UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT
Pursuant Regulation A of the Securities Act of 1933
June 28, 2019
(Date of Report (Date of earliest event reported))
FUNDRISE GROWTH EREIT III, LLC
(Exact name of registrant as specified in its charter)
| Delaware | 83-2162909 |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
| | |
| 11 Dupont Circle NW, 9th Floor, Washington, DC | 20036 |
| (Address of principal executive offices) | (ZIP Code) |
(202) 584-0550
(Registrant’s telephone number, including area code)
Common Shares
(Title of each class of securities issued pursuant to Regulation A)
Asset Acquisitions
Acquisition of Controlled Subsidiary Investment – SW4 JV LP
On June 28, 2019, we directly acquired ownership of a “majority-owned subsidiary”, SW4 JV LP (the “RSE SW4 Controlled Subsidiary”), for an initial purchase price of $40,877,070, which is the initial stated value of our equity interest in the RSE SW4 Controlled Subsidiary (the “RSE SW4 Investment”). The RSE SW4 Controlled Subsidiary used the proceeds to close on the acquisition of four stabilized garden-style multifamily properties totaling 1,616 units located in the Dallas-Fort Worth MSA. The four acquired assets are presented in detail in the table below (together, the “RSE SW4 Portfolio Property”). The closing of the initial RSE SW4 Investment and the RSE SW4 Portfolio Property occurred concurrently.
| RSE SW4 Portfolio Property |
| Asset Name | | Address | | Fundrise Growth eREIT III , LLC Funding Used for Acquisition | | Year Built | | Number of Units | | Approximate Rentable Square Feet | | Approximate Occupancy at Acquisition |
| Meadows of Bedford | | 1400 Sierra Springs Drive,
Bedford, TX 76021 | | $11,925,090 | | 1984 | | 490 | | 372,000 | | 95% |
| Remington Hill | | 5701 Overton Ridge Blvd,
Fort Worth, TX 76132 | | $10,675,590 | | 1986 | | 440 | | 339,000 | | 95% |
| Rock Ridge | | 305 Ranch Drive,
Arlington, TX 76018 | | $6,729,720 | | 2003 | | 226 | | 211,500 | | 96% |
| Summer Villas | | 17717 Preston Road, Dallas,
TX 75252 | | $11,546,670 | | 1984 | | 460 | | 328,000 | | 95% |
| Totals | | | | $40,877,070 | | | | 1,616 | | 1,250,500 | | |
The RSE SW4 Controlled Subsidiary is managed by American Landmark Apartments (“ALA”), which operates over 24,000 units across the southeast United States. ALA manages a diverse real estate portfolio valued in excess of $250 million.
Pursuant to the agreements governing the RSE SW4 Investment (the “RSE SW4 Operative Agreements”), our consent is required for all major decisions regarding the RSE SW4 Controlled Subsidiary. In addition, an affiliate of our sponsor earned an origination fee of approximately 2.0% of the RSE SW4 Investment, paid directly by the RSE SW4 Controlled Subsidiary.
The RSE SW4 Portfolio Property was acquired for an aggregate purchase price of approximately $191,000,000. It is anticipated that the RSE SW4 Controlled Subsidiary will invest approximately $17,486,000 across all properties in hard cost renovations, which are expected to include unit renovations and enhancements to amenity spaces, and $7,214,000 in total soft costs, bringing the total combined project cost for the RSE SW4 Portfolio Property to $215,700,000. The renovations are expected to be complete within 12 to 24 months. Detailed financial data for the RSE SW4 Portfolio Property is presented in the table below.
| Asset Name | | Purchase Price | | Projected Renovation Hard Costs | | Projected Renovation Soft Costs | | Total Cost | | SunTrust - FMAC Senior Loan Proceeds | | Loan to Cost (“LTC”) |
| Meadows of Bedford | | $56,750,000 | | $5,494,000 | | $2,056,000 | | $64,300,000 | | $40,916,000 | | 63.6% |
| Remington Hill | | $47,750,000 | | $4,775,000 | | $1,825,000 | | $54,350,000 | | $33,416,000 | | 61.5% |
| Rock Ridge | | $34,500,000 | | $1,975,000 | | $1,425,000 | | $37,900,000 | | $24,703,000 | | 65.2% |
| Summer Villas | | $52,000,000 | | $5,242,000 | | $1,908,000 | | $59,150,000 | | $36,508,000 | | 61.7% |
| Totals/Averages | | $191,000,000 | | $17,486,000 | | $7,214,000 | | $215,700,000 | | $135,543,000 | | 62.8% |
To finance the acquisition of the RSE SW4 Portfolio Property, four senior loans, $135,543,000 in aggregate, with ten (10) year initial terms at 3.78% interest rates with six years interest-only were provided by SunTrust - Freddie Mac (“the RSE SW4 Portfolio Senior Loans”). The remaining equity contributions to the RSE SW4 Controlled Subsidiary are being contributed 51% by the Company and 49% by ALA and its affiliates.
As of the closing date, the RSE SW4 Portfolio Senior Loans had an average LTC ratio of approximately 62.8%. 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. Please see the table above for property specific LTC ratios.
The Dallas-Fort Worth market presents a sound investment opportunity arising from strong demographic growth, solid multifamily market fundamentals, and robust job growth.
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 |
Bedford, TX Apartments-
Meadows of Bedford - SW4 JV LP | | 9.1% - 14.9% | | $11,212 | | $124 | | 6.0% | | 2.5% | | 2.5% | | 2.5% | | 10 years |
Fort Worth, TX Apartments-
Remington Hill - SW4 JV LP | | 9.1% - 14.2% | | $10,853 | | $127 | | 6.0% | | 2.5% | | 2.5% | | 2.5% | | 10 years |
Arlington, TX Apartments-
Rock Ridge - SW4 JV LP | | 10.0% - 15.2% | | $8,738 | | $104 | | 6.0% | | 2.5% | | 2.5% | | 2.5% | | 10 years |
Dallas, TX Apartments-
Summer Villas - SW4 JV LP | | 9.7% - 15.6% | | $11,396 | | $158 | | 6.5% | | 2.5% | | 2.5% | | 2.5% | | 10 years |
Safe Harbor Statement
This Current Report on Form 1-U contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in our Offering Statement on Form 1-A dated December 21, 2018, filed with the Securities and Exchange Commission (“SEC”), as such factors may be updated from time to time in our periodic filings and prospectus supplements filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our filings with the SEC. 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.
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | FUNDRISE GROWTH EREIT III, LLC |
| | | |
| | By: | Fundrise Advisors, LLC |
| | Its: | Manager |
| | | |
| | By: | /s/ Brandon T. Jenkins | |
| | Name: | Brandon T. Jenkins |
| | Title: | Chief Operating Officer |
Date: July 5, 2019
