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 2017, we provided a $2.9 million loan for the acquisition of a 15,000 square foot (0.34 acre) property in the Silver Lake - Echo Park neighborhood of Los Angeles, as the future site of a new subdivision of ten townhomes.
The borrower used our investment to progress through the first phase of entitlements for small lot home (SLO) development in Los Angeles. After one loan extension, as provided for in the terms of our original agreement, the borrower successfully entitled the site, but failed to secure a sale or refinance the property to pay back our investment. After we extended beyond the maturity date, the borrower again failed to pay back our loan. After negotiation, the borrower agreed to transfer ownership of the property to us in lieu of foreclosure.
After taking ownership of the property, we began seeking opportunities for a sale. Last month, we sold the property for approximately $3.1 million. After transaction costs and adjusted for fund level fees, our investment earned a net annualized return of roughly 7.2%. While this ended up being slightly lower than the expected return of roughly 8.0% (the interest rate on the original loan), given a challenging set of circumstances, which demanded that we pivot our business plan and shift away from a fixed income strategy to one in which we took ownership of the property and navigated the sale process ourselves, we view this as a favorable outcome.
Investor FAQ: How did this project impact your portfolio?
The returns earned from this investment have contributed to NAV increases for the eFund. Now that the sale has closed, this capital is freed up for deployment into other strategies.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
