What is a REIT?
A Real Estate Investment Trust (REIT) is a single investment into a portfolio of real estate properties, which are often diversified by property type, geography, or multiple categories to potentially achieve strategic objectives.
REITs are legally required to distribute 90% of all taxable income to investors annually.
Generally, REITs have historically outperformed the broad stock market more often than not when returns are measured in years.3 REITs have also historically been positively correlated with inflation, which may make them a possible hedge for inflation.4
3. https://www.reit.com/news/blog/market-commentary/reit-average--historical-returns-vs-us-stocks
4. https://www.reit.com/news/blog/market-commentary/how-reits-provide-protection-against-inflation
What is the RealtyMogul Income REIT?
The RealtyMogul Income REIT is a private limited liability company formed to invest in a diversified portfolio of commercial real estate investments, such as loans, equity in commercial real estate ventures, and other real estate-related assets. The RealtyMogul Income REIT is managed by RM Adviser, LLC, a wholly owned subsidiary of Realty Mogul, Co.
The Income REIT is qualified under Regulation A and is a non-traded REIT. That means that its offerings are exempt from the registration requirements of the Securities and Exchange Commission and can be offered using general solicitation to non-accredited investors subject to certain limitations. The Income REIT is not traded on a stock exchange.
What's the difference between the two RealtyMogul REITs?
The main differences are their respective investment strategies. The RealtyMogul Apartment Growth REIT targets investments in multifamily properties that offer value-add opportunities with the potential for value appreciation, while the RealtyMogul Income REIT targets investments in properties of all asset types with the goal of generating consistent cash distributions.
In short, the RealtyMogul Apartment Growth REIT is focused on growth investments while the RealtyMogul Income REIT is more focused on income-producing investments.
To learn more about the RealtyMogul REITs, click here.
How is the purchase price determined?
The purchase price per share equals our NAV per share (calculated as our NAV divided by the number of our common shares outstanding as of the end of the prior fiscal quarter) and will be adjusted at the beginning of every fiscal quarter (or as soon as commercially reasonable thereafter). Investors will pay the most recent publicly announced offering price as of the date of their subscription. Our website, www.realtymogul.com, will identify the current offering price per share as well as our NAV per share.
How often will I receive distributions?
Although distributions are not guaranteed, they are expected to be paid monthly; however, the Manager may declare other periodic distributions as circ*mstances dictate. You may elect to participate in our distribution reinvestment plan (DRIP), all potential distributions we pay to you may be automatically reinvested in shares of our common stock.
What is the Automatic Investment Program?
Existing Income REIT and Apartment Growth REIT investors who desire to purchase additional shares of either or both offerings at regular intervals may be able to do so by electing to participate in the auto investment program. The auto investment program allows an investor to choose a recurring investment amount that will be added to an existing REIT investment month-after-month automatically. The minimum periodic investment is $250 per month. If you elect to participate in both the auto investment program and our distribution reinvestment plan, distributions earned from shares purchased pursuant to the auto investment program will automatically be reinvested pursuant to our distribution reinvestment plan.
Existing Income REIT and Apartment Growth REIT investors can click on the “Auto Invest” tab on their investor Dashboard to begin the Auto Invest enrollment process. Once an enrollment form is submitted, the Auto Invest enrollment request will need to be processed before it will become active on your Dashboard. Please visit the “Auto Invest” tab on your investor Dashboard to get started and for more information.
Once your auto investment enrollment is active, you will have the option to either pause, edit, or cancel your enrollment right from the “Auto Invest” tab on your investor Dashboard. For more information, please refer to our full offering circular.
What fees and expenses will the REIT pay?
Unlike some public non-traded REIT offerings, RealtyMogul has direct access to its investors through its online portal. As a result, the Income REIT does not pay broker-dealers any selling commissions, which may average approximately 7% of the invested dollars. Therefore, the Income REIT offering has lower fees than some of the other REIT offerings available today in the market.
The following third-party expense reimbursem*nts will be paid from proceeds of the sale of the Income REIT shares:
| TYPE OF FEE | AMOUNT | NOTES |
|---|---|---|
| Organization, Offering and Other Operating Expenses including, but not limited to, actually incurred third-party legal, accounting, and marketing expenses** | Up to 3% of equity contribution | Net Asset Value (NAV), at any given time, is net of Organization, Offering and Other Operating Expenses. |
The following fees will be paid by the REIT to our Manager, RM Adviser, LLC, and/or its affiliates for services related to the offering, and the investment and management of our assets***:
| TYPE OF FEE | AMOUNT | NOTES |
|---|---|---|
| Asset Management Feepaid to our Manager, RM Adviser, LLC, and/or its affiliates | 1% annualized based on the “total equity value”. | For purposes of this fee, total equity value equals (a) our then-current NAV per share, multiplied by (b) the number of our common shares then outstanding. Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ) and the results of our operations and changes to our NAV. |
| Reimbursem*nt of Other Operating Expenses paid to our Manager, RM Adviser, LLC | Variable – dependent upon operations | Includes, but not limited to, license fees, auditing fees, fees associated with SEC reporting requirements, insurance costs, tax return preparation fees, taxes and filing fees, administration fees, fees for the services of an Independent Representative or Advisory Board, and third-party costs associated with the aforementioned expenses. |
For Equity Assets only:
| TYPE OF FEE | AMOUNT | NOTES |
|---|---|---|
| Servicing Fee (Performing Loans) - RM Originator, an affiliate of our Manager, RM Adviser, LLC | 0.5% of the principal balance plus accrued interest of each loan or preferred equity investments to RM Originator for the servicing and administration of certain loans and investments held by us. Servicing fees payable by us may be waived at RM Originator’s sole discretion. | Actual amounts are dependent upon the principal amount of the loans or preferred equity investments. We cannot determine these amounts at the present time. |
| Special Servicing Fee (Non-Performing Loans) - RM Originator, an affiliate of our Manager, RM Adviser, LLC | 1% of the original value of a non-performing debt or preferred equity investment serviced by such RM Lender.Whether an investment is deemed to be non-performing is at the sole discretion of our Manager. | Actual amounts are dependent upon the occurrence of a debt or preferred equity investment becoming non-performing and the original value of such assets. We cannot determine these amounts at the present time. |
**Other operating expenses, including, but not limited to the expense of an annual third-party audit and stock retainer for our portfolio manager, are paid by the REIT.
***There are other fees not paid by the REIT itself that may be paid to affiliates that originate or manage investments on behalf of the REIT. To learn more about our fees, estimated use of proceeds, and the Income REIT's estimated expenses, please refer to our full offeringcircular
Will I have the opportunity to redeem my common shares?
Non-traded REITs, such as the RealtyMogul Income REIT, are not liquid investments, which means you may think of an investment in the Income REIT as a long-term investment into real estate. We have, however, adopted a Share Repurchase Program whereby we alone may purchase shares back from investors. The Share Repurchase Program is designed to provide our shareholders with limited liquidity for their investment in the Income REIT shares, subject to availability of capital.
As is more thoroughly discussed in the Share Repurchase Program section of RealtyMogul Income REIT’s Offering Circular, after 12 months of ownership, you may request up to 25% of your eligible shares to be repurchased on a quarterly basis at the most recently announced NAV per share multiplied by the Effective Repurchase Rate, which may discount the amount you receive for your repurchased shares based on how long the shares have been held.
The Effective Repurchase Rate is based on the stock purchase anniversary as follows:
| Share Repurchase Anniversary (Year) | Effective Repurchase Rate(1) |
|---|---|
| Less than 1 year | No Repurchase Allowed |
| 1 year until 2 years | 98% |
| 2 years until 3 years | 99% |
| 3 or more years | 100% |
(1) As a percentage of the Repurchase Base Price per share. The repurchase price will be rounded down to the nearest $0.01.
We intend to limit the number of shares to be repurchased during any calendar year to 5.0% of the weighted average number of common shares outstanding during the prior calendar year (or 1.25% per quarter, with excess capacity carried over to later quarters in the calendar year). In the event that share repurchase requests exceed the 5.0% annual limit of allowable repurchases, pending requests will be honored on a pro rata basis.
As of June 30, 2023, we are receiving requests for the repurchase of our shares in excess of the repurchase limit set forth in our share repurchase program. In accordance with our share repurchase program, such share repurchase requests are honored on a pro rata basis. For more information regarding our share repurchase program, see the section of our Offering Circular captioned “Description of Our Common Shares – Quarterly Share Repurchase Program."
Our REIT Manager may in its sole discretion, amend, suspend, or terminate the share repurchase program at any time. Reasons we may amend, suspend or terminate the share repurchase program include (i) to protect our operations and our remaining shareholders, (ii) to prevent an undue burden on our liquidity, (iii) to preserve our status as a REIT, (iv) following any material decrease in our NAV, or (v) for any other reason.
To learn more about the Income REIT's Share Repurchase Plan, please refer to the section of our fullofferingcircularcaptioned “Description of Our Common Shares – Quarterly Share Repurchase Program."
How will the distributions I receive be taxed?
REIT distributions may be treated as ordinary income, capital gains, and/or return of capital for tax purposes, each of which may be taxed at a different rate for different investors.
Because each investor’s tax considerations are different, it is recommended that you consult with your tax advisor. You also should review the section of the offering circular entitled “U.S. Federal Income Tax Considerations,” including for a discussion of the special rules applicable to distributions in repurchase of shares and liquidating distributions.
Your annual detailed tax information will be reported on Form 1099-DIV, if required, and will be provided to you in electronic form by January 31 of the year following each taxable year.
What is the REIT's exit strategy?
The Company expects to seek a liquidity transaction in the future.
A liquidity transaction could consist of a sale of all assets, a roll-off to maturity of all assets, a sale or merger of the Company, consolidation with other REITs managed by our Manager, a listing of the Company on an exchange, or any other similar transaction.
The REIT does not have a stated term. The Income REIT's Manager has the discretion to consider and execute a liquidity transaction at any time if it determines it is in the best interest of the Company.
Am I eligible to invest?
The RealtyMogul Income REIT is available to all investors, subject to some regulatory limitations.
The regulators define some investors as either ‘accredited investors’ or ‘non-accredited investors’. Both may invest in the REIT, but the amount of money that you may invest is different depending on whether you are an accredited investor or a non-accredited investor.
Accredited investors are defined as:
- Individuals earning an annual income of over $200,000 per year for the last two years ($300,000 per year if filing as a couple), with the expectation of maintaining this level of income in the future; OR
- Having a net worth of more than $1 million (individually or jointly), excluding the value of a primary residence; OR
- Being a bank, insurance company, registered investment advisor, business development company, or small business investment company; OR
- Being a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered; OR
- Being a business in which all the equity owners are accredited investors; OR
- Being an employee benefit plan, a trust, charitable organization, partnership, or company with total assets in excess of $5 million.
If you do not meet the above definition of an accredited investor you are likely a non-accredited investor. If you are a non-accredited investor, you may still invest in the REIT but your investment is limited based on your annual income or net worth. RealtyMogul may help you to calculate your maximum allowable investment amount when you initiate an investment on our platform.
What will the REIT invest in?
The RealtyMogul Income REIT may invest in a variety of property types, including but not limited to, multifamily, office, industrial, self-storage, and retail real estate opportunities. The Income REIT may invest in various commercial real estate-related equity and debt assets across these different property types.
The Income REIT focuses on investing in the following types of assets: mortgage loans, subordinated mortgage loans, mezzanine debt and participations (also referred to as B-Notes), preferred equity interests in companies whose primary business is to own and operate one or more specified commercial real estate projects, debt securities whose payments are tied to a pool of commercial real estate projects (such as commercial mortgage-backed securities (“CMBS”), collateralized debt obligations (“CDO”) and REIT senior unsecured debt), interests in publicly-traded REITs as well as direct interests in real estate that meet certain criteria outlined by the staff of the SEC. We intend to hold at least 55% of the total value of our assets in commercial mortgage-related instruments that are closely tied to one or more underlying commercial real estate projects, such as mortgage loans, subordinated mortgage loans, mezzanine debt and participations, as well as direct interests in real estate that meet certain criteria set by the staff of the SEC.
