PART II AND III 14 filename14.htm

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission.  Information contained in this Preliminary Offering Circular is subject to completion or amendment.  These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified.  This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state.  We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR

Preliminary Offering Circular submitted confidentially to the Securities and Exchange Commission

pursuant to Section 6(e) of the Securities Act of 1933 on March 8,  2017

OFFERING CIRCULAR

C:\Users\mgcb\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\6MICG6BH\icon.jpg 

MogulREIT II, Inc.

Sponsored by

RM Sponsor, LLC

Up to $50,000,000 in Shares of Common Stock

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials.  These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.

The use of projections or forecasts in this offering is prohibited.  No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment in shares of our common stock.

 

 

 

 

 

 

 

 

 

    

Per Share

    

Total (2)

 

Public Offering Price(1)

 

$

10.00

 

$

50,000,000

 

Underwriting Discounts and Commissions(3)

 

$

1.20

 

$

600,000

 

Underwriting Discounts and Commissions Funded by Sponsor (3)

 

$

(1.20)

 

$

(600,000)

 

Proceeds to the Company from this Offering to the Public (Before Expenses)

 

$

10.00

 

$

50,000,000

 


(1)

The price per share shown was arbitrarily determined by our Manager, as defined below, and will apply until September 30, 2018.  Thereafter, our price per share will be adjusted every fiscal quarter and will be based on our net asset value, or NAV, as of the close of the last business day of the preceding fiscal quarter.

(2)

This is a “best efforts” offering.  

(3)

Neither we nor investors in this offering will pay upfront selling commissions in connection with the purchase of shares of our common stock.  Instead, Realty Mogul, Co. will fund our Sponsor, as defined below, in order to pay these upfront selling commissions to the applicable broker-dealer executing the sale.  Additionally, we will reimburse our Manager, as defined below, for actually incurred, third-party offering costs, which are not expected to exceed $1,450,000, and third-party organization costs, which are not expected to exceed $50,000; provided, however, we are under no obligation to do so before December 31, 2018. With respect to offering costs, on a monthly basis, the Company expects to reimburse RM Adviser, LLC, or our Manager,  for offering costs actually incurred at a rate equal to the aggregate proceeds raised in this offering as of the end of the prior month divided by the maximum offering amount of $50,000,000 (excluding any reimbursements made in previous months).  With respect to organization costs, the Company will not reimburse our Manager for such costs until the Company has raised $1,000,000 in this offering.  Once $1,000,000 has been raised in this offering, the Company expects to reimburse our Manager for all organization costs incurred.  See “Management Compensation” for a description of additional fees and expenses that we will pay our Manager. Additionally, see “Plan of Distribution” for additional items of compensation to be received by the broker-dealers involved in this offering.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth.  Different rules apply to accredited investors and non-natural persons.  Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A.  For general information on investing, we encourage you to refer to www.investor.gov.

We include a copy of Rule 251(d)(2)(i)(C) of Regulation A as an appendix to this offering circular and on the Realty Mogul website.

This Offering Circular follows the Form S‑11 disclosure format.

The date of this offering circular is __________, 2017.

 

 

 


 

The mailing address of our principal executive offices is:

MogulREIT II, Inc.

10780 Santa Monica Blvd.

Suite 140

Los Angeles, CA 90025

Attn: Investor Relations

Our telephone number is (877) 781‑7153 and our website address is www.realtymogul.com.

Investing in shares of our common stock is speculative and involves substantial risks.  You should purchase these securities only if you can afford a complete loss of your investment.  You should carefully review the “Risk Factors” section of this offering circular, beginning on page 24, which contains a detailed discussion of the material risks that you should consider before you invest in shares of our common stock.  These risks include the following:

·

We have no prior operating history.

·

Our ability to implement our investment strategy is dependent, in part, upon our ability to successfully conduct this offering through the Realty Mogul Platform, which makes an investment in us more speculative.

·

This is a blind pool offering, and we are not committed to acquiring any particular investments with the net proceeds of this offering.  You will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.

·

There are conflicts of interest between us, our Manager and its affiliates.

·

We established the initial offering price for our shares on an arbitrary basis and that initial offering price may not accurately reflect the value of our assets.

·

We may not achieve investment results that will allow us to make periodic distributions.

·

Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

·

We may allocate the net proceeds from this offering to investments with which you may not agree.

Certain market and industry data used in this offering circular has been obtained from independent industry sources and publications and third-party sources, as well as from research reports prepared for other purposes. Any forecasts prepared by such sources are based on data (including third-party data), models and the experience of various professionals, and are based on various assumptions, all of which are subject to change without notice. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and additional uncertainties as other forward-looking statements included in this offering circular.

The information provided by these industry sources should not be construed to sponsor, endorse, offer or promote an investment, nor does it constitute any representation or warranty, express or implied, regarding the advisability of an investment in shares of our common stock or the legality of an investment in shares of our common stock under appropriate laws.

MogulREIT II, Inc. is a newly organized Maryland corporation formed to invest in and manage a diversified portfolio of multifamily properties located in target markets throughout the United States. We intend to acquire established, well-positioned apartment communities that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation.  The use of the terms “MogulREIT II,” the “Company,” “we,” “us” or “our” in this offering circular refer to MogulREIT II, Inc., unless the context indicates otherwise.  We intend to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2017.

We are externally managed by RM Adviser, LLC which is an affiliate of our sponsor, RM Sponsor, LLC,  or our Sponsor.  Our Manager and our Sponsor are each wholly-owned subsidiaries of Realty Mogul, Co.

 


 

We are offering to the public up to $50,000,000 in shares of our common stock including any shares that may be sold pursuant to our distribution reinvestment plan.  We expect to offer shares of our common stock in this offering until we raise the maximum amount being offered; provided, however, our board of directors,  or the Board, may terminate this offering at any time.  Through September 30, 2018, the per share purchase price for shares of our common stock will be $10.00 per share, an amount that was arbitrarily determined by the Board.  Thereafter, the per share purchase price will be adjusted for each fiscal quarter, and will equal the NAV per share calculated as of the close of business the last day of the preceding fiscal quarter.  For example, during the fiscal quarter October 1 through December 31, 2018, the per share purchase price for shares of our common stock will equal the NAV per share calculated as of the close of business on September 30, 2018.  Beginning on October 1, 2018, our website, www.realtymogul.com, will identify the current per share purchase price.

The minimum investment in shares of our common stock for initial purchases is 100 shares, or $1,000 based on the current per share purchase price, excluding purchases by individual retirement accounts, or IRAs, and other tax-deferred accounts. For IRAs and other tax deferred accounts, you must initially purchase at least 1,000 shares of our common stock, or $10,000 based on the current per share purchase price. You should note that an investment in our shares will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all the applicable provisions of the Internal Revenue Code, or the Code.  In the Board’s  discretion, we may in the future increase or decrease the minimum investment amount for all new purchasers. We will disclose any new minimum investment amount on the Realty Mogul Platform, as defined below, at least two days in advance of that new minimum amount taking effect.  Factors that the Board may consider in modifying the minimum investment amount include, but are not limited to, our need for additional capital, the success of our prior capital-raising efforts, and the amount of money raised from our investors who invest the minimum amount versus the amount of money we have raised from investors contributing greater amounts. Any change to the minimum investment amount will apply prospectively to all new purchasers.

We intend to distribute shares of our common stock to the public exclusively through an online investment platform we refer to as the Realty Mogul Platform (www.realtymogul.com) and select registered investment advisors, or RIA partners.  The Realty Mogul Platform allows qualified investors to invest in real estate-related equity or debt opportunities that may have been historically difficult to access for some investors.  Through the use of the Realty Mogul Platform, investors can browse and screen real estate investments, view details of an investment and commit to invest online. The Realty Mogul Platform is owned and operated by our affiliate, RM Technologies, LLC, which is a wholly-owned subsidiary of Realty Mogul, Co. and an affiliate of our Sponsor and of our Manager.

All sales of shares of our common stock will be executed through North Capital Private Securities Corp., or NCPS, or Mogul Securities, LLC, or Mogul Securities, both of which are registered broker-dealers that are member firms of FINRA.  Mogul Securities is an affiliate of our Sponsor and of our Manager, and is a wholly owned subsidiary of Realty Mogul, Co.  Our Sponsor has entered into a Selling and Distribution Agreement with each of NCPS and Mogul Securities. Pursuant to each Selling and Distribution Agreement, our Sponsor will pay up to a 1.20% commission on the proceeds from the sale of any shares that the broker executed. These commissions will not be paid by, or charged to, either the Company or its investors.  We expect that all sales of shares of our common stock  will be executed through NCPS during this offering.  Certain employees of Realty Mogul, Co. are also registered representatives sponsored by NCPS and/or Mogul Securities. We anticipate that NCPS’s and Mogul Securities’ activity on our behalf will be conducted largely by such registered representatives, and a portion of the sales commission received by NCPS or Mogul Securities will be paid to those registered representatives.  Other than those registered representatives and Mogul Securities, no other affiliate of Realty Mogul, Co. will be acting as a broker or dealer in connection with this offering.

Initially, shares of our common stock will not trade on a stock exchange or other trading market.  This means that it may be difficult to sell your shares.  We have, however, adopted a share repurchase program designed to provide our stockholders with limited liquidity on a quarterly basis with respect to their investment in our shares.  See “Description of Our Common Stock—Quarterly Share Repurchase Program” for more details.

 


 

SUITABILITY STANDARDS

We will consider your answers to a number of questions soliciting information regarding your investing experience, investment horizon, current investment portfolio, investment objectives, risk tolerance and liquidity needs.  If you do not have investing experience or are in need of liquidity from your investments, we will elicit further information from you to determine whether an investment in our shares is suitable for you.  While we do not have any specific minimum standards that must be satisfied before we accept you as a stockholder (other than the qualified purchaser requirements discussed elsewhere in this offering statement), we will evaluate the totality of your responses to these questions to determine whether, in our sole discretion, an investment in shares of our common stock is reasonable.  We have implemented these suitability standards due to the volatility associated with investing in real estate, the difficulty of reselling shares of our common stock and the long-term nature of an investment in our shares.  The Company will ensure adherence to these suitability standards by NCPS and Mogul Securities by (i) implementing automated procedures to identify investors that appear to require further assessment due to responses that indicate, for instance, that such investors lack investing experience or have greater liquidity needs, and (ii) requiring that their registered representatives review those investors’ applications and document if an exception is warranted.  The suitability standards will not apply to resales of shares of our common stock.

 

 

 


 

Table of Contents

 

 

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR 

ii

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS 

iii

QUESTIONS AND ANSWERS ABOUT THIS OFFERING 

OFFERING SUMMARY 

13 

RISK FACTORS 

24 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 

63 

INDUSTRY DATA 

64 

ESTIMATED USE OF PROCEEDS 

64 

MANAGEMENT 

66 

MANAGEMENT COMPENSATION 

75 

PRINCIPAL STOCKHOLDERS 

77 

CONFLICTS OF INTEREST 

78 

INVESTMENT OBJECTIVES AND STRATEGY 

82 

PLAN OF OPERATION 

93 

DESCRIPTION OF OUR COMMON STOCK 

99 

DESCRIPTION OF OUR OPERATING PARTNERSHIP 

112 

U.S. FEDERAL INCOME TAX CONSIDERATIONS 

115 

ERISA CONSIDERATIONS 

140 

PLAN OF DISTRIBUTION 

143 

HOW TO SUBSCRIBE 

146 

LEGAL MATTERS 

147 

EXPERTS 

147 

ADDITIONAL INFORMATION 

148 

INDEX TO FINANCIAL STATEMENTS OF MOGULREIT II, INC. 

F-1

APPENDIX A 

A-1

APPENDIX B 

B-1

 

 

i


 

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the offering circular.  You should rely only on the information contained in this offering circular.  We have not authorized anyone to provide you with different information.  This offering circular may only be used where it is legal to sell these securities.  You should not assume that the information contained in this offering circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This offering circular is part of an offering statement that we filed with the Securities and Exchange Commission, or SEC, using a continuous offering process.  Periodically, as we update our quarterly NAV per share amount or have other material developments, we will provide an offering circular supplement that may add, update or change information contained in this offering circular.  Any statement that we make in this offering circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement.  The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this offering circular.  You should read this offering circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC.  See “Additional Information” for more details.

The offering statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov.  Also, a copy of our offering circular and all supplements will be posted on the Realty Mogul Platform website, www.realtymogul.com.  The contents of the Realty Mogul Platform website (other than the offering circular and supplements thereto) are not incorporated by reference in or otherwise a part of this offering circular.

Our Manager and those selling shares on our behalf in this offering will be permitted to make a determination that the purchasers of shares in this offering are “qualified purchasers” in reliance on the information and representations provided by the stockholder regarding the stockholder’s financial situation.  Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A.  For general information on investing, we encourage you to refer to www.investor.gov.

We include a copy of Rule 251(d)(2)(i)(C) of Regulation A as an appendix to this offering circular and on the Realty Mogul website.

ii


 

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

Shares of our common stock are being offered and sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act of 1933, as amended, or Securities Act).  As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state law, or “blue sky,” review, subject to our meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that our shares of common stock offered hereby are offered and sold only to “qualified purchasers” or at a time when our shares of common stock are listed on a national securities exchange.  “Qualified purchasers” include: (i) “accredited investors” as defined under Rule 501(a) of Regulation D promulgated under the Securities Act and (ii) all other investors so long as their investment in our shares of common stock does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).  Accordingly, we reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A.

To determine whether a natural person is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the person must have:

1.

an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase; or

2.

earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.

For the purposes of calculating net worth under 1. above:

(i)

a person’s primary residence shall not be included as an asset;

(ii)

indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and

(iii)

indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability.

If the investor is not a natural person, different standards apply.  See Rule 501 of Regulation D for more details.

For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D.

We intend to offer and sell our shares of common stock in this offering to qualified purchasers in every state of the United States. However, we will only offer 400,000 shares for sale in Texas and 150,000 shares for sale in Washington.  In addition, Michigan requires that an issuer may not accept more than $10,000 from any single purchaser unless that purchaser is an “accredited investor.”  As such, we will only offer shares for sale in Michigan in an amount up to $10,000 to persons who are not “accredited investors” as defined above.

 

 

 

iii


 

QUESTIONS AND ANSWERS ABOUT THIS OFFERING

The following questions and answers about this offering highlight material information regarding us and this offering, including in some cases information that is not otherwise addressed in the “Offering Summary” section of this offering circular.  You should read this entire offering circular, including the section entitled “Risk Factors,” before deciding to purchase shares of our common stock.

Questions about MogulREIT II, Inc. and REITs

Q:          What is MogulREIT II, Inc.?

A:          We are a newly organized Maryland corporation formed to invest in and manage a diversified portfolio of multifamily properties located in target markets throughout the United States. We intend to acquire established, well-positioned apartment communities that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation. The use of the terms “MogulREIT II,” the “Company,” “we,” “us” or “our” in this offering circular refer to MogulREIT II, Inc., unless the context indicates otherwise.

Q:          What is a REIT?

A:          In general, a REIT is an entity that:

·

Owns or finances income-producing real estate;

·

Allows investors to invest in portfolios of properties through the purchase of stock;

·

Qualifies as a REIT for U.S. federal income tax purposes and is therefore generally not subject to federal corporate income taxes on its net income that is distributed, which substantially eliminates the “double taxation” treatment (i.e., taxation at both the corporate and stockholder levels) that generally results from investments in a corporation; and

·

Pays distributions to investors of at least 90% of its annual REIT taxable income.

In this offering circular, we refer to an entity that qualifies to be taxed as a REIT for U.S. federal income tax purposes as a REIT.  We intend to qualify as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2017.

Q:          How will you structure the ownership and operation of your assets?

A:          We plan to own substantially all of our assets and conduct our operations through MogulREIT II Operating Partnership, LP, a Delaware limited partnership, or our operating partnership, which was organized in February 2017.  We are the sole general partner of our operating partnership. Because we will conduct substantially all of our operations through an operating partnership, we are organized in what is referred to as an “UPREIT” structure.

Q:          What is an “UPREIT”?

A:          UPREIT stands for Umbrella Partnership Real Estate Investment trust. We use the UPREIT structure because a contribution of property directly to us is generally a taxable transaction to the contributing property owner. In contrast, a contributor of a property who desires to defer taxable gain on the transfer of his or her property may transfer the property to our operating partnership in exchange for limited partnership interests and generally defer taxation of gain until the contributor later disposes of his or her limited partnership interests. We believe that using an UPREIT structure gives us an advantage in acquiring desired properties from persons who may not otherwise sell their properties because of unfavorable tax results.

1


 

Q:          Why should I invest in commercial real estate investments?

A:           Potential to generate income and opportunity for capital appreciation — A key feature of commercial real estate investment is the significant proportion of total return accruing from rental income over the long term.  Rental income can allow an investor to hold a commercial real estate investment through market cycles without having to liquidate the investment to generate cash flow.  In addition, investing in commercial real estate may provide an investor with the opportunity for capital appreciation.

Asset class diversification with potential to reduce volatility of a portfolio — Adding commercial real estate to your investment mix may increase your portfolio diversification.  According to studies published by the National Council of Real Estate Investment Fiduciaries, commercial real estate has a low or negative correlation to other major asset classes and over time has exhibited less volatility in total returns.

Potential to hedge against inflation — Commercial real estate has the potential to hedge against inflation because property values and rents have historically been positively correlated with growth in inflation.  Appreciation in property values can be as significant a part of a commercial real estate investment as cash flow from rental income.  Rents are typically tied to inflation, and a property’s value is tied to its rental income.  So, as inflation drives up rent, the value of the underlying property typically increases as well.  Inflation also generally makes new construction more expensive because the cost of building materials rises.  Less new construction could also lead to an increase in the value of existing properties.

Q:          Who might benefit from investing in shares of the Company’s common stock?

A:          An investment in shares of our common stock may be beneficial for you if you seek to diversify your personal portfolio with a commercial real estate investment vehicle focused primarily on investments in commercial real estate and other select real estate-related assets, seek to receive current income, seek to preserve capital and are able to hold your investment for a time period consistent with our liquidity strategy.  On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, that an investment in our shares will not meet those needs.

Q:          Are there any risks involved in buying shares of the Company’s common stock?

A:          Investing in shares of our common stock involves a high degree of risk.  If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment.  See “Risk Factors” for a description of the risks relating to this offering and an investment in our common stock.

Questions about Your Investment Strategy

Q:          What will you invest in?

A:          We intend to invest in multifamily properties, including independent senior-living communities, located in target markets throughout the United States.  We intend to acquire established, well-positioned apartment communities that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation. We will invest in the following types of assets: equity or preferred equity interests in companies whose primary business is to own and operate one or more specified multifamily projects.

Q:          Will you use leverage?

A:          We may use leverage of up to 75%  of the fair market value or expected fair market value (for a value-add acquisition) of our assets. This is an overall target. Our borrowing on any additional investment may exceed 75% of its fair market value or expected fair market value as long as total portfolio leverage does not exceed 75%.  See “Investment Objectives and Strategy” for more details.

2


 

Q:          What will you do with the proceeds from this offering?

A:         We expect to use substantially all of the net proceeds from this offering (after paying or reimbursing organization and offering expenses) to invest in and manage a diversified portfolio of multifamily properties located in target markets throughout the United States. We expect that any expenses or fees payable to our Manager for its services in connection with managing our daily affairs will be paid from cash flow from operations.  If such fees and expenses are not paid from cash flow, they will reduce the cash available for investment and distribution and will directly impact our NAV.  See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates.

We may not be able to promptly invest the net proceeds of this offering in multifamily properties, either equity or preferred equity. Additionally, from time to time, we will have excess cash that we need to manage, pending its distribution to our stockholders or investment by us in accordance with our investment strategy.  We intend to engage a third-party subadvisor to manage our cash balance.  We expect the subadvisor to (i) incur leverage on this cash balance and (ii) invest the cash and the debt incurred thereon in publicly-traded common or preferred shares in REITs or other short-term investments.  We will pay the subadvisor a fee of 0.5% of the amount invested (including the amount of any leverage utilized) and any additional out-of-pocket fees and expenses incurred by the subadvisor.

Questions about Service Providers

Q:          Who will choose which investments you make?

A:          We are externally managed by RM Adviser, LLC, our Manager.  A majority of the investment committee of our Manager will approve each of our investments.  Jilliene Helman, our Manager’s Chief Executive Officer, and Megan Goodfellow,  our Manager’s Chief Credit Officer, will be our Manager’s initial investment committee.

Q:          Who is Realty Mogul, Co.?

A:          Realty Mogul, Co. is the parent company of each of our Sponsor, our Manager, Realty Mogul Commercial Capital, Co., Mogul Securities, and RM Technologies, LLC.

Q:          Who is RM Technologies, LLC?

A.

RM Technologies, LLC operates the Realty Mogul Platform,  an online financial platform focused on real estate, which can be found on the website www.realtymogul.com.  With the exception of offering our shares online through select RIA partners, our common stock will be offered exclusively through the Realty Mogul Platform.

Q:          What is the Realty Mogul Platform?

A:          The Realty Mogul Platform is an online investment platform for commercial real estate, often times referred to as an “investment marketplace.”  The Realty Mogul Platform gives qualified investors the ability to:

·

browse investment offerings based on investment preferences including location, asset type, and risk and return profile;

·

transact entirely online, including digital legal documentation, funds transfer, and ownership recordation;

·

manage and track investments easily through an online dashboard; and

·

receive automated distributions and/or interest payments, and regular financial reporting.

Q:          What services will our Manager perform?

A:          Our Manager performs the following services: investment advisory and acquisition services (including performing due diligence on our investments), offering services, asset management services, marketing and

3


 

advertising services, accounting and other administrative services, stockholder services, financing services, and disposition services, among others.  See “Management — Responsibilities of our Manager” for more details.

Q:          What competitive advantages do you achieve through your relationship with Realty Mogul, Co.?

A:          Our Manager will use the personnel and resources of its affiliates to select our investments and manage our day-to-day operations.  Realty Mogul, Co.’s corporate, investment and operating platforms are well established, allowing us to realize economies of scale and other benefits, including the following:

·

Vertical Integration — Because the Company will be acquiring or investing in assets that are in large part originated and managed by affiliates of Realty Mogul, Co., the Company is able to take advantage of the vertical integration and synergies brought about by this relationship.  Realty Mogul, Co. or Realty Mogul Commercial Capital, Co., each of which may be referred to as an RM Originator in this offering circular, and Mogul Securities have professionals, processes and infrastructure in place to source equity investment opportunities, respectively, and they anticipate being able to provide high-quality investment opportunities to the Company and its stockholders.  Moreover, the availability of qualified executive and managerial talent at Realty Mogul, Co. and its affiliates directly benefits the Company and permits significant visibility into the assets being acquired and held by the Company from very early in their underwriting or origination process.

·

Experienced Management Team — Realty Mogul, Co. and its affiliates have a highly experienced team of real estate equity finance professionals, led by Jilliene Helman, its Chief Executive Officer.  Many of the senior executives and loan origination professionals at Realty Mogul, Co. have significant experience and credibility in the commercial real estate sector and have been in leadership roles at financial services institutions for many years. Collectively, these professionals have more than 150 years of combined direct experience in the commercial real estate business, and have managed more than $40 billion in originations and underwritings of commercial real estate loans and equity investments.  In addition, our Manager advises another REIT with similar investment objectives, MogulREIT I, LLC, which was qualified by the SEC on August 12, 2016.  The Company benefits from the knowledge and industry contacts, experience and judgment that these professionals have accumulated over numerous real estate cycles.  See “Management —Executive Officers of our Manager” for biographical information regarding these individuals.

·

Real Estate Credit Experience — The credit team of Realty Mogul, Co. and its affiliates has extensive experience in reviewing and underwriting commercial real estate investments.  The team has adopted approaches used by real estate finance industry leaders in its analysis of real estate capital structures and financial strategies, and these approaches will be brought to bear for the Company’s benefit.

·

Market Knowledge and Industry Relationships — Through their active and broad participation in the real estate industry, Realty Mogul, Co.’s affiliates benefit from market information that enables them to identify attractive commercial real estate equity investment opportunities and to make informed decisions with regard to the relative valuation of financial assets and capital allocation.  We believe that these extensive industry relationships with a wide variety of commercial real estate owners and operators, brokers and other intermediaries and third-party commercial real estate equity originators will provide us with a competitive advantage in sourcing attractive investment opportunities to meet our investment objectives.

·

Lead Generation — Potential sponsors and borrowers of real estate opportunities frequently come directly to the Realty Mogul Platform to seek financing for their projects.  As a result of this deal flow, which in many cases is unsolicited, the Company will have access to numerous potential opportunities at a relatively low cost.

·

Related Party Loans and Warehousing of Assets — If we do not have sufficient funds to acquire a particular investment, or have sufficient funds to acquire only a portion of a particular investment, then, in order to cover the shortfall, we may obtain a related party loan from an RM Originator or its affiliates on commercially reasonable terms.  Alternatively, an RM Originator or its affiliates may close and fund each loan or other investment prior to it being acquired by us.  This ability to “warehouse” investments allows us the flexibility to deploy our offering proceeds as funds are raised.  Our charter allows us to acquire investments from affiliates, provided that such affiliated transactions are approved by the Board, including a majority of our

4


 

independent directors.  However, the Board has authorized us to enter into unsecured related party loans that, in the aggregate, do not exceed $20 million, provide for no more than three principal payments and do not carry an interest rate that exceeds the then current applicable prime rate with respect to such loans, without the approval of the Board.  All other related party loans would require prior approval of the Board.  See “Plan of Operation — Related Party Loans and Warehousing of Assets.

In addition to the above, Realty Mogul’s core values of accountability, execution, investor protection, organizational excellence and user experience are a fundamental part of the culture at Realty Mogul, Co. and its affiliates.  These values inform the outlook, approach, and behavior of the Realty Mogul entities and their professionals, and are among the qualities our Manager will seek in considering its investment opportunities.  In each loan transaction considered by our Manager, the character and experience of the governing sponsor is closely examined, with an emphasis on ensuring that the operator has a solid reputation, track record, and the requisite skill and knowledge to manage the project in a professional manner.

Q:         What transactions would require the approval of the Board?

A:          Our Manager will make recommendations on all investments to our Board. The Board has preapproved investments that are less than 10% of the asset value of the REIT or have less than 75% leverage. In addition, the Board has authorized us to enter into unsecured related party loans that, in the aggregate, do not exceed $20 million, provide for no more than three principal payments and do not carry an interest rate that exceeds the then current applicable prime rate with respect to such loans without the approval of the Board.

Questions about Expenses

Q:         Will I be charged upfront selling commissions?

A:          No. Investors will not pay upfront selling commissions as part of the price per share of our common stock purchased in this offering.

Q:         Will any upfront selling commissions be paid?

A:          Our Sponsor has entered into a Selling and Distribution Agreement with each of NCPS and Mogul Securities.  Pursuant to each Selling and Distribution Agreement, our Sponsor will pay up to a 1.20% commission on the proceeds from the sale of any shares that the broker executed.  We expect that all sales of shares of our common stock will be executed through NCPS during this offering.  Certain employees of Realty Mogul, Co. are also registered representatives sponsored by NCPS and/or Mogul Securities. We anticipate that NCPS’s and Mogul Securities’ activity on our behalf will be conducted largely by those employees.  Other than those registered representatives and Mogul Securities, no other affiliate of Realty Mogul, Co. will be acting as a broker or dealer in connection with this offering.

Q:          Who will pay your organization, offering and ongoing reporting and operating costs?

A:          Our Manager or its affiliates will pay on our behalf all third-party costs incurred in connection with our organization and the offering of our common stock.  See “Estimated Use of Proceeds” for more information about the types of costs that may be incurred.  We will reimburse our Manager, without interest, for these third-party organization and offering costs incurred both before and after the date of this offering circular.  However, we are under no obligation to make such reimbursements before December 31, 2018.  The Company expects to reimburse our Manager, monthly, for offering costs actually incurred at a rate equal to the aggregate proceeds raised in this offering as of the end of the prior month divided by the maximum offering amount of $50,000,000 (excluding any reimbursements made in previous months).  With respect to organization costs, the Company will not reimburse our Manager for such costs until the Company has raised $1,000,000 in this offering.  Once $1,000,000 has been raised in this offering, the Company expects to reimburse our Manager for all organization costs incurred.

We will reimburse our Manager for the ongoing, out-of-pocket expenses that our Manager will pay on our behalf, including license fees, accounting and auditing fees, advertising and marketing fees, fees associated with SEC reporting requirements, increases in insurance costs, tax return preparation fees, taxes and filing fees,

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administration fees, and third-party costs associated with the aforementioned expenses.  These expenses do not include our Manager’s or Realty Mogul, Co.’s overhead, employee costs, utilities or technology costs.  The aforementioned expense reimbursements that we will pay to our Manager may be originally incurred by Realty Mogul, Co. in the performance of services by its employees under a shared services agreement between our Manager and Realty Mogul, Co.  See “Management—Shared Services Agreement.”

Q:          What fees will you pay to our Manager or any of its affiliates?

A:          We will pay our Manager  a monthly asset management fee at an annualized rate of 1.25% payable in arrears, which through September 30, 2018 will be based on our net offering proceeds as of the end of each month, and thereafter will be based on the average investment value of our assets. For purposes of this fee “average investment value” means, for any period, the average of the aggregate book value of all of our assets, before reserves for depreciation, amortization,  bad debts or other similar non-cash reserves, or, if the Board has determined an estimated NAV, then with respect to any asset included in the calculation of such estimated NAV, the appraised value of such asset.  In addition, we will pay our Manager an acquisition fee of up to 3% of the contract purchase price of each asset as well as a disposition fee of 2% of the contract sales price of each asset sold.  We will also reimburse our Manager or its affiliates for certain expenses associated with our organization and offering and for our operating expenses.  The payment by us of fees and expenses will reduce the cash available for investment and distribution and will directly impact our NAV.  See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates.

Questions about Distributions

Q:          How often will I receive distributions?

A:          We expect that the Board will authorize, and we will declare and pay, distributions quarterly in arrears; provided, however, the Board may authorize other periodic distributions as circumstances dictate.  Any distributions we make will be at the discretion of the Board, and will be based on, among other factors, our present and reasonably projected future cash flow.  In addition, the Board’s discretion as to the payment of distributions will be dictated by the REIT distribution requirements, which generally require that we make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain.  Moreover, even if we make the required minimum distributions under the REIT rules, we are subject to federal income and excise taxes on our undistributed taxable income and gains.  As a result, the Board also may authorize additional distributions, beyond the minimum REIT distribution, to avoid these taxes.  See “Description of Our Common Stock — Distributions” and “U.S. Federal Income Tax Considerations.”

Any distributions that we make will directly impact our NAV, by reducing the amount of our assets.  Our goal is to generate returns to our stockholders in the form of income through regular distributions and capital growth through increases in our NAV per share.  Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative), less any applicable share repurchase fees, will produce your total return.

Q:          What will be the source of distributions?

A:          We may pay distributions from sources other than cash flow from operations, including from the proceeds of this offering and borrowings, and we have no limit on the amounts we may pay from such sources.

Q:          Will the distributions I receive be taxable as ordinary income?

A:          REIT distributions, including distributions that are reinvested pursuant to our distribution reinvestment plan, may be treated as ordinary income, capital gains, and return of capital for tax purposes, each of which may be taxed at a different rate for different investors:

·

The majority of recurring REIT distributions will be taxed at your ordinary income rate if they are from current or accumulated earnings and profits.

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·

The portion of your distribution in excess of current and accumulated earnings and profits will be considered a return of capital for U.S. federal income tax purposes and will not result in current tax, but will lower the tax basis of your investment until it is reduced to, but not below, zero. Any return of capital in excess of your tax basis will be treated as sales proceeds from the sale of shares of our common stock and will be taxed accordingly.

·

Distributions that are designated as capital gain will generally be taxable at the long-term capital gains rate.

Because each investor’s tax considerations are different, we recommend that you consult with your tax advisor.  You also should review the section of this offering circular entitled “U.S. Federal Income Tax Considerations,” for a discussion of the special rules applicable to distributions in the repurchase of shares and liquidating distributions.

Q:          Will I be able to reinvest my cash distributions in additional shares?

A:          Yes. If you elect to participate in our distribution reinvestment plan, all distributions we pay to you will be automatically reinvested in shares of our common stock. See “Description of Our Common Stock – Distribution Reinvestment Plan.”

Questions about Share Repurchases

Q:         Will I have the opportunity to redeem my shares of common stock?

A:          Yes.  While you should view your investment in our common stock as a long-term investment with limited liquidity, we have adopted a share repurchase program whereby stockholders may request that we repurchase up to 25% of their shares quarterly while this offering is ongoing.  We also may make repurchases upon the death of a stockholder (referred to as “exception repurchases”;  all other repurchases are referred to as  “ordinary repurchases”). For ordinary repurchases, the amount we will pay to repurchase your shares will depend upon how long a stockholder requesting redemption has held his or her shares, or the Effective Repurchase Rate, as described below:

Exception repurchases are not subject to any discount associated with the amount of time shares were held and will be repurchased at 100% of the applicable price per share. The prices at which we will repurchase shares, or the Repurchase Base Price,  are as follows:

 

 

 

 

 

 

Repurchase

 

Period

    

Base Price Per Share

 

Through  3 years from date of initial qualification

 

Lower of NAV or $9.50

 

Starting after 3 years and a day from the date of initial qualification

 

Most recent NAV

 

 

 

 

 

 

 

    

Effective

 

Share Repurchase Anniversary (Year)

 

Repurchase Rate (1)

 

Less than 1 year

 

(Lock-up) 0

%

1 year until 2 years

 

98

%

2 years until 3 years

 

99

%

3 or more years

 

100

%

Death (Exception Repurchases)

 

100

%


(1)

As a percentage of the Repurchase Base Price per share. The repurchase price will be rounded down to the nearest $0.01.

Any fee charged to the Company by a third party in connection with a repurchase will be deducted from the total repurchase price, or Repurchase Cost. Accordingly, stockholders who present shares for repurchase will be paid an amount equal to the product of the applicable Repurchase Base Price per share multiplied by the Effective Repurchase Rate, minus the Repurchase Cost.  For purposes of determining the time period a stockholder has held each share, the time period begins as of the date the stockholder acquired the share.

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In the event that a stockholder requests repurchase of 100% of the shares owned by the stockholder on the date of presentment, we will waive the one-year holding period requirement for any shares presented that were acquired through our distribution reinvestment plan.

There is no regular trading market for our common stock.  We do not expect that a regular trading market will develop unless we list our shares of common stock on a national securities exchange and we currently do not intend to do so.  Further, following the conclusion of this offering, the Board 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  stockholders, (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.  See “Description of Our Common Stock—Quarterly Share Repurchase Program” for more details.

Q:          Will there be any limits on my ability to redeem my shares?

A:          Yes.  In the initial twelve months of this offering, we intend to limit the number of shares to be repurchased during a quarter to 1.25% of the weighted average number of shares of our common stock outstanding since the commencement of the offering.  After this offering has been ongoing for twelve months and while it is still ongoing, we intend to limit the number of shares to be repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year (or 1.25% per quarter, with excess capacity carried over to later quarters in the calendar year).  While we designed our share repurchase program to allow stockholders to request share repurchases on a quarterly basis (subject to the one-year holding period), we need to impose limitations on the total amount of net repurchases per quarter in order to maintain sufficient sources of liquidity to satisfy share repurchase requests without impacting our ability to invest in commercial real estate assets and maximize investor returns.  In the event that we do not have sufficient funds available to repurchase all of the shares of common stock for which share repurchase requests have been submitted in any quarter, such pending requests will be honored on a pro rata basis.  For investors who hold shares with more than one record date, share repurchase requests will be applied to such shares in the order in which they were purchased, on a first in /  first out basis.  See “Description of Our Common Stock—Quarterly Share Repurchase Program” for more details.

Questions about the Offering

Q:          What kind of offering is this?

A:          We are offering through the Realty Mogul Platform, www.realtymogul.com, a maximum of $50,000,000 of shares of our common stock to the public on a “best efforts” basis at $10.00 per share.

Q:          How is an investment in the Company’s common stock different from investing in shares of a traditional non-exchange traded REIT?

A:          We neither charge nor pay any broker-dealer distribution fees, saving investors approximately 70% to 90% in upfront expenses as compared to a traditional non-exchange traded REIT.  Traditional non-exchange traded REITs use a highly manpower-intensive method with hundreds to thousands of sales brokers calling on investors to sell their offerings.  Historically, these traditional non-exchange traded REITs have charged upfront sales commissions of 7% of invested capital to compensate their sales brokers.  Realty Mogul, Co. uses the Realty Mogul Platform, a low-cost online platform, which we intend to leverage in conducting this offering. Additionally, traditional non-exchange traded REITs have incurred organization and offering expenses of up to 15% of the amount raised in the offering.  Assuming we raise the maximum amount of $50,000,000 in this offering, we expect that our organization and offering expenses will be 3% of gross proceeds. 

Q:          How is an investment in the Company’s common stock different from investing in shares of other online REITs?

A:          We have a different investment strategy compared to other online REITs.  See “Investment Objectives and Strategy — Investment Strategy” for additional detail on our investment strategy.  For example, we will not invest in raw land as a standalone investment or in the new construction of any building.  Additionally, we have a

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uniquely qualified management team, which will manage our originations, credit and underwriting, and asset management functions.  See “Management — Executive Officers of our Manager” for additional detail on our management team’s experience.

Q:          How is an investment in the Company’s common stock different from investing in shares of other real estate investment opportunities offered on the Realty Mogul Platform?

A:           Currently, the Realty Mogul Platform offers individual real property-related investments as private placements to accredited investors only. The Realty Mogul Platform allows accredited investors to review due diligence materials for individual transactions and invest in one transaction at a time. Investing in the Company is different since investment decisions are made by our Manager and you are investing in a diversified portfolio and not a specific transaction or property. Additionally, the Company is accessible to both accredited and non-accredited investors and offers a lower investment minimum than some of the transactions offered on the Realty Mogul Platform. Our Manager charges a monthly asset management fee equal to 1.25% for managing the Company and its investments.  The other investment opportunities offered through the Realty Mogul Platform may charge fees that are higher or lower than the Company’s fee.  Finally, the Company is set up as a “blind pool” REIT, which means that we are not committed to acquiring any particular investments with the net proceeds of this offering.  Investing in the Company can lead to greater diversification because the Company intends to invest its assets in multiple real estate opportunities.  However, unlike other investment opportunities on the Realty Mogul Platform, a purchaser of shares of our common stock may not know what investments the Company will make with its assets at the time the investor purchases shares of our common stock.  Although our Manager currently manages another REIT with similar investment objectives, MogulREIT I, LLC, MogulREIT I, LLC’s portfolio primarily consists of loans and other debt instruments secured by commercial real estate and its investment strategy differs significantly from the Company’s investment strategy.

Q:          What is the purchase price for the Company’s common stock?

A:          The Board set our initial offering price at $10.00 per share, which will be the purchase price of our shares through September 30, 2018.  Thereafter, the per share purchase price will be adjusted for each fiscal quarter, and will equal the NAV per share calculated as of the close of business the last day of the preceding fiscal quarter. For example, during the fiscal quarter October 1 through December 31, 2018, the per share purchase price for shares of our common stock will equal the NAV per share calculated as of the close of business on September 30, 2018.  Beginning on October 1, 2018, our website, www.realtymogul.com, will identify the current per share purchase price.  Any subscriptions that we receive during a fiscal quarter will be executed at a price equal to our NAV per share in effect for that fiscal quarter.  We will use commercially reasonable efforts to monitor whether a material event occurs in between quarterly updates of NAV that we reasonably believe would cause our NAV per share to change by 5% or more from the last disclosed NAV.  While this offering is ongoing, if we reasonably believe that such a material event has occurred, we will calculate and disclose the updated NAV per share and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV per share information provided on our website.  We will also use that updated NAV per share as the offering price for new shares for the remainder of that fiscal quarter.  See “Description of Our Common Stock—Quarterly NAV Share Price Adjustments” for more details.

Q:          How does a “best efforts” offering work?

A:          When shares of our common stock are offered to the public on a “best efforts” basis, we are only required to use our best efforts to sell shares of our common stock.  Neither our Sponsor, Manager, broker-dealers nor any other party has a firm commitment or obligation to purchase any shares of our common stock.

Q:          Who can buy shares?

A:          Generally, you may purchase shares of our common stock if you are a “qualified purchaser” (as defined in Regulation A).  “Qualified purchasers” include:

·

“accredited investors” as defined under Rule 501(a) of Regulation D; and

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·

all other investors so long as their investment in our common stock does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).

For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D.  In particular, net worth in all cases should be calculated excluding the value of an investor’s home.  We reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A.  See  “State Law Exemption and Purchase Restrictions”  above for more information.

Q:          How do I buy shares?

A:          You may purchase our common stock in this offering by creating a new account, or logging into your existing account, at the Realty Mogul Platform.  You will need to fill out a subscription agreement like the one attached as an exhibit to this offering circular and make arrangements to pay for the shares at the time you subscribe.

Q:          Is there any minimum investment required?

A:          Yes.  You must initially purchase at least 100 shares in this offering, or $1,000 based on the current per share purchase price, unless you are investing through an IRA or other tax-deferred account. For IRAs and other tax deferred accounts, you must initially purchase at least 1,000 shares of our common stock or $10,000 based on the current per share purchase price. You should note that an investment in our shares will not, in itself create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Code. In the Board’s discretion, we may in the future increase or decrease the minimum investment amount for all new purchasers.  We will disclose any new minimum investment amount on the Realty Mogul Platform at least two days in advance of that new minimum amount taking effect. Factors that the Board may consider in modifying the minimum investment amount include, but are not limited to, our need for additional capital, the success of our prior capital-raising efforts, and the amount of money raised from our investors who invest the minimum amount versus the amount of money we have raised from investors contributing greater amounts.

Q:          May I make an investment through my IRA or other tax-deferred retirement account?

A:          Yes. Subject to certain restrictions set forth in this offering circular, you will be able to make an investment through your individual retirement account, or IRA, or other tax deferred account. When making investment decisions, you should consider, at a minimum, (i) whether the investment is in accordance with the documents and instruments governing your IRA or other deferred tax account; (ii) whether the investment is consistent with the fiduciary and other obligations associated with your IRA or other tax deferred account; (iii) whether the investment will generate an unacceptable amount of unrelated business taxable income, or UBTI, for your IRA or other tax deferred account; (iv) whether you will be able to comply with the requirements under the Employee Retirement Income Security Act of 1974, as amended, or ERISA, and the Code that you value the assets of the IRA or other tax deferred account annually; and (v) whether the investment would constitute a prohibited transaction under applicable law.

Q:          Are there special considerations that apply to employee benefit plans subject to ERISA or other retirement plans that are investing in shares?

A:          Yes. The section of the offering circular entitled “ERISA Considerations” describes the effect the purchase of shares will have on IRAs and retirement plans subject to ERISA, and/or the Code. ERISA is a federal law that regulates the operation of certain tax-advantaged retirement plans. Any retirement plan trustee or individual considering purchasing shares for a retirement plan or an IRA should carefully read that section of the offering circular.

We may make some investments that generate UBTI or, in certain circumstances, can result in a tax being imposed on us. Although we do not expect the amount of such income to be significant, there can be no assurance in this regard.

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Q:          Is there a maximum investment?

A:          Yes.  You cannot own more than 9.8% in value of our outstanding stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock at any time.  Additionally, if you do not qualify as an accredited investor, you may invest no more than the greater of (i) 10% of your income, but no more than $20,000 in any twelve-month period or (ii) 10% of your net worth, as calculated under Rule 501 of Regulation D, but no more than $100,000 in any twelve-month period.  If you want to invest more than the limitations set forth in the preceding sentence, you must qualify as an “accredited investor” as defined in Rule 501 of Regulation D.

Q:          How long will this offering last?

A:          We currently expect that this offering will remain open for investors until we raise the maximum amount being offered, unless terminated by us at an earlier time.  We reserve the right to terminate this offering for any reason at any time.

Q:          Who can help answer my questions about the offering?

A:          If you have more questions about the offering, or if you would like additional copies of this offering circular, you should contact us by phone at (877) 781‑7153, by email at MogulReitII@realtymogul.com or by mail at:

MogulREIT II, Inc.

10780 Santa Monica Blvd.

Suite 140

Los Angeles, CA 90025

Attn: Investor Relations

Questions About Our Performance

Q:          Will I be notified of how my investment is doing?

A:          Yes. Initially, we will provide you with periodic updates on our business and financial performance, including:

·

an annual report;

·

a semi-annual report;

·

current event reports for specified material events within four business days of their occurrence;

·

supplements to the offering circular, if we have material information to disclose to you; and

·

other reports that we may file or furnish to the SEC from time to time.

We will provide this information to you by posting such information on the SEC’s website at www.sec.gov, on the Realty Mogul Platform at www.realtymogul.com, or via e-mail.

After the conclusion of our offering, we may be eligible to suspend or terminate these public filings.  If we are eligible, and if we elect to suspend or terminate these filings, you will not receive the updates listed above.

Q:          When will I get my detailed tax information?

A:          Your Form 1099‑DIV tax information, if required, will be provided in electronic form by January 31 of the year following each taxable year.

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Q:          How will the Company’s NAV per share be calculated?

A:           At the end of each fiscal quarter, beginning October 1, 2018, our Manager’s internal accountants will calculate our NAV per share. The NAV per share calculation will reflect the total value of our assets minus the total value of our liabilities, divided by the number of shares of our common stock outstanding as of the close of the last business day of the preceding fiscal quarter. Our commercial real estate assets and investments will constitute a significant component of our total assets. We will take estimated values of each of our commercial real estate assets and investments, including related liabilities, based upon performance, market default rates, discount rates, loss severity rates, and, if the Board deems it necessary, individual appraisal reports of the underlying real estate assets provided periodically by an independent valuation expert. The independent valuation expert will not be responsible for, or prepare, our quarterly NAV per share.  However, we may hire a third party to calculate, or assist with calculating, the quarterly NAV per share.  See “Description of Our Common Stock—Valuation Policies” for more details about our NAV and how it will be calculated.

Q:          How exact will the calculation of the quarterly NAV per share be?

A:          Our goal is to provide a reasonable estimate of the value of the shares of our common stock as of the end of each fiscal quarter.  Our assets will consist principally of equity and preferred equity investments in a diverse portfolio of multifamily properties located in target markets throughout the United States.  The valuation of the real estate investments by our Manager’s internal accountants (with the input of our independent valuation expert, as needed) is subject to a number of subjective judgments and assumptions that may not prove to be accurate.  The use of different judgments or assumptions would likely result in different estimates of the value of our real estate investments.  Moreover, although we evaluate and provide our NAV per share on a quarterly basis, our NAV per share may fluctuate daily, so that the NAV per share in effect for any fiscal quarter may not reflect the amount that might be paid for your shares in a market transaction.  Further, our published NAV per share may not fully reflect certain material events to the extent that they are not known or their financial impact on our portfolio is not immediately quantifiable.  Any material event that we reasonably believe would cause our NAV per share to change by more than 5% would require a recalculation.  Any resulting potential disparity in our NAV per share may be in favor of either stockholders who have their shares repurchased, or stockholders who buy new shares, or existing stockholders.  See “Description of Our Common Stock—Valuation Policies.”

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OFFERING SUMMARY

This offering summary highlights material information regarding our business and this offering.  Because it is a summary, it may not contain all of the information that is important to you.  To understand this offering fully, you should read the entire offering circular carefully, including the “Risk Factors” section, before making a decision to invest in our common stock.

Overview

Realty Mogul, Co., our parent company, is a real estate investment marketplace leader.  Since Realty Mogul, Co. launched the Realty Mogul Platform in 2013, it has originated, underwritten, and financed over $250 million  in real estate properties across approximately 230 debt and equity transactions.  Over the past four years, Realty Mogul, Co. has raised capital for debt and equity commercial real estate offerings and invested that capital in multifamily, retail, office, self-storage, and industrial real estate opportunities.  Our Sponsor and our Manager, wholly owned subsidiaries of Realty Mogul, Co., currently sponsor and manage, respectively, MogulREIT I, LLC whose offering circular was filed with the SEC on July 19, 2016 and qualified on August 12, 2016.

We are an externally-managed REIT that will invest in commercial real estate-related assets with the objective of providing attractive risk-adjusted returns to our investors over the long-term, through both distributions and capital appreciation.  We intend to achieve this objective by making investments structured to comply with the REIT federal income tax requirements and not meet the definition of an “investment company” so as to avoid regulation under the Investment Company Act of 1940, as amended, or Investment Company Act.

We are managed by RM Adviser, LLC, a SEC registered investment adviser and wholly-owned subsidiary of Realty Mogul, Co. RM Adviser, LLC will have access to Realty Mogul, Co.’s deep team of real estate and finance professionals and will leverage their collective experience in originating, underwriting, and servicing billions of dollars in real estate-related assets over the course of their careers.

Our purpose is to provide investors an opportunity to acquire shares of a REIT without paying the high upfront fees and selling commissions typical in non-traded REITs, which, in turn, enables us to invest a higher percentage of your investment in real property and increase the Company’s total return.

MogulREIT II, Inc. is a newly organized Maryland corporation formed to invest in and manage a diverse portfolio of multifamily properties located in target markets throughout the United States. We intend to acquire established, well-positioned, apartment communities with operating histories that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation.  We intend to operate in a manner that will allow us to qualify as a REIT for U.S. federal income tax purposes.  Among other requirements, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

Our office is located at 10780 Santa Monica Blvd., Suite 140, Los Angeles, CA 90025.  Our telephone number is (877) 781‑7153. Information regarding the Company is also available on our web site at www.realtymogul.com.

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Investment Strategy

Our investment strategy involves investing in assets with varying levels of risk; investments will be focused on the  part of  the “capital stack” of real estate transactions called Common Equity and Preferred Equity.

Picture 9

We intend to use substantially all of the proceeds of this offering to invest in a diverse portfolio of multifamily properties located in target markets throughout the United States. We intend to acquire established, well-positioned, apartment communities with operating histories that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation. We intend to invest in and manage a diversified portfolio of commercial real estate investments, including equity in commercial real estate ventures.  We intend to hold: (1) at least 55% of the total value of our assets in common equity investments in which we are the controlling party and (2) at least 80% of the total value of our assets in the types of assets described above, plus in “real estate-related assets” that are related to one or more underlying commercial real estate projects.  These real estate-related assets may include assets, such as equity or preferred equity interests in companies whose primary business is to own and operate one or more specified multifamily projects and interests in publicly-traded REITs.

We will seek to create and maintain a diverse portfolio of multifamily properties,  including independent senior-living communities, located in targeted markets throughout the United States, with the objective of generating stable rental income and maximizing the opportunity for future capital appreciation. We expect that the portfolio will consist of established, well-positioned, apartment communities with existing high occupancies and consistent rental revenue, intended to provide a potential source of stable income to investors. Established apartments are typically older, more affordable apartments that cater to the middle-class segment of the workforce, with monthly rental rates that accommodate the generally accepted guidelines for housing costs as a percentage of gross income. As a result, the demand for apartment housing at these properties is higher compared to other types of multifamily properties and is generally more consistent in all economic cycles. We also intend to execute a “value-enhancement” strategy whereby we will acquire or invest in under-managed assets in high-demand neighborhoods, invest additional capital, and reposition the properties to increase both average rental rates and resale value. We believe that many of the properties targeted for “value-enhancement” typically will also be established, well-positioned, multifamily communities with existing high occupancies and consistent rental revenue. However, these properties present an opportunity to increase rental revenue by expending incremental capital (typically approximately 4‑7% of the original unit price) in superficial, aesthetic improvements such as new doors and lighting hardware, flooring, window coverings and appliances. Often such enhancements are of such a cosmetic nature as

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to generally not require building permits. These properties are deemed “under-managed” insofar as prior owners either failed to recognize the potential for, or did not have the capital to execute, a “value-enhancement” strategy.

Our Manager, through its affiliates, intends to structure, underwrite and originate many of the products in which we invest as this provides for the best opportunity to control our borrower and partner relationships and optimize the terms of our investments.  Our affiliates’ underwriting process, which our management team has successfully developed over their extensive real estate careers in a variety of market conditions and implemented at Realty Mogul, Co., will involve comprehensive financial, structural, operational and legal due diligence of our borrowers and partners in order to optimize pricing and structuring and mitigate risk.  We feel the current and future market environment provides a wide range of opportunities to generate compelling investments with strong risk-return profiles for our stockholders.

Investment Objectives

Our primary investment objectives are:

·

to realize capital appreciation in the value of our investments over the long term; and

·

to pay attractive and stable cash distributions to stockholders.

Market Opportunities

We believe that the near and intermediate-term market for investment in multifamily communities is compelling from a risk-return perspective. Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing to live in a variety of rental housing. The Company plans to provide rental housing for these multi-generational groups as they age through their housing needs. With home ownership is at its lowest rate since 1967 combined with the demographic and economic factors that favor renting, we believe that a multifamily investment policy targeted to provide rental housing options is appropriately timed for this market.  We believe that our investment strategy, combined with the experience and expertise of our Manager’s management team, will provide opportunities to invest in assets with attractive risk-adjusted returns.

Our Manager

RM Adviser, LLC, our Manager, manages our day-to-day operations.  Our Manager is a wholly-owned subsidiary of Realty Mogul, Co.  A team of real estate and debt finance professionals, acting through our Manager, will make all the decisions regarding the selection, negotiation, financing and disposition of our investments, subject to the limitations in a  management agreement by and between us and our Manager, or the management agreement. A majority of the investment committee of our Manager will approve each of our investments.  Jilliene Helman, our Manager’s Chief Executive Officer, and Megan Goodfellow,  our Manager’s Chief Credit Officer, will be our Manager’s initial investment committee. Our Manager will also provide asset management, marketing, investor relations and other administrative services on our behalf with the goal of maximizing our operating cash flow and preserving our invested capital.  Realty Mogul, Co. is able to exercise significant control over our business.

RM Technologies, LLC

RM Technologies, LLC is the operator of the Realty Mogul Platform.  RM Technologies, LLC is a wholly-owned subsidiary of Realty Mogul, Co.  We have engaged RM Technologies, LLC to provide investor communications and technology functions to us.

Jilliene Helman is the Chief Executive Officer of Realty Mogul, Co. Ms. Helman is responsible for overseeing the day-to-day operations of Realty Mogul, Co. and its affiliates, including RM Technologies, LLC.

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Our Structure

The chart below shows the relationship among various Realty Mogul, Co. affiliates and the Company as of the date of this offering circular.

Picture 6

Management Compensation

Our Manager and its affiliates will receive fees and expense reimbursements for services relating to this offering and the investment and management of our assets.  Our Manager currently provides offering, investment and management services to MogulREIT I, LLC. In addition, our Manager may also provide offering, investment and management services to other entities and may provide investment advice to persons or entities in the future through the investment calculator. See “Conflicts of Interest — Investment Calculator.” Some of the fees will be paid by the Company and some by unrelated third parties.  The items of compensation are summarized in the following table.  The Company will not pay our Manager or its affiliates any selling commissions or dealer manager fees in connection with the offer and sale of shares of our common stock.

No portion of the fees detailed below will be allocated to any individual in his or her capacity as an executive officer of our Manager.

 

 

 

 

 

Form of Compensation and Recipient

    

Determination of Amount

    

Estimated Amount

 

 

 

 

 

Organization and Offering Stage

 

 

 

 

 

Organization and Offering Expenses — Manager

 

Our Manager has paid and may continue to pay organization and offering expenses on our behalf. We will reimburse our Manager for any third-party costs and future third-party organization and offering costs it may incur on our behalf, depending on the offering proceeds we raise. See “Estimated Use of Proceeds” for more details. We expect organization and offering expenses to be no more than $1,500,000.

 

$300,000 - $1,500,000

 

 

 

 

 

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Form of Compensation and Recipient

    

Determination of Amount

    

Estimated Amount

Broker Sales Commission — NCPS or Mogul Securities and Realty Mogul Affiliated Employees

 

Realty Mogul, Co. will provide funding to our Sponsor to pay a sales commission of up to 1.20% to Mogul Securities or NCPS for their services in the sale of shares of our common stock. A portion of that sales commission will be paid to employees of our affiliates, who are serving as registered representatives of Mogul Securities or NCPS.

 

 

Actual amounts are dependent upon the offering proceeds we raise. The broker sales commission, assuming the maximum amount of this offering is raised and up to a 1.20% commission is paid on each executed sale, will be $600,000.

 

These amounts will be paid by our Sponsor and will not be charged to either the Company or its investors.

 

 

 

 

 

Acquisition Stage

 

 

 

 

 

Acquisition Fee — Manager or an affiliate of Manager

 

For each acquisition, we will pay our Manager or affiliate of our Manager up to 3% of the contract purchase price for the asset.  

 

Actual amounts are dependent upon the contract purchase price of each asset. We cannot determine these amounts at the present time.

 

 

 

 

 

Operational Stage

 

 

 

 

 

Asset Management Fee — Manager

 

Monthly asset management fee equal to an annualized rate of 1.25% payable in arrears, which , through September 30, 2018, will be based on our net offering proceeds at the end of each month, and thereafter will be based on the average investment value of the assets. For purposes of this fee, “average investment value” means, for any period, the average of the aggregate book value of all of our assets, before reserves for depreciation, amortization, bad debts, or other similar non-cash reserves, or, if the Board has determined an estimated NAV, then with respect to any asset included in the calculation of such estimated NAV, the appraised value of such asset.

 

Actual amounts are dependent upon the offering proceeds we raise and the results of our operations. We cannot determine these amounts at the present time.

 

 

 

 

 

Disposition Fee — Manager or an affiliate of Manager

 

In connection with the sale of properties, we will pay our Manager, or one of its affiliates, 2% of the contract sales price of each property sold.

 

Actual amounts are dependent upon the price at which we sell or otherwise liquidate our investments. We cannot determine these amounts at the present time.

 

 

 

 

 

Other Operating Expenses — Manager

 

We will reimburse our Manager for out-of-pocket expenses incurred on our behalf, including license fees, auditing fees, fees associated with SEC reporting requirements, acquisition expenses, interest expenses, property management fees, insurance costs, tax return preparation fees, marketing costs, taxes and filing fees, administration fees, fees for the services of independent directors, and third-party costs associated with the aforementioned expenses. These expenses do not include our Manager’s or Realty Mogul, Co.’s overhead, employee costs, utilities or technology costs.

 

The aforementioned expense reimbursements that we will pay to our Manager may be originally incurred by Realty Mogul, Co. in the performance of services by its employees under the shared services agreement between our Manager and Realty Mogul, Co. See “Management—Shared Services Agreement.”

 

Actual amounts are dependent upon our operations. We cannot determine these amounts at the present time.

 

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Our Manager’s Engagement of a Subadvisor

Our Manager also intends to engage American Assets Capital Advisers, LLC, a third-party subadvisor, to manage our cash balance.  If engaged, American Assets Capital Advisers, LLC would (i) incur leverage on this cash balance and (ii) invest the cash and the debt incurred thereon in common or preferred shares in publicly-traded REITs or other short-term investments.

Transactional Expenses

In the event we complete a transaction with a third party partner, we expect that there will be standard fees charged to us by these third party partners that will not be paid to Realty Mogul, Co. or its affilates.

 

Summary of Risk Factors

Investing in shares of our common stock is speculative and involves substantial risks.  You should purchase these securities only if you can afford a complete loss of your investment.  You should carefully review the “Risk Factors” section of this offering circular, beginning on page 24, which contains a detailed discussion of the material risks that you should consider before you invest in shares of our common stock.  These risks include the following:

·

We depend on our Manager to select our investments and conduct our operations.  We will pay fees and expenses to our Manager and its affiliates that were determined as between related parties, and therefore we do not have the benefit of arm’s length negotiations of the type normally conducted between unrelated parties.  These fees increase your risk of loss.  In addition, we can offer no assurance that our Manager will remain our investment manager.

·

Many of the investments in which we will invest will be acquired by our affiliates, Realty Mogul, Co. or Realty Mogul Commercial Capital, Co., each of which, in their acquisition capacity, may be referred to as an RM Originator in this offering circular.  Certain equity investments will be sourced by Mogul Securities, LLC, or Mogul Securities.  We may purchase investments directly from an RM Originator.  The RM Originators may also receive profit participation fees and/or other fees with respect to investments in which we invest.  Likewise, Mogul Securities may receive other fees with respect to investments in which we invest.  While these fees will not be paid by the Company or its investors, they may include our Manager to make investments on our behalf that are riskier than we might otherwise make and thereby indirectly have the effect of lowering the return our investors would receive in the absence of these fees.

·

We have no operating history, and as of the date this offering circular is qualified, we have a limited amount in cash.  There is no assurance that we will achieve our investment objectives.

·

This is a “blind pool” offering because, as of the date of this offering circular, we are not committed to acquiring any investments with the net proceeds of this offering.  Depending on our progress in funding investments at the time of your purchase, you may not be able to evaluate the economic merit of any of our investments.  You will have to rely entirely on the ability of our Manager to select suitable and successful investment opportunities.

·

The offering price of our shares was not established on an independent basis; after we commence operations, the actual value of your investment may be substantially less than what you pay.

·

Our Manager’s executive officers, and key real estate and debt finance professionals are also officers, directors, managers and/or key professionals of Realty Mogul, Co. and its affiliates.  As a result, they will face conflicts of interest, including time constraints, allocation of investment opportunities and other conflicts created by our Manager’s compensation arrangements with us and other affiliates of Realty Mogul, Co.

·

Our Sponsor and Manager has sponsored and advises MogulREIT I, LLC, a real estate program substantially similar to us, and we expect that they will sponsor and advise additional companies that may compete with us, and neither our Sponsor nor our Manager has an exclusive management arrangement with us.

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·

By purchasing shares in this offering, you are bound by the arbitration provisions contained in our subscription agreement which limits your ability to bring class action lawsuits or seek remedy on a class basis.

·

This offering is being made pursuant to recently adopted rules and regulations under Regulation A of the Securities Act.  The legal and compliance requirements of these rules and regulations, including ongoing reporting requirements related thereto, are relatively untested.

·

If we raise substantially less than the maximum offering amount, we may not be able to acquire a diverse portfolio of investments and the value of your shares may vary more widely with the performance of specific assets.  We may commence operations with the first third-party purchase of shares of our common stock.

·

Because our Sponsor has only invested $100,000 in the Company, our Sponsor does not have significant exposure to the loss in the value of our shares, which may increase your risk of loss.

·

If we internalize our management functions, your interest in us could be diluted and we could incur other significant costs associated with being self-managed.

·

Our Manager may change our targeted investments and asset allocation without stockholder consent, which could result in investments that are different from, and possibly riskier than, those described in this offering circular.

·

Although our distribution policy is not to use the proceeds of this offering to make distributions, our charter permits us to pay distributions from any source, including offering proceeds, borrowings or sales of assets.  We have not established a limit on the amount of proceeds we may use to fund distributions.  If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return may be reduced.  In any event, we intend to make annual distributions as required to comply with REIT distribution requirements and avoid U.S. federal income and excise taxes on retained income.  We have not established a minimum distribution payment level. The amount of our distributions may fluctuate and may be adversely affected by a number of factors, including the risk factors in this offering circular.

·

Our Manager’s internal accountants will calculate our NAV on a quarterly basis using valuation methodologies that involve subjective judgments and estimates.  As a result, our NAV may not accurately reflect the actual prices at which our commercial real estate assets and investments, including related liabilities, could be liquidated on any given day.

·

While we believe our NAV calculation methodologies are consistent with standard industry principles, there is no established practice among non-traded REITs for calculating NAV in order to establish a per share purchase and repurchase price. As a result, other non-traded REITs may use different methodologies or assumptions to determine NAV.  In the event that we are required to adjust our calculation methodologies or assumptions, the value of your investments, and consequently your returns, may be adversely affected.

·

Our charter does not require the Board to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require the Board to list our shares for trading by a specified date.  No public market currently exists for our shares of common stock.  Unless our shares of common stock are listed on a national securities exchange, you may not have the opportunity to sell your shares.  If you are able to sell your shares, you may have to sell them at a substantial loss. We do not currently intend to list our shares of common stock on a national exchange, and no market for our shares of common stock may develop.

·

We intend to qualify as a REIT for U.S. federal income tax purposes.  Our compliance with REIT requirements may subject your investment to certain risks and may force us to forgo potentially attractive opportunities.

·

If we fail to qualify as a REIT for U.S. federal income tax purposes and no relief provisions apply, we would be subject to entity-level federal income tax and, as a result, our cash available for distribution to our stockholders and the value of our shares could materially decrease.

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·

We will attempt to manage our portfolio so that we are not required to register as an investment company, such as a mutual fund.  This may result in us not making potentially profitable investments, or in us disposing of investments at times that we otherwise would prefer to hold those investments.

·

Our intended investments in commercial real estate loans and other select real estate-related assets will be subject to risks relating to the volatility in the value of the underlying real estate, default on underlying income streams, fluctuations in interest rates, and other risks associated with debt and real estate investments generally.  These investments are only suitable for sophisticated investors with a high-risk investment profile.  Our investment strategy involves leverage.  These investments may not be suitable for investors with lower risk tolerances.

·

Our Manager, its principals and/or its other affiliates may continue to sponsor and offer other real estate investment opportunities, including additional blind pool equity offerings similar to this offering, through the Realty Mogul Platform, and may make investments in real estate assets for their own respective accounts, whether or not competitive with our business.

·

Investments that do not meet certain minimum thresholds may not be made available to us.

·

The terms of the management agreement (including our Manager’s rights and obligations and the compensation payable to our Manager and its affiliates) were not negotiated at arm’s length.

·

We pay our Manager substantial management fees regardless of performance of our portfolio. Our Manager’s entitlement to substantial nonperformance-based compensation might reduce its incentive to devote its time and effort to seeking investments that provide attractive risk-adjusted returns for our portfolio, which could hurt both our ability to make distributions to our stockholders and the value of our common stock.

·

At some future date, we may seek stockholder approval to internalize our management by acquiring assets and employing the key real estate finance professionals performing services to us on behalf of our Manager for consideration that would be negotiated at that time.  The payment of such consideration could result in dilution to your interest in us and could reduce the net income per share and funds from operations per share attributable to your investment.  Additionally, in an internalization transaction, our Manager’s real estate finance professionals that become our employees may receive more compensation than they previously received from our Manager or its affiliates.  These possibilities may provide incentives to these individuals to pursue an internalization transaction, even if an alternative strategy might otherwise be in our stockholder’s best interests.

·

The Board may, without stockholder consent unless otherwise required by law, determine that we should engage in a roll-up or other similar transaction where we acquire other entities, including entities affiliated with the Board. Similarly, the Board may, without stockholder consent unless otherwise required by law, determine that we should list our shares on a national securities exchange.

·

Affiliates of our Sponsor and our Manager are engaged in selling investment opportunities to individuals and institutions outside of the Company, some of which may compete with the Company. There may be a conflict of interest in this arrangement because, among other things, the economic return to the entities or their respective personnel may be greater in selling opportunities to these competitive interests rather than to the Company.

·

The compensation arrangements for our Manager, its personnel and our affiliates may provide them an incentive to increase leverage in the Company or its investments, which may increase risk and volatility in the Company’s performance.

·

We rely on the exemption for insignificant participation by benefit plan investors under ERISA. If at any time 25% or more of the value of any class of equity interest is held by benefit plan investors, we must repurchase certain benefits plan investors’ shares of common stock or we will lose the exemption.

Distributions

We expect that the Board will authorize, and we will declare and pay, distributions quarterly in arrears; however, the Board may authorize other periodic distributions as circumstances dictate.

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Any distributions we make will be at the discretion of the Board, and will be based on, among other factors, our present and reasonably projected future cash flow.  Distributions will be paid to stockholders as of the record dates selected by the Board.  In addition, the Board’s discretion as to the payment of distributions will be limited by the REIT distribution requirements, which generally require that we make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain.  Moreover, even if we make the required minimum distributions under the REIT rules, we are subject to federal income and excise taxes on our undistributed taxable income and gains.  As a result, the Board also may authorize such additional distributions, beyond the minimum REIT distribution, to avoid such taxes.  See “Description of Our Common Stock — Distributions” and “U.S. Federal Income Tax Considerations.”

Any cash distributions that we make will directly impact our NAV, by reducing the amount of our assets.  Our goal is to generate returns to our stockholders in the form of income through regular distributions and capital growth through increases in our NAV per share.  Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative), less any applicable share repurchase fees, will produce your total return.

Our distributions, including distributions that are reinvested pursuant to our distribution reinvestment plan, will constitute a return of capital to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes.  To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares. Distributions reinvested pursuant to our distribution reinvestment plan will be considered a new purchase of shares as of the distribution date.

Borrowing Policy

We may use leverage of up to 75% of the fair market value or expected fair market value (for a value-add acquisition) of our assets. This is an overall target. Our borrowing on any individual investment may exceed 70% of its fair market value or expected fair market value as long as total portfolio leverage does not exceed 75%.  See “Investment Objectives and Strategy” for more details regarding our leverage policy.

Valuation Policies

At the end of each fiscal quarter, beginning October 1, 2018, our Manager’s  internal accountants will calculate our NAV per share. The NAV per share calculation will reflect the total value of our assets minus the total value of our liabilities, divided by the number of shares of our common stock outstanding as of the close of the last business day of the preceding fiscal quarter. Our commercial real estate assets and investments will constitute a significant component of our total assets. We will take estimated values of each of our commercial real estate assets and investments, including related liabilities, based upon performance and, if the Board deems it necessary, individual appraisal reports of the underlying real estate assets provided periodically by an independent valuation expert.

As with any methodology used to estimate value, the methodology that will be employed by our Manager’s  internal accountants 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 per share 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.

In addition, for any given quarter, our published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events on our portfolio is not immediately quantifiable. We will use commercially reasonable efforts to monitor whether a material event occurs in between quarterly updates of NAV that we reasonably believe would cause our NAV per share to change by 5% or more from the last disclosed NAV.  While this offering is ongoing, if we reasonably believe that such a material event has occurred, we will calculate and disclose the updated NAV per share and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV per share information provided on our website.

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Quarterly NAV Share Price Adjustments

The Board set our initial offering price at $10.00 per share, which will be the purchase price of shares of our common stock through September 30, 2018.  Thereafter, the per share purchase price will be adjusted for each fiscal quarter, and will equal the NAV per share calculated as of the close of business the last day of the preceding fiscal quarter. For example, during the fiscal quarter October 1 through December 31, 2018, the per share purchase price for shares of our common stock will equal the NAV per share calculated as of the close of business on September 30, 2018, prior to giving effect to any share purchases or repurchases to be effected on September 30, 2018.

While this offering is ongoing, beginning on October 1, 2018, we will file with the SEC on a quarterly basis an offering circular supplement disclosing the quarterly determination of our NAV per share that will be applicable for such fiscal quarter, which we refer to as the pricing supplement.  Additionally, we will identify the current per share purchase price on the Realty Mogul Platform.  The Realty Mogul Platform will also contain this offering circular, including any supplements and amendments.  As long as this offering continues, we will disclose, on a quarterly basis in an offering circular supplement filed with the SEC, the principal valuation components of our NAV.  In addition, we will use commercially reasonable efforts to monitor whether a material event occurs in between quarterly updates of NAV that we reasonably believe would cause our NAV per share to change by 5% or more from the last disclosed NAV.  While this offering is ongoing, if we reasonably believe that such a material event has occurred, we will calculate and disclose the updated NAV per share and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV per share information provided on our website.  We will also use that updated NAV per share as the offering price for new shares for the remainder of that fiscal quarter.  See “Description of Our Common Stock — Quarterly NAV Share Price Adjustments” for more details.

Quarterly Share Repurchase Program

While you should view your investment as a long-term investment with limited liquidity, we have adopted a share repurchase program, whereby stockholders may request that we repurchase up to 25% of their shares quarterly while this offering is ongoing.  We also may make repurchases upon the death of a stockholder (referred to as “exception repurchases”; all other repurchases are referred to as “ordinary repurchases”). For ordinary repurchases, the Effective Repurchase Rate will depend upon how long a stockholder requesting redemption has held his or her shares. For purposes of determining the time period a stockholder has held each share, the time period begins as of the date the stockholder acquired the share. Exception repurchases are not subject to any discount associated with the amount of time the shares were held and will be repurchased at 100% of the applicable Repurchase Base Price per share. The Repurchase Base Price at which we will repurchase shares is as follows:

 

 

 

 

 

 

Repurchase

 

Period

    

Base Price Per Share

 

Through  3 years from date of initial qualification

 

Lower of NAV or $9.50

 

Starting after  3 years and a day from the date of initial qualification

 

Most recent NAV

 

 

 

 

 

 

 

 

    

Effective

 

Share Repurchase Anniversary (Year)

 

Repurchase Rate (1)

 

Less than 1 year

 

(Lock-up) 0

%

1 year until 2 years

 

98

%

2 years until 3 years

 

99

%

3 or more years

 

100

%

Death (Exception Repurchases)

 

100

%


(1)

As a percentage of the Repurchase Base Price per share. The repurchase price will be rounded down to the nearest $0.01.

In the event that a stockholder requests repurchase of 100% of the shares owned by the stockholder on the date of presentment, we will waive the one-year holding period requirement for any shares presented that were acquired through our distribution reinvestment plan.  See “Description of Our Common Stock—Quarterly Share Repurchase Program” for more information.

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Liquidity Event

While we expect to seek a liquidity transaction in the future, there can be no assurance that a suitable transaction will be available or that market conditions for a transaction will be favorable at any time.  The Board has the discretion to consider and execute a liquidity transaction at any time if it determines such event to be in our best interests.  A liquidity transaction could include the sale of the Company, the sale of all or substantially all of our assets, a merger or similar transaction, the listing of our shares of common stock for trading on a national securities exchange or an alternative strategy that would result in a significant increase in the opportunities for stockholders to dispose of their shares. Stockholder approval would be required for the sale of all or substantially all of our assets, the sale of the Company or certain mergers of the Company. We do not have a stated term, as we believe setting a finite date for a possible, but uncertain future liquidity transaction may result in actions that are not necessarily in the best interest or within the expectations of our stockholders.

Operating Partnership

We are structured as an “umbrella partnership real estate investment trust,” or UPREIT. As such, we expect to own substantially all of our assets through MogulREIT II Operating Partnership, LP, or MogulREIT II OP, our operating partnership. We may, however, own assets directly through subsidiaries of MogulREIT II OP or through other entities. We are the sole general partner of MogulREIT II OP, and MR II OP, LLC, our wholly-owned subsidiary, is the initial limited partner of MogulREIT II OP.  MogulREIT II OP  is a disregarded entity for U.S. federal income tax purposes (i.e., it is not recognized for U.S. federal income tax purposes as an entity separate from us).

Voting Rights

Subject to our charter restrictions on transfer of our stock and except as may otherwise be specified in our charter, each holder of common stock is entitled at each meeting of stockholders to one vote per share of our common stock owned by such stockholder on all matters submitted to a vote of stockholders, including the election of directors. There is no cumulative voting in the election of directors, which means that the holders of a majority of shares of our outstanding common stock can elect all of the directors then standing for election and the holders of the remaining shares of common stock will not be able to elect any directors.

Other Governance Matters

Other than the limited stockholder voting rights described above, our charter vests most other decisions relating to our assets and to the business of the Company, including decisions relating to acquisitions and dispositions, the engagement of asset managers, the issuance of securities in the Company including additional shares of our common stock, mergers, roll-up transactions, listing on a national securities exchange, and other decisions relating to our business, in the Board.  See “Management” for more information about the rights and responsibilities of the Board.

Investment Company Act Considerations

We intend to conduct our operations and the operations of our operating partnership, and any other subsidiaries, so that neither we nor any subsidiaries meet the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act. A company is an “investment company” for purposes of the Investment Company Act if, absent an available exception or exemption, it (i) is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or (ii) owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

We intend to acquire and manage a diversified portfolio of commercial real estate investments.  We anticipate that our assets generally will be held in wholly and majority-owned subsidiaries of the company, each formed to hold a particular asset. We intend to monitor our operations and our assets on an ongoing basis in order to ensure that neither we, nor any of our subsidiaries, meet the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act.

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RISK FACTORS

An investment in shares of our common stock involves substantial risks.  You should carefully consider the following risk factors in addition to the other information contained in this offering circular before purchasing shares of our common stock.  You should purchase shares of our common stock only if you can afford a complete loss of your investment.  The risks and uncertainties discussed below are not the only ones we face, but do represent those risks and uncertainties that we believe are most significant to our business, operating results, prospects and financial condition.  Some statements in this offering circular, including statements in the following risk factors, constitute forward-looking statements.  See “Cautionary Note Regarding Forward-Looking Information.”

Risks Related to an Investment in MogulREIT II, Inc.

We have no operating history.

We are a newly formed company and have no operating history.  As of the date of this offering circular, we have not made any investments, and prior to our initial closing, have approximately $_____ in cash.  Our lack of an operating history significantly increases the risk and uncertainty you face in making an investment in our shares.

Because no public trading market for shares of our common stock currently exists, it will be difficult for you to sell your shares and, if you are able to sell your shares, you will likely sell them at a substantial discount to the public offering price.

Our charter does not require the Board to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require the Board to list our shares for trading on a national securities exchange by a specified date.  There is no public market for our shares.  While we and our affiliates may explore developing a secondary trading market for our common stock, it is possible that we will not be able to, or will decide not to, develop such a market.  Our charter prohibits the ownership of more than 9.8% in value of our outstanding stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock unless exempted prospectively or retroactively by the Board, which may inhibit large investors from purchasing your shares. Following the conclusion of this offering, in its sole discretion, including to protect our operations and our remaining stockholders, to prevent an undue burden on our liquidity or to preserve our status as a REIT, the Board could amend, suspend or terminate our share repurchase program without notice. Further, the share repurchase program includes numerous restrictions that would limit your ability to sell your shares. We describe these restrictions in more detail under “Description of Our Common Stock — Quarterly Share Repurchase Program.”  Therefore, it will be difficult for you to sell your shares promptly or at all.  If you are able to sell your shares, you would likely have to sell them at a substantial discount to their public offering price.  It is also likely that your shares would not be accepted as the primary collateral for a loan.  Because of the illiquid nature of our common stock, you should purchase shares of our common stock only as a long-term investment and be prepared to hold them for an indefinite period of time.

If we are unable to find suitable investments, or are delayed in finding suitable investments we may not be able to achieve our investment objectives or pay distributions in a timely manner, or at all.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our Manager in the acquisition of our investments and the ability of our Manager to identify loan origination opportunities for us. Additionally, our Manager has engaged a third-party subadvisor to manage our cash balance. Except for investments that may be described in supplements to this offering circular prior to the date you subscribe for shares of our common stock, you will have no opportunity to evaluate the economic merits or the terms of our investments before making a decision to invest in the Company. You must rely entirely on the management abilities of our Manager, the third-party subadvisor retained by our Manager and the loan servicers our Manager may select.

To the extent that our Manager’s real estate finance professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution.  Further, because we are raising a “blind pool” whereby we are not committed to investing in any particular assets, it may be difficult for us to invest the net offering proceeds promptly and on attractive terms.

We cannot assure you that our Manager will be successful in obtaining suitable investments on financially attractive terms or that, if our Manager makes investments on our behalf, our objectives will be achieved. If we would

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continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions, and we may not be able to meet our investment objectives.

We may allocate the net proceeds from this offering to investments with which you may not agree.

We will have significant discretion in the types of multifamily investments we will make with the net proceeds of this offering.  You will be unable to evaluate the manner in which the net proceeds of this offering will be invested or the economic merit of our expected investments and, as a result, we may use the net proceeds from this offering to invest in investments with which you may not agree. The failure of our management to apply these proceeds effectively or find investments that meet our investment criteria in sufficient time or on acceptable terms could result in unfavorable returns and could cause the value of our common stock to decline.

We may be unable to pay or maintain cash distributions or increase distributions over time.

There are many factors that can affect the availability and timing of cash distributions to our stockholders. Distributions are based primarily on anticipated cash flow from operations over time. The amount of cash available for distributions is affected by many factors, such as the performance of our Manager in selecting investments for us to make, selecting tenants for our properties and securing financing arrangements, our ability to buy properties as offering proceeds become available, the amount of rental income from our properties, and our operating expense levels, as well as many other variables. We may not always be in a position to pay distributions to you and any distributions we do make may not increase over time. In addition, our actual results may differ significantly from the assumptions used by the  Board in establishing the distribution rate to our stockholders. There also is a risk that we may not have sufficient cash flow from operations to fund distributions required to qualify as a REIT or maintain our REIT status.

We may pay some of our distributions from sources other than cash flow from operations, including borrowings, proceeds from asset sales or the sale of our securities in this or future offerings, which may reduce the amount of capital we ultimately invest in real estate and may negatively impact the value of your investment in our common stock.

To the extent that cash flow from operations is insufficient to fully cover our distributions to our stockholders, we may pay some of our distributions from sources other than cash flow from operations. Such sources may include borrowings, proceeds from asset sales or the sale of our securities in this or future offerings. We have no limits on the amounts we may pay from sources other than cash flow from operations. The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent investors to experience dilution. This may negatively impact the value of your investment in our common stock.

Because we may pay distributions from sources other than our cash flow from operations, distributions at any point in time may not reflect the current performance of our properties or our current operating cash flows.

Our organizational documents permit us to make distributions from any source, including the sources described in the risk factor above. Because the amount we pay out in distributions may exceed our earnings and our cash flow from operations, distributions may not reflect the current performance of our properties or our current operating cash flows. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of your investment and could reduce your basis in our common stock. A reduction in a stockholder’s basis in our common stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which, in turn, could result in greater taxable income to such stockholder.

Future disruptions in the financial markets or deteriorating economic conditions could adversely impact the commercial real estate market as well as the market for debt-related investments generally, which could hinder our ability to implement our business strategy and generate returns to you.

We intend to acquire a portfolio of real estate and real estate-related investments, which may be significantly impacted by economic conditions.  See “— Risks Related to Our Shares and Investments in Real Estate.”  The value of our real estate assets or the collateral securing or underlying any debt investment we make could decrease below our investment or outstanding principal amount of such investment.  In addition, revenues on the properties and other assets underlying any investments we may make could decrease, making it more difficult for tenants or operators to meet their payment

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obligations to us.  Each of these factors would increase the likelihood of default, which would likely have a negative impact on the value of our investment.

More generally, the risks arising from the financial market and economic conditions are applicable to all of the investments we may make.  The risks apply to any equity investments we may make as well as any investments held by entities in which we invest. They also apply to the debt and equity securities of companies that have investment objectives similar to ours.

Future disruptions in the financial markets or deteriorating economic conditions may also impact the market for our investments and the volatility of our investments.  The returns available to investors in our targeted investments are determined, in part, by: (i) the supply and demand for such investments and (ii) the existence of a market for such investments, which includes the ability to sell or finance such investments.  During periods of volatility, the number of investors participating in the market may change at an accelerated pace.  If either demand or liquidity increases, the cost of our targeted investments may increase. As a result, we may have fewer funds available to make distributions to investors.

All of the factors described above could adversely impact our ability to implement our business strategy and make distributions to our investors and could decrease the value of an investment in us.

This is a blind pool offering, and we are not committed to acquiring any particular investments with the net proceeds of this offering.  You will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.

This is a blind pool offering whereby we have not yet acquired and are not committed to acquiring any particular assets or investments with the net proceeds of this offering.  Apart from any investments that may be described in supplements to this offering circular, we are not able to provide you with any information to assist you in evaluating the merits of any specific investments that we may make.  We will seek to invest substantially all of the offering proceeds available for investment, after the payment of fees and expenses, in multifamily properties located in target markets throughout the United States.  Except as noted above, because you will be unable to evaluate the economic merit of assets before we invest in them, you will have to rely entirely on the ability of our Manager to select suitable and successful investment opportunities. These factors increase the risk that your investment may not generate returns comparable to our competitors.

You may be more likely to sustain a loss on your investment because our Sponsor does not have as strong an economic incentive to avoid losses as do sponsors that have made significant equity investments in their companies.

Our Sponsor has invested $100,000 in us through the purchase of  10,000  shares of our common stock at $10.00 per share.  Therefore, our Sponsor has little exposure to loss in the value of our shares.  Without this exposure, our investors may be at a greater risk of loss because our Sponsor does not have as much to lose from a decrease in the value of our shares as do those sponsors who make more significant equity investments in their companies. In addition, we will pay fees to our Manager and other affiliates of our Sponsor that are not dependent on the quality of services provided. Moreover, we may only terminate the management agreement for “cause.” Unsatisfactory financial performance of the Company does not constitute “cause” under the management agreement.

Because we are limited in the amount of funds we can raise, we will be limited in the number and type of investments we make and the value of your investment in us will fluctuate with the performance of the specific assets we acquire.

This offering is being made on a “best efforts” basis and we may begin to invest net proceeds from this offering immediately after the commencement of this offering. Further, under Regulation A, we are only allowed to raise up to $50 million in any 12‑month period pursuant to this offering (although we may raise capital in other ways). We expect the size of the commercial real estate loans and equity investments that we will make will average about $1.0 million to $5.0 million per asset.  As a result, the amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a diversified portfolio of investments, even if we are successful in raising the maximum offering amount.  If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments that we make.  In that case, the likelihood that any single asset’s performance would adversely affect our profitability will increase.  Your investment in our common stock will be subject to greater risk to the extent that we lack a diversified portfolio of investments.  Further, we will have certain fixed operating expenses, including certain filings with the SEC, regardless of whether we are able to raise substantial funds in this

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offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

Our investments may be concentrated and will be subject to risk of default.

While we intend to diversify our portfolio of investments in the manner described in this offering circular, we are not required to observe specific diversification criteria.  We have not established and do not plan to establish any investment criteria to limit our exposure to these risks for future investments.  To the extent that our portfolio is concentrated in any one geographic region, downturns relating generally to such region may result in tenant defaults or defaults on our preferred equity investments within a short time period, which may reduce our net income and the value of our shares and accordingly may reduce our ability to pay distributions to you.

Any adverse changes in Realty Mogul, Co.’s financial health or our relationship with Realty Mogul, Co. or its affiliates could hinder our operating performance and the return on your investment.

At this early stage in its development, Realty Mogul, Co. has funded substantially all of its operations with proceeds from private financings.  To meet its financing requirements in the future, it may raise funds through equity offerings, debt financings or strategic alliances.  Raising additional funds may involve agreements or covenants that restrict Realty Mogul, Co.’s business activities and options.  Additional funding may not be available to it on favorable terms, or at all.  If Realty Mogul, Co. is unable to obtain additional funds, it may be forced to reduce or terminate its operations.  Any inability for Realty Mogul, Co. to fund its operations could have a substantial and deleterious effect on our business and operations.

We have engaged our Manager to manage our operations and our portfolio of commercial real estate investments, including loans and equity in commercial real estate ventures and other real estate-related assets. Our Manager’s employees are also personnel of Realty Mogul, Co. and perform services through a shared services agreement between our Manager and Realty Mogul, Co.  Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our Manager and its affiliates as well as Realty Mogul, Co.’s real estate and debt finance professionals in the identification and acquisition of investments, the management of our assets, and operation of our day-to-day activities. Any adverse changes in Realty Mogul, Co.’s financial condition or our relationship with Realty Mogul, Co. could hinder our Manager’s ability to successfully manage our operations and our portfolio of investments.

We are dependent on our Manager and Realty, Mogul, Co.’s key personnel for our success.

Our future depends, in part, on the continued contributions of our Manager, its executive officers, members of its investment committee, and Realty Mogul, Co.’s key personnel, each of whom would be difficult to replace. In particular, Jilliene Helman of Realty Mogul, Co. is critical to the management of our business and operations and the development of our strategic direction. Ms. Helman, our Manager’s Chief Executive Officer, and Megan Goodfellow,  our Manager’s Chief Credit Officer, will be our Manager’s initial investment committee. The loss of the services of Ms. Helman or other executive officers or key personnel and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

In addition, we can offer no assurance that our Manager will remain our investment manager.  If our Manager does not remain our investment manager, and no suitable replacement is found to manage us, we may not be able to execute our business plan.  Moreover, our Manager is not obligated to dedicate any of Realty Mogul, Co.’s key personnel exclusively to us nor is it obligated to dedicate any specific portion of its time to our business, and none of Realty Mogul, Co.’s key personnel are contractually dedicated to us.

Our ability to implement our investment strategy is dependent, in part, upon our ability to successfully conduct this offering through the Realty Mogul Platform, which makes an investment in us more speculative.

We will conduct this offering through the Realty Mogul Platform, which is operated by RM Technologies, LLC, an affiliate of Realty Mogul, Co.  Realty Mogul, Co. has sponsored other real estate investment opportunities under other formats prior to this offering, including MogulREIT I, LLC. The success of this offering, and our ability to implement our business strategy, is dependent upon our ability to sell shares of our common stock to investors through the Realty Mogul Platform.  If we are not successful in selling shares of our common stock through the Realty Mogul Platform, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment

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strategy.  Additionally, given the different regulatory regime and advertising restrictions placed on this type of offering from many of the other offerings accomplished on the Realty Mogul Platform in the past, it is crucial to the success of this offering that this offering be properly segregated from the other offerings on the Realty Mogul Platform.  If we are unsuccessful in implementing this investment strategy, you could lose all or a part of your investment.

If we do not successfully implement a liquidity transaction, you may have to hold your investment for an indefinite period.

Although we expect to complete a transaction providing liquidity to stockholders  sometime in the future, our charter does not require the Board to pursue such a liquidity transaction.  Market conditions and other factors could cause us to delay the listing of our shares on a national securities exchange, delay developing a secondary trading market, or delay the commencement of a liquidation or other type of liquidity transaction, such as a merger or sale of assets.  If our Manager does determine to pursue a liquidity transaction, we would be under no obligation to conclude the process within a set time. If we adopt a plan of liquidation, the timing of the sale of assets will depend on real estate and financial markets, economic conditions in areas in which properties are located, and federal income tax effects on stockholders, that may prevail in the future. We cannot guarantee that we will be able to liquidate all assets.  After we adopt a plan of liquidation, we would likely remain in existence until all our investments are liquidated. If we do not pursue a liquidity transaction, or delay such a transaction due to market conditions, your shares may continue to be illiquid and you may, for an indefinite period of time, be unable to convert your investment to cash easily and could suffer losses on your investment.

We may change our targeted investments without stockholder consent.

The Board may change our targeted investments and asset allocation at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this offering circular.  A change in our targeted investments may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to you.  Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this offering circular.

We have minimal operating capital, no significant assets and no revenue from operations.

We have minimal operating capital and for the foreseeable future will be dependent upon our ability to finance our operations from the sale of equity or other financing alternatives.  There can be no assurance that we will be able to successfully raise operating capital.  The failure to successfully raise operating capital, and the failure to attract qualified real estate companies and sufficient investor purchase commitments, could result in our bankruptcy or other event which would have a material adverse effect on us and the value of our shares.  We have no significant assets or financial resources, so such adverse event could put your investment dollars at significant risk.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The real estate investment  market is competitive. We expect competition to persist and potentially intensify in the future, which could harm our operating results.

Our principal competitors include major financial institutions, private equity funds, real estate investment trusts, insurance companies, private investment funds, hedge funds, as well as online platforms that compete with the Realty Mogul Platform. Competition could result in the failure of the Realty Mogul Platform to achieve or maintain more widespread market acceptance, which could harm our business.  In addition, in the future, we and the Realty Mogul Platform may experience new competition from more established internet companies possessing large, existing customer bases, substantial financial resources and established distribution channels.  If any of these companies or any major financial institution, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.

Many of our competitors listed above have significantly more financial and other resources than we do and may be able to devote greater resources to the development and support of their platforms and distribution channels. We may not be able to compete successfully with those competitors for investments.  In addition, the number of entities and the amount of funds competing for suitable investments may increase.  If we pay higher prices for investments, our returns will

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be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets.  If such events occur, you may experience a lower return on your investment.

The online real estate investing industry is driven by constant innovation. If we or the Realty Mogul Platform are unable to compete with such companies and meet the need for innovation, the demand for the Realty Mogul Platform could stagnate or substantially decline.

We rely on third-party banks and on third-party computer hardware and software. If we are unable to continue utilizing these services, our business and ability to service the corresponding project loans may be adversely affected.

We and the Realty Mogul Platform rely on third-party and depository institutions insured by the Federal Deposit Insurance Corporation to process our transactions, including payments of corresponding loans and distributions to our stockholders. Under the Automated Clearing House, or ACH, rules, if we experience a high rate of reversed transactions, known as “chargebacks,” we may be subject to sanctions and potentially disqualified from using the system to process payments. We also rely on computer hardware purchased and software licensed from third parties to operate the Realty Mogul Platform. This purchased or licensed hardware and software may be physically located off-site, as is often the case with “cloud services.” This purchased or licensed hardware and software may not continue to be available on commercially reasonable terms, or at all.  If the Realty Mogul Platform cannot continue to obtain such services elsewhere, or if it cannot transition to another processor quickly, our ability to process payments will suffer and your ability to receive distributions will be delayed or impaired.

Any significant disruption in service on the Realty Mogul Platform or in its computer or communications systems could reduce its attractiveness and result in a loss of users.

We will conduct this offering through the Realty Mogul Platform, which is operated by RM Technologies, LLC, an affiliate of Realty Mogul, Co.  The success of this offering depends on our ability to sell shares through the Realty Mogul Platform.  If a catastrophic event resulted in a Realty Mogul Platform outage and physical data loss, the Realty Mogul Platform’s ability to perform its obligations would be materially and adversely affected.  The satisfactory performance, reliability, and availability of RM Technologies, LLC’s technology and its underlying hosting services infrastructure are critical to RM Technologies, LLC’s operations, level of customer service, reputation and ability to attract new users and retain existing users.  RM Technologies, LLC’s hosting services infrastructure is provided by a third-party hosting provider, or the Hosting Provider.  RM Technologies, LLC also maintains a backup system at a separate location that is owned and operated by a third party.  There is no guarantee that access to the Realty Mogul Platform will be uninterrupted, error-free or secure.  RM Technologies, LLC’s operations depend on the Hosting Provider’s ability to protect its and RM Technologies, LLC’s systems in its facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events.  If RM Technologies, LLC’s arrangement with the Hosting Provider is terminated, or there is a lapse of service or damage to its facilities, the Realty Mogul Platform could experience interruptions in its service as well as delays and additional expense in arranging new facilities.  Any interruptions or delays in RM Technologies, LLC’s service, whether as a result of an error by the Hosting Provider or other third-party error, RM Technologies, LLC’s own error, natural disasters or security breaches, whether accidental or willful, could harm our ability to perform any services for corresponding project investments or maintain accurate accounts, and could harm RM Technologies, LLC’s relationships with its users and RM Technologies, LLC’s reputation.  Additionally, in the event of damage or interruption, RM Technologies, LLC’s insurance policies may not adequately compensate RM Technologies, LLC for any losses that we may incur.  RM Technologies, LLC’s disaster recovery plan has not been tested under actual disaster conditions, and it may not have sufficient capacity to recover all data and services in the event of an outage at a facility operated by the Hosting Provider.  Any of these factors could prevent us from processing or posting payments on the corresponding investments, damage RM Technologies, LLC’s, Realty Mogul, Co.’s and our brand and reputation, divert Realty Mogul, Co.’s employees’ attention, and cause users to abandon the Realty Mogul Platform.

Our Manager’s due diligence of potential investments may not reveal all of the liabilities associated with such investments and may not reveal other weaknesses in such investments, which could lead to investment losses.

Before making an investment, our Manager assesses the strengths and weaknesses of the originator or issuer of the asset as well as other factors and characteristics that are material to the performance of the investment.  In making the assessment and otherwise conducting customary due diligence, our Manager relies on resources available to it and, in some

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cases, an investigation by third parties.  There can be no assurance that our Manager’s due diligence process will uncover all relevant facts or that any investment will be successful.

Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, may cause the value of our common stock to decline.

In the future, we may raise capital through the issuance of debt or equity securities. Upon liquidation, holders of our debt securities and preferred stock, if any, and lenders with respect to other borrowings will be entitled to our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or cause the value of our common stock to decline, or both. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to pay dividends to the holders of our common stock. Sales of substantial amounts of our common stock, or the perception that these sales could occur, could have a material adverse effect on the price of our common stock. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings, if any. Thus holders of our common stock will bear the risk of our future offerings reducing the value of our common stock and diluting the value of their stock holdings in us.

Subject to the approval of a majority of the Board, including a majority of the independent directors, we may enter into unsecured related party loans.  If we choose to raise debt capital and there is an economic slowdown or recession that would force us to liquidate, this debt would be paid back prior to distributions on our equity.  Further, if we incur debt, we may choose to pay back such debt rather than offering share repurchases to our stockholders.  If we prioritize paying debt over offering share repurchases, fewer, if any, funds would be available for share repurchases and your investment would be less liquid.

Risks Related to the Investment Platform

The Realty Mogul Platform may not operate as we anticipate.

We intend to distribute shares of our common stock to the public exclusively through the Realty Mogul Platform.  We also expect that the Realty Mogul Platform will be a source of investment leads for the Company.  Potential sponsors of real estate opportunities come directly to the Realty Mogul Platform to seek financing for their projects.  We anticipate that we will be able to use the Realty Mogul Platform to sell our shares, and that sponsors of real estate opportunities will continue to seek financing for their projects through the Realty Mogul Platform.  If the Realty Mogul Platform experiences technical challenges that inhibit our ability to sell shares through the platform or if sponsors do not continue to seek financing through the Realty Mogul Platform, we may need to implement more manpower-intensive strategies to sell our shares or source investments, which could lead to an increase in expenses and a corresponding decrease in the value of our common stock.

If the security of our investors’ confidential information stored in RM Technologies, LLC’s systems is breached or otherwise subjected to unauthorized access, your secure information may be stolen.

The Realty Mogul Platform may store investors’ bank information and other personally-identifiable sensitive data.  The Realty Mogul Platform is hosted in data centers that are compliant with payment card industry security standards and the website uses daily security monitoring services provided by McAfee SECURE certification and Incapsula.  However, any accidental or willful security breach or other unauthorized access could cause your secure information to be stolen and used for criminal purposes, and you would be subject to increased risk of fraud or identity theft.  Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Realty Mogul Platform and its third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures.  In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data.  These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our investors and real estate companies to lose confidence in the effectiveness of our data security measures.  Any security breach, whether actual or perceived, would harm our reputation, could result in a loss of investors, and the value of your investment in us could be adversely affected.

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If Realty Mogul, Co. or RM Technologies, LLC were to enter bankruptcy proceedings, the operation of the Realty Mogul Platform and the activities with respect to our operations and business would be interrupted and subscription proceeds held in a segregated account may be subject to the bankruptcy.

The success of this offering depends on our ability to sell shares through the Realty Mogul Platform.  If Realty Mogul, Co. or RM Technologies, LLC were to enter bankruptcy proceedings or were to cease operations, we would be required to find other ways to meet obligations regarding our operations and business.  Pursuing such alternatives could harm our operations and business by resulting in delays in the disbursement of distributions or the filing of reports or requiring us to pay significant fees to another company that we engage to perform services for us.

Risks Related to Compliance and Regulation

We are offering our common stock pursuant to recent amendments to Regulation A promulgated pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to Tier 2 issuers will make our common stock less attractive to investors as compared to a traditional initial public offering.

As a Tier 2 issuer, we will be subject to scaled disclosure and reporting requirements, which may make our common stock less attractive to investors as compared to a traditional initial public offering, which may make an investment in our common stock less attractive to investors who are accustomed to enhanced disclosure and more frequent financial reporting.  In addition, given the relative lack of regulatory precedence regarding the recent amendments to Regulation A, there is a significant amount of regulatory uncertainty in regards to how the SEC or the individual state securities regulators will regulate both the offer and sale of our securities, as well as any ongoing compliance that we may be subject to.  If our scaled disclosure and reporting requirements, or regulatory uncertainty regarding Regulation A, reduces the attractiveness of our common stock, we may be unable to raise the necessary funds to commence operations, or to develop a diversified portfolio of real estate investments, which could severely affect the value of our common stock.

Our use of Form 1‑A and our reliance on Regulation A for this offering may make it more difficult to raise capital as and when we need it, as compared to if we were conducting a traditional initial public offering on Form S‑11.

Because of the exemptions from various reporting requirements provided to us under Regulation A and because we are only permitted to raise up to $50 million in any 12‑month period in this offering under Regulation A (although we may raise capital in other ways), we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it.  Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry.  If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.

As a Tier 2 issuer, we will not need to provide a report on the effectiveness of our internal controls over financial reporting, and we will be exempt from the auditor attestation requirements concerning any such report as long as we are a Tier 2 issuer. We conducted an evaluation of our internal controls and believe we have the necessary framework in place. However, internal controls have inherent limitations. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by our internal controls.  However, we believe that our internal controls are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, or GAAP.

Non-compliance with laws and regulations may impair our ability to manage our assets.

Failure to comply with the laws and regulatory requirements applicable to our business may, among other things, limit our, or a collection agency’s, ability to collect all or part of the payments on our investments.  In addition, our non-compliance could subject us to damages, revocation of required licenses or other authorities, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm our business.

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If we are required to register as an investment company under the Investment Company Act, we could not continue our current business plan, which may significantly reduce the value of your investment.

We intend to conduct our operations, and the operations of our operating partnership and any other subsidiaries, so that no such entity meets the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act. Under the Investment Company Act, in relevant part, a company is an “investment company” if:

·

pursuant to Section 3(a)(1)(A), it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

·

pursuant to Section 3(a)(1)(C), it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the 40% test). “Investment securities” exclude U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We intend to monitor our operations and our assets on an ongoing basis in order to ensure that neither we, nor any of our subsidiaries, meet the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:

·

limitations on capital structure;

·

restrictions on specified investments;

·

prohibitions on transactions with affiliates;

·

compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations; and

·

potentially, compliance with daily valuation requirements.

In order for us to not meet the definition of an “investment company” and avoid regulation under the Investment Company Act, we must engage primarily in the business of buying real estate, and these investments must be made within one year after the offering ends. To avoid meeting the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. Similarly, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. Accordingly, the Board may not be able to change our investment policies as they may deem appropriate if such change would cause us to meet the definition of an “investment company.” In addition, a change in the value of any of our assets could negatively affect our ability to avoid being required to register as an investment company. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

We are not subject to regulatory oversight by any state or federal regulatory agency.

We are not subject to the periodic examinations to which, for example, commercial banks and other thrift institutions are subject.  Consequently, our acquisition, financing and disposition decisions and our decisions regarding establishing the fair value of our investments are not subject to periodic review by any governmental agency.  Moreover, we are not subject to regulatory oversight relating to our capital, asset quality, management or compliance with laws.

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Recent legislative and regulatory initiatives have imposed restrictions and requirements that could have an adverse effect on our business.

The financial industry is becoming more highly regulated.  There has been, and may continue to be, a related increase in regulatory investigations and regulation of the operating and investment activities of alternative investment funds.  Such investigations and regulation may impose additional expenses on us, may require the attention of senior management of our Manager and may result in fines if we are deemed to have violated any regulations.

As internet commerce develops, federal and state governments may adopt new laws to regulate internet commerce, which may negatively affect our business.

As internet commerce continues to evolve, increasing regulation by federal and state governments becomes more likely.  Our and the Realty Mogul Platform’s business could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to lending.  The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be required to pass along those costs to our sponsors in the form of increased fees, which could negatively impact our ability to make real estate investments.  In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided over the internet.  These taxes could discourage the use of the internet as a means of commercial financing, which would adversely affect the viability of the Realty Mogul Platform.

Laws intended to prohibit money laundering may require us to disclose investor information to regulatory authorities.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the PATRIOT Act, requires that financial institutions establish and maintain compliance programs to guard against money laundering activities, and requires the Secretary of the U.S. Department of Treasury to prescribe regulations in connection with anti-money laundering policies of financial institutions.  The Financial Crimes Enforcement Network, or FinCEN, an agency of the Department of Treasury, has announced that it is likely that such regulations would subject certain pooled investment vehicles to enact anti-money laundering policies.  It is possible that there could be promulgated legislation or regulations that would require us or our service providers to share information with governmental authorities with respect to prospective investors in connection with the establishment of anti-money laundering procedures.  Such legislation and/or regulations could require us to implement additional restrictions on the transfer of our common stock to comply with such legislation and/or regulations.  We reserve the right to request such information as is necessary to verify the identity of prospective stockholders and the source of the payment of subscription monies, or as is necessary to comply with any customer identification programs required by FinCEN and/or the SEC.  In the event of delay or failure by a prospective stockholder to produce any information required for verification purposes, an application for, or transfer of, shares of our common stock may be refused.  We will not have the ability to reject a transfer of shares of our common stock where all necessary information is provided and any other applicable transfer requirements, including those imposed under the transfer provisions of our charter, are satisfied.

We are relying on the exemption for insignificant participation by benefit plan investors under ERISA.

The Plan Assets Regulation provides that the assets of an entity will not be deemed to be the assets of a benefits plan if equity participation in the entity by benefit plan investors, including benefit plans, is not significant. The Plan Assets Regulation provides that equity participation in the entity by benefit plan investors is “significant” if at any time 25% or more of the value of any class of equity interest is held by benefit plan investors, which for these purposes includes IRAs (even though IRAs themselves are not subject to regulation under ERISA). Because we are relying on this exemption, we will not accept investments from benefit plan investors equal to or exceeding, in the aggregate, 25% of the value of any class of equity interest. If repurchases of shares cause us to go over this limit, we may repurchase shares of benefit plan investors without their consent until we are under the 25% limit. See “ERISA Considerations” for additional information regarding the Plan Assets Regulation.

Risks Related to Conflicts of Interest

There are conflicts of interest between us, our Manager and its affiliates.

Our executive officers are principals of our Manager and its parent company, Realty Mogul, Co. and/or their respective affiliates, which provide asset management and other services to our Manager and us.  All of the agreements

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and arrangements between such parties, including those relating to compensation, are not the result of arm’s length negotiations.  Contractual rates are determined by our Manager and affiliates based on industry standards and expectations of what our Manager would be able to negotiate with a third party on an arm’s length basis and are intended to approximate prevailing market rates, but there can be no assurances that the contracts are in fact consistent with the prevailing market rates or terms.  Some of the conflicts inherent in the Company’s transactions with our Manager and its affiliates are described below.  To the extent that such parties take actions that are more favorable to other entities than us, these actions could have a negative impact on our financial performance and, consequently, on distributions to stockholders and the value of our common stock.

The interests of our Manager, its principals and its other affiliates may conflict with your interests.

The management agreement provides our Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of our Manager, its principals and its other affiliates.  This risk is increased by our Manager being controlled by Jilliene Helman, who is a principal of Realty Mogul, Co. and who participates, or expects to participate, directly or indirectly in other offerings by Realty Mogul, Co. and its affiliates.  Potential conflicts of interest include, but are not limited to, the following:

·

our Manager, its principals and/or its other affiliates are expected to continue to originate and offer other real estate investment opportunities, including additional blind pool equity offerings similar to this offering, through the Realty Mogul Platform, and may make investments in real estate assets for their own respective accounts, whether or not competitive with our business;

·

affiliates of our Manager may compete with us with respect to certain investments which we may want to acquire, and as a result we may either not be presented with the opportunity or have to compete with the affiliates to acquire these investments. Our Manager and our officers may choose to allocate favorable investments to its affiliates instead of to us. The ability of our Manager, its officers and individuals providing services to our Manager to engage in other business activities may reduce the time our Manager spends managing us;

·

Our Manager, its principals and/or its other affiliates are not required to devote all of their time and efforts to our affairs.  For example, during turbulent conditions in the mortgage industry, distress in the credit markets or other times when we will need focused support and assistance from our Manager, other entities for which our Manager also acts as an investment manager will likewise require greater focus and attention, placing our Manager’s resources in high demand. In such situations, we may not receive the necessary support and assistance we require or would otherwise receive if we were internally managed or if our Manager did not act as a manager for other entities;

·

we pay our Manager substantial management fees regardless of the performance of our portfolio. Our Manager’s entitlement to substantial nonperformance-based compensation might reduce its incentive to devote its time and effort to seeking investments that provide attractive risk-adjusted returns for our portfolio. This in turn could hurt both our ability to make distributions to our stockholders and the value of our common stock;

·

our Manager is entitled to a monthly asset management fee, which is payable on all assets in our portfolio, including any investments acquired through debt financing.  As a result, our Manager may have an incentive to seek debt financing in order to increase assets under management and earn the increased asset management fee;

·

a broker-dealer affiliate of Realty Mogul, Co. may earn placement fees with respect to any interest in MogulREIT II, Inc. sold to investors;

·

an affiliate of Realty Mogul, Co. may earn acquisition, profit sharing and/or disposition fees for assets acquired by MogulREIT II, Inc.;

·

our Manager, its principals and/or its other affiliates will not be required to disgorge any profits or fees or other compensation they may receive from any other business they own separately from us, and you will not

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be entitled to receive or share in any of the profits, return fees or compensation from any other business owned and operated by our Manager, its principals and/or its other affiliates for their own benefit;

We may have an incentive to make investments because of the fees that such investments could generate for our affiliates.

Our Manager will be entitled to receive an acquisition fee for acquiring equity investments on our behalf, and a portion of that fee may be paid by our Manager to a third party for its role in sourcing the investment opportunity.  Because of this sourcing fee, our Manager may be incentivized to prioritize investments acquired by our Manager over investments acquired by an unaffiliated third party.  Further, while our Manager will attempt to make investments that allow us to qualify as a REIT and not meet the definition of an “investment company” and avoid regulation under the Investment Company Act, our Manager has some latitude on the types of investments that it may approve.  The acquisition fee will be based upon the contract purchase price of the asset acquired, which may create a disincentive on the part of our Manager to negotiate a lower price for us.  Such fee will be payable by us regardless of the quality of the asset acquired.

We have agreed to limit remedies available to us and our stockholders for actions by our Manager.

In the management agreement, we have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities.  These provisions are detrimental to stockholders because they restrict the remedies available to them for actions that might constitute breaches of duty and could reduce stockholder returns.  By purchasing shares of our common stock, you will be treated as having consented to the provisions set forth in the management agreement.  In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain our ongoing relationship with our Manager.

If Realty Mogul, Co. establishes additional REITs and other Realty Mogul Platform investment opportunities in the future, there may be conflicts of interests among the various REIT offerings.

Our Sponsor and our Manager, wholly owned subsidiaries of Realty Mogul, Co., currently sponsor and manage, respectively, MogulREIT I, LLC whose offering circular was filed with the SEC on July 19, 2016 and qualified on August 12, 2016.  In addition, our Sponsor and our Manager are expected to sponsor and manage, respectively additional REIT offerings and continue to offer investment opportunities through the Realty Mogul Platform, including offerings that will acquire or invest in commercial real estate loans and other real estate-related assets.  These additional REITs may have investment criteria that compete with us.  Except under any policies that may be adopted by our Manager or Sponsor, no REIT (including us) or Realty Mogul Platform investment opportunity will have any duty, responsibility or obligation to refrain from:

·

engaging in the same or similar activities or lines of business as any other REIT or Realty Mogul Platform investment opportunity;

·

doing business with any potential or actual tenant, lender, purchaser, supplier, customer or competitor of any REIT or Realty Mogul Platform investment opportunity;

·

engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual tenants, lenders, purchasers, suppliers or customers of any REIT or Realty Mogul Platform investment opportunity;

·

establishing material commercial relationships with another REIT or Realty Mogul Platform investment opportunity; or

·

making operational and financial decisions that could be considered to be detrimental to another REIT or Realty Mogul Platform investment opportunity.

In addition, any decisions by our Sponsor or Manager to renew, extend, modify or terminate an agreement or arrangement, or enter into similar agreements or arrangements in the future, may benefit one REIT more than another REIT or limit or impair the ability of any REIT to pursue business opportunities.  In addition, third parties may require as a condition to their arrangements or agreements with or related to any one particular REIT that such arrangements or

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agreements include or not include another REIT, as the case may be.  Any of these decisions may benefit one REIT more than another REIT.

Our participation in a co-ownership arrangement could subject us to risks that otherwise may not be present in other real estate investments, which could result in litigation or other potential liabilities that could increase our costs and negatively affect our results of operations.

From time to time, we may enter in co-ownership arrangements with respect to properties. Co-ownership arrangements involve risks generally not otherwise present with an investment in real estate and could result in litigation or other potential liabilities, such as the following:

·

the risk that a co-owner may at any time have economic or business interests or goals that are or become inconsistent with our business interests or goals;

·

the risk that a co-owner may be in a position to take action contrary to our instructions or requests or our policies or objectives or status as a REIT;

·

the possibility that an individual co-owner might become insolvent or bankrupt, or otherwise default under any mortgage loan financing documents applicable to the property, which may constitute an event of default under all of the applicable mortgage loan financing documents, result in a foreclosure and the loss of all or a substantial portion of the investment made by the co-owner, or allow the bankruptcy court to reject the agreements entered into by the co-owners owning interests in the property;

·

the possibility that a co-owner might not have adequate liquid assets to make cash advances that may be required in order to fund operations, maintenance and other expenses related to the property, which could result in the loss of current or prospective tenants and otherwise adversely affect the operation and maintenance of the property, could cause a default under any mortgage loan financing documents applicable to the property and result in late charges, penalties and interest, and could lead to the exercise of foreclosure and other remedies by the lender;

·

the risk that a co-owner could breach agreements related to the property, which may cause a default under, and possibly result in personal liability in connection with, any mortgage loan financing documents applicable to the property, violate applicable securities laws, result in a foreclosure or otherwise adversely affect the property and the co-ownership arrangement;

·

the risk that we could have limited control and rights, with management decisions made entirely by a third party; and

·

the possibility that we will not have the right to sell the property at a time that otherwise could result in the property being sold for its maximum value.

In the event that our interests become adverse to those of the other co-owners, we may not have the contractual right to purchase the co-ownership interests from the other co-owners. Even if we are given the opportunity to purchase such co-ownership interests in the future, we cannot guarantee that we will have sufficient funds available at the time to purchase co-ownership interests from the co-owners.

We might want to sell our co-ownership interests in a given property at a time when the other co-owners in such property do not desire to sell their interests. Therefore, because we anticipate that it will be much more difficult to find a willing buyer for our co-ownership interests in a property than it would be to find a buyer for a property we owned outright, we may not be able to sell our co-ownership interest in a property at the time we would like to sell.

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Our Manager faces conflicts of interest relating to joint ventures or other co-ownership arrangements that we may enter into with our Sponsor or real estate programs sponsored by our Sponsor, which could result in a disproportionate benefit to our Sponsor or another real estate program it sponsors.

We may enter into joint ventures with our Sponsor or other real estate programs it sponsors for the acquisition, development or improvement of properties as well as the acquisition of real estate-related investments. Since one or more of the executive officers of our Manager are executive officers of our Sponsor, our Manager may face conflicts of interest in determining which real estate program should enter into any particular joint venture or co-ownership arrangement. These persons also may have a conflict in structuring the terms of the relationship between us and any affiliated co-venturer or co-owner, as well as conflicts of interests in managing the joint venture, which may result in the co-venturer or co-owner receiving benefits greater than the benefits that we receive.

In the event we enter into joint venture or other co-ownership arrangements with our Sponsor or other real estate programs it sponsors, our Manager and its affiliates may have a conflict of interest when determining when and whether to buy or sell a particular property, or to make or dispose of another real estate-related investment. In addition, if we become listed for trading on a national securities exchange, we may develop more divergent goals and objectives from any affiliated co-venturer or co-owner that is not listed for trading. In the event we enter into a joint venture or other co-ownership arrangement with another real estate program it sponsors that has a term shorter than ours, the joint venture may be required to sell its properties earlier than we may desire to sell the properties. Even if the terms of any joint venture or other co-ownership agreement between us and our Sponsor or another real estate program it sponsors grants us the right of first refusal to buy such properties, we may not have sufficient funds or borrowing capacity to exercise our right of first refusal under these circumstances.

We have adopted certain procedures for dealing with potential conflicts of interest as described in “Conflicts of Interest - Certain Conflict Resolution Measures.

The conflicts of interest policy we have adopted may not adequately address all of the conflicts of interest that may arise with respect to our activities and is subject to change or suspension.

In order to avoid any actual or perceived conflicts of interest among the REITs and with our Manager’s officers and affiliates, we have adopted a conflicts of interest policy to specifically address some of the conflicts relating to our activities.  There is no assurance that this policy will be adequate to address all of the conflicts that may arise or will address such conflicts in a manner that is favorable to us.  The Board may modify, suspend or rescind our conflicts of interest policy, including any resolution implementing the provisions of the conflicts of interest policy, in each case, without a vote of our stockholders.

Risks Related to Our Shares and Investments in Real Estate

Investing in our common stock may involve a high degree of risk.

The investments we make in accordance with our investment objectives may result in a high amount of risk when compared to alternative investment options and volatility or loss of principal. Our investments may be highly speculative and aggressive, are subject to credit risk, interest rate, and market value risks, among others, and therefore an investment in our common stock may not be suitable for someone with lower risk tolerance.

We may not realize income or gains from our investments.

We invest to generate both current income and capital appreciation. The investments we invest in may, however, not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize income or gains from our investments. Any gains that we do realize may not be sufficient to offset any other losses we experience. Any income that we realize may not be sufficient to offset our expenses.

We may invest in equity interests of other companies which may limit the control that our Manager has over the investments.

We may take equity stakes in companies that own real estate or other real estate-related assets, subject to certain limitations related to our qualification as a REIT and to not meeting the definition of an “investment company” under the

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Investment Company Act.  In such situations, our Manager’s ability to control these equity investments may depend on our relative ownership stake in such investments.  We may be a minority investor in some circumstances and our Manager’s ability to control the underlying assets of the entity may be limited.  In addition, the entity and its other stockholders may have economic or business interests or goals that are inconsistent with our own, or may be in a position to take action contrary to our investment objective which could cause a material adverse effect on you and could cause the value of our stock to decline.

The real estate-related equity securities in which we may invest are subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities.

We may invest in equity securities of real estate companies, subject to certain limitations related to our qualification as a REIT and to not meeting the definition of an “investment company” under the Investment Company Act, which involves a higher degree of risk than debt securities due to a variety of factors, including that such investments may be subordinate to creditors and are not secured by the issuer’s property.  Our investments in real estate-related equity securities will involve special risks relating to the particular issuer of the equity securities, including the financial condition and business outlook of the issuer.  Issuers of real estate-related equity securities generally invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate, including risks relating to rising interest rates.

In addition, the equity investments we may make in partnerships and limited liability companies may expose us to risks associated with non-target assets.  While our target assets are various types of multifamily properties, we may make non-controlling investments in entities that invest not only in multifamily properties but other types of assets, as well.  Accordingly, we would be exposed to the risks associated with such other types of assets, including, among other risks, the following:

·

Mortgage real estate loans, which are subject to the risks associated with the underlying property, the creditworthiness of the borrower, difficulties in enforcing collection and foreclosure remedies, as well as fluctuations in value caused by changing interest rates, other market conditions, and regulations;

·

Subordinated commercial real estate loans, B Notes, and mezzanine loans, which are also subject to the same risks noted above, but are also subject to the priority of senior loans and, in the case of subordinated loans, the rights of senior lenders under any intercreditor arrangements, and, in the case of mezzanine loans, the likelihood of higher aggregate loan-to-value ratios;

·

Construction loans, which are subject to the additional risks associated with cost overruns and non-completion of the construction or renovation of the underlying properties;

·

Mortgage backed securities, which are subject to all the risks of the underlying mortgage loans (noted above), including the risks of prepayment or default, as well as the viability of the credit support underlying the particular tranche of the securities to which we are indirectly exposed and the actions of the loan servicers and sub-servicers, which could take actions that adversely affect the securities held; and

·

Collateralized Debt Obligation securities, or CDOs, which are subject to the risks of the underlying instruments securing the CDOs, such as debt instruments, bonds, mortgage-backed securities, and swaps.

The failure of any third-party subadvisor retained by our Manager to safeguard and grow our cash balance would negatively impact the value of our common stock and hinder the execution of our investment strategy.  Moreover, the investment strategy that the subadvisor would pursue involves leverage and investing in publicly-traded REIT securities, which places our cash balance at greater financial risk than alternative cash management strategies.

We will have excess cash that we will need to manage, pending its distribution to our stockholders or investment by us in accordance with our investment strategy.  Our Manager intends to engage American Assets Capital Advisers, LLC, a third-party subadvisor, to manage our cash balance.  If engaged, American Assets Capital Advisers, LLC would (i) incur leverage on this cash balance and (ii) invest the cash and the debt incurred thereon in common or preferred shares in publicly-traded REITs or other short-term investments.

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There is no assurance that any subadvisor will successfully manage, safeguard or return our cash balance.  Our Manager intends to authorize the subadvisor to invest in publicly-traded common or preferred shares in REITs, which are subject to price volatility.  Should the price of the securities purchased by the subadvisor decline, we may not recover our cash balance, which would reduce the value of our common stock and hinder the execution of our investment strategy.  Moreover, our Manager intends to authorize the subadvisor to use debt to increase the potential returns that can be earned on our cash balance.  The use of leverage increases the risk of loss should the value of our investments in publicly-traded common or preferred shares in REITs decline.

Commercial real estate equity investments will be subject to risks inherent in ownership of real estate.

Real estate cash flows and values are affected by a number of factors, including competition from other available properties and our ability to provide adequate property maintenance and insurance and to control operating costs.  Real estate cash flows and values are also affected by such factors as government regulations (including zoning, usage and tax laws), interest rate levels, the availability of financing, property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws.  Commercial real estate equity investments that we make will be subject to such risks.

Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.

The illiquidity of our target investments may make it difficult for us to sell such investments if the need or desire arises.  We expect many of our investments will be illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments and our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

Some of our assets will be classified for accounting purposes as “available-for-sale.”  These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders’ equity without impacting net income on the income statement.  Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets.  If the market value of those assets declines, the lender may require us to post additional collateral to support the loan.  If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so.  A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations.  As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity.  In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.

Some of our portfolio investments will be carried at estimated fair value as determined by us and there may be uncertainty as to the value of these investments.

Some of our portfolio investments will be in the form of securities that are recorded at fair value but that have limited liquidity or are not publicly traded.  The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable.  We estimate the fair value of these investments on a quarterly

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basis.  Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.  The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

If we overestimate the value or income-producing ability or incorrectly price the risks of our investments, we may experience losses.

Analysis of the value or income-producing ability of a commercial property is highly subjective and may be subject to error.  Our Manager will value our potential investments based on yields and risks, taking into account estimated future losses on select commercial real estate equity investments, and the estimated impact of these losses on expected future cash flows and returns.  In the event that we underestimate the risks relative to the price we pay for a particular investment, we may experience losses with respect to such investment.

A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could harm our operations.

Many of our investments may be susceptible to economic slowdowns or recessions, which could lead to financial losses in our investments and a decrease in revenues, net income and assets.  An economic slowdown or recession, in addition to other non-economic factors such as an excess supply of properties, could have a material negative impact on the values of commercial real estate.  Declining real estate values will likely reduce our ability to acquire new real estate assets, since sponsors often use increases in the value of their existing properties to support the purchase or investment in additional properties.  Any sustained period of increased payment delinquencies, foreclosures or losses could  significantly harm our revenues, results of operations, financial condition, business prospects and our ability to make distributions to you.

Terrorist attacks and other acts of violence or war may affect the value of our common stock and underlying investments.

Terrorist attacks may harm the value of our underlying investments and our common stock. We cannot assure you that there will not be further terrorist attacks against the United States or U.S. businesses. These attacks or armed conflicts may directly impact the property underlying our investments.  More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economies. These and other types of adverse economic conditions could harm the value of the property underlying our investments or the securities markets in general which could harm our investment returns and may adversely affect our ability to make distributions.

Insurance may not cover all losses on the properties that underlie our investments.

We may have equity investments with underlying properties that have comprehensive insurance, including liability, fire and extended coverage.  However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods and hurricanes that may be uninsurable or not economically insurable.  For example, some properties may not have terrorism insurance if it is deemed commercially unreasonable.  Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed.  Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the property, which might impair our security and decrease the value of the property and thus the value of your investment.

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.  Our investments in multifamily properties will be subject to risks generally attributable to the ownership of real property, including:

·

changes in global, national, regional or local economic, demographic or real estate market conditions;

·

changes in supply of or demand for similar properties in an area;

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·

increased competition for real property investments targeted by our investment strategy;

·

bankruptcies, financial difficulties or lease defaults by our residents;

·

changes in interest rates and availability of financing;

·

changes in the terms of available financing, including more conservative loan-to-value requirements and shorter debt maturities;

·

competition from other residential properties;

·

the inability or unwillingness of residents to pay rent increases;

·

changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws;

·

the severe curtailment of liquidity for certain real estate related assets; and

·

rent restrictions due to government program requirements.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.  We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of multifamily properties and could make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the multifamily properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our multifamily properties decreases, we may be forced to dispose of the properties at a price lower than the price we paid to acquire our properties, which could adversely impact the results of our operations and our ability to make distributions and return capital to our investors.

A concentration of our investments in the multifamily sector or in certain geographic regions may leave our profitability vulnerable to a downturn or slowdown in the sector or state or region.

We expect that our property portfolio will be comprised solely of multifamily properties. As a result, we will be subject to risks inherent in investments in a single type of property. If our investments are solely in the multifamily sector, the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn or slowdown in the multifamily sector could be more pronounced than if we had more fully diversified our investments.

The underlying value of our properties and the ability to make distributions to our stockholders depend upon the ability of the residents of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our company.  Residents’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our residents’ ability to make rental payments. In the event of a resident default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment and re-leasing our property. We may be unable to re-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of our stockholders’ investment to decline.

In order to attract residents, we may be required to expend funds for capital improvements and property renovations when residents do not renew their leases or otherwise vacate their apartment homes. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital

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reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure our stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

In addition, if our investments are concentrated in a particular state or geographic region, and such state or geographic region experiences economic difficulty disproportionate to the nation as a whole, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, could be more pronounced than if we had more fully diversified our investments geographically.  The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.  In addition to general, regional and national economic conditions, our operating results may be impacted by the economic conditions of the specific markets in which we have concentrations of properties. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily property space resulting from the local business climate, could adversely affect our property revenue, and hence net operating income.

A property that experiences significant vacancy could be difficult to sell or re-lease.

A property may experience significant vacancy through the eviction of residents and/or the expiration of leases. Certain of the multifamily properties we acquire may have some level of vacancy at the time of our acquisition of the property and we may have difficulty obtaining new residents. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the property could be diminished because the market value may depend principally upon the value of the leases of such property.

We will compete with numerous other persons and entities for real estate investments.

We will be subject to significant competition in seeking real estate investments and residents. We will compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors may have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital. There is no assurance that we will be able to acquire multifamily properties on favorable terms, if at all. These factors could adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions to you.

Competition from other multifamily communities and housing alternatives for residents could reduce our profitability and the return on your investment.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We will face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely will compete with numerous housing alternatives in attracting residents, including owner-occupied single and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner-occupied single- and multifamily homes available to rent or buy (caused by declining mortgage interest rates and government programs to promote home ownership) could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

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Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies.

We expect to implement a “value-enhancement” strategy for approximately 50‑70% of the conventional multifamily homes we acquire. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities will vary in degree based on the specific business plan for each asset, but could include new appliances, upgraded cabinets, countertops and flooring. Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies. The risks related to these value-enhancement investments include risks related to delays in the repositioning or improvement process, higher than expected capital improvement costs, possible borrowings necessary to fund such costs, and ultimately that the repositioning process may not result in the higher rents and occupancy rates anticipated. In addition, our value-enhancement properties may not produce revenue while undergoing capital improvements. Furthermore, we may also be unable to complete the improvements of these properties and may be forced to hold or sell these properties at a loss. For these and other reasons, we cannot assure you that we will realize growth in the value of our value-enhancement multifamily properties, and as a result, our ability to make distributions to our stockholders could be adversely affected.

Multifamily properties are illiquid investments, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.

Multifamily properties are illiquid investments. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property.

Additionally, we may be required to expend funds to correct defects or to make improvements before a real property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

We may have no or only limited recourse for any problems later identified for multifamily apartment communities we acquire, which could materially and adversely affect us, including our results of operations.

We anticipate sellers of multifamily apartment communities will sell such properties “as is,” “where is” and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase and sale agreements may contain limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of multifamily apartment communities with no or limited warranties increases the risk that we may lose some or all of our invested capital in the property, as well as the loss of rental income from that multifamily apartment community, which could materially and adversely affect us.

Increased competition and increased affordability of single-family homes could limit our ability to retain residents, lease apartment homes or increase or maintain rents.

Any apartment communities we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family homes, as well as owner occupied single- and multifamily homes available to rent. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

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Increased construction of similar properties that compete with our apartment communities in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

We may acquire apartment communities in locations that experience increases in construction of properties that compete with our apartment communities. This increased competition and construction could:

·

make it more difficult for us to find residents to lease apartment homes in our apartment communities;

·

force us to lower our rental prices in order to lease apartment homes in our apartment communities;

·

or substantially reduce our revenues and cash available for distribution to our stockholders.

Our multifamily properties will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Our multifamily properties will subject to real and personal property taxes, as well as excise taxes, that may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the properties, we will be ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.

Uninsured losses or costly premiums for insurance coverage relating to real property may adversely affect your returns.

We intend to adequately insure all of our multifamily properties against casualty losses. The nature of the activities at certain properties we may acquire, may expose us and our operators to potential liability for personal injuries and property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, tornadoes, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders sometimes require commercial property owners to purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure you that funding will be available to us for repair or reconstruction of damaged real property in the future. Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety.

Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties, may affect our properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages

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for noncompliance. In connection with the acquisition and ownership of our properties, we may be exposed to these costs in connection with such regulations. The cost of defending against environmental claims, any damages or fines we must pay, compliance with environmental regulatory requirements or remediating any contaminated real property could materially and adversely affect our business and results of operations, lower the value of our assets and, consequently, lower the amounts available for distribution to our stockholders.

Potential liability for environmental matters could adversely affect our financial condition.

Although we intend to subject our multifamily apartment communities to an environmental assessment prior to acquisition, we may not be made aware of all the environmental liabilities associated with a property prior to its purchase. There may be hidden environmental hazards that may not be discovered prior to acquisition. The costs of investigation, remediation or removal of hazardous substances may be substantial. In addition, the presence of hazardous substances on one of our properties, or the failure to properly remediate a contaminated property, could adversely affect our ability to sell or rent the property or to borrow using the property as collateral.

Various federal, state and local environmental laws impose responsibilities on an owner or operator of real estate and subject those persons to potential joint and several liabilities. Typical provisions of those laws include:

·

responsibility and liability for the costs of investigation, removal, or remediation of hazardous substances released on or in real property, generally without regard to knowledge of or responsibility for the presence of the contaminants;

·

liability for claims by third parties based on damages to natural resources or property, personal injuries, or costs of removal or remediation of hazardous or toxic substances in, on, or migrating from our property;

·

responsibility for managing asbestos-containing building materials, and third-party claims for exposure to those materials; and

·

environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require expenditures.

The properties will include certain amenities for the residents at the properties that could increase the potential liabilities at the properties.

In addition to the apartment buildings, the properties will be improved with various amenities, such as swimming pools, exercise rooms, playgrounds, laundry facilities, business centers and/or rentable club houses. Certain claims could arise in the event that a personal injury, death, or injury to property should occur in, on, or around any of these improvements. There can be no assurance that particular risks pertaining to these improvements that currently may be insured will continue to be insurable on an economical basis or that current levels of coverage will continue to be available. If a loss occurs that is partially or completely uninsured, we may lose all or part of their investment. We may be liable for any uninsured or underinsured personal injury, death or property damage claims. Liability in such cases may be unlimited but shareholders will not be personally liable.

The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders.

Investment in properties may also be subject to the Americans with Disabilities Act of 1990, as amended, or the ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA. We cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.

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To the extent we invest in age-restricted communities, we may incur liability by failing to comply with the Fair Housing Act, the Housing for Older Persons Act or certain state regulations, which may affect cash available for distribution to our stockholders.

To the extent we invest in age-restricted communities, any such properties must comply with the Fair Housing Act, or FHA, and Housing for Older Persons Act, or HOPA. The FHA generally prohibits age-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the U.S. Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require that age-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

Government housing regulations may limit the opportunities at some of the government-assisted housing properties we invest in, and failure to comply with resident qualification requirements may result in financial penalties or loss of benefits, such as rental revenues paid by government agencies.

To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents to pre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted property.

Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.

We may enter into interest rate swap agreements or pursue other interest rate hedging strategies.  Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions.  Interest rate hedging may fail to protect or could adversely affect us because, among other things:

·

interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;

·

available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;

·

the duration of the hedge may not match the duration of the related liability or asset;

·

our hedging opportunities may be limited by the treatment of income from hedging transactions under the rules determining REIT qualification;

·

the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

·

the party owing money in the hedging transaction may default on its obligation to pay; and

·

we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders.  Therefore, while we may enter into such transactions to seek to reduce interest rate

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risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions.  In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially.  Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.  Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

Our use of certain hedging techniques may expose us to counterparty risks.

If a swap counterparty under an interest rate swap agreement that we intend to enter into as part of our hedging strategy cannot perform under the terms of the interest rate swap, we may not receive payments due under that agreement, and thus, we may lose any unrealized gain associated with the interest rate swap.  The hedged liability could cease to be hedged by the interest rate swap.  Additionally, we may also risk the loss of any collateral we have pledged to secure our obligations under the interest rate swap if the counterparty becomes insolvent or files for bankruptcy.  Similarly, if an interest rate cap counterparty fails to perform under the terms of the interest rate cap agreement, in addition to not receiving payments due under that agreement that would off-set our interest expense, we could also incur a loss for all remaining unamortized premium paid for that security.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Code may limit our ability to hedge our assets, operations and liabilities.  Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (1) interest rate risk on liabilities incurred to carry or acquire real estate or (2) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests, and such instrument is properly identified under applicable Department of Treasury regulations.  Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests.  As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, or implement the hedges through a taxable REIT subsidiary, or TRS.  This could increase the cost of our hedging activities because our TRS would be subject to tax on income or gains resulting from hedges entered into by it or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.  In addition, losses in our TRSs will generally not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.  Any limitation on hedging could result in greater risks associated with interest rate or other changes than we would otherwise incur.

We may elect not to qualify for hedge accounting treatment.

If we choose to use derivative and hedge transactions and instruments in the future, we will record them in accordance with Accounting Standards Codification 815. If we elect not to qualify for hedge accounting treatment, our operating results may be more volatile or suffer because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction, depending on other accounting policy elections we make.

We are exposed to environmental liabilities with respect to properties to which we take title.

In the course of our business, we may take title to real estate, and, if we do take title, we could be subject to environmental liabilities with respect to these properties.  In such a circumstance, we may be held liable to a governmental entity or to third parties for property damage, personal injury, and investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases, at a property.  The costs associated with investigation or remediation activities could be substantial.  If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

Our strategy involves leverage, which may cause substantial loss.

We may use leverage of up to 75% of the fair market value or expected fair market value (for a value-add acquisition) of our assets. This is an overall target. Our borrowing on any individual investment may exceed 75% of its fair market value or expected fair market value as long as total portfolio leverage does not exceed 75%.  We will incur this

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leverage by borrowing against a portion of the market value of our total assets. By incurring this leverage, we could enhance our returns. Nevertheless, this leverage, which is fundamental to our investment strategy, also creates significant risks.

Because of our leverage, we may incur substantial losses if our borrowing costs increase. Our borrowing costs may increase for any of the follow reasons:

·

short-term interest rate increases;

·

the market value of our securities decreases;

·

interest rate volatility increases; or

·

the availability of financing in the market decreases.

We may enter into financing facilities that contain covenants that restrict our operations and inhibit our ability to grow our business and increase revenues.

We may enter into financing facilities that contain restrictions, covenants, and representations and warranties that, among other things, could require us to satisfy specified financial, asset quality, loan eligibility and loan performance tests. If we fail to meet or satisfy any of these covenants or representations and warranties, we would be in default under these agreements and our lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable, enforce their respective interests against collateral pledged under such agreements and restrict our ability to make additional borrowings. We also may enter into financing agreements that contain cross-default provisions, such that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default. Covenants and restrictions in future financing facilities may restrict our ability to, among other things:

·

incur or guarantee additional debt;

·

make certain investments or acquisitions;

·

make distributions on common stock;

·

repurchase common stock pursuant to our share repurchase program;

·

engage in mergers or consolidations;

·

reduce liquidity below certain levels;

·

grant liens;

·

incur operating losses for more than a specified period; and

·

enter into transactions with affiliates.

Such restrictions could interfere with our ability to obtain financing, including the financing needed to qualify as a REIT, or to engage in other business activities, which may significantly harm our business, financial condition, liquidity and results of operations. A default and resulting repayment acceleration could significantly reduce our liquidity, which could require us to sell our assets to repay amounts due and outstanding. This could also significantly harm our business, financial condition, results of operations, and our ability to make distributions. A default could also significantly limit our financing alternatives such that we could be unable to pursue our leverage strategy, which could curtail our investment returns.

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If the counterparty to a repurchase transaction defaulted on its obligation to resell the underlying security back to us at the end of the transaction term, or if the value of the underlying security declined as of the end of that term or if we defaulted on our obligations under a repurchase agreement, we would lose money on a repurchase transaction.

If we engage in a repurchase transaction, we would generally sell securities to the transaction counterparty and receive cash from the counterparty. Under these circumstances, the counterparty would be obligated to resell the securities back to us at the end of the term of the transaction, which is typically 30 to 90 days. Because the cash we received from the counterparty when we initially sold the securities to the counterparty was less than the value of those securities (this difference is referred to as the haircut), if the counterparty defaulted on its obligation to resell the securities back to us we would incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the securities).

We would also lose money on a repurchase transaction if the value of the underlying securities declined as of the end of the transaction term, as we would have to repurchase the securities for their initial value but would receive securities worth less than that amount. Any losses we would incur on our repurchase transactions could adversely affect our earnings, and thus our cash available for distribution to you. If we defaulted on one of our obligations under a repurchase transaction, the counterparty could terminate the transaction and cease entering into any other repurchase transactions with us. In that case, we may need to establish a replacement repurchase facility with another repurchase dealer.  There is no assurance we would be able to establish a suitable replacement facility.

Our rights under a repurchase agreement would be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under a repurchase agreement.

In the event of our insolvency or bankruptcy, certain repurchase agreements, if any, may qualify for special treatment under the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to foreclose on the collateral agreement without delay.  In the event of the insolvency or bankruptcy of a lender during the term of a repurchase agreement, the lender may be permitted, under applicable insolvency laws, to repudiate the contract, and our claim against the lender for damages may be treated simply as an unsecured creditor.  In addition, if the lender is a broker or dealer subject to the Securities Investor Protection Act of 1970, or an insured depository institution subject to the Federal Deposit Insurance Act, our ability to exercise our rights to recover our securities under a repurchase agreement or to be compensated for any damages resulting from the lender’s insolvency may be further limited by those statutes. These claims would be subject to significant delay and, if and when received, may be substantially less than the damages we actually incur.

Risks Related to Our Corporate Structure

Our charter permits the Board to authorize the issuance of stock with terms that may subordinate the rights of stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.

Our charter permits the Board to authorize the issuance of up to 10,000,000 shares of stock, of which 9,000,000 shares are classified as common stock and 1,000,000 shares are classified as preferred stock.  In addition, the Board, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. The Board may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of any such stock. Shares of our common stock shall be subject to the express terms of any series of our preferred stock.  The  Board could authorize the issuance of preferred stock with terms and conditions that have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing the removal of incumbent management or a change of control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium to the purchase price of our common stock for our stockholders. See “Description of Our Common Stock – Preferred Stock.”

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Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit your ability to dispose of your shares.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

·

any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or

·

an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he, she or it otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.

After the five-year prohibition, any such business combination between the Maryland corporation and an interested stockholder generally must be recommended by the Board of the corporation and approved by the affirmative vote of at least:

·

80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

·

two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by the Board prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, the Board has exempted any business combination involving our Manager or any affiliate of our Manager. As a result, our Manager and any affiliate of our Manager may be able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. For a more detailed discussion of the Maryland laws governing us and the ownership of shares of our common stock, see “Description of Our Common Stock – Business Combinations.”

Maryland law also limits the ability of a third party to buy a large percentage of our outstanding shares and exercise voting control in electing directors.

Under its Control Share Acquisition Act, Maryland law also provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by the corporation’s disinterested stockholders by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by interested stockholders, that is, by the acquirer, or officers of the corporation or employees of the corporation who are directors of the corporation, are excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock that would entitle the acquirer, except solely by virtue of a revocable proxy, to exercise voting control in electing directors within specified ranges of voting control. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a

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provision exempting from the Control Share Acquisition Act any and all acquisitions of our stock by any person. This provision may be amended or eliminated at any time in the future. If this provision were amended or eliminated, this statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer by anyone other than our Manager or any of its affiliates. For a more detailed discussion on the Maryland laws governing control share acquisitions, see “Description of Our Common Stock – Control Share Acquisitions.”

Our charter includes a provision that may discourage a stockholder from launching a tender offer for our shares.

Our charter requires that any tender offer, including any “mini-tender” offer, must comply with most of the requirements of Regulation 14D of the Exchange Act of 1934, or the Exchange Act. The offering person must provide us notice of the tender offer at least ten business days before initiating the tender offer. If the offering person does not comply with these requirements, our stockholders will be prohibited from transferring any shares to such non-complying person unless they first offered such shares to us at the tender offer price offered by the non-complying person. In addition, the non-complying person shall be responsible for all of our expenses in connection with that person’s noncompliance. This provision of our charter may discourage a person from initiating a tender offer for our shares and prevent you from receiving a premium to your purchase price for your shares in such a transaction.

The Board may change certain of our policies without stockholder approval, which could alter the nature of your investment. If you do not agree with the decisions of the Board, you only have limited control over changes in our policies and operations and may not be able to change such policies and operations.

The Board determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. The Board may amend or revise these and other policies without a vote of our stockholders. As a result, the nature of your investment could change without your consent. If the board determines to make any such change, we will notify our stockholders through a supplement to this offering circular, a letter to our stockholders and/or a public filing with the SEC. Under the Maryland General Corporation Law and our charter, our stockholders generally have a right to vote only on the following:

·

the election or removal of directors;

·

an amendment of our charter, except that the board may amend our charter without stockholder approval to increase or decrease the aggregate number of our shares or the number of our shares of any class or series that we have the authority to issue, to change our name, to change the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock or to effect certain reverse stock splits;

·

our dissolution; and

·

a merger or consolidation, a conversion, a statutory share exchange or the sale or other disposition of all or substantially all of our assets.

All other matters are subject to the discretion of the board.

Our rights and the rights of our stockholders to recover claims against our officers, directors and our Manager are limited, which could reduce your and our recovery against them if they cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our bylaws, in the case of our directors and officers, and our bylaws and the management agreement, in the case of our Manager and its affiliates, require us, to the maximum extent permitted by Maryland law, to indemnify and advance expenses to our directors, our officers, and our Manager and its affiliates. Our bylaws permit us to provide such indemnification and advance for expenses to our employees and agents. Additionally, our charter limits, to the maximum extent permitted by Maryland law, the liability of our directors and officers to us and our stockholders for monetary damages.  We and our stockholders may have more limited rights against our directors, officers, employees and agents, and our Manager and its affiliates, than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them. In addition, our Manager 

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is not required to retain cash to pay potential liabilities and it may not have sufficient cash available to pay liabilities if they arise. If our Manager is held liable for a breach of its fiduciary duty to us, or a breach of its contractual obligations to us, we may not be able to collect the full amount of any claims we may have against our Manager. We may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our Manager in some cases, which would decrease the cash otherwise available for distribution to our stockholders.

Your interest in us will be diluted if we issue additional shares.

Existing stockholders and potential investors in this offering do not have preemptive rights to any shares issued by us in the future. Our charter has authorized up to 10,000,000 shares of stock, of which 9,000,000 shares are classified as common stock and 1,000,000 shares are classified as preferred stock. Subject to any limitations set forth under Maryland law, the Board may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock that we have authority to issue, or classify or reclassify any unissued stock into other classes or series of stock without the necessity of obtaining stockholder approval. All of such shares may be issued in the discretion of the Board. Investors purchasing shares in this offering likely will suffer dilution of their equity investment in us, in the event that we (1) sell shares in this offering or sell additional shares in the future, including those issued pursuant to our distribution reinvestment plan, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue shares of our common stock to our Manager, its successors or assigns in payment of an outstanding fee obligation as set forth under our management agreement or (5) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership.

Federal Income Tax Risks

Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

We believe that our organization, prior and proposed ownership, and method of operation have enabled and will enable us to meet the requirements for qualification and taxation as a REIT.  However, we cannot assure you that we will qualify as such.  This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control.  Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT or the U.S. federal income tax consequences of such qualification.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

·

we would not be allowed a deduction for distributions paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

·

we could be subject to the U.S. federal alternative minimum tax and possibly increased state and local taxes; and

·

unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.  As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of shares of our common stock.  See “U.S. Federal Income Tax Considerations” for a discussion of material U.S. federal income tax consequences relating to us and our common stock.

Even if we qualify as a REIT, we may owe other taxes that will reduce our cash flows.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, on taxable income that we do not distribute to our stockholders, on net income from certain “prohibited transactions,” and on income from some activities conducted as a result of a foreclosure, and state or local income, property

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and transfer taxes.  For example, to the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income.  We also will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under the Code.  As another example, we are subject to a 100% “prohibited transaction” tax on any gain from a sale of property that is characterized as held for sale, rather than investment, for U.S. federal income tax purposes, unless we comply with a statutory safe harbor or earn the gain through  a TRS.  Further, any TRS that we establish will be subject to regular corporate U.S. federal, state and local taxes.  Any of these taxes would decrease cash available for distribution to stockholders.

REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds during unfavorable market conditions.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales.  In addition, we may need to reserve cash (including proceeds from this offering) to satisfy our REIT distribution requirements, even though there are attractive investment opportunities that may be available.  To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, computed without regard to the dividends paid deduction and excluding net capital gains.  In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our REIT taxable income, as adjusted.  We intend to make distributions to our stockholders to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives.  Our cash flows from operations may be insufficient to fund required distributions, for example as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments.  The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.  In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. To address and/or mitigate some of these issues, we may make taxable distributions that are in part paid in cash and in part paid in our common stock.  In such cases our stockholders may have tax liabilities from such distributions in excess of the cash they receive.  The treatment of such taxable share distributions is not clear, and it is possible the taxable share distribution will not count towards our distribution requirement, in which case adverse consequences could apply.

We intend to distribute our REIT taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both corporate income tax and the 4% nondeductible excise tax. However, there is no requirement that TRSs distribute their after-tax net income to their parent REIT or their stockholders.  Our taxable income may substantially exceed our net income as determined in accordance with GAAP because, for example, realized capital losses will be deducted in determining our GAAP net income, but may not be deductible in computing our taxable income. In addition, we may invest in assets that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets.  To the extent that we generate such non-cash taxable income in a taxable year, we may incur corporate income tax and the 4% nondeductible excise tax on that income if we do not distribute such income to our stockholders in that year. As a result of the foregoing, we may generate less cash flow than taxable income in a particular year. In that event, we may be required to use cash reserves, incur debt, or liquidate non-cash assets at rates or at times that we regard as unfavorable to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in that year.

If we fail to invest a sufficient amount of the net proceeds from selling our common stock in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.

Temporary investment of the net proceeds from sales of our common stock in short-term securities and income from such investment generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds.  If we are unable to invest a sufficient amount of the net proceeds from sales of our common stock in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents.  If we fail to satisfy any such income or asset test, unless we are entitled to

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relief under certain provisions of the Code, we could fail to qualify as a REIT.  See “U.S. Federal Income Tax Considerations.”

If we form a TRS our overall tax liability could increase.

Any TRS we form will be subject to U.S. federal, state and local income tax on its taxable income.  Accordingly, although our ownership of any TRSs may allow us to participate in the operating income from certain activities that we could not participate in without violating the REIT income tests requirements of the Code or incurring the 100% tax on gains from prohibited transactions, the TRS through which we earn such operating income or gain will be fully subject to corporate income tax.  The after-tax net income of any TRS would be available for distribution to us; however, any dividends received by us from our domestic TRSs will only be qualifying income for the 95% REIT income test, not the 75% REIT income test.  If we have any non-U.S. TRSs, then they may be subject to tax in jurisdictions where they operate and under special rules dealing with foreign subsidiaries, and they may generate income that is nonqualifying for either of the REIT income tests.

Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own and engage in transactions with TRSs, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock or securities of one or more TRSs.  A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT.  A TRS also may sell assets without incurring the 100% tax on prohibited transactions.  Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.  A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.  Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs (and for taxable years  beginning after December 31, 2017, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs).  In addition, the rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.  The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis (for example if we charged our TRS interest in excess of an arm’s length rate).  We may jointly elect with one or more subsidiaries for those subsidiaries to be treated as TRSs for U.S. federal income tax purposes.  These TRSs will pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us.  We will monitor the value of our respective investments in any TRSs we may form for the purpose of ensuring compliance with TRS ownership limitations and intend to structure our transactions with any such TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above.  There can be no assurance, however, that we will be able to comply with the 25% (or 20% for taxable years beginning after December 31, 2017) TRS limitation or to avoid application of the 100% excise tax.

Dividends payable by REITs generally do not qualify for reduced tax rates under current law.

Under current law, the maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20%.  Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income when paid to such stockholders.  The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

If our operating partnership or certain other subsidiaries fail to maintain their status as disregarded entities or partnerships, their income may be subject to taxation, which would reduce the cash available to us for distribution to you.

We intend to cause MogulREIT II OP, our operating partnership, to maintain its current status as a disregarded entity, or in the alternative, a partnership for federal income tax purposes. Our operating partnership would lose its status as a disregarded entity for federal income tax purposes if it issues interests to any subsidiary we establish that is not a disregarded entity for tax purposes (a regarded entity) or a person other than us. If our operating partnership issues interests to any subsidiary we establish that is a regarded entity for tax purposes or a person other than us, we would characterize

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our operating partnership as a partnership for federal income tax purposes. As a disregarded entity or partnership, our operating partnership is not subject to federal income tax on its income. However, if the IRS were to successfully challenge the status of our operating partnership as a disregarded entity or partnership, MogulREIT II OP would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This could also result in our losing REIT status. This would substantially reduce the cash available to us to make distributions to you and the return on your investment.

In addition, if certain of our other subsidiaries through which MogulREIT II OP owns its properties, in whole or in part, lose their status as partnerships or disregarded entities for federal income tax purposes, such subsidiaries would be subject to taxation as corporations, thereby reducing cash available for distributions to our operating partnership. Such a re-characterization of MogulREIT II OP’s subsidiaries also could threaten our ability to maintain REIT status.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or to liquidate otherwise attractive investments.

To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our shares.  We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution.  Thus, compliance with the REIT requirements may, for instance, hinder our ability to make certain otherwise attractive investments or undertake other activities that might otherwise be beneficial to us and our stockholders, or may require us to borrow or liquidate investments in unfavorable market conditions and, therefore, may hinder our investment performance.  As a REIT, at the end of each calendar quarter, at least 75% of the value of our assets must consist of cash, cash items, U.S. Government securities and qualified “real estate assets.”  The remainder of our investments in securities (other than cash, cash items, U.S. Government securities, securities issued by a TRS and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.  In addition, in general, no more than 5% of the value of our total assets (other than cash, cash items, U.S. Government securities, securities issued by a TRS and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% (or 20% for taxable years beginning after December 31, 2017) of the value of our total securities can be represented by securities of one or more TRSs.  After meeting these requirements at the close of a calendar quarter, if we fail to comply with these requirements at the end of any subsequent calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification.  As a result, we may be required to liquidate from our portfolio or forego otherwise attractive investments.  These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

You may be restricted from acquiring, transferring or being approved for repurchase of certain amounts of our common stock.

In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made.  To assist us in qualifying as a REIT, our charter contains an aggregate share ownership limit and a common stock ownership limit.  Generally, any of our shares owned by affiliated owners will be added together for purposes of the aggregate share ownership limit, and any common stock owned by affiliated owners will be added together for purposes of the common stock ownership limit.

If anyone attempts to transfer or own shares in a way that would violate the aggregate share ownership limit or the common stock ownership limit (or would prevent us from continuing to qualify as a REIT), unless such ownership limits have been waived prospectively or retroactively by the Board, those shares instead will be deemed transferred to a trust for the benefit of a charitable beneficiary and will be either repurchased by us or sold to a person whose ownership of the shares will not violate the aggregate share ownership limit or the common stock ownership limit and will not prevent us from qualifying as a REIT.  If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset.  Anyone who acquires or owns shares in violation of the aggregate share ownership limit or the common stock ownership limit, unless such ownership limit or limits have been waived prospectively or retroactively by the Board, or the other restrictions on transfer or ownership in our charter, bears the risk of a financial loss when the shares are repurchased or sold, if the NAV of our shares falls between the date of purchase and the date of repurchase or sale.

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Our limits on ownership of our shares also may require us to decline share repurchase requests that would cause other stockholders to exceed such ownership limits.  In addition, in order to comply with certain of the distribution requirements applicable to REITs we will decline to honor any repurchase request that we believe is a “dividend equivalent” repurchase, as discussed in “U.S. Federal Income Tax Considerations — Taxation of Taxable U.S. Stockholders — Repurchases of Common Stock.”

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may make non-controlling investments in entities that are considered partnerships for federal income tax purposes.  For purposes of the asset and income tests we must meet to qualify as a REIT, if we make an equity investment in such an entity, we are deemed to own our proportionate share of the partnership’s assets and to earn our proportionate share of the partnership’s gross income based on our pro rata share of capital interests in the partnership.  Such partnerships may invest in mezzanine loans, for which the IRS has provided a safe harbor but not rules of substantive law.  Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test.  To the extent that any such mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our REIT status.

Such partnerships may also invest in debt or preferred equity investments with “kickers.”  The character of such investments for REIT purposes may depend on the assets and operations of the issuer, which we generally will not control.  Thus, no assurance can be given that any such issuer will not operate in a manner that causes us to fail an income or asset test requirement.  In addition, the proper treatment of certain investments, including investments through subsidiaries (with rights to receive preferred economic returns) and “kickers,” for U.S. federal income tax purposes is unclear.  If the IRS were to successfully challenge our characterization of an investment, it could adversely affect our REIT status.

The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that the Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.  If we cease to be a REIT, we will not be allowed a deduction for distributions paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates, as well as state and local taxes, which may have adverse consequences on our total return to our stockholders.

Investments outside the United States could present additional complications to our ability to satisfy the REIT qualification requirements and may subject us to additional taxes.

Although we do not expect to invest in non-U.S. real estate assets, if we were to make such investments, operating in functional currencies other than the U.S. dollar and in environments in which real estate transactions are customarily structured differently than they are in the United States or are subject to different legal rules, it may complicate our ability to structure non-U.S. investments in a manner that enables us to satisfy the REIT qualification requirements.  In addition, non-U.S. investments may subject us to various non-U.S. tax liabilities, including withholding taxes.

The IRS may take the position that gains from sales of property are subject to a 100% prohibited transaction tax.

We may have to sell assets from time to time to fund share repurchase requests, to satisfy our REIT distribution requirements, to satisfy other REIT requirements, or for other purposes. It is possible that the IRS may take the position that one or more sales of our properties may be a prohibited transaction, which is a sale of property held by us primarily for sale in the ordinary course of our trade or business.  If we are deemed to have engaged in a prohibited transaction, our gain from such sale would be subject to a 100% tax.  The Code sets forth a safe harbor under which a REIT may, under certain circumstances, sell property without risking the imposition of the 100% tax, but there is no assurance that we will be able to qualify for the safe harbor.  We do not intend to hold property for sale in the ordinary course of business, but there is no assurance that the IRS will not challenge our position, especially if we make frequent sales or sales of property in which we have short holding periods.  For example, we could be subject to this tax if we were to acquire a portfolio of real estate assets and shortly thereafter dispose of portions of the portfolio we did not want to hold long term.  Therefore, in order to avoid the prohibited transactions tax, we may choose to hold certain assets that we believe would not perform

56


 

as well as the remaining assets of such an acquired portfolio, or we may choose not to acquire a portfolio offered on an “all-or-none” basis, even though certain assets in the portfolio might otherwise satisfy our investment criteria and be beneficial to us.

Possible legislative, regulatory or other actions affecting REITs could adversely affect our stockholders and us.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department.  Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us.  We cannot predict whether, when, in what forms, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.  A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes.  If such changes occur, we may be required to pay additional taxes on our assets or income or be subject to additional restrictions.  These increased tax costs could, among other things, adversely affect our financial condition, the results of operations and the amount of cash available for the payment of distributions.

Stockholders are urged to consult with their own tax advisors with respect to the impact that legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in our shares.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder’s investment in our common stock and may trigger taxable gain.

A portion of our distributions, including distributions that are reinvested pursuant to our distribution reinvestment plan, may be treated as a return of capital for U.S. federal income tax purposes.  As a general matter, a portion of our distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of our distributions for a year exceeds our current and accumulated earnings and profits for that year. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares.  See “U.S. Federal Income Tax Considerations.” Distributions that are reinvested pursuant to our distribution reinvestment plan will be treated as a new share purchase as of the date of the distribution.

Our ability to provide certain services to our tenants may be limited by the REIT rules, or may have to be provided through a TRS.

As a REIT, we generally cannot hold interests in rental property where tenants receive services other than services that are customarily provided by landlords, nor can we derive income from a third party that provides such services.  If services to tenants at properties in which we hold an interest are limited to customary services, those properties may be disadvantaged as compared to other properties that can be operated without the same restrictions.  However, we can provide such non-customary services to tenants or share in the revenue from such services if we do so through a TRS, though income earned through the TRS will be subject to corporate income taxes.

Our Manager and its affiliates have limited prior experience managing a portfolio of assets to comply with REIT requirements.

REITs are subject to numerous complex requirements in order to maintain their REIT status, including income and asset composition tests.  Our Manager and its affiliates have limited prior experience managing a portfolio in the manner intended to comply with such requirements.  To the extent our Manager and its affiliates manage us in a manner that causes us to fail to be a REIT, it could adversely affect the value of shares of our common stock.

Our qualification as a REIT and avoidance of the 100% tax on prohibited transactions may depend on the characterization of loans that are made as debt for U.S. federal income tax purposes.

As noted previously, we must consider the assets and income of entities treated as partnerships for federal tax purposes when determining whether we meet the qualifications to be taxed as a REIT.  If partnerships in which we invest hold loans that the IRS considers to have sufficient equity characteristics for federal income tax purposes to require their

57


 

recharacterization as equity, our REIT status could be jeopardized.  Moreover, to the extent the issuers of such recharacterized debt hold their assets as dealer property or inventory, our share of gains from sales by the borrower would be subject to the 100% tax on prohibited transactions.  See “U.S. Federal Income Tax Considerations – Gross Income Tests.”

The failure of a loan to qualify as an obligation secured by a mortgage on real property within the meaning of the REIT rules could adversely affect our ability to qualify as a REIT.

We may indirectly (for example, through investments in partnerships) hold investments in loans whose qualification as a real estate mortgage loan for REIT purposes is uncertain or which are treated in part as qualifying mortgage loans and in part as unsecured loans.  The failure of a loan that we treated as a qualifying mortgage loan to qualify as such for REIT purposes could cause us to fail one or more of the REIT income or asset tests, and thereby cause us to fail to qualify as a REIT unless certain relief provisions also apply.  See “U.S. Federal Income Tax Considerations – Gross Income Tests – Interest Income and Fees and Expense Reimbursements” and “U.S. Federal Income Tax Considerations – Asset Tests.”

The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur.

Borrowings incurred by partnerships in which we invest could result in such partnerships holding taxable mortgage pools for U.S. federal income tax purposes.  Certain categories of stockholders, however, such as non-U.S. stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain U.S. tax-exempt stockholders that are subject to UBTI, could be subject to increased taxes on a portion of their dividend income from us that is attributable to such taxable mortgage pools.  In addition, to the extent that our shares are owned by tax-exempt “disqualified organizations,” such as certain government-related entities and tax-exempt organizations that are not subject to tax on unrelated business income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool.  In that case, we may reduce the amount of our distributions to any disqualified organization whose share ownership gave rise to the tax.

In investment in our common stock could result in UBTI to tax-exempt investors.

If (1) we are allocated income from partnerships holding taxable mortgage pools, (2) we are a ‘‘pension-held REIT,’’ (3) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (4) the residual Real Estate Mortgage Investment Conduit interests, or REMICs, purchased by us or partnerships in which we invest generate ‘‘excess inclusion income,’’ then a portion of the distributions to, and in the case of a stockholder described in clause (3), gains realized on the sale of common stock by, such tax-exempt stockholder may be subject to federal income tax as UBTI under the Code.

We could fail to qualify as a REIT or we could become subject to a penalty tax if income we recognize from certain investments that are treated or could be treated as equity interests in a foreign corporation exceeds 5% of our gross income in a taxable year.

We may invest in securities that are treated or could be treated for U.S. federal (and applicable state and local) corporate income tax purposes as equity interests in foreign corporations. Categories of income that qualify for the 95% gross income test include dividends, interest and certain other enumerated classes of passive income. Under certain circumstances, the federal income tax rules concerning controlled foreign corporations and passive foreign investment companies require that the owner of an equity interest in a foreign corporation include amounts in income without regard to the owner’s receipt of any distributions from the foreign corporation. Amounts required to be included in income under those rules are technically neither actual dividends nor any of the other enumerated categories of passive income specified in the 95% gross income test. Furthermore, there is no clear precedent with respect to the qualification of such income under the 95% gross income test. Due to this uncertainty, we intend to limit our direct investment in securities that are or could be treated as equity interests in a foreign corporation such that the sum of the amounts we are required to include in income with respect to such securities and other amounts of non-qualifying income do not exceed 5% of our gross income. We cannot assure you that we will be successful in this regard. To avoid any risk of failing the 95% gross income test, we may be required to invest only indirectly, through a domestic TRS, in any securities that are or could be considered to be equity interests in a foreign corporation. This, of course, will result in any income recognized from any such investment to be subject to federal income tax in the hands of the TRS, which may, in turn, reduce our yield on the investment.  For further information, see “U.S. Federal Income Tax Considerations.”

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If we were considered to actually or constructively pay a “preferential dividend” to certain of our stockholders, our status as a REIT could be adversely affected.

As stated above, in order to qualify as a REIT, we must distribute as dividends to our stockholders at least 90% of our annual REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains.  Historically, in order for dividends to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT-level tax deduction, the dividends could not be “preferential dividends.”  A dividend is not a preferential dividend if the distribution is pro rata among all outstanding shares of stock within a particular class and in accordance with the preferences among different classes of stock as set forth in a REIT’s organizational documents.  On December 18, 2015, Congress passed the Protecting Americans from Tax Hikes Act of 2015, which is commonly referred to as the PATH Act.  The PATH Act repealed the set of rules prohibiting preferential dividends, but only with respect to REITs that file annual and periodic reports with the SEC under the Exchange Act.  We do not expect to become subject to the reporting requirements of the Exchange Act; however, if we do, we will become a reporting company under the Exchange Act, and the preferential dividend rule will be inapplicable to us.  However, if we do not become subject to and comply with the reporting requirements under the Exchange Act, we will not be exempt from the preferential dividend rule.  We expect to remain exempt from those requirements as long as we do not sell shares to at least 2,000 stockholders or more than 500 stockholders who are not accredited investors.  We intend to make dividends pro rata by class as disclosed under “Description of Our Common Stock – Distributions.” Nevertheless, if the IRS were to take the position that we paid a preferential dividend while we were subject to the preferential dividend rule, such dividends would not qualify for the dividends paid deduction, we may be deemed to have failed the 90% distribution test, and our status as a REIT could be terminated for the year in which such determination is made.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial and administrative changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. Particularly given a new Presidential administration, additional changes to tax laws are likely to continue to occur in the future and we cannot assure you that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our common stock. We urge you to consult with your own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our common stock.

Foreign investors may be subject to FIRPTA on the sale of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”

A foreign person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, on the gain recognized on the disposition. FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is a “domestically controlled qualified investment entity” and does not apply to the disposition of stock in a REIT if the holder is a “qualified foreign pension fund.”

A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (the continuous five year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. We cannot assure you that we will qualify as a domestically controlled qualified investment entity. If we were to fail to so qualify, gain realized by a foreign investor on a sale of our common stock would be subject to FIRPTA unless our common stock were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock or the investor was a qualified foreign pension fund.

A qualified foreign pension fund (including entities all of the interests of which are held by qualified foreign pension funds) is any trust, corporation, or other organization or arrangement (a) that is created or organized under the law of a country other than the United States, (b) that is established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered, (c) that does not have a single participant or beneficiary with a right to more than 5% of its assets or income, (d) that is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which it is established or operates, and (e) with respect to which, under the laws of the country in which it is established or operates, either (i) contributions made to it, which would

59


 

otherwise be subject to tax under such laws, are deductible or excluded from the gross income or taxed at a reduced rate, or (ii) taxation of any of its investment income is deferred or taxed at a reduced rate.  Accordingly, both public and private non-U.S. pension plans may benefit from this new FIRPTA exemption.

Retirement Plan Risks

If you fail to meet the fiduciary and other standards under ERISA or the Code as a result of an investment in our common stock, you could be subject to criminal and civil penalties.

If the fiduciary of an employee pension benefit plan subject to ERISA (such as a profit sharing, Section 401(k), or pension plan) or any other retirement plan or account fails to meet the fiduciary and other standards under ERISA or Section 4975 of the Code (such as an IRA or Keogh plan) as a result of an investment in our stock, the fiduciary could be subject to civil (and criminal, if the failure is willful) penalties.

There are special considerations that apply to such plans and accounts subject to ERISA and Section 4975 of the Code whose assets are being invested in our common stock. If you are investing the assets of such a plan or account (including assets of an insurance company general account or entity whose assets are considered plan assets under ERISA) in our common stock, in addition to meeting the fiduciary obligations noted in the preceding paragraph, you should satisfy yourself that:

·

your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plan or account’s investment policy;

·

your investment satisfies the prudence and diversification requirements of Section 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and/or the Code;

·

your investment in our shares, for which no trading market exists or is expected to develop, is consistent with, and will not impair the liquidity of the plan or IRA, including liquidity needed to satisfy minimum and other distribution requirements and tax withholding requirements that may be applicable;

·

your investment will not produce unacceptable UBTI for the plan or IRA;

·

you will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the plan or IRA;

·

your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code; and

·

our assets will not be treated as “plan assets” of the plan or IRA.

With respect to the annual valuation requirements under ERISA and the Code, we expect to provide an estimated NAV for shares of our common stock quarterly commencing on October 1, 2018.  See “Description of Our Common Stock – Valuation Policies.”  You should ensure that this frequency and approach to valuation is acceptable to the trustee or custodian of any plan or account before any investment in our shares is made by such plan or account.  The estimated value we report is not likely to reflect the proceeds you would receive upon our liquidation or upon the sale of your shares of common stock.  Accordingly, we can make no assurances that such estimated value will satisfy the applicable annual valuation requirements under ERISA and the Code.  The Department of Labor or the Internal Revenue Service, or the IRS, may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of shares of our common stock.  In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties, or other sanctions.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Code, the fiduciary that authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested, and for IRAs, the tax-exempt status of the IRA may be lost and all of the assets of the IRA may be deemed

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distributed and subject to tax.  For a discussion of the considerations associated with an investment in our shares by a qualified employee benefit plan or IRA, see “ERISA Considerations.”  ERISA plan fiduciaries and IRA owners and custodians should consult with counsel before making an investment in our common stock.

Significant investment by benefit plan investors (as defined by ERISA) could result in treatment of our assets as benefit plan assets.

The Department of Labor has promulgated regulations, which are referred to as the Plan Assets Regulation, describing what constitutes the assets of an entity whose underlying assets are considered to include “plan assets” of such plans, accounts, and arrangements (each of which we refer to as a benefit plan) with respect to the benefit plan’s investment in an entity for purposes of the fiduciary responsibility provisions of Title I of ERISA and Section 4975 of the Code.  Under the Plan Assets Regulation, if a benefit plan invests in an “equity interest” of an entity that is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act, the benefit plan’s assets are deemed to include both the equity interest itself and an undivided interest in each of the entity’s underlying assets, unless it is established that the entity is an “operating company” or the equity participation by “benefit plan investors” (as defined in Section 3(42) of ERISA) is not “significant.”

Under the Plan Assets Regulation and Section 3(42) of ERISA, equity participation in an entity by benefit plan investors is “significant” on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the value of any class of equity interest in the entity is held by benefit plan investors.  We refer to this as the 25% limitation.  For purposes of making determinations under the 25% limitation, (i) the value of any equity interests held by a person (other than a benefit plan investor) that has discretionary authority or control with respect to the assets, or any affiliate of such a person, is disregarded, and (ii) an entity that holds plan assets shall be considered to be a benefit plan investor only to the extent of its equity interests held by other benefit plan investors.  The definition of a “benefit plan investor” effectively excludes governmental, church, and foreign benefit plans, but for purposes of calculating the 25% limitation includes IRAs.

We do not expect our common stock to be considered a “publicly offered security” for purposes of ERISA.  Additionally, we will not be registered under the Investment Company Act, and we may not qualify as an “operating company” for purposes of the Plan Assets Regulation.  Therefore, if participation in us through the acquisition of any class of equity interest by benefit plan investors is “significant” within the meaning of the Plan Assets Regulation and Section 3(42) of ERISA, our assets could be deemed to be the assets of benefit plans investing in our securities unless we are otherwise able to meet one of the other exemptions under ERISA.  See “ERISA Considerations.”

If our assets were deemed to be “plan assets” under ERISA, among other things:

(i)

the prudence and other fiduciary responsibility standards of ERISA would apply to investments we make;

(ii)

certain transactions in which we might seek to engage could constitute “prohibited transactions” under ERISA and the Code, which, absent an exemption, could restrict us from acquiring an otherwise desirable investment or from entering into an otherwise favorable transaction;

(iii)

our assets could be subject to ERISA’s reporting and disclosure requirements;

(iv)

the fiduciary causing the benefit plan to make an investment in our securities could be deemed to have delegated its responsibility to manage the assets of the benefit plan; and

(v)

the indicia of ownership of our assets would have to be maintained within the jurisdiction of the district courts of the United States unless certain regulatory exceptions were applicable.

We cannot guarantee that we will be able to limit equity participation in our securities by benefit plan investors to less than 25% of the total value of each class of our equity securities or that we could qualify under one of the “operating company” exemptions.  Accordingly, our assets may be deemed “plan assets” under ERISA, which could severely restrict our operations or subject us to fines if we fail to comply with the above-noted requirements.

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If you invest in our shares through an IRA or other retirement plan, you may be limited in your ability to withdraw required minimum dividends.

If you establish a plan or account through which you invest in our common stock, federal law may require you to withdraw required minimum dividends from such plan in the future.  Our shares will be highly illiquid, and our share repurchase program only offers limited liquidity.  See “Description of Our Common Stock – Quarterly Share Repurchase Program.”  If you require liquidity, you may generally sell your shares, but such sale may be at a price less than the price at which you initially purchased your common stock.  If you fail to withdraw required minimum distributions from your plan or account, you may be subject to certain taxes and tax penalties.

Specific rules apply to foreign, governmental and church plans.

As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the Plan Assets Regulation.  Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Code and, under certain circumstances in the case of church plans, Section 4975 of the Code.  Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Code.  Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for and the availability of any exemption relief.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this offering circular that are 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 offering circular or in the information incorporated by reference into this offering circular.

The forward-looking statements included in this offering circular are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties.  Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.  Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.  Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

·

our ability to effectively deploy the proceeds raised in this offering;

·

our ability to attract and retain members to the Realty Mogul Platform;

·

risks associated with breaches of our data security;

·

changes in economic conditions generally and the real estate and securities markets specifically;

·

expected rates of return provided to investors;

·

the ability of our Manager, or its affiliates, to source real estate investment opportunities and to originate and service our loans and other assets;

·

our ability to retain and hire competent individuals who will provide services to us and appropriately staff our operations;

·

legislative or regulatory changes impacting our business or our assets (including changes to the laws governing the taxation of REITs and SEC guidance related to Regulation A or the JOBS Act);

·

changes in business conditions and the market value of our assets, including changes in interest rates, prepayment risk, operator or borrower defaults or bankruptcy, and generally the increased risk of loss if our investments fail to perform as expected;

·

our ability to implement effective conflicts of interest policies and procedures among the various real estate investment opportunities sponsored by Realty Mogul, Co.;

·

our ability to access sources of liquidity when we have the need to fund share repurchases of our common stock in excess of the proceeds from the sales of shares our common stock in our continuous offering and the consequential risk that we may not have the resources to satisfy share repurchase requests;

·

our failure to maintain our status as a REIT;

·

our compliance with applicable local, state and federal laws, including the Investment Advisers Act of 1940, as amended, or the Advisers Act, the Investment Company Act and other laws; and

·

changes to GAAP.

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Any of the assumptions underlying forward-looking statements could be inaccurate.  You are cautioned not to place undue reliance on any forward-looking statements included in this offering circular.  All forward-looking statements are made as of the date of this offering circular and the risk that actual results will differ materially from the expectations expressed in this offering circular will increase with the passage of time.  Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this offering circular, whether as a result of new information, future events, changed circumstances or any other reason.  In light of the significant uncertainties inherent in the forward-looking statements included in this offering circular, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this offering circular will be achieved.

INDUSTRY DATA

This offering circular contains statistical data, estimates and forecasts that are based on independent industry publications, such as those published by Axiometrics, Inc., Joint Center of Housing Studies of Harvard University, Prequin, Chaldron Economics, or other publicly available information, as well as information based on internal sources.  Although we believe that the third-party sources referred to in this offering circular are reliable, we have not independently verified the information provided by these third parties.  While we are not aware of any misstatements regarding any third-party information presented in this offering circular, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under “Risk Factors” and elsewhere in this offering circular.

ESTIMATED USE OF PROCEEDS

The table below sets forth our estimated use of proceeds from this offering, assuming we sell in this offering $50,000,000 in shares of our common stock, the maximum offering amount including shares sold pursuant to our distribution reinvestment plan.  Shares of our common stock will be offered at $10.00 per share through September 30, 2018. Thereafter, our price per share will be adjusted every fiscal quarter and will be based on our NAV as of the close of the last business day of the preceding fiscal quarter.  Our Sponsor previously acquired 10,000 shares of our common stock at a price equal to the initial public offering price in connection with our formation, for net proceeds to us of $100,000.  We intend to use substantially all of the proceeds of this offering to invest in a diverse portfolio of multifamily properties located in target markets throughout the United States.

We expect that any expenses or fees payable to our Manager for its services in connection with managing our daily affairs will be paid from cash flow from operations.  If such fees and expenses are not paid from cash flow (or not waived) they will reduce the cash available for investment and distribution and will directly impact our NAV.  See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates.  Many of the amounts set forth in the table below represent our Manager’s best estimate since they cannot be precisely calculated at this time.

We may not be able to promptly invest the net proceeds of this offering in properties and other investments in real estate. Accordingly, from time to time, we will have excess cash that we need to manage, pending investment by us in accordance with our investment strategy or distribution to our stockholders.  We intend to engage a third-party subadvisor to manage our cash balance.  We expect the subadvisor to (i) incur leverage on this cash balance and (ii) invest the cash and the debt incurred thereon in publicly-traded common or preferred shares in REITs or other short-term investments.  We will pay the subadvisor a fee of 0.5% of the amount invested (including the amount of any leverage utilized) and any additional out-of-pocket fees and expenses incurred by the subadvisor.

If we are unable to raise substantial funds during our offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate more significantly with the performance of the specific assets we acquire. Our inability to raise substantial funds

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would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to make distributions to our stockholders.

 

 

 

 

 

 

 

Maximum

 

 

 

Offering

 

 

 

Amount (1)

 

Gross Offering Proceeds

    

$

50,000,000

 

Less:

 

 

 

 

Organization and Offering Expenses(2)(3)

 

$

1,500,000

 

Net Proceeds from this Offering

 

$

48,500,000

 

Estimated Amount Available for Investments

 

$

48,500,000

 


(1)

This is a “best efforts” offering.

(2)

Investors will not pay upfront selling commissions in connection with the purchase of our shares of our common stock.  We will reimburse our Manager for actually incurred, third-party organization and offering costs, but we are under no obligation to do so before December 31, 2018.  Offering costs are not expected to exceed $1,450,000 and organization costs are not expected to exceed $50,000.  With respect to offering costs, on a monthly basis, the Company expects to reimburse our Manager for offering costs actually incurred at a rate equal to the aggregate proceeds raised in this offering as of the end of the prior monthly divided by the maximum offering amount of $50,000,000 (excluding any reimbursements made in previous months).  With respect to organization costs, the Company will not reimburse our Manager for such costs until the Company has raised $1,000,000 in this offering.  Once $1,000,000 has been raised in this offering, the Company expects to reimburse our Manager for all organization costs incurred.  See “Management Compensation” for a description of additional fees and expenses that we will pay our Manager.

(3)

Amount reflected is an estimate.  Includes all expenses to be paid by us in connection with the formation of the Company and the qualification of the offering, and the marketing and distribution of shares, including, without limitation, expenses for printing, engraving and amending offering statements or supplementing offering circulars, mailing and distributing costs, telephones, internet and other telecommunications costs, all advertising and marketing expenses, charges of experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees.  See “Plan of Distribution.”

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MANAGEMENT

General

We operate under the direction of the Board.  We have retained RM Adviser, LLC as our Manager to manage our day-to-day affairs and the acquisition and disposition of our investments, subject to the Board’s supervision.

Our charter and bylaws provide that the number of directors on the Board may be established by a majority of the entire Board, but may not be less than the minimum number permitted by Maryland law. Our bylaws provide, in general, that a majority of the Board must be independent directors. An “independent director” is a person who the Board affirmatively determines has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us.  A director is not independent if:  (i) the director is, or has been within the last three years, an employee of us, or an immediate family member of the director is, or has been within the last three years, an executive officer of us; (ii) the director has received, or has an immediate family member who is an executive officer of us and has received, during any 12‑month period within the last three years, more than $120,000 compensation directly from us; (iii) the director or an immediate family member is a current partner of our auditor, is a current employee of the auditor, an immediate family member is a current employee of the auditor and personally works on our audit, or was or an immediate family member was within the last three years a partner or employee of the auditor and personally worked on our audit within that time; (iv) the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee; or (v) the director is a current employee, or an immediate family member is a current executive officer, of an organization that has made to or received from us payments for property or services in an amount which, in any of the last three fiscal years, exceeds greater of 2% of such other company’s  consolidated gross revenues of $1 million.  As of the date of this offering circular, we have a total of [____] directors, a majority of whom are independent directors.

Each director will serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Although the number of directors may be increased or decreased, a decrease will not have the effect of shortening the term of any incumbent director.

Any director may resign at any time and may be removed for cause by the stockholders upon the affirmative vote of stockholders entitled to cast at least two-thirds of all the votes entitled to be cast generally in the election of directors.

Any vacancy created by the death, resignation, removal, adjudicated incompetence or other incapacity of a director may be filled by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum.  Any vacancy created by an increase in the number of directors may be filled by a majority of the entire Board.  Any director elected to fill a vacancy will serve until the next annual meeting of stockholders and until his or her successor is elected and qualifies. Each director will be bound by our charter and bylaws.

Our directors will not be required to devote all of their time to our business and only are required to devote the time to our affairs as their duties require. We expect that our directors will meet semi-annually, in person or by teleconference, or more frequently if necessary. Consequently, in the exercise of their responsibilities, our directors will rely heavily on our Manager and on information provided by our Manager. Our directors will supervise the relationship between us and our Manager.  The Board is empowered to fix the compensation of all officers that it selects and approve the payment of compensation to directors for services rendered to us.

The Board has adopted written policies on investments and borrowing, the general terms of which are set forth in this offering circular. Our directors may revise those policies or establish further written policies on investments and borrowings and monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled and are in the best interests of our stockholders. During the discussion of a proposed transaction, independent directors may offer ideas for ways in which transactions may be structured to offer the greatest value to us, and our Manager will take these suggestions into consideration when structuring transactions.

From time to time, our Manager may direct certain of its affiliates to acquire properties that would be suitable investments for us or our Manager may create special purpose entities to acquire properties that would be suitable investments for us. Subsequently, we may acquire such properties from such affiliates of our Manager if and when we have sufficient offering proceeds to do so. A majority of our directors, including a majority of our independent directors,

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who are not otherwise interested in the transaction must approve all transactions with our Manager or its affiliates. Our board of directors also will be responsible for reviewing the performance of our Manager and determining, from time to time and at least on an annual basis, that the compensation to be paid to our Manager is reasonable in relation to the nature and quality of services performed and that the provisions of the management agreement are being carried out.

The management agreement has a one-year term and will  be automatically renewed for an unlimited number of successive one-year periods. Our Manager will be able to terminate the management agreement upon 60 days’ written notice without cause or penalty. We will be able to terminate the management agreement only for “cause.” “Cause” is defined as:

 

                  our Manager’s continued breach of any material provision of the management agreement following a period of 30 days after written notice thereof (or 45 days after written notice of such breach if our Manager, under certain circumstances, has taken steps to cure such breach within 30 days of the written notice);

 

                  the commencement of any proceeding relating to the bankruptcy or insolvency of our Manager, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition;

 

                  our Manager committing fraud against us, misappropriating or embezzling our funds, or acting, or failing to act, in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under the management agreement; provided, however, that if any of these actions is caused by an employee, personnel and/or officer of our Manager or one of its affiliates and our Manager (or such affiliate) takes all necessary and appropriate action against such person and cures the damage caused by such actions within 30 days of our Manager’s actual knowledge of its commission or omission, then the management agreement may not be terminated; or

 

                  the dissolution of our Manager.

 

Unsatisfactory financial performance of the Company does not constitute “cause” under the management agreement. Fees to be payable to our Manager pursuant to the management agreement, including any fees that may be paid upon termination of the management agreement, are described below under  “Management Compensation.”

Neither our Manager nor any of its affiliates will vote or consent to the voting of shares of our common stock they now own or hereafter acquire on matters submitted to the stockholders regarding either (1) the removal of our Manager, any director or any of their respective affiliates, or (2) any transaction between us and our Manager, any director or any of their respective affiliates. In determining the requisite percentage in interest required to approve such a matter, shares owned by our Manager and its affiliates will not be included.

Committees of the Board

The entire Board will be responsible for supervising our entire business and considering all major business decisions. However, our bylaws provide that the Board may establish such committees as the Board believes appropriate and in our best interests. The Board will appoint the members of the committee in the Boards’ discretion.  Committees typically report to the entire Board.

Audit Committee

The Board established an audit committee, consisting of _____________ and _______________, our independent directors. _____________ serves as chairman of the audit committee. The audit committee, by approval of at least a majority of its members, selects the independent registered public accounting firm to audit our annual financial statements, reviews with the independent registered public accounting firm the plans and results of the audit engagement, approves the audit and non-audit services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the adequacy of our internal accounting controls. The Board adopted a charter for the audit committee that sets forth its specific functions and responsibilities.

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Executive Officers and Directors

As of the date of this offering circular, our executive officers and directors are as follows:

 

 

 

 

 

 

Name

    

Age

    

Position

Jilliene Helman

 

30 

 

Chief Executive Officer, President and Secretary

Karen Fleck

 

33 

 

Chief Financial Officer, Vice President and Treasurer

[______________]

 

[__]

 

Independent Director

[______________]

 

[__]

 

Independent Director

 

Biographical information for Ms. Helman and Ms. Fleck is provided below under the caption “- Executive Officers of our Manager.”

 

Responsibilities of Independent Directors

In accordance with our charter, a majority of our independent directors generally must approve corporate actions or policies that directly relate to the following:

·

any transfer or sale of our Sponsor’s initial investment in us; provided, however, our Sponsor may not sell its initial investment while it remains our Sponsor, but our Sponsor may transfer the shares to an affiliate;

·

the duties of our directors, including ratification of our charter, the written policies on investments and borrowing, the monitoring of administrative procedures, investment operations and our performance and the performance of our Manager;

·

the management agreement;

·

liability and indemnification of our directors, Manager and affiliates;

·

fees, compensation and expenses, including organization and offering expenses, acquisition fees and acquisition expenses, disposition fees, total operating expenses, real estate commissions on the resale of property, incentive fees, and Manager compensation;

·

any change or modification of our statement of investment objectives;

·

real property appraisals;

·

our borrowing policies;

·

annual and special meetings of stockholders;

·

election of our directors; and

·

our distribution reinvestment plan.

Compensation of Directors

We pay to each of our independent directors a retainer of 500 shares per year, plus an additional retainer of 500 shares to the chairman of the audit committee. We also pay 500 shares for each meeting of the Board or committee thereof the director attends in person and 500 shares for each meeting the director attends by telephone. In the event there is a meeting of the Board and one or more committees thereof in a single day, the fees paid to each director will be limited to 500 shares per day. All directors will receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at each meeting of the Board. Independent directors are not reimbursed by us, our Sponsor,  our Manager or any of their affiliates for spouses’ expenses to attend events (if any) to which spouses are invited. If a non-independent director is also an employee of the Company or our Manager or its affiliates, we will not pay compensation for services rendered as a director.

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Limited Liability and Indemnification of Our Directors, Officers, Manager and Other Agents

Maryland law permits us to include in our charter a provision limiting the liability of our directors and officers to our stockholders and us for money damages, except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty established by a final judgment and that is material to the cause of action.

The Maryland General Corporation Law requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The Maryland General Corporation Law allows directors and officers to be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding unless it is established that:

·

an act or omission of the director or officer was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;

·

the director or officer actually received an improper personal benefit in money, property or services; or

·

with respect to any criminal proceeding, the director or officer had reasonable cause to believe his or her act or omission was unlawful.

A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by the corporation or in its right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses. The Maryland General Corporation Law permits a corporation to advance reasonable expenses to a director or officer upon receipt of a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.

To the maximum extent permitted by Maryland law, our charter limits directors’ and officers’ liability to us and our stockholders for monetary damages.  To the maximum extent permitted by Maryland law, our charter authorizes us to obligate ourselves and our bylaws obligate us to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to our directors, our officers, our advisor or any of its affiliates.  Our charter and bylaws also permit us to provide such indemnification and advance of expenses to our employees and agents. This provision does not reduce the exposure of directors and officers to liability under federal or state securities laws, nor does it limit the stockholders’ ability to obtain injunctive relief or other equitable remedies for a violation of a director’s or an officer’s duties to us, although the equitable remedies may not be an effective remedy in some circumstances.

We have also agreed to indemnify and hold harmless our Manager and its affiliates performing services for us from specific claims and liabilities arising out of the performance of their obligations under the management agreement. As a result, our stockholders and we may be entitled to a more limited right of action than they and we would otherwise have if these indemnification rights were not included in the management agreement.

The general effect to our stockholders of any arrangement under which we agree to insure or indemnify any persons against liability is a potential reduction in distributions resulting from our payment of premiums associated with insurance or indemnification payments in excess of amounts covered by insurance. In addition, indemnification could reduce the legal remedies available to our stockholders and us against our officers and directors.

The SEC and some state securities commissions take the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable.

Our Manager

Our Manager manages our day-to-day affairs, and implements our investment strategy.  A majority of the investment committee of our Manager will approve each of our investments.  Jilliene Helman, our Manager’s Chief

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Executive Officer, and Megan Goodfellow,  our Manager’s Chief Credit Officer, will be our Manager’s initial investment committee.  Our Manager and its officers are not required to devote all of their time to our business and are only required to devote such time to our affairs as their duties require.

We will follow the investment and borrowing policies set forth in this offering circular unless they are modified by our Manager.  Our Manager may establish further written policies on investments and borrowings and will monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled.  Our Manager may change our investment objectives at any time without approval of our stockholders.

Our Manager performs its duties and responsibilities pursuant to the management agreement.  We have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities. Our Manager is a wholly-owned subsidiary of Realty Mogul, Co.

Our Manager also sponsors an investment calculator available to users of the Realty Mogul Platform.  The investment calculator uses investor inputs to generate recommendations as to the portion of an investment portfolio that should be held in real estate investments and the types of investments available through the Realty Mogul Platform that may be appropriate to the portfolio given the investor’s risk and return profile.

Our Manager currently manages another REIT with similar investment objectives, MogulREIT I, LLC, which was filed with the SEC on July 19, 2016 and qualified on August 12, 2016.  MogulREIT I, LLC has not established a targeted date or time frame for pursuing a liquidity event, although it has disclosed in its offering circular that it expects to seek a liquidity transaction in the future if it determines that such transaction is in its best interests.

Responsibilities of our Manager

Subject to the oversight and direction of the Board, the responsibilities of our Manager include:

Investment Advisory and Acquisition Services

·

approve and oversee our overall investment strategy, which will consist of elements such as investment selection criteria, diversification strategies and asset disposition strategies;

·

serve as our investment and financial manager with respect to investing in and managing a diverse portfolio of multifamily properties located in targeted markets throughout the United States.;

·

approve and oversee our debt financing strategies;

·

approve joint ventures, limited partnerships and other such relationships with third parties;

·

approve any potential liquidity transaction;

·

obtain market research and economic and statistical data in connection with our investments and investment objectives and policies;

·

oversee and conduct the due diligence process related to prospective investments; and

·

negotiate and execute approved investments and other transactions.

Offering Services

·

the development of this offering, including the determination of its specific terms;

·

in conjunction with NCPS and Mogul Securities, preparation and approval of all marketing materials to be used by us relating to this offering, including any “testing the waters” materials;

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·

in conjunction with NCPS and Mogul Securities, the negotiation and coordination of the receipt, collection, processing and acceptance of subscription agreements and other administrative support functions;

·

in conjunction with NCPS and Mogul Securities, creation and implementation of various technologies and electronic communications related to this offering; and

·

in conjunction with NCPS and Mogul Securities, all other services related to this offering.

Asset Management Services

·

investigate, select, and, on our behalf, engage and conduct business with such persons as our Manager deems necessary to the proper performance of its obligations under the management agreement, including but not limited to consultants, accountants, lenders, technical managers, attorneys, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies and any and all persons acting in any other capacity deemed by our Manager necessary or desirable for the performance of any of the services under the management agreement;

·

monitor applicable markets and obtain reports (which may be prepared by our Manager or its affiliates) where appropriate, concerning the value of our investments;

·

monitor and evaluate the performance of our investments, provide daily management services to us and perform and supervise the various management and operational functions related to our investments;

·

formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of investments on an overall portfolio basis; and

·

coordinate and manage relationships between us and any joint venture partners.

Accounting and Other Administrative Services

·

manage and perform the various administrative functions necessary for our day-to-day operations;

·

provide or arrange for administrative services, legal services, office space, office furnishings, personnel and other overhead items necessary and incidental to our business and operations;

·

provide financial and operational planning services and portfolio management functions;

·

maintain accounting data and any other information concerning our activities as will be required to prepare and to file all periodic financial reports and returns required to be filed with the SEC and any other regulatory agency, including annual financial statements;

·

maintain all appropriate Company books and records;

·

oversee tax and compliance services and risk management services and coordinate with appropriate third parties, including independent accountants and other consultants, on related tax matters;

·

make, change, and revoke such tax elections on behalf of the Company as the Board deems appropriate, including, without limitation, (i) making an election to be treated as a REIT or to revoke such status and (ii) making an election to be classified as an association taxable as a corporation for U.S. federal income tax purposes;

·

supervise the performance of such ministerial and administrative functions as may be necessary in connection with our daily operations;

·

in conjunction with any subadvisor, provide us with all necessary cash management services;

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·

manage and coordinate with the transfer agent the process of making distributions and payments to stockholders;

·

evaluate and obtain adequate insurance coverage based upon risk management determinations;

·

provide timely updates related to the overall regulatory environment affecting us, as well as managing compliance with regulatory matters;

·

evaluate our corporate governance structure and appropriate policies and procedures related thereto; and

·

oversee all reporting, record keeping, internal controls and similar matters in a manner to allow us to comply with applicable law.

Stockholder Services

·

determine our distribution policy and recommend that the Board approve distributions from time to time;

·

determine amounts available for repurchases of our common stock;

·

manage communications with our stockholders, including answering phone calls and preparing and sending written and electronic reports and other communications; and

·

establish technology infrastructure to assist in providing stockholder support and services.

Financing Services

·

identify and evaluate potential financing and refinancing sources, engaging a third-party broker if necessary;

·

negotiate terms of, arrange and execute financing agreements;

·

manage relationships between us and our lenders, if any; and

·

monitor and oversee the service of our debt facilities and other financings, if any.

Disposition Services

·

evaluate and approve potential asset dispositions, sales or liquidity transactions; and

·

structure and negotiate the terms and conditions of transactions pursuant to which our assets may be sold.

Our Manager may hire third parties to assist with the performance of the aforementioned services.

Allocation of Investment Opportunities

Realty Mogul, Co. expects to continue to offer investment opportunities through the Realty Mogul Platform.  As a result, investment opportunities may arise that could be allocated to either the Realty Mogul Platform, the Company or another REIT managed by our Manager.  In these instances, investments will be allocated as follows: any potential equity investment exceeding $1,500,000 will first be made available to the REITS based on the applicability of each investment opportunity to the investments policies of the Company and the additional REITs. Our Manager will further allocate investment opportunities among the Company and any additional REITs based on: the diversification and current asset concentration of each entity; the amount of capital available to each entity at the time an investment is presented; and other similar factors.  To the extent that, based on these factors, an investment opportunity is an appropriate investment for any of the additional REITs and/or the Company, then our Manager’s investment committee will allocate the new investment opportunity to the Company or an additional REIT based on which entity has gone the longest period of time without making an investment.  However, our Manager may choose to deviate from this allocation policy if the policy will cause the applicable entity to be out of compliance with its avoiding regulation under the Investment Company Act and/or the

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IRS requirements for REITs, or based on other factors that affect whether an investment is in the best interest of the Company or any additional REIT.  If we choose not to invest, then those investment opportunities will be made available to other investors through the Realty Mogul Platform.

We may, where the investment committee of our Manager determines that the size of an investment would create undue concentration in our portfolio or that the entire investment would otherwise be unsuitable for us, permit a portion of an investment to be sold on the Realty Mogul Platform.  In no event would the Company’s ability to invest in its portion of the investment be contingent upon the successful sale of the remaining portion on the Realty Mogul Platform.

Shared Services Agreement

Our Manager has entered into a shared services agreement with Realty Mogul, Co.  Pursuant to this agreement, employees of Realty Mogul, Co. will provide certain services to our Manager, including portfolio management, asset valuation, risk management and asset management services as well as administration services addressing legal, compliance, investor relations and information technologies necessary for the performance by our Manager of its duties under the management agreement. Under the shared services agreement, Realty Mogul, Co. will be entitled to receive reimbursement of expenses incurred on behalf of us or our Manager as described in “Management Compensation” and pursuant to the management agreement.  All employees of Realty Mogul, Co. who provide services to our Manager will be subject to our Manager’s policies and procedures, including its Code of Ethics.

Executive Officers of our Manager

As of the date of this offering circular, the executive officers of our Manager and their positions and offices are as follows:

 

 

 

 

 

 

Name

    

Age

    

Position

 

Jilliene Helman

 

30

 

Chief Executive Officer, President and Secretary

 

Justin Hughes

 

34

 

Senior Managing Director

 

Elizabeth Braman

 

42

 

Senior Managing Director

 

Karen Fleck

 

33

 

Chief Financial Officer, Vice President and Treasurer

 

Megan Goodfellow

 

57

 

Chief Credit Officer

 

Charles Taylor

 

47

 

Managing Director

 

 

Jilliene Helman serves as our Chief Executive Officer, President and Secretary, and Chief Executive Officer of our Manager.  Since May 2012, Ms. Helman has served as the Chief Executive Officer and a director of Realty Mogul, Co., where she is responsible for Realty Mogul, Co.’s strategic direction and operations.  In this capacity, she has approved over $250 million of investments with property values worth over $1 billion.  From July 2008 to September 2012, Ms. Helman served in a variety of capacities at Union Bank, including as a Management Training Associate; an Assistant Vice President, Sales Development Manager; and Vice President, Corporate Risk Management. Ms. Helman held these positions across the wealth management, finance and risk management departments of Union Bank. Ms. Helman is a Certified Wealth Strategist and holds Series 7, Series 63 and Series 24 licenses. Ms. Helman has a Bachelor of Science in Business Administration degree from Georgetown University.

Justin Hughes serves as Senior Managing Director of our Manager.  Since May 2012, Mr. Hughes has served as the Chief Technology Officer and a director of Realty Mogul, Co.  From September 2007 to May 2012, Mr. Hughes was an independent contractor supporting his clients with web application development, digital marketing and other IT-related services. Mr. Hughes is a licensed real estate professional in California. Mr. Hughes holds Series 7, Series 63 and Series 24 licenses. Mr. Hughes has a Bachelor of Science degree from the University of California, Berkeley.

Elizabeth Braman serves as Senior Managing Director of our Manager.  Since May 2014, Ms. Braman has served as the Chief Production Officer of Realty Mogul, Co., where she is responsible for procuring new products and bringing new equity and debt investment opportunities to the Realty Mogul Platform.  From November 2012 to May 2014, Ms. Braman served as Chief Production Officer at ReadyCap Commercial, a provider of small-balance commercial real estate financing backed by Waterfall Asset Management, a firm with $5.4 billion in assets under management, where she headed originations.  From May 2011 to October 2012, Ms. Braman served as a Senior Vice President, Commercial Lending at Skyline Financial Corp., a mortgage banking and brokerage firm. Ms. Braman is a Certified Commercial Investment Member (CCIM) and a licensed attorney. Ms. Braman has more than 15 years of experience in commercial

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real estate. Ms. Braman has a Bachelor of Arts degree from American University and a Master of Business Administration and a Juris Doctor degree from George Washington University.

Karen Fleck serves as our Vice President, Chief Financial Officer and Treasurer, and Chief Financial Officer of our Manager. Since January 2017, Ms. Fleck has served as the Chief Operating Officer of Realty Mogul, Co. From May 2016 to January 2017,  Ms. Fleck served as the Senior Vice President of Realty Mogul, Co.  From March 2015 through May 2016, Ms. Fleck was the Controller of Realty Mogul, Co.  From March 2011 to March 2015, Ms. Fleck served as the Chief Financial Officer of American Assets Investment Management, LLC and American Assets Capital Advisers, LLC, which are both Registered Investment Advisors, and American Assets, Inc., an investment holding company. At these companies, she was responsible for financial management and accounting.  Prior to joining American Assets, Inc.,  Ms. Fleck served as a supervisor at RSM US LLP where she worked for a wide range of audit clients, including public company clients registered with the SEC, and oversaw many complex areas of GAAP accounting. Ms. Fleck is a Certified Public Accountant. Ms. Fleck has a Bachelor of Science degree and a Master of Science in Accounting degree from the University of Connecticut.

Megan Goodfellow serves as Chief Credit Officer of our Manager.  Since January 2015, Ms. Goodfellow has served as the Chief Credit Officer of Realty Mogul, Co. Ms. Goodfellow has worked in institutional finance for over three decades.  From June 2007 to January 2015, Ms. Goodfellow served as the Director of Affordable Housing Special Asset Management at Centerline Capital Group, a provider of real estate mortgage services that was acquired by The Hunt Companies in December 2015, where she was responsible for overseeing more than 50 properties and the restructuring of troubled assets. Ms. Goodfellow served as the Chief Underwriter and Credit Officer of the CMBS group of JP Morgan Chase from May 1998 to January 2006, where she oversaw five regional offices and 30 underwriters responsible for the underwriting and closing of conduit and balance sheet loans.  Earlier in her career, Ms. Goodfellow worked in the investment group for American General Corporation, holding various positions involving real estate and mortgage portfolios, and for Fidelity Investments, where she focused on real estate development and investments. Ms. Goodfellow is a Chartered Financial Analyst (CFA). Ms. Goodfellow has a Bachelor of Arts degree from St. Bonaventure University and a Masters of Business Administration degree from the University of Houston.

Chuck Taylor serves as Managing Director of our Manager and has more than 20 years of experience in commercial real estate finance, providing a broad capital markets understanding and well-rounded financing and investing perspective. He has closed over $8 billion in commercial debt and equity transactions in his career. Previously,  Mr. Taylor was Principal and EVP at A10 Capital, where he was responsible for originating commercial mortgage loans in the Southeastern United States. Prior to A10 Capital, Mr. Taylor was director of acquisitions for Reynolds Capital Group, a real estate private equity fund with more than $130 million of committed capital. Before joining Reynolds Capital, Mr. Taylor was an executive director with J.P. Morgan in the Commercial Real Estate Debt Capital Markets group for 10 years. He served as the head of underwriting for the East Region, overseeing teams in New York and Atlanta. Mr. Taylor earned a Bachelor’s degree in Economics and a Master’s degree in Real Estate, both from the University of Florida.

Compensation of Executive Officers

We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us.  As described above, certain of the executive officers of Realty Mogul, Co. also serve as executive officers of our Manager.  Each of these individuals receives compensation for his or her services, including services performed for us on behalf of our Manager, from Realty Mogul, Co.  As executive officers of our Manager, these individuals will manage our day-to-day affairs, oversee the review, selection and recommendation of investment opportunities, service acquired investments and monitor the performance of these investments to ensure that they are consistent with our investment objectives.  Although we will indirectly bear some of the costs of the compensation paid to these individuals, through fees we pay to our Manager, we do not intend to pay any compensation directly to these individuals.

Holdings of Shares of Our Common Stock

Our Sponsor has invested $100,000 in us through the purchase of 10,000  shares in a private placement at $10.00 per share.

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Realty Mogul Platform

With the exception of offering shares of our common stock online through select RIA partners, shares of our common stock will be offered exclusively through the Realty Mogul Platform.  The Realty Mogul Platform is owned and operated by RM Technologies, LLC, a wholly-owned subsidiary of Realty Mogul, Co.  We will not pay RM Technologies, LLC any sales commissions or other remuneration for hosting this offering on the Realty Mogul Platform.  The Realty Mogul Platform has previously hosted private offerings of investment opportunities originated by the RM Originators under similar arrangements.  The Realty Mogul Platform was formed in 2013 and has a limited operating history.  See “Risk Factors –  Risks Related to the Investment Platform.

License Agreement

We will enter into a license agreement with Realty Mogul, Co. effective upon the commencement of this offering, pursuant to which Realty Mogul, Co. will grant us a non-exclusive, royalty free license to use the name “Realty Mogul.”  Other than this license, we will have no legal right to use the “Realty Mogul” name.  In the event that our Manager ceases to manage us, we would be required to change our name to eliminate the use of “Realty Mogul.”

MANAGEMENT COMPENSATION

Our Manager and its affiliates will receive fees and expense reimbursements for services relating to this offering and the investment and management of our assets.  Our Manager provides offering, investment or management services to other entities,  and it may do so in the future and may provide investment advice to persons or entities through the investment calculator. See “Conflicts of Interest – Investment Calculator.”  Some of the fees will be paid by the Company and some by unrelated third parties.  The items of compensation are summarized in the following table.  The Company will not pay our Manager or its affiliates any selling commissions or dealer manager fees in connection with the offer and sale of shares of our common stock.

No portion of the fees detailed below will be allocated to any individual in his or her capacity as an executive officer of our Manager.

 

 

 

 

 

Form of Compensation and Recipient

    

Determination of Amount

    

Estimated Amount

 

 

 

 

 

Organization and Offering Stage

 

 

 

 

 

Organization and Offering Expenses — Manager

 

Our Manager has paid and may continue to pay organization and offering expenses on our behalf. We will reimburse our Manager for any third-party costs and future third-party organization and offering costs it may incur on our behalf, depending on the offering proceeds we raise. See “Estimated Use of Proceeds” for more details. We expect organization and offering expenses to be no more than $1,500,000.

 

$ 300,000 - $1,500,000