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 SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S 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.

PRELIMINARY OFFERING CIRCULAR DATED JANUARY 22, 2021

Ark7 Properties LLC

(A DELAWARE SERIES LIMITED LIABILITY COMPANY)

535 Mission St., 14th Floor

San Francisco, CA 94105

www.ark7.com

There is no minimum subscription per investor.

This offering will terminate at the earlier of (1) the date at which the maximum offering amount has been sold, or the date at which the offering is earlier terminated by the company, in its sole discretion. At least every 12 months after this offering has been qualified by the United States Securities and Exchange Commission (the “Commission” or “SEC”), the company will file a post-qualification amendment to include the company’s recent financial statements. No escrow agent has been engaged for this offering and hold funds tendered by investors will be held in a segregated account controlled by the company. The company may undertake one or more closings on a rolling basis and, after each closing, funds tendered by investors will be available to the company. No escrow agent has been engaged for this offering and hold funds tendered by investors will be held in a segregated account controlled by the company.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF 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

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, THE COMPANY ENCOURAGES YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO www.investor.gov.

This offering is inherently risky. See “Risk Factors” on page 4.

Sales of these securities will commence on approximately [date].

The company is following the “Offering Circular” format of disclosure under Regulation A.

In the event that the company becomes a reporting company under the Securities Exchange Act of 1934, the company intends to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Summary — Implications of Being an Emerging Growth Company.”

TABLE OF CONTENTS

In this Offering Circular, the terms “Ark7 Properties LLC” “Ark7 Properties,” “we,” “us, “our,” the “company” and similar terms refer to Ark7 Properties LLC, a Delaware Series Limited Liability Company.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

Implications of Being an Emerging Growth Company

The company is not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because the company is not registering its securities under the Exchange Act.  Rather, the company will be subject to the more limited reporting requirements under Regulation A, including the obligation to electronically file:

In addition, at any time after completing reporting for the fiscal year in which the company’s offering statement was qualified, if the securities of each class to which this offering statement relates are held of record by fewer than 300 persons and offers or sales are not ongoing, the company may immediately suspend its ongoing reporting obligations under Regulation A. 

If and when the company becomes subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during its last fiscal year, it will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, the company:

The company intends to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. The company’s election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, the company may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after its initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that the company no longer meets the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that the company would cease to be an “emerging growth company” if it has more than $1.07 billion in annual revenues, have more than $700 million in market value of its common stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that the company may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

RISK FACTORS

The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as cyber-attacks and the ability to prevent those attacks). Additionally, early-stage companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Risks Relating to the Structure, Operation and Performance of the Company

An investment in an offering constitutes only an investment in that Series and not in the company or any Underlying Asset. A purchase of Series Interests in a Series does not constitute an investment in either the company or an Underlying Asset directly, or in any other Series Interest.  This results in limited voting rights of the investor, which are solely related to a particular Series, and are further limited by the Operating Agreement of the company, described further herein.  Investors will have limited voting rights. Thus, the Manager and the Asset Manager retain significant control over the management of the company, each Series and the Underlying Assets.  

Furthermore, because the Interests in a Series do not constitute an investment in the company as a whole, holders of the Interests in a Series are not expected to receive any economic benefit from, or be subject to the liabilities of, the assets of any other Series.  In addition, the economic interest of a holder in a Series will not be identical to owning a direct undivided interest in an Underlying Asset because, among other things, a Series will be required to pay corporate taxes before distributions are made to the holders, and the Asset Manager will receive a fee in respect of its management of the Underlying Asset.

Liability of investors between series of interests. The company is structured as a Delaware series limited liability company that issues a separate series of interests for each Underlying Asset. Each series of interests will merely be a separate series and not a separate legal entity. Under the Delaware Limited Liability Company Act (the “LLC Act”), if certain conditions (as set forth in Section 18-215(b) of the LLC Act) are met, the liability of investors holding one series of interests is segregated from the liability of investors holding another series of interests and the assets of one series of interests are not available to satisfy the liabilities of other series of interests.  

Although this limitation of liability is recognized by the courts of Delaware, there is no guarantee that if challenged in the courts of another U.S. State or a foreign jurisdiction, such courts will uphold a similar interpretation of Delaware corporation law, and in the past certain jurisdictions have not honored such interpretation.

If the company’s series limited liability company structure is not respected, then investors may have to share any liabilities of the company with all investors and not just those who hold the same series of interests as them. Furthermore, while the company intends to maintain separate and distinct records for each series of interests and account for them separately and otherwise meet the requirements of the LLC Act, it is possible a court could conclude that the methods used did not satisfy Section 18-215(b) of the LLC Act and thus potentially expose the assets of a series to the liabilities of another series of interests.  The consequence of this is that investors may have to bear higher than anticipated expenses which would adversely affect the value of their Series Interests or the likelihood of any distributions being made by a particular Series to its investors.

In addition, the company is not aware of any court case that has tested the limitations on inter-series liability provided by Section 18-215(b) in federal bankruptcy courts and it is possible that a bankruptcy court could determine that the assets of one series of interests should be applied to meet the liabilities of the other series of interests or the liabilities of the company generally where the assets of such other series of interests or of the company generally are insufficient to meet its liabilities.

If any fees, costs and expenses of the company are not allocable to a specific Series of Interests, they will be borne proportionately across all of the Series of Interests (which may include future Series of Interests to be issued).  Although the Manager will allocate fees, costs and expenses acting reasonably and in accordance with its allocation policy (see “Description of the Business – Allocations of Expenses” section), there may be situations where it is difficult to allocate fees, costs and expenses to a specific series of interests and therefore, there is a risk that a series of interests may bear a proportion of the fees, costs and expenses for a service or product for which another series of interests received a disproportionately high benefit.

Each Series Interest will rely on its Manager, Ark7 to manage each property. Following the acquisition of any Underlying Asset, the Underlying Asset will be managed by Ark7. In addition, Ark7 will be entitled to certain fees in exchange for its day-to-day operations of each Underlying Asset. Any compensation arrangements will be determined by Ark7 sitting on both sides of the table and will not be an arm’s length transaction.

If Ark7, the company’s asset manager, fails to retain its key personnel, the company may not be able to achieve its anticipated level of growth and its business could suffer. The company’s future depends, in part, on Ark7’s ability to attract and retain key personnel. Its future also depends on the continued contributions of the executive officers and other key personnel of Ark7, each of whom would be difficult to replace.

In particular, Yizhen Zhao, who is the Chief Executive Officer of Ark7, is critical to the

management of the company’s business and operations and the development of its strategic direction. The loss of the services of Mr. Zhao or other executive officers or key personnel of Ark7 and the process to replace any of those key personnel would involve significant time and expense and may significantly delay or prevent the achievement of the company’s business objectives.

There is competition for time among the various entities sharing the same management team. Currently, Ark7 is the managing member of Ark7 Properties, Series #KYLBE, Series #MHQNN and Series #DJVWQ. It is foreseeable that at certain times the various entities will be competing for time from the management team.

There is currently no trading market for the company’s securities. There is currently no public trading market for any Series Interests, and an active market may not develop or be sustained.  If an active public or private trading market for the Securities does not develop or is not sustained, it may be difficult or impossible for you to resell your Series Interests at any price.  Even if a public or private market does develop, the market price could decline below the amount you paid for your Interests.

The company has limited operating history for investors to evaluate. The company and each Series Interest were recently formed and have not generated any revenues and have no operating history upon which prospective investors may evaluate their performance. No guarantee can be given that the company or any Series Interest will achieve their investment objectives, the value of any Underlying Asset will increase or that any Underlying Asset will be successfully monetized.

Possible Changes in Federal Tax Laws make it impossible to giver certainty to the tax treatment of any series of interest. The Code is subject to change by Congress, and interpretations of the Code may be modified or affected by judicial decisions, by the Treasury Department through changes in regulations and by the Internal Revenue Service through its audit policy, announcements, and published and private rulings. Although significant changes to the tax laws historically have been given prospective application, no assurance can be given that any changes made in the tax law affecting an investment in any series of interest of the company would be limited to prospective effect.

For instance, prior to effectiveness of the Tax Cuts and Jobs Act of 2017, an exchange of the Interests of one series for another might have been a non-taxable ‘like-kind exchange’ transaction, while transactions now only qualify for that treatment with respect to real property.  Accordingly, the ultimate effect on an Investor’s tax situation may be governed by laws, regulations or interpretations of laws or regulations which have not yet been proposed, passed or made, as the case may be.

The company’s manager can determine in its sole discretion whether to suspend the redemption provision of the company’s operating agreement. Under Section 7.5 of the company’s operating agreement, the company is instituting a redemption plan for redeeming interests at set ratios within the first 24 months after their acquisition. These ratios would require redemption below the prices at which the interests were issued. However, the company’s manager has the sole discretion whether to suspend the redemption program, which may occur in cases of limited liquidity of the company.

Risks Relating to the Offering

The company may not raise sufficient funds to achieve its business objectives. There is no minimum amount required to be raised before the company can accept your subscription for the Series Interests, and it can access the funds immediately. The company may not raise an amount sufficient for it to meet all of its objectives. Once the company accepts your investment funds, there will be no obligation to return your funds. Even if other Series Interests are sold, there may be insufficient funds raised through this offering to cover the expenses associated with the offering or complete development and implementation of the company’s operations. The lack of sufficient funds to pay expenses and for working capital will negatively impact the company’s ability to implement and complete its planned use of proceeds.

The company’s management has full discretion as to the use of proceeds from the offering. The company presently anticipates that the net proceeds from the offering will be used by us as general working capital. The company reserves the right, however, to use the funds from the offering for other purposes not presently contemplated herein but which are related directly to growing its current business. As a result of the foregoing, purchasers of the Series Interests hereby will be entrusting their funds to the company’s management, upon whose judgment and discretion the investors must depend, with only limited information concerning management’s specific intentions.

The purchase prices for the Series Interests have been arbitrarily determined. The purchase price for the Series Interests has been arbitrarily determined by the company and bears no relationship to the company’s assets, book value, earnings or other generally accepted criteria of value. In determining pricing, the company considered factors such as the company’s limited financial resources, the nature of its assets, estimates of its business potential, the degree of equity or control desired to be retained by the existing unit holders and general economic conditions.

If the company does not successfully dispose of real estate assets, you may have to hold your investment for an indefinite period. The determination of whether to dispose of the Underlying Asset is entirely at the discretion of the company. Even if the company decides to dispose of an Underlying Asset, the company cannot guarantee that it will be able to dispose of the Underlying Asset at a favorable price to investors.

Competition with other parties entering real estate investment business may reduce the company’s profitability. There are and will be other entities engaged in real estate investment, including financial institutions, many of which have greater resources than the company does. Larger entities may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and built-in client base. Such competition could make it more difficult to obtain future funding, which could affect the company’s growth as a company.

The company does not intend to hire an escrow agent and therefore does not have an independent third party holding investors funds until they are released to the company. Typically, the escrow agent retains custody of the assets such as cash, until certain conditions are met, at which time those assets are released to the company. In this offering the company has not retained an escrow agent and therefore investors may be subject to increased administrative risk as additional administrative burdens will be placed on the company who may or may not have the expertise to administer the escrow seamlessly.

Risk Factors Related to the Real Estate Market

The company’s real estate and real estate-related assets will be subject to the risks typically associated with real estate. The properties the company acquires will be subject to the risks typically associated with real estate. The value of real estate may be adversely affected by a number of risks, including:

The value of each property is directly related to its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties.

The underlying value and performance of any real estate asset will fluctuate with general and local economic conditions. The successful operation of any real estate asset is significantly related to general and local economic conditions. Periods of economic slowdown or recession, significantly rising interest rates, declining employment levels, decreasing demand for real estate, declining real estate values, or the public perception that any of these events may occur, can result in reductions in the underlying value of any asset and result in poor economic performance. In such cases, investors may lose the full value of their investment, or may not experience any distributions from the real estate asset.

The market in which the company participates is competitive and, if it does not compete effectively, its operating results could be harmed. The company competes with many other entities engaged in real estate acquisition and operating activities, including but not limited to individuals, corporations, bank and insurance company investment accounts, real estate investment trusts, and private real estate funds. This market is competitive and rapidly changing. The company expects competition to persist and intensify in the future, which could harm its ability to acquire properties on terms that investors find to be reasonable.

An Underlying Asset that has significant vacancies could be difficult to sell, which could diminish the return on the Underlying Asset. An Underlying Asset may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, the company may suffer reduced revenues resulting in less cash available for distribution to its investors. In addition, the resale value of the Underlying Asset could be diminished because the market value of each Underlying Asset will depend principally upon the value of the cash flow generated by the leases associated with that Underlying Asset. Such a reduction in the resale value of a property could also reduce the value of investor interests.

The company may decide to sell an Underlying Asset which could conflict with an investor’s interests. The company may determine when to sell any Underlying Asset at any time in accordance with the management rights afforded to the manager. Investors will not have a say in this decision. The timing and decision to sell an Underlying Asset may conflict with investors personal interests, beliefs or theories regarding the real estate market. Further, it is possible the sale was not done at an optimal time. In any case, investors would not have any cause of action against the company or manager for such sales.

A decline in general economic conditions in the markets in which each Underlying Asset is located or in the United States generally could lead to an increase in tenant defaults, lower rental rates and less demand for commercial real estate space in those markets. As a result of these trends, the company may be more inclined to provide leasing incentives to its tenants in order to compete in a more competitive leasing environment. Such trends may result in reduced revenue and lower resale value of properties, which may reduce your return.

Lawsuits may arise between the company and its tenants resulting in lower cash distributions to investors. Disputes between landlords and tenants are common. These disputes may escalate into legal action from time to time. In the event a lawsuit arises between the company and a tenant it is likely that the company will see an increase in costs. Accordingly, cash distributions to investors may be affected.

Costs imposed pursuant to governmental laws and regulations may reduce the company’s net income and the cash available for distributions to its investors. Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. The company could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns. Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of the company’s tenants, the condition of properties at the time the company buys them, operations in the vicinity of its properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect its properties. The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder the company’s ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages the company must pay will reduce its ability to make distributions and may reduce the value of your investment.

The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distribution to the company’s investors. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such 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. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce the amounts available for distribution to you.

Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions. Each Underlying Asset may 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. 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. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for ADA compliance will reduce the company’s net income and the amount of cash available for distributions to investors.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce the company’s cash flows and the return on investment. There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, 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. Insurance risks associated with potential acts of terrorism could sharply increase the premiums the comapny pays for coverage against property and casualty claims. Additionally, to the extent the company finances the acquisition of an Underlying Asset, mortgage lenders in some cases insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit the company’s ability to finance or refinance its properties if so required. In such instances, the company may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. The company may not have adequate coverage for such losses. If any of the properties incur a casualty loss that is not fully insured, the value of the assets will be reduced by any such uninsured loss, which may reduce the value of investor interests. In addition, other than any working capital reserve or other reserves the company may establish, the company has no additional sources of funding to repair or reconstruct any uninsured property. Also, to the extent the company must pay unexpectedly large amounts for insurance, it could suffer reduced earnings that would result in lower distributions to investors.

Risks related to forum selection and jury waivers

Investors will be subject to the terms of the Subscription Agreement. As part of this investment, each investor will be required to agree to the terms of the Subscription Agreement included as Exhibit 4 to the Offering Statement of which this Offering Circular is part. The Subscription Agreement requires investors to indemnify the company for any claim of brokerage commissions, finders’ fees, or similar compensation. All legal conflicts relating to the Subscription Agreement will be heard in California courts under Delaware law.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the Subscription Agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under the Agreement. Investors in this offering will be bound by the Subscription Agreement, which includes a provision under which investors waive the right to a jury trial of any claim they may have against the company arising out of or relating to the Agreement, including any claims made under the federal securities laws. By signing the Agreement, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.

If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To the company’s knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, the company believes that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Delaware, which governs the Agreement, by a federal or state court in the State of California. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within an agreement is sufficiently prominent such that a party knowingly, intelligently, and voluntarily waived the right to a jury trial. The company believes that this is the case with respect to the Subscription Agreement. You should consult legal counsel regarding the jury waiver provision before entering into the Subscription Agreement.

If you bring a claim against the company in connection with matters arising under the Agreement, including claims under the federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the company. If a lawsuit is brought against the company under the Agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action.

Nevertheless, if the jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the Agreement with a jury trial. No condition, stipulation or provision of the Subscription Agreement serves as a waiver by any holder of the company’s securities or by the company of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when the units are transferred, the transferee is required to agree to all the same conditions, obligations, and restrictions applicable to the units or to the transferor with regard to ownership of the units, that were in effect immediately prior to the transfer of the units, including but not limited to the Subscription Agreement.

Risks Related to Covid-19

The company’s results of operations may be negatively impacted by the coronavirus outbreak. In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified, and the U.S., Europe, and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the value of the Shares and investor demand for the Shares generally.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase the company’s cost of capital and adversely affect its ability to access the capital markets in the future. To date, COVID-19 has not negatively impacted the company; however, it is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect Ark7’s business, results of operations, or financial condition.

The extent to which COVID-19 affects the company’s financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and the company’s business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect the company’s business. The company’s business could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus, or COVID-19. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could adversely affect the value of the Common Stock and the financial condition of the company’s investors or prospective investors, resulting in reduced demand for the Common Stock generally. “Shelter-in-place” or other such orders by governmental entities could also disrupt the company’s operations, if employees, who cannot perform their responsibilities from home, are not able to report to work.

DILUTION

Dilution means a reduction in value, control, or earnings of the units the investor owns.

As of the date of this Offering Circular, Ark7 owns 100% of the company’s membership interests. Those membership interests are not connected to any specific Series Interest. Investors in this offering will be acquiring either Series #KYLBE Interests, Series #MHQNN Interests, and/or Series #DJVWQ Interests of the company, the economic rights of each Series Interest will be based on the corresponding Underlying Asset. As such, investors will not experience dilution except as a result of the sale of additional interests of the Series to which they have subscribed.

PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

The company is offering up to 696 units of Series #KYLBE Interests, up to 514 Series #MHQNN Interests and up to 53,579, Series #DJVWQ Interests on a “best efforts” basis at a price of $890 per Series #KYLBE Interest, $940 per Series #MHQNN Interest and $28.50 per Series #DJVWQ Interest. There is no minimum investment amount, however each investor has to purchase at least one Series Interest.

The company plans to market the securities directly on a “best efforts” basis. The company intends to use its website and an offering landing page to offer the Series Interests to eligible investors. The company’s officers, directors, employees, and advisors may participate in the offering. They will prepare written materials and respond to investors after the investors initiate contact with the company, however the company’s officers, directors, employees and advisors will not orally solicit investors.

The Offering Circular will be furnished to prospective investors in this offering via download 24 hours a day, 7 days a week on the company’s website www.ark7.com. Prospective investors may subscribe for the company units in this offering only through the website.

The offering will terminate at the earlier of the date at which the maximum offering amount has been sold, or the date at which the offering is earlier terminated by the company, in its sole discretion. The company may undertake one or more closings on a rolling basis. After each closing, funds tendered by investors will be available to the company for its use. 

The company has also engaged Dalmore Group, LLC (“Dalmore”) a broker-dealer registered with the SEC and a member of FINRA, to perform the following administrative and compliance related functions in connection with this offering, but not for underwriting or placement agent services:

As compensation for the services listed above, the company has agreed to pay Dalmore a commission equal to 1% of the amount raised in the offering to support the offering on all newly invested funds after the issuance of a No Objection Letter by FINRA. In addition, the company has paid Dalmore a $5,000 one-time advance expense allowance to cover reasonable out-of-pocket accountable expenses actually anticipated to be incurred by Dalmore in connection with this offering. Dalmore will refund any amount related to this expense allowance to the extent it is not used, incurred or provided to the company. The company has also agreed to pay Dalmore a one-time consulting fee of $20,000 to provide ongoing general consulting services relating to this offering such as coordination with third party vendors and general guidance with respect to the offering, which will be due and payable within 30 days after this offering is qualified by the SEC and the receipt of a No Objection Letter from FINRA.  Assuming the offering is fully-subscribed, the company estimates that total fees due to pay Dalmore, including the one-time advance expense allowance fee of $5,000 and consulting fee of $20,000, would be $51,296.02.

Selling Security holders

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the company.

Transfer Agent

The company has not yet engaged a transfer agent.

Process of Subscribing

After the offering Statement has been qualified by the Commission, the company will accept tenders of funds to purchase the Series Interests.

Investors will be required to complete a subscription agreement in order to invest. The subscription agreement includes a representation by the investor to the effect that, if the investor is not an “accredited investor” as defined under securities law, the investor is investing an amount that does not exceed the greater of 10% of their annual income or 10% of their net worth (excluding the investor’s principal residence).

To subscribe for the Series Interests, each prospective investor must:

Any potential investor will have ample time and is advised to review the Subscription Agreement, along with their counsel, prior to making any final investment decision.

The company may close on investments on a “rolling” basis (so not all investors will receive their Series Interests on the same date). Investors may subscribe by tendering funds by check, wire transfer, credit or debit card or ACH transfer to the segregated account controlled by the company until the company has accepted the investor’s subscription. Upon closing, funds tendered by investors will be made available to the company for its use. The company has the right to refuse to sell the Series Interests to any prospective investor or for any reason in its sole discretion, including, without limitation, if such prospective investor does not promptly supply all information requested by the company in connection with such prospective investor subscription. In addition, in the company’s sole discretion, it may establish a limit on the purchase of Series Interests by particular prospective investors.

No Escrow Agent 

The company has not hired an escrow agent to hold funds tendered by investors. Funds will be held in a segregated account controlled by the company until the company has accepted the investor’s subscription. At that time, those funds will be available to the company.

Forum Selection Provision

The Subscription Agreement that investors will execute in connection with the offering includes a forum selection provision that requires any claims against the company based on the Agreement to be brought in a state or federal court of competent jurisdiction in the State of California for the purpose of any suit, action or other proceeding arising out of or based upon the Agreement. Although the company believes the provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies and in limiting the company’s litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the company. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. The company believes that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Investors will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations thereunder.

Jury Trial Waiver

The Subscription Agreement that investors will execute in connection with the offering provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the Agreement, including any claim under federal securities laws. By signing the Subscription Agreement, an investor will warrant that the investor has reviewed this waiver with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, subscribers will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

USE OF PROCEEDS TO ISSUER

Series #KYLBE

Assuming a maximum raise of $619,440, and after deducting the estimated offering expenses of $6,194 in fees to Dalmore and excluding state filing fees, the net proceeds of this Series #KYLBE Interests offering would be approximately $613,246.

The table below sets forth the uses of proceeds of the company’s Series #KYLBE Interests, assuming an offering amount of $154,860, $309,720, $464,580 and $619,440 (the maximum offering amount). For further discussion, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Plan of Operations.”

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

In addition, no payments will be used to pay directors. In the company’s sole discretion, management fees may be incurred. However, the company has waived management fees from March 1, 2020 until March 1, 2022.

Pursuant to the Loan Agreement dated November 22, 2019, Ark7 Properties borrowed a total of $756,250 at 3.5% interest from First Republic Bank. Pursuant to an Assignment and Assumption Agreement dated June 1, 2020, Series #KYLBE is responsible for this loan and intends to pay the interest and principal balance. With the use of proceeds in this offering, the company intends to make a partial repayment of this loan, up to $619,440. The company intends to generate additional revenues to repay this loan from lease revenues and by lending up to $756,250 at 3.5% interest back to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions and to provide a steady revenue stream of interest payments back to the Series.

In addition to raising funds in this offering, Series #KYLBE is also raising funds from a concurrent offering under Rule 506(c) of Regulation D which will go towards repayment of the First Republic Bank loan and anticipated loan to Ark7 described below.

In the event that the Series #KYLBE Interests offering is not fully subscribed in this and the concurrent offering, and the company is unable to repay the loan to First Republic Bank, the company believes that lease revenues will be sufficient to cover repayment of debt obligations due to First Republic Bank.

Series #MHQNN

Assuming a maximum raise of $483,160, and after deducting the estimated offering expenses of $4,832 in fees to Dalmore and excluding state filing fees, the net proceeds of this Series #MHQNN Interest offering would be approximately $478,328.

The table below sets forth the uses of proceeds of the company’s Series #MHQNN Interests, assuming an offering amount of $120,790, $241,580, $362,370 and $483,160 (the maximum offering amount). For further discussion, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Plan of Operations.”

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

In addition, no payments will be used to pay directors. In the company’s sole discretion, management fees may be incurred. However, the company has waived management fees from April 1, 2020 until April 1, 2022.

Pursuant to the Loan Agreement dated November 22, 2019 Ark7 Properties borrowed a total of $756,250 at 3.5% interest from First Republic Bank. Pursuant to an Assignment and Assumption Agreement dated June 1, 2020, Series #MHQNN is responsible for this loan and intends to pay the interest and principal balance. With the use of proceeds in this offering, the company intends to make a partial repayment of this loan up to $483,160. The company intends to generate additional revenues to repay this loan from lease revenues and by lending up to $756,250 at 3.5% interest back to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions and to provide a steady revenue stream of interest payments back to the Series.

In addition to raising funds in this offering, Series #MHQNN is also raising funds from a concurrent offering under Rule 506(c) of Regulation D which will go towards repayment of the First Republic Bank loan and anticipated loan to Ark7 described below.

In the event that the Series #MHQNN Interest offering is not fully subscribed in this and the concurrent offering, and the company is unable to repay the loan to First Republic Bank, the company believes that lease revenues will be sufficient to cover repayment of debt obligations due to First Republic Bank.

Series #DJVWQ

Assuming a maximum raise of $1,527,002, and after deducting the estimated offering expenses of $15,270 in fees to Dalmore and excluding state filing fees, the net proceeds of this Series #DJVWQ Interests offering would be approximately $1,511,731.

The table below sets forth the uses of proceeds of the company’s Series #DJVWQ Interests, assuming an offering amount of $381,750, $763,501, $1,145,251 and $1,527,002 (the maximum offering amount). For further discussion, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Plan of Operations.”

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

In addition, no payments will be used to pay directors. In the company’s sole discretion, management fees may be incurred. However, the company has waived management fees from Oct 1, 2020 until Oct 1, 2022.

Pursuant to the Loan Agreement dated September 2, 2020, Ark7 Properties and Series #DJVWQ borrowed a total of $1,169,400 at 2.95% interest from First Republic Bank. Series #DJVWQ is responsible for this loan and intends to pay the interest and principal balance. With the use of proceeds in this offering, the company intends to make a partial repayment of this loan, up to $1,527,002. The company intends to generate additional revenues to repay this loan from lease revenues and by lending up to $1,169,400 at 5.6% interest back to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions and to provide a steady revenue stream of interest payments back to the Series.

In addition to raising funds in this offering, Series #DJVWQ is also raising funds from a concurrent offering under Rule 506(c) of Regulation D which will go towards repayment of the First Republic Bank loan and anticipated loan to Ark7 described above.

In the event that the Series #DJVWQ Interest offering is not fully subscribed in this and the concurrent offering, and the company is unable to repay the loan to First Republic Bank, the company believes that lease revenues will be sufficient to cover repayment of debt obligations due to First Republic Bank.

THE COMPANY’S BUSINESS

Overview

Ark7 Properties LLC (“Ark7 Properties”) was incorporated in the State of Delaware on October 31, 2018. The company began operations on June 24, 2019. The purpose of the company is to establish separate series for the holding of properties to be acquired by the company. Notably, the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series of the company will be enforceable against the assets of the applicable series only, and not against the assets of the company. In addition, Ark7 will manage all Underlying Assets related to the various Series including the sales of property, leases, maintenance and insurance.

Ark7 Properties is a wholly owned subsidiary of Ark7. As discussed in further in the Series Limited Liability Company Agreement of Ark7 Properties dated September 13, 2019, (the “Operating Agreement”), Ark7 is the managing member of Ark7 Properties. Ark7 was incorporated in the State of Delaware on June 26, 2018. Ark7 is a real estate investment platform that allows individual investors to have direct access to quality real estate investment opportunities and invest in the units of each property.

To date, Ark7 Properties has established three registered series. Series #KYLBE, Series #MHQNN and Series #DJVWQ.

Property Overview: Series #KYLBE

The Underlying Asset for Series #KYLBE is a multi-family dwelling located at 3102 California Street, Berkeley, CA 94703. The property is located within the Kellersbergers/Peralta Ranch subdivision in Berkeley. It is a 6-unit multi-family property. It is 100% occupied by tenants. The company has improved certain facilities, including updating and installing new security gates and intends to improve the parking lot by adding storage units or additional parking for tenants. In total, the company intends to spend $42,000 on capital improvements to the property.

The property generates a 5.24% cap rate and 6.07% cash on cash returns based on the offering data. There is approximately $750K debt payable at an interest of 3.5% from First Republic Bank, and the company intends to issue the same amount of debt receivable at interest of 6% to Ark7.

Below are notable statistics regarding the property:

In the event the company decides to sell the property, approval from the Series Interests holders would be sought.

Building Facts

Financial Summary

Lease Summary

Intended Improvements and Capital Expenditures

The company intends to spend $42,000 on capital improvements to the property. To date, the company has installed security gates and intends to add additional parking spaces.

Property Specific Risks

The Underlying Asset for Series #KYLBE is subject to a local rent control ordinance, the “Berkeley Rent Stabilization Board.” The rent increase for this particular Underlying Asset will be controlled and limited pursuant to the Berkeley Rent Stabilization Board’s decision each year. The uncertainty of their decisions may affect the company’s cash on cash return.

Local Market Overview

The housing market in Berkeley, zip code 94703, has demonstrated a strong increase over the last decades. Favorable factors that the company looks to include the following:

Property Overview: SERIES #MHQNN

The Underlying Asset, for Series #MHQNN is a multifamily property located at 2924 Mabel Street, Berkeley, CA 94702. It is a 5-unit multi-family property. It is 80% occupied by tenants. The company has replaced the roof of the multifamily property and remodeled one unit. In total, the company intends to spend $40,000 on capital improvements to the property.

The property generates a 6.21% cap rate and 6.04% cash on cash returns based on the offering data.

There is approximately $750K debt payable at an interest of 3.5% from First Republic Bank, and the company intends to issue the same amount of debt receivable at interest of 6% to Ark7.

Below are notable statistics regarding the property:

In the event the company decides to sell the property, approval from the Series Interests holders would be sought

Building Facts

Financial Summary

Lease Summary

Intended Improvements and Capital Expenditures

The company intends to spend $40,000 on capital improvements to the property. To date, the company has upgraded all the security alarms and intends to replace the fence and do some reasonable works to improve the foundation.

Property Specific Risks

The company does not anticipate any risks out of the ordinary course of business at this time.

Local Market Overview

The average sale price of a home in 94702 was approximately $1.23M in August 2020, up 23% since August 2019. The average sale price per square foot in 94703 is more than $810, up 13% since last year. The average rent in Berkeley has at least 4% increase compared to last year.

Property Overview: Series #DJVWQ

The Underlying Asset for Series #DJVWQ is a multi-family dwelling located at 2314 Bonar Street, Berkeley, CA 94702.

The Underlying Asset for Series #DJVWQ is a multi-family dwelling located at 2314 Bonar Street, Berkeley, CA 94702. It is a 5-unit multi-family property. It is approximately 80% occupied by tenants. The company has improved certain facilities, including but not limited to, upgrading the parking lot pavement. In total, the company intends to spend $45,000 on capital improvements to the property.

The property generates a 5.68% cap rate and 6.09% cash on cash returns based on the offering data.
There is approximately $1,169,000 debt payable at an interest of 2.95% from First Republic Bank as of December 31, 2020, and the company intends to issue the same amount of debt receivable at an interest of 5.6% to Ark7.

Below are notable statistics regarding the property:

In the event the company decides to sell the property, approval from the Series Interests holders would be sought.

Building Facts

Financial Summary

Lease Summary

Intended Improvements and Capital Expenditures

The company intends to spend $45,000 on capital improvements to the property.

Property Specific Risks

The Underlying Asset for Series #DJVWQ is subject to a local rent control ordinance, the “Berkeley Rent Stabilization Board.” The rent increase for this particular Underlying Asset will be controlled and limited pursuant to the Berkeley Rent Stabilization Board’s decision each year. The uncertainty of their decisions may affect the company’s cash on cash return.

Local Market Overview

The housing market in Berkeley, zip code 94702, has demonstrated a strong increase over the last decades. Favorable factors that the company looks to include the following:

Market Outlook — Berkley

Overview

In November 2020, the median list price of homes in Berkeley, CA was $1.2M, trending up 24.9% year-over-year. The median listing price per square foot was $705. The median sale price was $1.4M. The market, according to Redfin, is a seller’s market in November 2020. The sale-to-list price ratio is 112.97%, which indicates homes in Berkeley, CA sold for 12.97% above asking price on average in November 2020.

The price per square foot in Berkeley has grown from $727 in November 2019 to $798 in November 2020, a 9.77% year-over-year increase.

Based on Rentjungle research, as of November 2020, the average rent for an apartment in Berkeley, CA was $3,117 which is a 0.51% increase from November 2019 when the average rent was $3,101.

94702

The housing market in Berkley, zip code 94702, has demonstrated a strong increase over the last decades. Favorable factors that the company looks to include the following:

94703

The housing market in Berkeley, zip code 94703, has demonstrated a strong increase over the last decades. Favorable factors that the company looks to include the following:

The company believes, the Bay Area, where the Underlying Assets for Series #KYLBE, Series #MHQNN and Series DJVWQ are located is a market that is commonly a buyer’s market. Below is the Berkeley, CA multi-family real estate price appreciation graph by Zillow. Zillow notes that Berkley home values have increased 5.38% from October 31, 2019 to October 31, 2020 and predicts that home values may increase 6.57% by October 31, 2021. That said, the company believes the Berkley area will continue to stabilize and show growth in the coming 18 months.

Market Outlook - San Francisco Bay Area

Throughout 2020 the San Francisco housing market has experienced a downfall despite the trend of the last few years. The median list price of homes in San Francisco, CA was $1.4M in November 2020, trending down -2.2% year-over-year. The median listing price per square foot was $978. The median sale price was $1.4M.

Home values have decreased 0.71% from November 30, 2019 to November 30, 2020. However, Zillow predicts that values will increase 6.8% within the next year. Since December 2010, the median home price in San Francisco has increased from $743,000 to $1.43M. Below is the San Francisco, CA real estate price appreciation graph by Zillow.

Market Outlook - National Housing Market

According to the National Multifamily Housing Council, there are almost 44 million renter-occupied homes in the United States. While rental costs have increased in 66% of United States counties between March and April 2019, in many markets, it is still more affordable to rent than to purchase a home. As the following figure shows, the total spending in housing market has continued to rise as a percentage of GDP through the period.

Market Outlook - Household Net Worth

The company believes that purchasing a home is often one of the largest investments that individuals make. Home ownership accounts for a significant portion of households’ net worth in the United States. As of 2018, owner-occupied real estate accounted for approximately a quarter of households’ net worth, according to Federal Reserve data. As depicted below, the share of a households’ net worth arising from their home has been relatively stable over the past several years, after declining significantly following the 2007-2009 recession. Therefore, the company believes that due to relatively stable net worth, housing markets have a long-term correlation with economics.

Marketing/Distribution Channels

When assessing an investment opportunity, the company looks to the following factors to determine whether an Underlying Asset should be added to the company’s real estate portfolio:

Further, the company has built up its own evaluation model and has an in-house sourcing team to locate what it believes to be the best deals, including off-market real estate transactions.

Competition

As a stock-like real estate investing platform the company believes that its competitors include traditional real estate investment companies such as REITs, and crowdfunding platforms.

Plan of Operations

The company intends to focus on properties located in California and specifically, the Bay Area, however, the company may begin to assess other potential underlying assets, outside of California but within the United States, over the course of the next twelve months.

Ideally, Underlying Assets acquired will consist of the following:

When acquiring these properties, the company intends to have up to a 30-50% loan to value ratio.

The company chooses properties based on large-scale historical and marketing data and rich real-estate experiences from its team’s real-estate experts. Some factors the company looks to include:

As part of its plan of operations, Ark7 Properties intends to execute the following milestones over the course of the next 12 months:

Employees

Ark7 Properties currently has 0 full-time employees and 0 part-time employees.

Ark7, as the Managing Member of the company and the Managing Member and Asset Manager of each of the Series Interests, currently has 5 full-time employees and 4 part-time employees. The employees work at the company’s San Francisco headquarters location as well as remotely.

Intellectual Property

On August 21, 2020, Ark7 applied for the Trademark Ark7. On January 26, 2021, the mark will be published for opposition.

Regulation

The company believes it is in compliance with all necessary federal, state, and local regulations involved in the production, sale, and distribution of its product.

Litigation

The company is not a party to any current litigation.

THE COMPANY’S PROPERTY

On August 13, 2019, Ark7 Properties acquired the Underlying Asset for Series #KYLBE, which was assigned to Series #KYLBE on October 16, 2020. The property is located at 3102 California Street, Berkeley, CA 94703. The property has the following encumbrance:

On November 27, 2019, Ark7 Properties acquired the Underlying Asset for Series #MHQNN, which was assigned to Series #MHQNN on October 16, 2020. The property is located at 2924 Mabel St, Berkeley, CA 94702. The property has the following encumbrance:

On September 11, 2020, Ark7 Properties acquired the Underlying Asset for Series #DJVWQ, which was assigned to Series #DJVWQ on September 11, 2020. The property is located at 2314 Bonar Street, Berkeley, CA 94702. The property has the following encumbrance:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of the financial statements and financial condition of Ark7 Properties and results of its operations together with its financial statements and related notes appearing at the end of this Offering Circular. This discussion contains forward-looking statements reflecting the company’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular.

Overview

Ark7 Properties is a newly organized Delaware series limited liability company formed to acquire and manage a portfolio of primarily duplex, small multi-families, single family, and condo property located in California with a focus toward the San Francisco Bay Area. Ark7 Properties is a wholly owned subsidiary of Ark7 Inc. (“Ark7”).

Ark7 is the company’s manager. As the company’s manager, it will manage the company’s day-to-day operations. Ark7 is also the manager of Series #KYLBE, Series #MHQNN and Series #DJVWQ and will manage each property that the company acquires.

Results of Operations

The company was formed on October 31, 2018 and commenced operations on June 24, 2019. The company did not generate revenues in the year ended December 31, 2019. The company’s net revenues for the six months ended June 30, 2020 (“Interim 2020”) was $123,992, compared to $0 for the six months ended June 30, 2019, (“Interim 2019”). To date, its operations have consisted of reviewing and finalizing loan agreements, making capital improvements to various properties and securing potential funding.

As of December 31, 2019, the company incurred expenses of $141,103 categorized as general and administrative expenses related to its activities. As of Interim 2020 the company incurred expenses of $115,056 categorized as general and administrative expenses related to its activities.

Liquidity and Capital Resources

The company’s current capital resources come from operating cash flow and outstanding loans. The Series Interests are dependent on the net proceeds from this offering for the repayment of various loans to related third parties and banks. For information regarding the anticipated use of proceeds from this offering, see “Use of Proceeds”.

As of the date of this Offering Circular, the company has limited cash on hand. As of December 31, 2019, the company had $44,439 cash on hand. As of Interim 2020 the company had $240,184 cash on hand.

As of December 31, 2019, the company had a net loss of $111,737.76. In order to acquire the Underlying Assets, Ark7 Properties entered into a loan agreement with Ark7. Pursuant to this Loan Agreement dated July 8, 2019 Ark7 Properties borrowed $1,500,000 from Ark7 with an interest rate of 7%. The loan was repaid in full on July 8, 2020.

As of Interim 2020, the company had a net loss of $69,522.

Recent offerings of Securities and Outstanding Debt

Subject to the proceeds received from any particular offering of Series Interests, following repayment of the loan from Ark7 to Ark7 Properties, the company intends to loan funds to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions.

Trend Information

The Berkley housing market continues to rank as one of Redfin’s most competitive housing markets. As noted on various real estate websites, most homes that are listed get multiple offers, often with waived contingencies. Homes generally sell for approximately 15% above list price and have sales pending in approximately thirteen days. In some instances, certain homes can sell for about 28% above list price and have sales pending in approximately 9 days. The company believes that this trend will continue into 2021.

COVID-19 Operational Adjustments

In the last few months, the spread and efforts to contain COVID-19 have resulted in significant impacts on local and national economic conditions. As of December 1, 2020, although the company has lowered a few tenants’ rent by less than 10%, on balance, the company has not experienced any significant rise in the inability of tenants to make monthly rent payments. The company will continue to monitor the effects of COVID-19 on its business and whether it may need to provide greater flexibility to certain tenants rather than incur the cost of eviction.

Relaxed Ongoing Reporting Requirements

If the company becomes a public reporting company in the future, it will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which the company refers to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as the company remains an “emerging growth company,” the company may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:

If the company becomes a public reporting company in the future, the company expects to take advantage of these reporting exemptions until it is no longer an emerging growth company. The company would remain an “emerging growth company” for up to five years, although if the market value of its Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, the company would cease to be an “emerging growth company” as of the following December 31.

If the company does not become a public reporting company under the Exchange Act for any reason, the company will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semi-annual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semi-annual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, the company will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and its unitholders could receive less information than they might expect to receive from more mature public companies.

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

In accordance with the Operating Agreement and the Series Designation for Series #KYLBE dated November 6, 2019, Ark7 Inc. is the initial member of the Series #KYLBE. Ark7 Inc. is also the manager of Ark7 Properties. Finally, Ark7 is the managing member and asset manager of Series #KYLBE.

Further, in accordance with the Operating Agreement and the Form of Series Designation for Series #MHQNN dated September 17, 2019, Ark7 Inc. is the initial member of the Series #MHQNN. Ark7 Inc. is also the managing member of Ark7 Properties. Finally, Ark7 is the managing member and asset manager of Series #MHQNN.

Finally, in accordance with the Operating Agreement and the Form of Series Designation for Series #DJVWQ dated July 28, 2020, Ark7 Inc. is the initial member of the Series #DJVWQ. Ark7 Inc. is also the managing member of Ark7 Properties. Finally, Ark7 is the managing member and asset manager of Series #DJVWQ.

Ark7 Properties is managed by its managing member, Ark7. Ark7 is operated by the following executives and directors all work for the company on a full time basis.

Yizhen Zhao, CEO and Co-Founder

Andy “Yizhen” Zhao is currently the co-founder and Chief Executive Officer of Ark7. He has served in this position since October 2018. Prior to that, he worked as Software Engineers/Architecture Leads at Uber from 2017 to 2019, LinkedIn from 2014 to 2017, Twitter from 2013 to 2014, and Google from 2010 to 2013. He studied Computer Science at Shanghai Jiaotong University from 2006 to 2010 and received multiple Champion rewards for participating in international computer programming contests.

James “Jim” Holt, COO and Co-Founder

James Holt is currently Ark7’s Co-Founder and Chief Operating Officer.  He has served in this position since October 2018.  In addition, James currently serves as the founder of Elevate Group, a real estate top agent at Compass, which he founded in 2019.  Prior to that, he founded and led The Holt Team, a real estate team that existed from 2006 to 2019.  He studied Mathematical and Computational Sciences at Stanford University from 1999 to 2003. 

Meng Xu, CMO and Co-Founder

Meng Xu is currently Ark7’s Co-Founder and Chief Marketing Officer. She has served in this position since October 2020. Prior to that, she worked as Marketing Director at PalmDrive Inc. from 2015 to 2019. She received her Master's degree in Media, Culture and Communication from New York University in 2014 and her Bachelor's dual degree in German Studies and Advertising from Shanghai Jiaotong University in 2012.

Yujian Weng, CTO and Co-Founder

James “Yujian” Weng is currently the co-founder and Chief Technology Officer of Ark7. He has served in this position since December 2020. Prior to that, he was Senior Director, Connected Vehicle Services at NIO from 2016 to 2019. In this position, he was responsible for lead design and development of NIO Connected Car Platform. Previously, he led an ads & content personalization team at Cheetah Mobile from 2015 to 2016, he was a software engineer at Yahoo! from 2010 to 2015.

Peifeng Zhang, Co-Founder and Director of Marketing

Pike “Peifeng” Zhang is currently a Co-Founder and Director of Marketing at Ark7. He has served in this position since May 2019 to the present date. Prior to this, Pike worked at AppleCare’s Content Service and Apple Online Store’s Digital Content Management as program manager from March 2015 to May 2019. From June 2013 to January 2015, he worked as marketing project manager at a startup named Qtech Solutions Inc, linguist at TransPerfect and project coordinator at Google.  He holds two master’s degrees, one in mass communication from the University of Wisconsin-Superior, which he received in 2003 and the other in technical communication from Iowa State University which he received in 2006.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ended December 31, 2020, the company did not compensate any director or executive officer for their services to Ark7 Properties.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table displays, on a post Conversion basis, the voting securities beneficially owned by (1) any individual director or officer who beneficially owns more than 10% of any class of the company’s capital stock, (2) all executive officers and directors as a group and (3) any other holder who beneficially owns more than 10% of any class of the company’s capital stock on a post Conversion basis.

The column “Percent of Class” includes a calculation of the amount the person owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the outstanding amount of securities in that class if no other people exercised their rights to acquire those securities. The result is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in this column will not add up to 100%.

As of January 15, 2021, Series #KYLBE had 1,304 Series Interests issued and outstanding and 2,000 Series Interests have been authorized.

As of January 15, 2021, Series #MHQNN had 1,486 Series Interests issued and outstanding and 2,000 Series Interests have been authorized.

As of January 15, 2021, Series #DJVWQ had 26,421 Series Interests issued and outstanding and 80,000 Series Interests have been authorized.

Ark7 is currently the 100% owner of Ark7 Properties and the day-to-day manager of Ark7 Properties.

Yizhen Zhao is currently the majority owner of Ark7.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

The company is subject to various conflicts of interest arising out of its relationship with Ark7, the company’s manager and its affiliates. These conflicts are discussed below.

Affiliates’ Interests in Other Ark7 Entities

General

The officers and directors of Ark7 are also key professionals of Ark7 Properties. These persons have legal obligations with respect to those entities that are similar to their obligations to the company. In addition, in the future, these persons and other affiliates of Ark7 may organize other real estate-related entities.

Allocation of Acquisition Opportunities

From time to time, Ark7 may create new entities that will acquire real estate assets and make offers of securities to accredited investors, foreign investors, and under Regulation D or Regulation A. Ark7 will, in its sole discretion determine which entity will be responsible for acquiring a specific asset.

Allocation of the Company’s Affiliates’ Time

The company relies on Ark7’s real estate professionals who act on behalf of its company, including Mr. Zhao, for the day-to-day operation of the business. Mr. Zhao is also the Chief Executive Officer of Ark7. As a result of his interests in other Ark7 entities, his obligations to other investors and the fact that he engages in and will continue to engage in other business activities on behalf of himself and others, Mr. Zhao will face conflicts of interest in allocating his time among the company, Ark7, other related entities and other business activities in which he is involved. However, the company believes that Ark7 and its affiliates have sufficient real estate professionals to fully discharge their responsibilities to the Ark7 entities for which they work.

Loan Received from Ark7 to Ark7 Properties 

In order to acquire the Underlying Assets of Series #DJVWQ Ark7 Properties entered into a loan agreement with Ark7. Pursuant to this Loan Agreement dated May 15, 2020 Ark7 Properties borrowed $850,000 from Ark7 with an interest rate of 7%. The loan will be repaid in full by May 15, 2021. Series #DJVWQ anticipates repaying this loan with proceeds from the offering.

Loan issued to Ark7 Properties LLC from Ark7 Properties Series #KYLBE

On May 1, 2020 Ark7 Properties entered into a Loan Agreement with Ark7 Properties Series #KYLBE. Ark7 Properties Series #KYLBE will loan Ark7 Properties $756,250.00 at 6% interest. Interest payments commence on July 31, 2020. The loan is due in full on July 31, 2050.

Subject to the proceeds received from any particular offering of Series Interests, following repayment of the loan from Ark7 to Ark7 Properties, the company intends to loan funds to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions.

Loan issued to Ark7 Properties LLC from Ark7 Properties Series #MHQNN

On May 1, 2020 Ark7 Properties entered into a Loan Agreement with Ark7 Properties Series #MHQNN. Ark7 Properties Series #MHQNN will loan Ark7 Properties $756,250.00 at 6% interest. Interest payments commence on July 31, 2020. The loan is due in full on July 31, 2050.

Subject to the proceeds received from any particular offering of Series Interests, following repayment of the loan from Ark7 to Ark7 Properties, the company intends to loan funds to Ark7. The intention is to provide Ark7 with additional funds to undertake other acquisitions.

SECURITIES BEING OFFERED

The following descriptions of the company’s Series Interests, certain provisions of Delaware law and certain provisions of the certificate of registered series of Ark7 Properties LLC - Series #KYLBE, certificate of registered series of Ark7 Properties LLC - Series #MHQNN, certificate of registered series of Ark7 Properties LLC - Series #DJVWQ, form of series designation #KYLBE, form of series designation #MHQNN, form of series designation #DJVWQ and the Operating Agreement are summaries and are qualified by reference to Delaware law, the certificate of registered series of Ark7 Properties LLC - Series #KYLBE, certificate of registered series of Ark7 Properties LLC - Series #MHQNN, certificate of registered series of Ark7 Properties LLC - Series #DJVWQ, form of series designation #KYLBE, form of series designation #MHQNN, form of series designation #DJVWQ and the Operating Agreement.

General

The company is offering membership interests of Series #KYLBE, a registered series of a Delaware series limited liability company at a purchase price of $890 per Series Interest. The company has authorized, the issuance of up to 2,000 Series #KYLBE Interests.

In addition, the company is also offering membership interests of Series #MHQNN, a registered series of a Delaware series limited liability company at a purchase price of $940 per Series Interest. The company has authorized the issuance of up to 2,000 Series #MHQNN Interests.

Finally, the company is also offering membership interests of Series #DJVWQ, a registered series of a Delaware series limited liability company at a purchase price of $28.50 per Series Interest. The company has authorized the issuance of up to 80,000 Series #DJVWQ Interests.

Title to each property will be held by each Series Interest.

Ark7 is the managing member of Series #KYLBE, Series #MHQNN and Series #DJVWQ.

Ark7 is the asset manager of Series #KYLBE, Series #MHQNN and Series #DJVWQ.

Distributions

Subject to Section 7.3, Article XI and any Interest Designation, as described in the Operating Agreement, any free cash flows of each Series after the following:

will be applied and distributed in the following manner:

Redemption

Subject to Section 7.5 of the Operating Agreement, a member may request redemption of one or more of his Series Interests up to 24 months after acquiring his Series Interests. Price, requirements and limitations are set forth in Section 7.5 of the Operating Agreement. Limitations include, but are not limited to the following:

Voting Rights

Generally, Series Interests shall entitle holders to one vote per Series Interest on any and all matters submitted to the consent or approval of members generally. No separate vote or consent of the holders of Series Interests shall be required for the approval of any matter, except as required by the Delaware Act or except as provided elsewhere in the related Form of Series Designation Agreement or Operating Agreement.  

Reports to members 

The company’s operating agreement requires that it prepares an annual report and delivers it to its economic members within 120 days after the end of each fiscal year and 90 calendar days after the end of the semi-annual reporting date. The managing member shall use its commercially reasonable efforts to circulate to each economic member electronically by e-mail or made available via an online platform:

Distribution Upon Liquidation of a Series

Subject to the terms of a Series Interest any amounts available for distribution following the liquidation of a Series, net of any fees, costs and liabilities (as determined by the managing member in its sole discretion), shall be applied and distributed 100% to the members (pro rata to their Interests and which, for the avoidance of doubt, may include the managing member and its affiliates).

Other Rights

Holders of Series Interests shall have no conversion, exchange, sinking fund, appraisal rights, no preemptive rights to subscribe for any securities of the company and no preferential rights to distributions of Series Interests.

Forum Selection Provisions

The company’s subscription agreement and operating agreement include forum selection provisions that require any claims against the company based on the subscription agreement or operating agreement to be brought in a court of competent jurisdiction in the State of California. These forum selection provisions may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted these provisions to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the company.

ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR

The company will be required to make annual and semi-annual filings with the SEC. The company will make annual filings on Form 1-K, which will be due by the end of April each year and will include audited financial statements for the previous fiscal year. The company will make semi-annual filings on Form 1-SA, which will be due by September 28 each year, which will include unaudited financial statements for the six months to June 30. The company will also file a Form 1-U to announce important events such as the loss of a senior officer, a change in auditors, or certain types of capital-raising. The company will be required to keep making these reports unless it files a Form 1-Z to exit the reporting system, which it will only be able to do if it has less than 300 unitholders of record and have filed at least one Form 1-K.

At least every 12 months, the company will file a post-qualification amendment to the offering Statement of which this Offering Circular forms a part, to include the company’s recent financial statements.

The company may supplement the information in this Offering Circular by filing a Supplement with the SEC.

All these filings will be available on the SEC’s EDGAR filing system. You should read all the available information before investing.

FINANCIAL STATEMENTS 

ARK7 PROPERTIES, LLC

BALANCE SHEET (UNAUDITED)

As of June 30, 2020

ARK7 PROPERTIES, LLC 

STATEMENT OF OPERATION (UNAUDITED)

FOR THE PERIOD ENDED JUNE 30, 2020

ARK7 PROPERTIES, LLC

STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE PERIOD FROM JANUARY 1st THROUGH JUNE 30th 2020

ARK7 PROPERTIES LLC

FINANCIAL REPORT

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019 

TABLE OF CONTENTS

INDEPENDENT AUDITOR’S REPORT

Member and Management

Ark7 Properties LLC

San Francisco, California

We have audited the accompanying financial statements of Ark7 Properties LLC (a Delaware Limited Liability Company), which comprise the balance sheet as of December 31, 2019 and the related statement of operations, changes in member’s equity, and cash flows for the period from October 31, 2018 (Inception) to December 31, 2019, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ark7 Properties LLC as of December 31, 2019, and the results of its operations and its cash flows for the period from October 31, 2018 (Inception) to December 31, 2019 in accordance with accounting principles generally accepted in the United States of America.

San Francisco, California

September 19, 2020

ARK7 PROPERTIES LLC

BALANCE SHEET

AT DECEMBER 31, 2019

The accompanying notes are an integral part of these financial statements.

ARK7 PROPERTIES LLC

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

The accompanying notes are an integral part of these financial statements.

ARK7 PROPERTIES LLC

STATEMENT OF CHANGES IN MEMBER’S EQUITY

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

The accompanying notes are an integral part of these financial statements.

ARK7 PROPERTIES LLC

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

The accompanying notes are an integral part of these financial statements.

ARK7 PROPERTIES LLC

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

The accompanying notes are an integral part of these financial statements.

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

Ark7 Properties LLC (the “Company”) is a single member Delaware limited liability company that is wholly owned by Ark7 Inc., as a limited liability company in accordance with the Limited Liability Company Act (LLCA) of the state of Delaware that conducts related operations. The Company does not have a termination date. Simultaneously with the formation of the Company, the Company's member entered into an operating agreement on October 31, 2018.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP)

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be materially affected. The Company bases its estimates on past experience and other assumption that the Company believes are reasonable under the circumstances and the Company evaluates those estimates on an ongoing basis.

Lease revenue is reported on a straight-line basis over the terms of the respective leases.

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and tenant receivable. The Company places its cash with financial institutions, and its balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At various times, the Company had cash balance in excess of the insured amount. At December 31, 2019, the Company had no uninsured cash balances.

The Company’s financial instruments include cash and tenant receivable. The Company’s value of these financial instruments approximates fair value due to their short-term nature.

Land is carried at cost. Building, leasehold improvements, furniture, fixtures, and equipment are carried at cost, less accumulated depreciation and amortization. The building, furniture, fixtures, and equipment are depreciated using the straight- line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the terms of the related leases. Repairs and maintenance are expensed when incurred.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset or group of assets. If estimated future undiscounted net cash flows are less than the carrying amount of the asset or group of assets, the asset is considered impaired and an expense is recorded in an amount required to reduce the carrying amount of the asset to its then fair value. Fair value generally is determined from estimated discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale). For the year ended December 31, 2019, the Company has not recognized any impairment losses.

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

Investment properties consist of the following as of December 31, 2019:

Depreciation expense for the period from October 31, 2018 to December 31, 2019 was $23,593.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). This update is to report transparent and economically neutral information about the assets and liabilities that arises from leases. As result, lessees would be required to recognize the rights and obligations resulting from leases as assets and liabilities. For public business entities, the update is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2020 and interim periods beginning after December 15, 2021. Early adoption is permitted. The management is currently evaluating the impact the amendments in this ASU will have on the financial statements.

The company is a disregarded entity for tax purposes and does not incur income taxes; instead, its earnings are reported by the member. The financial statements, therefore, do not include a provision for income taxes.

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus, or COVID-19, a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic continues to adversely impact economic activity in real estate. Given the nature of the outbreak and the on-going developments, there is a high degree of uncertainty and it is not possible at this time to predict the extent and nature of the overall future impact on the Company's investments.

In September 2020, the Company entered into the agreement to acquire a new property to meet its investment criteria.

The Company has evaluated subsequent events through September 19, 2020, the date that the financial statements were available to be issued.

On November 22, 2019, when the Company entered the loan discussed in Note 5, all financing costs were capitalized and are being amortized over 10 years. Amortization expense for the period from October 31, 2018 to December 31, 2019 was $123.

In September 2019, the Company executed six operating leases agreement of 3102 California Street, Berkeley, 3106 California Street, Berkeley and 3108 California Street, Berkeley with several tenants. The initial terms of the Company’s leases with tenants are on month-to-month basis with 30-days termination notice.

In December 2019, the Company executed four operating leases agreement of 2924 Mable St., Berkeley with several tenants. The initial terms of the Company’s leases with tenants are on month-to-month basis with 30-days termination notice.

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

At December 31, 2019 and for the period from October 31, 2018 to December 31, 2019, the Company had the following balances and transactions with its sole member:

On November 22, 2019, the Company executed into a Loan Agreement Secured by Deed of Trust. According to the Loan Agreement, the Company borrowed $1,512,500, and the monthly payment started on January 1, 2020. The loan bears interest rate of 3.5% per annum until December 1, 2024 and subject to interest change equal to the Current Index applicable to the Interest Change Date plus two and 75/100 percent (2.75%) per annum, rounded upward to the next highest one-eighth (1/8th) of one percentage point (0.125%), unless the result of such addition is equal to a number which is a multiple of one-eighth (1/8th) of one percent (0.125%). The loan will mature on December 1, 2029.

For the period from October 31, 2018 to December 31, 2019, the interest expense was $5,147.

At December 31, 2019, the outstanding balance on the mortgage payable was as follows:

Maturities of the loan payable are as follows:

ARK7 PROPERTIES LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM OCTOBER 31, 2018 (INCEPTION)

TO DECEMBER 31, 2019

The Company has an unsecured notes payable with its sole member. The notes bear interest at 7% per annum on the unpaid balance and will be repaid in full on May 15, 2021 on the outstanding balances. At December 31, 2019, the outstanding balances on the notes amounted to $1,500,000.

PART III

INDEX TO EXHIBITS

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.