In January 2019, we provided an $891,000 loan for the acquisition and renovation of a roughly 3,500 square foot industrial building in the East Hollywood neighborhood of Los Angeles. The business plan involved the borrower securing the necessary permits to renovate the existing warehouse into a creative office space.
Today, we’re pleased to report that the sponsor recently obtained the permits as planned and paid back our investment in full by refinancing into a construction loan. We earned an annualized return of roughly 9.2%¹ over the life of the investment, which is consistent with our underwritten projections.
As we stated in our recent letter on how we plan to invest through the current crisis, we believe that attractive investment opportunities will begin to present themselves in the coming months. A payoff like this one serves to further bolster our cash reserves as we look to acquire assets that have the potential to outperform over the long term due to more permanent structural changes that emerge from the pandemic.
Investor FAQ: How did this project impact your portfolio?
This investment was structured as 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 this investment, the regular income it generated supported quarterly dividends for the Income eREIT II.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
