On June 6, 2019, the real estate company under the preferred equity investment paid off the balance in full for Ashland Apartments in Chicago, IL, in the amount of $1,469,300. This payoff marks the first full cycle transaction in the MogulREIT II portfolio.
The initial business plan for the property called for all units to be renovated over a 6-month span ending December 2018, during which time the units that were not being renovated would retain their tenants. While the business plan was not complete at the time of payoff, the real estate company elected to complete the business plan with its own equity. Cash flow during the renovation period was not slated to cover the debt service for the senior loan and our preferred equity investment; thus, MogulREIT II capitalized one year of interest payments which was being held in a reserve account. All interest payments were paid in full out of this interest reserve.
In addition to the completion of Ashland Apartments, MogulREIT II has added a $3,385,320 joint-venture equity investment for the acquisition and renovation of Terrace Hill Apartments, a Class B multifamily apartment complex in El Paso, Texas. Terrace Hill apartments is the first direct acquisition for RM Adviser, MogulREIT II’s manager and subsidiary of RealtyMogul.
We decided to launch the direct acquisitions line of business as it aligns with our core mission – providing institutional quality investments to discerning investors. We are excited for what is to come and thank all of our investors for being dedicated investment partners as we continue to grow.
Since 2012, we have built great relationships investing alongside 70 operating partners across the country. We have built proprietary technology and systems to underwrite, analyze and provide asset management services from commercial real estate. And with our track record, we are most proud of the 180+* and growing number of investors on our platform who continue to trust us to put their hard-earned money to work.
How do these updates impact the MogulREIT II Portfolio?
- With the completion of Ashland Apartments, all active properties now in the MogulREIT II portfolio (open to all investors) were originally only offered to accredited investors as private, individual property offerings on our platform.
- When we add assets into MogulREIT II, we look to invest in value-add multifamily properties that have in-place cash flow. Our investment in Terrace Hill Apartments aligns with this ideology. The business plan entails improving the Property through a strategic renovation program, renovating units that become available due to normal tenant turnover, and re-leasing the renovated units. Moreover, the Property is situated in the resilient El Paso market, which, according to CoStar market reports, incurred cumulative job losses of less than 3% during the last recession beginning in 2007.
- While a preferred equity investment such as Ashland Apartments typically pays a higher current rate than a joint venture equity investment such as Terrace Hill Apartments, there is typically no profit share, so the upside is limited. The benefit of adding another joint venture equity investment to the portfolio is the potential for an increase to NAV.
Any additional questions? Feel free to contact Investor-Help@RealtyMogul.com.
*As of June 2019
Investing in MogulREIT II’s common shares is speculative and involves substantial risks. The “Risk Factors” section of the offering circular contains a detailed discussion of risks that should be considered before you invest. These risks include, but are not limited to illiquidity, complete loss of capital, limited operating history, conflicts of interest and blind pool risk. MogulREIT II’s multifamily investments can be subject to specific risks including changes in demographic or real estate market conditions, resident defaults, and competition from other multifamily properties.