In May 2017, we provided a $10 million loan for the construction of 11 luxury homes in Hollywood, Los Angeles. In December, 2018, we increased our original investment by $750,000. The project wrapped up construction and secured certificates of occupancy last June, and the sponsor began selling the homes shortly after, to strong results.
Recently, the borrower refinanced our loan and paid back our investment with interest in full. We earned an annualized return of roughly 8.8%¹ over the life of the project, 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 does 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.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
