Important note: The realized return on an individual project may vary significantly from your portfolio-level return as an investor. To learn more about why this may be the case, see the “how did this project impact your portfolio?” section.
In December 2019, we provided a $6.5 million loan for the acquisition of a 53,000 square foot (1.2 acre) property in Toluca Lake, California.
Today, we’re pleased to report that the borrower successfully executed on the business plan to secure the permits and entitlements necessary to build a 345-unit apartment community on the site, which you can see an illustrative rendering of above.
With the property shovel-ready, the borrower recently refinanced into a construction loan and paid back our investment in full. We earned an annualized return of roughly 8% over the life of the investment, per the terms of our loan agreement.
Investor FAQ: How did this project impact your portfolio?
Throughout the term of this investment, the interest income it generated supported quarterly dividends for the Income eREIT II.
Income in a historically low interest rate environment
This investment is a great example of our broader Fixed Income strategy, which has historically consisted primarily of short to medium-term loans or similar financing of new development. Many of these investments are either reaching maturity, or being paid back early via refinance due to the historically low interest rate environment. This has resulted in us holding a greater than usual amount of cash on hand, which, as we stated in our year-end letter, serves to reduce returns in the immediate term. For example, while this investment generated a roughly 8% yield (adjusted to be net of fees), the annualized yield on the Income eREIT II as a whole was roughly 5.4% as of this writing.
While we are actively evaluating the most attractive strategies to deploy into new income-generating investments in this environment, it is reasonable to expect that (along with nearly every other asset class), yields on private real estate investments in the near term would generally be lower than they were in the past.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
