The Real Estate Company is collectively defined as Steve Bram as the financial sponsor and Gary Schaffel as a fee developer. Mr. Schaffel has 55 years of experience in the construction industry, having completed over 10,000 apartment units as Head of Construction for Goldrich & Kest Industries and Schaffel Development Company. He has built 25 similar buildings in the last 15 years throughout Los Angeles as a Principal. Mr. Schaffel has also developed several condominium buildings near the Property, which were built to higher specifications than typical apartment buildings. Mr. Bram has been in the real estate investment business for 37 years and is currently a Co-Manager on over 15 commercial assets. He also manages George Smith Partners, which arranges $4 billion in commercial real estate financing annually. Mr. Bram and Mr. Schaffel have worked together for 13 years. Mr. Bram initially provided real estate investment banking services to Mr. Schaffel and currently serves as Mr. Schaffel's primary financial partner. Mr. Bram will provide 10% of the required cash equity on the subject transaction. The Property will be Mr. Bram and Mr. Schaffel's seventh overall development project that they have completed, reviewed, or have worked on together. The Real Estate Company recently completed a 36-unit project in Tujunga on time and on budget.
Toluca Lake Apartments (the “Property”) is the development of a Class A multifamily building with 57 units. The Property is located at 4366-4376 Cahuenga Blvd in the Toluca Lake neighborhood of Los Angeles, CA. The Property will feature a mix of one studio unit (359 sf), 45 one-bedroom units (613 sf), and 11 two-bedroom units (954 sf). The property used the California Density Bonus Ordinance which provided certain incentives in return for providing additional affordable units. Six units will be designated affordable and four units will provide right of return/replacement rent levels to tenants. The Property will have high-end finishes and state-of-the-art appliance packages throughout all units. Most upper units will have balconies, while ground-floor units will have private patios with direct access to Cahuenga Boulevard and Bloomfield Street. The Property will be fully-amenitized with a 69-car secured subterranean garage, a recreation room, a gym, coworking spaces on each floor, a 15-seat theater, and 25 storage units. The Property will also include two landscaped rooftop courtyards with views of Santa Monica and the San Gabriel Mountains. The Property is within walking distance of NBC Universal, Universal Studios, Warner Brothers Lot, the Metro Red Line (to Downtown LA), and the Toluca Lake Shopping district, which has a Trader Joe’s and numerous boutique restaurants. The Property also has easy access to the 134, 170, and 101 Freeways.
Proposed Unit Mix:
| Unit Type (Market) | # of Units | % of Total | Unit Size (square feet) | Avg. Market Rent* |
| Studio | 1 | 2% | 359 | $2,100 |
| 1 Bed, 1 Bath | 37 | 65% | 615 | $2,653 |
| 2 Bed, 2 Bath | 9 | 16% | 957 | $3,370 |
| Subtotal/Averages | 47 | 82% | 675 | $2,778 |
| Unit Type (Affordable) | # of Units | % of Total | Unit Size (square feet) | Avg. Affordable Rent* |
| 1 Bed, 1 Bath** | 5 | 9% | 608 | $379 |
| 2 Bed, 2 Bath | 1 | 2% | 937 | $890 |
| Subtotal/Averages | 6 | 11% | 663 | $464 |
| Unit Type (Right of Return/ Replacement) | # of Units | % of Total | Unit Size (square feet) | Avg. Affordable Rent* |
| 1 Bed, 1 Bath | 3 | 5% | 597 | $1,777 |
| 2 Bed, 2 Bath | 1 | 2% | 937 | $2,546 |
| Subtotal/Averages | 4 | 7% | 682 | $1,969 |
| Total/Averages | 57 | 100% | 674 | $2,478 |
*All rents are net effective
**Includes manager's unit at free rent
Lease Comparables
| Windsor Lofts at Universal City | L'Estancia | Talaria Burbank | NOHO5500 | Avalon Studio 4121 | NVE Apartments | Total/Averages | Subject | |
| CoStar Class | A | A | A | A | A | A | A (as developed) | |
| Units | 138 | 160 | 241 | 84 | 149 | 82 | 142 | 57 |
| Year Built | 2007 | 1995 | 2019 | 2018 | 2009 | 2017 | 2011 | 2022 (projected) |
| Average Square Feet | 952 | 900 | 1,183 | 721 | 786 | 834 | 896 | 675 |
| Average Rental Rate | $2,682 | $2,697 | $4,243 | $2,653 | $2,839 | $2838 | $2,992 | $2,778* |
| Distance from Subject | 0.5 miles | 1.0 mile | 1.9 miles | 2.4 miles | 2.6 miles | 2.9 miles | 1.6 miles |
Sales Comparables
| The Weddington | Metropolitan at Larchmont Village | Chateau Toluca Apartments | Riverside Arts Apartments | NVE Apartments | Vues on Gordon | Total/Averages | Subject | |
| Date | Jan-2020 | Jun-2019 | Apr-2019 | Mar-2019 | Dec-2018 | Apr-2018 | ||
| Costar Rating | A | B | B | B | A | A | A (as developed) | |
| Units | 329 | 34 | 40 | 51 | 82 | 47 | 97 | 57 |
| Year Built | 2019 | 2017 | 1991 | 1986 | 2017 | 2018 | 2008 | 2022 (projected) |
| Purchase Price | $169,200,000 | $19,000,000 | $16,425,000 | $15,350,000 | $34,350,000 | $23,500,000 | $46,304,167 | $23,078,522** |
| $/Unit | $514,286 | $558,824 | $410,625 | $300,980 | $418,902 | $500,000 | $476,544 | $404,886 |
| Cap Rate | 4.50% | 3.91% | 4.02% | 3.42% | 3.50% | 4.20% | 3.93% | 4.75%*** |
| Distance from Subject | 1.8 miles | 6.2 miles | 0.1 mile | 1.5 miles | 2.9 miles | 5.3 miles | 2.7 miles |
* Reflects market-rate units only
** Total development costs
*** Stabilized return on capital
Sale and lease comps were obtained from the Real Estate Company using CoStar, Axiometrics and/or other sources. Leasing activities at above comps may fluctuate due to the COVID-19 pandemic and/or the above rents may reflect pre-pandemic rent levels due to the development transaction and projected lease-up starting in 2022.
| Sources of Funds | Amount |
|---|---|
| Debt | $16,500,000 |
| Equity | $5,724,062 |
| Total Sources of Funds (1) | $22,224,062 |
| Uses of Funds | Amount |
| Land Purchase Price | $4,775,000 |
| Land Closing Costs, Carrying Costs, and Return on Predevelopment Equity | $1,472,529 |
| Real Estate Company Acquisition Fee | $71,625 |
| Loan Fees | $144,375 |
| Hard Costs | $12,473,492 |
| Soft Costs | $1,728,878 |
| Real Estate Company Development Fee(1) | $854,460 |
| Financing Fees and Closing Costs (2) | $592,912 |
| Interest Reserve | $965,250 |
| Total Uses of Funds(1) | $22,224,062 |
Please note that the Real Estate Company's equity contribution may consist of friends and family equity and equity from funds controlled by the Real Estate Company. Additionally, the numbers represented above can change prior to closing depending on final loan proceeds, property condition assessments, appraisals, final closing costs, and other lender-mandated expenses.
(1) Development fee to be paid at sale of Property, is not escrowed upfront, and is therefore excluded from the "Total Sources of Funds" and "Total Uses of Funds" figures.
(2) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage-based fee for real estate companies to use the marketplace. An estimate of this fee is included in the Financing Fees and Closing Costs and is intented to be capitalized into the transaction at the discretion of the Manager.
The expected terms of the debt financing are as follows:
- Estimated Proceeds: $16,500,000
- Initial Funding: $2,692,727
- Future Funding: $13,807,273
- Estimated Rate (Floating): 4.625%
- Term: 30 months
- Interest Only: 30 months
- Extension Options: 5-year miniperm
- Prepayment Penalty (During Extension Period): Swap breakage fee
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 intends to make distributions to investors (RealtyMogul investors and the Real Estate Company collectively defined as "Members") as follows:
- To the Members, pari passu, all excess operating cash flows to an 8.0% IRR to the Members;
- 70% / 30% (70% to Members / 30% to Promote) of excess cash flow to an 18.0% IRR;
- Real Estate Company "catch-up" up to $1,000,000 for land value lift;
- 50% / 50% (50% to Members / 50% to Promote) of excess cash flow and appreciation thereafter.
Note that all distributions will occur after the payment of the Target's liabilities (loan payments, operating expenses, and other fees as set forth in the LLC agreements, in addition to any member loans or returns due on member loan).
Distributions are expected to start in Q2 2023 and are projected to continue on a quarterly basis thereafter (as applicable). 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 (partial) | |
|---|---|---|---|
| Effective Gross Revenue | $0 | $266,517 | $421,896 |
| Total Operating Expenses | $0 | $214,315 | $162,591 |
| Net Operating Income | $0 | $52,201 | $259,306 |
| Year 0 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| Distributions to GSB Toluca Apts, LLC Investors | ($5,151,656) | $0 | $0 | $0 | $7,435,204 |
| Net Earnings to Investor - Hypothetical $50,000 Investment |
($50,000) | $0 | $0 | $0 | $72,163 |
Certain fees and compensation will be paid over the life of the transaction; please refer to the Real Estate Company's materials for details. The following fees and compensation will be paid(1)(2)(3):
| Type of Fee | Amount of Fee | Received By | Paid From | Notes |
|---|---|---|---|---|
| Acquisition Fee | $71,625 | Real Estate Company | Capitalized Equity Contribution | 1.5% of the land purchase price in transaction |
| Developer Fee | $854,460 | Real Estate Company | Paid at Sale | 4.75% of development hard costs and soft costs plus 8% accrued return |
| Debt Placement Fee | $82,500 | Real Estate Company or its Affiliate | Capitalized Equity Contribution | 0.5% of the loan amount |
| Type of Fee | Amount of Fee | Received By | Paid From |
|---|---|---|---|
| Administrative Services Fee | 1.0% of amount invested into GSB Toluca Apts, LLC | RM Admin(3) | Distributable Cash or Capitalized Equity Contribution |
(1) Fees may be deferred to reduce impact to investor distributions
(2) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage-based fee for real estate companies to use the marketplace. An estimate of this fee is included in the Closing Costs and is intented to be capitalized into the transaction at the discretion of the Manager.
(3) RM Admin will be providing the following services:(a) responding to inbound investor inquiries regarding how to subscribe to the Project, (b) distribution of all annual tax forms (after receipt of same from Project Sponsor), (c) processing distributions that are payable from GSB Toluca Apts, LLC to Investors, however, RM Admin will not be deemed to have custody of client funds, (d) distribution of all quarterly reports (after receipt of same from Project Sponsor) and (e) summarizing sponsor information on property performance, responding to investor inquiries regarding sponsor performance information as well as the real estate market generally.
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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.
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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.
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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.
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