We’ve invested roughly $16.3 million in the acquisition and renovation of Chase Heritage Apartments, a 236-unit apartment community in Sterling, Virginia, about 30 miles west of Washington, DC.

Despite the overall negative impact on demand for apartments in the urban core of major gateway cities (such as Washington, DC) caused by the pandemic, we believe that over the long term, housing supply in certain more affordably priced suburban submarkets will remain supply constrained.

In the case of this investment, Sterling represents a prime example of this type of submarket relative to the DC metro area as a whole. As tech companies continue to deepen their roots in Northern Virginia and contribute a layer of dynamism on top of the traditional, stable employment center created by the federal government, we believe there is ample room for growth in the coming years.

Business plan

Originally built in 1986, the buildings have been well maintained. The property’s previous owner fully renovated 79 (or roughly a third) of the units, beginning in 2018. Our business plan calls for an additional $6.1 million to renovate a portion of the remaining units and improve the community’s common areas, of which we will contribute approximately $1.8 million and our partner, McDowell Properties, the remainder. We expect our total commitment to be about $18.1 million over the duration of our investment.

At the time of our acquisition, rent collections, one of the primary measures of health at an apartment property, were roughly 95%, having maintained similarly strong levels of performance through the course of the COVID-19 pandemic. While the property is currently cash flowing, we believe there is an opportunity to make it even more competitive with the cosmetic upgrades to the unit interiors (something you’ve probably heard from us many times before if you’ve been investing with us for a while).

Together with our partner, we plan to be long-term owner-operators, holding the property for roughly the next seven to ten years before seeking an exit. Our goal is to earn consistent cash flow from rent payments, with the potential for long-term upside by eventually selling the community for more than we put into it.

Why we invested

While the extent of the negative impacts of the COVID-19 pandemic on the broader economy remains uncertain, we believe this investment is well-positioned not only to withstand a prolonged economic downturn, but to potentially benefit from more permanent shifts in behavior that may result.

  • Excellent location: Sterling is conveniently located at the western end of the Dulles Technology Corridor, a major employment hub for defense contractors and tech companies, dubbed “The Silicon Valley of the East" by Atlantic magazine.
  • Experienced partner: McDowell Properties currently operates a portfolio of roughly 10,000 units across the United States, and since their inception in 2004 they’ve purchased over 40,000 units valued at over $3.0 billion.
  • Income-generating asset: Rent collections at the property were roughly 95% at the time of our investment, generating consistent cash flow for us as the owners.

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