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Completed Equity
Multifamily
Riviera Marina
San Diego, CA
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By DMJ Capital Partners
19.2%* TARGET IRR 18.2%-20.2%
4.1%* TARGET AVG CASH ON CASH
1.33x* TARGET EQUITY MULTIPLE
Estimated Hold Period 20 months
Estimated First Distribution 3/2020
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Overview
Value-add acquisition of a well located multifamily property near the beach in Southern California.
Location

The properties are situated one block from the beach in Pacific Beach in San Diego, California.

Value-Add

There is an opportunity to renovate the properties and increase rental income.  $25,425 is budgeted per unit for interior renovations.

Market

Median household income in a 5-mile radius is $79,633 per CoStar.

Property At A Glance
Year Built 1977
# of Units 12
# of Buildings 5
Current Occupancy 75%
Acquisition Price

$5,500,000

Investment Highlights
Strong Market with Low Vacancy: Given median home value within three miles is greater than $800,000, much of the market is forced to rent, as evidenced by submarket vacancy of 2.7% according to Axiometrics
Attractive Basis: The Real Estate Company is purchasing the Property for $458,333 per unit, which is more than $28,000 per unit below nearby sale comps
Value-add Upside Potential: Poor management has kept in-place rents far below market, and there is even further upside potential through renovations
Management
Cumulative Distributions

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/
  • Doug Ceresia, CCIM, SIOR
    Principal
  • Matt Midura
    Principal
  • Josh Buchholz
    Principal
Doug Ceresia, CCIM, SIOR
Principal

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.

Matt Midura
Principal

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.

Josh Buchholz
Principal

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.

Track Record

 

DMJ Principals' Transcation History
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
Total       931,203 $200,250,000

 

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.

Business Plan

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:

Riviera Marina - Capital Expenditures Budget
CapEx Item $ Amount Per Unit
Interior Unit Renovations $305,100 $25,425
Wood Replacement $5,500 $458
New Roofing $30,000 $2,500
Stucco Exterior $25,000 $2,083
Plumbing $71,125 $5,927
Electrical/Lighting $13,500 $1,125
Windows, Doors and Trim $53,259 $4,438
Painting $16,350 $1,363
New Entry Gate $3,750 $313
Contingency 10.0% $52,358 $4,363
Total $575,942 $47,995
Property
Property Details

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.

In-Place Unit Mix
Unit Type # of Units % of Total Unit (Square Feet) In-Place Rent Per Unit Post-Reno Rent Per Unit
1/1 Apartment* 1 8% 682 $1,515 $2,879
1/1.5 Townhouse* 1 8% 800 $1,778 $3,030
2/1 House 1 8% 617 $1,747 $2,929
2/1.5 Townhouse 5 42% 800 $2,036 $3,030
2/1.5 Apartment 2 17% 863 $1,995 $2,879
2/2 House 1 8% 1,103 $2,273 $3,131
3/1.5 Townhouse 1 8% 1,974 $3,030 $3,889
Totals/Averages 12 100% 909 $2,043 $3,064

*These units will be converted to two-bedrooms

 

Comparables

Sale Comparables
  1760 Oliver Ave 853 Felspar St Narragansett 1449 Felspar St Averages Subject
Date Oct-17 Jan-18 May-18 Mar-18   Oct-18
# of Units 4 5 16 8 8 12
Year Built N/A 1948 1973 1990 1970 1977
Purchase Price $2,215,000 $2,050,000 $6,750,000 $4,500,000 $3,878,750 $5,500,000
$/Per Unit $553,750 $410,000 $421,875 $562,500 $487,031 $458,333
Cap Rate 3.71% 3.06% 2.90% 3.83% 3.38% 3.07%
Distance 0.6 miles 1.2 miles 4.0 miles 0.7 miles 1.6 miles  
2 Bedroom Lease Comparables
  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  
3 Bedroom Lease Comparables
  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

Location

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%.

Market Overview 

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.

Submarket Overview

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. 

Demographic Information

Demographics
Distance from Property 1 mile 3 miles 5 miles
Population (2018) 28,671 104,503 285,790
Population (2023) 29,995 108,993 298,018
Average Age 35 39 39
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.

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $3,450,000
Equity $2,970,000
Total Sources of Funds $6,420,000
Uses of Funds Cost
Purchase Price $5,500,000
CapEx Reserve $575,942
Real Estate Company Acquisition Fee $110,000
North Capital Broker Dealer Fee $106,400
Closing Costs $77,658
Working Capital $50,000
Total Uses of Funds $6,420,000
Debt Assumptions

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.

Distributions

The Target will make distributions to investors (The Company and Real Estate Company, collectively, the "Members") as follows:  

Operating Income, Refinance, and Sales Proceeds

  1. To the Members, pari passu, all excess operating cash flows to an 8.0% IRR to the Members;
  2. 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; 
  3. 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. 

Cash Flow Summary
  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 Cash Flows
  Year 0 2018 2019 2020
Distributions to
RealtyMogul 124, LLC Investors
($2,711,279) $0 $167,593 $3,442,896
Net Earnings to Investor
- Hypothetical $50,000 Investment
($50,000) $0 $3,091 $63,492
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 $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.
Recurring Fees
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.

Documents
Disclaimers/FAQs
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.


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.


Capital Adequacy

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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