Non-Transferability of Securities
The transferability of membership interests in The Company are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Moreover, the estimated investment holding period described herein is only a projection, and there can be no assurance when or if an investment may be liquidated. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.
All funds from investors will be held in a non-interest bearing escrow account with Broker-Dealer as escrow agent for the benefit of the investors in accordance with Rule 15c2-4 under the Exchange Act. All investor funds will be transmitted directly by wire or electronic funds transfer via ACH to the escrow account maintained by the escrow agent per the instructions in the Subscription Agreement. Upon certification by Broker-Dealer and acceptance by the Company that all contingencies have been met, the investor’s funds will be promptly transmitted to the Company. If the contingencies fail to be satisfied during the offering period, we will instruct the Broker-Dealer to return all funds to the investors without interest, deduction, or setoff, and all of the obligations of the investor hereunder shall terminate.
The Target anticipates that present cash reserves, together with the net proceeds from the sale of Membership Interests in this offering, will be sufficient to finance operating costs and expenses for a period of at least 75 days following the closing of this offering, assuming that all of the Membership Interests offered hereby are sold in accordance with the terms hereof. However, the Target may need additional capital to continue and expand operations and to implement business plan and strategy, as contemplated in this offering. If operations expand faster or at a higher rate than currently anticipated or revenues generated by the Target are lower than projected, additional capital may be required sooner than expected to fund the business plan. There is no assurance or guarantee that additional capital will be available when needed by the Target, or that such capital will be available under terms acceptable to the Target or on a timely basis. If additional funds are raised through the issuance of equity, convertible debt, or similar Membership Interests of the Company, the percentage of ownership of the Company by the Company's Members will be reduced, the Company's Members may experience dilution, and such Membership Interests may have rights or preferences senior to those of the Company's Membership Interest issued pursuant to this offering. There is no assurance that additional financing will be available on terms favorable to Target or at all. If adequate funds are not available or are not available on acceptable terms, the ability to fund the business plan would be limited significantly. This limitation could harm substantially the business, results of operations, and financial condition.
Fluctuating Values of Real Property
Real estate valuation is an inherently inexact process, and depends on numerous factors, all of which are subject to change. Appraisals or opinions of value may prove to be insufficiently supported, and the Company’s review of the value of the Property and/or security may be based on information that is incorrect or opinions that are overly optimistic. The risk of default on any loan in such situations is increased, and the risk of loss to investors in the Company will be similarly increased.
Uncertain Exit Timing
Although it is anticipated that the Property will be sold at the end of the expected holding period, the Company may not have any meaningful control over the timing of the sale of the Property, and therefore we cannot offer assurances of when a sale of the Property may occur. If the Property is not sold during the expected holding period the Company may have certain rights (either at that point or at a later time), to force a sale of the Property or force a purchase of the interests of Company, however, if such rights exist they may be subject to other limitations such as the approval of the lender holding the loan secured by the Property and the requirements of the operating agreement of the Target.
California State Environmental Risks
The State of California is subject to various natural disasters, including severe drought, earthquakes, and fire seasons. The Property is vulnerable to damage or interruption from such natural disasters, power losses, telecommunication failures, terrorist attacks, human errors, break-ins and similar events. The occurrence of a natural disaster or other unanticipated problem could result in a strain on the Company’s financial condition. The is no guarantee that the Target will carry adequate insurance for the Property at the time of a loss. Because the Property is located in an earthquake fault zone, it is particularly sensitive to the risk of damage to, or total destruction of, the Property, which, if incurred, could adversely affect the Target’s results of operations and financial condition, and consequently have a material adverse effect to the Company’s financials and its investors.
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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