Portfolio update: New preferred equity investment in North Augusta, SC

New preferred equity investment with a 13% gross return to fund a 343-unit multifamily development

Oct 24, 2024

We are excited to announce the latest addition to the Income Real Estate Fund’s portfolio — a preferred equity investment in the Augusta Development, a 343-unit ground-up multifamily development located in North Augusta, SC. This investment offers a fixed 13.00%¹ gross return and is expected to support the Income Real Estate Fund’s strong annualized distribution rate.

Investment overview

Augusta Development is a 343-unit apartment community featuring seven four-story residential buildings, ten three-story carriage homes, and a resort-style clubhouse with premium amenities and high-quality finishes. Community amenities include a fitness center, pet spa, saltwater pool, and various outdoor recreational areas. The sponsor is a seasoned developer with extensive experience across the multifamily sector in the Southeast.

Investment structure

Preferred equity position: The investment is structured as preferred equity, providing priority returns ahead of common equity and the sponsor.
Strong potential return: The 13.00%¹ annual gross interest rate delivers a compelling yield, particularly as the Fed signals a shift in policy, reducing rates by 50 basis points at their September meeting.
Experienced sponsor: The sponsor is highly experienced with over 43 apartment communities with a $3.3 billion value.

Local market insights

North Augusta is part of the broader Augusta, GA metropolitan area, which has recently seen strong economic growth. The area's affordability, particularly in comparison to other nearby cities like Atlanta, and the ongoing development within "The Hive," a 200-acre mixed-use community, where Augusta Development is the only multi-family component of the development. The location makes Augusta Development well-positioned for growth and absorption.

Market dynamics

As we’ve discussed at length, we believe the current macroeconomic environment continues to create a window of opportunity for what are historically attractive investments with uncommonly strong risk-adjusted returns, specifically in the credit and lending markets. As the Fed begins lowering rates over the next several months, we expect that the fixed return of this and other preferred equity investments across the portfolio will only look increasingly attractive relative to what are anticipated to be lower yields on most fixed-income investments.

Impact on your portfolio

The addition of Augusta Development to the Fundrise Income Real Estate Fund is aligned with our ongoing strategy to invest in high-quality, income-generating assets that deliver attractive returns. As we continue to experience a shift in interest rates, we anticipate the Fund’s current yield will remain robust.

As always, Fundrise remains committed to sourcing investments that align with our long-term objectives of delivering strong, stable returns. Our broad and diversified portfolio aims to provide consistent distributions over the long term, regardless of market cycles and economic conditions.

If you have any questions, please feel free to reach out to our Investor Relations team at investments@fundrise.com.

1. This solely represents a fixed rate of preferred return due to the Fundrise Income Real Estate Fund under the terms of its investment agreement(s) and does not reflect either a gross or net return that an investor in the Fundrise Income Real Estate Fund may expect to receive as a result of this fixed rate return. Due to the uncertainty of other factors that will ultimately determine the return to any investor (such as leverage, cash drag, and other potential financings), the performance of this asset to the investor is currently unknowable and undeterminable, and may ultimately be lower or higher than the stated fixed rate of preferred return.

Disclosure: An investor in the Fundrise Income Real Estate Fund should consider the investment objectives, risks, charges, and expenses carefully before investing. The Fund’s prospectus contains this and other information and may be obtained here. Investors should read the prospectus carefully before investing.