Our loan will be used to finance the construction of this luxury horizontal multifamily community, which the borrower expects will take roughly two years to complete. At that point, they plan to lease up the units and pay back our preferred equity investment, either using proceeds from a sale or by refinancing the property once it’s stabilized. (In the world of real estate investing, “stabilized” refers to a property that is almost completely leased up — typically an occupancy rate over 90%, therefore producing a “stable” flow of rental revenue.)
In June 2022, the Sponsor acquired the vacant land already zoned for residential development. In May 2023, they began constructing one-story single-unit buildings and one- and two-story duplexes, with a total of 103 luxury units. The development will offer a diverse unit mix of one- and two-bedroom floorplans and community amenities. Construction is anticipated to complete in late 2024. Under the investment terms, our preferred equity will receive priority ahead of the common equity (i.e., the borrower's equity), in regards to any distributions, profits, or payback. By structuring this investment (and most of our other investments in construction) like debt, we aim to mitigate risk to our investors’ principal and negate the impact of delays on performance.
The borrower has agreed to pay us a 13.85%1 fixed annual rate that will accrue until the earlier of either redemption or the first extension. Additionally, the borrower has agreed to pay us a rate of 3.50% in current-pay interest on the $500,000 held in interest reserve. This interest will be replenished semiannually until the sponsor equity requirement is fully met. To increase our margin of safety, the sponsor signed as a guarantor for the preferred equity and provided standard carve-out provisions and guarantees. In addition, the sponsor invested an amount of equity representing approximately 23.6% of the total expected costs, similar to our investment but junior to our position. That means they would lose their entire investment before our principal would be threatened.
Our approximately $9 million investment represents our full commitment to the project. At closing, the sponsor drew $1.3 million of the $9 million, with an additional $500,000 held in interest reserves, with the remaining capital to be drawn down over time, based on agreed-upon milestones, such as foundation, framing, roofing, etc. Our team reviews detailed third-party progress reports before approving each draw, limiting the amount of principal at risk at any given point.
This investment was made by two Fundrise sponsored funds: the Fundrise Income Fund, which invested roughly $1.8 million, and the Fundrise Opportunistic Credit Fund, which invested roughly $7.2 million.
1111B S Governors Ave #6149
Dover, DE 19904
United States
The information herein contains forward-looking statements. All statements other than statements of historical facts, including statements regarding Cohere’s (the “Company”) future results of operations and financial position, including financial targets, business strategy, plans and objectives for future operations, are forward-looking statements. The Company has based these forward-looking statements largely on its current estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this publication. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, the Company operates in a very competitive and rapidly changing environment.
It is not possible for Company management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this publication, to conform these statements to actual results or to changes in the Company’s expectations.
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Business Plan
