We are excited to announce the Fundrise Opportunity Fund’s latest acquisition -- an adaptive reuse commercial development in the West Adams neighborhood of Los Angeles. The property was acquired for approximately $9.3 million with the intention to invest approximately $3 to $4 million into the renovation and redevelopment of the property.
This property, which is the fourth asset that the Fund has acquired in this part of Los Angeles, is located within close proximity to the Fund’s other assets along the West Jefferson corridor, providing a critical mass of development projects in the area. We believe that this density of projects will not only allow us to take a more holistic approach to the long-term development and growth of the overall neighborhood but also improve our ability to effectively market the properties for sale at the end of our intended hold period, ultimately driving better returns for the Fund.
Business plan
After going under contract in November 2019, our initial plans included exploring the ground-up development of a new, larger scale class A office. However, given the significant disruption caused to the coronavirus pandemic to the office market more broadly, we now believe the site may be better positioned as an adaptive re-use or slightly smaller scale development, as we continue to allow the neighborhood to grow organically around us.
The site benefits from having a good deal of flexibility, and should we determine it is more appropriate not to maximize density in the near term, this future development potential should add value to the eventual exit as a future buyer can capitalize on this upside.
As Los Angeles continues to reopen, we will continue to closely monitor changes in the leasing market. We believe that the West Adams/West Jefferson corridor may see even further interest, not only as growth continues to see spillover from Culver City, but also because the existing building stock allows for the potential for low-density, individual and private office buildings, reducing the need to spend time in elevators and shared lobbies, as well as potentially offering greater outdoor space.
Pursuant to the stipulations of the Opportunity Zone legislation as outlined in the Internal Revenue Code section 1400Z-2, we intend to substantially improve the property by deploying capital in excess of our cost basis in the building. We expect to complete these improvements within the required time frame stipulated by Opportunity Zone legislation.
