Last year, we invested in the construction of 13 homes in the hilly LA neighborhood of Angelino Heights. Although the property’s elevation should offer great views of downtown, it has required extensive excavation and grading to prepare the site for building. We’re pleased to report that this phase of the project has been completed, and work has begun on pouring foundations and laying concrete blocks for the external walls.
While the project is progressing, the sponsor has reported some delays as a result of it taking longer than expected to obtain their permits. In addition, they have adjusted their initial construction budget upwards by roughly 4%. Although we do not anticipate these changes having a material impact on the project’s successful completion, they do highlight some of the common challenges that are inherent in real estate construction.
These types of challenges reinforce our decision to be a lender on most of our construction projects, with a significant equity buffer to reduce any potential negative impact.
More broadly, this investment is a prime example of our strategy of meeting the growing demand for housing in urban infill locations where new supply is limited. We believe that the housing market dynamics in the Los Angeles area will continue to support robust home price appreciation, and in turn the success of our investment in this project and others like it.
We look forward to providing you with additional updates as this and our many other housing investments in LA take shape.
Investor FAQ: How does an individual project impact your portfolio?
Investors often ask us how the individual projects in their portfolio impact their returns. In the case of a debt investment, like this one, the interest payments we receive from the borrower typically flow up to investors’ portfolios as quarterly dividends.
Each major milestone that a project progresses through increases the likelihood that it will reach a successful completion and pay back the principal of our investment.
