We’ve invested roughly $21.6 million to acquire Cypress Bay, a community of 87 detached, single-family rental homes in Palm Bay, Florida, located along the Atlantic coast just south 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. Learn more about the single-family rental asset class here.
As we referenced in our 2021 year-end letter, 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 Flagship Fund, which invested roughly $19.44 million and the Growth eREIT VII, which invested $2.16 million, while an additional $24.1 million was provided through a senior loan, bringing the total projected costs to roughly $45.7 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
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 a major, nationally renowned homebuilder, who wrapped up construction at the community in February 2022. At the time of our acquisition, approximately 41% of the homes were occupied. The community consists of spacious three-, four-, and five-bedroom homes, each with its own attached garage and pet-friendly, fenced yard.
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. We expect to work with a professional property manager, and to be a long-term owner over the next several years to a decade.
Our intent with this and other investments in single-family rental home communities is to be a long-term investor, building a scaled portfolio that generates consistent rental income, while at the same time being positioned 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
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Great location: 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.
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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.
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High-quality asset: The property was acquired directly from a nationally recognized homebuilder who wrapped up construction in early 2022. The community consists of brand new construction with high-quality amenities, presenting no need for renovations or updates in the near future.
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.
