In August 2017, we invested $6 million in the construction of Capital Club Apartments — a 312-unit luxury apartment community in Indian Land, SC, a suburb of Charlotte.

Despite initial delays due to permitting issues and heavy rains, we’re pleased to report that substantial progress has been made on the project. As you can see from the video, the clubhouse and nine of the residential buildings have taken shape with roofing and siding installation underway.

Construction is now expected to complete in spring 2020, roughly six months behind the initial schedule. From here on out, we believe construction should progress smoothly, and we are hopeful that the project will deliver on the revised timeline.

Preparing for the unexpected in construction projects

By structuring this investment (and most of our other investments in construction) like debt, we aim to mitigate risk to your principal and negate the impact of delays on performance.

  • The borrower must pay us a fixed rate of return each month for as long as it takes to finish the project. This means that delays do not negatively impact returns as long as the project eventually finishes.
  • The borrower must invest their own capital before drawing on our investment. Their equity provides us a cushion against losses and increases their motivation to finish the project since they have “skin in the game”.
  • We typically fund our investment in draws over time, releasing the money incrementally upon completion of agreed-upon milestones, such as foundation, framing, roofing, etc. Our team reviews detailed third party progress reports before approving each draw, limiting the amount of principal at risk at any given point.

Investor FAQ: How does this project impact your portfolio?

This investment is structured like debt, where the project’s sponsor must pay us a fixed rate of return — in this case, 12% annually — 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 has generated has supported quarterly dividends for the East Coast eREIT.

We look forward to providing you with additional updates on this project. As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.