In February 2018, we partnered with a local sponsor to acquire two older apartment communities — The Arbors and The Courtyards — in Albuquerque, New Mexico, as part of your Fundrise portfolio.
The plan was to perform light renovations, then hold the properties for several years, with the expectation that stable demand from nearby major employers, including the University of New Mexico and the federal government, would support consistent rental income with the potential for growth in value later on.
Over the first 12 months, the common areas, including pool, parking lots, and signage were all upgraded. The sponsor also replaced the property manager and focused on signing new leases while keeping expenses in check. By mid-2019 both properties had healthy occupancy and expense levels that were close to projections.
As a result of the growth in value of the assets, our partner approached us towards the end of last year with an offer to buy us out of the deal by refinancing the asset at a lower cost of capital. In our view, a substantial amount of the original business plan’s value had already been captured and because of the way we structured the investment we were in a position to negotiate an attractive exit price that was also agreeable to our partner’s aims.
While we typically make equity investments with the intention of being a long-term owner of the real estate, occasionally opportunities present themselves to achieve outsized performance by exiting earlier than we may have initially anticipated. In this case, between the rental income we received and the increased price at which we exited the investment, we realized an annualized return of approximately 18.0%¹, outperforming our underwritten projection of 11.4 - 13.5% and freeing up capital to pursue new opportunities.
Investor FAQ: How did this project impact your portfolio?
This investment was structured as equity, i.e. we were part owners of the properties and entitled to our share of rental income as well as any profits from selling our stake in them.
Over the past two years, the rental income earned has contributed to quarterly dividends, while the increased value of the properties has been captured in past adjustments to the West Coast eREIT’s NAV per share.
We plan to reinvest the proceeds from the sale of our investment into new projects as opportunities present themselves.
As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.
