We’ve invested $7 million in the construction of a 195-unit apartment community in Lake Stevens, Washington, a northern suburb of Seattle. Stringent regulatory restrictions have historically hampered development in Lake Stevens, limiting the supply of apartments. According to CoStar, there was only one other similar project under construction at the time of our investment, despite strong job growth in the area.
While yields on public stocks and bonds are at near-historic lows, we continue to see the potential to earn attractive yields — in this case, roughly 10.75% annually — by financing the construction of apartments in supply-constrained areas.
Business plan
The project’s sponsor, Evergreen Housing Development Group, broke ground on the property in June, and expects to complete construction by the end of next year. Our investment is structured like debt, where we are entitled to earn a fixed rate of return over the life of the investment before the sponsor can earn a return for themselves.
Why we invested:
- Strong relationship with experienced sponsor: Evergreen Housing Development Group is an experienced regional developer with a portfolio valued in excess of $585 million. We’ve invested in five other projects with them, of which three have already paid back successfully.
- Attractive margin of safety: Evergreen has roughly $8.5 million of equity (20% of total expected project costs) junior to our position. They would have to lose their entire investment before our principal was threatened.
- Healthy local economy: With projected job growth of more than 40% over the next decade, Lake Stevens is poised to experience increased demand for housing. This should boost the value of the property, serving to further reduce our risk.
As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.
