We’ve provided a loan of $33.5 million for the acquisition of an approximately 15.3 acre industrial property in San Juan Capistrano, California, located between Los Angeles and San Diego.

Because of a general pullback in land and development lending from traditional banks, we expect to see occasional opportunities — such as this one — to provide financing at a relatively attractive basis while also earning strong yields in a historically low interest rate environment: in this case, our loan bears an interest rate equivalent to 8.5% per annum.

Strategy

Fixed Income

Provide real estate backed loans or similar structured financing

  • Risk-return profile: Low to moderate
  • Expected timing / delay of returns: Typically immediately after acquisition
  • Expected source of returns: Interest income

More about our strategies

Note that this section is intended to provide a general overview of the Fixed Income strategy for educational purposes only, and is not meant to be representative of the specific details of any individual investment. All investments involve risk and there are no guarantees of any returns.

Business plan

With our investment, the borrower has purchased the 15-acre property, which currently contains a vacant 125,000 square foot industrial building. They now intend to obtain the approvals and permits for the construction of an additional industrial building ranging between 49,000 and 80,000 square feet. The property’s excellent location — about two hours between both Los Angeles and San Diego — makes it a great fit for our industrial real estate strategy of investing in distribution centers near prime metropolitan areas, a real estate category we believe will retain its high demand, as online shopping and retail delivery becomes ever more integral to many Americans’ lives.

Upon securing the necessary permits, the borrower plans to pay back our investment via refinancing or from the sale of the newly permitted property to a developer. Our investment in the project is structured as a loan (debt), where we are entitled to earn an annual return of roughly 8.5% over the life of the investment before the borrower can earn a return for themselves.

Why we invested

  • Experienced sponsor: Integral Communities is a California-based real estate firm that specializes in entitlement and development throughout the state. The principals of the firm have collectively developed projects valued in excess of $1 billion, including two other California-based investments with Fundrise over the past few years.
  • Attractive margin of safety: The borrower contributed $5.2 million of their own equity at closing, which is junior to our investment.
  • Prime location: The property is located along Interstate 5 directly between Los Angeles and San Diego, providing access to two major metro areas within a two-hour drive. As customers demand faster delivery times, we believe that distribution facilities located close to major population centers will become increasingly important for online retailers.

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