RealtyMogul Preps for MogulREIT II, MogulREIT I Has Raised $15.5 Million

By JD Alois for CWI has filed a new Form 1-A indicating its intent to launch a second MogulREIT using the Reg A+ securities exemption. MogulREIT II intends on raising up to $50 million to invest in multi-family residences targeting a millenial consumer, according to the current Offering Circular.

RealtyMogul said management intended to make preferred equity and joint venture equity investments in multifamily properties, including independent senior-living communities, located in target markets throughout the United States.  The real estate platform said it would invest in apartment communities that have demonstrated consistently strong occupancy rates and income levels across market cycles as well as multifamily properties.

RealtyMogul said they believe that the near and intermediate-term market for investment in multifamily communities is compelling from a risk-return perspective. The company said that Millennials and Baby Boomers, are increasingly choosing to live in rental housing.

As part of the filing, RealtyMogul updated on its first foray into the RETI space.  RealtyMogul said that as of June 8,  2017, MogulREIT I had raised approximately $15.5 million. MogulREIT I is different in its investment approach than MogulREIT II as it intends to hold:

  • At least 55% of the total value of its assets in commercial mortgage-related instruments that are closely tied to one or more underlying commercial real estate projects, such as senior mortgage loans, subordinated mortgage loans, mezzanine debt and participations (also referred to as B-Notes) that meet certain criteria outlined by the staff of the SEC; and
  • At least 80% of the total value of its assets in the types of assets described above, plus “real estate-related assets” that are related to one or more underlying commercial real estate projects.

MogulREIT I, as of June 8, had acquired nine assets, consisting of four mezzanine financings, two preferred equity investments, one bridge financing and two junior participation loans, with an aggregate acquisition cost of approximately $18.8 million.  The properties that are the subject of such investments are commercial properties (one self-storage, three office, one office/warehouse,  two retail, one medical office and one mixed-use) located in California, Colorado, Florida, Georgia, New York and Texas.

MogulREIT I does not own or manage these properties.    As of June 28, 2017, one of the mezzanine loans was repaid in full by the borrower and approximately $12.1 million remained outstanding on the remaining investments.

There are a growing number of real estate investment funds that are using Reg A+ to raise capital and invest in real estate. The lower disclosure hurdle and $50 million cap appears to be appealing to certain real estate investment platforms. Real estate is one of the largest, if not the largest, asset class using Reg A+.