DENVER—Fundrise, a real estate crowdfunding platform, recently made its debut in the Denver real estate market after providing $1 million to finance a ground-up mixed-use apartment complex with Littleton Capital Partners. The 69 individual investors in the project are expected to receive a gross annual return of 13.2% percent, to be distributed over a projected 15-month term. Since Denver made Real Estate Forum‘s list of growth markets, GlobeSt.com exclusively chatted with the firm’s director of product development, Brandon Jenkins, on what is attractive about the market and how it differs than others around the nation.
GlobeSt.com: So, first question is really, why Denver? What about the market is attractive?
Brandon Jenkins: Denver is exactly the right fit for the Fundrise product. We like the underlying fundamentals of the Denver market—stable job growth, high quality of living, large numbers of well educated young families, and new opportunities for urban infill development.
Millennials are the largest population in Denver today, which is a great sign for the real estate market. These individuals will go on to build businesses, start families, and expand Denver into an enormous urban hub.
GlobeSt.com: How is the City different than Fundrise’s other core markets like New York or Washington, DC, for example?
Jenkins: A lot of people tell us that institutional money is stuck on the coasts. In DC and NY, in particular, there is a large supply of relatively cheap capital and it is driving up property prices and hurting overall returns.
We think that Denver has a lot of development opportunity, but lenders are being more conservative and there is a real gap for inexpensive equity from Fundrise via the crowd.
GlobeSt.com: What is your strategy for entering a new market?
Jenkins: After we identify the next Fundrise market based on macro growth trends, we look for the top 25 or so developers with a strong track record of delivering the highest quality projects.
Our project in RiNo with Littleton Capital Partners gave us further momentum to expand more broadly into the market.
GlobeSt.com: What has been the response from the market so far? How has Fundrise’s crowdfunding model been received?
Jenkins: We’ve been amazed by the overwhelmingly positive response. Almost every group we’ve spoken with has seen an opportunity to fit Fundrise into a project they are currently working on. We expect Denver to be one of our top markets in the next six to nine months.
GlobeSt.com: What sort of sponsors do you look to work with? Why?
Jenkins: Our focus is on working with highest quality sponsors in the market. We look for groups with a strong track record and a history of execution.
Real estate development can be complex and mistakes can be costly. We want to provide Fundrise investors with the best investment opportunities and it all starts with who you work with.
GlobeSt.com: How do you underwrite sponsors and projects in a new market?
Jenkins: The Fundrise underwriting process is extremely thorough. Our experienced team looks at every aspect of a project and stresses potential performance through a wide variety of changing market conditions.
We only invest in projects that we are comfortable owning ourselves. Of the hundreds of projects we review every week, less than a half dozen make it through our underwriting process.
GlobeSt.com: What asset types are Fundrise investors most interested in?
Jenkins: Our investors look first and foremost for quality risk adjusted returns. We believe there is long term value in urban infill assets particularly multifamily, mixed use, and retail. We see some interesting opportunities in the tax credit space – and are generally bearish on speculative office development.
Fundrise is taking advantage of Denver’s light rail expansion and the development of Union Station to provide our investors with high-yield ground-up and value-add deals with recognizable sponsors.
Currently we’re looking at multifamily, retail, office, and boutique for-sale projects.
In particular, Littleton Capital Partners’ mixed-use ground-up development in RiNo was extremely well-received on the platform.
GlobeSt.com: How about investors in the Denver market?
Jenkins: We’ve had a consistently strong base of investors in Denver since early on — and they’d been asking for a deal in the market for several years now. We see interest continuing to grow in size as we offer more opportunities in the market.