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 November 2019, we invested roughly $30.8 million in the Icon at Harbour Island Apartments, a 340-unit luxury apartment tower, just south of downtown Tampa. Approximately 87% of our investment was funded by the Income eREIT, while the remaining 13% was provided by the East Coast eREIT.
At the time of our acquisition, the property was approximately 90% occupied. The business plan involved the sponsor, Olympus Property, holding and managing the property for seven to ten years before paying back our investment via sale or refinance. This Fixed Income investment consisted of a preferred return structure (similar to a loan), in which the sponsor is obligated to pay us a fixed rate of return over the life of the investment, and their equity provides a margin of safety for our principal.
Recently, the sponsor recapitalized their portfolio and paid back our investment in full, including our preferred return, earlier than expected. We earned an annualized return of approximately 9.2%¹ over the roughly 15-month term, which is consistent with our investment 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 investors in the Income and East Coast eREITs.
Income in a historically low interest rate environment
This investment is part 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 9.2%¹ yield (adjusted to be net of fees), the annualized yield on the Income and East Coast eREITs were 5.98% and 4.18%, respectively, as of the time 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.
