There is an opportunity to renovate the Property and increase rental income. $5,000 is budgeted per unit for interior renovations along with an additional $1.1 million for exterior improvements.
After the Property is stabilized, double-digit cash-on-cash is expected.
The Property is being acquired at a favorable basis compared to recent transactions in the market, on a per unit and cap rate basis.
$6,250,000
Berkshire Property Holdings
Berkshire Property Holdings (the "Real Estate Company") was founded in 2013 by Hamza Kuraishi and Zamir Kazi and is headquartered in Miami, Florida. It is a real estate investment firm specializing in multifamily acquisitions and re-developments throughout the USA. It currently operates in California, Florida, Georgia and Texas. In a short space of time, Berkshire Property Holdings has established an excellent reputation for moving swiftly and decisively when identifying undervalued and under-performing assets in strategic locations. The company's strategy has been to operate in markets where it sees significant growth potential. The company believes that its success hinges on careful market selection, strong sourcing capabilities, comprehensive due diligence, detailed financial analysis, and methodical execution. Berkshire Property Holdings uses it’s veteran acquisition team’s market expertise to target assets in high growth submarkets and then create value through a combination of rebranding, renovating, and revitalizing property management. A disciplined investment approach to renovation and tenant improvement has led to repositioning opportunities in assets with significant value-add potential, while always maintaining a focus on downside risk limitation.
http://berkshirepropertyholdings.com/-
Zamir KaziCEO / Co-Founder -
Hamza KuraishiManaging Principal / Co-Founder
Zamir is the CEO and co-founder of Berkshire Property Holdings. He is responsible for the overall operations and management of Berkshire Property Holdings, as well as overseeing the origination, structuring and asset management of all of Berkshire’s investment activities. Zamir has overseen over 36 successful real estate transactions for Berkshire Property Holdings.
Zamir attended FSU and graduated magna cum laude with a Bachelor’s degree in Pre-Med with Business. Post university, Zamir started and sold several successful business and has been frequently published in Forbes Magazine, Entrepreneur, Inc and The Huffington Post. A true entrepreneur, Zamir’s vision, verve and drive are integral assets to Berkshire Property Holdings success.
Hamza is the Managing Principal and co-founder of Berkshire Property Holdings. While intimately involved in all aspects of the company, Hamza’s main focus at Berkshire Property Holdings is in raising capital and managing investor relations.
Prior to founding Berkshire Property Holdings, Hamza was a partner at a London stock brokerage company for 10 years. Hamza has a background in Military Engineering and holds an honour’s Bachelor’s Degree in Geography and Urban Planning from the University of London. A graduate of the Royal Military Academy Sandhurst, Hamza’s man management skills are integral to all repositioning success at the properties.
Real Estate Company Portfolio
| Property | Location | Asset Type | Acq Date | Units | Purchase Price | Sale Price | ||
| Las Lomas | Dallas, TX | Multifamily | 2019 | 221 | $18,000,000 | Not Sold | ||
| Park at Peachtree Hills | Atlanta, GA | Multifamily | 2019 | 118 | $18,000,000 | Not Sold | ||
| Camelot Gardens | Jacksonville, FL | Multifamily | 2019 | 691 | $40,000,000 | Not Sold | ||
| Desert Peaks | El Paso, TX | Multifamily | 2018 | 175 | $6,250,000 | Not Sold | ||
| Alexandria Landings | Atlanta, GA | Multifamily | 2018 | 472 | $19,700,000 | Not Sold | ||
| Phillippi Shores | Sarasota, FL | Multifamily | 2018 | 28 | $2,005,000 | $3,600,000 | ||
| Willow Bend | Orlando, FL | Multifamily | 2016 | 188 | $8,500,000 | $13,500,000 | ||
| Pine View | Orlando, FL | Multifamily | 2016 | 91 | $2,600,000 | $4,000,000 | ||
| Riviera Villas | Orlando, FL | Multifamily | 2015 | 40 | $1,250,000 | $2,200,000 | ||
| Park Sands | Tampa, FL | Multifamily | 2015 | 28 | $1,400,000 | $1,650,000 | ||
| Florida Portfolio | Various, FL | Multifamily | 2015 | 150 | $3,750,000 | $5,000,000 | ||
| Orlando Portfolio | Orlando, FL | Multifamily | 2015 | 150 | $3,750,000 | $5,000,000 | ||
| Total | 2,352 | $125,205,000 | $34,950,000 | |||||
The above bios and track record were provided by the Real Estate Company and have not been independently verified by RealtyMogul
In this transaction, RealtyMogul investors are to invest in RealtyMogul 114, LLC ("The Company"), which is to subsequently invest in Desert Peaks JV, LLC ("The Target"), a limited liability company that will indirectly own interest in the Property. Berkshire Property Holdings (the "Real Estate Company") is under contract to purchase the Property for $6.25 million ($39,308 per unit) and the total project cost is expected to be $9.0 million ($56,808 per unit).
The Real Estate Company plans to implement a value-add strategy, in which it will capitalize $2.1 million ($13,069 per unit) to renovate the Property in the first 24 months. $795,000 ($5,000 per unit) has been budgeted for interior unit upgrades which include painting, new cabinets, light fixtures and black appliances, and vinyl plank flooring. Additionally, $1.1 million has been budgeted for deferred maintenance and exterior improvements including the installation of new A/C units, resurfacing of asphalt, stair renovations, new exterior signage, addition of a playground set, highend grill, and pool upgrades. Upon stabilization, the Sponsor expects to achieve net effective rents of $775 per unit, which represents a 30% premium over in-place rents but a 3% discount to the Northwest El Paso submarket average rent, according to Axiometrics. The business plan calls for a 3 year hold, at which point the Property is expected to be sold at a 7.25% cap rate.
Below is a summary of the capital improvements budget:
| CapEx Item | $ Amount | Per Unit |
|---|---|---|
| Interior Unit Renovations | $795,000 | $5,000 |
| 159 new A/C Units | $647,800 | $4,074 |
| Brick enclosure redesign | $7,500 | $47 |
| Exterior building paint | $98,000 | $616 |
| Asphalt resurface | $65,000 | $409 |
| Exterior stair renovation | $23,850 | $150 |
| Monument sign | $11,750 | $74 |
| New roofs | $195,000 | $1,226 |
| Playground set | $5,200 | $33 |
| Highend grill | $2,300 | $14 |
| Pool furniture | $8,000 | $50 |
| Gutters | $8,000 | $50 |
| Fencing replacement | $5,500 | $35 |
| Pool upgrade | $12,000 | $75 |
| Window screens | $4,200 | $26 |
| Contingency 10.0% | $188,910 | $1,188 |
| Total | $2,078,010 | $13,069 |
Built in two phases in 1966 and 1973, the Property consists of 14 buildings, which house 55 one-bedroom, 91 two-bedroom, and 13 three-bedroom units. Amenities include a fitness center, business center, clubhouse, pet park, laundry facilities, two pools, balconies/patios, fireplaces, and washer/dryer hookups. Although the Property has been well-maintained, the majority of unit interiors have not undergone significant renovation. Within walking distance are Starbucks, McDonald's, Planet Fitness, and Walgreens. Within three miles are a Whole Foods, Walmart Supercenter, Home Depot, Sprouts, several shopping centers and restaurants.
| Unit Type | # of Units | % of Total | Unit (Square Feet) | In-Place Rent Per Unit | Post-Reno Rent Per Unit |
|---|---|---|---|---|---|
| 1/1 Small | 20 | 13% | 698 | $521 | $674 |
| 1/1 Large | 35 | 22% | 743 | $552 | $706 |
| 2/1 Small | 54 | 34% | 840 | $605 | $786 |
| 2/1 Large | 17 | 11% | 858 | $621 | $802 |
| 2/1.5 Townhouse | 20 | 13% | 942 | $613 | $813 |
| 3/2 Small | 12 | 8% | 1,240 | $727 | $980 |
| 3/2 Large | 1 | 1% | 1,680 | $750 | $1,005 |
| Totals/Averages | 159 | 100% | 851 | $596 | $775 |
Sale Comparables
| Ryan's Crossing | West Town | El Pavon | Mesa Village | Total/Averages | Subject | |
| Date | Sep '17 | Jun '17 | Feb '17 | Nov '16 | Dec '18 | |
| Year Built | 1986 | 1973 | 1993 | 1973 | 1966/1973 | |
| CoStar Class | C | B | B | C | B | |
| # of Units | 248 | 192 | 116 | 160 | 179 | 159 |
| Purchase Price | $16,000,000 | $13,300,000 | $5,100,000 | $9,300,000 | $10,925,000 | $6,250,000 |
| $/Unit | $64,516 | $69,271 | $43,966 | $58,125 | $58,969 | $39,308 |
| Cap Rate | 6.22% | 6.48% | 6.50% | 6.50% | 6.43% | 8.20% |
| Distance from Subject | 0.9 miles | 1.4 miles | 3.4 miles | 2.3 miles | 2.0 miles |
Lease Comparables
| Caprock Apartments | Coronado Trails | Indian Springs | WestTown Apartments | Total/Averages | Subject | |
| Number of Units | 296 | 60 | 232 | 192 | 195 | 159 |
| Year Built | 1978 | 1974 | 1982 | 1973 | 1977 | 1966/1973 |
| Average SF | 819 | 958 | 835 | 1,085 | 924 | 851 |
| Average Rental Rate | $783 | $747 | $775 | $839 | $786 | $775 |
| Average Rent per SF | $0.96 | $0.78 | $0.93 | $0.77 | $0.85 | $0.91 |
| Distance from Subject | 0.4 miles | 1.4 miles | 2.0 miles | 1.3 miles | 1.3 miles |
Sale and lease comps were obtained from CoStar and Axiometrics
Market Overview
Per Axiometrics, the military provides a strong and stable economic anchor for the El Paso metro, with Fort Bliss and William Beaumont Army Medical Center being major contributors to the local economy. As such, the El Paso metro recorded year‐over‐year job growth during the past eight years. According to the Bureau of Labor Statistics, the metro posted a net gain of 7,800 jobs in the year‐ending October 2018, with those additions growing the existing employment base 2.2%. Annual job gains were most pronounced in the Education/Health Services sector. Employment gains over the past year took El Paso’s total job count some 39,200 positions or 13.9% above the first quarter 2008 level. El Paso’s unemployment rate hit 3.9% in October 2018.
According to CoStar, apartment development in El Paso has been in full swing this cycle, and the metro has expanded its inventory by about 15% since 2010. Consistent demand for apartments has helped mitigate supply‐driven pressure on fundamentals in recent years. Traditionally, rent growth is meager in El Paso, but gains have started to gain traction more recently. Texas's non‐disclosure status can cloud the investment scene, but inventory turnover rarely exceeds 5% here, and most trades typically involve local investors.
Demographic Information
| Distance from Property | 1 mile | 3 miles | 5 miles |
|---|---|---|---|
| Population (2018) | 15,454 | 70,690 | 179,395 |
| Population (2023) | 15,641 | 71,335 | 180,806 |
| Average Age | 38 | 38 | 37 |
| Median Household Income | $53,676 | $55,447 | $48,022 |
| Average Household Size | 2.4 | 2.5 | 2.8 |
| Median Home Value | $177,165 | $196,987 | $167,661 |
| Population Growth 2018-2023 | 1.2% | 0.9% | 0.8% |
Demographic information above was obtained from CoStar.
| Sources of Funds | Cost |
|---|---|
| Debt | $6,212,500 |
| Equity | $2,820,000 |
| Total Sources of Funds | $9,032,500 |
| Uses of Funds | Cost |
| Purchase Price | $6,250,000 |
| CapEx Reserve | $2,078,010 |
| Loan Fee | $77,656 |
| Real Estate Company Acquisition Fee | $93,750 |
| North Capital Broker Dealer Fee | $99,000 |
| Closing Costs | $244,084 |
| Working Capital | $40,000 |
| Cash Flow Reserve | $150,000 |
| Total Uses of Funds | $9,032,500 |
The expected terms of the debt financing are as follows:
- Lender: Ameritas Investment Partners, Inc.
- Estimated Proceeds: $6,212,500
- Estimated Rate (Fixed): 6.2%
- Amortization: None
- Term: 3 years
- Interest Only: 3 years
- Prepayment Penalty: None, but there is 0.5% exit fee
- Extension Options: Two one-year extension options
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 15.0% IRR to Members;
- 55.0% / 45.0% (55.0% to Members / 45.0% 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 June 2019 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 | Year 3 | |
|---|---|---|---|
| Effective Gross Revenue | $1,286,714 | $1,480,929 | $1,545,473 |
| Total Operating Expenses | $774,291 | $791,111 | $804,251 |
| Net Operating Income | $512,422 | $689,818 | $741,222 |
| Year 0 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|
| Distributions to RealtyMogul 114, LLC Investors |
($2,500,000) | $238,640 | $225,525 | $3,236,350 |
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $4,773 | $4,511 | $64,727 |
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 | $93,750 | Real Estate Company | Capitalized Equity Contribution | 1.5% of the Property purchase price. |
| Broker-Dealer Fee | $99,000 | North Capital (1) | Capitalized Equity Contribution | Greater of $50,000 and 4.0% of the equity raised by RealtyMogul 114, LLC. |
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
| Management and Administrative Fee | 1.0% of amount invested in RealtyMogul 114, LLC | RM Manager, LLC | Distributable Cash | RM Manager, LLC is the Manager of RealtyMogul 114, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2) |
| Asset Management Fee | 1.0% of Effective Gross Income | Real Estate Company | Distributable Cash | |
| Property Management Fee | 3.0% of Effective Gross Income | FPI Management | 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.
Forward-Looking Statements
Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will” and similar expressions to identify these forward-looking statements.
Non-Transferability of Securities
The transferability of membership interests in The Company are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Moreover, the estimated investment holding period described herein is only a projection, and there can be no assurance when or if an investment may be liquidated. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.
Capital Call Risk
The amount of capital that may be required by the Target from the Company is unknown, and although the Target does not require that the Company and its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or sell additional equity. The Company does not intend to participate in a capital call if one is requested by the Target, and in such event the manager of the Target may accept additional contributions from other members of Target or from new members. In the event that the manager of Target advances any capital on behalf of the Company, it will be deemed to be a manager loan at an interest rate that cannot be determined at this time. Amounts that are contributed by existing or new members will be deemed to be additional capital contributions, in which case the Company's interest in Target will potentially suffer a proportionate amount of dilution.
Texas Flood Risk
The Property is located in El Paso, Texas, an area which is subject to occasional and sometimes destructive flooding emanating from various weather systems, and may be located in a special flood hazard zone. There can be no assurance that a flood will not cause significant damage to the Property, in which case the business and financial condition of the Target, and thus the Company, would be materially adversely affected.
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.
Interest-Only Loan Period
The loan being used to acquire the Property is expected to have an interest-only period during the first 3 years of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.
Apartment Complex - Competition
Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. The Property will compete with other residential alternatives to attract tenants, including but not limited to other apartment units that are currently available for rent, new apartments that are built and condominiums/houses that are for rent or sale. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify. If the Property is not able to successfully compete with the competitive residential alternatives in the local or regional area this could adversely affect the ability of Target to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.
Renovation Risks
As of December 2018, the Property had a 90% occupancy level, and the Target intends to implement a capital improvement plan involving the interior and exterior renovation of the Property, and a leasing program in its effort to add value to the Property. The Target intends to renovate all or some of the units within the Property and increase the current rental rates of such renovated units. There can be no assurance that, (i) the renovations will be consummated on a timely basis, (ii) the renovations will be completed satisfactorily, (iii) such work will not materially adversely affect other aspects of the operation of the Property, and (iv) the planned rental rate increase will have favorable results to meet the goals the Target projected. Any delays or negative results of the renovation work or rental increase efforts could adversely affect the Property’s financial results or occupancy levels, including its business operations and thus the value of the Company’s investment.
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.