The team at our affiliated broker-dealer, RM Securities, conducts diligence on of the issuer, including detailed background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to screening for any criminal background, we may also turn down sponsors due to poor reference checks, even if the background and criminal checks are satisfactory.
We require unaffiliated sponsors to use an unaffiliated third-party escrow agent.* When an investor makes an investment with such sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s contingency offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.
Unless otherwise disclosed, escrow accounts are not required for some investments that accommodate 1031 investments where the property is already acquired.
Our processes typically includes visiting certain properties (or a subset of properties if it's a fund) to confirm the real estate is what and where the real estate is supposed to be. For certain properties that accommodate 1031 exchange investments, the team will review third-party prepared due diligence reports in lieu of a site visit.
We have formalized processes and checklists for every private placement deal listed on the platform.
Brennan Investment Group
Brennan Investment Group, LLC (“Brennan Investment Group” or the “Company”) is a private real estate investment company headquartered in Chicago, Illinois. Brennan Investment Group was formed in 2010. Its Managing Principals are comprised primarily of former First Industrial Realty Trust (NYSE: FR) founders and executives. Since 2010, the Company has purchased more than $1 billion in industrial real estate, partnering with institutional capital providers such as Goldman Sachs, California State Teachers Retirement System (CalSTRS), Gatehouse Bank and DLJ Real Estate Capital Partners.
The Company’s current portfolio spans 22 states, encompasses over 22 million square feet and currently has an occupancy rate of 98.5%. Brennan Investment Group acquires, develops and operates industrial real estate in select major metropolitan markets throughout the United States, including Central Florida, Chicago, Northern New Jersey, Southern California, Texas and Washington, D.C. The Company’s experienced principals utilize a disciplined investment approach in selectively identifying opportunities that look to achieve risk-adjusted returns for investors. Brennan Investment Group believes that industrial real estate is a large, stable and diversified investment class that offers a compelling opportunity for both current income and appreciation across a variety of industrial property types.
Track Record
http://brennaninvestmentgroup.com/
At A Glance
Investment Strategy: | Buy and Hold |
Projected Hold Period: | Four (4) years |
Total Project Budget: | $11,066,666 |
Property Type: | Flex Industrial |
Net Rentable Area: | 132,997 Square Feet |
Distributions to Realty Mogul 47, LLC: | Pari passu to a 10% IRR, then 60/40 split |
Going-In Cap Rate (Year 1): | 8.55% |
Going-In Cap Rate(1): | 8.80% |
Projected First Distribution: | March 2016 |
Distribution Schedule: | Quarterly |
Investor Funding Deadline: | October 19, 2015 |
Estimated Closing Date: | October 23, 2015 |
(1) Based on T6 NOI annualized.
Investment Details
Brennan Investment Group ("Sponsor" or "BIG") is under contract to purchase 8600 Jameel Road and 12705 Kirkwood St. (the “Portfolio” or "Properties") for $10,375,000 ($78.01/sf) representing an 8.55% cap rate on projected Year 1 net operating income. For the last 15 years the Portfolio has been institutionally owned by the publicly traded First Industrial REIT (NYSE: FR). Troy MacMane, co-founder of BIG and located in BIG's Houston office, was previously employed by First Industrial and charged with managing their investment portfolio including the Jameel and Kirkwood assets. Troy has nearly a decade of experience with the assets to be acquired.
Realty Mogul investors are being provided the opportunity to invest in Realty Mogul 47, LLC. Realty Mogul 47, LLC will be making an investment in Jameel Kirkwood LLC, which will hold title to the Property. Through Jameel Kirkwood LLC, the Sponsor will handle all aspects of the investment including acquiring the property, implementing capital improvements as necessary, property management, leasing, and ultimately selling the property.
Although the buildings have been well maintained, the Sponsor has budgeted $80,000 for minor capital improvements to increase the attractiveness of the Property as necessary. The Sponsor intends to leverage their prior experience with the assets and the market by managing rollover over the hold period. The Sponsor has underwritten an 8% general vacancy factor (in addition to turnover and absorption vacancy), and assumes that tenants renew at a 65% probability. The project should benefit from four years of interest-only debt, but the main driver of value creation is the spread between the exit cap and going in cap rates. The Sponsor believes they were able to tie up the property at a cap rate that would not have been feasible a year ago, as historically, cap rates were in the 8% to sub-8% range (as indicated by the sales comps), but expects that cap rate levels will normalize by the end of the hold period.
The Sponsor plans to hold the property for four (4) years before exiting the investment, but the hold period could be longer or shorter. Realty Mogul investors have the opportunity to participate as equity stakeholders and earn a share of the cash-flow and appreciation. Investors may expect to receive quarterly updates and distributions, with the first distribution expected in March 2016 and on a quarterly basis thereafter.
Investment Highlights
- Well Maintained/Institutionally Owned
- 94% Occupied With In Place Cash Flow
- Well Located: Both properties are strategically located within close proximity to major highways and are located on hard corners at the front of their respective parks.
- Diversified Tenant Base With Limited Exposure to the Energy Markets
- Sponsor Has Over a Decade of Experience With the Assets and has a Local Office in Houston
- Rental Rate Growth: Industrial rental rates are projected to increase in Houston and in Texas over the next couple of years. According to CBRE Houston Industrial MarketView Q2 2015, economists "expect 4.3% annual average rent growth through 2017". The included pro-forma by comparison assumes a more conservative annual growth rate of 1.5% in year 2 and then 3% thereafter.
- Basis Compares Favorably to Comps and is Below Estimated Replacement Cost ($115-125 PSF per conversations with market participants):
The investment will be structured as the purchase of limited liability company interests in Realty Mogul 47, LLC, which will in turn purchase interests in Jameel Kirkwood LLC. Jameel Kirkwood LLC will hold title to the Property and is managed by the Sponsor. Realty Mogul 47, LLC is a special purpose entity pursuing a venture capital strategy, and will be advised by RM Manager, LLC, an exempt reporting adviser and a wholly-owned subsidiary of Realty Mogul, Co.
Risks and Risk Mitigation*
- 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.
- Illiquid Investment - Transfer Restrictions & No Public Market: The transferability of membership interests in Realty Mogul 47, LLC 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. 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.
- Interest Only Loan: The loan being used to acquire the Property is interest-only for four years of operation, which means that there will be no reduction in the principal balance during that period.
- Debt With a Ten-Year Term: The loan on the Property is expected to have a term of ten years and will require defeasance to prepay the Loan. This means that a potential buyer will likely need to assume the loan. RM has underwritten the 1% assumption fee as being borne 50/50 by the Sponsor/buyer. At the projected exit price, the loan LTV is expected to be 60%.
- Local Market Conditions May Impact Rental Rates: Local conditions may significantly affect occupancy, rental rates, and the operating performance of a property. Such risks include (but are not limited to): (i) plant closings, industry slowdowns and other facts that affect the local economy; (ii) an oversupply of, or a reduced demand for, similar properties; (iii) a decline in household formation or employment or lack of employment growth, (iv) laws that could inhibit the ability to raise rents or to sell a property; and (v) other economic conditions that might cause an increase in operating expenses, such as increases in property taxes, utilities, compensation of on-site personnel and routine maintenance.
- Management Risk: Investors will be relying solely on the Sponsor for the execution of its business plan. The Sponsor may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of Jameel Kirkwood LLC (including Realty Mogul 47, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the Sponsor has significant operating experience, Jameel Kirkwood LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 47, LLC is pursuing a venture capital strategy through its investment in Jameel Kirkwood LLC, and the manager of Realty Mogul 47, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.
- Manager of Realty Mogul 47, LLC Will Participate in Sponsors' Promote Interest:The manager of Realty Mogul 47, LLC will be entitled to a participation in the value of any excess distributable cash flow and any appreciation of the property realized upon its sale. This could lead to a potential conflict of interest between the manager and Realty Mogul 47, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.
- Uncertain Distributions: The Sponsor cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 47, LLC) from either net cash from operations or proceeds from the sale or refinancing of the asset. Sponsor, in its discretion, may retain any portion of such funds for tenant improvements, tenant refurbishments and other lease-up costs or for working capital reserves. Sponsor has chosen to make distributions semi-annually.
- Risk of Interest Charges for Sponsor Capital Calls: The amount of capital that may be required by Jameel Kirkwood LLC from Realty Mogul 47, LLC is unknown, and although Jameel Kirkwood LLC does not require that its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or additional capital. Realty Mogul 47, LLC does not intend to participate in a capital call if one is requested by Jameel Kirkwood LLC, and in such event the manager of Jameel Kirkwood LLC may accept additional contributions from other members of Jameel Kirkwood LLC. Amounts that the manager of Jameel Kirkwood LLC advances on behalf of Realty Mogul 47, LLC will be deemed to be a manager loan at an interest rate of 16%. Amounts that are contributed by existing or new members will be deemed to be additional capital contributions, in which case Realty Mogul 47, LLC's interest in Jameel Kirkwood LLC will suffer a proportionate amount of dilution.
- Uncertain Exit Timing: Although it is anticipated that the Property will be sold at the end of the expected four (4) year hold period, Realty Mogul 47, LLC will not have full control over the timing of the sale of the Property, and therefore we cannot offer assurances of when the exit will occur. If the Property is not sold after five (5) years Realty Mogul 47, LLC has the right to cause a sale of the Portfolio.
- General Economic and Market Risks: While the Sponsor has conducted significant research to justify the intended rental rates and sales price relative to comparable properties in the market, its best efforts to forecast economic conditions cannot state for certain whether or not investor sentiment and the capital markets will be favorable to the property at the intended disposition date. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand for real estate investments, all of which are beyond the control of the Sponsor.
*The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Investor Document Package for a discussion of additional risks.
The above presentation is based upon information supplied by the Sponsor. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 47, LLC, 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.
The Portfolio consists of 6 separate free standing buildings on individual parcels. The buildings have minimum clear heights of 12', with grade level loading incorporated. There is adequate parking, with 127 spaces at Kirkwood Center and 211 spaces at 8600-8850 Jameel Road. The size of the tenants range from 1,541-8,611 square feet, with an average tenant size of 3,437 square feet. The suites are in good condition, function well, and have a low TI and maintenance requirement on new leases and renewals.
The properties are in good physical condition, including new roofs on all 6 buildings (2004 for Jameel) and (2011 for Kirkwood). The roofs on the Kirkwood Center buildings have warranties in place until 2026. The recently completed property condition report performed by EBI Consulting found no immediate repairs necessary at either asset.
Jameel | Kirkwood | Total/Avg | |
Addresses: | 8600 Jameel Rd., Houston, TX | 12705 Kirkwood St., Stafford, TX | |
Year Built: | 1980 | 1984 | |
Property Type: | Flex Industrial | Flex Industrial | |
SF: | 87,099 | 45,898 | 132,997 |
Occupancy: | 91% | 100% | 94% |
Buildings: | 4 | 2 | 6 |
% Office | 72% | 78% | 74% |
Clear Heights: | 12' | 12' | 12' |
Parking Spaces: | 211 | 127 | 338 |
Parking Ratio: | 2.42:1,000 SF | 2.77:1,000 SF | 2.54:1,000 SF |
Both properties are strategically located within close proximity to major highways and are located on hard corners. Kirkwood Center is located one mile from the Hwy. 59 and US Hwy 90A intersection. 8600-8850 Jameel Rd. is located just two miles from the Beltway 8 and US Hwy 290 intersection. The parks are mature, well landscaped industrial centers with similar age and style to the light industrial & manufacturing product immediately surrounding. The Properties are located in the northwest and southwest Houston industrial submarkets.
8600 Jameel Road is a four-building multi-tenant industrial property comprising 87,099 SF that was built in 1980. Situated on 5.86 acres, the Property located on the corner of Jameel Road and Fairbanks North Houston Road nearby US Highway 290 and US Highway 8 (Houston’s outer loop).
12705 S. Kirkwood Rd. is a two-building multi-tenant industrial property comprising 45,898 SF that was built in 1984. Situated on 3.10 acres, the Property is located on the corner of S. Kirkwood Road and Bluebonnet Drive nearby US Highway 90, Interstate 6/US Highway 59, and US Highway 8 (Houston’s outer loop).
Houston Market Overview
According to CBRE, the overall Houston industrial market contains more than 487 million SF of inventory, and as of the end of the 2nd quarter 2015 has an availability rate of 7.0%. Overall rents were unchanged in Q2 2015; current average monthly asking gross rates per sq. ft. citywide are $0.69 per month. Still, these rates have steadily increased during the prior 12 months ending Q2 2015 with a 4.5% escalation since Q2 2014. Going forward, CBRE Econometric Advisors expects 4.3% annual average rent growth through 2017 as oil price impacts are limited to those Houston submarket’s most exposed to the inverse volatility between the upstream and downstream energy sectors – i.e.: the Southeast and South submarkets. The average quoted gross monthly rent rates are $0.48 per sq. ft. for warehouse/ distribution space; $0.86 per sq. ft. for flex/service space; and $0.73 per sq. ft. for manufacturing space with flex making the lion’s share of the gains this year. Class A and new product rent will remain steady while, interestingly enough, older product has been seeing a slight increase during the economic recovery. Still the tax man cometh: Houston’s Harris County Appraisal District (HCAD) has started mailing property value notices to commercial and industrial property owners. The chief appraiser has advised that Houston’s booming economy will continue to have an impact on property values for 2015 and they will continue to increase this year. Even in the face of shrinking oil prices and subsequent, the Harris County economy in general is doing very well. HCAD reports that warehouses also have seen an increase in value because the city’s industrial growth is directly related to its transportation infrastructure. Warehouse values increased 23% in 2015, compared with 14% in the 2014 tax year. Increased trade through the county has continued to strengthen Houston’s industrial market and warehouse sector.
The above information came from the Q2 2015 CBRE Houston Industrial Marketview Report. The demographic information to the right was provided by onboardnavigator.com and is presented with statistics for Jameel/Kirkwood.
The above presentation is based upon information supplied by the Sponsor. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 47, LLC, 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.
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.
No Investment AdviceNothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.
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.