|Current Ann. Return||6.0%|
|Accrued Ann. Return||+
|Gross Ann. Return*|
|Current Ann. Return||6.0%|
|Accrued Ann. Return||+ 8.0%|
|Gross Ann. Return*||14.0%|
|Term Remaining||22 of 36 mo.|
|Underlying Security||Preferred Equity|
This is an opportunity to invest in the ground-up construction of a brand new Class-A 106-unit apartment building, The Keelson, located in Seattle’s Ballard neighborhood. The sponsor, Pryde+Johnson, has owned the land since 2004 and used half of the site to successfully deliver 79 high-end condos in 2008. The remaining portion of the site is now fully-entitled with building permits in place, and the sponsor has already broken ground. The sponsor has successfully completed several projects in the immediate area, including most recently delivering the Soren Apartments (a previous Fundrise investment) earlier this year, which is already more than 85% leased and exceeding their initial projections.
The Seattle real estate market continues to experience a tremendous amount of growth due largely to the number of growing companies such as Amazon, Google, Facebook, Alibaba, and Microsoft. In 2014, the city saw more than 12% job growth in the tech sector, beating out Silicon Valley. Amazon’s head of real estate told local real estate leaders that the company alone would need 30 new apartment buildings each with a minimum of 200 units to be built every year just to house the number of employees they intend to hire and bring into the Seattle market. This unprecedented growth has driven rapid demand for more residential units.
The Keelson Apartments will be located one block north of NW Market Street in the heart of the trendy Ballard neighborhood, one of Seattle’s most popular and dense neighborhoods. The location is clearly favored by institutional owners: Equity Residential, Avalon Bay, Amli and Blackrock all own large new apartment properties within a few blocks of the subject property. The neighborhood is well served by Metro’s RapidRide bus service that provides 24/7 access throughout the region. Ballard is a very strong multigenerational market ranging from 20-year-olds to 70+.
The sponsor has budgeted total project cost of $28.7M to be funded with a $20.25M construction loan, $3.55M of preferred equity from Fundrise, and $4.9M of sponsor equity. The sponsor projects as-stabilized NOI of $1,902,233. At a projected 4.75% cap rate, the project is expected to sell in year 3 for over $40M.
The project would have to under perform on their rental projections by more than 25% before the Fundrise investment would be negatively impacted.
This investment is projected to earn a gross annual return of 14% over the 36 month anticipated term. 6% annual will be distributed on a quarterly basis and 8% annual will be accrued and paid out at the end of the term.
The Ballard location is within one of the strongest submarkets in Seattle. It has unmatched ‘coolness’ and caché with a concentration of boutique retail and restaurants with easy walkability and proximity to downtown. It is an area favored by institutional owners; Equity Residential, Avalon Bay, Amli, and Blackrock all own properties within a few blocks of the subject.
Pryde+Johnson has decades of experience developing in the core Seattle submarkets. The sponsor previously successfully built 79 high-end condo units on the adjacent site and most recently in May of 2015 delivered a similar 111-unit project (the Soren Apartments) that is currently more than 85% leased and exceeding initial expectations.
Due to the large demand for new buildings in Seattle and volume of proposed new projects, the permitting process has become significantly slower than in previous years. This project is fully-entitled with final building permits in place, and the sponsor has already broken ground.
Seattle continues to experience a record amount of growth due to growing companies including Amazon, Google, Facebook, Alibaba, and Microsoft. In 2014, the city saw more than 12% job growth in the tech sector, beating out Silicon Valley. Amazon’s head of real estate told local real estate leaders that the company alone would need 30 new apartment buildings each with a minimum of 200 units to be built every year just to house the number of employees they intend to hire and bring into the Seattle market. This growth has driven rapid demand for more residential units.
|Gross Annual Return*||14.0%|
|Capital Senior to Fundrise||70-79%||4|
|Capital Junior to Fundrise||10-19%||4|
|Sponsor’s Track Record||$50-249 million||2|
The information contained in the Fundrise Rating is for informational purposes only. It is impersonal and not individualized for any specific investor's financial situation and is not investment advice. These ratings are not intended to be, nor should you interpret them to be, a prediction of how a particular investment will actually perform. You should always carefully consider investments in any security and be comfortable with your understanding of the investment. You may also consider consulting investment professionals.
|Type||Source||% of Total||Amount|
|Preferred Equity||Fundrise Investment||12.4%||$3,550,000|
The subject property consists of a single seven-story podium-style building. The project contains a total of 106 multifamily units, 88 parking spaces, and no commercial space.
Unit Mix (prices are sponsor projections):
The sponsor has purposely positioned the project in and around the competition’s unit types, mix, and sizes to create a product that both maximizes the economics on a per-square-foot basis, and also gives a competitive advantage from a marketability standpoint. The sponsor’s research of the competing properties helped them to design a product that will fill a void and will meet needs that aren’t being satisfied.
For example, EQR’s Urbana nearby has studios but no open one-bedrooms. The subject property has no studios but will have open one-bedrooms that are slightly larger (25 to 50 SF) than the studios, but also provide a bedroom than can be separate from the living/ kitchen area. Additionally, neither the Urbana nor Avalon’s AVA (across the street) has 1/1 +Dens, but Keelson will, and not only are Keelson’s 1/1 +Dens at similar sizes to both competing properties’ one bedrooms, they are extremely functional and have an extra space/den, thus providing a superior product both on price and space.
|Address||1537 NW 56th Street|
|City & State||Seattle, WA|
|Product Type||Residential / Multifamily|
|Project Phase||Ground-Up / Shovel-Ready|
Seattle is the largest city in the Pacific Northwest and one of the fastest-growing cities in the United States. The cultural and business center of the region, Seattle and its surrounding areas are the home to Boeing’s aircraft assembly plants, Microsoft, Amazon.com, Costco, Nintendo of America, Starbucks, and the University of Washington, as well as a vibrant arts scene and an excellent park system. Seattle added nearly 50,000 to the MSA in each of the past four years with additional employment gains forecast well into the future driving continued demographic growth.
The Seattle market continues to rank in the top five national investment markets in several asset classes. Long term, the multifamily sector’s expansion is limited by available land, a major reason that investors with longer hold horizons rank the region highly.
- The ongoing favorable market performance in the apartment sector has been attributed to several demand factors including:
- Household creation will peak in the 25 to 34 age bracket over the next five years and this group is traditionally mostly renters.
- The apparent durability of changed "rent" vs. "own" psychology, due to more transitory lifestyles and residual lack of confidence in the housing market.
- Return toward traditional lending regulations with large down payment requirements has postponed many home purchases and will likely keep a portion of the population as renter households.
- Lack of affordable condominium inventory in the neighborhoods that are considered to be most desirable to many of the potential entry-level buyers, leading them to continue renting.
These factors point toward continued demand for apartment units over the next few years, especially better quality apartments, as renters are looking at longer stays, justifying a flight to quality. The likely outcome is increased demand for rental housing. In addition, there will likely be some loss of apartment inventory as conversions of newer or planned apartments to condominiums will eventually provide entry level units as the for sale market continues to recover.
The Ballard location is within one of the strongest submarkets in Seattle. It has unmatched ‘coolness’ and cachet with a concentration of authentic and boutique retail, walkability, and a great neighborhood setting within relative proximity to Seattle’s urban core. Ballard is known as a center for fresh farm-to-table restaurants by nationally acclaimed chefs in addition to the numerous bars, clubs, and shopping. There is a QFC (Kroger) grocery across the street, a Bartells drug store (a regional chain) a block away, and a wide range of shops and restaurants on Market Street.
Pryde+Johnson is a second-generation privately owned developer and builder with more than 25 years of experience in the Seattle market. The Pryde + Johnson’s team has extensive experience in multifamily developments, including over 21 apartment communities and condominium projects.View full profile
|Gross ann. return*||14.0%|
|Servicing and administration fee||-0.5%|
|Net ann. return to investors||13.5%|