Frequently Asked Questions
ABOUT REAL GROWTH CAPITAL
WHO IS REAL GROWTH CAPITAL?
We are a real estate investment firm that acquires commercial and multi-family properties in fast-growing markets in the southeast. Our headquarters is in Charleston.
WHERE DOES REAL GROWTH CAPITAL INVEST?
Real Growth Capital invests in markets in the southeastern United States. Smaller firms have a strategic advantage to bigger firms because of local connections, a lack of middlemen siphoning returns, and street-level knowledge of market drivers. We evaluate demand metrics such as population growth, rent growth, transportation systems, proximity to universities, job growth, and many more factors. We invest in commercial and affordable housing assets across Tennessee, Florida, and the Carolinas. For market-rate, value-add assets, we target Greenville (SC), Charlotte, Raleigh-Durham, Greensboro-Winston Salem, Atlanta, Nashville, Chattanooga, Knoxville, Jacksonville, and Tampa. We believe these markets offer the best opportunities for our investors given the size and strengths of our firm.
WHAT TYPES OF PROJECTS DOES REAL GROWTH CAPITAL INVEST IN?
Real Growth Capital targets underperforming commercial and multi-family assets in high-growth markets in the southeastern U.S.. We invest in assets where we can create value by buying with favorable terms and enhancing revenue. The focus is narrowed by each market’s local growth conditions. Generally, we invest in affordable housing (e.g. HAP, LIHTC) for cash-flow and longer hold periods. We invest in value-add multifamily assets for shorter holding periods with the goal of maximizing investors’ IRR with strong interim cash-flow and a profitable sale.
WHAT MAKES REAL GROWTH CAPITAL DIFFERENT?
Real Growth Capital targets real estate assets that we want to invest in ourselves. We are not a middle man or broker like a traditional crowd-funding site. We do not model deals to achieve mediocre returns for investors and substantial fees for the sponsor. We create value, and we aim to generate the highest possible risk-adjusted returns for investors so that we can increase our own invested wealth and grow our business.
We are not a fund and do not offer complicated, pre-bundled investments. Rather, we use technology to allow investors to make informed, asset-level investment choices. We believe this creates an opportunity for greater diversity among asset classes and markets. Investors only select projects that match their specific investment criteria and goals. We only invest in markets where we have specialized expertise and local knowledge.
IS REAL GROWTH CAPITAL A REIT?
No. Real Growth Capital offers asset-level investments in high-qualify opportunities.
Our investors own an actual membership interest in the LLC that purchases and operates each real estate asset. We believe this structure maximizes the ability of informed investors to surpass their investment goals. All tax benefits (such as depreciation and interest expense) flow through to investors in our model. With a REIT and some funds, the company captures the tax benefits; and money paid to investors is typically taxed as ordinary income.
Private REITs pay financial advisers to “sell” their product–which means higher costs and lower returns.
REITs can take money up front without a specific property in mind. This creates pressure to invest and can influence investment decisions in ways that yield inferior opportunities. A REIT may invest in cash and then pay investors a dividend with their own money. Real Growth Capital uses a called capital structure. We only ask for capital after an asset is located and underwritten; and the investor can see transparently where his money (and our money) is going.
REITs and some funds generate significant fees through transactions and financial engineering. Real Growth Capital generates value and earns a performance fee based on the profitability of the investment to investors and sponsor alike.
Real Growth Capital provides strong transparency to investors for the life of the investment. Investors see the detailed structure of the LLC acquiring the property as well as the projected quarterly revenues, expenses, returns, and distributions. An investor can see exactly how Real Growth Capital is creating value and how it expects to pay that value to investors. After an investment is made, we provide periodic updates during any development or transitional phases plus quarterly performance updates. REITs are “real estate” investments; but the similarities largely stop there. We offer an entirely different business model and an entirely different investment.
IS REAL GROWTH CAPITAL A BROKER-DEALER?
No. Real Growth Capital is not a broker-dealer. We are a private equity firm that sponsors group investments in real estate assets. We search for deals in our target markets that have the potential to yield high risk-adjusted returns. We then acquire control of properties and form the LLC which is to own and operate the property. We manage the asset after acquisition; and, if the asset is to be sold in the future, we sell it.
A broker-dealer sells securities, typically for a commission. We create unique investment opportunities and share the risk and reward alongside our investment partners.
INVESTOR QUESTIONS
SHOULD I SIGNUP THROUGH THE REAL GROWTH CAPITAL WEBSITE?
Sign up to receive in-depth information about our investment offerings as they are shared with our investors as well as our private commercial real estate newsletter. After investing, your inbox becomes the place to receive account statements, updates, and ongoing communications from Real Growth Capital. We hope you will find the newsletter informative, but you can unsubscribe at any time. We do not sell your information or use it for any purpose besides sending you our newsletter and investment opportunities.
CAN I INVEST WITH REAL GROWTH CAPITAL?
Real Growth Capital’s offerings are available to accredited investors. We do not verify accreditation status until you decide to invest in an offering. The term “accredited investor” is used by the U.S. Securities and Exchange Commission in Section 501 of Regulation D. To qualify, an investor must meet one of the following criteria:
- Earn an individual income of more than $200,000 per year, or a joint spousal income of more than $300,000 per year, in each of the last two years and expect to reasonably maintain the same level of income;
- Have a net worth exceeding $1 million, either individually or jointly with his or her spouse (excluding the primary residence);
- Be a bank, insurance company, registered investment company, business development company, or small business investment company;
- Be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered; or
- Be a business in which all the equity owners are accredited investors. Be an employee benefit plan, a trust, charitable organization, partnership, or company with total assets in excess of $5 million.
DO I NEED TO VERIFY THAT I AM AN ACCREDITED INVESTOR?
Yes. Once you decide to invest in a property, a team member will contact you with instructions on how to verify your accreditation. The information needed is not burdensome.
HOW DO I INVEST WITH REAL GROWTH CAPITAL?
We share our investment opportunities through our email list. If you want to invest in a particular property, the email discussing the opportunity will contain a link to view detailed information about the offering and instructions how to invest. If you choose to invest, we will contact you with instructions on how to verify your accreditation, sign legal documents, and fund the investment.
CAN IN INVEST WITH MY RETIREMENT ACCOUNT?
Yes. Investors are able to invest with their traditional self-directed IRAs.
HOW WILL I KNOW ABOUT MY INVESTMENT PERFORMANCE?
We send detailed reports at least once a quarter and, generally, at milestones during any development or transition phase of a project. In addition, we are a relatively small firm. If you have questions about a particular investment, you can simply email or call Michael or Scott directly to inquire.
CAN I RESELL MY SECURITIES?
Probably not. Investors participating in Real Growth Capital offerings purchase highly illiquid securities. You should expect to hold the securities until they mature or there is a liquidation event.
WHO IS RESPONSIBLE FOR MANAGEMENT OF THE INVESTMENT?
The structure of each opportunity varies, but generally, Real Growth Capital will manage the direction of the project and asset, and a third-party management company may be engaged to manage the tenants and maintenance of the property itself. Various lawyers, accountants, and other professionals are typically also engaged to assist with operation of the asset. The offering document will contain details of project management.
WHAT FEES DO YOU CHARGE?
At Real Growth Capital, we invest alongside our investors and then structure deals to earn the bulk of our fee based on performance. This keeps everyone in the same boat. A performance fee means that a sponsor might contribute 10% of the capital to a project; then receive a range of 10% to 30% of the profits depending on the success of the investment for our investors. Over-performance means happy investors and happy sponsors.
Generally, there are three common types of non-performance fees that a group investment sponsor might charge depending on the work required. These are typical of private equity offerings and are generally intended to compensate the sponsor where he does work that the investment group would otherwise pay an outside professional or firm to do:
Acquisition Fee (1-3% of the purchase price). This is paid upon the deal closing to compensate the sponsor for the work of putting together the deal, underwriting the project, performing diligence, assembling the project team (potentially accountants, bankers, property managers, lawyers, brokers, and contractors), and acquiring the property. We work full-time sourcing and underwriting investment opportunities.
Asset Management Fee (1-3% of gross revenue). This is a monthly expense of the business to compensate the sponsor for the ongoing work of managing the asset. This is earned for the sponsor’s efforts and expertise running the business.
Construction Fee (varies). This is an expense during construction to compensate the sponsor for oversight and management of construction. This is earned when a sponsor has particular knowledge and expertise which allows him to do the work a project supervisor or other professional would otherwise be hired to do.
DO INVESTORS PAY THESE FEES?
No. They are simply treated like any other business expense as the business operates–which makes sense because the sponsor is performing work that the business would otherwise pay a third-party to do.
ARE FEES COUNTED BEFORE YOUR FORECAST INVESTOR RETURNS?
Absolutely.
When we forecast that investors will receive a cash-on-cash return of 9.25% in year 2 of an investment, for example, and an aggregate IRR of 15.50%, that means we expect to pay each investor 9.25% over the course of the second year of operation and we expect the total returns an investor receives to have an IRR of 15.50% from acquisition, through any refinance, to sale. What’s more, we prepare a detailed proforma through our underwriting of an asset. Before you choose to join an opportunity, you review our detailed projections of revenue and expenses for the life of the investment–including how the profits are shared.
Transparency is what separates Real Growth Capital offerings from other types of investments. The offering circular and private placement memorandum, which accompany each offering, detail specifically when all fees and other expenses will be taken, their amounts, when investors will be paid, and the amounts they will be paid.
