We’ve invested roughly $6 million in the construction of the Mason Palm Bay, a 252-unit apartment community in Palm Bay, Florida, a growing city located along the Atlantic coast, just an hour outside of Orlando.

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 reiterated in our third quarter performance update for 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 initial investment in the project was made by a joint venture between two Fundrise sponsored funds, the Fundrise Flagship Fund, which invested roughly $5.4 million, and the Balanced eREIT II, which invested $603,000.

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

Our loan will be used to finance the construction of this new community, which the borrower expects will take roughly two years to complete. At that point, they expect to lease up the units and pay back our loan via a sale or by refinancing once the property is stabilized.

The goal of this investment is to produce an attractive income stream through financing the creation of new housing in a growing area. Our investment in Mason Palm Bay is structured as preferred equity, which functions like debt, where we are entitled to an annual return equivalent to roughly 10% over the term of the investment.

Our $6 million investment represents our full commitment to the project, which will draw down over time as construction progresses.

Why we invested

  • Fast-growing area: Located along the Atlantic coast of Florida just an hour drive from Orlando, Palm Bay’s MSA population grew by 10.8% between 2010 and 2019, significantly more than the national MSA average of 7.5%. Part of the Space Coast — a stretch of Florida surrounding the Kennedy Space Center — Palm Bay’s economy is anchored by the national aerospace and defense industries, and the city has been recognized as a hub for excellent job, wage, and high-tech growth.

  • Experienced partner: Waypoint Residential has invested over $2 billion across more than 20,000 rental housing units located in the South, Southeast, and Midwest markets. Prior to this acquisition, we have invested in eight other similar projects with Waypoint Residential, including the Lotus at Starkey Ranch and Williamson at the Overlook, both of which we initially invested in to fund their construction and later acquired as stabilized communities.

  • Attractive margin of safety: The sponsor has roughly $13.6 million of equity (about 28% of the total expected costs) junior to our position. They would have to lose their entire investment before our principal was threatened.

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

Additional Information: An investor in the Fundrise Real Estate Interval Fund (the “Flagship Fund”) should consider the investment objectives, risks, and charges and expenses of the Flagship Fund carefully before investing. The Flagship Fund’s prospectus contains this and other information about the Flagship Fund and may be obtained here. Investors should read the prospectus carefully before investing.