We just acquired a new office in LA which is pretty exciting. Projected returns on this project are 6.7-9.7% which isn’t super high, but it’s in a mature and stable market and is relatively low risk with an investment grade of B2.
Here’s the update from Fundrise:
Thanks to a combination of tech, transit, and a chronic undersupply of housing, we believe this area is positioned to experience outsized growth over the next seven to ten years.
As part of our broader strategy to invest in emerging urban areas, we’ve acquired a mixed-use property in the Jefferson Park area of South Los Angeles, with plans to redevelop it to a mix of creative office and retail usage. Thanks to a variety of factors, including tech companies opening major offices, an expansion of the LA Metro system, and prospective homebuyers being priced out of more established neighborhoods, we believe that this area is poised to undergo outsized growth over the next seven to ten years.
The property is currently comprised of one residential and four commercial units across three buildings, totaling 8,900 square feet of rentable space. At the time of our acquisition, all five units were occupied, and we plan to keep them rented out while we explore redevelopment to a mix of creative office and retail uses.
With this investment, we aim to earn consistent cash flow from rent payments while capturing what we believe will be strong price appreciation in South LA over the next seven to ten years.
We paid roughly $3.1 million for the property, and anticipate spending an additional $1.8 million on renovations over the next three years.
Why we invested
- Major tech boom in South LA: The property is located conveniently near Culver City, where Amazon Studios, Apple, HBO, and WeWork are in the process of opening major offices. We expect that a substantial number of the thousands of tech employees who will work in these offices will also want to live, dine, and shop nearby, driving a major increase in overall property values.
- Cash-flowing with upside potential: The property is fully occupied and income-generating from day one. The building sits on a large 13,300 square foot lot, giving it the potential to be redeveloped to higher density usage. With or without executing on this redevelopment plan, we believe that the property will appreciate in value over the next ten years given its central, transit-oriented location.
- City-wide housing shortage: LA housing prices have grown much faster than incomes in recent years, resulting in a major affordability crisis within the city. With large sections of the city simply out of reach for many renters and homebuyers, we believe that smart investments in up-and-coming areas will deliver attractive long-term returns