In May 2018, we invested $9 million in the construction of the Quest at Cedar Park, a 333-unit apartment community including 3,900 square feet of retail space in Cedar Park, Texas, a major suburb of Austin.
After completing construction in the fall of last year, the project’s sponsor, North American Properties, shifted focus to lease up the newly-built property. Despite the broader economic uncertainty brought about by the pandemic, early leasing efforts at the property were promising. Just two months after completing construction, the property was 38% occupied.
Last month, the sponsor successfully sold the property and paid back our investment in full. Per the terms of our preferred structure investment (which is similar to debt), we earned an annualized return of 11% over the life of the investment.
As we stated in our 2020 year-end letter to investors, the real estate industry continues to experience a K-shaped recovery, where some asset classes (including suburban apartments in the Sunbelt, of which this property is a prime example) are actually seeing increased demand due to the impact of the virus, as well as improved financing due to lower overall interest rates.
We view the success of this investment as further reinforcing our conviction around other, similar investments in the portfolio, and we are optimistic that as the country continues to recover and overall sentiment continues to improve, we expect to see further increases in demand for well-priced, well-located properties in growing areas.
Investor FAQ: How does this project impact your portfolio?
This investment was structured like debt, where the project’s sponsor paid us a fixed rate of return before they could earn a return for themselves, and their equity provided us with a cushion against losses. Throughout the term of this investment, the regular income it generated supported quarterly dividends for the Growth eREIT.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
