Portfolio update: New preferred equity investment in the San Antonio metro area

New high-yield investment with a 13.50% fixed return in a 349-unit multifamily development near San Antonio, TX

Nov 25, 2024

We are pleased to announce the latest addition to the Fundrise Income Real Estate Fund — a preferred equity investment in Lemon Creek Ranch located in Boerne, Texas, just north of San Antonio. This 13.50%¹ gross return investment continues to support our strategy of identifying high-quality assets with strong market fundamentals. We believe this investment further supports our current annualized distribution rate, even as the Fed continues lowering interest rates, continuing to validate our belief that the Income Real Estate Fund continues to be a compelling investment as interest rates come down.

Investment overview

Lemon Creek Ranch will be located within a 118-acre mixed-use master development anchored by a recently opened grocery store and will feature other amenities including a tailored mix of retail, dining, entertainment, office, and hospitality. There will also be 25 acres of dedicated green space within the mixed-use development.

Location: Boerne, TX, within the fast-growing San Antonio metropolitan area
Asset type: Multifamily housing—349 units across six three-story residential buildings
Community features: Resort-style pool, fitness center, community courtyard, outdoor lounges, private garages, and a clubhouse with leasing offices
Unit amenities: Smart home features, wood-style flooring, stainless steel kitchen appliances, private yards for select units, and designer closets

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 13.50%¹ annual gross interest rate delivers a compelling yield.
Experienced sponsor: The sponsor is experienced with over 50 apartment communities with roughly $1.8 billion in value.

Local market insights

Boerne, TX, has seen substantial growth with a 67% population increase over the past decade and a projected 24% growth over the next five years. This rapid expansion, combined with local zoning restrictions limiting future multifamily development, creates an environment of constrained housing supply, supporting the demand and lease-up performance for high-quality projects like Lemon Creek Ranch.

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 continues 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

With our investment in Lemon Creek Ranch, we aim to continue to capitalize on the continued demand for rental housing in growth markets like San Antonio, helping ensure stable returns for our investors. We anticipate the current yield from the Income Real Estate Fund to remain strong, delivering value to our investors as market conditions evolve.

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.