We’ve acquired approximately 34-acres of construction-ready land in Denton, Texas, for an initial purchase price of $16.5 million, with plans to develop it into a 405-unit rental townhome community. The property is conveniently located near Interstate I-35 E, providing direct access to downtown Dallas within a 45-minute drive.

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 first quarter flagship portfolio update and 2020 year-end letter 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 acquisition was made by a joint venture between two Fundrise sponsored funds: the Fundrise Interval Fund, which invested roughly $9.9 million, and the Growth eREIT 2019, which invested roughly $6.6 million.

Strategy

Opportunistic

Acquire and (re)develop the real estate, often from the ground up

  • Risk-return profile: Very high
  • Expected timing / delay of returns: Often two years or more
  • Expected source of returns: Growth

More about our strategies

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

The property is already entitled for the construction of 405 townhomes. We plan to work through design and permitting over the next several months, and expect to be ready to begin construction sometime in the fourth quarter. Our timeline calls for delivery of the first batch of homes early next year, with subsequent batches delivering on a monthly cadence thereafter. We’ve engaged a national general contractor to perform construction services on this project, whose track record consists of over $1.5 billion worth of projects, including several other similar communities in the region.

Similar to our other single-family rental home communities, our intent is to lease up each batch of homes as they deliver, while construction on the overall community continues. When construction is complete, we will be the sole owner of an entire rental townhome community, situated in a desirable location just north of Dallas, putting us in an excellent position for both ongoing rental income generation and long-term appreciation.

We expect the total budget to be roughly $80 million, a portion of which we may seek to obtain construction financing for.

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.

While we’ve acquired the land in an all-cash transaction, we intend to obtain portfolio-level financing when the homes deliver, with the aim of increasing expected returns and freeing up cash to deploy elsewhere.

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.

  • Already entitled site: Prior to our investment, the property had secured the entitlements necessary for the development of all 405 townhomes. Because the property has already taken those important steps toward construction, we’re able to begin development significantly sooner than if we needed to entitle the project ourselves, which reduces our overall timeline and uncertainty in the investment.

  • Growing local economy: The Dallas metro area as a whole continues to rank among the nation’s fastest-growing, having added 19% to its population since 2010, far outpacing the nationwide increase of about 6% over the same period. Additionally, in 2020, the Dallas area proved to be the second largest market in the country for Fortune 500 companies, based on revenue, behind only New York.

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