The Growth eREIT invests in affordably-priced apartments in the Sunbelt by providing equity capital to select partners for the purpose of adding value through renovations. Between 2016 - 2020, the eREIT primarily focused on value-add Class B multi-family assets of institutional quality acquired below replacement cost.
In 2020, the Growth eREIT began directly acquiring stabilized Class A residential assets as the sole owner. This strategic shift is emblematic of the evolution of Fundrise's asset management strategy. Our vertically integrated value chain now allows our managed funds to operate assets, eliminating real estate partner carried interest and fees, with the aim of providing superior risk-adjusted returns for our investors.
Investment strategy drivers:
- Workforce housing: The U.S. has faced a decades-long shortage of middle-income housing near employment hubs, sometimes referred to as workforce housing. This limited supply, coupled with housing inflation outpacing wage growth, means that more affordably-priced housing translates to an attractive risk-adjusted return. We believe this demand-supply imbalance will result in well-located workforce housing continuing to appreciate in value over time.
- Build-for-Rent housing communities: Shifting consumer preferences coupled with millennials entering their prime family-building phase, we see an opportunity to diversify the Growth eREIT into the next generation of preferred housing options. This strategy complements our workforce, affordably price-point housing investments in that it often captures the tenant that is ready to upgrade from an apartment into a single family home. We expect to see continued strong growth in the SFR sector over the next decade.
- Low cost basis: Acquiring properties at or below their replacement cost, a strategy known as value investing. In other words, the price paid to acquire a property is less than what it would cost someone else to build a similar property in the same location today.
- Long-term fixed financing: Bolstering these strategies is the long-term fixed financing we have in place on many of the assets today. This financing was secured prior to interest rates rising throughout 2022, providing the ability to maximize consistent cash-flow while also reducing volatility over the term of the investment.
