UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT
Pursuant to Regulation A of the Securities Act of 1933
November 29, 2023
(Date of Report (Date of earliest event reported))
RealtyMogul Apartment Growth REIT, Inc.
(Exact name of issue as specified in its charter)
| Maryland | | 81-5263630 |
| (State or other jurisdiction | | (I.R.S. Employer |
| of incorporation or organization) | | Identification No.) |
10573 W Pico Blvd,
PMB #603
Los Angeles, CA, 90064
(Full mailing address of
principal executive offices)
(877) 781-7153
(Issuer’s telephone number, including area code)
Common Stock
(Title of each class of securities issued pursuant to Regulation A)
Item 9. Other Events.
On November 29, 2023, RealtyMogul Apartment Growth REIT, Inc. issued an investor communication relating to the quarter ended September 30, 2023. The text of the investor communication is set forth below.
Q3 2023*
To discuss your REIT holdings, schedule a call with Investor Relations at:
https://calendly.com/realtymogul-investor-relations or call 877-781-7062
REALTYMOGUL APARTMENT GROWTH REIT
| OFFERING OVERVIEW | | TOTAL ASSET VALUE1 | | $ | 257,000,000 | |
| | | NUMBER OF INVESTMENTS2 | | | 9 | |
| RealtyMogul Apartment Growth REIT is a non-traded REIT, investing in value-add multifamily apartment buildings with both preferred and joint venture equity, with a focus on providing capital appreciation to investors. | | TOTAL NUMBER OF MULTIFAMILY UNITS2 | | | 1,595 | |
| | | INCEPTION TO DATE RETURN3 | | | 6.4 | % |
| | | FIVE-YEAR RETURN3 | | | 7.2 | % |
| | | THREE-YEAR RETURN3 | | | 9.6 | % |
| | | ONE-YEAR RETURN3 | | | -4.0 | % |
| | | Q3 ANNUALIZED DISTRIBUTION RATE4 | | | 4.5 | % |
| | | DISTRIBUTION FREQUENCY | | | Quarterly | |
| | | TAX REPORTING FORM | | | 1099-DIV | |
| | | CONSECUTIVE DISTRIBUTIONS4 | | | 23 Quarters | |
KEY OBJECTIVES
● To realize capital appreciation in the value of our investments over the long term
● To pay attractive and stable cash distributions.
PORTFOLIO STATISTICS5
*All data as of September 30, 2023 unless otherwise specified.
1 Aggregate value of all underlying properties in RealtyMogul Apartment Growth REIT, Inc. based on the most recent internal valuations as of the end of the fiscal quarter upon which our most recently announced net asset value (“NAV”) per share is based pursuant to our valuation policies; provided, however, the value of properties underlying investments acquired since the effective date of the most recently announced NAV per share is based on the most recent purchase price of such properties. As with any methodology used to estimate value, the methodology employed by our affiliates’ internal accountants or asset managers is based upon a number of estimates and assumptions about future events that may not be accurate or complete. For more information, see the “Description of Our Common Stock – Valuation Policies” section of our offering circular.
2 Based on the current outstanding investments as of October 31, 2023.
3 Returns shown reflect the percent change in the NAV per share from the beginning of the applicable period, plus the amount of any distribution per share declared in the period. All returns shown assume reinvestment of quarterly distributions pursuant to RealtyMogul Apartment Growth REIT’s distribution reinvestment plan, are derived from unaudited financial information and are net of all RealtyMogul Apartment Growth REIT expenses, including management fees. An individual stockholder’s total return may vary from the total return, and there is no assurance that stockholders will be able to realize the estimated NAV per share upon attempting to sell their shares. Past performance is historical and not a guarantee of future results. Additional return metrics can be found at the RealtyMogul website.
4 There is no guarantee that stockholders will receive a distribution, and distributions have been paid from sources other than cash flow from operations, including net proceeds from our offering, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager, borrowings in anticipation of future operating cash flow and the issuance of additional securities. The board of directors may in the future declare lower distributions or no distributions at all for any given period.
5 Based on the original real estate investment amounts as of October 31, 2023.
MARKET UPDATES
VIEWS FROM MANAGEMENT
Dear Investor,
Thank you for your continued support of RealtyMogul Apartment Growth REIT. We have now provided 23 consecutive quarters of distributions, totaling over $11,300,000. Currently, over 3,500 investors are invested, and RealtyMogul Apartment Growth REIT holds investments in over $257 million6 of real estate. We are also happy to share that as of October 2023, approximately 64% of investors have enrolled in the distribution reinvestment plan (the “DRIP”), allowing for their distributions to compound over time. If you would like to participate in the DRIP, simply log into your account and then select “Reinvest Distributions.”
For Q3 2023, NAV per share decreased from $10.47 to $10.41, reflecting a 0.6% decrease quarter over quarter. Q3 2023 distribution reflected an approximately 4.50% annual distribution rate based on a $10.47 NAV per share. The NAV per share calculation as of September 30, 2023 reflects the total value of RealtyMogul Apartment Growth REIT’s assets minus the total value of our liabilities, divided by the number of shares outstanding as of September 30, 2023.
RealtyMogul Apartment Growth REIT is focused entirely on multifamily apartment communities. We have pursued this strategy, in part, because we believe multifamily assets have significant upside potential due to the nationwide housing shortage as a result of under-building. According to Freddie Mac, the United States is underbuilt by approximately 3.8 million homes. We look at this undersupply, coupled with the drastic rise of interest rates over the past two years leading to a subsequent rise in the cost of home mortgages, as a significant barrier to entry to home ownership for many American families. In terms of risk mitigation, we believe that multifamily assets provide downside protection as a result of the large numbers of tenants at each multifamily property, creating diverse income streams.
Unlike the public markets where price changes and current investor sentiment may cause market values to vary from the value of the underlying assets, the values for Apartment Growth REIT are tied to the current fair market value of the underlying assets.7 NAV for Apartment Growth REIT has decreased since 2022 as real estate values have decreased. As property fundamentals are by and large holding up, we believe this decrease in real estate values is largely due to cap rate expansion with cap rates rising across the country. We believe much of this expansion is a result of the increase in interest rates that has made financing real estate more expensive for many. In order to achieve the same level of risk adjusted returns, investors have demanded acquiring assets at higher cap rates to compensate. Since January 2022, short- and long-term interest rates have increased significantly, with the Federal Funds Rate increasing over 5% and the 10-year U.S. Treasury increasing by almost 3%.
Although values are down year-over-year, we believe the underlying property fundamentals in Apartment Growth REIT’s portfolio remain strong. As of 3Q23, occupancy for the underlying properties in the portfolio has averaged 93%. Similarly, rent collection has averaged 93%. Moreover, for YTD 2022 versus YTD 2023, the underlying properties in the portfolio have averaged net operating income increases of 6.3%, and we’ve maintained our distributions for 23 consecutive quarters.8 Lastly, the weighted average interest rate on the property-level mortgages for Apartment Growth REIT sits at 4.84% 3Q23.9
Apartment Growth REIT was designed with a long-term investment horizon. While the properties in the REIT are experiencing valuation decreases in the aggregate, we are continuing to push operations to advance each property’s business plan and increase net operating income. With the increase of Apartment Growth REIT’s cash reserves during 2022 and 2023, we aim to strike a balance between prudently managing the existing portfolio as well as taking advantage of opportunities that inevitably surface during periods of disruption.
6 Aggregate value of all underlying properties in RealtyMogul Apartment Growth REIT, Inc. based on the most recent internal valuations as of the end of the fiscal quarter upon which our most recently announced NAV per share is based pursuant to our valuation policies; provided, however, the value of properties underlying investments acquired since the effective date of the most recently announced NAV per share is based on the most recent purchase price of such properties. As with any methodology used to estimate value, the methodology employed by our affiliates’ internal accountants or asset managers is based upon a number of estimates and assumptions about future events that may not be accurate or complete. For more information, see the “Description of Our Common Stock – Valuation Policies” section of our offering circular.
7 Commercial real estate performs differently than other asset classes, such as stocks or bonds, and lacks liquidity. An investment in RealtyMogul Apartment Growth REIT, Inc. is not a direct investment in commercial real estate.
8 There is no guarantee that stockholders will receive a distribution, and distributions have been paid from sources other than cash flow from operations, including net proceeds from our offering, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager, borrowings in anticipation of future operating cash flow and the issuance of additional securities. The board of directors may in the future declare lower distributions or no distributions at all for any given period.
9 Certain mortgages for the underlying properties within the Apartment Growth REIT are floating rate mortgages with an interest rate cap agreement executed. The weighted average interest rates for Apartment Growth REIT assume the highest possible interest rate based on the caps in place at the properties.
In 2022, 100% of our distributions were classified as capital gains income.10 Distributions were classified as such because the REIT sold properties which resulted in capital gains. As a REIT investor, you are entitled to capital gains treatment and tax rate on asset sales done by the REIT.
During Q3 2023, the U.S. Bureau of Economic Analysis estimated that U.S. seasonally adjusted real GDP increased 4.9% quarter over quarter. The Federal Reserve updated its forecast for 2023 growth in the nation’s GDP from the 1.0% it projected in June 2023 to 2.1% as well as projected a 3.8% unemployment rate for 2023, down from the June 2023 estimate of 4.1%. The unemployment rate ended 2022 at 3.7%. Average hourly earnings for employees increased 4.5% year over year according to the U.S. Bureau of Labor Statistics. In addition, the Consumer Price Index (“CPI”) rose year over year 3.2% in July, 3.7% in August, and 3.7% in September according to the U.S. Bureau of Labor Statistics. Shelter costs, which comprise approximately one-third of CPI, increased 7.2% year over year. Given the economic inflation, the Federal Reserve has taken steps to cool off the economy by increasing the Federal Funds Rate, the rate at which commercial banks borrow and lend their excess reserves to each other overnight, seven times in 2022 and four times in 2023 from a target rate of 0.00% to 0.25% to the current target rate of 5.25% to 5.50%. The Federal Reserve is reducing their balance sheet through quantitative tightening, allowing bonds to mature without reinvestment of the principal. As it relates to real estate purchases, the cost to finance a real estate investment with a mortgage has increased in each quarter of 2022, stabilizing in Q4 2022 before increasing again in Q2 2023; however, we believe that real estate is positively correlated with inflation as property prices and rental income tend to rise as inflation rises. We like multifamily investments in an inflationary environment as the typical one-year lease term allows an owner to mark rents to market on an annual basis. We believe that RealtyMogul Apartment Growth REIT is well positioned as it continues to seek a diversified portfolio of multifamily real estate, which has a low or negative correlation to other major asset classes and over time has exhibited less volatility than other asset classes.11
10 There is no guarantee that stockholders will receive a distribution, and distributions have been paid from sources other than cash flow from operations, including net proceeds from our offering, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager, borrowings in anticipation of future operating cash flow and the issuance of additional securities. The board of directors may in the future declare lower distributions or no distributions at all for any given period.
11 Commercial real estate performs differently than other asset classes, such as stocks or bonds, and lacks liquidity. An investment in RealtyMogul Apartment Growth REIT, Inc. is not a direct investment in commercial real estate.
INVESTMENT UPDATES
| BROOKLYN PORTFOLIO | | VILLAS DEL SOL I & II (FKA PLANO MULTIFAMILY PORTFOLIO) |
| |  |
Location: Brooklyn, NY Equity Investment: $3,000,000 Business Plan: Acquire nine rent-stabilized properties, maximize occupancy and increase rents as allowed. Investment Type: Joint Venture Equity Acquisition Date: 11/30/2017 Asset Management Update: Portfolio occupancy increased 2% quarter over quarter, ending Q3 at 100%, with zero vacant units in the 112-unit portfolio. The real estate company has been leasing, and will continue to lease, units according to the legal rents set by the New York Rent Guidelines Board. For the time period from October 2022 to September 2023, the Rent Guidelines Board has allowed for increases of 3.25% for one-year leases and 5% for two-year leases. The property averaged 96% rent collection for Q3 2023. | | Location: Plano, TX Equity Investment: $1,000,000 Business Plan: Acquire and renovate a portfolio of garden-style apartment buildings. Investment Type: Joint Venture Equity Acquisition Date: 01/09/2018 Asset Management Update: Portfolio occupancy increased 2% quarter over quarter, ending Q3 at 97% occupied. 67 of the 156 units have been upgraded with new flooring, appliances, backsplash, and lighting packages. Exterior and common area improvements are complete, and the property is amenitized with an improved leasing office, gazebos, BBQ grills, an upgraded laundry room and soccer court. The property averaged 97% rent collection for Q3 2023. This property was targeted for sale in 2023. Its originally anticipated closing of September 2023 has been extended to November 30, 2023. |
NINETY-NINE44 APARTMENTS 
Location: Dallas, TX Equity Investment: $4,000,000 Business Plan: Acquire and renovate a garden-style apartment community. Investment Type: Joint Venture Equity Acquisition Date: 9/9/2020 Asset Management Update: Property occupancy decreased 6% quarter over quarter, ending Q3 at 89% occupied. As of September 2023, the real estate company renovated 53 units. Of those 53 units, 49 have been leased and have achieved an average premium of $169/month, or 19% over prior rents. The real estate company has completed exterior capex work, including landscaping, parking lot repairs, parking lot restriping, trip hazard repairs, laundry room improvements, carport replacement, and fitness center improvements. The real estate company plans to improve the fans, lighting, and air conditioning for the fitness center as well as playground and private yard improvements in the coming quarters. The property averaged 93% rent collection for Q3 2023. | | THE ORION 
Location: Orion Township, MI Equity Investment: $5,000,000 Business Plan: Acquire and renovate a garden-style apartment community. Investment Type: Joint Venture Equity Acquisition Date: 3/23/2021 Asset Management Update: Property occupancy increased 8% quarter over quarter, ending Q3 at 97% occupancy. As of September 2023, 102 of the 200 units have been renovated since acquisition. Of those 102 units, 100 have been leased and have achieved an average premium of $322/month, or 27% over prior rents. Exterior improvements continue to progress as the clubhouse remodel, BBQ area, new exterior paint, new signage, new dog park, and parking lot projects have been completed. Improvements to the playground area and irrigation system are underway. Based on current bids, exterior improvements are expected to be completed below budget. The property averaged 99% rent collection for Q3 2023. |
LOTUS VILLAGE 
Location: Austin, TX Equity Investment: $2,500,000 Business Plan: Acquire and renovate a low-rise apartment community. Investment Type: Joint Venture Equity Acquisition Date: 6/25/2021 Asset Management Update: Property occupancy remained static quarter over quarter, ending Q3 at 94% occupancy. As of September 2023, 54 of the 222 units have been renovated since acquisition. Of those 54 units, 53 have been leased and have achieved an average premium of $212/month, or 17% over prior rents. The real estate company has completed capex work, including fitness center renovations, pool repairs, signage enhancement, BBQ area updates, dog park updates, landscaping, and garage repairs. The property averaged 89% rent collection for Q3 2023. During Q2 2023, the Company funded a capital call totaling $276,192 to purchase an interest rate cap related to an extension of the loan and provide working capital in anticipation of a 2024 sale of the property. | | SHERWOOD OAKS 
Location: Riverview, FL Equity Investment: $4,200,000 Business Plan: Acquire and renovate a garden-style apartment community. Investment Type: Joint Venture Equity Acquisition Date: 11/30/2021 Asset Management Update: Property occupancy decreased 2% quarter over quarter, ending Q3 at 91% occupancy. The capital improvements budget includes exterior work as the prior owner previously renovated all unit interiors. Exterior renovations continue to progress with the dog park, pool, parking lot, wastewater facility, fitness center, outdoor amenities, and drainage completed. Other improvements have commenced, including improvements to the landscaping and lighting. The property averaged 97% rent collection for Q3 2023. |
RESTORATION ON CANDLEWOOD 
Location: Oklahoma City, OK Equity Investment: $5,250,000 Business Plan: The borrower used to proceeds of the investment to acquire and lease-up a garden style apartment community. Investment Type: Preferred Equity Acquisition Date: 3/21/2023 Required Redemption Date: 3/31/2026 Asset Management Update: Property occupancy increased 7% quarter over quarter, ending Q3 at 67% occupancy. Since quarter end, occupancy has increased to 71% as of November 1, 2023. At the property, the real estate company is performing regular unit turns as the prior owner previously renovated all unit interiors. The property averaged 99% rent collection for Q3 2023. | | RIDGELINE VIEW TOWNHOMES 
Location: Vancouver, WA Equity Investment: $4,000,000 Business Plan: Acquire a 2022-built, Class A townhome community and grow revenues by reducing concessions associated with initial lease up. Investment Type: Joint Venture Equity Acquisition Date: 5/19/2023 Asset Management Update: Property occupancy decreased 8%, or four units, quarter over quarter, ending Q3 at 86% occupancy. The real estate company is in the process of adding technology packages to the units. The property averaged 89% rent collection for Q3 2023. |
BROOKSIDE APARTMENTS 
Location: Raleigh, NC Equity Investment: $3,000,000 Business Plan: Acquire and renovate a low-rise apartment community. Investment Type: Joint Venture Equity Acquisition Date: 6/30/2023 Asset Management Update: Property occupancy decreased 4% quarter over quarter, ending Q3 at 93% occupancy. The company is in the process of receiving bids to start unit interior renovation work. Additionally, the real estate company has completed capex work, including plumbing replacements and siding repairs. Other improvements have commenced, including improvements to the exterior paint. The property averaged 86% rent collection for Q3 2023; rent collection during the quarter was impeded due to the delay in receiving housing authority payments, which were subsequently received in October and November. | | |
INVESTMENT ACTIVITY
DISTRIBUTIONS
RealtyMogul Apartment Growth REIT has declared distributions for 23 consecutive quarters. The board of directors authorized a distribution for each month of the third quarter of 2023 on June 15, 2023. Exclusive of special distributions, distributions have been paid on a quarterly basis since January 1, 2018 and equate to approximately 4.5% on an annualized basis based upon the then current per share purchase price.
NET ASSET VALUE (NAV)
| PRICE PER SHARE (AS OF 11/1/23)* | | | NAV PER SHARE (AS OF 9/30/23) | |
| $10.41 | | | | $10.41 | |
*Our offering price per share equals our most recently announced NAV per share and will be adjusted at the beginning of every fiscal quarter (or as soon as commercially reasonable thereafter). On November 1, 2023, we announced that our NAV per share is $10.41, as of September 30, 2023. Accordingly, effective November 1, 2023, the offering price per share is $10.41. The price per share pursuant to our distribution reinvestment plan will equal our most recently announced NAV per share and any repurchases of shares made pursuant to our share repurchase program will be made at the most recent NAV per share (less any applicable discounts, as set forth in our offering circular).
The NAV per share calculation reflects the total value of our assets minus the total value of our liabilities, divided by the number of shares outstanding.
As with any methodology used to estimate value, the methodology employed calculating our NAV per share is based upon a number of estimates and assumptions about future events that may not be accurate or complete. Further, different parties using different assumptions and estimates could derive a different NAV per share, which could be significantly different from our calculated NAV per share. Our NAV will fluctuate over time and does not represent: (i) the price at which our shares would trade on a national securities exchange, (ii) the amount per share a stockholder would obtain if he, she or it tried to sell his, her or its shares or (iii) the amount per share stockholders would receive if we liquidated our assets and distributed the proceeds after paying all our expenses and liabilities.
Copyright © 2023 RM Adviser, LLC, All rights reserved.
Previous Updates
Please follow the below links to access updates from the prior four quarters. Historical quarterly updates can also be found on the SEC EDGAR website.
Q2 2023 Shareholder Letter
Q1 2023 Shareholder Letter
Q4 2022 Shareholder Letter
Q3 2022 Shareholder Letter
As always, please feel free to contact us at info@realtymogul.com or call directly with any questions you may have.
Sincerely,
| /s/ Jilliene Helman | | /s/ Eric Levy |
| Jilliene Helman | | Eric Levy |
| CEO, RM Adviser, LLC | | Vice President, Portfolio Manager, RM Adviser, LLC |
Forward-Looking Statements
This Current Report on Form 1-U contains forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” “continue,” “could,” “might,” “potential,” “predict,” “should,” “will,” “would,” and similar expressions or statements regarding future periods or the negative of these terms are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Current Report on Form 1-U.
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | REALTYMOGUL APARTMENT GROWTH REIT, INC. |
| | | |
| | By: | /s/ Jilliene Helman |
| | Name: | Jilliene Helman |
| | Title: | Chief Executive Officer and President |
| | | |
| | By: | /s/ Eric Levy |
| | Name: | Eric Levy |
| | Title: | Vice President, Portfolio Manager, RM Adviser, LLC |
| | | |
| | Date: | November 29, 2023 |
