MogulREIT II recently disclosed refinancings for two of its portfolio properties. This is a brief update about each refinancing.
MogulREIT II Strategy and Portfolio Makeup
As a reminder, MogulREIT II is a public, non-traded REIT that invests in apartment buildings nationwide. While we have distributed quarterly income since inception equating to a 4.5% annualized return, the focus is on long-term capital appreciation from the renovation and repositioning of the multifamily properties.
From a capital appreciation standpoint, the strategy is focused on value creation through some form of property improvements in order to increase rental income and ultimate resale value.
For target geographic markets, we focus on regions with strong economic fundamentals and apartment communities that have demonstrated consistently high occupancy and income levels across market cycles.
The source of cash flow is derived from tenants paying rents and additional potential income stemming from enhancements to the property, such as the addition of a laundry facility or interior/exterior renovations.
MogulREIT II offers an annualized distribution rate of 4.5%, payable quarterly and has a minimum initial investment of just $5000.
Two Portfolio Property Refinancings
Serendipity Apartments (now named Clover Apartments after re-branding)
As previously disclosed, on August 31, 2017, we acquired a $4,000,000 joint-venture limited partnership equity investment in connection with the acquisition of a 343-unit multifamily apartment community located in Dallas, Texas. We acquired the investment for a purchase price of $4,000,000, which was funded with a loan from Realty Mogul Commercial Capital, Co., which we subsequently paid back in full.
In Q1 2020, the Sponsor of the transaction refinanced its acquisition loan with a new senior loan to reduce the interest rate and take the project to completion. The term of the senior loan is ten years, with interest-only payments for three years. The senior loan’s interest rate is floating at one-month LIBOR plus 207 basis points with a cap of 5.5%. The refinancing returned approximately 50% of the original investment.
Plano Multifamily Portfolio
As previously disclosed, on January 9, 2018, we acquired a $1,000,000 joint-venture limited partnership equity investment related to the acquisition and renovation of two garden-style apartment communities comprising 156 units located at 1809 G Avenue in Plano, Texas. We acquired the investment for a purchase price of $1,000,000.
In Q1 2020, the Sponsor of the transaction refinanced its acquisition loan with a new senior loan to reduce the interest rate and take the project to completion. The term of the senior loan is ten years, with interest-only payments for five years. The senior loan’s interest rate is a floating rate at one-month LIBOR plus 247 basis points with a cap of 5.97%. The refinancing returned approximately 50% of the original investment.
In light of current market conditions and turmoil surrounding COVID-19, we believe these two successful refinancings during the first quarter of this year are testament to both the strength of their respective Sponsors, as well as the underlying fundamentals of each property investment. We look forward to continued progress in both holdings, and for MogulREIT II and its investors to potentially reap those benefits.
As a reminder, recently, MogulREIT II’s Net Asset Value (NAV) and Purchase Price were reduced to conservatively reflect the impact of COVID-19 to the portfolio. NAV and Purchase Price are currently set at $9.77. The Purchase Price is now at its lowest level in the history of the REIT.
This is not an offer to sell or the solicitation of an offer to buy any security, which only can be made through official offering documents that contain important information about risks, fees and expenses. Investing in the Company’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 invested capital, limited operating history, conflicts of interest and blind pool risk. In addition to the foregoing risks, the adverse economic effects of the COVID-19 pandemic are unknown and could materially impact this investment. Past performance is not indicative of future results. Securities offered through North Capital Private Securities, member FINRA/SIPC.