We recently acquired Rock Ridge, a 69-unit single-family rental home community in Pensacola, Florida, for a purchase price of roughly $23.2 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 second quarter flagship portfolio update, 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 $20,856,000, and the Growth eREIT VII, which invested $2,317,000.
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
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
We acquired this property from D.R. Horton (NYSE: DHI), one of the largest and most accomplished homebuilders in the country, who wrapped up construction at the property late last year. The community consists of spacious three-to-five bedroom homes equipped with smart home technology, and each with its own driveway and garage. As of June 2021, over 98% of the homes were already occupied.
We acquired the property in an all-cash transaction, with plans to use portfolio-level financing with the aim of targeting stronger returns, and freeing up cash to deploy elsewhere. We expect to continue working with the in-place professional property manager, and to be a long-term owner over the next several years to a decade.
Given how recently construction of the community was completed, we anticipate that the homes will remain competitive, attract tenants, and support rent growth for the foreseeable future without significant capital needs for renovations. As with our other equity investments into stabilized properties, our goal is to earn consistent cash flow from rental income over the course of the investment, with the potential for long-term upside by selling the property for more than we invested into it.
Why we invested
- Income-generating asset: The property was roughly 98% occupied at the time of our investment, generating consistent cash flow through rental income.
- Social distancing-friendly: We believe the privacy provided by the community’s fully detached and individual homes will be particularly attractive to renters seeking an additional level of social distancing, or who simply need more living space as norms around work and school shift.
- Strong recent growth: Pensacola’s financial stability is anchored to the large local presence of the Department of Defense and Navy, which has helped support the MSA’s rate of population growth in recent years — about two times greater than the national average over the past decade, according to the US Census. These stable employers helped Pensacola weather the economic turbulence brought about by the COVID-19 pandemic, keeping real estate rental vacancies relatively low throughout the crisis.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
