We’ve acquired The Ridley, a new, 301-unit apartment community in Jacksonville, Florida, for a purchase price of roughly $66.3 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 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.

The Growth eREIT invested roughly $32.8 million to acquire the property, along with a senior loan in the amount of $36.4 million, bringing the total budget to $69.2 million, which includes financing and other soft costs.

Strategy

Core Plus

Acquire and operate stabilized, cash flowing real estate

  • Risk-return profile: Moderate
  • Expected timing / delay of returns: Shortly after acquisition
  • Expected source of returns: Income with some growth

More about our strategies

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

Construction was completed in late 2019. The community leased up steadily throughout 2020 despite the uncertainty brought about by the COVID-19 pandemic. By the time of our acquisition, 276 of the 301 units (91%) had signed leases in place. The property achieved rent collections of approximately 80% in the months leading up to our acquisition; excluding rent concessions, collections were up to roughly 87% in February 2021. We expect to work with a professional property management firm over the coming months to finish leasing up the remaining units and reduce concessions to maximize rent collections at the property.

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.

1031 exchange

This investment is part of a 1031 exchange, in which we’ve reinvested the proceeds from the sales of the Haven Mt Vernon Apartments and Haven Fort Belvoir Apartments into this acquisition. By executing a 1031 exchange, the Growth eREIT has the opportunity to defer tax payments on the capital gains from the sales, which we expect to have a positive impact on investors’ returns over the long term.

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: In recent years, Jacksonville has experienced a considerable population uptick, joining the trend that has propelled major growth among Florida’s other big cities. According to census data released in 2020, Jacksonville ranked as 15th for growth in residents nationwide, with a 10.9% bump over the past decade. The city’s business-friendly local government has paved the way for a rich job market and several major employers selecting the city for their headquarters.

  • Income-generating asset: The property achieved rent collections of approximately 80% in the months leading up to our acquisition; excluding rent concessions, rent collections were up to roughly 87% in February 2021. By the time of our acquisition in April, 276 of the 301 units (91%) had signed leases in place. We expect to work with a professional property management firm over the coming months to finish leasing up the remaining units and reduce concessions to maximize rent collections at the property.

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