In May 2016, we invested in the development of Elysium Fourteen, a 56-unit luxury apartment building with ground floor retail in Washington, DC. Today, we’re pleased to announce that the investment has paid back, earning an internal rate of return of approximately 11.4%. Upon completion of construction, the borrower successfully leased up the building’s residential and retail spaces, before securing longer-term, lower-rate financing.
Investing in a rapidly-growing neighborhood
This project is an excellent example of how getting “ahead of the curve” of an area’s growth can produce attractive-risk adjusted returns.
After suffering decades of blight, the 14th Street corridor in Washington, DC had been steadily making a comeback since Whole Foods opened a location at the southern end in 2000. However, the northern end was slower to redevelop, leaving it full of potential. This created an opening for us as an opportunistic investor to earn an above-market return by taking what we felt was a relatively low risk — the continued revitalization of an iconic street in our nation’s capital, powered by a broad demographic shift toward walkable, urban living.
Less than three years after we invested, the property and surrounding blocks are now transformed.
The retail space has attracted top national brands, including Lululemon, Orangetheory fitness, and Jeni’s Splendid Ice Creams, steps from one of the most vibrant intersections in the city.
In retrospect, it looks like an obvious investment, but in reality, it required an agile, opportunistic team with intimate knowledge of the area to produce a successful result.
Investor FAQ: How does an individual project impact your portfolio?
This investment was structured like debt, where the project’s sponsor must pay us a fixed rate of return before they can earn a return for themselves, and their equity provides us with a cushion against losses. Throughout the term of the investment, the regular income it generated has supported quarterly dividends for the Income eREIT.
Being cognizant of our current economic climate — late in the expansion phase of the economic cycle — we continue to focus on debt and debt-like investments in an effort to fortify your Fundrise portfolio for times of turbulence, while preparing to aggressively pursue future opportunities that may arise as a result of that same turbulence.
