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Funded
Office
Twin Oaks
Norfolk, VA
INVESTMENT STRATEGY
Core Plus
INVESTMENT TYPE
Equity
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100% funded
Offered By SF Partners
17.1%* TARGET IRR 16.1%-18.1%
14.2%* TARGET AVG CASH ON CASH
1.9x* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 years
Estimated First Distribution 8/2019
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Explore this Project
Overview
Acquisition and hold of two adjacent Class A office buildings in Norfolk, VA.
Property At A Glance
Year Built 1999/2001
Total SF 170,616
Current Occupancy 95%
Number of Tenants 18
Parking Ratio 4.53 per 1,000 square feet
Acquisition Price

$24,475,000

Investment Highlights
Repeat Real Estate Company: RealtyMogul investors previously invested alongside SF Partners in the acquisition of the Hollywood Medical Office Building in October 2015 and the acquisition of Cinnamon Tree Plaza in May 2016. The Hollywood Medical Office Building was subsequently sold in July 2018 which yielded a 32.6% IRR to RealtyMogul investors. Cinnamon Tree Plaza was subsequently sold in February 2018 which yielded an 18.0% IRR to RealtyMogul investors. Past performance is not indicative of future results and there can be no assurance that RealtyMogul will achieve comparable results or be able to avoid losses.
Strong Tenancy: The Properties are 95% leased with an attractive tenant roster including leading companies in the defense, government, construction, and professional service industries.
Cash Flow Profile: Double-digit cash flow is expected throughout the majority of the hold period.
Management
Cumulative Distributions

SF Partners

SF Partners ("SF") is a Real Estate Investment firm established in 2009 with the primary focus of purchasing and managing commercial real estate in the state of Florida. The principals of SF, Charles Stuzin and Daniel Stuzin, have been involved in both the banking and real estate industries in South Florida for more than 40 years. In the past few years, SF has placed on an emphasis on expanding outside of Florida to find commercial projects that meet their investment criteria. They have recently invested in Colorado, Georgia, Kentucky, and South Carolina. 

Since inception, SF has purchased and operated over twenty multi-tenant commercial properties primarily in the South Florida area. SF's strategy has been to identify commercial buildings where it can add value through increasing occupancy, rental rates, and reducing expenses. Many of the properties purchased by SF have also required substantial investment in capital improvements in order to achieve the aforementioned objectives.

The investment strategy is based upon acquiring and managing “sub‐performing” commercial real estate assets that offer attractive risk-based returns in the following property types: office, retail and light industrial. Typical deal size ranges from $1,000,000 ‐ $12,000,000. By focusing on smaller commercial properties, SF believes it can find value as there are less sophisticated purchasers pursuing these type of deals. Transaction types are standard arms-length buyer/seller purchases but have also included the acquisition of: non-performing notes, portfolio purchases and REO assets. The management team has developed a strategy which allows for quick stabilization of the asset (typically within 12‐18 months). The “in-house” property management team also allows SF to keep expenses to a minimum while providing superior value to its tenants.

Since 2011, SF has owned and managed 1.6 million square feet of office properties with cumulative purchase prices of $135 million. SF has sold 11 properties with cumulative sale prices of $67 million.

RealtyMogul investors previously invested alongside SF Partners in the acquisition of the Hollywood Medical Office Building in October 2015 and the acquisition of Cinnamon Tree Plaza in May 2016. Hollywood Medical Office Building was subsequently sold in July 2018 which yielded a 32.5% IRR to RealtyMogul investors. Cinnamon Tree Plaza was subsequently sold in February 2018 which yielded an 18.0% IRR to RealtyMogul investors. 

Past performance is not indicative of future results and there can be no assurance that RealtyMogul will achieve comparable results or be able to avoid losses.

http://www.sfpartnersllc.com/
  • Charles Stuzin
    Chairman of the Board
  • Daniel Stuzin
    President
Charles Stuzin
Chairman of the Board

Charles is a principal of SF Partners. He has spent his 40 year career in the banking and real estate industries. Previously, he served as Chairman and President of CSF Holdings, Inc. (holding company for Citizens Federal Bank). He currently serves as Chairman of the Board for the Holding Company of Coconut Grove Bancshares. Charles holds a bachelors degree in accounting from the University of Florida and a J.D. from the University Of Miami School Of Law. Mr Stuzin’s experience has been great source of counsel for the operations of SF Partners. 

Daniel Stuzin
President

Daniel is a founder and managing principal of SF Partners and is responsible for setting the investment strategy of the firm. He maintains overall responsibility for all operations of the firm. Daniel holds a bachelors degree in accounting from the University of Illinois and a J.D. from the University of Miami School of Law. Daniel was President and founder of SF Partners Mortgage LLC, a licensed commercial Florida lender that originated and managed commercial loans between 2003-2009.

Track Record

SF Partners Track Record & Assets Under Management
Address Location Property Type Acquisition Date Square Footage Purchase Price $ Per SF Sale Price Status
2290-2328 10th Avenue North Lake Worth, FL Office Mar-15 101,136 $8,600,000 $85 Active
2675 Winkler Avenue Fort Myers, FL Office Sep-14 64,386 $4,400,000 $68 Active
2151 W. Hillsboro Boulevard Deerfield Beach, FL Office Oct-12 41,000 $3,080,000 $75 Active
1801-1925 S. Perimeter Road Fort Lauderdale, FL Office Nov-11 73,000 $3,410,550 $47 Active
1800 S. Australian Avenue West Palm Beach, FL Office Aug-11 45,000 $4,250,000 $94 Active
6520-6528 US Highway 301 Riverview, FL Office Apr-11 38,400 $3,264,000 $85 Active
1551 Forum Place West Palm Beach, FL Office Sep-15 39,899 $4,000,000 $100 Active
580-600 Village Blvd West Palm Beach, FL Office Sep-16 70,000 $10,800,000 $154 Active
1455 Old Alabama Road Roswell, GA Office May-17 77,381 $7,900,000 $102 Active
2700 NE Expressway Atlanta, GA Office Aug-17 110,113 $10,250,000 $93 Active
2850 Holcomb Bridge Road Norcross, GA Office Mar-18 105,632 $4,550,000 $43 Active
11001 Bluegrass Parkway Louisville, KY Office Feb-18 128,373 $10,000,000 $78 Active
1330 Inverness Drive Colorado Springs, CO Office Jul-18 113,604 $11,750,000 $103 Active
7499 Parklane Road Columbia, SC Office Jul-18 47,810 $4,160,000 $87 Active
21301 Powerline Road Boca Raton, FL Office Sep-13 53,000 $6,905,000 $130 $11,500,000 Sold
4300 N. University Drive Lauderhill, FL Office Jun-13 97,800 $5,300,000 $54 $9,300,000 Sold
5959-5999 Central Avenue St. Petersburg, FL Office Mar-13 62,508 $2,900,000 $46 $4,575,000 Sold
324 Datura Street West Palm Beach, FL Office Aug-12 66,000 $3,587,500 $54 $6,000,000 Sold
440 East Sample Road Pompano Beach, FL Office May-12 27,515 $1,325,000 $48 $2,450,000 Sold
741-749 US Highway 1 North Palm Beach, FL Office Jun-11 25,000 $1,500,000 $60 $2,175,000 Sold
3700 Washington Street Hollywood, FL Office Oct-15 57,815 $8,300,000 $144 $11,500,000 Sold
2051-2151 45th Street West Palm Beach, FL Office Mar-16 69,178 $7,800,000 $113 $9,500,000 Sold
5701 N. Pine Island Road Tamarac, FL Office May-16 40,000 $4,150,000 $104 $4,900,000 Sold
618 US Highway One North Palm Beach, FL Office Apr-11 46,400 $1,100,000 $24 $2,800,000 Sold
2425 E. Commercial Blvd Ft. Lauderdale, FL Office Dec-10 21,276 $1,450,000 $68 $2,300,000 Sold
Total       1,622,226 $134,732,050 $82 $67,000,000  

 

Past performance is not indicative of future results and there can be no assurance that RealtyMogul will achieve comparable results or be able to avoid losses.

Business Plan
Property

In this transaction, RealtyMogul investors are to invest in RealtyMogul 128, LLC ("The Company"), which is to subsequently invest in KAS Twin Oaks, LLC ("The Target"), a limited liability company that will indirectly own interest in the Property. SF Partners (the "Real Estate Company") has closed on the Property for $24.5 million ($143 per square foot) and the total project cost is $25.6 million ($148 per square foot).

The Real Estate Company plans to implement a light common area cap ex plan, reduce operational inefficiencies, and renew tenants as lease expirations occur throughout the hold period. $240,000 ($1.41 per square foot) has been budgeted for common area upgrades which include bathroom updates ($100,000), new carpet and paint in the common areas ($75,000), parking lot repairs ($50,000), and a new lobby directory ($15,000). The Real Estate Company has also reserved an additional $185,000 for working capital. The business plan calls for a five-year hold, at which point the Property is expected to be sold at an 8.50% cap rate.

Property Details

The Property is two four-story, 95% leased, Class A office buildings totaling 170,616 rentable sq. ft. with 773 parking spaces (4.52 spaces / 1,000 SF) and situated on 11.02 acres. The Properties are located within the Lake Wright Office Park, adjacent to Interstate 64, Military Highway, and Northampton Boulevard, and 0.1 miles from the Norfolk International Airport and six miles from downtown Norfolk. The Lake Wright Executive Center is a corporate campus with approximately 750,000 square feet of office space and four hotels with 572 rooms of lodging and on-site restaurants. 

Twin Oaks I has a rentable SF of 84,634 SF and is currently 90% occupied. The building's largest tenant, Titan America, occupies roughly 33,023 SF (39% of Building I). Other major tenants at Twin Oaks I are Tetratech (6,359 SF), Biotelemetry, Inc. (7,729 SF), and UST Global (6,379 SF).

Twin Oaks II has a rentable SF of 85,982 SF and is currently 100% occupied. Twin Oaks II's largest tenant is Booz Allen at 34,577 SF (40% of Building II). Other major tenants at Twin Oaks II include Reddix (13,221 SF), the US Gov / GSA (TSA) (10,900 SF), and Falconwood (7,932 SF).

Construction for Twin Oaks I was completed in 1999 and Twin Oaks II in 2001. The buildings consist of a concrete foundation with slab on-grade. The exterior is primarily a brick veneer with pre-cast concrete accents and insulated glass windows.

Each building has a non-ballasted mechanically fastened membrane roof system. Each building has two hydraulic elevators.

Major Tenants:

Booz Allen Hamilton - Founded in 1914 and headquartered in McClean, VA, Booz Allen is a global consulting firm that advises public and private sector clients, primarily the U.S. government, on areas ranging from organization to strategy to logistics to information technology.  Booz Allen is publicly traded on the NYSE under the ticker symbol: BAH. Between tenant improvement dollars and tenant invested dollars, the Real Estate Company reports that the tenant has invested over $4 million into the buildout of the space for their 2018 renewal. 

Titan America - Titan America ("Titan") is a subsidiary of Titan Cement Group, which is a publicly traded company on the Athens Stock Exchange.  The company has approximately 3,000 employees and is a leading supplier of heavy building materials in the United States. Titan is headquartered at the subject Property. 

ARDX - Founded in 2006, ARDX is a healthcare management and consulting firm which focuses primarily on serving various integrated management and technology solutions agencies within the federal government.  ARDX has been appraised at the highest maturity level of the Capability Maturity Model for Services (CMMI0SVC Level 5) by the CMMI® Institute.  ARDX is amongst an elite group of companies who have achieved this recognition and one of few U.S. small businesses nationwide.

U.S. Government / GSA (TSA) - The Transportation Security Administration (TSA) is an agency of the United States Department of Homeland Security that has authority over the security of people traveling in the United States. The Aviation and Transportation Security Act was passed by the 107th Congress and signed on November 19, 2001 in response to the September 11 terrorist attacks.

UST Global - Founded in 1998 and headquartered in Aliso Viejo, California, UTS Global is a leading digital technology services provider for Global 1000 companies.  The private company has over 15,000 associates operating in 25 countries in 4 continents.

Tetra Tech - Founded in Pasadena, California in 1966, Tetra Tech (NASDAQ: TTEK) is a leading worldwide provider of consulting and engineering services that has more than 250 offices throughout the United States.  The company supports government and commercial clients by providing innovative solutions focused on water, environment, infrastructure, resource management, energy, and international development.

Major Tenants Summary: 

Tenant Square Footage % of Total Rent per SqFt Lease Expiration Lease Type
Booz Allen Hamilton 34,577 20.2% $22.00 4/30/2026 Full Service Gross
Titan America 33,023 19.3% $21.58 5/31/2030 Full Service Gross
ARDX 13,221 7.7% $27.04 7/31/2022 Full Service Gross
US Gov / GSA (TSA) 10,967 6.4% $28.36 12/31/2022 Full Service Gross
Falconwood 7,932 4.6% $23.34 1/31/2022 Full Service Gross
UST Global 6,379 3.7% $27.86 1/31/2020 Full Service Gross
Tetra Tech 6,359 3.7% $23.43 4/30/2024 Full Service Gross
Coulee Techlin 4,916 2.9% $25.00 9/30/2022 Full Service Gross
Bio Telemetry 8,279 4.8% $25.25 4/30/2024 Full Service Gross
UST Global 4,635 2.7% $25.75 5/31/24 Full Service Gross
Total 126,762 74.1% $23.54 -- --
Comparables

Lease Comps 
  440 Monticello 283 Constitution 4500 Main 580 E Main 5701 Cleveland Total / Averages Subject
Submarket Downtown VA Beach CBD/Pembroke VA Beach CBD/Pembroke Downtown Norfolk Newtown/Witchduck -- Central Norfolk
Costar Rating 5-star 4-star 4-star 4-star 4-star -- 4-star
Date Signed June-16 May-17 June-18 April-16 Feb-18 -- --
Square Footage 299,887 129,465 116,500 58,674 136,000 148,105 170,970
Year Built (Renovated) 2010 1983 (2005) 2008 2000 1993 1998 1999 (2001)
Tenant UBS Magellan HRSC Hazen and Sawyer Tidewater CC Hapag-Lloyd America -- --
Average Rental Rate (FSG) $30.00 $25.50 $24.50 $19.25* $21.00 $24.05 $25.11
Parking Ratio per 1,000 SqFt 6.17 0.00 1.83 3.07 5.00 3.21 4.52
Distance from Subject (mi.) 4.9 4.8 4.7 5.1 2.8 4.5 --

*Building marketing space for $21.00 FSG as of 1/25/2019

Sales Comps
  1 BayPort 5800 Northampton 11827 Canon* ADP Building 300 E Main** Total / Averages Subject
Date Sold Oct-15 Dec-15 July-16 April-17 August-18 --  
Submarket Oyster Point Central Norfolk Oyster Point Downtown Norfolk Downtown Norfolk -- Central Norfolk
Costar Rating 3-star 4-star 3-star 4-star 4-star -- 4-star
Square Footage 96,906 314,778 58,092 288,662 199,621 191,612 170,970
Year Built (Renovated) 2002 1994 (2014) 2009 1974 (2017) 1990 2000 1999 (2001)
Purchase Price $18,000,000 $56,825,100 $9,760,641 $57,000,000 $18,550,000 $32,027,148 $24,475,000
Price per SqFt $185.75 $180.52 $168.02 $197.46 $92.93 $164.94 $144.45
Cap Rate -- -- -- 7.00% 7.94% 7.5% 6.85%***
Parking Ratio per 1,000 SqFt 2.04 4.00 5.00 2.67 0.99 2.94 4.52
Distance from Subject (mi.) 21.9 0.2 20.2 4.9 5.2 10 --

*Sold as part of an 11-property portfolio

**Property had an occupancy rate of 81% upon sale

***Based on T-12 net operating income which included average occupancy of ~90%, $178,000 of free rent, and operating expenses which were 11% higher than UW projections. Note that the cap rate using In-Place Income and T-12 operating expenses is 9.2%. 

 

Location

 

Market Overview

Norfolk's economy is heavily reliant on the military, as the largest Navy base in the world is located in Norfolk (Naval Station Norfolk). Naval Station Norfolk has the largest concentration of U.S. Navy forces through 75 ships alongside 14 piers and 134 aircraft and 11 aircraft hangars at the adjacently operated Chambers Field. Norfolk is also home to one of NATO's two Strategic Command headquarters. The primary employment sectors in the market are Government (~160,000 jobs), Retail/Wholesale Trade (108,000 jobs) and Professional and Business Services (114,000 jobs). Major employers in the area include the U.S. Department of Defense, Sentara Healthcare, and the Norfolk City Public Schools. 

As of early February 2019, current job growth for Norfolk was 1.38%, which trails the United States average of 1.65%. As of the same date, the metro unemployment rate was 3.2%, which falls below the United States average of 3.7%. 

Office fundamentals have generally recovered since vacancies peaked in 2012.  The market vacancy rate currently stands at 8.3% with 52,423,143 total rentable square feet of office space and a further 753,368 square feet under construction.  Gross asking rent for the market is $19.08 per square foot.  The past 12 months have seen net absorption of 283,000 square feet, with 198,000 square feet delivered.  The vacancy rate has fallen 0.2% and rent has grown at a rate of 2.3%.

Rent levels among high-quality assets increased 13.0% between Q1 2016 and Q4 2018, with most of this growth happening in 2018.  The current vacancy rate among Class B+/A buildings is 8.5%, with 682,803 total square feet under construction, and average gross asking rents of $23.92 per square foot.

Submarket Overview

The Central Norfolk submarket has an office vacancy rate of 9.0%, with 3,275,580 total rentable square feet of office space and 0 square feet under construction.  Gross asking rent for the submarket is $19.92 per square foot.  The past 12 months have seen net absorption of 9,500 square feet with 0 square feet delivered.  The vacancy rate has fallen 0.3% and rent has grown at a rate of 2.6%.

The current vacancy rate among Class B+/A properties is 1.3%, with 0 square feet under construction, and average gross asking rents of $24.49 per square foot.

Market & Submarket data per Costar. 

Demographic Information

Demographics

Demographic Information (2018) 1 Mile Radius 3 Mile Radius 5 Mile Radius
Population 3,502 100,268 283,957
Population Projection (2023) 3,471 100,571 285,737
Average Age 37.70 36.40 36.60
Median Household Income $54,361 $50,334 $53,419
Average Household Size 2.60 2.50 2.50
Median Home Value $166,912 $182,248 $204,568
Population Growth 2018-2023 (0.89%) 0.30% 0.36%

Demographic data per Costar. 

 

Photos
Financials
Sources & Uses

Sources of Funds
  $ Amount  Per SqFt %
Senior Loan $18,200,000 $106.67 71%
RM Equity (47%) $3,500,000 $20.51 14%
Real Estate Company Equity (53%) $3,896,778 $22.84 15%
Total $25,596,778 $150.03 100%
Uses of Funds
  $ Amount  Per SqFt %
Purchase Price $24,475,000 $143.45 96%
Broker-Dealer Fee (4.3%) $150,000 $1.03 1%
CapEx Budget $240,000 $2.07 1%
Closing Costs & Fees $378,050 $1.41 1%
Working Capital $185,000 $1.08 1%
Pre-Paid Tax & Insurance $168,728 $0.99 1%
Total $25,596,778 $150.03 100%
Debt Assumptions

The Real Estate Company closed on a senior loan upon acquisition of the Property. The terms of the debt financing are as follows:

  • Lender: Starwood Mortgage Capital
  • Estimated Initial Proceeds: $18,200,000
  • Maximum Additional Funding: None
  • Estimated Interest Rate: 4.81% fixed rate
  • Interest Only Period: 30 months
  • Amortization Period: 30 years
  • Loan Term: 65 months
  • Extension Options: One 12-month extension at 400 basis points over the initial term fixed rate. Lender will sweep all cash if exercised. 
  • Prepayment Penalty: Locked out until September 30, 2023. Subject to the greater of yield maintenance or a 1% prepayment penalty thereafter. No prepay after August 6, 2024. 
  • Recourse: No
  • Reserves: $1 per square foot per year for anticipated future leasing costs. 
Distributions

The Target intends to make distributions for all available cash and capital proceeds to investors (The Company, Other LP investors and Real Estate Company, collectively, the "Members") as follows:

  1. Pro-rata share of cash flow to an 8% IRR hurdle
  2. Excess balances will be split pro rata 70% to Members (pro rata in accordance with and in proportion to their respective Company Percentages) and 30% to Real Estate Company.

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 operating agreement, in addition to any member loans or returns due on member loans).

The Company will distribute 100% of its share of excess cash flow (after expenses and fees) to the members of The Company (the RealtyMogul investors).  

Distributions are expected to start in September 2019 and are expected to continue on a bi-annual 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.

Targeted Cash Flows
  Year 1 Year 2 Year 3 Year 4 Year 5 Reversion
Effective Gross Revenue $3,721,616 $3,774,932 $3,878,393 $3,831,631 $4,062,116 $4,122,609
Total Operating Expenses $1,380,723 $1,414,048 $1,449,674 $1,481,603 $1,522,685 $1,629,076
Net Operating Income $2,340,893 $2,360,884 $2,428,719 $$2,350,028 $2,539,431 $2,493,533
Company Cash Flows
  Year 0 2019 2020 2021 2022 2023 Reversion
Distributions to Company ($3,535,000) $464,358 $551,102 $551,654 $456,840 $342,809 $4,274,723
Net Earnings to Investor - Hypothetical $50,000 Investment ($50,000) $6,582 $7,795 $7,803 $6,462 $4,849 $60,463
               
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
Deferred Acquisition Fee $100,000 Real Estate Company Capitalized Equity Contribution $25,000 to be taken out of cash flow for first four years of hold period
Broker-Dealer Fee $150,000 (4.3% of equity raised)  North Capital 1 Capitalized Equity Contribution  
Disposition Fee $183,348 (0.625% of gross reversion value) RM Manager, LLC
Capitalized Equity Contribution
RM Manager, LLC will receive the greater of 0.625% of the gross reversion value or $168,750. 
Recurring Fees
Type of Fee Amount of Fee Received By Paid From Notes
Property Management Fee 3.0% of Effective Gross Income Real Estate Company, Property Manager Distributable Cash Real Estate Company is charging 1.0% of Effective Gross Income for accounting fees; Colliers, the property manager, is charging 2.0% of EGI
Management and Administrative Fee 1.0% of amount invested by Realty Mogul 128, LLC RM Manager, LLC Distributable Cash

 RM Manager, LLC is the Manager of The Company and a wholly-owned subsidiary of Realty Mogul, Co.

(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.


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.


Interest-Only Loan Period 

The loan being used to acquire the Property is expected to have an interest-only period during the first 2.5 years of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.


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.


Virginia Hurricane Risk

Virginia is subject to frequent and sometimes debilitating natural disasters including but not limited to coastal hurricanes. There can be no assurance that hurricanes and flooding within the state, or any other environmental factor, will not cause significant difficulties and disruptions in the daily operation of the Property, or that Real Estate Company and the Target are properly insured for any such damage caused to the Property or its business operations. As a result, the business and financial condition of the Target, and thus the Company and its investors, may be materially adversely affected.


Office Building Competition Risk

Office buildings are subject to market forces affecting supply and demand just like other types of commercial space, but the economic drivers for office space are sometimes different than those for other real estate investments. Rents and valuations for offices are primarily influenced not just by employment growth but also by a region’s economic focus. Office properties are especially influenced by specific types of employment -- namely, sectors with very high proportions of office use. These economic segments are generally those that utilize service and professional employees such as attorneys, accountants, engineers, insurance personnel, real estate brokers and related service providers (like title and escrow providers), and people working in banking, financial services, consulting, medical, dental, and pharmaceutical fields. Office space tends to be leased for relatively long periods, with tenants often having the option to renew leases for additional terms. This means that office properties often have leases that can lag current market lease rates, and an appropriate “step-up” of rental rates may not be able to be imposed until a lease expires. Economic downturns can affect office buildings more than residential buildings, since businesses can go bankrupt even while people continue to need housing. Re-leases of office space can often require significant lead time to consummate.


Cash Sweep Potential by Senior Lender

A mortgage loan is expected to exist on the Property throughout the investment term.  if an extension of the original mortgage loan term is required, the senior lender that provided the mortgage at the time the Property was purchased requires a reserve of all available cash flow from the Property (i.e., a Cash Sweep), until such time as the Property is sold or refinanced with a new senior lender.  If the Property does not generate revenues sufficient to meet its operating expenses, including a Cash Sweep, Target’s cash flow and ability to pay distributions to its members (including the Company) will be adversely affected.


Market and Economic Conditions May Impact Revenue from the Property’s Operations

Local conditions in the market of the Property may significantly affect occupancy, rental rates, and the operating performance of the 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) zoning, rent control or other laws regulating similar properties that could prevent Target from raising rents or modifying, expanding or selling the Property; (v) economic conditions that could cause an increase in operating expenses of Target, such as increases in property taxes, utilities, compensation of on-site personnel and routine maintenance; (vi) stability of military facilities or a reduction in their allocated budget and or operations.


Vacancies and Tenant Defaults May Reduce the Property’s Revenues

A vacancy or default of a tenant on its rent will cause Target to lose the revenue from that unit and, if enough effective vacancies occur, it could cause Target to have to find an alternative source of revenue to meet any loan payments and other operating expenses for a particular property. Although not without penalty, a major tenant in the Property has an early termination option for their lease during the investment term. If the company managing the investment property does not employ sufficiently aggressive marketing campaigns and/or lease incentive programs, vacancies may increase and an investment in the Company may be adversely affected.


*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 Real Estate Company 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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