Filed Pursuant to Rule 253(g)(2)
File No. 024-10843
FUNDRISE GROWTH EREIT II, LLC
SUPPLEMENT NO. 9 DATED NOVEMBER 23, 2020
TO THE OFFERING CIRCULAR DATED MARCH 11, 2020
This document supplements, and should be read in conjunction with, the offering circular of Fundrise Growth eREIT II, LLC (“we”, “our” or “us”), dated March 11, 2020 and filed by us with the Securities and Exchange Commission (the “Commission”) on March 11, 2020 (the “Offering Circular”). Unless otherwise defined in this supplement, capitalized terms used in this supplement shall have the same meanings as set forth in the Offering Circular.
The purpose of this supplement is to disclose:
| · | Asset acquisition. |
Asset Acquisition
Acquisition of Controlled Subsidiary Investment – FR-MP The Palmer JV LLC
On November 17, 2020, we directly acquired ownership of a “majority-owned subsidiary”, FR-MP The Palmer JV LLC (the “Palmer Controlled Subsidiary”), for an initial purchase price of approximately $23,415,000, which is the initial stated value of our equity interest in the Palmer Controlled Subsidiary. We anticipate funding an additional $935,000 through future capital calls, bringing our total investment in the Palmer Controlled Subsidiary to approximately $24,350,000 (the “Palmer Investment”). The Palmer Controlled Subsidiary used the proceeds to purchase an entity membership interest in a single stabilized garden-style multifamily property totaling 502 units located at 1345 Towne Lake Hills South Drive, Woodstock, GA 30189 (the “Palmer Property”). The closing of the initial Palmer Investment and the Palmer Property occurred concurrently.
The Palmer Controlled Subsidiary is managed by McDowell Properties (“McDowell”), which currently operates approximately 10,000 units across the United States. Since its inception in 2004, McDowell has purchased over 40,000 units valued at over $3.0 billion.
Pursuant to the agreements governing the Palmer Investment (the “Palmer Operative Agreements”), our consent is required for all major decisions regarding the Palmer Controlled Subsidiary. In addition, an affiliate of our sponsor earned an origination fee of approximately 2.0% of the Palmer Investment, paid directly by the Palmer Controlled Subsidiary.
The Palmer Property was acquired for a purchase price of approximately $92,000,000. McDowell anticipates additional hard costs of approximately $3,815,000 to perform common area and unit improvements, as well as additional soft costs and financing costs of approximately $2,957,000, bringing the total projected project cost for the Quail Valley Property to approximately $98,772,000. The renovations are expected to be complete within 36-60 months. To finance the acquisition of the Quail Valley Property, a $70,125,000 senior secured loan with a ten (10) year initial term at an interest rate of 30-Day Average Secured Overnight Financing Rate (“SOFR”) + 2.58% with five years interest-only was provided by Wells Fargo – Freddie Mac (the “Palmer Senior Loan”). The remaining equity contributions to the Palmer Controlled Subsidiary are being contributed 85% by us and 15% by McDowell and its affiliates.
As of the closing date, the Palmer Senior Loan had an approximate LTC ratio of 71.0%. The LTC ratio, or the loan-to-cost ratio, is the approximate amount of the total debt on the asset, divided by the anticipated cost to complete the project. We generally use LTC as a measure of leverage for properties that are subject to construction. There can be no assurance that the anticipated completion cost will be achieved or that the LTC ratio will not vary at points over the course of ownership.
The Palmer Property is a 502-unit garden-style apartment property in Woodstock, GA, and was approximately 94% occupied at the time of our investment. The property was constructed in 1996 and 1999, and the build is of wood frame.
The Atlanta market presents a sound investment opportunity arising from strong population growth and solid multifamily market metrics.
The following table contains performance assumptions and projections. Individual assumptions and projected returns are presented at the asset level. All of the values in the table below are projections and assumptions that we believe to be reasonable; however, there can be no guarantee that such results will be achieved.
| Asset Name | Projected Returns | Projected Renovation Hard Cost per Unit | Projected Average Increase to Monthly Rent from Renovation | Projected Stabilized Economic Vacancy | Projected Average Annual Rent Growth | Projected Average Annual Other Income Growth | Projected Average Annual Expense Growth | Projected Hold Period |
| Woodstock, GA Apartments - The Palmer - FR-MP The Palmer JV LLC | 11.4% - 15.7% | $7,599 | $141 | 6.0% | 2.25% | 2.25% | 2.75% | 10 years |
Please note that past performance is not indicative of future results, and these asset performance projections may not reflect actual future performance. Any projections on the future returns of any of our assets may not prove to be accurate and are highly dependent on the assumptions described above. Investing in Fundrise Growth eREIT II, LLC is an inherently risky investment that may result in total or partial loss of investment to investors.
We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
