We’ve provided a loan of $33.5 million for the acquisition of an approximately 13.8 acre property in Escondido, California, just north of San Diego, as the future site of 510 new homes.

Because of a general pullback in land and development lending from traditional banks, we expect to see occasional opportunities — such as this one — to provide financing at a relatively attractive basis while also earning strong yields in a historically low interest rate environment: in this case, the terms of our loan agreement include an interest rate equivalent to 8.5% annually.

Strategy

Fixed Income

Provide real estate backed loans or similar structured financing

  • Risk-return profile: Low to moderate
  • Expected timing / delay of returns: Typically immediately after acquisition
  • Expected source of returns: Interest income

More about our strategies

Note that this section is intended to provide a general overview of the Fixed Income 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 13.8-acre property has a few existing structures that previously served as a hospital facility, but no longer meet today’s needs. Prior to our investment, the property was already entitled for the construction of 510 residential units, with a mix of townhomes and apartments. The borrower now intends to demolish the existing structures to make way for the future rental community.

Once the demolition is complete, the borrower plans to pay back our investment through a sale of the construction-ready site to a developer. Our investment in the project is structured as a loan (debt), where we are entitled to earn an annual return of roughly 8.5% over the life of the investment before the borrower can earn a return for themselves.

Why we invested

  • Experienced sponsor: Integral Communities is a California-based real estate firm that specializes in entitlement and development throughout the state. The principals of the firm have collectively developed projects valued in excess of $1 billion, including two other California-based investments with Fundrise over the past few years.

  • Attractive margin of safety: Our loan is equal to roughly 71% of the total value of the property, based on a June 2021 appraisal. This serves to reduce our risk, as the property would have to lose roughly 30% of its value before the principal of our investment was threatened.

  • Prime location: The property is located only a few minutes off of Interstate 15, which connects San Diego directly to Riverside County, just east of LA. When finished, the rental community will be in close proximity to parks, shops, and restaurants, providing new, attractive rental options in Southern California's much-constrained housing market.

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