In July 2019, we invested $13.1 million in the acquisition and renovation of Mezza Apartments, a 440-unit apartment community in Jacksonville, Florida. As is typical of many of our investments in affordably-priced apartments in the Sunbelt, we saw an opportunity to buy and improve an existing property below replacement cost, i.e. what it would cost to build a similar new community from the ground up.

Shortly after we closed on the property, our partner kicked off a value-add plan, which included renovating each apartment as well as improvements to the clubhouse, landscaping, and pool area.

Rent growth of 9.4% since acquisition

Today, we’re pleased to share that the renovations at Mezza Apartments are now complete, and, despite the effects of the COVID-19 pandemic this year, the property has shown promising rent growth since we acquired it. To date, the property has achieved an overall average rental increase of about $95 per unit, a 9.4% increase since acquisition.

Although this improvement is about $50 less than our originally projected rent growth, we expect to see future increases: We conducted the renovations immediately upon acquiring the property, while tenants remained in place, with the intent of increasing rents as leases were signed or renewed. However, due to the timing of COVID, we determined it would be in the best interest of both the property and the tenants to apply the rent increases more gradually, as the full impacts of the pandemic remained unknown. Now, while it may take longer than originally anticipated to see the full increases in rent income, we expect the units to realize additional growth over time.

Rent collections remain strong

Meanwhile, rent collections at Mezza — one of the primary measures of health at an apartment property — have stayed at strong levels, averaging over 97% for April through October. This performance represents an improvement over apartment industry averages of roughly 94 – 96%, according to the latest available data reported by NAREIT.

Like our other apartment communities in Sunbelt cities, we view the performance of this investment, both generally and through the pandemic, as a reinforcement of our conviction that affordable real estate in growing areas is always in demand (for a more in-depth discussion of this topic we suggest you read our mid-year letter to investors if you haven’t already).

Investor FAQ: How does this project impact your portfolio?

This investment is structured as equity, which means we are the owners of the property and entitled to our share of rental income, plus any future increase in the value of the property. As an investor, you can expect to see this impact your return in two ways. Any additional rental income would contribute to quarterly dividends, while any increase in the property value would be captured in adjustments to the East Coast eREIT’s net asset value (NAV) per share.

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