We’ve acquired The Cobalt at Lake Houston, a 296-unit apartment community in Humble, Texas, for a purchase price of roughly $49.5 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.

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 $20.6 million, and the Balanced eREIT II, which invested roughly $2.3 million. A senior loan in the amount of roughly $27.9 million was also provided. The investment amounts include a budget for financing and other soft costs, bringing our total projected commitment to approximately $50.9 million.

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

Built in 2019, the community has been leasing up consistently over the past year. As of the July 2021 rent roll (the latest before our investment), the property was approximately 91% occupied. In the time since our acquisition, occupancy has increased to 92%, while a total of 96% of units have leases in place.

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.

Why we invested

  • Fast-growing area: The property is located within the Houston metropolitan area, just 25 miles northeast of downtown. Between 2010 and 2019, the Houston area’s population grew 19% to approximately 7 million residents, making it the fifth largest MSA in the country, according to the U.S. Census.
  • High-quality asset: Delivered in late 2019, The Cobalt at Lake Houston is a brand new construction, with high-quality amenities and details throughout, presenting no need for renovations or updates in the near future.
  • Income-generating asset: The property achieved rent collections of approximately 85% in the month leading up to our acquisition; excluding rent concessions (a marketing incentive many properties use to attract new tenants), collections were up to roughly 92.5% in July 2021. As of the time of this writing, 92% of units are physically occupied, while an additional 4% have signed leases in place. We expect to work with a professional property management firm over the coming months to lease up any unoccupied units and reduce concessions to maximize rental income 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.