We’ve invested roughly $12.5 million in the acquisition of the Trellis Apartments, a stabilized 210-unit apartment community in Marietta, Georgia, about a 30 minute drive northwest of downtown Atlanta.

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 have 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 Q1 strategy and 2020 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.

Strategy

Value Add

Acquire real estate that needs improvements and / or lease-up

  • Risk-return profile: Moderate to high
  • Expected timing / delay of returns: Several months to a year
  • Expected source of returns: Growth with some income

More about our strategies

Note that this section is intended to provide a general overview of the Value Add 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

Originally constructed in 1986, about 30% of the 210 units have previously been fully renovated, while another roughly 30% have been partially improved. Our business plan calls for spending an additional $4.6 million to perform property-wide renovations, improving both the units’ interiors and exteriors. Of those costs, we intend to contribute approximately $3.2 million and our partner, McDowell Properties, the remainder. Taking those costs into account, we expect our total commitment to be about $15.7 million over the duration of our investment.

Rent collections at the property were roughly 91% over the 12 months prior to our acquisition, generally trending up, with February closer to 96%. We believe there is an opportunity to increase rental income through renovations to the unit interiors (something you’ve probably heard from us many times before if you’ve been investing with us for a while), in addition to improving collections through more focused management.

Together with our partner, we plan to be long-term owner-operators. Our goal is to earn consistent cash flow from rent payments, with the potential for long-term upside by eventually selling the community for more than we put into it.

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.

  • Income with growth potential: While the property is currently cash flowing, we believe there is an opportunity to make it even more competitive through renovations and focused management.

  • Experienced partner: McDowell Properties currently operates a portfolio of roughly 10,000 units across the United States, and since their inception in 2004 they’ve purchased over 40,000 units valued at over $3.0 billion.

  • Great location: Located in Marietta, GA, just off of I-75, the property is in close proximity to central Atlanta, which has shown consistently strong population and stable rent growth in recent years. In addition, the property has easy access to Kennesaw State University, a major local jobs center, and the area known as the Platinum Triangle, a commercial hub home to 150,000 jobs, a convention center, and over 4,000 hotel rooms, making the apartments a prime location for commuters.

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