|Current Ann. Return||9.0%|
|Accrued Ann. Return||+
|Gross Ann. Return*|
|Current Ann. Return||9.0%|
|Accrued Ann. Return||+ 1.5%|
|Gross Ann. Return*||10.5%|
|Term Remaining||7 of 18 mo.|
|Underlying Security||Senior Debt|
This is an opportunity to invest in the acquisition and pre-development of two commercial lots totaling approximately 13,500 SF of land located between the Hollywood and Koreatown neighborhoods of Los Angeles. The site is on the corner of Melrose and Oxford Avenues and currently consists of two single-family homes and one commercial mixed-use building. The sponsor, Index Real Estate, purchased the property for $2,100,000 and plans to go through an entitlement process to increase the amount of density allowed before ultimately developing a 30+ unit apartment building on the site.
The investment from Fundrise is structured as a senior secured loan with an expected term of 18 months. The initial loan amount of $1,300,000 represents an LTC (loan-to-cost ratio) of 62% of the purchase price of $2,100,000. The sponsor intends to invest an additional $360,000 in pre-development costs over the next 12 months to ready the site for construction, resulting in a total equity investment of approximately $1,160,000 junior to the Fundrise investment.
The Los Angeles market as a whole has seen rapid price increases for new homes and condos due primarily to a lack of supply. Home sale prices in the LA have grown on average between 15-20% over the last 12 months. The Koreatown sub-market specifically has become one of the most popular neighborhoods in the city, particularly with younger residents. The market is expected to see continued strong demand for new residential housing over the next 12-24 months.
This investment is projected to pay a projected 10.5% annual gross return over the initial 18 month term of the investment.
|Gross Annual Return*||10.5%|
|Capital Senior to Fundrise||0%||0|
|Capital Junior to Fundrise||40% or more||1|
|Sponsor’s Track Record||Less than $50 million||3|
|Secured by the Property||Yes||-1|
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|
|Equity||Sponsor and LPs||43.3%||$991,540|
|Senior Debt||Fundrise Investment||56.7%||$1,300,000|
The sponsor plans on doubling the buildable area allowed under current zoning from 20,232 square feet to 40,464 square feet over the next few months, at which point Fundrise has agreed (only during the initial term) to advance an additional $275,000 which will bring the loan balance to 75% of the acquisition price.
Project is located in a desirable and central location between Hollywood and
Koreatown. Residents will be half a mile from the 101 Freeway and 1.5 miles
from the Vermont/ Beverly Metro Red Line Station. This subway line connects
riders to North Hollywood, Wilshire, and Downtown Los Angeles. Riders can
travel from the Vermont/Beverly Station to Metro Center in Downtown in about
of the future project will have access to great local amenities as well. Trader
Joe’s, Pavilions, The Hollywood Farmer’s Market, Arclight Cinemas, along with
dozens of restaurants, shopping and entertainment are all within walking
distance. There is also a 190,000 SF Target Superstore a mile away that is set
to open next year. The Property receives a walkscore of 87.
sponsor will invest an additional $360,000 into the deal over the next 12
months to ready the site for construction, bringing the Fundrise investment to 59%
LTC (if 3.0 FAR increased density is achieved and the loan is upsized; 50% LTC
at the $1,300,000 investment). The sponsor group is splitting the required
equity between Index Real Estate Investments and a 1031 Personal Exchange
company owned by Pablo Kupersmid.
The current plan is to up-zone
the project, complete construction drawings, obtain permits and construction
financing, and take Fundrise out within 12 months. It is possible that Fundrise
will re-evaluate the deal, and elect to make a preferred equity investment in the
The sponsor believes they will have the ability to build a 33 to 35 unit apartment project, which is well suited for Melrose Avenue. Although project plans are unclear, Fundrise is confident that there are several exits for their investment at land values well above its basis. Site optionality includes following the Sponsor’s plan for 33 to 35 apartment units, building a project at the by-right zoning, building townhomes similar to the Lennar project 3 blocks west of the project, or rehabilitating the existing homes and selling them.
The Sponsor group is providing personal guarantees for the investment.
|Address||4918 Melrose Avenue|
|City & State||Los Angeles, CA|
|Product Type||Land Acquisition / Planned Residential|
|Project Phase||Ground-Up / Pre-Development|
The Koreatown submarket is an up and coming area just west of the downtown of Los Angeles that has a large amount of restaurant and retail space. Koreatown is one of the most popular and hip neighborhoods in Los Angeles. Following the 1992 riots, the neighborhood was burned out and suffered significantly as a result. The neighborhood did not start to turn around until the late 90s when Korean investors started buying property as a way to protect cash investments during the Asian Financial Crisis. Since then, the neighborhood has continued to grow.
Today Koreatown is the densest neighborhood in Los Angeles and draws visitors and new residents alike. According to a Feburary 2015 article in the New York Times, “Today this sprawling, three-square-mile community just west of downtown has become one of the city’s hippest areas thanks to the continuing renovation of its rich architectural heritage, a new subway traversing its Wilshire Boulevard hub and recently opened boutique hotels like the Line and Normandie. Moreover, K-Town never sleeps, given its strong Asian and Latin work ethic and its clubs, bars and restaurants that have become urban night-life hubs.”
Index Real Estate Investments is the entity for which Pablo Kupsermid and Gabriel Gold are managing partners. They are experienced developers with over 20 years of real estate experience, including experience in multi-family, retail and office development.View full profile
|Gross ann. return*||10.5%|
|Servicing and administration fee||-0.5%|
|Net ann. return to investors||10.0%|