We’ve invested $9.46 million to provide a loan for the acquisition of two buildings totaling 100,000 square feet in the West Midtown neighborhood of Atlanta, with plans to redevelop the site into a pair of new apartment towers containing approximately 500 units.

By opportunistically financing new housing creation in neighborhoods like this one, where major redevelopment is underway and new zoning laws support increased density, we can continue to target attractive yields at relatively low risk — in this case, 8% annually.

Business plan

With our investment, the borrower has purchased the property — currently containing two commercial buildings and a parking lot fully leased to the Atlanta Humane Society — and has already rezoned the site from industrial to mixed-use development. They now intend to obtain approvals and permits for the redevelopment of the property into two apartment towers with roughly 500 units. Upon finalizing permits, they plan to either sell the shovel-ready property or secure a construction loan to take out our position in the investment.

Our investment is structured as debt, where we are entitled to earn a fixed annual return of roughly 8% over the life of the investment before the sponsor can earn a return for themselves.

How might the impact of COVID-19 affect this investment?

It’s reasonable to assume that this project may have a longer development timeline than the sponsor initially projected due to the impact the pandemic is having on the ability for governments to operate their normal permitting and approval processes. We structured our loan to include an interest reserve for the entire three-year term, which effectively means that the borrower prepaid all of the interest up front, providing us a margin of safety against such delays in the event that the current disruption in the market continues for longer than expected.

Why we invested

  • Attractive margin of safety: Our investment is secured at a 68.9% loan to cost (LTC) basis, including three years of interest reserve pre-funded at closing.
  • Up-and-coming location: Atlanta’s West Midtown neighborhood is already seeing a redevelopment boom with a number of office and residential projects, driven by the close proximity of parks, restaurants, employers, and Georgia Tech.
  • Experienced partner: The principals of the borrower have overseen the acquisition and growth of approximately 90 sites, with a total development value to-date of roughly $5 billion

As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.

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A brief note about how we’re navigating the coronavirus (COVID-19) pandemic

Though black swan events like the current coronavirus pandemic are impossible to predict, nearly every decade has experienced some form of significant economic disruption. Recognizing this, we’ve spent the last several years structuring our investments to withstand a sudden and prolonged period of distress. Given today’s extreme uncertainty, we have begun taking decisive action aimed at further fortifying your portfolio.

In the immediate term, we expect to limit most new acquisitions and instead anticipate holding more cash in reserve. We plan to focus on pushing our existing projects forward, and in rare instances, look to deploy strategically into properties — like this one — that we feel are particularly well suited to withstand near term stress or even benefit from the current disruption in the market. As we continue to monitor the ongoing effects of this disruption, we expect that over time having additional cash reserves on hand may allow us to capitalize on new opportunities that begin to present themselves.