In February 2019, we provided a $2.75 million loan for the acquisition and renovation of a six-unit apartment building in Bushwick, Brooklyn. The business plan involved the borrower renovating all six vacant units with the goal of increasing rental income before securing tenants and paying back our loan.
After completing work last July, the borrower successfully leased up the improved units. Today, we’re pleased to report that they recently refinanced the property and paid back our loan with interest. We earned an annualized return of roughly 8.9%¹ over the life of the investment, which exceeded our initial projection of 6.5% because the borrower agreed to pay interest on the maximum loan balance, even though they didn’t draw down the full loan amount.
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 II.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
