We’ve acquired Lotus at Starkey Ranch, a stabilized 384-unit apartment community in Odessa, Florida, for a purchase price of $87 million.

At a strategic level, this investment fits within our affordably-priced Sunbelt apartment / rental housing thesis. From millennials to retirees, a broad group of Americans has been taking part in a migration from northern to southern states over the past decade, driving continued demand for well-priced, well-located real estate, and supporting steady returns for disciplined investors.

As we stated in our mid-year and year-end letters to investors, we believe that this long-term trend has only been further accelerated by the pandemic. In an economy where remote work is becoming the norm for more and more people, we expect that an increasing share of the population won’t need to live in expensive gateway cities and will instead seek out locations that offer lower living costs and more agreeable climates.

This investment was made by a joint venture between two Fundrise sponsored funds, the Fundrise Interval Fund, which invested roughly $38.4 million, and the Balanced eREIT II, which invested roughly $4.3 million. A senior loan in the amount of $47.9 million was provided by KeyBank. The investment amounts include a budget for financing and other soft costs.

Business plan

Our investment in the Lotus at Starkey Ranch is a direct acquisition of the entire community. Construction of the community was originally completed in 2019, and it achieved stabilization in November.

Since this is new construction, we don’t anticipate committing significant capital to improvements for the foreseeable future.

Our intent with this and other similar investments — including both single-family rental home communities and some apartment communities — is to be a long-term investor, building a scaled portfolio that generates consistent rental income, while at the same time positioning ourselves to capture what we believe will be outsized price appreciation thanks to a confluence of demographic factors driving demand across the Sunbelt.

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.

  • Growing local economy: The Tampa region is one of the country’s top 20 largest metropolitan areas and has been recognized in recent years as the #1 top metro attracting renters and the best big city in Florida to live in. Over the course of the COVID-19 pandemic, the Tampa market has been one of only 14 major American MSAs to produce positive rent growth year-over-year, at 3.6%.
  • Income-generating asset: The property achieved rent collections of approximately 82.5% in the months leading up to our acquisition; rent concessions aside, rent collections were as high as roughly 96% in January 2021.
  • Great location: Lotus at Starkey Ranch’s location in the Odessa submarket gives it direct access to the Tampa MSA economy and network while still providing a lower cost of living and the potential to enjoy more expansive space. Odessa also benefits from a handful of highly-graded new schools, while Lotus at Starkey Ranch enjoys immediate access to a suite of retail and lifestyle amenities, including a selection of restaurants, golf courses, and even a wilderness preserve.

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