Important note: The realized return on an individual project may vary significantly from your portfolio-level return as an investor. To learn more about why this may be the case, see the “How did this project impact your portfolio?” section.
In May 2019, we invested roughly $39 million in the acquisition of a portfolio of 11 apartment communities across Georgia, comprising nearly 2,000 individual residential units. The properties were acquired in two tranches, with six of the communities — all focused around Savannah, GA — purchased at closing, and the other five properties acquired several months later.
Our preferred investment, which was structured similar to debt, provided capital for the project’s sponsor, Carter Multifamily, to close on the acquisitions and perform a value-add plan that involved a combination of in-unit and common area upgrades. During the term of the investment, we were entitled to a fixed return equivalent to roughly 10.6% annually, which drove strong quarterly dividend distributions for investors.
While we originally anticipated our investment redeeming after a five year term, Carter Multifamily has successfully sold the portfolio and paid back our investment in full and ahead of schedule. We ultimately earned an annualized return of roughly 13.9% over the term of our investment1 — exceeding our initial projection of 10.6% because the sponsor agreed to pay our preferred return on the full amount we committed to invest, even though they did not draw down the full amount. We view the strong performance of this business plan as continued validation of our investment thesis around the Sunbelt, where rental housing has been in fierce demand. We expect this demand will continue to grow thanks to the ongoing migration of Americans to Southern states, where residents can find well-priced real estate in cities with lower living costs and superior climates.
Details about each project
| Asset Name | Location | Fundrise Investment (Approx.) | Number of Units |
|---|---|---|---|
| Alhambra | Savannah, GA | $2,799,000 | 150 |
| Azure Cove | Garden City, GA | $2,582,000 | 144 |
| Carriage House | Savannah, GA | $2,530,000 | 144 |
| Kessler Point | Garden City, GA | $2,171,000 | 120 |
| Ridgewood | Savannah, GA | $2,462,000 | 144 |
| The Arbors | Garden City, GA | $2,245,000 | 108 |
| Riverstone | Macon, GA | $4,890,000 | 220 |
| Heritage at Riverstone | Canton, GA | $6,585,000 | 240 |
| Ten35 Alexander | Augusta, GA | $4,360,000 | 200 |
| Falls at Spring Creek | Macon, GA | $5,098,000 | 296 |
| Legacy at River Crossing | Macon, GA | $3,353,000 | 200 |
| Totals | — | $39,075,000 | 1,966 |
What this means for your portfolio
Prior to this payoff, our investment in this 11-asset portfolio represented the majority of the Income eREIT III’s assets, and supported strong current income for the fund. As we look to redeploy the proceeds of this successful investment, investors should expect the Income eREIT III’s returns to temporarily slow while we identify and acquire new assets. Additionally, it’s important to remember that interest rates have come down substantially over the intervening two years since we made this investment, and there are few indications they will change course in the near future. As a result, it is reasonable to expect that yields on real estate along with most other asset classes will follow suit and remain well below historical averages.
That said, we continue to see opportunities to earn superior yields relative to public REITs or dividend stocks, primarily through investing in the creation of new housing in areas where there is a consistent mismatch between supply and demand. We look forward to keeping you updated as the Income eREIT III evolves into its next phase.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
