PART II AND III 2 v462401_partiiandiii.htm PART II AND III

As submitted to the Securities and Exchange Commission on March 23, 2017

Post-Qualification Offering Circular Amendment No. 4

File No. 024-10492

PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR

Preliminary Offering Circular dated March 23, 2017

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

OFFERING CIRCULAR

Fundrise Real Estate Investment Trust, LLC
(the "Income eREIT")

Sponsored by

Rise Companies Corp.

Up to $20,889,420 in Common Shares

Fundrise Real Estate Investment Trust, LLC is a recently organized Delaware limited liability company formed to originate, invest in and manage a diversified portfolio of commercial real estate investments. Through our recently completed initial offering, we raised approximately $50 million in capital from 6,587 investors. We have used, and continue to expect to use substantially all of the net proceeds from this and our prior offering to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and investments in commercial real estate. We may also invest in commercial real estate-related debt securities (including commercial mortgage-backed securities, or CMBS, collateralized debt obligations, or CDOs, and REIT senior unsecured debt) and other real estate-related assets.

We are externally managed by Fundrise Advisors, LLC, or our Manager, which is an investment adviser registered with the Securities and Exchange Commission, or SEC, and a wholly-owned subsidiary of our sponsor, Rise Companies Corp., the parent company of Fundrise, LLC, our affiliate. Fundrise, LLC owns and operates an online investment platform www.fundrise.com (the “Fundrise Platform”) that allows investors to become equity or debt holders in real estate opportunities that may have been historically difficult to access for some investors. Through the use of the Fundrise Platform, investors can browse and screen real estate investments, view details of an investment and sign legal documents online. We elected to be treated as a real estate investment trust, or REIT, for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2015.

We are offering up to $20,889,420 in our common shares, which represent limited liability company interests in our Company. The minimum investment in our common shares for initial purchases is 100 shares, or $1,000 based on the current $10.00 per share price. We expect to offer common shares in this offering until we raise the maximum amount being offered, unless terminated by our Manager at an earlier time. The per share purchase price for our common shares is currently $10.00 per share, an amount that was arbitrarily determined by our Manager. The per share purchase price in this offering will be adjusted every fiscal quarter and, as of January 1st, April 1st , July 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), will equal the greater of (i) $10.00 per share or (ii) the sum of our net asset value, or NAV, divided by the number of our common shares outstanding as of the end of the prior fiscal quarter (NAV per share). Although we do not intend to list our common shares for trading on a stock exchange or other trading market, we have adopted a redemption plan designed to provide our shareholders with limited liquidity on a quarterly basis for their investment in our shares.

We intend to distribute our shares principally through the Fundrise Platform.

Investing in our common shares is speculative and involves substantial risks. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 26 to read about the more significant risks you should consider before buying our common shares. These risks include the following:

We depend on our Manager to select our investments and conduct our operations. We will pay fees and expenses to our Manager and its affiliates that were not determined on an arm’s length basis, and therefore we do not have the benefit of arm’s length negotiations of the type normally conducted between unrelated parties. These fees increase your risk of loss.

We have a limited operating history. Our prior performance may not predict our future results. Therefore, there is no assurance that we will achieve our investment objectives.

Our Manager’s executive officers, and key real estate and debt finance professionals are also officers, directors, managers and/or key professionals of our sponsor and its affiliates. As a result, they will face conflicts of interest, including time constraints, allocation of investment opportunities and significant conflicts created by our Manager’s compensation arrangements with us and other affiliates of our sponsor.

Our sponsor has sponsored and may in the future sponsor other companies that compete with us, and our sponsor does not have an exclusive management arrangement with us; however, our sponsor has adopted a policy for allocating investments between different companies that it sponsors with similar investment strategies.

This offering is being made pursuant to recently adopted rules and regulations under Regulation A of the Securities Act of 1933, as amended, or the Securities Act. The legal and compliance requirements of these rules and regulations, including ongoing reporting requirements related thereto, are relatively untested.

If we internalize our management functions, your interest in us could be diluted and we could incur other significant costs associated with being self-managed.

We may change our investment guidelines without shareholder consent, which could result in investments that are different from those described in this offering circular.

Although our distribution policy is to use our cash flow from operations to make distributions, our organizational documents permit us to pay distributions from any source, including offering proceeds, borrowings or sales of assets. We have not established a limit on the amount of proceeds we may use to fund distributions. If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return may be reduced. Our sponsor has agreed to purchase our common shares in private placements under certain circumstances in order to provide additional funds for distributions to shareholders; however, such issuances will dilute the equity ownership of public shareholders. In any event, we intend to make annual distributions as required to comply with REIT distribution requirements and avoid U.S. federal income and excise taxes on retained income.

Our sponsor’s internal accountants and asset management team will calculate our NAV on a quarterly basis using valuation methodologies that involve subjective judgments and estimates. As a result, our NAV may not accurately reflect the actual prices at which our commercial real estate assets and investments, including related liabilities, could be liquidated on any given day.

Our operating agreement does not require our Manager to seek shareholder approval to liquidate our assets by a specified date, nor does our operating agreement require our Manager to list our shares for trading by a specified date. No public market currently exists for our shares. Until our shares are listed, if ever, you may not sell your shares. If you are able to sell your shares, you may have to sell them at a substantial loss.

If we fail to qualify as a REIT for U.S. federal income tax purposes and no relief provisions apply, we would be subject to entity-level federal income tax and, as a result, our cash available for distribution to our shareholders and the value of our shares could materially decrease.

Real estate investments are subject to general downturns in the industry as well as downturns in specific geographic areas. We cannot predict what the occupancy level will be in a particular building or that any tenant or mortgage or other real estate-related loan borrower will remain solvent. Accordingly, we cannot guarantee that you will receive cash distributions or appreciation of your investment.

Our investments in commercial real estate loans, commercial real estate and other select real estate-related assets will be subject to risks relating to the volatility in the value of the underlying real estate, default on underlying income streams, fluctuations in interests rates, and other risks associated with debt, and real estate investments generally. These investments are only suitable for sophisticated investors with a high-risk investment profile.

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.

The use of projections or forecasts in this offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment in our common shares.

	Per Share		Total Maximum

Public Offering Price(1)	$	10.00	$	20,889,420.00
Underwriting Discounts and Commissions(2)	$	—	$	—
Proceeds to Us from this Offering to the Public (Before Expenses)	$	10.00	$	20,889,420.00

(1)

The initial price per share shown was arbitrarily determined by our Manager and is the greater of (i) $10.00 per share or (ii) the sum of our net asset value, or NAV, divided by the number of our common shares outstanding as of the end of the prior fiscal quarter (NAV per share). This is a “best efforts” offering.

(2)

Investors will not pay upfront selling commissions in connection with the purchase of our common shares. Following the completion of the offering, we will reimburse our Manager for offering costs, which are expected to be approximately $[_________]. Reimbursement payments are made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from this and our prior offering. If the sum of the total unreimbursed amount of such offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.50% limit), calculated on an accumulated basis, until our Manager has been reimbursed in full. As of December 31, 2016, approximately $993,000 in organizational and offering costs have been incurred by and reimbursed to our Manager in connection with our prior offering.

See “Management Compensation” for a description of additional fees and expenses that we will pay our Manager.

We will offer our common shares on a best efforts basis through the online Fundrise Platform. Neither Fundrise, LLC nor any other affiliated entity involved in the offer and sale of the shares being offered hereby is a member firm of the Financial Industry Regulatory Authority, Inc., or FINRA, and no person associated with us will be deemed to be a broker solely by reason of his or her participation in the sale of our common shares.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

This Offering Circular follows the Form S-11 disclosure format.

The date of this offering circular is March 23, 2017

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the offering circular. You should rely only on the information contained in this offering circular. We have not authorized anyone to provide you with different information. This offering circular may only be used where it is legal to sell these securities. You should not assume that the information contained in this offering circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This offering circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material investments, update our quarterly NAV per share amount, or have other material developments, we will provide an offering circular supplement that may add, update or change information contained in this offering circular. Any statement that we make in this offering circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this offering circular. You should read this offering circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Additional Information” below for more details.

The offering statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov, or on the Fundrise Platform website, www.fundrise.com. The contents of the Fundrise Platform website (other than the offering statement, this offering circular and the appendices and exhibits thereto) are not incorporated by reference in or otherwise a part of this offering circular.

Our sponsor and those selling shares on our behalf in this offering will be permitted to make a determination that the purchasers of shares in this offering are “qualified purchasers” in reliance on the information and representations provided by the shareholder regarding the shareholder’s financial situation. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

TABLE OF CONTENTS

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR	i
STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS	iii
QUESTIONS AND ANSWERS ABOUT THIS OFFERING	1
OFFERING SUMMARY	13
RISK FACTORS	26
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION	59
ESTIMATED USE OF PROCEEDS	61
MANAGEMENT	63
MANAGEMENT COMPENSATION	69
PRINCIPAL SHAREHOLDERS	72
CONFLICTS OF INTEREST	73
INVESTMENT OBJECTIVES AND STRATEGY	78
PLAN OF OPERATION	93
DESCRIPTION OF OUR COMMON SHARES	123
U.S. FEDERAL INCOME TAX CONSIDERATIONS	139
ERISA CONSIDERATIONS	160
PLAN OF DISTRIBUTION	163
HOW TO SUBSCRIBE	165
LEGAL MATTERS	166
EXPERTS	166
ADDITIONAL INFORMATION	166
INDEX TO FINANCIAL STATEMENTS OF FUNDRISE REAL ESTATE INVESTMENT TRUST, LLC	F-1
APPENDIX A: FORM OF SUBSCRIPTION AGREEMENT	A-1

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

Our common shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state law “Blue Sky” review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that our common shares offered hereby are offered and sold only to “qualified purchasers” or at a time when our common shares are listed on a national securities exchange. “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D and (ii) all other investors so long as their investment in our common shares does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). However, our common shares are being offered and sold only to those investors that are within the latter category (i.e., investors whose investment in our common shares does not represent more than 10% of the applicable amount), regardless of an investor’s status as an “accredited investor.” Accordingly, we reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A.

To determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor must be a natural person who has:

an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person; or

earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.

For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D. In particular, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles.

iii

QUESTIONS AND ANSWERS ABOUT THIS OFFERING

The following questions and answers about this offering highlight material information regarding us and this offering that is not otherwise addressed in the “Offering Summary” section of this offering circular. You should read this entire offering circular, including the section entitled “Risk Factors,” before deciding to purchase our common shares.

Q:	What is Fundrise Real Estate Investment Trust, LLC?

A:	We were organized as a Delaware limited liability company to originate, invest in and manage a diversified portfolio of commercial real estate loans and investments in commercial real estate. We may also invest in commercial real estate-related debt securities and other real estate-related assets. The use of the terms “Fundrise Real Estate Investment Trust”, the “company”, the “Income eREIT”, “we”, “us” or “our” in this offering circular refer to Fundrise Real Estate Investment Trust, LLC unless the context indicates otherwise.

Q:	How much did you raise in your initial offering?

A:	As of the completion of our initial offering on December 5, 2016, we had received subscriptions for approximately $50 million in the Offering (not including the approximate $1.2 million received in private placements to our sponsor, Rise Companies Corp., and Fundrise, LP, an affiliate of our sponsor).

Q:	What percentage of the proceeds from your initial offering have you invested?

A:	As of December 31, 2016, the invested amount represents 97.25% of the proceeds raised in our initial offering. However, a portion of the proceeds initially invested into loans have been repaid and subsequently reinvested.

Q:	What is a real estate investment trust, or REIT?

A:	In general, a REIT is an entity that:

	· combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management;

	· is able to qualify as a “real estate investment trust” under the Internal Revenue Code of 1986, as amended, the Code, for U.S. federal income tax purposes and is therefore generally entitled to a deduction for the dividends it pays and not subject to federal corporate income taxes on its net income that is distributed to its shareholders. This treatment substantially eliminates the “double taxation” treatment (i.e., taxation at both the corporate and shareholder levels) that generally results from investments in a corporation; and

	· generally pays distributions to investors of at least 90% of its annual ordinary taxable income.

	In this offering circular, we refer to an entity that qualifies to be taxed as a real estate investment trust for U.S. federal income tax purposes as a REIT. We elected to be treated as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.

Q:	What is an eREIT^TM?

A:	An “eREIT”^TM is a type of real estate investment trust sponsored by Rise Companies Corp., our sponsor, and offered directly to investors online on the Fundrise Platform, without any brokers or selling commissions. Each eREIT^TM intends to invest in a diversified pool of commercial real estate assets, such as apartments, hotels, shopping centers, and office buildings from across the country.

Q:	Who chooses which investments you make?

A:	We are externally managed by Fundrise Advisors, LLC, or our Manager, an investment adviser registered with the SEC. Our Manager makes all of our investment decisions.

Q:	Who is Rise Companies Corp.?

A:	Rise Companies Corp., our sponsor and the parent company of our Manager, is also the parent company of Fundrise, LLC, our affiliate. Fundrise, LLC owns and operates an online investment platform www.fundrise.com (the “Fundrise Platform”).

Q:	What is the Fundrise Platform?

A:	The Fundrise Platform is an online investment platform for commercial real estate. Fundrise gives investors the ability to:

	· browse investment offerings based on investment preferences including location, asset type, risk and return profile;

	· transact entirely online, including digital legal documentation, funds transfer, and ownership recordation; and

	· manage and track investments easily through an online portfolio; receive automated distributions and/or interest payments, and regular financial reporting.

Q:	What competitive advantages do you achieve through your relationship with your sponsor?

A:	Our Manager utilizes the personnel and resources of our sponsor to select our investments and manage our day-to-day operations. Our sponsor’s corporate, investment and operating platforms are well established, allowing us to realize economies of scale and other benefits including the following:

	· Experienced Management Team — Our sponsor has a highly experienced management team of real estate and debt finance professionals, led by Benjamin S. Miller, its Co-Founder and Chief Executive Officer. The senior investment executives of our sponsor have dedicated their entire careers to the commercial real estate sector. These executives provide stability in the management of our business and allow us to benefit from the knowledge and industry contacts they have gained through numerous real estate cycles. Please see “Management —Executive Officers of our Manager” for biographical information regarding these individuals.

	· Real Estate Investment Experience — As of December 31, 2016, our sponsor had facilitated or originated approximately 93 real estate assets in both Programs with aggregate purchase prices of approximately $1.15 billion, excluding 3 World Trade Center. Of the $1.15 billion aggregate real estate purchase prices, our sponsor offered through its Programs approximately $208 million, consisting of approximately $62.2 million of commercial real estate loan assets, $87.5 million of investments in commercial real estate (primarily through majority-owned subsidiaries with rights to receive preferred economic returns), and $57.3 million of commercial real estate common equity investments. The portfolios included in the Programs are diversified by investment size, security type, property type and geographic region. As a result of the depth and thoroughness of its underwriting process, the extensive investing experience of its management team and its strong performance record in managing a diverse portfolio of assets, we believe our sponsor has earned a reputation as a leading real estate manager, which has allowed it to access funding from a broad base of investors.

	· Market Knowledge and Industry Relationships — Through its active and broad participation in the fixed income markets, our sponsor benefits from market information that enables it to identify attractive commercial real estate debt investment opportunities and to make informed decisions with regard to the relative valuation of financial assets and capital allocation. We believe that our sponsor’s extensive industry relationships with a wide variety of commercial real estate owners and operators, brokers and other intermediaries and third party commercial real estate debt originators provides us with a competitive advantage in sourcing attractive investment opportunities to meet our investment objectives.

	· Related Party Loans and Warehousing of Assets — If we have sufficient funds to acquire only a portion of a loan or other investment then, in order to cover the shortfall, we will obtain a related party loan from, or issue a participation interest to, Fundrise Lending, LLC, a wholly-owned subsidiary of Rise Companies Corp. (“Fundrise Lending”) or its affiliates. Our operating agreement expressly authorizes us to enter into such related party loans and to issue such participation interests. Alternatively, Fundrise Lending or its affiliates may close and fund each loan or other investment prior to it being acquired by us. This ability to warehouse investments allows us the flexibility to deploy our offering proceeds as funds are raised. We may then acquire such investment at a price equal to the fair market value of such investment, provided that its fair market value is materially equal to its cost (i.e., the aggregate equity capital invested by Fundrise Lending or its affiliates in connection with the acquisition and during the warehousing of such investments, plus assumption of debt and any costs, such as accrued property management fees and transfer taxes, incurred during or as a result of the warehousing or, with respect to debt, the principal balance plus accrued interest net of any applicable special servicing fees). See “Plan of Operation – Related Party Loans and Warehousing of Assets”.

· Regulation A Experience — Our sponsor’s executive team was one of the first groups to sponsor a real estate investment opportunity through a Regulation A offering, having sponsored three Regulation A offerings from August 2012 through February 2014 and recently filed and qualified five offerings similar to this one under the revised Regulation A rules effective as of June 2015 (commonly referred to as “Regulation A+”). In addition, our sponsor, through its wholly-owned subsidiaries, runs an active online investment platform that utilizes private offering exemptions under the Securities Act to sell real estate-related securities to investors. Its management team is skilled in reporting and compliance obligations related to Regulation A and the Securities Act, and has well-developed compliance and investor relations functions.

· Distribution Support Commitment — To provide shareholders with distributions before we had acquired a substantial portfolio of income-producing investments, Fundrise, LP, an affiliate of our sponsor, agreed to purchase additional common shares to support our quarterly distribution payments under certain circumstances (the “distribution support commitment”) pursuant to a distribution support agreement. If our operating results in any calendar quarter during the distribution support period were less than the amount that would produce a 15% annualized return, then Fundrise, LP was obligated to purchase shares following the end of such quarter at the then NAV per share for an aggregate purchase price equal to the amount by which our operating results were less than the 15% annualized amount. The distribution support commitment was to be in place until (i) the purchase by Fundrise, LP of an aggregate of $1,000,000 in common shares or (ii) December 31, 2017, whichever was earlier (the “distribution support period”).

As of February 14, 2017, Fundrise, LP has purchased 100,000 common shares in satisfaction of its distribution support commitment, thus satisfying its obligations under the distribution support commitment. Accordingly, Fundrise, LP is no longer obligated to purchase any additional shares pursuant to the distribution support commitment.

For more information regarding Fundrise, LP’s distribution support commitment and our distribution policy, please see “Description of Our Common Shares — Distributions—Distribution Support Commitment”.

Q:	Why should I invest in commercial real estate investments?

A:	Our goal is to provide a professionally managed, diversified portfolio of high-quality commercial real estate assets to investors who generally have had very limited access to such investments in the past. Allocating some portion of your portfolio to a direct investment in high-quality commercial real estate assets may provide you with:

	· a reasonably predictable and stable level of current income from the investment;

	· diversification of your portfolio, by investing in an asset class that historically has not been correlated with the stock market generally; and

	· the opportunity for capital appreciation.

Q:	Why should I invest specifically in a company that is focused primarily on commercial real estate loans and other investments in commercial real estate?

A:	We believe that the absence of many historical sources of debt financing for the commercial real estate market, resulting from continued uncertain economic conditions has and will continue to create a favorable environment for experienced commercial real estate lenders to produce attractive, risk-adjusted returns employing little or no leverage in the near term. The de-leveraging and risk assessment taking place among the large institutional banks and traditional credit providers, as well as the temporary suspension of securitized vehicles as a means of financing, has left real estate owners with very limited options for obtaining debt financing for acquisitions and refinancings. As a result, the pricing of real estate debt capital has increased dramatically and the terms and structure of real estate loans, including borrower recourse, have become much more favorable for lenders. At the same time, as part of this overall de-leveraging, we expect that portfolios of existing loans and debt instruments secured by commercial real estate will continue to be offered for sale by banks and other institutions at discounts to par value and in some cases with relatively attractive seller financing. In addition, many owners of commercial real estate face maturities on loans that have been syndicated or securitized or both, and may have difficulty due to the loan structure and servicing standards, in obtaining an extension even for performing, stabilized assets.

Q:	What kind of offering is this?

A:	We are offering through Fundrise, LLC’s online investment platform www.fundrise.com, or the Fundrise Platform, a maximum of $20,889,420 in our common shares to the public on a “best efforts” basis. This offering is being conducted as a continuous offering pursuant to Rule 251(d)(3) of Regulation A, meaning that while the offering of securities is continuous, active sales of securities may happen sporadically over the term of the offering. Further, the acceptance of subscriptions, whether via the Fundrise Platform or otherwise, may be briefly paused at times to allow us to effectively and accurately process and settle subscriptions that have been received.

Q:	How is an investment in your common shares different from investing in shares of a listed REIT?

A:	The fundamental difference between our common shares and a listed REIT is the daily liquidity available with a listed REIT. Although we have adopted a redemption plan that generally allows investors to redeem shares on a quarterly basis, for investors with a short-term investment horizon, a listed REIT may be a better alternative than investing in our common shares. However, we believe our common shares are an alternative way for investors to deploy capital into a diversified pool of real estate assets, with a lower correlation to the general stock market than listed REITs. In addition, recently, the overall listed-REIT sector has recently been trading at all-time highs, with the FTSE NAREIT All REIT Index yielding generally less than 5% from January 1, 2010 to December 31, 2016. We believe such pricing suggests that a substantial portion of the price of listed REITs is attributable to a built-in liquidity premium, since recent unlevered capitalization rates on real estate transactions in the private sector have averaged 4-6%, according to the most recent publicly available report published by CBRE U.S. Cap Rate Data from January 2017.

	Additionally, listed REITs are subject to more demanding public disclosure and corporate governance requirements than we will be subject to. While we are subject to the scaled reporting requirements of Regulation A, such periodic reports are substantially less than what would be required for a listed REIT.

Q:	How is an investment in your common shares different from investing in shares of a traditional non-exchange traded REIT?

A:	We neither charge nor pay any broker-dealer distribution fees, saving investors approximately 70% to 90% in upfront expenses as compared to a traditional non-exchange traded REIT. Traditional non-exchange traded REITs use a highly manpower-intensive method with hundreds to thousands of sales brokers calling on investors to sell their offerings. Our sponsor has pioneered a low cost digital platform, which we intend to leverage in conducting this offering, thus reducing the financial burdens to us of offering our common shares.

Q:	How is an investment in your common shares different from investing in shares of other real estate investment opportunities offered on the Fundrise Platform or on similar online investment platforms?

A:	We are one of the few non-exchange traded REITs offered directly to all potential investors primarily over the internet. Most other similar online investment platforms that we are aware of typically offer individual property investments as private placements to accredited investors only. We intend to own a more diversified portfolio, with certain tax advantages unique to REITs, that is accessible to both accredited and non-accredited investors at a low investment minimum.

Q:	What is the purchase price for your common shares?

A:	Our Manager set our initial offering price at $10.00 per share, which remains the purchase price of our shares. The per share purchase price in this offering will be adjusted every fiscal quarter and, as of January 1st, April 1st, July 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), will be equal to the greater of (i) $10.00 per share or (ii) our NAV divided by the number of shares outstanding as of the close of business on the last business day of the prior fiscal quarter. Our website, www.fundrise.com , will identify the current NAV per share. Any subscriptions that we receive during a fiscal quarter will be executed at a price equal to our NAV per share in effect for that fiscal quarter. If a material event occurs in between quarterly updates of NAV that would cause our NAV per share to change by 5% or more from the last disclosed NAV, we will disclose the updated price and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV information provided on our website. See “Description of Our Common Shares—Quarterly Share Price Adjustments” for more details.

Q:	How will your NAV per share be calculated?

A:	Our NAV per share is calculated at the end of each fiscal quarter by our internal accountants using a process that reflects several components, including (1) estimated values of each of our commercial real estate assets and investments, as determined by such asset management team, including related liabilities, based upon (a) market capitalization rates, comparable sales information, interest rates, net operating income, (b) with respect to debt, default rates, discount rates and loss severity rates, (c) for properties that have development or value add plans, progress along such development or value add plan, and (d) in certain instances reports of the underlying real estate provided by an independent valuation expert, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of periodic distributions and (4) estimated accruals of operating revenues and expenses. In instances where an appraisal of the underlying real estate asset is necessary, including, but not limited to, instances where our Manager is unsure of its ability on its own to accurately determine the estimated values of our commercial real estate assets and investments, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, we will engage an appraiser that has expertise in appraising commercial real estate loans and assets, to act as our independent valuation expert. The independent valuation expert will not be responsible for, or prepare, our quarterly NAV per share. See “Description of our Common Shares—Valuation Policies” for more details about our NAV and how it will be calculated.

Q:	How exact will the calculation of the quarterly NAV per share be?

A:	As there is no market value for our shares as they are not expected to be listed or traded, our goal is to provide a reasonable estimate of the value of our common shares as of the end of each fiscal quarter, with the understanding that our common shares are not listed or traded on any stock exchange or other marketplace. Our assets will consist principally of commercial real estate loans and other real estate investments. Our independent valuation expert and internal accountants’ valuation of the real estate underlying these assets is subject to a number of judgments and assumptions that may not prove to be accurate. The use of different judgments or assumptions would likely result in different estimates of the value of the real estate underlying our assets. Moreover, although we evaluate and provide our NAV per share on a quarterly basis, our NAV per share may fluctuate daily, so that the NAV per share in effect for any fiscal quarter may not reflect the precise amount that might be paid for your shares in a market transaction. Further, our published NAV per share may not fully reflect certain material events to the extent that they are not known or their financial impact on our portfolio is not immediately quantifiable. Any resulting potential disparity in our NAV per share may be in favor of either shareholders who redeem their shares, or shareholders who buy new shares, or existing shareholders. See “Description of our Common Shares—Valuation Policies.”

Will I have the opportunity to redeem my common shares?

Yes. While you should view this investment as long-term, we have adopted a redemption plan whereby, on a quarterly basis, an investor may obtain liquidity. The Manager has designed our redemption plan with a view towards providing investors with an initial period with which to decide whether a long-term investment in the Company is right for them. In addition, despite the illiquid nature of the assets expected to be held by the Company, the Manager believes it is best to provide the opportunity for quarterly liquidity in the event shareholders need it in the form of a discounted redemption price prior to year 5, which economic benefit indirectly accrues to shareholders who have not requested redemption. Neither the Manager nor our sponsor receives any economic benefit as a result of the discounted redemption price through year 5.

Pursuant to our redemption plan, shareholders may request that we redeem at least 25% of their shares. In addition, the redemption plan is subject to certain liquidity limitations, which may fluctuate depending on the liquidity of the real estate assets held by us.

For the first eighty-nine (89) days following the settlement of the common shares subject to the redemption request (the “Introductory Period”), the per share redemption price will be equal to the purchase price of the shares being redeemed reduced by (i) the aggregate sum of distributions paid with respect to such shares, rounded down to the nearest cent and (ii) the aggregate sum of distributions, if any, declared but unpaid on the shares subject to the redemption request. In other words, a shareholder would receive back their original investment amount, from the redemption price paid, prior distributions received and distributions that have been declared (and that will be received when paid), but would not receive any amounts in excess of their original investment amount.

Beginning on the ninetieth (90^th) day following the settlement of the common shares subject to the redemption request (the “Post-Introductory Period”), the per share redemption price will be calculated based on a declining discount to the per share price for our common shares in effect at the time of the redemption request, and rounded down to the nearest cent. In addition, the redemption plan is subject to certain liquidity limitations, which may fluctuate depending on the liquidity of the real estate assets held by us. During the Post-Introductory Period, the redemption price with respect to the common shares that are subject to the redemption request will not be reduced by the aggregate sum of distributions, if any, that have been (i) paid with respect to such shares prior to the date of the redemption request or (ii) declared but unpaid on such shares with record dates during the period between the redemption request date and the redemption date.

Holding Period from Date of Settlement	Effective Redemption Price (as percentage of per share redemption price) (1)
Less than 90 days (Introductory Period)		100.0	%(2)(3)
90 days until 3 years		97.0	%(4)
3 years to 4 years		98.0	%(5)
4 years to 5 years		99.0	%(6)
More than 5 years		100.0	%(7)

(1)

The Effective Redemption Price will be rounded down to the nearest $0.01.

(2)

The per share redemption price during the Introductory Period is calculated based upon the purchase price of the shares, not the per share price in effect at the time of the redemption request.

(3)

The Effective Redemption Price during the Introductory Period will be reduced by the aggregate sum of distributions paid or payable on such shares, the amount of which we are unable to calculate at this time.

(4)

For shares held at least ninety (90) days but less than three (3) years, the Effective Redemption Price includes the fixed 3% discount to the per share price for our common shares in effect at the time of the redemption request.

(5)

For shares held at least three (3) years but less than four (4) years, the Effective Redemption Price includes the fixed 2% discount to the per share price for our common shares in effect at the time of the redemption request.

(6)

For shares held at least four (4) years but less than five (5) years, the Effective Redemption Price includes the fixed 1% discount to the per share price for our common shares in effect at the time of the redemption request.

(7)

For shares held at least five (5) years, the Effective Redemption Price does not include any discount to the per share price for our common shares in effect at the time of the redemption request.

Furthermore, any shareholder requesting redemption will be responsible for any third-party costs incurred in effecting such redemption, including but not limited to, bank transaction charges, custody fees, and/or transfer agent charges. The redemption plan may be changed or suspended at any time without notice. See “Description of Our Common Shares—Quarterly Redemption Plan” for more details.

Q:	What is the number and percentage of common shares that have been submitted for redemption?

A:	As of December 31, 2016, 111,625 common shares have been submitted for redemption and 100% of such redemption requests have been honored.

Q:	Will there be any limits on my ability to redeem my shares?

A:	Yes. While we designed our redemption plan to allow shareholders to request redemptions on a quarterly basis, we need to impose limitations on the total amount of net redemptions per calendar quarter in order to maintain sufficient sources of liquidity to satisfy redemption requests without impacting our ability to invest in commercial real estate assets and maximize investor returns. In the event our Manager determines, in its sole discretion, that we do not have sufficient funds available to redeem all of the common shares for which redemption requests have been submitted in any given month or calendar quarter, as applicable, such pending requests will be honored on a pro rata basis In the event that not all redemptions are being honored in a given quarter, the pro rata distributions will be rounded down to the nearest share for each shareholder. For investors who hold common shares with more than one record date, redemption requests will be applied to such common shares in the order in which they settled, on a last in first out basis – meaning, those common shares that have been continuously held for the shortest amount of time will be redeemed first. We intend to limit common shareholders to one (1) redemption request outstanding at any given time, meaning that, if a common shareholder desires to request more or less shares be redeemed, such common shareholder must first withdraw the first redemption request, which may affect whether the request is considered in the “Introductory Period” or “Post-Introductory Period”. In accordance with the SEC’s current guidance on redemption plans contained in T-REIT Inc. (June 4, 2001) and Wells Real Estate Investment Trust II, Inc. (Dec. 3, 2003), we are prohibited from redeeming more than 5.0% of the weighted average number of common shares outstanding during the prior calendar year. Accordingly, we presently intend to limit the number of shares to be redeemed during any calendar quarter to 1.25% of the common shares outstanding, with excess capacity carried over to later calendar quarters in that calendar year. However, as we intend to make a number of commercial real estate investments of varying terms and maturities, our Manager may elect to increase or decrease the amount of common shares available for redemption in any given calendar quarter, as these commercial real estate assets are paid off or sold, but in no event will we redeem more than 5.0% during any calendar year. Notwithstanding the foregoing, we are not obligated to redeem common shares under the redemption plan. Further, our Manager may in its sole discretion, amend, suspend, or terminate the redemption plan at any time without notice, including to protect our operations and our non-redeemed shareholders, to prevent an undue burden on our liquidity, to preserve our status as a REIT, following any material decrease in our NAV, or for any other reason. However, in the event that we amend, suspend or terminate our redemption plan, we will file an offering circular supplement and/or Form 1-U, as appropriate, to disclose such amendment. The Manager may also, in its sole discretion, decline any particular redemption request if it believes such action is necessary to preserve our status as a REIT. See “Description of Our Common Shares—Quarterly Redemption Plan” for more details.

Q:	Will I be charged upfront selling commissions?

A:	No. Investors will not pay upfront selling commissions as part of the price per common share purchased in this offering. Additionally, there is no dealer manager fee or other service-related fee in connection with the offering and sale of our common shares through the Fundrise Platform.

Q:	Who will pay your organization and offering costs?

A:	Our Manager or its affiliates has paid and will continue to pay on our behalf all costs incurred in connection with our organization and the offering of our shares. See “Estimated Use of Proceeds” for more information about the types of costs that may be incurred, including those expenses described in the next paragraph. Following the completion of our initial offering, we began to reimburse our Manager, without interest, for these organization and offering costs incurred both before and after such date. Reimbursement payments will be made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from this and our prior offering. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.50% limit), calculated on an accumulated basis, until our Manager has been reimbursed in full. As of December 31, 2016, approximately $993,000 in organizational and offering costs have been incurred by and reimbursed to our Manager in connection with our prior offering.

Q:	What fees and expenses do you pay to the Manager or any of its affiliates?

A:	We pay our Manager a quarterly asset management fee currently equal to an annualized rate of 0.85% based on our NAV at the end of each prior quarter. This rate is determined by our Manager in its sole discretion, but cannot exceed an annualized rate of 1.00%. The amount of the asset management fee may vary from time to time, and we will publicly report any changes in the asset management fee. We reimburse our Manager for the organization and offering expenses that the Manager has paid or will pay on our behalf. We will also reimburse our Manager for out-of-pocket expenses in connection with the origination of our commercial real estate loans and other real-estate related investments, to the extent not reimbursed by the borrower. Additionally, we reimburse our Manager for out-of-pocket expenses paid to third parties in connection with providing services to us. This does not include the Manager’s overhead, employee costs borne by the Manager, utilities or technology costs. The expense reimbursements that we will pay to our Manager include expenses incurred by our sponsor in the performance of services under the shared services agreement between our Manager and our sponsor. See “Management—Shared Services Agreement.”

	The payment by us of fees and expenses will reduce the cash available for investment and distribution and will directly impact our quarterly NAV. See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates.

Q:	Will you use leverage?

A:	Yes, we may use leverage, although as of December 31, 2016, we had not utilized any leverage in making our investments. Our targeted portfolio-wide leverage, after we have acquired a substantial portfolio, is between 40-60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the initial portfolio) in order to quickly build a diversified portfolio of assets. Please see “Investment Objectives and Strategy” for more details.

Q:	How often will I receive distributions?

A:	We expect that our Manager will declare and pay distributions quarterly in arrears; however, our Manager may declare other periodic distributions as circumstances dictate. Any distributions we make will be at the discretion of our Manager, and will be based on, among other factors, our present and reasonably projected future cash flow. We expect that the Manager will set the rate of distributions at a level that will be reasonably consistent and sustainable over time, which will be fully dependent on the yields generated by our assets and may be substantially less than the distribution rate that was payable while the distribution support commitment was in effect. In addition, the Manager’s discretion as to the payment of distributions will be limited by the REIT distribution requirements, which generally require that we make aggregate annual distributions to our shareholders of at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. Moreover, even if we make the required minimum distributions under the REIT rules, we will be subject to federal income and excise taxes on our undistributed taxable income and gains. As a result, the Manager intends to make such additional distributions, beyond the minimum REIT distribution, to avoid such taxes. See “Description of Our Common Shares — Distributions” and “U.S. Federal Income Tax Considerations.”

	Any distributions that we make will directly impact our NAV, by reducing the amount of our assets. Our goal is to provide a reasonably predictable and stable level of current income, through quarterly distributions, while at the same time maintaining a fair level of consistency in our NAV. Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative) will produce your total return.

Q:	What will be the source of your distributions?

A:	We may pay distributions from sources other than cash flow from operations, including from the proceeds of this offering, the private placements to our sponsor and Fundrise, LP, or the additional common shares sold to an affiliate of our sponsor pursuant to the distribution support agreement (see “Q: What competitive advantages do we achieve through our relationship with our sponsor – Distribution Support Commitment” above), interest or dividend income received from our investments, principal repayment of the loans that we make, redemption and/or redemption premiums of investments in commercial real estate through majority-owned subsidiaries with rights to receive preferred economic returns, the sale of investments or loan proceeds, among others, and we have no limit on the amounts we may pay from such sources.

Q:	Will the distributions I receive be taxable as ordinary income?

A:	Unless your investment is held in a qualified tax-exempt account or we designate certain distributions as capital gain dividends, distributions that you receive generally will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. The portion of your distribution in excess of current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the tax basis of your investment, rather than result in current tax, until your basis is reduced to zero. Return of capital distributions made to you in excess of your tax basis in our common shares will be treated as sales proceeds from the sale of our common shares for U.S. federal income tax purposes. Distributions we designate as capital gain dividends will generally be taxable at long-term capital gains rates for U.S. federal income tax purposes. However, because each investor’s tax considerations are different, we recommend that you consult with your tax advisor. You also should review the section of this offering circular entitled “U.S. Federal Income Tax Considerations,” including for a discussion of the special rules applicable to distributions in redemption of shares and liquidating distributions.

Q:	May I reinvest my cash distributions in additional shares?

A:	Yes. While we have not adopted a distribution reinvestment plan whereby investors may elect to have their cash distributions automatically reinvested in additional common shares, so long as this offering remains ongoing, you may choose to use the proceeds of any distribution to purchase additional shares hereunder either directly or through a program established by our Manager. The purchase price for such shares is $10.00 until March 31, 2017. Thereafter, the per share purchase price in this offering will be adjusted every fiscal quarter and, as of January 1st, April 1st, July 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), will be equal to the greater of (i) $10.00 per share or (ii) our NAV divided by the number of shares outstanding as of the close of business on the last business day of the prior fiscal quarter. Note, however, that under the rules applicable to us under Regulation A, we are only permitted to publicly offer up to $50,000,000 of our common shares in any twelve-month period.

Q:	Who might benefit from an investment in our shares?

A:	An investment in our shares may be beneficial for you if you seek to diversify your personal portfolio with a public commercial real estate investment vehicle focused primarily on commercial real estate loans, investments in commercial real estate and other select real estate-related assets, seek to receive current income, seek to preserve capital and are able to hold your investment for a time period consistent with our liquidity strategy. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, that an investment in our shares will not meet those needs.

Q:	Are there any risks involved in buying our shares?

A:	Investing in our common shares involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” for a description of the risks relating to this offering and an investment in our shares.

Q:	How does a “best efforts” offering work?

A:	When common shares are offered to the public on a “best efforts” basis, we are only required to use our best efforts to sell our common shares. Neither our sponsor, Manager nor any other party has a firm commitment or obligation to purchase any of our common shares.

Q:	Who can buy shares?

A:	Generally, you may purchase shares if you are a “qualified purchaser” (as defined in Regulation A under the Securities Act). “Qualified purchasers” include:

	· “accredited investors” under Rule 501(a) of Regulation D; and

	· all other investors so long as their investment in our common shares does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).

	However, our common shares are being offered and sold only to those investors that are within the latter category (i.e., investors whose investment in our common shares does not represent more than 10% of the applicable amount), regardless of an investor’s status as an “accredited investor.”

	Net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. We reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A. Please refer to the section above entitled “State Law Exemption and Purchase Restrictions” for more information.

Q:	How do I buy shares?

A:	You may purchase our common shares in this offering by creating a new account, or logging into your existing account, at the Fundrise Platform. You will need to fill out a subscription agreement like the one attached to this offering circular as Appendix A for a certain investment amount and pay for the shares at the time you subscribe.

Q:	Is there any minimum investment required?

A:	Yes. If you are a first time investor in our common shares, you must initially purchase at least 100 shares in this offering, or $1,000 based on the current per share price. There is no minimum investment requirement on additional purchases after you have purchased a minimum of 100 shares. However, in certain instances, we may revise the minimum purchase requirements in the future or elect to waive the minimum purchase requirement, such as for individuals who participate in different plans established by our Manager through which they can invest in our common shares. In addition, in order to help protect usfrom the risk of chargebacks, we intend to require that any subscription in excess of $100,000 of our shares be funded through a bank wire transfer and not an ACH electronic fund transfer.

Q:	May I make an investment through my IRA or other tax-deferred retirement account?

A:	Generally, yes. We currently accept investments through IRAs maintained with certain custodians, although we intend to limit the amount of IRA investments to less than 25 percent of our shares. However, IRAs or other tax-deferred retirement accounts that invest in our shares generally will be subject to tax on all or a significant portion of their share of our profits as “unrelated business taxable income” under the Code.

Q:	What will you do with the proceeds from your offering?

A:	We expect to use substantially all of the net proceeds from this offering (after paying or reimbursing offering expenses) to continue to invest in and manage a diverse portfolio of commercial real estate loans and investments in commercial real estate and other select real estate-related assets. We expect that any expenses or fees payable to our Manager for its services in connection with managing our daily affairs, including but not limited to, the selection and acquisition or origination of our investments, will be paid from cash flow from operations. If such fees and expenses are not paid from cash flow (or waived) they will reduce the cash available for investment and distribution and will directly impact our quarterly NAV. See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates.

	We may not be able to promptly invest the net proceeds of this offering in commercial real estate loans, investments in commercial real estate and other select real estate-related assets. In the interim, we may invest in short-term, highly liquid or other authorized investments. Such short-term investments will not earn as high of a return as we expect to earn on our real estate-related investments.

Q:	How long will this offering last?

A:	We currently expect that this offering will remain open for investors until we raise the maximum amount being offered, unless terminated by us at an earlier time. We reserve the right to terminate this offering for any reason at any time.

Q:	Will I be notified of how my investment is doing?

A:	Yes, we will provide you with periodic updates on the performance of your investment in us, including:

	· an annual report;

	· a semi-annual report;

	· current event reports for specified material events within four business days of their occurrence;

	· supplements to the offering circular, if we have material information to disclose to you; and

	· other reports that we may file or furnish to the SEC from time to time.

	We will provide this information to you by posting such information on the SEC’s website at www.sec.gov, on the Fundrise Platform at www.fundrise.com, via e-mail, or, upon your consent, via U.S. mail.

Q:	When will I get my detailed tax information?

A:	Your IRS Form 1099-DIV tax information, if required, will be provided by January 31 of the year following each taxable year.

Q:	Who can help answer my questions about the offering?

A:	If you have more questions about the offering, or if you would like additional copies of this offering circular, you should contact us by email at investments@fundrise.com or by mail at:

Fundrise Real Estate Investment Trust, LLC

1601 Connecticut Avenue NW

Suite 300

Washington, D.C. 20009

Attn: Investor Relations

OFFERING SUMMARY

This offering summary highlights material information regarding our business and this offering that is not otherwise addressed in the “Questions and Answers About this Offering” section of this offering circular. Because it is a summary, it may not contain all of the information that is important to you. To understand this offering fully, you should read the entire offering circular carefully, including the “Risk Factors” section before making a decision to invest in our common shares.

Fundrise Real Estate Investment Trust, LLC

Fundrise Real Estate Investment Trust, LLC is a Delaware limited liability company formed to invest in and manage a diversified portfolio of commercial real estate loans and investments in commercial real estate. We may also invest in commercial real estate-related debt securities, and other real estate-related assets. We intend to continue to operate in a manner that will allow us to qualify as a REIT for U.S. federal income tax purposes. Among other requirements, REITs are required to distribute to shareholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

Our office is located at 1601 Connecticut Avenue NW, Suite 300, Washington, D.C. 20009. Our telephone number is (202) 584-0550. Information regarding our Company is also available on our web site at www.fundrise.com.

Recent Developments

Capital Raised

As of December 5, 2016, we had received subscriptions for approximately $50 million in our initial offering (not including the approximate $1.2 million received in private placements to our sponsor, Rise Companies Corp., and Fundrise, LP, an affiliate of our sponsor, and the distribution support commitment). We are offering up to $20,889,420 in our common shares, which represents the value of shares available to be offered as of the date of this offering circular out of the rolling 12-month maximum offering amount of $50 million in our common shares.

Assets Acquired

See “Plan of Operation—Our Investments” for a detailed summary of our assets.

Distributions Paid

Through March 21, 2017, we have paid an aggregate of 5 distributions since our inception with an average annualized yield of 9.21%. See “Description of Our Common Shares—Distributions” below. While we are under no obligation to do so, we expect that our Manager will continue to declare distributions with a daily record date, and pay distributions quarterly in arrears in amounts similar to those previously declared. However, there can be no assurance as to whether distributions will be declared or the amount of such distributions.

Investment Strategy

We have used, and continue to expect to use substantially all of the net proceeds from this and our prior offering to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and investments in commercial real estate (through majority-owned subsidiaries with rights to receive preferred economic returns). We may also invest in commercial real estate-related debt securities (including CMBS, CDOs and REIT senior unsecured debt), and other real estate-related assets.

We seek to create and maintain a portfolio of investments that generate a low volatility income stream of attractive and consistent cash distributions. Our focus on investing in debt instruments emphasizes the payment of current returns to investors and preservation of invested capital as our primary investment objectives, with a lesser emphasis on seeking capital appreciation from our investments, as is typically the case with more opportunistic or equity-oriented strategies.

Our Manager expects to continue to directly structure, underwrite and originate many of the debt products in which we invest as this provides for the best opportunity to control our borrower and partner relationships and optimize the terms of our investments. Our proven underwriting process, which our management team has successfully developed over their extensive real estate careers in a variety of market conditions and implemented at our sponsor, involves comprehensive financial, structural, operational and legal due diligence of our borrowers and partners in order to optimize pricing and structuring and mitigate risk. We feel the current and future market environment (including any existing or future government-sponsored programs) provides a wide range of opportunities to generate compelling investments with strong risk-return profiles for our shareholders.

Investment Objectives

Our primary investment objectives are:

to pay attractive and consistent cash distributions; and

to preserve, protect and return your capital contribution.

We also seek to realize growth in the value of our investments by timing their sale to maximize value. However, there is no assurance that our investment objectives will be met.

Market Opportunities

We believe that the near and intermediate-term market for investment in commercial real estate loans, commercial real estate investments, commercial real estate-related debt securities, and other real-estate related assets is compelling from a risk-return perspective. Given the prospect of low growth for the economy, we favor a strategy weighted toward targeting senior and mezzanine debt which maximize current income, with significant subordinate capital and downside structural protections. In contrast, returns typically associated with pure equity strategies are mostly “back-ended” and are dependent on asset appreciation, capitalization rate compression, cash flow growth, aggressive refinancing and/or sale of the underlying property. We believe that our investment strategy, combined with the experience and expertise of our Manager’s management team, will provide opportunities to originate investments with attractive current and accrued returns and strong structural features directly with real estate companies, thereby taking advantage of changing market conditions in order to seek the best risk-return dynamic for our shareholders.

Our Manager

Fundrise Advisors, LLC, our Manager, manages our day-to-day operations. Our Manager is an investment adviser registered with the SEC and a wholly-owned subsidiary of our sponsor. A team of real estate and debt finance professionals, acting through our Manager, makes all of the decisions regarding the selection, negotiation, financing and disposition of our investments, subject to the limitations in our operating agreement. Our Manager also provides asset management, marketing, investor relations and other administrative services on our behalf with the goal of maximizing our operating cash flow and preserving our invested capital. Rise Companies Corp., our sponsor, is able to exercise significant control over our business.

About the Fundrise Platform

We are also an affiliate of Fundrise, LLC, the owner and operator of an online financial platform focused on real estate, which may be found on the website: www.fundrise.com (the “Fundrise Platform”). Fundrise, LLC is a wholly-owned subsidiary of Rise Companies Corp., our sponsor.

Benjamin S. Miller is the co-founder and Chief Executive Officer of Rise Companies Corp., our sponsor. Mr. Benjamin S. Miller is responsible for overseeing the day-to-day operations of Rise Companies Corp. and its affiliates, including Fundrise, LLC.

Our Structure

The chart below shows the relationship among various Rise Companies Corp. affiliates and our Company as of the date of this offering circular.

* As we raise sufficient offering proceeds to acquire investments, (i) we may obtain a related party loan from, or issue a participation interest to, Fundrise Lending or its affiliates, or (ii) Fundrise Lending or its affiliates may acquire such investments and sell them to us at a later time. See “Plan of Operation – Related Party Loans and Warehousing of Assets.”

** Pursuant to our operating agreement, the Manager receives an asset management fee and a special servicing fee. See “Management Compensation.”

Management Compensation

Our Manager and its affiliates receive fees and expense reimbursements for services relating to this and our prior offering, as well as for the investment and management of our assets. The items of compensation are summarized in the following table. Neither our Manager nor its affiliates receive any selling commissions or dealer manager fees in connection with the offer and sale of our common shares. See “Management Compensation” for a more detailed explanation of the fees and expenses payable to our Manager and its affiliates.

Form of Compensation and Recipient	Determination of Amount	Estimated Amount

	*Offering Stage*

Offering Expenses — Manager	Our Manager has paid and will continue to pay offering expenses on our behalf in connection with the offering of our shares. We reimburse our Manager for these costs and future offering costs it may incur on our behalf.	Our organization and offering expenses as of December 31, 2016 were approximately $993,000 and we expect to incur [_______] in expenses in connection with this offering.

	*Acquisition and Development Stage*

Acquisition / Origination Fee — Manager or its Affiliate	The borrower pays up to 3.0% of the amount funded by our sponsor or affiliates of our sponsor to acquire or originate commercial real estate loans or the amount invested in the case of other real estate investments, excluding any acquisition and origination expenses and any debt attributable to such investments. We are not entitled to this fee.	Paid by the co-investors, joint-venture or borrower at closing. Actual amounts are dependent upon the total equity and debt capital we raise; we cannot determine these amounts at the present time.

Reimbursement of Acquisition / Origination Expenses — Manager	We reimburse our Manager for actual expenses incurred in connection with the selection, acquisition or origination of an investment, to the extent not reimbursed by the borrower, whether or not we ultimately acquire or originate the investment.	Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ); we cannot determine these amounts at the present time.

Form of Compensation and Recipient	Determination of Amount	Estimated Amount

	*Operational Stage*

Asset Management Fee — Manager	Quarterly asset management fee currently equal to an annualized rate of 0.85% based on our NAV at the end of each prior quarter. This rate is determined by our Manager in its sole discretion, but cannot exceed an annualized rate of 1.00%. The amount of the asset management fee may vary from time to time, and we will publicly report any changes in the asset management fee.	Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ) and the results of our operations; we cannot determine these amounts at the present time.


Special Servicing Fee – Manager or Other Party	We reimburse our Manager for actual expenses incurred on our behalf in connection with the special servicing of non-performing assets, including, but not limited to, reimbursement of non-ordinary expenses and employee time required to special service a non-performing asset. Whether an asset is deemed to be non-performing is in the sole discretion of our Manager.	Actual amounts are dependent upon the occurrence of an asset becoming non-performing, the original value of such asset, and the results of our operations; we cannot determine these amounts at the present time.

Other Operating Expenses — Manager	We reimburse our Manager for out-of-pocket expenses paid to third parties in connection with providing services to us. This does not include the Manager’s overhead, employee costs borne by the Manager, utilities or technology costs.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

	The expense reimbursements that we pay to our Manager also include expenses incurred by our sponsor in the performance of services under the shared services agreement between our Manager and our sponsor, including any increases in insurance attributable to the management or operation of our Company.

	*Liquidation/Listing Stage*

Disposition Fees	None.	—

Summary of Risk Factors

Investing in our common shares involves a high degree of risk. You should carefully review the “Risk Factors” section of this offering circular, beginning on page 26, which contains a detailed discussion of the material risks that you should consider before you invest in our common shares.

Conflicts of Interest

Our Manager and its affiliates will experience conflicts of interest in connection with the management of our business. Some of the material conflicts that our Manager and its affiliates will face include the following:

The asset management fee paid to our Manager is based on our NAV, which is calculated by our sponsor’s internal accountants and asset management team. Our Manager may benefit by us retaining ownership of our assets at times when our shareholders may be better served by the sale or disposition of our assets in order to avoid a reduction in our NAV.

Our sponsor’s real estate and debt finance professionals acting on behalf of our Manager must determine which investment opportunities to recommend to us and other Fundrise entities. Our sponsor has organized, as of the date of this offering circular, the following similar programs:

• Fundrise Equity REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio of commercial real estate properties;

• Fundrise Midland Opportunistic REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio primarily consisting of investments in multifamily rental properties and development projects located primarily in the Houston, TX, Dallas, TX, Austin, TX, Chicago, IL, and Denver, CO metropolitan statistical areas;

• Fundrise West Coast Opportunistic REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio primarily consisting of investments in multifamily rental properties and development projects located primarily in the Los Angeles, CA, San Francisco, CA, San Diego, CA, Seattle, WA, and Portland, OR metropolitan statistical areas;

• Fundrise East Coast Opportunistic REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio primarily consisting of investments in multifamily rental properties and development projects located primarily in the states of Massachusetts, New York, New Jersey, North Carolina, South Carolina, Georgia and Florida, as well as the metropolitan statistical areas of Washington, DC and Philadelphia, PA;

These additional programs may have investment criteria that compete with us.

Our sponsor’s real estate and debt finance professionals acting on behalf of our Manager have to allocate their time among us, our sponsor’s business and other programs and activities in which they are involved.

The terms of our operating agreement (including the Manager’s rights and obligations and the compensation payable to our Manager and its affiliates) were not negotiated at arm’s length.

Our shareholders may only remove our Manager for “cause” following the affirmative vote of shareholders holding two-thirds of the outstanding common shares. Unsatisfactory financial performance does not constitute “cause” under the operating agreement.

At some future date after we have acquired a substantial investment portfolio that our Manager determines would be most effectively managed by our own personnel, we may seek shareholder approval to internalize our management by acquiring assets and employing the key real estate and debt finance professionals performing services to us on behalf of our Manager for consideration that would be negotiated at that time. The payment of such consideration could result in dilution to your interest in us and could reduce the net income per share and funds from operations per share attributable to your investment. Additionally, in an internalization transaction, our sponsor’s real estate and debt finance professionals that become our employees may receive more compensation than they previously received from our sponsor or its affiliates. These possibilities may provide incentives to these individuals to pursue an internalization transaction, even if an alternative strategy might otherwise be in our shareholder’s best interests.

Our Manager may, without shareholder consent unless otherwise required by law, determine that we should merge or consolidate through a roll-up or other similar transaction involving other entities, including entities affiliated with our Manager, into or with such other entities.

As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements, including the requirements for a board of directors or independent board committees.

Distributions

While we are under no obligation to do so, we expect that our Manager will declare and pay distributions quarterly in arrears; however, our Manager may declare other periodic distributions as circumstances dictate. In order that investors may generally begin receiving distributions immediately upon our acceptance of their subscription, we expect to authorize and declare distributions based on daily record dates.

On April 12, 2016, we paid out our first distribution to shareholders of record as of the close of business on each day of the period commencing on January 1, 2016 and ending on March 31, 2016. In addition, our Manager has declared daily distributions for shareholders of record as of the close of business on each day from April 1, 2016 through March 31, 2017, as shown in the table below. See the section entitled “Description of Our Common Shares – Distributions” for a fuller description of the distributions we have declared and/or paid.

Distribution Period	Daily Distribution Amount/Common Share			Date of Declaration		Payment Date (1)		Annualized Yield (2)
01/01/16 – 03/31/16		0.0012205045			12/31/15		04/12/16		4.45	%
04/01/16 – 04/30/16		0.0027397254			03/30/16		07/13/16		10.00	%
05/01/16 – 06/30/16		0.0027397260			04/20/16		07/13/16		10.00	%
07/01/16 – 09/30/16		0.0030136986			06/08/16		10/13/16		11.00	%
10/01/16 – 12/31/16		0.0030821918			09/16/16		01/12/17		11.25	%
01/01/17 – 03/31/17		0.0028767123			12/31/16		04/21/17		10.50	%
Weighted Average		0.0025879539	(3)		-		-		9.45	%(4)

(1) Dates presented are the dates on which the distributions were, or are, scheduled to be distributed; actual distribution dates may vary.

(2) Annualized yield numbers represent the annualized yield amount of each distribution calculated on an annualized basis at the then current rate, assuming a $10.00 per share purchase price. While the Manager is under no obligation to do so, each annualized basis return assumes that the Manager would declare distributions in the future similar to the distributions for each period presented, and there can be no assurance that the Manager will declare such distributions in the future or, if declared, that such distributions would be of a similar amount.

(3) Average daily distribution amount per common share is calculated as the average of the daily declared distribution amounts from January 1, 2016 through March 31, 2017.

(4) Average annualized yield is calculated as the annualized yield of the average daily distribution amount for the periods presented, assuming a $10.00 per share purchase price. While the Manager is under no obligation to do so, the average annualized basis return assumes that the Manager would declare distributions in the future similar to the average distributions for the period from January 1, 2016 through March 31, 2017, and there can be no assurance that the Manager will declare such distributions in the future or, if declared, that such distributions would be of a similar amount.

Any distributions we make are at the discretion of our Manager, and are based on, among other factors, our present and reasonably projected future cash flow. Distributions are paid to shareholders as of the record dates selected by the Manager. In addition, the Manager’s discretion as to the payment of distributions is limited by the REIT distribution requirements, which generally require that we make aggregate annual distributions to our shareholders of at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. Moreover, even if we make the required minimum distributions under the REIT rules, we are subject to federal income and excise taxes on our undistributed taxable income and gains. As a result, the Manager intends to continue to make such additional distributions, beyond the minimum REIT distribution, to avoid such taxes. See “Description of Our Common Shares — Distributions” and “U.S. Federal Income Tax Considerations.”

Any distributions that we make directly impacts our NAV, by reducing the amount of our assets. Our goal is to provide a reasonably predictable and stable level of current income, through quarterly or other periodic distributions, while at the same time maintaining a fair level of consistency in our NAV. Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative) will produce your total return.

Our distributions will generally constitute a return of capital to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares.

Distribution Support Commitment

To provide shareholders with distributions before we had acquired a substantial portfolio of income-producing investments, Fundrise, LP, an affiliate of our sponsor, agreed to purchase additional common shares to support our quarterly distribution payments under certain circumstances (the “distribution support commitment”) pursuant to a distribution support agreement. in any calendar quarter during the distribution support period were less than the amount that would produce a 15% annualized return, then Fundrise, LP was obligated to purchase shares following the end of such quarter at the then NAV per share for an aggregate purchase price equal to the amount by which our operating results were less than the 15% annualized amount. The distribution support commitment was to be in place until (i) the purchase by Fundrise, LP of an aggregate of $1,000,000 in common shares or (ii) December 31, 2017, whichever was earlier (the “distribution support period”).

Borrowing Policy

We may employ conservative levels of borrowing in order to provide additional funds to support our investment activities, although as of December 31, 2016 we have not utilized any leverage. Our target portfolio-wide leverage after we have acquired an initial substantial portfolio of diversified investments is between 40-60% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. During periods when we are significantly growing our portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the portfolio) in order to quickly build a diversified portfolio of assets. Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. However, other than during a period when we are significantly growing our portfolio, it is our policy to not borrow more than 75% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. We cannot exceed the leverage limit of our leverage policy unless any excess in borrowing over such level is approved by our Manager’s investment committee. See “Investment Objectives and Strategy” for more details regarding our leverage policies.

Valuation Policies

At the end of each fiscal quarter, our internal accountants calculate our NAV per share using a process that reflects (1) estimated values of each of our commercial real estate assets and investments, as determined by our sponsor’s asset management team, including related liabilities, based upon (a) market capitalization rates, comparable sales information, interest rates, net operating income, (b) with respect to debt, default rates, discount rates and loss severity rates, (c) for properties that have development or value add plans, progress along such development or value add plan, and (d) in certain instances reports of the underlying real estate provided by an independent valuation expert, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of our periodic distributions and (4) estimated accruals of our operating revenues and expenses. In instances where we determine an appraisal of the real estate asset is necessary, including, but not limited to, instances where our Manager is unsure of its ability on its own to accurately determine the estimated values of our commercial real estate assets and investments, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, we will engage an appraiser that has expertise in appraising commercial real estate assets, to act as our independent valuation expert. The independent valuation expert will not be responsible for, or prepare, our NAV per share.

As there is no market value for our shares as they are not expected to be listed or traded, our goal is to provide a reasonable estimate of the value of our common shares on a quarterly basis, with the understanding that our common shares are not listed or traded on any stock exchange or other marketplace. However, the majority of our assets will consist of commercial real estate loans and, as with any commercial real estate valuation protocol, the conclusions reached by our sponsor’s internal asset management team or internal accountants, as the case may be, are based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our commercial real estate assets and investments. In addition, for any given period, our published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events on our portfolio is not immediately quantifiable. As a result, the calculation of our NAV per share may not reflect the precise amount that might be paid for your shares in a market transaction, and any potential disparity in our NAV per share may be in favor of either shareholders who redeem their shares, or shareholders who buy new shares, or existing shareholders. However, to the extent quantifiable, if a material event occurs in between updates of NAV that would cause our NAV per share to change by 5% or more from the last disclosed NAV, we will disclose the updated price and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV information provided on our website.

Quarterly Share Price Adjustments

Our Manager set our initial offering price at $10.00 per share, which will remain the purchase price of our common shares in this offering until April 1, 2017. Thereafter, the per share purchase price in this offering will be adjusted every fiscal quarter and, as of January 1st, April 1st, July 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), will be equal to the greater of (i) $10.00 per share or (ii) our NAV divided by the number of shares outstanding as of the close of business on the last business day of the prior fiscal quarter, in each case prior to giving effect to any share purchases or redemptions to be effected on such day.

We will file with the SEC on a quarterly basis an offering circular supplement disclosing the quarterly determination of our NAV per share that is applicable for such fiscal quarter, which we refer to as the pricing supplement. We also post that fiscal quarter’s NAV on the public Fundrise Platform, www.fundrise.com. The Fundrise Platform also contains this offering circular, including any supplements and amendments. We will disclose, on a quarterly basis in an offering circular supplement filed with the SEC, the principal valuation components of our NAV. In addition, if a material event occurs in between quarterly updates of NAV that would cause our NAV per share to change by 5% or more from the last disclosed NAV, we will disclose the updated price and the reason for the change in an offering circular supplement as promptly as reasonably practicable, and will update the NAV information provided on our website.

Any subscriptions that we receive prior to the end of a fiscal quarter will be executed at a price equal to our NAV per share applicable to such fiscal quarter. See “Description of Our Common Shares—Quarterly Share Price Adjustments” for more details.

Quarterly Redemption Plan

While shareholders should view this investment as long-term, we have adopted a redemption plan whereby, on a quarterly basis, an investor has the opportunity to obtain liquidity. The Manager has designed our redemption plan with a view towards providing investors with an initial period with which to decide whether a long-term investment in the Company is right for them. In addition, despite the illiquid nature of the assets expected to be held by the Company, the Manager believes it is best to provide the opportunity for quarterly liquidity in the event shareholders need it in the form of a discounted redemption price prior to year 5, which economic benefit indirectly accrues to shareholders who have not requested redemption. Neither the Manager nor our sponsor receive any economic benefit as a result of the discounted redemption price through year 5.

Holding Period from Date of Settlement	Effective Redemption Price (as percentage of per share redemption price) (1)
Less than 90 days (Introductory Period)		100.0	%(2)(3)
90 days until 3 years		97.0	%(4)
3 years to 4 years		98.0	%(5)
4 years to 5 years		99.0	%(6)
More than 5 years		100.0	%(7)

(1)

The Effective Redemption Price will be rounded down to the nearest $0.01.

(2)

The per share redemption price during the Introductory Period is calculated based upon the purchase price of the shares, not the per share price in effect at the time of the redemption request.

(3)

(4)

(5)

(6)

(7)

For shares held at least five (5) years, the Effective Redemption Price does not include any discount to the per share price for our common shares in effect at the time of the redemption request.

Because our NAV per share is calculated at the end of each quarter, the redemption price for shares held ninety (90) days or longer may change between the date we receive the redemption request and the date on which redemption proceeds are paid. As a result, the redemption price that a shareholder will receive may be different from the redemption price on the day the redemption request is made.

Redemption of our common shares are made quarterly upon written request to us at least 15 days prior to the end of the applicable calendar quarter; provided, however, written requests for common shares to be redeemed during the Introductory Period must be delivered to the Manager prior to the end of such common shares’ Introductory Period; provided, however, such redemption request must be presented to the Company at least 15 days prior to the end of each calendar quarter (e.g., if an investment in common shares settled on March 30, 2016, a redemption request must be delivered to the Manager no later than June 15, 2016). The Manager intends to provide notice of redemption by the last business day of each quarter, with an effective redemption date as of the last day of each quarter, and to endeavor to remit the redemption price within 14 days of the end of such quarter; although payment of the redemption price may be delayed until 21 days after the end of such quarter, due to exigent circumstances, including, without limitation, (1) our partner real estate operators or borrower(s) fail to provide adequate information regarding the assets within a time period that allows us to perform our NAV calculation, which in turn would prevent us from determining share redemption prices; (2) macro-economic crises or property-level events, such as damage to the property, that may affect our ability to make redemptions or determine NAV, or that we believe have a material impact on a previously computed NAV; and (3) our payment processing provider chooses to discontinue service or has technical outages that prevent us from processing share redemptions in a timely manner based on our intended processing date. Shareholders may withdraw their redemption request at any time up to five (5) business days prior to the end of the calendar quarter in which the redemption request was submitted.

We cannot guarantee that the funds set aside for the redemption plan will be sufficient to accommodate all requests made in any calendar quarter. In the event our Manager determines, in its sole discretion, that we do not have sufficient funds available to redeem all of the common shares for which redemption requests have been submitted in any given calendar quarter, such pending requests will be honored on a pro rata basis. In the event that not all redemptions are being honored in a given quarter, the pro rata distributions will be rounded down to the nearest share for each shareholder. For investors who hold common shares with more than one record date, redemption requests will be applied to such common shares in the order in which they settled, on a last in first out basis – meaning, those common shares that have been continuously held for the shortest amount of time will be redeemed first. We intend to limit common shareholders to one (1) redemption request outstanding at any given time, meaning that, if a common shareholder desires to request more or less shares be redeemed, such common shareholder must first withdraw the first redemption request, which may effect whether the request is considered in the “Introductory Period” or “Post-Introductory Period”.

In accordance with the SEC’s current guidance on redemption plans contained in T-REIT Inc. (June 4, 2001) and Wells Real Estate Investment Trust II, Inc. (Dec. 3, 2003), we are prohibited from redeeming more than 5.0% of the weighted average number of common shares outstanding during the prior calendar year. Accordingly, we presently intend to limit the number of shares to be redeemed during any calendar quarter to 1.25% of the common shares outstanding, with excess capacity carried over to later calendar quarters in that calendar year. However, as we intend to make a number of commercial real estate investments of varying terms and maturities, our Manager may elect to increase or decrease the amount of common shares available for redemption in any given calendar quarter, as these commercial real estate assets are paid off or sold, but in no event will we redeem more than 5.0% during any calendar year. Notwithstanding the foregoing, we are not obligated to redeem common shares under the redemption plan.

There is no fee in connection with a redemption of our common shares, and the discount applied to the redemption price is for the benefit of shareholders who remain as shareholders of the Company, and does not provide any economic benefit to our Manager or sponsor; however, a shareholder requesting redemption will be responsible for reimbursing us for any third-party costs incurred as a result of the redemption request, including but not limited to, bank transaction charges, custody fees, and/or transfer agent charges.

In addition, the Manager may, in its sole discretion, amend, suspend, or terminate the redemption plan at any time without notice, including to protect our operations and our non-redeemed shareholders, to prevent an undue burden on our liquidity, to preserve our status as a REIT, following any material decrease in our NAV, or for any other reason. However, in the event that we amend, suspend or terminate our redemption plan, we will file an offering circular supplement and/or Form 1-U, as appropriate, to disclose such amendment. The Manager may also, in its sole discretion, decline any particular redemption request if it believes such action is necessary to preserve our status as a REIT. Therefore, you may not have the opportunity to make a redemption request prior to any potential termination of our redemption plan.

Please refer to the section entitled “Description of Our Common Shares—Quarterly Redemption Plan” for more information.

Liquidity Event

Subject to then existing market conditions, we may consider alternatives to our liquidation as a means for providing liquidity to our shareholders within approximately five to seven years from the completion of our initial offering (December 5, 2016). While we expect to seek a liquidity transaction in this time frame, there can be no assurance that a suitable transaction will be available or that market conditions for a transaction will be favorable during that time frame. Our Manager has the discretion to consider a liquidity transaction at any time if it determines such event to be in our best interests. A liquidity transaction could consist of a sale or roll-off to scheduled maturity of our assets, a sale or merger of the Company, a consolidation transaction with other companies managed by our Manager or its affiliates, a listing of our shares on a national securities exchange or a similar transaction. We do not have a stated term, as we believe setting a finite date for a possible, but uncertain future liquidity transaction may result in actions that are not necessarily in the best interest or within the expectations of our shareholders.

Voting Rights

Our common shareholders have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the common shares, and removal of our Manager for “cause”. Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of common shareholders. Our shareholders do not elect or vote on our Manager, and, unlike the holders of common shares in a corporation, have only limited voting rights on matters affecting our business, and therefore limited ability to influence decisions regarding our business. For additional information, see “Description of Our Common Shares—Voting Rights.”

Other Governance Matters

Other than the limited shareholder voting rights described above, our operating agreement vests most other decisions relating to our assets and to the business of our Company, including decisions relating to acquisitions, originations and dispositions, the engagement of asset managers, the issuance of securities in our Company including additional common shares, mergers, dispositions, roll-up transactions, and other decisions relating to our business, in our Manager. See “Management” for more information about the rights and responsibilities of our Manager.

Investment Company Act Considerations

We intend to conduct our operations so that neither we, nor any of our subsidiaries, is required to register as investment companies under the Investment Company Act of 1940, as amended, or the Investment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We anticipate that we will hold real estate and real estate-related assets described below (i) directly, (ii) through wholly-owned subsidiaries, (iii) through majority-owned joint venture subsidiaries, and, (iv) to a lesser extent, through minority-owned joint venture subsidiaries. We will limit what we buy and hold through minority-owned joint venture subsidiaries because assets held in such subsidiaries will not be deemed investment securities.

We intend, directly or through our subsidiaries, to originate, invest in and manage a diversified portfolio of commercial real estate investments. We expect to use substantially all of the net proceeds from this offering to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans, (also referred to as B-Notes) mezzanine loans, and participations in such loans) and to make other investments in commercial real estate. We may also invest in commercial real estate-related debt securities (including commercial mortgage-backed securities, or CMBS, collateralized debt obligations, or CDOs, and REIT senior unsecured debt and other real estate-related assets).

We will monitor our compliance with the 40% test and the holdings of our subsidiaries to ensure that each of our subsidiaries is in compliance with an applicable exemption or exclusion from registration as an investment company under the Investment Company Act.

The securities issued by any wholly-owned or majority-owned subsidiary that we may form and that are excluded from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.

The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. We treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. The determination of whether an entity is a majority-owned subsidiary of our Company is made by us. We also treat subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or in which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (referred to herein as “Controlled Subsidiaries”), as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act. We reached our conclusion on the basis that the interests issued by the Controlled Subsidiaries are the functional equivalent of voting securities. We have not asked the SEC staff for concurrence of our analysis and it is possible that the SEC staff could disagree with any of our determinations. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on us.

We believe that neither we nor certain of our subsidiaries will be considered investment companies for purposes of Section 3(a)(1)(A) of the Investment Company Act because we and they will not engage primarily or hold themselves out as being primarily engaged in the business of investing, reinvesting or trading in securities. Rather, we and such subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Consequently, we and our subsidiaries expect to be able to conduct our operations such that none will be required to register as an investment company under the Investment Company Act.

Certain of our subsidiaries may also rely upon the exclusion from the definition of investment company under Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires an entity to invest at least 55% of its assets in “mortgages and other liens on and interests in real estate”, which we refer to as “qualifying real estate interests”, and at least 80% of its assets in qualifying real estate interests plus “real estate-related assets”.

Qualification for exemption from registration under the Investment Company Act will limit our ability to make certain investments. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such exclusions, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.

The loss of our exclusion from regulation pursuant to the Investment Company Act could require us to restructure our operations, sell certain of our assets or abstain from the purchase of certain assets, which could have an adverse effect on our financial condition and results of operations. See “Risk Factors—Risks related to Our Organizational Structure—Maintenance of our Investment Company Act exemption imposes limits on our operations, which may adversely affect our operations.”

RISK FACTORS

An investment in our common shares involves substantial risks. You should carefully consider the following risk factors in addition to the other information contained in this offering circular before purchasing shares. The occurrence of any of the following risks might cause you to lose a significant part of your investment. The risks and uncertainties discussed below are not the only ones we face, but do represent those risks and uncertainties that we believe are most significant to our business, operating results, prospects and financial condition. Some statements in this offering circular, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Statements Regarding Forward-Looking Information.”

Risks Related to an Investment in Fundrise Real Estate Investment Trust

We have a limited prior operating history, and the prior performance of our sponsor or other real estate investment opportunities sponsored by our sponsor may not predict our future results.

We are a recently formed company and have a limited operating history. You should not assume that our performance will be similar to the past performance of our sponsor or other real estate investment opportunities sponsored by our sponsor. Our limited operating history significantly increases the risk and uncertainty you face in making an investment in our shares.

Because no public trading market for your shares currently exists, it will be difficult for you to sell your shares and, if you are able to sell your shares, you will likely sell them at a substantial discount to the public offering price.

Our operating agreement does not require our Manager to seek shareholder approval to liquidate our assets by a specified date, nor does our operating agreement require our Manager to list our shares for trading on a national securities exchange by a specified date. There is no public market for our shares and we currently have no plans to list our shares on a stock exchange or other trading market. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards. In addition, our operating agreement prohibits the ownership of more than 9.8% in value or number of our shares, whichever is more restrictive, or more than 9.8% in value or number of our common shares, whichever is more restrictive, unless exempted by our Manager, which may inhibit large investors from purchasing your shares. In its sole discretion, including to protect our operations and our non-redeemed shareholders, to prevent an undue burden on our liquidity or to preserve our status as a REIT, our Manager could amend, suspend or terminate our redemption plan without notice. Further, the redemption plan includes numerous restrictions that would limit your ability to sell your shares. We describe these restrictions in more detail under “Description of Our Common Shares — Quarterly Redemption Plan.” Therefore, it will be difficult for you to redeem and/or sell your shares promptly or at all. If you are able to sell your shares, you would likely have to sell them at a substantial discount to their public offering price. It is also likely that your shares would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our shares, you should purchase our shares only as a long-term investment and be prepared to hold them for an indefinite period of time.

If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our Manager in the acquisition of our investments and the ability of our Manager to source loan origination opportunities for us. In some cases we may also depend upon the performance of third-party loan servicers to service our loan investments. Except for investments that may be described in supplements to this offering circular prior to the date you subscribe for our shares, you will have no opportunity to evaluate the economic merits or the terms of our investments before making a decision to invest in our Company. You must rely entirely on the management abilities of our Manager and the loan servicers our Manager may select. We cannot assure you that our Manager will be successful in obtaining suitable investments on financially attractive terms or that, if our Manager makes investments on our behalf, our objectives will be achieved. If we, through our Manager, are unable to find suitable investments promptly, we will hold the proceeds from this offering in an interest-bearing account or invest the proceeds in short-term assets in a manner that is consistent with our qualification as a REIT. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return will be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, our organization documents permit us to pay distributions from any source, including offering proceeds, borrowings, or sales of assets. We have not placed a cap on the use of proceeds to fund distributions. From time to time, we may not generate sufficient cash flow from operations to fund distributions. While none of the distributions declared by the Company for the periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016 were paid using proceeds from our Offering or the purchase of additional shares by Fundrise, LP pursuant to the Distribution Support Agreement, there can be no assurance that future distributions will not be paid from such sources.

Pursuant to the Distribution Support Agreement, in certain circumstances where our operating results in any calendar quarter during the distribution support period were less than the amount that would produce a 15% annualized return, then Fundrise, LP was obligated to purchase shares following the end of such quarter at the then NAV per share for an aggregate purchase price equal to the amount by which our operating results were less than the 15% annualized amount. Fundrise, LP purchased 100,000 of our common shares on during the distribution support period, thus fulfilling its commitment. The sale of these shares resulted in the dilution of the ownership interests of our public shareholders. If we pay distributions from sources other than our cash flow from operations, we will have less cash available for investments, we may have to reduce our distribution rate, our NAV may be negatively impacted and stockholders’ overall return may be reduced.

Future disruptions in the financial markets or deteriorating economic conditions could adversely impact the commercial real estate market as well as the market for debt-related investments generally, which could hinder our ability to implement our business strategy and generate returns to you.

We intend to continue originate and acquire a diversified portfolio of commercial real estate loans and other investments in commercial real estate. We may also invest in commercial real estate-related debt securities, and other real estate-related assets. Economic conditions greatly increase the risks of these investments (see “— Risks Related to Our Investments”). The value of collateral securing any loan investment we may make could decrease below the outstanding principal amount of such loan. In addition, revenues on the properties and other assets underlying any loan investments we may make could decrease, making it more difficult for borrowers to meet their payment obligations to us. Each of these factors would increase the likelihood of default and foreclosure, which would likely have a negative impact on the value of our loan investment. More generally, the risks arising from the financial market and economic conditions are applicable to all of the investments we may make. The risks apply to commercial mortgage, mezzanine or bridge loans. They also apply to the debt and equity securities of companies that have investment objectives similar to ours.

Future disruptions in the financial markets or deteriorating economic conditions may also impact the market for our investments and the volatility of our investments. The returns available to investors in our targeted investments are determined, in part, by: (i) the supply and demand for such investments and (ii) the existence of a market for such investments, which includes the ability to sell or finance such investments. During periods of volatility, the number of investors participating in the market may change at an accelerated pace. If either demand or liquidity increases, the cost of our targeted investments may increase. As a result, we may have fewer funds available to make distributions to investors.

All of the factors described above could adversely impact our ability to implement our business strategy and make distributions to our investors and could decrease the value of an investment in us.

We may suffer from delays in locating suitable investments, which could limit our ability to make distributions and lower the overall return on your investment.

We rely upon our Manager’s real estate and debt finance professionals, including Mr. Benjamin S. Miller, its Co-Founder and Chief Executive Officer, to identify suitable investments. Our sponsor and other Fundrise entities also rely on Mr. Miller for investment opportunities. To the extent that our Manager’s real estate and debt finance professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution. We could also suffer from delays in locating suitable investments as a result of our reliance on our Manager at times when its officers, employees, or agents are simultaneously seeking to locate suitable investments for other Fundrise sponsored programs, some of which have investment objectives and employ investment strategies that are similar to ours. Delays we encounter in the selection and origination of income-producing loans and other assets would likely limit our ability to pay distributions to our shareholders and lower their overall returns. Similar concerns arise when there are prepayments, maturities or sales of our investments. See “—Prepayments can adversely affect the yields on our investments” below.

You may be more likely to sustain a loss on your investment because our sponsor does not have as strong an economic incentive to avoid losses as do sponsors who have made significant equity investments in their companies.

Fundrise, LP, an affiliate of our sponsor, and our sponsor have only invested approximately $200,000 in us through the purchase of 20,000 of our common shares at $10.00 per share. Therefore, if we are successful in raising enough proceeds to be able to reimburse our sponsor for our offering expenses, our sponsor will have little exposure to loss in the value of our shares. Without this exposure, our investors may be at a greater risk of loss because our sponsor does not have as much to lose from a decrease in the value of our shares as do those sponsors who make more significant equity investments in their companies.

Because we are limited in the amount of funds we can raise, we will be limited in the number and type of investments we make and the value of your investment in us will fluctuate with the performance of the specific assets we acquire.

This offering is being made on a “best efforts” basis. Further, under Regulation A, we are only allowed to raise up to $50 million in any 12 month period (although we may raise capital in other ways). We expect the size of the commercial real estate loans and equity investments that we make to average about $3.0 million to $10.0 million per asset. As a result, the amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a diversified portfolio of investments, even if we are successful in raising the maximum offering amount. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments that we make. In that case, the likelihood that any single asset’s performance would adversely affect our profitability will increase. Your investment in our shares will be subject to greater risk to the extent that we lack a diversified portfolio of investments. Further, we have certain fixed operating expenses, including certain expenses as a public reporting company, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

Our ability to implement our investment strategy is dependent, in part, upon our ability to successfully conduct this offering through the Fundrise Platform, which makes an investment in us more speculative.

We will conduct this offering primarily through the Fundrise Platform, which is owned by Fundrise, LLC. Only a limited number of real estate investment opportunities have been offered through the Fundrise Platform prior to this offering. Our sponsor has sponsored other real estate investment opportunities under other formats prior to this offering, but this is one of the first REIT offerings being offered through the Fundrise Platform. The success of this offering, and our ability to implement our business strategy, is dependent upon our ability to sell our shares to investors through the Fundrise Platform. If we are not successful in selling our shares through the Fundrise Platform, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, you could lose all or a part of your investment.

If we do not successfully implement a liquidity transaction, you may have to hold your investment for an indefinite period.

Although we presently intend to complete a transaction providing liquidity to shareholders within approximately five to seven years from the completion of our initial offering (December 5, 2016), our operating agreement does not require our Manager to pursue such a liquidity transaction. Market conditions and other factors could cause us to delay the listing of our shares on a national securities exchange or delay the commencement of a liquidation or other type of liquidity transaction, such as a merger or sale of assets, beyond five to seven years from the termination of this offering. If our Manager does determine to pursue a liquidity transaction, we would be under no obligation to conclude the process within a set time. If we adopt a plan of liquidation, the timing of the sale of assets will depend on real estate and financial markets, economic conditions in areas in which properties are located, and federal income tax effects on shareholders, that may prevail in the future. We cannot guarantee that we will be able to liquidate all assets. After we adopt a plan of liquidation, we would likely remain in existence until all our investments are liquidated. If we do not pursue a liquidity transaction, or delay such a transaction due to market conditions, your shares may continue to be illiquid and you may, for an indefinite period of time, be unable to convert your investment to cash easily and could suffer losses on your investment.

We may change our targeted investments and investment guidelines without shareholder consent.

Our Manager may change our targeted investments and investment guidelines at any time without the consent of our shareholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this offering circular. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common shares and our ability to make distributions to you.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The real estate lending market is competitive and rapidly changing. We expect competition to persist and intensify in the future, which could harm our ability to increase volume on our platform.

Our principal competitors include major banking institutions, private equity funds, real estate investment trusts, as well as online lending platforms that compete with the Fundrise Platform. Competition could result in reduced volumes, reduced fees or the failure of the Fundrise Platform to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, in the future we and the Fundrise Platform may experience new competition from more established internet companies possessing large, existing customer bases, substantial financial resources and established distribution channels. If any of these companies or any major financial institution decided to enter the online lending business, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.

Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their platforms and distribution channels. Our potential competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships than we have. These competitors may be better able to develop new products, to respond quickly to new technologies and to undertake more extensive marketing campaigns. The online real estate investing industry is driven by constant innovation. If we or the Fundrise Platform are unable to compete with such companies and meet the need for innovation, the demand for the Fundrise Platform could stagnate or substantially decline.

We rely on third-party banks and on third-party computer hardware and software. If we are unable to continue utilizing these services, our business and ability to service the corresponding project loans may be adversely affected.

We and the Fundrise Platform rely on third-party and FDIC-insured depository institutions to process our transactions, including payments of corresponding loans, processing of subscriptions under this offering and distributions to our shareholders. Under the Automated Clearing House (ACH) rules, if we experience a high rate of reversed transactions (known as “chargebacks”), we may be subject to sanctions and potentially disqualified from using the system to process payments. The Fundrise Platform also relies on computer hardware purchased and software licensed from third parties. This purchased or licensed hardware and software may be physically located off-site, as is often the case with “cloud services.” This purchased or licensed hardware and software may not continue to be available on commercially reasonable terms, or at all. If the Fundrise Platform cannot continue to obtain such services elsewhere, or if it cannot transition to another processor quickly, our ability to process payments will suffer and your ability to receive distributions will be delayed or impaired.

If our Manager fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our Manager’s ability to attract and retain key personnel. Our future also depends on the continued contributions of the executive officers and other key personnel of our Manager, each of whom would be difficult to replace. In particular, the Founder/Chief Executive Officer Benjamin S. Miller of our parent company and sponsor, Rise Companies Corp., who is the Chief Executive Officer of our Manager, is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Mr. Benjamin S. Miller or other executive officers or key personnel of our Manager and the process to replace any of our Manager’s key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

Employee misconduct and unsubstantiated allegations against us and misconduct by employees of our sponsor could expose us to significant reputational harm.

We are vulnerable to reputational harm, as we operate in an industry where integrity and the confidence of our investors is of critical importance. If an employee of our sponsor or its affiliates were to engage in illegal or suspicious activities, or if unsubstantiated allegations are made against us or our sponsor by such employees, stockholders or others, our sponsor and we may suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities or allegations), financial position, relationships with key persons and companies in the real estate market, and our ability to attract new investors. Our business often requires that we deal with confidential information. If employees of our sponsor were to improperly use or disclose this information, we could suffer serious harm to our reputation, financial position and current and future business relationships.

It is not always possible to deter employee misconduct, and the precautions our sponsor takes to detect and prevent this activity may not be effective in all cases. Misconduct by our sponsor’s employees, or even unsubstantiated allegations of misconduct, could subject our sponsor and us to regulatory sanctions and result in an adverse effect on our reputation and our business. See “Management—Recent Developments Regarding our Manager’s Executive Officers.”

If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to market, operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation or as a result of the lack of adequate, accurate or timely information. If our risk management efforts are ineffective, we could suffer losses or face litigation, particularly from our clients, and sanctions or fines from regulators.

Our techniques for managing risks may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks or to seek positive, risk-adjusted returns. In addition, any risk management failures could cause fund losses to be significantly greater than historical measures predict. Our more qualitative approach to managing those risks could prove insufficient, exposing us to unanticipated losses in our net asset value and therefore a reduction in our revenues.

This offering is focused on attracting a large number of investors that plan on making relatively small investments. An inability to attract such investors may have an adverse effect on the success of this offering, and we may not raise adequate capital to implement our business strategy.

Our common shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A). “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D (which, in the case of natural persons, (A) have an individual net worth, or joint net worth with the person’s spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person, or (B) earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year) and (ii) all other investors so long as their investment in the particular issuer does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). However, we intend to continue to offer and sell our common shares only to those investors that are within the latter category (i.e., investors whose investment in our common shares does not represent more than 10% of the applicable amount), regardless of an investor’s status as an “accredited investor.” Therefore, our investor base and our target investor base inherently consists of persons that may not have the high net worth or income that investors in a traditional initial public offerings have, where the investor base is typically composed of “accredited investors.”

Our reliance on attracting investors that may not meet the net worth or income requirements of “accredited investors” carries certain risks that may not be present in traditional initial public offerings. For example, certain economic, geopolitical and social conditions may influence the investing habits and risk tolerance of these smaller investors to a greater extent than “accredited investors,” which may have an adverse effect on our ability to raise adequate capital to implement our business strategy. Additionally, our focus on investors that plan on making, or are able to make, relatively small investments requires a larger investor base in order to meet our goal of raising $20,889,420 in this offering. We may have difficulties in attracting a large investor base, which may have an adverse effect on the success of this offering, and a larger investor base involves increased transaction costs, which will increase our expenses.

Risks Related to our Sponsor and the Fundrise Platform

Our sponsor is a development stage company with limited operating history and no profits to date. As a company in the early stages of development, our sponsor faces increased risks, uncertainties, expenses and difficulties.

Our sponsor has a limited operating history. In order for us to be successful, the volume of investments and financings originated through the Fundrise Platform will need to increase, which will require our sponsor to increase its facilities, personnel and infrastructure to accommodate the greater obligations and demands on the Fundrise Platform. The Fundrise Platform is dependent upon the website to maintain current listings and transactions in real estate-related assets. Our sponsor also expects to constantly update its software and website, expand its customer support services and retain an appropriate number of employees to maintain the operations of the Fundrise Platform. If our business grows substantially, our sponsor may need to make significant new investments in personnel and infrastructure to support that growth. If our sponsor is unable to increase the capacity of the Fundrise Platform and maintain the necessary infrastructure, or if our sponsor is unable to make significant investments on a timely basis or at reasonable costs, you may experience delays in receipt of distributions on our common shares, periodic downtime of the Fundrise Platform or other disruptions to our business and operations.

Our Sponsor will need to raise substantial additional capital to fund its operations, and if it fails to obtain additional funding, it may be unable to continue operations.

Prior to January 2017, our sponsor had funded substantially all of its operations with proceeds from private financings from individual investors. On January 31, 2017, our sponsor began an initial offering of shares of its class B common stock to the public. As of [_______ ___, 2017], our sponsor had raised [$_________] through such equity offering. To continue the development of the Fundrise Platform, our sponsor will require substantial additional funds. To meet such financing requirements in the future, our sponsor may raise funds through equity offerings, debt financings or strategic alliances. Raising additional funds may involve agreements or covenants that restrict our sponsor’s business activities and options. Additional funding may not be available to it on favorable terms, or at all. If our sponsor is unable to obtain additional funds for the operation of the Fundrise Platform, it may be forced to reduce or terminate its operation, which may adversely affect our business and results of operations.

Our sponsor is currently incurring net losses and expects to continue incurring net losses in the future.

Our sponsor is currently incurring net losses and expects to continue incurring net losses in the future. Its failure to become profitable could impair the operations of the Fundrise Platform by limiting its access to working capital to operate the Fundrise Platform. In addition, our sponsor expects its operating expenses to increase in the future as it expands its operations. If our sponsor’s operating expenses exceed its expectations, its financial performance could be adversely affected. If its revenue does not grow to offset these increased expenses, our sponsor may never become profitable. In future periods, our sponsor may not have any revenue growth, or its revenue could decline.

If our sponsor were to enter bankruptcy proceedings, the operation of the Fundrise Platform and the activities with respect to our operations and business would be interrupted and subscription proceeds held in a segregated account may be subject to the bankruptcy.

If our sponsor were to enter bankruptcy proceedings or to cease operations, we would be required to find other ways to meet obligations regarding our operations and business. Such alternatives could result in delays in the disbursement of distributions or the filing of reports or could require us to pay significant fees to another company that we engage to perform services for us.

If the security of our investors’ confidential information stored in our sponsor’s systems is breached or otherwise subjected to unauthorized access, your secure information may be stolen.

The Fundrise Platform may store investors’ bank information and other personally-identifiable sensitive data. The Fundrise Platform is hosted in data centers that are compliant with payment card industry security standards and the website uses daily security monitoring services provided by Symantec Corporation. However, any accidental or willful security breach or other unauthorized access could cause your secure information to be stolen and used for criminal purposes, and you would be subject to increased risk of fraud or identity theft. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Fundrise Platform and its third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our investors and our partner real estate operators to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, resulting in a potential loss of investors and adverse effect on the value of your investment in us.

Any significant disruption in service on the Fundrise Platform or in its computer systems could reduce the attractiveness of the Fundrise Platform and result in a loss of users.

If a catastrophic event resulted in a platform outage and physical data loss, the Fundrise Platform’s ability to perform its functions would be adversely affected. The satisfactory performance, reliability, and availability of our sponsor’s technology and its underlying hosting services infrastructure are critical to our sponsor’s operations, level of customer service, reputation and ability to attract new users and retain existing users. Our sponsor’s hosting services infrastructure is provided by a third party hosting provider (the “Hosting Provider”). Our sponsor also maintains a backup system at a separate location that is owned and operated by a third party. The Hosting Provider does not guarantee that users’ access to the Fundrise Platform will be uninterrupted, error-free or secure. Our sponsor’s operations depend on the Hosting Provider’s ability to protect its and our sponsor’s systems in its facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. If our sponsor’s arrangement with the Hosting Provider is terminated, or there is a lapse of service or damage to its facilities, our sponsor could experience interruptions in its service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in our sponsor’s service, whether as a result of an error by the Hosting Provider or other third-party error, our sponsor’s own error, natural disasters or security breaches, whether accidental or willful, could harm our ability to perform any services for corresponding project investments or maintain accurate accounts, our sponsor’s relationships with users of the Fundrise Platform and our sponsor’s reputation. Additionally, in the event of damage or interruption, our sponsor’s insurance policies may not adequately compensate our sponsor for any losses that we may incur. Our sponsor’s disaster recovery plan has not been tested under actual disaster conditions, and it may not have sufficient capacity to recover all data and services in the event of an outage at a facility operated by the Hosting Provider. These factors could prevent us from processing or posting payments on the corresponding investments, damage our sponsor’s brand and reputation, divert our sponsor’s employees’ attention, and cause users to abandon the Fundrise Platform.

We do not own the Fundrise name, but were granted a license by our sponsor to use the Fundrise name. Use of the name by other parties or the termination of our license agreement may harm our business.

We have entered into a license agreement with our sponsor, pursuant to which our sponsor granted us a non-exclusive, royalty-free license to use the name “Fundrise.” Under this agreement, we will have a right to use the “Fundrise” name as long as our Manager continues to manage us. Our sponsor will retain the right to continue using the “Fundrise” name. Our sponsor is not precluded from licensing or transferring the ownership of the “Fundrise” name to third parties, some of whom may compete against us. Consequently, we will be unable to prevent any damage to the goodwill associated with our name that may occur as a result of the activities of our sponsor or others related to the use of our name. Furthermore, in the event the license agreement is terminated, we will be required to change our name and cease using the “Fundrise” name. Any of these events could disrupt our recognition in the market place, damage any goodwill we may have generated and otherwise harm our business.

Risks Related to Compliance and Regulation

We intend to continue to offer our common shares pursuant to recent amendments to Regulation A promulgated pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to Tier 2 issuers will make our common shares less attractive to investors as compared to a traditional initial public offering.

As a Tier 2 issuer, we will be subject to scaled disclosure and reporting requirements, which may make our common shares less attractive to investors as compared to a traditional initial public offering, which may make an investment in our common shares less attractive to investors who are accustomed to enhanced disclosure and more frequent financial reporting. In addition, given the relative lack of regulatory precedence regarding the recent amendments to Regulation A, there is a significant amount of regulatory uncertainty in regards to how the SEC or the individual state securities regulators will regulate both the offer and sale of our securities, as well as any ongoing compliance that we may be subject to. If our scaled disclosure and reporting requirements, or regulatory uncertainty regarding Regulation A, reduces the attractiveness of our common shares, we may be unable to raise the necessary funds necessary to commence operations, or to develop a diversified portfolio of real estate investments, which could severely affect the value of our common shares.

Our use of Form 1-A and our reliance on Regulation A for this offering may make it more difficult to raise capital as and when we need it, as compared to if we were conducting a traditional initial public offering on Form S-11.

Because of the exemptions from various reporting requirements provided to us under Regulation A and because we are only permitted to raise up to $50 million in any 12 month period under Regulation A (although we may raise capital in other ways), we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.

As a Tier 2 issuer, we do not need to provide a report on the effectiveness of our internal controls over financial reporting, and we are exempt from the auditor attestation requirements concerning any such report so long as we are a Tier 2 issuer. We are in the process of evaluating whether our internal control procedures are effective and therefore there is a greater likelihood of undiscovered errors in our internal controls or reported financial statements as compared to issuers that have conducted such evaluations.

Non-compliance with laws and regulations may impair our ability to arrange, service or otherwise manage our loans and other assets.

Failure to comply with the laws and regulatory requirements applicable to our business may, among other things, limit our, or a collection agency’s, ability to collect all or part of the payments on our investments. In addition, our non-compliance could subject us to damages, revocation of required licenses or other authorities, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm our business.

Some states, including California, require nonfinancial companies, such as Fundrise Lending, LLC, a wholly-owned subsidiary of Rise Companies Corp. (“Fundrise Lending”) that work with our Manager to originate loans and other real estate investments, to obtain a real estate or other license in order to make commercial loans on a regular basis. Fundrise Lending has a California Finance Lenders Law License with California’s Department of Business Oversight that satisfies the requirements in California. Fundrise Lending does not intend to finance loans in states where such licenses are required until it obtains the required license. Fundrise Lending may, in the future, affiliate itself with third parties such as financial institutions in order to be able to arrange loans in jurisdictions where it might otherwise be restricted.

Maintenance of our Investment Company Act exemption imposes limits on our operations, which may adversely affect our operations.

We intend to continue to conduct our operations so that neither we nor any of our subsidiaries is required to register as an investment company under the Investment Company Act. We anticipate that we will hold real estate and real estate-related assets described below (i) directly, (ii) through wholly-owned subsidiaries, (iii) through majority-owned joint venture subsidiaries, and, (iv) to a lesser extent, through minority-owned joint venture subsidiaries. We will limit what we buy and hold through minority-owned joint venture subsidiaries because assets held in such subsidiaries will not be deemed investment securities.

We intend, directly or through our subsidiaries, to originate, invest in and manage a diversified portfolio of commercial real estate investments. We expect to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and to make other investments in commercial real estate. We may also invest in commercial real estate-related debt securities (including commercial mortgage-backed securities, or CMBS, collateralized debt obligations, or CDOs, and REIT senior unsecured debt and other real estate-related assets.

In connection with the Section 3(a)(1)(C) analysis, the determination of whether an entity is a majority-owned subsidiary of our Company is made by us. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. The Investment Company Act further defines voting security as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. We also treat subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or in which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (referred to herein as “Controlled Subsidiaries”), as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act. We reached our conclusion on the basis that the interests issued by the Controlled Subsidiaries are the functional equivalent of voting securities. We have not asked the SEC staff for concurrence of our analysis, our treatment of such interests as voting securities, or whether the Controlled Subsidiaries, or any other of our subsidiaries, may be treated in the manner in which we intend, and it is possible that the SEC staff could disagree with any of our determinations. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on us.

Certain of our subsidiaries may rely on the exclusion provided by Section 3(c)(5)(C) under the Investment Company Act. Section 3(c)(5)(C) of the Investment Company Act is designed for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exclusion generally requires that at least 55% of the entity’s assets on an unconsolidated basis consist of qualifying real estate assets and at least 80% of the entity’s assets consist of qualifying real estate assets or real estate-related assets. These requirements limit the assets those subsidiaries can own and the timing of sales and purchases of those assets.

To classify the assets held by our subsidiaries as qualifying real estate assets or real estate-related assets, we rely on no-action letters and other guidance published by the SEC staff regarding those kinds of assets, as well as upon our analyses (in consultation with outside counsel) of guidance published with respect to other types of assets. There can be no assurance that the laws and regulations governing the Investment Company Act status of companies similar to ours, or the guidance from the SEC or its staff regarding the treatment of assets as qualifying real estate assets or real estate-related assets, will not change in a manner that adversely affects our operations. In fact, in August 2011, the SEC published a concept release in which it asked for comments on this exclusion from regulation. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon our exemption from the need to register or exclusion under the Investment Company Act, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could further inhibit our ability to pursue the strategies that we have chosen.

Furthermore, although we intend to monitor the assets of our subsidiaries regularly, there can be no assurance that our subsidiaries will be able to maintain their exclusion from registration. Any of the foregoing could require us to adjust our strategy, which could limit our ability to make certain investments or require us to sell assets in a manner, at a price or at a time that we otherwise would not have chosen. This could negatively affect the value of our common shares, the sustainability of our business model and our ability to make distributions.

Registration under the Investment Company Act would require us to comply with a variety of substantive requirements that impose, among other things:

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limitations on capital structure;

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restrictions on specified investments;

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restrictions on leverage or senior securities;

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restrictions on unsecured borrowings;

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prohibitions on transactions with affiliates; and

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compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us.

Registration with the SEC as an investment company would be costly, would subject us to a host of complex regulations and would divert attention from the conduct of our business, which could materially and adversely affect us. In addition, if we purchase or sell any real estate assets to avoid becoming an investment company under the Investment Company Act, our net asset value, the amount of funds available for investment and our ability to pay distributions to our shareholders could be materially adversely affected.

We are not subject to the banking regulations of any state or federal regulatory agency.

We are not subject to the periodic examinations to which commercial banks and other thrift institutions are subject. Consequently, our financing decisions and our decisions regarding establishing loan loss reserves are not subject to periodic review by any governmental agency. Moreover, we are not subject to regulatory oversight relating to our capital, asset quality, management or compliance with laws.

Recent legislative and regulatory initiatives have imposed restrictions and requirements on financial institutions that could have an adverse effect on our business.

The financial industry is becoming more highly regulated. There has been, and may continue to be, a related increase in regulatory investigations of the trading and other investment activities of alternative investment funds. Such investigations may impose additional expenses on us, may require the attention of senior management of our Manager and may result in fines if we are deemed to have violated any regulations.

As Internet commerce develops, federal and state governments may adopt new laws to regulate Internet commerce, which may negatively affect our business.

As Internet commerce continues to evolve, increasing regulation by federal and state governments becomes more likely. Our and the Fundrise Platform’s business could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to lending. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be required to pass along those costs to our borrowers in the form of increased fees, which could negatively impact our ability to make loans or other real estate investments. In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided over the Internet. These taxes could discourage the use of the Internet as a means of commercial financing, which would adversely affect the viability of the Fundrise Platform.

Laws intended to prohibit money laundering may require Fundrise to disclose investor information to regulatory authorities.

The Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “PATRIOT Act”) requires that financial institutions establish and maintain compliance programs to guard against money laundering activities, and requires the Secretary of the U.S. Treasury (“Treasury”) to prescribe regulations in connection with anti-money laundering policies of financial institutions. The Financial Crimes Enforcement Network (“FinCEN”), an agency of the Treasury, has announced that it is likely that such regulations would subject certain pooled investment vehicles to enact anti-money laundering policies. It is possible that there could be promulgated legislation or regulations that would require Fundrise or its service providers to share information with governmental authorities with respect to prospective investors in connection with the establishment of anti-money laundering procedures. Such legislation and/or regulations could require us to implement additional restrictions on the transfer of our common shares to comply with such legislation and/or regulations. We reserve the right to request such information as is necessary to verify the identity of prospective shareholders and the source of the payment of subscription monies, or as is necessary to comply with any customer identification programs required by FinCEN and/or the SEC. In the event of delay or failure by a prospective shareholder to produce any information required for verification purposes, an application for, or transfer of, our common shares may be refused. We do not have the ability to reject a transfer of our common shares where all necessary information is provided and any other applicable transfer requirements, including those imposed under the transfer provisions of our operating agreement, are satisfied.

Risks Related to Conflicts of Interest

There are conflicts of interest between us, our Manager and its affiliates.

Our Manager’s executive officers, including our Manager’s Chief Executive Officer, Benjamin S. Miller, are principals in the Manager’s parent company, Rise Companies Corp., which provides asset management and other services to our Manager and us. Prevailing market rates are determined by Management based on industry standards and expectations of what Management would be able to negotiate with a third party on an arm’s length basis. All of the agreements and arrangements between such parties, including those relating to compensation, are not the result of arm’s length negotiations. Some of the conflicts inherent in the Company’s transactions with the Manager and its affiliates, and the limitations on such parties adopted to address these conflicts, are described below. The Company, Manager and their affiliates try to balance our interests with their own. However, to the extent that such parties take actions that are more favorable to other entities than us, these actions could have negative impact on the our financial performance and, consequently, on distributions to shareholders and the value of our common shares. We have adopted a conflicts of interest policy and certain conflicts will be reviewed by the Independent Representative (defined below). See “Conflicts of Interest—Certain Conflict Resolution Measures—Independent Representative” and “—Our Policies Relating to Conflicts of Interest”.

Our Manager faces a conflict of interest because the asset management fee it receives for services performed for us is based on our NAV, which employees of our sponsor, the parent company of our Manager, are ultimately responsible for determining.

Our Manager, a wholly-owned subsidiary of our sponsor, is paid an asset management fee, which is based on our NAV as calculated by our sponsor’s internal accountants and asset management team. The calculation of our NAV involves certain subjective judgments with respect to estimating, for example, the value of our commercial real estate assets and investments and accruals of our operating revenues and expenses, and therefore, our NAV may not correspond to the realizable value upon a sale of those assets. Because the calculation of NAV involves subjective judgment, there can be no assurance that the estimates used by our sponsor’s internal accountants and asset management team to calculate our NAV, or the resulting NAV, will be identical to the estimates that would be used, or the NAV that would be calculated, by an independent consultant. In addition, our Manager may benefit by us retaining ownership of our assets at times when our shareholders may be better served by the sale or disposition of our assets in order to avoid a reduction in our NAV.

The interests of the Manager, the principals and its other affiliates may conflict with your interests.

The operating agreement provides our Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of the Manager, the principals and its other affiliates. This risk is increased by the Manager being controlled by Benjamin Miller, who is a principal in our sponsor and who participates, or expects to participate, directly or indirectly in other offerings by our sponsor and its affiliates. Potential conflicts of interest include, but are not limited to, the following:

the Manager, the principals and/or its other affiliates are offering, and may continue to originate and offer other real estate investment opportunities, including additional blind pool debt offerings similar to this offering, primarily through the Fundrise Platform, and may make investments in real estate assets for their own respective accounts, whether or not competitive with our business;

the Manager, the principals and/or its other affiliates are not required to disgorge any profits or fees or other compensation they may receive from any other business they own separately from us, and you will not be entitled to receive or share in any of the profits return fees or compensation from any other business owned and operated by the Manager, the principals and/or its other affiliates for their own benefit;

we may engage the Manager or affiliates of the Manager to perform services at prevailing market rates. Prevailing market rates are determined by the Manager based on industry standards and expectations of what the Manager would be able to negotiate with third party on an arm’s length basis; and

the Manager, the principals and/or its other affiliates are not required to devote all of their time and efforts to our affairs.

We have agreed to limit remedies available to us and our shareholders for actions by our Manager that might otherwise constitute a breach of duty.

Our Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our shareholders. Accordingly, we and our shareholders only have recourse and are able to seek remedies against our Manager to the extent it breaches its obligations pursuant to our operating agreement. Furthermore, we have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities. These provisions are detrimental to shareholders because they restrict the remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties. By purchasing our common shares, you will be treated as having consented to the provisions set forth in the operating agreement. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the operating agreement because of our desire to maintain our ongoing relationship with our Manager.

Risks Related to Our Investments

Our commercial real estate loans, investments in commercial real estate and other real estate-related assets are subject to the risks typically associated with real estate.

Our commercial real estate loans and other real estate-related assets will generally be directly or indirectly secured by a lien on real property that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property. We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the mortgaged properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in commercial real estate-related debt securities and commercial real estate investments (including investments in real property) may be similarly affected by real estate property values. Therefore, our investments are subject to the risks typically associated with real estate.

The value of real estate may be adversely affected by a number of risks, including:

natural disasters such as hurricanes, earthquakes and floods;

acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;

adverse changes in national and local economic and real estate conditions;

an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;

changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;

costs of remediation and liabilities associated with environmental conditions affecting properties; and

the potential for uninsured or underinsured property losses.

The value of each property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties. These factors may have a material adverse effect on the ability of our borrowers to pay their loans, as well as on the value that we can realize from assets we originate, own or acquire.

In addition, to the extent we make equity investments in commercial real estate, such investments will be subject to all of the risks associated with real estate described above.

The commercial real estate loans we originate and invest in could be subject to delinquency, foreclosure and loss, which could result in losses to us.

Commercial real estate loans are secured by multifamily or commercial property and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, including environmental legislation, natural disasters, terrorism, social unrest and civil disturbances. In addition, to the extent we originate or acquire adjustable rate mortgage loans, such loans may contribute to higher delinquency rates because borrowers with adjustable rate mortgage loans may be exposed to increased monthly payments if the related mortgage interest rate adjusts upward from the initial fixed rate.

In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations. We expect that many of the commercial real estate loans that we originate will be fully or substantially non-recourse. In the event of a default by a borrower on a non-recourse loan, we will only have recourse to the underlying asset (including any escrowed funds and reserves) collateralizing the loan. If a borrower defaults on one of our commercial real estate loans and the underlying asset collateralizing the commercial real estate loan is insufficient to satisfy the outstanding balance of the commercial real estate loan, we may suffer a loss of principal or interest. In addition, even if we have recourse to a borrower’s assets, we may not have full recourse to such assets in the event of a borrower bankruptcy.

Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the mortgaged property at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans, impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.

Our investments in subordinated commercial real estate loans may be subject to losses.

We may acquire or originate subordinated commercial real estate loans. In the event a borrower defaults on a subordinated loan and lacks sufficient assets to satisfy our loan, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill periods”), and control decisions made in bankruptcy proceedings relating to borrowers.

The mezzanine loans in which we may invest involve greater risks of loss than senior loans secured by the same properties.

We may mezzanine loans that take the form of subordinated loans secured by a pledge of the ownership interests of either the entity owning the real property or an entity that owns (directly or indirectly) the interest in the entity owning the real property. These types of investments may involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.

Majority-owned subsidiaries we may invest in will be subject to specific risks relating to the particular subsidiary.

We may invest in majority-owned subsidiaries owning real estate where we are entitled to receive a preferred economic return. Such investments may be subordinate to debt financing. These investments will involve special risks relating to the particular subsidiary, including the financial condition and business outlook of the subsidiary. To the extent these investments are subordinate to debt financing, they will also be subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders to the issuer, (iv) the operation of mandatory sinking fund or call or redemption provisions during periods of declining interest rates that could cause the subsidiary to reinvest any redemption proceeds in lower yielding assets, (v) the possibility that earnings of the subsidiary may be insufficient to meet any distribution obligations and (vi) the declining creditworthiness and potential for insolvency of the subsidiary during periods of rising interest rates and economic downturn. As a result, we may not recover some or all of our capital, which could result in losses.

Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we make or acquire may materially adversely affect our investment.

The renovation, refurbishment or expansion by a borrower under a mortgaged or leveraged property involves risks of cost overruns and non-completion. Costs of construction or improvements to bring a property up to standards established for the market position intended for that property may exceed original estimates, possibly making a project uneconomical. Other risks may include environmental risks and construction, rehabilitation and subsequent leasing of the property not being completed on schedule. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment.

Investments in non-conforming or non-investment grade rated loans involve greater risk of loss.

Some of our current and future investments may not conform to conventional loan standards applied by traditional lenders and either will not be rated or may be rated as non-investment grade by the rating agencies. The non-investment grade ratings for these assets typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, these investments may have a higher risk of default and loss than investment grade rated assets. Any loss we incur may be significant and may reduce distributions to our shareholders and adversely affect the value of our common shares.

We may invest in CMBS, which are subject to several types of risks that may adversely impact our performance.

Commercial mortgage-backed securities, or CMBS, are bonds that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, the mortgage-backed securities we may invest in are subject to all the risks of the underlying mortgage loans, including the risks of prepayment or default.

In a rising interest rate environment, the value of CMBS may be adversely affected when repayments on underlying mortgage loans do not occur as anticipated, resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a longer-term instrument. The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated assets but more sensitive to adverse economic downturns or individual issuer developments. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality securities because the ability of obligors of mortgages underlying CMBS to make principal and interest payments or to refinance may be impaired. In this case, existing credit support in the securitization structure may be insufficient to protect us against loss of our principal on these securities. The value of CMBS also may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities markets as a whole. In addition, CMBS are subject to the credit risk associated with the performance of the underlying mortgage properties.

CMBS are also subject to several risks created through the securitization process. Certain subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes a large percentage of delinquent loans, there is a risk that interest payment on subordinate CMBS will not be fully paid. Subordinate securities of CMBS are also subject to greater risk than those CMBS that are more highly rated.

We may not control the special servicing of the mortgage loans included in the CMBS in which we may invest and, in such cases, the special servicer may take actions that could adversely affect our interests.

With respect to each series of CMBS in which we may invest in the future, overall control over the special servicing of the related underlying mortgage loans may be held by a directing certificateholder, which is appointed by the holders of the most subordinate class of CMBS in such series. We may acquire classes of existing series of CMBS where we will not have the right to appoint the directing certificateholder. In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the directing certificateholder, take actions that could adversely affect our interests.

We may invest in CDOs and such investments may involve significant risks.

We may invest in CDOs. CDOs are multiple class debt securities, or bonds, secured by pools of assets, such as mortgage-backed securities, B-Notes, mezzanine loans, REIT debt and credit default swaps. Like typical securities structures, in a CDO, the assets are pledged to a trustee for the benefit of the holders of the bonds. Like CMBS, CDOs are affected by payments, defaults, delinquencies and losses on the underlying commercial real estate loans. CDOs often have reinvestment periods that typically last for five years during which proceeds from the sale of a collateral asset may be invested in substitute collateral. Upon termination of the reinvestment period, the static pool functions very similarly to a CMBS securitization where repayment of principal allows for redemption of bonds sequentially. To the extent we invest in the equity securities of a CDO, we will be entitled to all of the income generated by the CDO after the CDO pays all of the interest due on the senior debt securities and its expenses. However, there will be little or no income or principal available to the CDO equity if defaults or losses on the underlying collateral exceed a certain amount. In that event, the value of our investment in any equity class of a CDO could decrease substantially. In addition, the equity securities of CDOs are generally illiquid and often must be held by a REIT and because they represent a leveraged investment in the CDO’s assets, the value of the equity securities will generally have greater fluctuations than the values of the underlying collateral.

Investments that are not United States government insured involve risk of loss.

We may originate and acquire uninsured loans and assets as part of our investment strategy. Such loans and assets may include mortgage loans, mezzanine loans and bridge loans. While holding such interests, we are subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under loans, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the collateral and the principal amount of the loan. To the extent we suffer such losses with respect to our investments in such loans, the value of our Company and the value of our common shares may be adversely affected.

We have not established investment criteria limiting the geographic concentration of our investments in commercial real estate loans, commercial real estate and other real estate-related assets. If our investments are concentrated in an area that experiences adverse economic conditions, our investments may lose value and we may experience losses.

Certain commercial real estate loans, investments in commercial real estate and other real estate-related assets in which we invest are, and in the future may be in or secured by a single property or properties in one geographic location. These investments may carry the risks associated with significant geographical concentration. We have not established and do not plan to establish any investment criteria to limit our exposure to these risks for future investments. As a result, properties underlying our investments may be overly concentrated in certain geographic areas, and we may experience losses as a result. A worsening of economic conditions in the geographic area in which our investments are, and in the future may be concentrated could have an adverse effect on our business, including reducing the demand for new financings, limiting the ability of customers to pay financed amounts and impairing the value of our collateral.

Adjustable rate mortgage loans may entail greater risks of default to lenders than fixed rate mortgage loans.

Adjustable rate mortgage loans may contribute to higher delinquency rates. Borrowers with adjustable rate mortgage loans may be exposed to increased monthly payments if the related mortgage interest rate adjusts upward from the initial fixed rate or a low introductory rate, as applicable, in effect during the initial period of the mortgage loan to the rate computed in accordance with the applicable index and margin. This increase in borrowers’ monthly payments, together with any increase in prevailing market interest rates, after the initial fixed rate period, may result in significantly increased monthly payments for borrowers with adjustable rate mortgage loans, which may make it more difficult for the borrowers to repay the loan or could increase the risk of default of their obligations under the loan.

Changes in interest rates and/or credit spreads could negatively affect the value of our investments, which could result in reduced earnings or losses and negatively affect the cash available for distribution to our shareholders.

We may invest in fixed-rate debt investments with fixed distribution amounts. Under a normal yield curve, an investment in these instruments will decline in value if long-term interest rates increase or if credit spreads widen. We may invest in floating-rate debt investments, for which decreases in interest rates or narrowing of credit spreads will have a negative effect on value and interest income. Even though a loan or other debt investment may be performing in accordance with its loan agreement and the underlying collateral has not changed, the economic value of the loan may be negatively impacted by the incremental interest foregone from the changes in interest rates or credit spreads. Declines in market value may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our shareholders.

Prepayments can adversely affect the yields on our investments.

Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such prepayments received, the yield on our portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, our anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain investments.

Commercial real estate equity investments will be subject to risks inherent in ownership of real estate.

Real estate cash flows and values are affected by a number of factors, including competition from other available properties and our ability to provide adequate property maintenance and insurance and to control operating costs. Real estate cash flows and values are also affected by such factors as government regulations (including zoning, usage and tax laws), interest rate levels, the availability of financing, property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws. Commercial real estate equity investments that we make will be subject to such risks.

Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our shareholders.

We may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity, if any, will continue to vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:

interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;

available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;

the duration of the hedge may not match the duration of the related liability or asset;

our hedging opportunities may be limited by the treatment of income from hedging transactions under the rules determining REIT qualification;

the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

the party owing money in the hedging transaction may default on its obligation to pay; and

we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our shareholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.

The illiquidity of our investments may make it difficult for us to sell such investments if the need or desire arises. The senior mortgage loans, subordinated loans, mezzanine loans, and other loans and investments that we have originated or purchased, or may in the future originate or purchase will be particularly illiquid investments due to their short life and the greater difficulty of recoupment in the event of a borrower’s default. In addition, some of the commercial real estate-related debt securities that we may purchase may be traded in private, unregistered transactions and may therefore be subject to restrictions on resale or otherwise have no established trading market. As a result, we expect many of our investments will be illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments and our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our shareholders.

Some of our assets may be classified for accounting purposes as “available-for-sale.” These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to shareholders’ equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to shareholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.

Some of our portfolio investments are carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.

Some of our portfolio investments are in the form of securities that are recorded at fair value but that have limited liquidity or are not publicly traded. The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable. We estimate the fair value of these investments on a quarterly basis. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common shares could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

Competition with third parties in acquiring and originating investments may reduce our profitability and the return on your investment.

We have significant competition with respect to our acquisition and origination of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies, online investment platforms and other investors, many of which have greater resources than us. We may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we pay higher prices for investments or originate loans on more generous terms than our competitors, our returns will be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets. If such events occur, you may experience a lower return on your investment.

A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could harm our operations.

Many of our investments are susceptible to economic slowdowns or recessions, which could lead to financial losses in our investments and a decrease in revenues, net income and assets. An economic slowdown or recession, in addition to other non-economic factors such as an excess supply of properties, could have a material negative impact on the values of both commercial real estate and residential real estate properties. Declining real estate values will likely reduce our level of new mortgage loan originations, since borrowers often use increases in the value of their existing properties to support the purchase or investment in additional properties. Borrowers may also be less able to pay principal and interest on our loans if the real estate economy weakens. Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our cost on the loan. Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interest income from loans in our portfolio as well as our ability to originate, sell and securitize loans, which would significantly harm our revenues, results of operations, financial condition, business prospects and our ability to make distributions to you.

Insurance may not cover all potential losses on the mortgaged properties which may impair our security and harm the value of our assets.

We require that each of the borrowers under our mortgage loan investments obtain comprehensive insurance covering the mortgaged property, including liability, fire and extended coverage. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods and hurricanes that may be uninsurable or not economically insurable. We may not require borrowers to obtain terrorism insurance if it is deemed commercially unreasonable. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the mortgaged property, which might impair our security and decrease the value of the property.

With respect to mortgaged properties, options and other purchase rights may affect value or hinder recovery.

A borrower under certain mortgage loans may give its tenants or another person a right of first refusal or an option to purchase all or a portion of the related mortgaged property. These rights may impede the lender’s ability to sell the related mortgaged property at foreclosure or may adversely affect the value or marketability of the property.

If we overestimate the value or income-producing ability or incorrectly price the risks of our investments, we may experience losses.

Analysis of the value or income-producing ability of a commercial property is highly subjective and may be subject to error. Our Manager will continue to value our potential investments based on yields and risks, taking into account estimated future losses on the commercial real estate loans and the mortgaged property included in the securitization’s pools or select commercial real estate equity investments, and the estimated impact of these losses on expected future cash flows and returns. In the event that we underestimate the risks relative to the price we pay for a particular investment, we may experience losses with respect to such investment.

The leases on the properties underlying our investments may not be renewed on favorable terms.

The properties underlying our investments could be negatively impacted by the deteriorating economic conditions and weaker rental markets. Upon expiration or earlier termination of leases on these properties, the space may not be relet or, if relet, the terms of the renewal or reletting (including the cost of required renovations or concessions to tenants) may be less favorable than current lease terms. In addition, the poor economic conditions may reduce a tenants’ ability to make rent payments under their leases. Any of these situations may result in extended periods where there is a significant decline in revenues or no revenues generated by these properties. Additionally, if market rental rates are reduced, property-level cash flows would likely be negatively affected as existing leases renew at lower rates. If the leases for these properties cannot be renewed for all or substantially all of the space at these properties, or if the rental rates upon such renewal or reletting are significantly lower than expected, the value of our investments may be adversely effected.

A borrower’s form of entity may cause special risks or hinder our recovery.

Since most of the borrowers for our commercial real estate loan investments are legal entities rather than individuals, our risk of loss may be greater than those of mortgage loans made to individuals. Unlike individuals involved in bankruptcies, most of the entities generally do not have personal assets and creditworthiness at stake. The terms of the mortgage loans generally require that the borrowers covenant to be single-purpose entities, although in some instances the borrowers are not required to observe all covenants and conditions that typically are required in order for them to be viewed under standard rating agency criteria as “single-purpose entities.” Borrowers’ organizational documents or the terms of the mortgage loans may limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers’ ability to incur additional indebtedness. These provisions are designed to mitigate the possibility that the borrowers’ financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan in the pool.

The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage. Borrowers that are not single-purpose entities structured to limit the possibility of becoming insolvent or bankrupt, may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because the borrowers may be (i) operating entities with a business distinct from the operation of the mortgaged property with the associated liabilities and risks of operating an ongoing business or (ii) individuals that have personal liabilities unrelated to the property.

We are exposed to environmental liabilities with respect to properties to which we take title.

In the course of our business, we may take title to real estate, and, if we do take title, we could be subject to environmental liabilities with respect to these properties. In such a circumstance, we may be held liable to a governmental entity or to third parties for property damage, personal injury, and investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases, at a property. The costs associated with investigation or remediation activities could be substantial. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

Risks Relating to Economic Conditions

Economic recessions or downturns may have an adverse effect on our business, financial condition and results of operations.

Economic recessions or downturns may result in a prolonged period of market illiquidity, which could have an adverse effect on our business, financial condition and results of operations. Unfavorable economic conditions also could reduce investments on the Fundrise Platform by investors and engagement by real estate operators. Periods of economic slowdown or recession, significantly rising interest rates, declining employment levels, decreasing demand for real estate, or the public perception that any of these events may occur, have resulted in and could continue to result in a general decline in acquisition, disposition and leasing activity, as well as a general decline in the value of real estate and in rents. These events could adversely affect our demand among investors, which will impact our results of operations.

During an economic downturn, it may also take longer for us to dispose of real estate investments, or the disposition prices may be lower than originally anticipated. As a result, the carrying value of such real estate investments may become impaired and we could record losses as a result of such impairment or could experience reduced profitability related to declines in real estate values. These events could adversely affect our performance and, in turn, our business, and negatively impact our results of operations.

Negative general economic conditions could continue to reduce the overall amount of sale and leasing activity in the commercial real estate industry, and hence the demand for our securities, which may in turn adversely affect our revenues. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the United States and other countries.

Further downgrades of the U.S. credit rating, impending automatic spending cuts or a government shutdown could negatively impact our liquidity, financial condition and earnings.

Recent U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit rating downgrades and economic slowdowns, or a recession in the United States. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the United States and global financial markets and economic conditions. With the improvement of the U.S. economy, the Federal Reserve may continue to raise interest rates, which would increase borrowing costs and may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to essentially shut down for periods of time. Continued adverse political and economic conditions could have an adverse effect on our business, financial condition and results of operations.

Global economic, political and market conditions and economic uncertainty may adversely affect our business, results of operations and financial condition.

The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, may continue to contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause further economic uncertainties or deterioration in the United States and worldwide. Economic uncertainty can have a negative impact on our business through changing spreads, structures and purchase multiples, as well as the overall supply of investment capital. Since 2010, several European Union, or EU, countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. Additionally, the precise details and the resulting impact of the United Kingdom’s vote to leave the EU, commonly referred to as “Brexit,” are impossible to ascertain at this point. The effect on the United Kingdom’s economy will likely depend on the nature of trade relations with the EU following its exit, a matter to be negotiated. The decision may cause increased volatility and have a significant adverse impact on world financial markets, other international trade agreements, and the United Kingdom and European economies, as well as the broader global economy for some time. Further, there is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as China, may have a severe impact on the worldwide and United States financial markets. We do not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the United States economy and securities markets or on our investments. As a result of these factors, there can be no assurance that we will be able to successfully monitor developments and manage our investments in a manner consistent with achieving our investment objectives.

Risks Related to Our Organization and Structure

Our shareholders do not elect or vote on our Manager and have limited ability to influence decisions regarding our business.

Our operating agreement provides that the assets, affairs and business of our Company will be managed under the direction of our Manager. Our shareholders do not elect or vote on our Manager, and, unlike the holders of common shares in a corporation, have only limited voting rights on matters affecting our business, and therefore limited ability to influence decisions regarding our business. In addition, our operating agreement provides that the Manager will generally operate in a manner that is appropriate to maintain our REIT status, which may further limit decisions regarding our business.

Our common shareholders have limited voting rights and may be bound by either a majority or supermajority vote.

Our common shareholders have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the common shares and removal of our Manager for “cause”. Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of common shareholders. Generally, matters to be voted on by our shareholders must be approved by a majority of the votes cast by all common shares present in person or represented by proxy, although the vote to remove the Manager for “cause” requires a two-thirds vote. If any vote occurs, you will be bound by the majority or supermajority vote, as applicable, even if you did not vote with the majority or supermajority.

As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements, including the requirements for a board of directors or independent board committees.

As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements that an issuer conducting an offering on Form S-11 or listing on a national stock exchange would be. Accordingly, while we have retained the Independent Representative to review certain conflicts of interest, we do not have a board of directors, nor are we required to have (i) a board of directors of which a majority consists of “independent” directors under the listing standards of a national stock exchange, (ii) an audit committee composed entirely of independent directors and a written audit committee charter meeting a national stock exchange’s requirements, (iii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting a national stock exchange’s requirements, (iv) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of a national stock exchange, and (v) independent audits of our internal controls. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of a national stock exchange.

As our sponsor establishes additional REIT offerings and other Fundrise Platform investment opportunities in the future, there may be conflicts of interests among the various REIT offerings and other programs, which may result in opportunities that would benefit our Company being allocated to the other offerings.

Our sponsor has in the past and expects to continue in the future to establish and sponsor additional REIT offerings and other programs in the future, and to continue to offer investment opportunities through the Fundrise Platform, including offerings that will originate, acquire or invest in commercial real estate loans, commercial real estate and other real estate-related assets. Our sponsor’s real estate and debt finance professionals acting on behalf of our Manager must determine which investment opportunities to recommend to us and other Fundrise entities. Our sponsor has previously organized, as of the date of this offering circular, the following similar programs:

• Fundrise Equity REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio of commercial real estate properties;

These additional programs may have investment criteria that compete with us. If a sale, financing, investment or other business opportunity would be suitable for more than one program, our sponsor and its officers and directors will allocate it using their business judgment. Any allocation of this type may involve the consideration of a number of factors that our sponsor and its officers and directors determine to be relevant. Except under any policies that may be adopted by our Manager or sponsor, no program (including us) or Fundrise Platform investment opportunity will have any duty, responsibility or obligation to refrain from:

engaging in the same or similar activities or lines of business as any other program or Fundrise Platform investment opportunity;

doing business with any potential or actual tenant, lender, purchaser, supplier, customer or competitor of any program or Fundrise Platform investment opportunity;

engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual tenants, lenders, purchasers, suppliers or customers of any program or Fundrise Platform investment opportunity;

establishing material commercial relationships with another program or Fundrise Platform investment opportunity; or

making operational and financial decisions that could be considered to be detrimental to another program or Fundrise Platform investment opportunity.

In addition, any decisions by our sponsor or Manager to renew, extend, modify or terminate an agreement or arrangement, or enter into similar agreements or arrangements in the future, may benefit one program more than another program or limit or impair the ability of any program to pursue business opportunities. In addition, third parties may require as a condition to their arrangements or agreements with or related to any one particular program that such arrangements or agreements include or not include another program, as the case may be. Any of these decisions may benefit one program more than another program.

The conflicts of interest policies we have adopted may not adequately address all of the conflicts of interest that may arise with respect to our activities and are subject to change or suspension.

In order to avoid any actual or perceived conflicts of interest among the programs and with our Manager’s directors, officers and affiliates, we have adopted a conflicts of interest policy to specifically address some of the conflicts relating to our activities. There is no assurance that these policies will be adequate to address all of the conflicts that may arise or will address such conflicts in a manner that is favorable to our Company. Our Manager may modify, suspend or rescind the policies set forth in the conflicts policy, including any resolution implementing the provisions of the conflicts policy, in each case, without a vote of our shareholders.

Certain provisions of our operating agreement and Delaware law could hinder, delay or prevent a change of control of our Company.

Certain provisions of our operating agreement and Delaware law could have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change of control of our Company. These provisions include the following:

Authorization of additional shares, issuances of authorized shares and classification of shares without shareholder approval. Our operating agreement authorizes us to issue additional shares or other securities of our Company for the consideration and on the terms and conditions established by our Manager without the approval of our shareholders. In particular, our Manager is authorized to provide for the issuance of an unlimited amount of one or more classes or series of our shares, including preferred shares, and to fix the number of shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series. Our ability to issue additional shares and other securities could render more difficult or discourage an attempt to obtain control over our Company by means of a tender offer, merger or otherwise.

Delaware Business Combination Statute—Section 203. Section 203 of the DGCL, which restricts certain business combinations with interested shareholders in certain situations, does not apply to limited liability companies unless they elect to utilize it. Our operating agreement does not currently elect to have Section 203 of the DGCL apply to us. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction by which that person became an interested shareholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested shareholder, and an interested shareholder is a person who, together with affiliates and associates, owns, or within three years prior did own, 15% or more of voting shares. Our Manager may elect to amend our operating agreement at any time to have Section 203 apply to us.

Ownership limitations. To assist us in qualifying as a REIT, our operating agreement, subject to certain exceptions, provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of our common shares, whichever is more restrictive, or more than 9.8% in value or in number of our shares, whichever is more restrictive. Accordingly, no person may own, or be deemed to own, more than 9.8% in value or in number of our shares, whichever is more restrictive. The ownership limits could have the effect of discouraging a takeover or other transaction in which shareholders might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests. Furthermore, we will reject any investor’s subscription in whole or in part if we determine that such subscription would violate such ownership limits.

Exclusive authority of our Manager to amend our operating agreement. Our operating agreement provides that our Manager has the exclusive power to adopt, alter or repeal any provision of the operating agreement, unless such amendment would adversely change the rights of the common shares. Thus, our shareholders generally may not effect changes to our operating agreement.

You are limited in your ability to sell your common shares pursuant to our redemption plan. You may not be able to sell any of your common shares back to us, and if you do sell your shares, you may not receive the price you paid upon subscription.

Our redemption plan may provide you with an opportunity to have your common shares redeemed by us. We anticipate that our common shares may be redeemed by us on a quarterly basis. However, our redemption plan contains certain restrictions and limitations, including those relating to the number of our common shares that we can redeem at any given time and limiting the redemption price. Specifically, we are required to limit the number of shares to be redeemed during any calendar year to no more than 5.0% of the weighted average number of common shares outstanding during the prior calendar year (or 1.25% per calendar quarter, with excess capacity carried over to later calendar quarters in that calendar year). However, as we intend to make additional commercial real estate investments of varying terms and maturities, our Manager may elect to increase or decrease the amount of common shares available for redemption in any given calendar quarter, as these commercial real estate assets are paid off or sold, so long as, in the aggregate, we do not redeem more than 5.0% in any calendar year.

In addition, our Manager reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the redemption plan without notice. Therefore, you may not have the opportunity to make a redemption request prior to a potential termination of the redemption plan and you may not be able to sell any of your common shares back to us pursuant to the redemption plan. Moreover, if you do sell your common shares back to us pursuant to the redemption plan, you will not receive the same price you paid for the common shares being redeemed other than during your Introductory Period. See “Description of Our Common Shares — Quarterly Redemption Plan.”

The offering price of our shares was not established on an independent basis; the actual value of your investment may be substantially less than what you pay. When determining the estimated value of our shares, the value of our shares has been and will be based upon a number of assumptions that may not be accurate or complete.

Our Manager established the offering price of our shares on an arbitrary basis. The selling price of our shares bears no relationship to our book or asset values or to any other established criteria for valuing shares. Because the offering price is not based upon any independent valuation, the offering price may not be indicative of the proceeds that you would receive upon liquidation. Further, the offering price may be significantly more than the price at which the shares would trade if they were to be listed on an exchange or actively traded by broker-dealers.

The per share purchase price for this offering will be adjusted every fiscal quarter and, as of January 1st , April 1st , July 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), will equal the greater of (i) $10.00 per share or (ii) the sum of our net asset value, or NAV, divided by the number of our common shares outstanding as of the end of the prior fiscal quarter (NAV per share). Estimates of our NAV per share are based on available information and judgment. Therefore, actual values and results could differ from our estimates and that difference could be significant. This approach to valuing our shares may bear little relationship and will likely exceed what you might receive for your shares if you tried to sell them or if we liquidated our portfolio. In addition, the price you pay for your shares in this offering may be more or less than shareholders who acquire their shares in the future.

Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.

Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Under our operating agreement, we have authority to issue an unlimited number of additional common shares or other securities, although, under Regulation A, we are only allowed to sell up to $50 million of our shares in any 12 month period (although we may raise capital in other ways). In particular, our Manager is authorized, subject to the restrictions of Regulation A and other applicable securities laws, to provide for the issuance of an unlimited amount of one or more classes or series of shares in our Company, including preferred shares, and to fix the number of shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series, without shareholder approval. After your purchase in this offering, our Manager may elect to (i) sell additional shares in this or future public offerings, (ii) issue equity interests in private offerings, or (iii) issue shares to our Manager, or its successors or assigns, in payment of an outstanding fee obligation. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

By purchasing shares in this offering, you are bound by the arbitration provisions contained in our subscription agreement which limits your ability to bring class action lawsuits or seek remedy on a class basis.

By purchasing shares in this offering, investors agree to be bound by the arbitration provisions contained in Section 13 of our subscription agreement. Such arbitration provision applies to claims that may be made regarding this offering and, among other things, limits the ability of investors to bring class action lawsuits or similarly seek remedy on a class basis.

Section 13 of the subscription agreement allows for either us or an investor to elect to enter into binding arbitration in the event of any claim in which we and the investor are adverse parties, including claims regarding this offering. While not mandatory, in the event that we elected to invoke the arbitration clause of Section 13, the rights of the adverse shareholder to seek redress in court would be severely limited.

Further, Section 13(f) of the subscription agreement restricts the ability of individual investors to bring class action lawsuits or to similarly seek remedy on a class basis, unless otherwise consented to by us. These restrictions on the ability to bring a class action lawsuit is likely to result in increased costs, both in terms of time and money, to individual investors who wish to pursue claims against us.

Risks Related to Our Status as a REIT

Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our shareholders.

We believe that our organization, prior and proposed ownership and method of operation will continue to enable us to meet the requirements for qualification and taxation as a REIT. However, we cannot assure you that we will continue to qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT or the U.S. federal income tax consequences of such qualification.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because:

we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

we could be subject to the U.S. federal alternative minimum tax and possibly increased state and local taxes; and

unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common shares. See “U.S. Federal Income Tax Considerations” for a discussion of certain U.S. federal income tax considerations relating to us and our common shares.

Even if we qualify as a REIT, we may owe other taxes that will reduce our cash flows.

Even if we continue to qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, on taxable income that we do not distribute to our shareholders, on net income from certain “prohibited transactions,” and on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. For example, to the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. We also will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under the Code. As another example, we are subject to a 100% “prohibited transaction” tax on any gain from a sale of property that is characterized as held for sale, rather than investment, for U.S. federal income tax purposes, unless we comply with a statutory safe harbor or earn the gain through a taxable REIT subsidiary (“TRS”). Further, any TRS that we establish will be subject to regular corporate U.S. federal, state and local taxes. Any of these taxes would decrease cash available for distribution to shareholders.

REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds during unfavorable market conditions.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. In addition, we may need to reserve cash (including proceeds from this offering) to satisfy our REIT distribution requirements, even though there are attractive investment opportunities that may be available. To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding capital gains. In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our taxable income including any net capital gain. We intend to make distributions to our shareholders to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives. Our cash flows from operations may be insufficient to fund required distributions, for example as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments. We generally are required to accrue income from mortgage loans, mortgage backed securities, and other types of debt instruments currently over the term of the asset, even if we do not receive the cash payments corresponding to such income until later periods. Thus, all or a part of the anticipated increase in yield on the loans we hold that are attributable to deferred interest, exit fees and/or equity participation features generally must be accrued currently notwithstanding that the corresponding cash payment is deferred or uncertain. The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. To address and/or mitigate some of these issues, we may make taxable distributions that are in part paid in cash and in part paid in our common shares. In such cases our shareholders may have tax liabilities from such distributions in excess of the cash they receive. The treatment of such taxable share distributions is not clear, and it is possible the taxable share distribution will not count towards our distribution requirement, in which case adverse consequences could apply.

If we fail to invest a sufficient amount of the net proceeds from selling our common shares in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.

Temporary investment of the net proceeds from sales of our common shares in short-term securities and income from such investment generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds. If we are unable to invest a sufficient amount of the net proceeds from sales of our common shares in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Code, we could fail to qualify as a REIT. See “U.S. Federal Income Tax Considerations.”

If we form a taxable REIT subsidiary (TRS), our overall tax liability could increase.

Any TRS we form will be subject to U.S. federal, state and local income tax on its taxable income. Accordingly, although our ownership of any TRSs may allow us to participate in the operating income from certain activities that we could not participate in without violating the REIT income tests requirements of the Code or incurring the 100% tax on gains from prohibited transactions, the TRS through which we earn such operating income or gain will be fully subject to corporate income tax. The after-tax net income of any TRS would be available for distribution to us; however, any dividends received by us from our domestic TRSs will only be qualifying income for the 95% REIT income test, not the 75% REIT income test. If we have any non-U.S. TRSs, then they may be subject to tax in jurisdictions where they operate and under special rules dealing with foreign subsidiaries, and they may generate income that is nonqualifying for either of the REIT income tests.

Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own and engage in transactions with TRSs, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock or securities of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. A TRS also may sell assets without incurring the 100% tax on prohibited transactions. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis (for example if we charged our TRS interest in excess of an arm’s length rate). We may jointly elect with one or more subsidiaries for those subsidiaries to be treated as TRSs for U.S. federal income tax purposes. These TRSs will pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us. We will monitor the value of our respective investments in any TRSs we may form for the purpose of ensuring compliance with TRS ownership limitations and intend to structure our transactions with any such TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) TRS limitation or to avoid application of the 100% excise tax.

Dividends payable by REITs generally do not qualify for reduced tax rates under current law.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. shareholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income when paid to such shareholders. The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common shares.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or to liquidate otherwise attractive investments.

To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our shares. We may be required to make distributions to our shareholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may, for instance, hinder our ability to make certain otherwise attractive investments or undertake other activities that might otherwise be beneficial to us and our shareholders, or may require us to borrow or liquidate investments in unfavorable market conditions and, therefore, may hinder our investment performance. As a REIT, at the end of each calendar quarter, at least 75% of the value of our assets must consist of cash, cash items, U.S. Government securities and qualified “real estate assets.” The remainder of our investments in securities (other than cash, cash items, U.S. Government securities, securities issued by a TRS and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than cash, cash items, U.S. Government securities, securities issued by a TRS and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) of the value of our total securities can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or real property interests. After meeting these requirements at the close of a calendar quarter, if we fail to comply with these requirements at the end of any subsequent calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate from our portfolio or forego otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.

You may be restricted from acquiring, transferring or redeeming certain amounts of our common shares.

In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. To assist us in qualifying as a REIT, our operating agreement contains an aggregate share ownership limit and a common shares ownership limit. Generally, any of our shares owned by affiliated owners will be added together for purposes of the aggregate share ownership limit, and any common shares owned by affiliated owners will be added together for purposes of the common shares ownership limit.

If anyone attempts to transfer or own shares in a way that would violate the aggregate share ownership limit or the common shares ownership limit (or would prevent us from continuing to qualify as a REIT), unless such ownership limits have been waived by our Manager, those shares instead will be deemed transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not violate the aggregate share ownership limit or the common shares ownership limit and will not prevent us from qualifying as a REIT. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset. Anyone who acquires or owns shares in violation of the aggregate share ownership limit or the common shares ownership limit, unless such ownership limit or limits have been waived by our Manager, or the other restrictions on transfer or ownership in our operating agreement, bears the risk of a financial loss when the shares are redeemed or sold, if the NAV of our shares falls between the date of purchase and the date of redemption or sale.

Our limits on ownership of our shares also may require us to decline redemption requests that would cause other shareholders to exceed such ownership limits. In addition, in order to comply with certain of the distribution requirements applicable to REITs we will decline to honor any redemption request that we believe is a “dividend equivalent” redemption as discussed in “U.S. Federal Income Tax Considerations—Taxation of Taxable U.S. Shareholders—Redemptions of Common Shares.”

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may acquire mezzanine loans, for which the Internal Revenue Service, or the IRS, has provided a safe harbor but not rules of substantive law. Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our REIT status.

We intend to make certain other investments through subsidiaries (with rights to receive preferred economic returns) and may invest in “kickers” with respect to certain investments that we determine to hold outside of a TRS. The character of such investments for REIT purposes may depend on the assets and operations of the issuer, which we generally will not control. Thus, no assurance can be given that any such issuer will not operate in a manner that causes us to fail an income or asset test requirement. In addition, the proper treatment of certain investments, including investments through subsidiaries (with rights to receive preferred economic returns) and “kickers,” for U.S. federal income tax purposes is unclear. If the IRS were to successfully challenge our characterization of an investment, it could adversely affect our REIT status.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Code substantially limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets or to offset certain other positions does not constitute “gross income” for purposes of the 75% or 95% gross income tests, provided certain circumstances are satisfied. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on income or gains resulting from hedges entered into by it or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRSs will generally not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.

The ability of our Manager to revoke our REIT qualification without shareholder approval may cause adverse consequences to our shareholders.

Our operating agreement provides that our Manager may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates, as well as state and local taxes, which may have adverse consequences on our total return to our shareholders.

Investments outside the U.S. could present additional complications to our ability to satisfy the REIT qualification requirements and may subject us to additional taxes.

Although we do not expect to invest in non-U.S. real estate assets, if we were to make such investments, operating in functional currencies other than the U.S. dollar and in environments in which real estate transactions are customarily structured differently than they are in the U.S. or are subject to different legal rules may complicate our ability to structure non-U.S. investments in a manner that enables us to satisfy the REIT qualification requirements. In addition, non-U.S. investments may subject us to various non-U.S. tax liabilities, including withholding taxes.

The IRS may take the position that gains from sales of property are subject to a 100% prohibited transaction tax.

We may have to sell assets from time to time to fund redemption requests, to satisfy our REIT distribution requirements, to satisfy other REIT requirements, or for other purposes. It is possible that the IRS may take the position that one or more sales of our properties may be a prohibited transaction, which is a sale of property held by us primarily for sale in the ordinary course of our trade or business. If we are deemed to have engaged in a prohibited transaction, our gain from such sale would be subject to a 100% tax. The Code sets forth a safe harbor under which a REIT may, under certain circumstances, sell property without risking the imposition of the 100% tax, but there is no assurance that we will be able to qualify for the safe harbor. We do not intend to hold property for sale in the ordinary course of business, but there is no assurance that the IRS will not challenge our position, especially if we make frequent sales or sales of property in which we have short holding periods. For example, we could be subject to this tax if we were to dispose of or securitize loans (or portions thereof) in a manner that was treated as a sale of the loans for U.S. federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level (and may conduct such sales through a TRS), and may limit the structures we utilize for any securitization transactions, even though the sales or structures might otherwise be beneficial to us.

Possible legislative, regulatory or other actions affecting REITs could adversely affect our shareholders and us.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our shareholders or us. We cannot predict whether, when, in what forms, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our shareholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect our financial condition, the results of operations and the amount of cash available for the payment of dividends.

Shareholders are urged to consult with their own tax advisors with respect to the impact that legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in our shares.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a shareholder’s investment in our common shares and may trigger taxable gain.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes. As a general matter, a portion of our distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of our distributions for a year exceeds our current and accumulated earnings and profits for that year. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares. See “U.S. Federal Income Tax Considerations.”

Our ability to provide certain services to our tenants may be limited by the REIT rules, or may have to be provided through a TRS.

As a REIT, we generally cannot hold interests in rental property where tenants receive services other than services that are customarily provided by landlords, nor can we derive income from a third party that provides such services. If services to tenants at properties in which we hold an interest are limited to customary services, those properties may be disadvantaged as compared to other properties that can be operated without the same restrictions. However, we can provide such non-customary services to tenants or share in the revenue from such services if we do so through a TRS, though income earned through the TRS will be subject to corporate income taxes.

Our Manager and its affiliates have limited experience managing a portfolio of assets owned by a REIT.

REITs are subject to numerous complex requirements in order to maintain their REIT status, including income and asset composition tests. Our Manager and its affiliates have limited experience managing a portfolio in the manner intended to comply with such requirements. To the extent our Manager and its affiliates manage us in a manner that causes us to fail to be a REIT, it could adversely affect the value of our common shares.

Our qualification as a REIT and avoidance of 100% tax may depend on the characterization of loans that we make as debt for U.S. federal income tax purposes.

For U.S. federal income tax purposes, the IRS or a court may treat a loan with sufficient equity characteristics as equity for tax purposes. We may obtain equity participation rights with respect to our loans, and we may make loans with relatively high loan-to-value ratios and/or high yields, which are among the features that can cause a loan to be treated as equity for U.S. federal income tax purposes. Although we have structured, and intend to continue to structure each of our loans so that the loan should be respected as debt for U.S. federal income tax purposes, it is possible that the IRS or a court could disagree and seek to recharacterize the loan as equity. Recharacterization of one of our loans as equity for U.S. federal income tax purposes generally would require us to include our share of the gross assets and gross income of the borrower in our REIT asset and income tests. Inclusion of such items could jeopardize our REIT status. Moreover, to the extent our borrowers hold their assets as dealer property or inventory, if we are treated as holding equity in a borrower for U.S. federal income tax purposes, our share of gains from sales by the borrower would be subject to the 100% tax on prohibited transactions (except to the extent earned through a TRS).

The failure of a loan to qualify as an obligation secured by a mortgage on real property within the meaning of the REIT rules could adversely affect our ability to qualify as a REIT.

We may make investments in loans whose qualification as a real estate mortgage loan for REIT purposes is uncertain or which are treated in part as qualifying mortgage loans and in part as unsecured loans. The failure of a loan that we treated as a qualifying mortgage loan to qualify as such for REIT purposes could cause us to fail one or more of the REIT income or asset tests, and thereby cause us to fail to qualify as a REIT unless certain relief provisions also apply.

In general, interest income accrued on a loan that is secured by real property and personal property during a taxable year constitutes qualifying mortgage interest in its entirety for purposes of the 75% gross income test only if the loan is secured by a mortgage on real property with a value (at the time we committed to acquire the loan) at least equal to the highest outstanding principal amount of the loan during such taxable year. In the case of loans to improve or develop real property, the value of the real property collateral when we commit to acquire a loan is deemed to include the reasonably estimated cost of the improvements or developments (other than personal property) which will secure the loan and which will be constructed from the proceeds of the loan. Subject to an exemption discussed in “U.S. Federal Income Tax Considerations – Gross Income Tests – Interest Income,” if the outstanding principal balance of a mortgage loan during the taxable year exceeds the deemed value of the real property securing the loan at the time we committed to acquire the loan, a portion of the interest accrued during the year will not be qualifying mortgage interest for the 75% income test and a portion of such loan likely will not be a qualifying real estate asset. In that case, we could earn income that is not qualifying for the 75% income test and be treated as holding a non-real estate investment in whole or part, which could result in our failure to qualify as a REIT.

The “taxable mortgage pool” rules may increase the taxes that we or our shareholders may incur, and may limit the manner in which we effect future securitizations.

Any borrowings incurred by us could result in the creation of taxable mortgage pools for U.S. federal income tax purposes. Except as provided below, we generally would not be adversely affected by the characterization as a taxable mortgage pool so long as we own 100% of the equity interests in a taxable mortgage pool. Certain categories of shareholders, however, such as non-U.S. shareholders eligible for treaty or other benefits, shareholders with net operating losses, and certain U.S. tax-exempt shareholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our shares are owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool. In that case, we may reduce the amount of our distributions to any disqualified organization whose share ownership gave rise to the tax. Moreover, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for U.S. federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

We make statements in this offering circular that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this offering circular or in the information incorporated by reference into this offering circular.

The forward-looking statements included in this offering circular are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

our ability to effectively deploy the proceeds raised in this offering;

our ability to attract and retain members to the Fundrise Platform;

risks associated with breaches of our data security;

changes in economic conditions generally and the real estate and securities markets specifically;

limited ability to dispose of assets because of the relative illiquidity of real estate investments;

increased interest rates and operating costs;

our failure to obtain necessary outside financing;

risks associated with derivatives or hedging activity;

our ability to retain our executive officers and other key personnel of our advisor, our property manager and their affiliates;

expected rates of return provided to investors;

the ability of our sponsor and its affiliates to source, originate and service our loans and other assets, and the quality and performance of these assets;

our ability to retain and hire competent employees and appropriately staff our operations;

legislative or regulatory changes impacting our business or our assets (including changes to the laws governing the taxation of REITs and SEC guidance related to Regulation A or the JOBS Act);

changes in business conditions and the market value of our assets, including changes in interest rates, prepayment risk, operator or borrower defaults or bankruptcy, and generally the increased risk of loss if our investments fail to perform as expected;

our ability to implement effective conflicts of interest policies and procedures among the various real estate investment opportunities sponsored by our sponsor;

our ability to access sources of liquidity when we have the need to fund redemptions of common shares in excess of the proceeds from the sales of our common shares in our continuous offering and the consequential risk that we may not have the resources to satisfy redemption requests;

our failure to maintain our status as a REIT;

our compliance with applicable local, state and federal laws, including the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Investment Company Act and other laws; and

changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this offering circular. All forward-looking statements are made as of the date of this offering circular and the risk that actual results will differ materially from the expectations expressed in this offering circular will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this offering circular, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this offering circular, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this offering circular will be achieved.

ESTIMATED USE OF PROCEEDS

The table below sets forth our estimated use of proceeds from this and our initial offering, assuming we sell in this offering $20,889,420 in common shares, the maximum offering amount. Our price per share is currently $10.00, an amount that was arbitrarily determined by our Manager. The price per share will be adjusted every fiscal quarter and will equal the greater of (i) $10.00 per share or (ii) the sum of our net asset value, or NAV, divided by the number of our common shares outstanding as of the end of the prior fiscal quarter (NAV per share).

Through our recently completed initial offering, we raised approximately $50 million in capital from 6,587 investors. We have used, and expect to continue to use substantially all of the net proceeds from this and our prior offering (after paying or reimbursing organization and offering expenses) to invest in and manage a diversified portfolio of commercial real estate loans, commercial real estate and other real estate-related assets. We expect that any expenses or fees payable to our Manager for its services in connection with managing our daily affairs, including but not limited to, the selection and acquisition or origination of our investments, will be paid from cash flow from operations. If such fees and expenses are not paid from cash flow (or waived) they will reduce the cash available for investment and distribution and will directly impact our quarterly NAV. See “Management Compensation” for more details regarding the fees that will be paid to our Manager and its affiliates. Many of the amounts set forth in the table below represent our Manager’s best estimate since they cannot be precisely calculated at this time.

We may not be able to promptly invest the net proceeds of this offering in commercial real estate loans, investments in commercial real estate and other real estate-related assets. In the interim, we may invest in short-term, highly liquid or other authorized investments, subject to the requirements for qualification as a REIT. Such short-term investments will not earn as high of a return as we expect to earn on our real estate-related investments.

	Maximum Offering
	Amount
Gross Offering Proceeds	$	20,889,420
Less:
Offering Expenses(1)(2)	$	[ ·]
Net Proceeds from this Offering	$	[ ·]
Estimated Amount Available for Investments	$	[ ·]

(1)

Investors will not pay upfront selling commissions in connection with the purchase of our common shares. Following the completion of the offering, we will reimburse our Manager for offering costs, which are expected to be approximately $[ ]. Reimbursement payments are made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from this and our initial offering. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.50% limit), calculated on an accumulated basis, until our Manager has been reimbursed in full. As of December 31, 2016, approximately $993,000 in organizational and offering costs have been incurred by and reimbursed to our Manager in connection with our prior offering. This is a “best efforts” offering. Please see “Management Compensation” for a description of additional fees and expenses that we will pay our Manager.

(2)

Amount reflected is an estimate. Includes all expenses to be paid by us in connection with the qualification of the offering, and the marketing and distribution of shares, including, without limitation, expenses for printing, engraving and amending offering statements or supplementing offering circulars, mailing and distributing costs, telephones, internet and other telecommunications costs, all advertising and marketing expenses, charges of experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees. See “Plan of Distribution.”

MANAGEMENT

Our Manager

We operate under the direction of our Manager, which is responsible for directing the management of our business and affairs, managing our day-to-day affairs, and implementing our investment strategy. Our Manager has established an investment committee that makes decisions with respect to all acquisitions and dispositions. See “—Investment Committee of our Manager” below. The Manager and its officers and directors are not required to devote all of their time to our business and are only required to devote such time to our affairs as their duties require.

We follow investment guidelines adopted by our Manager and the investment and borrowing policies set forth in this offering circular unless they are modified by our Manager. Our Manager may establish further written policies on investments and borrowings and will monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled. Our Manager may change our investment objectives at any time without approval of our shareholders.

Our Manager performs its duties and responsibilities pursuant to our operating agreement. Our Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our shareholders. Furthermore, we have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities.

Experience of our Management Team

As of December 31, 2016, our sponsor had facilitated or originated approximately 93 real estate assets in both Programs with aggregate purchase prices of approximately $1.15 billion, excluding 3 World Trade Center. Of the $1.15 billion aggregate real estate purchase prices, our sponsor offered through its Programs approximately $208 million, consisting of approximately $62.2 million of commercial real estate loan assets, $87.5 million of investments in commercial real estate (primarily through majority-owned subsidiaries with rights to receive preferred economic returns), and $57.3 million of commercial real estate common equity investments. The portfolios included in the Programs are diversified by investment size, security type, property type and geographic region. As a result of the depth and thoroughness of its underwriting process, the extensive investing experience of its management team and its strong performance record in managing a diverse portfolio of assets, we believe our sponsor has earned a reputation as a leading real estate manager, which has allowed it to access funding from a broad base of investors.

Responsibilities of our Manager

The responsibilities of our Manager include:

Investment Advisory, Origination and Acquisition Services

approve and oversee our overall investment strategy, which consists of elements such as investment selection criteria, diversification strategies and asset disposition strategies;

serve as our investment and financial manager with respect to originating, investing in and managing a diversified portfolio of commercial real estate loans, commercial real estate and other real estate-related assets;

adopt and periodically review our investment guidelines;

approve and oversee our debt financing strategies;

approve joint ventures, limited partnerships and other such relationships with third parties;

approve any potential liquidity transaction;

obtain market research and economic and statistical data in connection with our investments and investment objectives and policies;

oversee and conduct the due diligence process related to prospective investments;

prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for our Manager’s investment committee to evaluate the proposed investments; and

negotiate and execute approved investments and other transactions.

Offering Services

the development of this offering, including the determination of its specific terms;

preparation and approval of all marketing materials to be used by us relating to this offering;

the negotiation and coordination of the receipt, collection, processing and acceptance of subscription agreements, commissions, and other administrative support functions;

creation and implementation of various technology and electronic communications related to this offering; and

all other services related to this offering.

Asset Management Services

investigate, select, and, on our behalf, engage and conduct business with such persons as our Manager deems necessary to the proper performance of its obligations under our operating agreement, including but not limited to consultants, accountants, lenders, technical managers, attorneys, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies and any and all persons acting in any other capacity deemed by our Manager necessary or desirable for the performance of any of the services under our operating agreement;

monitor applicable markets and obtain reports (which may be prepared by our Manager or its affiliates) where appropriate, concerning the value of our investments;

monitor and evaluate the performance of our investments, provide daily management services to us and perform and supervise the various management and operational functions related to our investments;

formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of investments on an overall portfolio basis; and

coordinate and manage relationships between us and any joint venture partners.

Accounting and Other Administrative Services

manage and perform the various administrative functions necessary for our day-to-day operations;

provide or arrange for administrative services, legal services, office space, office furnishings, personnel and other overhead items necessary and incidental to our business and operations;

provide financial and operational planning services and portfolio management functions;

maintain accounting data and any other information concerning our activities as will be required to prepare and to file all periodic financial reports and returns required to be filed with the SEC and any other regulatory agency, including annual financial statements;

maintain all appropriate company books and records;

oversee tax and compliance services and risk management services and coordinate with appropriate third parties, including independent accountants and other consultants, on related tax matters;

make, change, and revoke such tax elections on behalf of the Company as the Manager deems appropriate, including, without limitation, (i) making an election be treated as a REIT or to revoke such status and (ii) making an election to be classified as an association taxable as a corporation for U.S. federal income tax purposes;

supervise the performance of such ministerial and administrative functions as may be necessary in connection with our daily operations;

provide us with all necessary cash management services;

manage and coordinate with the transfer agent, if any, the process of making distributions and payments to shareholders;

evaluate and obtain adequate insurance coverage based upon risk management determinations;

provide timely updates related to the overall regulatory environment affecting us, as well as managing compliance with regulatory matters;

evaluate our corporate governance structure and appropriate policies and procedures related thereto; and

oversee all reporting, record keeping, internal controls and similar matters in a manner to allow us to comply with applicable law.

Shareholder Services

determine our distribution policy and authorizing distributions from time to time;

approve amounts available for redemptions of our common shares;

manage communications with our shareholders, including answering phone calls, preparing and sending written and electronic reports and other communications; and

establish technology infrastructure to assist in providing shareholder support and services.

Financing Services

identify and evaluate potential financing and refinancing sources, engaging a third party broker if necessary;

negotiate terms of, arrange and execute financing agreements;

manage relationships between us and our lenders, if any; and

monitor and oversee the service of our debt facilities and other financings, if any.

Disposition Services

evaluate and approve potential asset dispositions, sales or liquidity transactions; and

structure and negotiate the terms and conditions of transactions pursuant to which our assets may be sold.

Allocation of Investment Opportunities

For more information regarding the factors that our Manager’s investment committee may consider in allocating investment opportunities among our additional similar programs (eREITs ^TM ), please see “Conflicts of Interest – Our Affiliates’ Interests in Other Fundrise Entities – Allocation of Investment Opportunities”.

Shared Services Agreement

Our Manager has entered into a shared services agreement with Rise Companies Corp., our sponsor, effective as of November 24, 2015. Pursuant to this agreement, our Manager is provided with access to, among other things, our sponsor’s portfolio management, asset valuation, risk management and asset management services as well as administration services addressing legal, compliance, investor relations and information technologies necessary for the performance by our Manager of its duties under the operating agreement in exchange for a fee representing our Manager’s allocable cost for these services. The fee paid by our Manager pursuant to the shared services agreement does not constitute a reimbursable expense under our operating agreement. However, under the shared services agreement, our sponsor is entitled to receive reimbursement of expenses incurred on behalf of us or our Manager that we are required to pay to our Manager under our operating agreement.

Executive Officers of our Manager

As of the date of this offering circular, the executive officers of our Manager and their positions and offices are as follows:

Name	Age	Position
Benjamin S. Miller	40	Chief Executive Officer and Interim Chief Financial Officer and Treasurer
Brandon T. Jenkins	31	Chief Operating Officer
Bjorn J. Hall	36	General Counsel, Chief Compliance Officer and Secretary

Benjamin S. Miller currently serves as Chief Executive Officer of our Manager and has served as Chief Executive Officer and Director of our sponsor since its inception on March 14, 2012. As of February 9, 2016, Ben is also serving as Interim Chief Financial Officer and Treasurer of our Manager. Since June 2012, Ben has been Managing Partner of Rise Development LLC, a real estate company focused in the Mid-Atlantic. In December 2011, Ben started Popularise LLC, a real estate crowdsourcing website, which he currently manages. Prior to Rise Development, Ben had been a Managing Partner of the real estate company WestMill Capital Partners from October 2010 to June 2012, and before that, was President of Western Development Corporation from April 2006 to October 2010, after joining our Company in early 2003 as a board advisor and then as COO in 2005. Western Development Corp. is one of the largest retail, mixed-use real estate companies in Washington, DC, most notably known for developing Gallery Place, Washington Harbour, Georgetown Park, and Potomac Mills. While at Western Development, Ben led the development activities of over 1.5 million square feet of property, including more than $300.0 million of real estate acquisition and financing. Ben was an Associate and part of the founding team of Democracy Alliance, a progressive investment collaborative, from 2003 until he joined Western Development in 2005. From 1999 to 2001, Ben was an associate in business development at Lyte Inc., a retail technology start-up. Starting in 1997 until 1999, Ben worked as an analyst at a private equity real estate fund, Lubert-Adler, and for venture capital firm IL Management. Ben has a Bachelor of Arts from the University of Pennsylvania. Ben is on the Board of Trustees of the National Center for Children and Families.

Brandon T. Jenkins currently serves as Chief Operating Officer of our Manager and has served in such capacities with the sponsor since February of 2014, prior to which time he served as Head of Product Development and Director of Real Estate which he continues to do currently. Additionally, Brandon has served as Director of Real Estate for WestMill Capital Partners since March of 2011. Previously, Brandon spent two and a half years as an investment advisor and sales broker at Marcus & Millichap, the largest real estate investment sales brokerage in the country. Prior to his time in brokerage, Brandon also worked for Westfield Corporation, a leading shopping center owner. Brandon earned is BA in Public Policy and Economics from Duke University.

Bjorn J. Hall currently serves as the General Counsel, Chief Compliance Officer and Secretary of our Manager and has served in such capacities with our sponsor since February 2014. Prior to joining our sponsor in February 2014, Bjorn was a counsel at the law firm of O’Melveny & Myers LLP, where he was a member of the Corporate Finance and Securities Group. Bjorn has a Bachelor of Arts from the University of North Dakota and received a J.D. from Georgetown University Law Center.

Recent Developments Regarding our Manager’s Executive Officers

On February 8, 2016, Mr. Michael McCord, our Manager’s former Chief Financial Officer and Treasurer, and our sponsor’s former Controller, abruptly and without notice, presented our sponsor with a severance agreement requiring a payment to Mr. McCord of approximately One Million Dollars ($1,000,000), as well as the vesting of all his outstanding stock awards in our sponsor. Mr. McCord claimed that if the severance agreement was not executed within approximately 2 hours, that he would provide the SEC with evidence of the sponsor improperly handling two real estate transactions. Due to Mr. McCord’s refusal to participate in our sponsor’s internal review, Mr. McCord was placed on administrative leave on February 8, 2016, and, following further disruptive acts on the part of Mr. McCord, was terminated on February 9, 2016.

Although our sponsor believes the claims to be baseless, it immediately provided Mr. McCord with an opportunity to provide more clarity as to his claims, as well as engaged an independent registered public accounting firm, which is not affiliated with RSM US LLP (“Independent Accounting Firm”), to conduct an investigation of our sponsor’s prior investment programs. Based on the results of its own investigation, as supported by the report of the Independent Accounting Firm, our sponsor continues to believe that there is no merit or reasonable basis to Mr. McCord's allegations.

In addition, our sponsor concluded that its methodology for valuing the two assets that were involved in the transactions was generally consistent with typical valuation methodology and were considered reasonable. The resulting fair value conclusions for the two real estate transactions were each greater than our sponsor's financial basis in the investments, and were deemed reasonable based on independent testing by the Independent Accounting Firm of the applicable approaches to value. Further, based on the Independent Accounting Firm's research of joint-venture equity structures in the marketplace, as well as current mezzanine loan interest rates, our sponsor concluded that the financial basis in each of the investments was reasonable.

Finally, the Independent Accounting Firm was engaged to review the cash inflows and outflows with respect to our sponsor’s Project Dependent Note (defined below) investment program. Based on such review, which included tracing funds to the applicable investment and bank statements, our sponsor concluded that all funds received and distributed (through interest and repayment) were appropriately accounted for without exception.

Investment Committee of our Manager

The investment committee of our Manager is a standing committee, established to assist our Manager in fulfilling its oversight responsibilities by (1) considering and approving of each investment made by us, (2) establishing our investment guidelines and overseeing our investments, and the investment activity of other accounts and funds held for our benefit, and (3) overseeing the investment activities of certain of our subsidiaries. The investment committee consists of at least three members, including our sponsor’s Chief Executive Officer, our sponsor’s Chief Operating Officer, and a third member chosen unanimously by the other two members of the investment committee, who will serve until such time as such investment committee member resigns or is replaced. The initial investment committee is comprised of Mr. Benjamin Miller (our sponsor’s Chief Executive Officer), Mr. Brandon Jenkins (our sponsor’s Chief Operating Officer), and Mr. Alex King Davidson (our sponsor’s SVP of Real Estate). In the event that two or more members of the investment committee are interested parties in a transaction, the Independent Representative (defined below) will be required to approve the transaction. See “Conflicts of Interest—Certain Conflict Resolution Measures—Our Policies Relating to Conflicts of Interest”.

Compensation of Executive Officers

We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us. Each of the executive officers of our sponsor also serves as an executive officer of our Manager. Each of these individuals receives compensation for his or her services, including services performed for us on behalf of our Manager, from our sponsor. As executive officers of our Manager, these individuals serve to manage our day-to-day affairs, oversee the review, selection and recommendation of investment opportunities, service acquired investments and monitor the performance of these investments to ensure that they are consistent with our investment objectives. Although we indirectly bear some of the costs of the compensation paid to these individuals, through fees we pay to our Manager, we have not paid, and in the future do not intend to pay any compensation directly to these individuals.

Limited Liability and Indemnification of our Manager and Others

Subject to certain limitations, our operating agreement limits the liability of our Manager, its officers and directors, our sponsor and our sponsor’s shareholder and affiliates, for monetary damages and provides that we will indemnify and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to our Manager, its officers and directors, our sponsor and our sponsor’s shareholder and affiliates.

Our operating agreement provides that to the fullest extent permitted by applicable law our Manager, its officers and directors, our sponsor and our sponsor’s shareholders and affiliates are not liable to us. In addition, pursuant to our operating agreement, we have agreed to indemnify our Manager, its officers and directors, our sponsor and our sponsor’s shareholders and affiliates, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the company and attorney’s fees and disbursements) arising from the performance of any of their obligations or duties in connection with their service to us or the operating agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the Manager or one of our Manager’s directors or officers.

Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Term and Removal of the Manager

Our operating agreement provides that our Manager will serve as our manager for an indefinite term, but that our Manager may be removed by us, or may choose to withdraw as manager, under certain circumstances.

Our shareholders may only remove our Manager at any time with 30 days prior written notice for “cause,” following the affirmative vote of two-thirds of our shareholders. If the Manager is removed for “cause”, the Members will have the power to elect a replacement Manager upon the affirmative vote or consent of the holders of a majority of our common shares. “Cause” is defined as:

our Manager’s continued breach of any material provision of the operating agreement following a period of 30 days after written notice thereof (or 45 days after written notice of such breach if our Manager, under certain circumstances, has taken steps to cure such breach within 30 days of the written notice);

the commencement of any proceeding relating to the bankruptcy or insolvency of our Manager, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition;

our Manager committing fraud against us, misappropriating or embezzling our funds, or acting, or failing to act, in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under the operating agreement; provided, however, that if any of these actions is caused by an employee, personnel and/or officer of our Manager or one of its affiliates and our Manager (or such affiliate) takes all necessary and appropriate action against such person and cures the damage caused by such actions within 30 days of our Manager’s actual knowledge of its commission or omission, then our Manager may not be removed; or

the dissolution of our Manager.

Unsatisfactory financial performance of the Company does not constitute “cause” under the operating agreement.

Our Manager may assign its rights under our operating agreement in its entirety or delegate certain of its duties under the operating agreement to any of its affiliates, including pursuant to the shared services agreement described above under “—Shared Services Agreement” without the approval of our shareholders so long as our Manager remains liable for any such affiliate’s performance, and if such assignment or delegation does not require our approval under the Advisers Act. Our Manager may withdraw as our Manager if we become required to register as an investment company under the Investment Company Act, with such withdrawal deemed to occur immediately before such event. Our Manager will determine whether any succeeding manager possesses sufficient qualifications to perform the management function. In the event of the removal or withdrawal of our Manager, our Manager will cooperate with us and take all reasonable steps to assist in making an orderly transition of the management function.

Holdings of our Common Shares

Fundrise, LP, an affiliate of our sponsor, previously invested $199,000 in us through the purchase of 19,900 common shares in a private placement on the date of the initial offering statement was declared “qualified” by the SEC at the same $10.00 per share price as in this offering. Our sponsor also previously acquired 100 common shares in connection with our formation in a private placement at the same $10.00 per share price as in this offering. In addition, Fundrise, LP agreed to purchase up to an additional $1,000,000 of our common shares under certain circumstances until December 31, 2017 pursuant to a distribution support agreement in order to provide additional funds to support distributions to shareholders during that time period. As of February 2017, pursuant to the distribution support commitment, Fundrise, LP had purchased 100,000 shares of the Company's common shares for $1,000,000 under the Distribution Support Agreement, and had thus fulfilled its obligations under the Distribution Support Agreement. Fundrise, LP is not obligated to purchase any more of our common shares. See “Description of Common Shares — Distributions—Distribution Support Commitment.”

Fundrise Platform

We will conduct this offering primarily on the Fundrise Platform, which will host this offering in connection with the distribution of the common shares offered pursuant to this offering circular. The Fundrise Platform is owned and operated by Fundrise, LLC, a wholly-owned subsidiary of Rise Companies Corp., our sponsor. We will not pay Fundrise, LLC, the owner of the Fundrise Platform, any sales commissions or other remuneration for hosting this offering on the Fundrise Platform. The Fundrise Platform has previously hosted private and public offerings of other affiliates of the sponsor under similar arrangements.

License Agreement

We have entered into a license agreement with our sponsor, pursuant to which our sponsor granted us a non-exclusive, royalty free license to use the name “Fundrise”. Other than with respect to this license, we have no legal right to use the “Fundrise” name. In the event that our Manager ceases to manage us, we would be required to change our name to eliminate the use of “Fundrise”.

MANAGEMENT COMPENSATION

Our Manager and its affiliates will receive fees and expense reimbursements for services relating to this offering and the investment and management of our assets. The items of compensation are summarized in the following table. Neither our Manager nor its affiliates will receive any selling commissions or dealer manager fees in connection with the offer and sale of our common shares.

Form of Compensation and Recipient	Determination of Amount	Estimated Amount
	*Offering Stage*

Offering Expenses — Manager	Our Manager has paid and will continue to pay offering expenses on our behalf in connection with the offering of our shares. We reimburse our Manager for these costs and future offering costs it may incur on our behalf.	Our organization and offering expenses as of December 31, 2016 were approximately $993,000 and we expect to incur [_______] in expenses in connection with this offering.

	*Acquisition and Development Stage*

Acquisition / Origination Fee — Manager or its Affiliate (2)	The borrower pays up to 3.0% of the amount funded by our sponsor or affiliates of our sponsor to acquire or originate commercial real estate loans or the amount invested in the case of other real estate investments, excluding any acquisition and origination expenses and any debt attributable to such investments. We are not be entitled to this fee.	Paid by the co-investors, joint-venture or borrower at closing. Actual amounts are dependent upon the total equity and debt capital we raise; we cannot determine these amounts at the present time.

Reimbursement of Acquisition / Origination Expenses — Manager	We reimburse our Manager for actual expenses incurred in connection with the selection, acquisition or origination of an investment, to the extent not reimbursed by the borrower, whether or not we ultimately acquire or originate the investment.	Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ); we cannot determine these amounts at the present time.

Form of Compensation and Recipient	Determination of Amount	Estimated Amount

	*Operational Stage*

Asset Management Fee — Manager (3)	Quarterly asset management fee currently equal to an annualized rate of 0.85% based on our NAV at the end of each prior quarter. This rate is determined by our Manager in its sole discretion, but cannot exceed an annualized rate of 1.00%. The amount of the asset management fee may vary from time to time, and we will publicly report any changes in the asset management fee.	Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ) and the results of our operations; we cannot determine these amounts at the present time.

Special Servicing Fee – Manager or Other Party (3)	We reimburse our Manager for actual expenses incurred on our behalf in connection with the special servicing of non-performing assets, including, but not limited to, reimbursement of non-ordinary expenses and employee time required to special service a non-performing asset. Whether an asset is deemed to be non-performing is in the sole discretion of our Manager.	Actual amounts are dependent upon the occurrence of an asset becoming non-performing, the original value of such asset, and the results of our operations; we cannot determine these amounts at the present time.

Other Operating Expenses — Manager	We reimburse our Manager for out-of-pocket expenses of third parties in connection with providing services to us. This does not include the Manager’s overhead, employee costs borne by the Manager, utilities or technology costs. The expense reimbursements that we pay to our Manager also include expenses incurred by our sponsor in the performance of services under the shared services agreement between our Manager and our sponsor, including any increases in insurance attributable to the management or operation of our Company.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

	*Liquidation/Listing Stage*

Disposition Fees	None.	—

(1)

Following the completion of the offering, we will reimburse our Manager for offering costs, which are expected to be approximately [$_____]. Reimbursement payments are made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from this and our prior offering. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.50% limit), calculated on an accumulated basis, until our Manager has been reimbursed in full. As of December 31, 2016, approximately $993,000 in organizational and offering costs have been incurred by and reimbursed to our Manager in connection with our prior offering.

(2)

The acquisition/origination fee paid to our Manager by borrowers is a percentage of the purchase price of an investment or the amount funded by us to acquire or originate a loan.

(3)

Our Manager in its sole discretion may defer or waive any fee payable to it under the operating agreement. All or any portion of any deferred fees will be deferred without interest and paid when the Manager determines.

PRINCIPAL SHAREHOLDERS

The following table sets forth the beneficial ownership of our common shares as of the date of this offering circular for each person or group that holds more than 5% of our common shares, for each director and executive officer of our Manager and for the directors and executive officers of our Manager as a group. To our knowledge, each person that beneficially owns our common shares has sole voting and disposition power with regard to such shares.

Unless otherwise indicated below, each person or entity has an address in care of our principal executive offices at 1601 Connecticut Avenue, NW, Suite 300, Washington, D.C. 20009.

	Number of Shares		Percent of
Name of Beneficial Owner(1)	Beneficially Owned		All Shares
Benjamin S. Miller		1,213		*
Brandon T. Jenkins		100		*
Bjorn J. Hall		315		*
All directors and executive officers of our Manager as a group (3 persons)		1,628		*

Represents less than 1% of our outstanding common shares.

(1)

Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest.

CONFLICTS OF INTEREST

We are subject to various conflicts of interest arising out of our relationship with our Manager and its affiliates. We discuss these conflicts below and conclude this section with a discussion of the corporate governance measures we have adopted to mitigate some of the risks posed by these conflicts.

Our Affiliates’ Interests in Other Fundrise Entities

General

The officers and directors of our Manager and the key real estate and debt finance professionals of our sponsor who perform services for us on behalf of our Manager are also officers, directors, managers, and/or key professionals of our sponsor and other Fundrise entities. These persons have legal obligations with respect to those entities that are similar to their obligations to us. In the future, these persons and other affiliates of our sponsor may organize other real estate-related or debt-related programs and acquire for their own account real estate-related investments that may be suitable for us. In addition, our sponsor may grant equity interests in our Manager to certain management personnel performing services for our Manager.

Payment of Certain Fees and Expenses of our Manager

Our Manager is a wholly-owned subsidiary of our sponsor. We pay fees and expenses to our Manager, and its affiliates, including our sponsor, that were not determined on an arm’s length basis. The asset management fee paid to our Manager is based on our NAV, which is calculated by our sponsor’s internal accountants and asset management team. Our Manager may benefit by us retaining ownership of our assets at times when our shareholders may be better served by the sale or disposition of our assets in order to avoid a reduction in our NAV.

Allocation of Investment Opportunities

We rely on our Manager’s executive officers and our sponsor’s key real estate and debt finance professionals who act on behalf of our Manager to identify suitable investments. Our sponsor and other Fundrise entities also rely on these same key real estate and debt finance professionals. Our sponsor has in the past, and expects to continue in the future, to offer other Fundrise Platform investment opportunities, primarily through the Fundrise Platform, including offerings that acquire or invest in commercial real estate equity investments, including multifamily properties, commercial real estate loans, and other select real estate-related assets. Our sponsor has previously organized, as of the date of this offering circular, the following programs:

• Fundrise Equity REIT, LLC, which was formed to originate, invest in and manage a diversified portfolio of commercial real estate properties;

These additional programs may have investment criteria that compete with us.

If a sale, financing, investment or other business opportunity would be suitable for more than one program, our sponsor will allocate it using its business judgment. Any allocation of this type may involve the consideration of a number of factors that our sponsor determines to be relevant. The factors that our sponsor’s real estate and debt finance professionals could consider when determining the entity for which an investment opportunity would be the most suitable include the following:

the investment objectives and criteria of our sponsor and the other Fundrise entities;

the cash requirements of our sponsor and the other Fundrise entities;

the effect of the investment on the diversification of our sponsor’s or the other Fundrise entities’ portfolio by type of investment, and risk of investment;

the policy of our sponsor or the other Fundrise entities relating to leverage;

the anticipated cash flow of the asset to be acquired;

the income tax effects of the purchase on our sponsor or the other Fundrise entities;

the size of the investment; and

the amount of funds available to our sponsor or the Fundrise entities.

If a subsequent event or development causes any investment, in the opinion of our sponsor’s real estate and debt finance professionals, to be more appropriate for another Fundrise entity, they may offer the investment to such entity.

Except under any policies that may be adopted by our Manager, which policies will be designed to minimize conflicts among the programs and other investment opportunities provided on the Fundrise Platform, no program or Fundrise Platform investment opportunity has any duty, responsibility or obligation to refrain from:

engaging in the same or similar activities or lines of business as any program or Fundrise Platform investment opportunity;

doing business with any potential or actual tenant, lender, purchaser, supplier, customer or competitor of any program or Fundrise Platform investment opportunity;

establishing material commercial relationships with another program or Fundrise Platform investment opportunity; or

making operational and financial decisions that could be considered to be detrimental to another program or Fundrise Platform investment opportunity.

In addition, any decisions by our Manager to renew, extend, modify or terminate an agreement or arrangement, or enter into similar agreements or arrangements in the future, may benefit one program more than another program or limit or impair the ability of any program to pursue business opportunities. In addition, third parties may require as a condition to their arrangements or agreements with or related to any one particular program that such arrangements or agreements include or not include another program, as the case may be. Any of these decisions may benefit one program more than another program.

Furthermore, Fundrise Lending does not receive origination or other fees in connection with the acquisition of third-party originated loans. Therefore, Fundrise Lending may experience a conflict of interest in determining whether to acquire, on our behalf, loans and other assets originated by third parties rather than those originated by Fundrise Lending. However, our objective is to use Fundrise Lending’s and its principals’ expertise in loan origination. Accordingly, we have primarily purchased and expect to continue to primarily purchase loans originated by Fundrise Lending, LLC, rather than loans originated by third parties. Please note that, in any event, the origination fees are payable by the co-investors, joint-venture or borrower at closing.

Allocation of Our Affiliates’ Time

We rely on our sponsor’s key real estate and debt finance professionals who act on behalf of our Manager, including Mr. Benjamin S. Miller, for the day-to-day operation of our business. Mr. Benjamin S. Miller is also the Chief Executive Officer of our sponsor and other Fundrise entities. As a result of his interests in other Fundrise entities, his obligations to other investors and the fact that he engages in and he will continue to engage in other business activities on behalf of himself and others, Mr. Benjamin S. Miller faces conflicts of interest in allocating his time among us, our Manager and other Fundrise entities and other business activities in which he is involved. However, we believe that our Manager and its affiliates have sufficient real estate and debt finance professionals to fully discharge their responsibilities to the Fundrise entities for which they work.

Receipt of Fees and Other Compensation by our Manager and its Affiliates

Our Manager and its affiliates receive substantial fees from us, which fees are not negotiated at arm’s length. These fees could influence our Manager’s advice to us as well as the judgment of affiliates of our Manager, some of whom also serve as our Manager’s officers and directors and the key real estate and debt finance professionals of our sponsor. Among other matters, these compensation arrangements could affect their judgment with respect to:

the continuation, renewal or enforcement of provisions in our operating agreement involving our Manager and its affiliates, or the shared services agreement between our Manager and our sponsor;

public offerings of equity by us, which will likely entitle our Manager to increased origination fees, asset management fees and other fees;

acquisitions of investments and originations of loans at higher purchase prices, which entitle our Manager to higher origination fees and asset management fees regardless of the quality or performance of the investment or loan and, in the case of acquisitions of investments from other Fundrise entities, might entitle affiliates of our Manager to disposition fees in connection with services for the seller;

borrowings up to or in excess of our stated borrowing policy to acquire investments and to originate loans, which borrowings will increase asset management fees payable by us to our Manager;

whether and when we seek to list our common shares on a stock exchange or other trading market;

whether we seek shareholder approval to internalize our management, which may entail acquiring assets (such as office space, furnishings and technology costs) and the key real estate and debt finance professionals of our sponsor who are performing services for us on behalf of our Manager for consideration that would be negotiated at that time and may result in these real estate and debt finance professionals receiving more compensation from us than they currently receive from our sponsor;

whether and when we seek to sell the company or its assets; and

whether and when we merge or consolidate our assets with other companies, including companies affiliated with our Manager.

Duties Owed by Some of Our Affiliates to Our Manager and our Manager’s Affiliates

Our Manager’s officers and directors and the key real estate and debt finance professionals of our sponsor performing services on behalf of our Manager are also officers, directors, managers and/or key professionals of:

Rise Companies Corp., our sponsor;

Fundrise Advisors, LLC, our Manager;

Fundrise, LLC, the owner of the Fundrise Platform; and

other Fundrise entities.

As a result, they owe duties to each of these entities, their shareholders, members and limited partners. These duties may from time to time conflict with the duties that they owe to us.

No Independent Underwriter

As we are conducting this offering without the aid of an independent underwriter, you will not have the benefit of an independent due diligence review and investigation of the type normally performed by an independent underwriter in connection with the offering of securities. See “Plan of Distribution.”

License Agreement

We have entered into a license agreement with our sponsor, pursuant to which our sponsor granted us a non-exclusive, royalty free license to use the name “Fundrise”. See “Management—License Agreement”.

Certain Conflict Resolution Measures

Independent Representative

If our sponsor, Manager or their affiliates have a conflict of interest with us that is not otherwise covered by an existing policy we have adopted or a transaction is deemed to be a “principal transaction”, the Manager will appoint an independent representative (the “Independent Representative”) to protect the interests of the shareholders and review and approve such transactions. Any compensation payable to the Independent Representative for serving in such capacity on our behalf will be payable by us. Principal transactions are defined as transactions between our sponsor, Manager or their affiliates, on the one hand, and us or one of our subsidiaries, on the other hand. Our Manager is only authorized to execute principal transactions with the prior approval of the Independent Representative and in accordance with applicable law. Such prior approval may include but not be limited to pricing methodology for the acquisition of assets and/or liabilities for which there are no readily observable market prices.

On December 2, 2015, the Manager appointed William Thomas Lockard, Jr. to serve as the independent representative (the “Independent Representative”) for the various eREITs^TM managed by our Manager, to protect the interests of the shareholders and review and approve any transactions in which our sponsor, Manager or their affiliates have a conflict of interest with us or a transaction deemed to be a “principal transaction”. Mr. Lockard is currently a private investor. He worked for 30 years as a public finance investment banker at closely held San Francisco-based Stone & Youngberg. Over the course of his banking career he structured more than 500 California local government financings representing more than $6 billion in public infrastructure and housing related projects. Mr. Lockard was a partner in the firm and served on both the firm’s board of directors and executive management committee.

Following the sale of Stone & Youngberg to Stifel, Mr. Lockard joined Rise Companies Corp. in 2014 as a Senior Vice President. Beginning in July 2015, Mr. Lockard transitioned from an employee of Rise Companies Corp. to a senior advisor. In December 2015, Mr. Lockard agreed to become the independent representative of Fundrise Advisors, LLC and no longer acts as a senior advisor to Rise Companies Corp.

Mr.Lockard earned a bachelor’s degree from Stanford University, a master’s degree from Claremont Graduate University, and an MBA from the University of Pennsylvania's Wharton School. Mr.Lockard served as a trustee of the University of Pennsylvania. He is a Stanford University Associate. Currently he is the board treasurer for the Center for Investigative Reporting. He is a board member of the Salesian Boys' and Girls' Club San Francisco. Mr. Lockard has served as treasurer on the boards of Coro of Northern California and the ACLU of Northern California. Mr. Lockard is a full member of the Urban Land Institute, a member of the San Francisco Golden Gate chapter of Lambda Alpha, and a member of the Stanford Real Estate Council.

The Manager believes that Mr. Lockard is independent based on the criteria for an “interested person” set forth in Section 2(a)(19) of the Investment Company Act.

Our Policies Relating to Conflicts of Interest

In addition to the provisions in our operating agreement described below and our Manager’s investment allocation policies described above, we have adopted the following policies prohibiting us from entering into certain types of transactions with our Manager, our sponsor, their officers or any of their affiliates in order to further reduce the potential for conflicts inherent in transactions with affiliates.

Pursuant to these conflicts of interest policies, we may not engage in the following types of transactions unless such transaction is approved by the Independent Representative:

sell or lease any investments to our Manager, our sponsor, their officers or any of their affiliates;

acquire or lease any investments from our Manager, our sponsor, their officers or any of their affiliates; and

invest in or make mortgage loans in which the transaction is with our Manager, our sponsor, their officers or any of their affiliates, including any mortgage loans that are subordinate to any mortgage or equity interest of our Manager, our sponsor, their officers or any of their affiliates.

We may, however, purchase an investment from Fundrise Lending or its affiliates in the event that Fundrise Lending or its affiliates initially acquires an investment that is suitable for us at a time when we are unable to do so, with the intention of providing us the opportunity to acquire the investment at a later date when we are able to acquire the investment. As required by our operating agreement, we will not purchase investments from Fundrise Lending or its affiliates in these circumstances without a determination by the Independent Representative that such transaction is fair and reasonable to us and at a price to us that is not materially greater than the cost of the asset to Fundrise Lending or its affiliate, as applicable.

In addition, pursuant to these conflicts of interest policies, we will neither make any loans to our Manager, our sponsor, their officers or any of their affiliates nor borrow money from our Manager, our sponsor, their officers or any of their affiliates, except as otherwise provided in the offering circular or unless approved by the Independent Representative. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by the Manager. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought nor would the prohibition limit our ability to advance reimbursable expenses incurred by our Manager, our sponsor, their officers or any of their affiliates.

These conflicts of interest policies may be amended at any time in our Manager’s discretion.

Other Operating Agreement Provisions Relating to Conflicts of Interest

Our operating agreement contains many other restrictions relating to conflicts of interest including the following:

Term of our Manager. Our operating agreement provides that our Manager will serve as our manager for an indefinite term, but that our Manager may be removed by us, or may choose to withdraw as manager, under certain circumstances. Our shareholders may remove our Manager at any time with 30 days prior written notice for “cause,” following the affirmative vote of two-thirds of our shareholders. Unsatisfactory financial performance does not constitute “cause” under the operating agreement. Our Manager may withdraw as manager if we become required to register as an investment company under the Investment Company Act, with such withdrawal deemed to occur immediately before such event. In the event of the removal of our Manager, our Manager will cooperate with us and take all reasonable steps to assist in making an orderly transition of the management function. Our Manager will determine whether any succeeding manager possesses sufficient qualifications to perform the management function. See “Management—Term and Removal of the Manager”.

Other Transactions Involving Affiliates. Before engaging in a transaction involving an affiliate, our Manager must conclude that all other transactions between us and our sponsor, our Manager, any of their officers or directors, or any of their affiliates are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. See “Management—Investment Committee of our Manager.”

INVESTMENT OBJECTIVES AND STRATEGY

Investment Objectives

Our investment objectives are:

to pay attractive and consistent cash distributions; and

to preserve, protect and return your capital contribution.

We cannot assure you that we will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, our Manager has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets. Our Manager’s investment committee will review our investment guidelines at least annually to determine whether our investment guidelines continue to be in the best interests of our shareholders.

Investment Strategy

Through our recently completed initial offering, we raised approximately $50 million in capital from 6,587 investors. We have used, and intend to continue to use substantially all of the net proceeds from this and our prior offering to originate, acquire, asset manage, selectively leverage, syndicate and opportunistically sell investments in a variety of commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and investments in commercial real estate (through majority-owned subsidiaries with rights to receive preferred economic returns). We may also invest in commercial real estate-related debt securities (including CMBS, CDOs and REIT senior unsecured debt), and other real estate-related assets. We seek to create and maintain a portfolio of investments that generate a low volatility income stream that provide attractive and consistent cash distributions. Our focus on investing in debt and debt-like instruments emphasizes the payment of current returns to investors and the preservation of invested capital, with a lesser emphasis on seeking capital appreciation. We expect that our portfolio of investments will be secured primarily by U.S. based collateral and diversified by security type, property type and geographic location.

We may selectively employ leverage to enhance total returns to our shareholders through a combination of senior financing on our real estate acquisitions, secured facilities, and capital markets financing transactions, although as of December 31, 2016 we have not utilized any leverage. Our target portfolio-wide leverage after we have acquired an initial substantial portfolio of diversified investments is between 40-60% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the interim portfolio) in order to quickly build a diversified portfolio of assets. We seek to secure conservatively structured leverage that is long-term, non-recourse, non mark-to-market financing to the extent obtainable on a cost effective basis. To the extent a higher level of leverage is employed it may come either in the form of government-sponsored programs or other long-term, non-recourse, non-mark-to-market financing. Our Manager may from time to time modify our leverage policy in its discretion. However, other than during our initial period of operations, it is our policy not to borrow more than 75% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. We cannot exceed the leverage limit of leverage policy unless any excess in borrowing over such level is approved by our Manager’s investment committee.

In executing on our business strategy, we believe that we will benefit from our Manager’s affiliation with our sponsor given our sponsor’s strong track record and extensive experience and capabilities as an online real estate origination and funding platform. These competitive advantages include:

Our sponsor’s experience and reputation as a leading real estate investment manager, which historically has given it access to a large investment pipeline similar to our targeted assets and the key market data we use to underwrite and portfolio manage assets;

Our sponsor’s direct and online origination capabilities, which are amplified by a proprietary technology platform, business process automation, and a large user base, of which a significant portion are seeking capital for real estate projects;

Our sponsor’s relationships with financial institutions and other lenders that originate and distribute commercial real estate debt and other real estate-related products and that finance the types of assets we intend to acquire and originate;

Our sponsor’s experienced portfolio management team which actively monitors each investment through an established regime of analysis, credit review and protocol;

Our sponsor’s management team which has a successful track record of making commercial real estate investments in a variety of market conditions; and

Our sponsor’s commitment to purchase up to an additional $1 million of our common shares during the distribution support commitment in the amount by which our operating results were less than the amount that would produce a 15% annualized return.

Investment Decisions and Asset Management

Within our investment policies and objectives, our Manager’s investment committee has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets. We believe that successful real estate investment requires the implementation of strategies that permit favorable purchases and originations, effective asset management and timely disposition of those assets. As such, we have developed a disciplined investment approach that combines the experience of its team of real estate and debt finance professionals with a structure that emphasizes thorough market research, stringent underwriting standards and an extensive down-side analysis of the risks of each investment. The approach also includes active and aggressive management of each asset acquired.

We believe that active management is critical to creating value. We develop a well-defined exit strategy for each investment we make. Specifically, we assign an exit or refinance timeline to each asset we acquire prior to its purchase as part of the original business plan for the asset. We then continually re-evaluate the exit strategy of each asset in response to the performance of the individual asset, market conditions and our overall portfolio objectives to determine the optimal time to sell the asset.

To execute our disciplined investment approach, a team of our real estate and debt finance professionals take responsibility for the business plan of each investment. The following practices summarize our investment approach:

Local Market Research – The investment team extensively researches the acquisition and/or origination and underwriting of each transaction, utilizing both real time market data and the transactional knowledge and experience of our network of professionals and in market relationships.

Underwriting Discipline – We follow a tightly controlled and managed process to examine all elements of a potential investment, including, with respect to real property, its location, income-producing capacity, prospects for long-range appreciation, income tax considerations and liquidity. Only those assets meeting our investment criteria will be accepted for inclusion in our portfolio. In an effort to keep an asset in compliance with those standards, the underwriting team remains involved through the investment life cycle of the asset and consults with the other internal professionals responsible for the asset. This team of experts reviews and develops comprehensive reports for each asset throughout the holding period.

Risk Management – Risk management is a fundamental principle in our construction of portfolios and in the management of each investment. Diversification of portfolios by investment type, investment size and investment risk is critical to controlling portfolio-level risk. Operating or performance risks arise at the investment level and often require real estate operating experience to cure. Our real estate and debt finance professionals review the operating performance and history of our joint-venture and development partners against projections and provide the oversight necessary to detect and resolve issues as they arise.

Asset Management – Prior to the purchase of an individual asset or portfolio, the Manager closely works with the acquisition and underwriting teams to develop an asset business strategy. This is a forecast of the action items to be taken and the capital needed to achieve the anticipated returns. We review asset business strategies regularly to anticipate changes or opportunities in the market during a given phase of a real estate cycle. We have designed this process to allow for realistic yet aggressive enhancement of value throughout the investment period.

Execution on Investment Strategy

Small Deal Sizes + Regulatory Inefficiencies + Urban Infill = Attractive Risk-Adjusted Returns

We believe we owe our current attractive risk-return profile to three core principles:

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Small Assets: our average origination size is roughly $3,000,000. We believe this has allowed us to find higher returns in assets that fall under the radar of big banks and investment funds.

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Regulatory Inefficiencies: Greater banking regulations are creating opportunities for nimble lenders like the Income eREIT. The 2008 Financial Crisis transformed the banking sector, opening gaps in the market.

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Core Urban Infill Location: Nearly every Income eREIT investment is in the core of a major city.

Returns to date have supported our investment thesis to look outside of typical investments made by Wall Street. Although the path less traveled means putting in extra work, our Manager’s strong commitment to originating the highest quality real estate investments remains our top priority. Meanwhile, employment and migration trends reinforce the benefits of targeting deals in major cities and walkable urban cores.

Small Assets

We believe we have secured compelling risk-adjusted returns largely by targeting the small-balance commercial (SBC) loan market, with an average deal size around $3 million. This market has been underserved and poorly penetrated by the largest commercial banks, as small deals often miss the radar of big lenders, or are simply too small for them to profitably finance. According to analytics and appraisal firm Boxwood Means, in 2014, the top 15 commercial lenders commanded just over 20% of the sub-$5 million market, and less than 20% of the sub-$1 million market.

In contrast, we are able to provide smaller-balance loans than many of our larger competitors. While our average investment is approximately $3 million, 2015 loan sizes averaged between $6.5 million and $26.9 million among traditional lenders, according to data from Real Capital Analytics.

Successfully issuing small-balance loans requires that significant attention is paid to each individual asset, something that the Income eREIT has been able to achieve through the combination of our Manager’s dedicated underwriting team and the efficient implementation of new technology.

Regulatory Inefficiencies

We have capitalized on regulation-induced inefficiencies in the commercial real estate debt market. Historically, smaller local and community banks picked up much of the slack in the SBC debt market. However, according to a 2015 Regulatory Impact Study by the Commercial Real Estate Finance Council, financial industry regulations—legacies of the subprime mortgage crisis—have left these banks saddled with higher cost burdens, constricting their ability to lend.

Meanwhile, new Basel III HVCRE (High Volatility Commercial Real Estate) regulations have limited larger commercial banks’ abilities to issue higher-leverage construction loans, exacerbating the fact that typical leverage levels have been declining since the financial crisis. A 2016 report published by the Mortgage Bankers Association found that the average underwritten loan-to-value ratio for CMBS loans fell by nearly 500 basis points from 2007-15. Coupled with new HVCRE rules, we believe this trend has left open an attractive slice in the capital stack that we have stepped in to fill. This slice offers less risk than common equity due to its mid-level tranche position, coupled with relatively high returns due to limited competition from large banks.

*Note, "preferred equity" also includes investments through wholly owned subsidiaries with rights to preferred economic returns.

Data illustrate the growth of alternative lending in the context of regulatory inefficiencies. The Mortgage Bankers Association found that, from 2014-2015, commercial and multifamily originations increased by just 35% among commercial banks and savings institutions, compared with nearly 70% among alternative lenders like private equity shops and mortgage REITs. Last year, programs sponsored by Rise Companies Corp. significantly surpassed more traditional lending market segments with year-over-year growth in originations of nearly 130%, as of September 2016.

Core Urban Infill Locations

We believe we are poised to benefit from the nation’s overall trend toward urbanization, which is being driven by a combination of forces including delayed coupling and homeownership among Millennials, and an increasing preference for urban living among Baby Boomers.

A CBRE report projects that more than 10% of global GDP growth through 2025 will come from major U.S. cities. The impact on commercial real estate could be profound. In its report, CBRE analyzed time-series data on property fundamentals for both apartment and office properties, and found that, historically, urban locations have appreciably outperformed their suburban counterparts on both rent growth and price appreciation.

Markets in which we have invested have performed particularly well on key migration and employment metrics. Population growth in these markets averaged north of 9% from 2010-2015—nearly 500 basis points above the national growth rate of 4.1%, per the American Community Survey.

Employment trends have been another boon. According to Bureau of Labor Statistics data, five of the cities in which we have invested—New York, Los Angeles, Atlanta, Seattle, and Washington, D.C.—added more jobs in 2016 than any other metropolitan areas in the country, except Dallas.

These markets have outperformed not only on job additions, but also on wage growth. According to the Bureau of Labor Statistics, 2016 wage and salary increases in Washington, D.C., Los Angeles, New York, Seattle, and Atlanta each surpassed the national rate.

On the whole, we expect strong continued demand for both residential and commercial assets in core urban infill locations. This, in turn, should bolster property fundamentals and thereby, we believe, protect our invested capital and returns.

Market Overview and Opportunity

We believe that the near and intermediate-term market for investment in commercial real estate loans, commercial real estate and other real estate-related assets is compelling from a risk-return perspective. Given the prospect of low growth for the economy, we favor a strategy weighted toward targeting senior and mezzanine debt which maximize current income, with significant subordinate capital and downside structural protections. In contrast, returns typically associated with pure equity strategies are mostly “back-ended” and are dependent on asset appreciation, capitalization rate compression, cash flow growth, aggressive refinancing and/or sale of the underlying property. We believe that our investment strategy combined with the experience and expertise of our Manager’s management team will provide opportunities to originate investments with attractive current and accrued returns and strong structural features directly with real estate companies, thereby taking advantage of changing market conditions in order to seek the best risk-return dynamic for our shareholders.

We believe that the following market conditions, which are by-products of the extended credit market dislocation, should create a favorable investment environment for us.

The small balance commercial market is underserved by conventional capital sources and the lending market is fragmented, reducing the availability and overall efficiency for property owners raising funds.

According to Boxwood Means LLC, a leading research authority in the small-cap commercial real estate market, small balance commercial (SBC) loan originations under $5 million in value topped $175 billion as of early 2015. However, traditional institutional lenders poorly penetrate the SBC market, which is demonstrated by a secular decline of SBC loans held on bank balance sheets. The top 15 lenders – all commercial banks – accounted for only 23% of total volume last year. By contrast, the top 5 residential lenders command close to 50% of total originations.

The inefficiency and fragmentation of the SBC market has resulted in a relatively favorable pricing dynamic. As of April 2015, there is the largest spread in prices between the Core Commercial CPPI component and the Boxwood SCPI-117 since 2005. The size of the gap illustrates the potential value discrepancy of small cap commercial real estate relative to institutional properties.

Exhibit 16: Historical Leverage

More stringent regulatory environment for lending has increased standards and reduced proceeds for borrowers, frequently creating a gap of funding between the senior debt and the borrower’s available equity capital.

According to Keefe, Bruyette & Woods, Inc., a Stifel Company, average loan-to-values are 68%, a 10-year historic low. Contraction of the banking system and capital adequacy issues have greatly diminished the capacity of major banks to provide commercial mortgage loans and credit facilities to property owners. The banking industry has been transformed by bankruptcies, including the seizure of approximately 195 banks by the Federal Deposit Insurance Corporation, or FDIC (25 in 2008, 140 in 2009 and 30 more by March 12, 2010), and the tightening of lending standards at commercial banks. The conservative lending environment has created an opportunity for flexible capital to fill the funding gap required to fully capitalize properties.

Concentration of fundraising among the largest private equity funds has increased the difficulty for real estate companies to raise equity or mezzanine investments of less than $10,000,000.

One of the responses to the 2008 recession, according to Preqin Global Private Equity Report, has been growth in the average size of investment funds, whereby large investors have been investing more of their capital with managers that have extensive track records, and are therefore, by nature, raising much larger funds. In 2014, funds of a size equivalent to $1.5 billion or more accounted for 58% of all private equity capital raised; while, first-time managers only accounted for 7% of capital raised. The average fund size hit a record of greater than $600,000,000. Larger funds consequently focus on larger deals in order to deploy their capital fully and effectively.

The decline in construction lending volume and tightening of credit standards from traditional sources of financing for commercial real estate has decreased debt capital available for construction and land development.

Construction lending fell precipitously since the 2008 recession. The FDIC report shows that outstanding construction loans for both residential and commercial projects have only recently recovered from the nadir. Data from Sageworks, a financial information company, shows that construction and land development loans were 5.14% of total loans and leases as of year-end 2014, down from 8.88% in March 2008,despite the fact that loss rates for construction and land development loans have fallen from 3.58% of average loan balances in December 2009 to 0.24% as of late 2014. According to an American Banking Association survey, a quarter of U.S. banks also cited hard caps on commercial lending imposed by regulators and other supervisory requirements as a reason for decreased construction lending.

The increasing number of maturing commercial real estate loans over the next five years appears to be greater than the market’s capacity to provide refinancing capital.

The large volume of scheduled loan maturities over the next few years will expand available investment opportunities. According to Barclays Capital, approximately $500 billion of commercial real estate debt matures in 2016 and over $550 billion matures in 2017. Additionally, a significant share of the commercial mortgage-backed securities (“CMBS”) loans maturing in the next two years are likely to be floating rate or bridge loans, which tend to be shorter term and have larger balances than fixed-rate commercial loans.

Commercial Real Estate Debt Maturities

Sources: Barclays Capital (numbers are estimated except for CMBS)

Targeted Investments

We seek to acquire a diversified portfolio of commercial real estate investments consisting primarily of commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and investments in commercial real estate. We may also invest in commercial real estate-related debt securities (including CMBS, CDOs and REIT senior unsecured debt), select commercial real estate equity investments and other real estate-related assets. We target assets that generally offer predictable current cash flow and attractive risk-adjusted returns based on the underwriting criteria established and employed by our Manager. Our ability to execute our investment strategy is enhanced through access to our sponsor’s direct origination capabilities, as opposed to a strategy that relies solely on buying assets in the open market from third party originators. We seek to invest in a portfolio that includes some or all of the following investment characteristics: (i) provides current income; (ii) is secured by high-quality commercial real estate; (iii) includes subordinate capital investments by strong sponsors that support our investments and provide downside protection; and (iv) possesses strong structural features that will maximize repayment potential.

Commercial Real Estate Loans

We have acquired, and intend to continue to acquire commercial real estate loans by directly originating the loans and by purchasing them from third party sellers. Although we generally prefer the benefits of direct origination, the current market conditions have created situations where holders of commercial real estate debt may be in distress and are therefore willing to sell at prices that compensate the buyer for the lack of control typically associated with directly structured investments. The experience of our Manager’s management team in making distressed investments greatly augments our capabilities in this area.

Our primary focus is to originate and invest in the following types of commercial real estate loans:

Senior Mortgage Loans. We have invested in, and intend to continue to invest in senior mortgage loans that are predominantly three to five year term loans providing capital for the acquisition, refinancing or repositioning of quality real estate and may be fixed or floating rate loans that immediately provide us with current income, which we refer to as current-pay loans. We expect that our senior mortgage loans will be primarily backed by properties located in the U.S., and we expect to continue invest in senior mortgage loans with low loan-to-value ratios. We may selectively syndicate portions of these loans, including senior or junior participations that will effectively provide permanent financing or optimize returns which may include interest-only portions.

Senior mortgage loans provide for a higher recovery rate and lower defaults than other debt positions due to the lender’s favorable control features which at times means control of the entire capital structure. Because of these attributes, this type of investment receives favorable treatment from third party rating agencies and financing sources, which should increase the liquidity of these investments.

Subordinated Mortgage Loans, or B-Notes. We may also invest in structurally subordinated first mortgage loans and junior participations in first mortgage loans or participations in these types of assets, commonly referred to as B-Notes, secured by quality real estate properties primarily located in the U.S. We may create subordinated mortgage loans by creating participations of our directly originated first mortgage loans generally through syndications of senior interests or co-origination with a senior lender or we may buy such assets directly from third party originators. Further, we expect that the re-emergence of the CMBS market will allow us to originate first mortgage loans to property owners with near-term liquidity issues and will allow us to contribute the senior AAA rated proceeds of the origination for inclusion in securitizations while retaining the subordinate debt at attractive returns. Due to the current credit market weakness and resulting dearth of capital available in this part of the capital structure, we believe that the opportunities to both directly originate and to buy subordinated mortgage investments from third parties on favorable terms will continue to be attractive.

Investors in subordinated mortgage loans are compensated for the increased risk of such assets from a pricing perspective as compared to first mortgage loans but still benefit from a lien on the related property. Investors typically receive principal and interest payments at the same time as senior debt unless a default occurs, in which case these payments are made only after any senior debt is paid in full. Rights of holders of subordinated mortgage loans are usually governed by participation and other agreements that, subject to certain limitations, typically provide the holders with the ability to cure certain defaults and control certain decisions of holders of senior debt secured by the same properties (or otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher recoveries.

Mezzanine Loans. These are loans secured by one or more direct or indirect ownership interests in an entity that directly or indirectly owns commercial real property. We may own mezzanine loans directly or we may hold a participation in a mezzanine loan or a sub-participation in a mezzanine loan. Mezzanine loans may be either short (three to five year) or longer (up to 10 year) terms and may be fixed or floating rate. These loans are predominantly current-pay loans (although there may be a portion of the interest that accrues if cash flow generated by the related property is not sufficient to pay current interest) and may provide for participation in the value or cash flow appreciation of the underlying property, which participation is known as an “equity kicker” as described below. We believe that opportunities to both directly originate and to buy mezzanine loans from third parties on favorable terms will continue to be attractive. In the current market, mezzanine loans can be the key piece of capital to bridge the gap between senior debt and borrower equity during a refinance or acquisition. Therefore, we expect to achieve favorable terms — both economic and structural — on the mezzanine loans in which we invest.

Investors in mezzanine loans are compensated for the increased risk of such assets from a pricing perspective and still benefit from the right to foreclose, in many instances more efficiently than senior mortgage debt. Upon a default by the borrower under the mezzanine loan, the mezzanine lender generally can take control on an expedited basis of the property-owning entity, subject to the rights of the holders of debt senior in priority on the property. Rights of holders of mezzanine loans are usually governed by intercreditor or interlender agreements that provide such holders with the right to cure certain defaults and control certain decisions of holders of any senior debt secured by the same properties (or otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher recoveries.

Nonetheless, these types of investments involve a higher degree of risk relative to a senior mortgage secured by the underlying real property because the investment may become unsecured as a result of foreclosure by the senior lender if the mezzanine lender is unable to cure senior mortgage defaults. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy the mezzanine loan. If a borrower defaults on our mezzanine loans or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt has been repaid.

Commercial Real Estate-Related Debt Securities

In addition to our focus on origination of and investments in commercial real estate and commercial real estate loans, we may also invest in commercial real estate-related debt securities such as CMBS, CDOs, unsecured debt issued by REITs and interests in other securitized vehicles that own real estate-related debt. While we may invest in any commercial real estate-related debt securities, we expect that the majority of these investments would be CMBS.

CMBS. CMBS are commercial mortgages which are pooled together in a trust. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans. The commercial mortgage security is structured with credit enhancement to protect against potential cash flow delays and shortfalls. This credit enhancement usually takes the form of allocation of loan losses to investors in reverse sequential order (equity to AAA classes), whereas interest distributions and loan prepayments are usually applied sequentially (AAA classes to equity).

The typical commercial mortgage is a five or ten year loan, with a 30-year amortization schedule and a balloon principal payment due on the maturity date. Most fixed-rate commercial loans have strong prepayment protection and require prepayment penalty fees or defeasance. The loans are structured in this manner to maintain the collateral pool’s cash flow or to compensate the investors from foregone interest collections.

CDOs. CDOs are multiple class debt securities, or bonds, secured by pools of assets, such as mortgage-backed securities, B-Notes, mezzanine loans, REIT debt and credit default swaps. Like typical securities structures, in a CDO, the assets are pledged to a trustee for the benefit of the holders of the bonds. CDOs often have reinvestment periods that typically last for five years during which proceeds from the sale of a collateral asset may be invested in substitute collateral. Upon termination of the reinvestment period, the static pool functions very similarly to a CMBS securitization where repayment of principal allows for redemption of bonds sequentially.

Publicly-Traded REIT Securities. We may also choose to invest in senior unsecured debt securities of publicly-traded equity REITs. Publicly-traded equity REITs typically own large, diversified pools of commercial real estate properties and employ moderate leverage. Most of these companies specialize in particular property types such as regional malls, office properties, apartment properties and industrial warehouses. Corporate bonds issued by these types of REITs are usually rated investment grade and benefit from strong covenant protection.

Ratings of Commercial Real Estate-Related Debt Securities. For CMBS and CDOs, the securitization process is governed by one or more of the rating agencies, including Fitch, Moody’s and Standard & Poor’s, who determine the respective bond class sizes, generally based on a sequential payment structure. Bonds that are rated from AAA to BBB by the rating agencies are considered “investment grade.” Bond classes that are subordinate to the BBB class are considered “non-investment” grade. The respective bond class sizes are determined based on the review of the underlying collateral by the rating agencies. The payments received from the underlying loans are used to make the payments on the securities. Based on the sequential payment priority, the risk of nonpayment for the AAA securities is lower than the risk of nonpayment for the non-investment grade bonds. Accordingly, the AAA class is typically sold at a lower yield compared to the non-investment grade classes that are sold at higher yields. We may invest in investment grade classes, non-investment grade classes or the equity of securitizations.

Investments in Commercial Real Property

In instances where we invest through a majority-owned subsidiary, we have major decision rights over matters, including, but not limited to, financing, refinancing, sale, and material changes to the underlying real estate. Our majority-owned subsidiaries generally make investments that meet the following criteria: (i) our subsidiary exercises ongoing control rights over the management of the underlying property (e.g., consent rights over sale, refinance, major project decisions, development plans, budgets, raising additional equity or debt, etc.), (ii) our subsidiary has approval rights in connection with any material decision pertaining to the administration and servicing of any mortgage loan and with respect to any material modification of such mortgage loan agreements that encumber the underlying property, (iii) our subsidiary has recognition from the mortgage lender entitling it to notice of defaults, the right to readily cure monetary or non-monetary defaults or purchase the mortgage loan in the event of a default on the mortgage loan, and (iv) our subsidiary has the right to unilaterally force the sale or purchase the property upon a default under the operating agreement, and, through its ownership of the property-owning entity, become the sole owner of the underlying property.

Although commercial real estate investments have not constituted a large portion of our sponsor’s historical investments, we intend to continue to leverage our sponsor’s management team’s extensive prior experience in this sector, as well as our sponsor’s origination capabilities and extensive financial institution relationships to identify these investment opportunities that are appropriate for our investment portfolio at the appropriate time in the real estate cycle. Certain owners of commercial real property are suffering distress. This fact and reduced demand by buyers for such properties has led to price reduction and as a result, the opportunity for higher returns. Improved economics may present an opportunity for us to acquire such properties. We expect that our acquired properties would have occupancy levels consistent with the performance of the local market and would generate accretive and immediate cash flow. Although current market conditions may allow us to acquire properties with little or no leverage, given the stabilized nature of the targeted properties, we may apply modest levels of leverage to enhance our returns. In particular, our sponsor and its real estate professionals who have been performing services for us on behalf of our Manager have extensive experience in acquiring, managing and disposing of net lease properties. Net lease properties generally have a small number of tenants with longer leases and few or no landlord responsibilities. We will manage and dispose of any real property assets we acquire in the manner that our Manager determines is most advantageous to us.

Other Real Estate Investments

We may invest in private issuances of equity or debt securities of public companies; and in a loan, security or other full recourse obligations for which the business of the related obligor is significantly related to real estate.

These investments may or may not have a scheduled maturity and are expected to be of longer duration (five-to-ten year terms) than our typical portfolio investment. Such investments are expected to be fixed rate (if they have a stated investment rate), and may have accrual structures and provide other distributions or equity participations in overall returns above negotiated levels. These investments are also expected to be collateralized or otherwise backed primarily by U.S. real estate collateral.

We do not anticipate allocating a large amount of our capital or time to these investments initially but as market conditions begin to improve we believe that compelling opportunities will arise that should generate significant returns.

Investments in Government Sponsored Programs

If we meet the qualifications established by the FDIC, we may elect to invest in any existing or future programs sponsored by the government to facilitate the investment in assets of the type we seek to acquire for our portfolio, to the extent consistent with our investment strategies and objectives.

Other Possible Investments

Although most of our investments are currently of the types described above, we may make other investments, such as international investments. In fact, we may invest in whatever types of interests in real estate- or debt-related assets that we believe are in our best interests. Although we can purchase any type of interest in real estate- or debt-related assets, our conflicts of interest policy and operating agreement do limit certain types of investments involving our Manager, our sponsor, their officers or any of their affiliates. See “Conflicts of Interest—Certain Conflict Resolution Measures.”

Investment Process

Our Manager has the authority to make all the decisions regarding our investments consistent with the investment guidelines and borrowing policies approved by our Manager’s investment committee and subject to the limitations in our operating agreement and the direction and oversight of our Manager’s investment committee. Our Manager’s investment committee must approve all investments other than investments in commercial real estate loans and commercial real estate-related debt securities. With respect to investments in commercial real estate loans and commercial real estate-related debt securities, our Manager’s investment committee has adopted investment guidelines that our Manager must follow when acquiring such assets on our behalf without the approval of our Manager’s investment committee. We have not and will not, however, purchase or lease assets in which our Manager, any of our officers or any of their affiliates has an interest without a determination by the Independent Representative that such transaction is fair and reasonable to us and at a price to us that is not materially greater than the cost of the asset to the affiliated seller or lessor. In the event that two or more members of the investment committee are interested parties in a transaction, the Independent Representative will consider and vote upon the approval of the transaction. Our Manager’s investment committee will formally review at a duly called meeting our investment guidelines on an annual basis and our investment portfolio on a quarterly basis or, in each case, more often as they deem appropriate. Changes to our investment guidelines must be approved by our Manager’s investment committee.

Our Manager focuses on the direct origination and select purchasing of commercial real estate loans. It sources our investments from new or existing customers, former and current financing and investment partners, third party intermediaries, competitors looking to share risk and securitization or lending departments of major financial institutions.

In selecting investments for us, our Manager utilizes our sponsor’s established investment and underwriting process, which focuses on ensuring that each prospective investment is being evaluated appropriately. The criteria that our Manager considers when evaluating prospective investment opportunities include:

macroeconomic conditions that may influence operating performance;

real estate market factors that may influence real estate lending and/or economic performance of the underlying real estate collateral;

fundamental analysis of the underlying real estate collateral, including tenant rosters, lease terms, zoning, operating costs and the asset’s overall competitive position in its market;

the operating expertise and financial strength of the sponsor or borrower;

real estate and leasing market conditions affecting the underlying real estate collateral;

the cash flow in place and projected to be in place over the term of the loan;

the appropriateness of estimated costs and timing associated with capital improvements of the underlying real estate collateral;

a valuation of the investment, investment basis relative to its value and the ability to liquidate an investment through a sale or refinancing of the underlying asset;

review of third-party reports, including appraisals, engineering and environmental reports;

physical inspections of underlying real estate collateral and analysis of markets; and

the overall structure of the investment and rights in the loan documentation.

If a potential investment meets our Manager’s underwriting criteria, our Manager reviews the proposed transaction structure, including security, reserve requirements, cash flow sweeps, call protection and recourse provisions. Our Manager evaluates the asset’s position within the overall capital structure and its rights in relation to other capital tranches. Our Manager analyzes each potential investment’s risk-return profile and review financing sources, if applicable, to ensure that the investment fits within the parameters of financing facilities and to ensure performance of the underlying real estate collateral.

Borrowing Policy

We believe that our sponsor’s ability to obtain both competitive interim and term financings and its relationships with top tier financial institutions should continue to allow our Manager to successfully employ moderate levels of borrowing in order to enhance our returns to shareholders. Although our investment strategy is not contingent on financing our assets in the capital markets, our sponsor’s past experience and ability in structuring and managing match-funded, flexible term debt facilities and securitization vehicles should continue to provide our Manager with an advantage in potentially obtaining conservatively structured term financing for many of our investments, to the extent available, through capital markets and other financing transactions, including allowing our Company to be among the first to access the capital markets when conditions permit.

We may employ leverage in order to provide more funds available for investment, although as of December 31, 2016 we have not utilized any leverage. We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments. We expect that once we have fully invested the proceeds of this and our initial offering, our debt financing, on a portfolio-wide basis, will be between 40-60% of the greater of the cost (before deducting depreciation or other non cash reserves) or fair market value of our assets, although it may exceed this level during our offering stage. Our Manager may from time to time modify our leverage policy in its discretion. However, other than during our initial period of operations, it is our policy to not borrow more than 75% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. We cannot exceed the leverage limit of our leverage policy unless any excess in borrowing over such level is approved by our Manager’s investment committee.

Operating Policies

Credit Risk Management. We may be exposed to various levels of credit and special hazard risk depending on the nature of our underlying assets and the nature and level of credit enhancements supporting our assets. Our Manager and its executive officers review and monitor credit risk and other risks of loss associated with each investment. In addition, we seek to diversify our portfolio of assets to avoid undue geographic, issuer, industry and certain other types of concentrations. Our Manager’s investment committee monitors the overall portfolio risk and levels of provision for loss.

Interest Rate Risk Management. To the extent consistent with maintaining our qualification as a REIT, we follow an interest rate risk management policy intended to mitigate the negative effects of major interest rate changes. We intend to minimize our interest rate risk from borrowings by attempting to “match-fund”, which means our Manager seeks to structure the key terms of our borrowings to generally correspond to the interest rate term of our assets and through hedging activities.

Hedging Activities. We may engage in hedging transactions to protect our investment portfolio from interest rate fluctuations and other changes in market conditions. These transactions include interest rate swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments. These instruments may be used to hedge as much of the interest rate risk as we determine is in the best interest of our shareholders, given the cost of such hedges and the need to maintain our qualification as a REIT. We may from time to time enter into interest rate swap agreements to offset the potential adverse effects of rising interest rates under certain short-term repurchase agreements. We may elect to bear a level of interest rate risk that could otherwise be hedged when our Manager believes, based on all relevant facts, that bearing such risk is advisable or economically unavoidable.

Equity Capital Policies. Under our operating agreement, we have authority to issue an unlimited number of additional common shares or other securities. In particular, our Manager is authorized to provide for the issuance of an unlimited amount of one or more classes or series of shares in our Company, including preferred shares, and to fix the number of shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series, without shareholder approval. After your purchase in this offering, our Manager may elect to: (i) sell additional shares in this or future public offerings, (ii) issue equity interests in private offerings or (iii) issue shares to our Manager, or its successors or assigns, in payment of an outstanding fee obligation or to Fundrise Lending, LLC pursuant to its commitment to purchase shares under its distribution support commitment. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

Disposition Policies

The period that we will hold our investments in commercial real estate loans, commercial real estate and other real estate-related assets will vary depending on the type of asset, interest rates and other factors. Our Manager develops a well-defined exit strategy for each investment we make. Our Manager continually performs a hold-sell analysis on each asset in order to determine the optimal time to hold the asset and generate a strong return to our shareholders. Economic and market conditions may influence us to hold our investments for different periods of time. We may sell an asset before the end of the expected holding period if we believe that market conditions have maximized its value to us or the sale of the asset would otherwise be in our best interests.

Liquidity Event

Subject to then existing market conditions, we may consider alternatives to our liquidation as a means for providing liquidity to our shareholders within approximately five years from the completion of our initial offering. While we expect to seek a liquidity transaction in this time frame, there can be no assurance that a suitable transaction will be available or that market conditions for a transaction will be favorable during that time frame. Our Manager has the discretion to consider a liquidity transaction at any time if it determines such event to be in our best interests. A liquidity transaction could consist of a sale or roll-off to scheduled maturity of our assets, a sale or merger of the Company, a consolidation transaction with other companies managed by our Manager or its affiliates, a listing of our shares on a national securities exchange or a similar transaction. We do not have a stated term, as we believe setting a finite date for a possible, but uncertain future liquidity transaction may result in actions that are not necessarily in the best interest or within the expectations of our shareholders.

Prior to our completion of a liquidity transaction, our redemption plan may provide an opportunity for you to have your common shares redeemed, subject to certain restrictions and limitations. See “Description of our Common Shares—Quarterly Redemption Plan.”

PLAN OF OPERATION

General

We are a recently organized Delaware limited liability company formed to acquire and manage a diversified portfolio of commercial real estate loans, commercial real estate-related debt securities and commercial real estate equity investments. We have acquired, and intend to continue to acquire senior and subordinate mortgage, mezzanine, bridge and other commercial real estate loans, and to invest in commercial real estate and commercial real estate-related debt securities primarily originated by our sponsor or its affiliates. In addition, we may acquire any real properties or commercial real estate equity investments that in the opinion of our Manager, meets our investment objectives. We plan to continue to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of real estate assets that provide attractive and stable returns to our investors. We may make our investments through direct loan origination, the acquisition of individual loan or securities assets or by acquiring portfolios of assets, other mortgage REITs or companies with investment objectives similar to ours.

Fundrise Advisors, LLC is our Manager. As our Manager, it manages our day-to-day operations and our portfolio of commercial real estate loans, commercial real estate and other real estate-related assets. Our Manager also has the authority to make all of the decisions regarding our investments, subject to the limitation in our operating agreement and the direction and oversight of our Manager’s investment committee. Our sponsor will also provide asset management, marketing, investor relations and other administrative services on our behalf.

We elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2015. If we qualify as a REIT for U.S. federal income tax purposes, we generally will not be subject to U.S. federal income tax to the extent we distribute qualifying dividends to our shareholders. If we fail to qualify as a REIT in any taxable year after electing REIT status, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and cash available for distribution. However, we were organized and operated in a manner that enabled us to qualify for treatment as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015, and we intend to continue to operate so as to remain qualified as a REIT for U.S. federal income tax purposes thereafter.

Competition

Our net income depends, in large part, on our ability to originate investments with attractive risk-adjusted yields. In originating these investments, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, private funds, other lenders, governmental bodies and other entities, as well as online lending platforms that compete with the Fundrise Platform, many of which have greater financial resources and lower costs of capital available to them than we have. In addition, there are numerous mortgage REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, size of loans offered and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential loans than we are, our investment volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.

Liquidity and Capital Resources

We are dependent upon the net proceeds from this and our initial offering to conduct our proposed operations. We have obtained and will continue to obtain the capital required to purchase and originate real estate-related investments and conduct our operations from the proceeds of our initial offering, this offering and any future offerings we may conduct, as well as from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. For information regarding the anticipated use of proceeds from this offering, see “Estimated Use of Proceeds.”

We will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

As of December 31, 2016, while we have entered into the Promissory Grid Note described below, we have not made any draws on such Promissory Grid Note, and we have not utilized any leverage, however because certain of our investments include both quarterly current interest payments and interest paid-in kind upon redemption or repayment of our investments, there may be differences between net income from operations and cash flow generated from our investments. In order to manage this difference between accrued paid-in kind interest and the distribution requirements of a REIT, we have entered into a promissory grid note with our sponsor for up to $10 million. See section entitled “Plan of Operation – Related Party Loans and Warehousing of Assets – Promissory Grid Note” for a fuller description of the promissory grid note. Our targeted portfolio-wide leverage after we have acquired an initial substantial portfolio of diversified investments is between 40-60% of the greater of the cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the initial portfolio) in order to quickly build a diversified portfolio of assets. Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. However, other than during our initial period of operations, it is our policy to not borrow more than 75% of the greater of cost (before deducting depreciation or other non cash reserves) or fair market value of our assets. We cannot exceed the leverage limit of our leverage policy unless any excess in borrowing over such level is approved by our Manager’s investment committee.

In addition to making investments in accordance with our investment objectives, we use our capital resources to make certain payments to our Manager. During our offering stage, these payments include payments for reimbursement of certain offering expenses. During our acquisition and development stage, we expect to make payments to our Manager in connection with the selection and origination or purchase of investments, the management of our assets and costs incurred by our Manager in providing services to us. For a discussion of the compensation to be paid to our Manager, see “Management Compensation”.

We elected to be taxed as a REIT commencing with our taxable year ended December 31, 2015. To maintain our qualification as a REIT, we are required to make aggregate annual distributions to our shareholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our Manager may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our Manager deems relevant. Provided we have sufficient available cash flow, we intend to authorize and declare distributions based on daily record dates and pay distributions on a quarterly or other periodic basis. We have not established a minimum distribution level.

Related Party Loans and Warehousing of Assets

If we have sufficient funds to acquire only a portion of a loan or other investment then, in order to cover the shortfall, we will obtain a related party loan from, or issue a participation interest to, Fundrise Lending or its affiliates. Our operating agreement expressly authorizes us to enter into such related party loans and to issue such participation interests. Each related party loan and participation interest will be an unsecured obligation of ours, that is payable solely to the extent that such related party loan or participation interest remains outstanding. In addition to the proceeds from our initial offering, we will use the proceeds from this offering to pay down the principal and interest of the related party loan or the principal of the outstanding participation interests, as appropriate, reducing the payment obligation of the related party loan or participation interest, and our obligation to the holder of the related party loan or participation interest. We may also utilize related party loans, from time to time, as a form of leverage to acquire investments.

In instances where a participation interest is outstanding, payments of the participation interest will be pari passu (i.e., of equal seniority) to our right to payment from the underlying asset, and any payments received from the underlying asset will be subsequently distributed pro rata (i.e., in equal proportion to their proportionate interest) among us and the participation interest holder. In the event that we sell a sufficient number of common shares through this and our initial offering to fully extinguish the principal of an outstanding participation interest, we will repay the participation interest, and, other than any accrued but unpaid return due to it from the underlying asset, the holder of the participation interest will no longer hold any obligation of ours with regard to payment. It is anticipated that each participation interest will have a varying return that is dependent upon, and will generally be identical to, the projected return on the underlying asset.

As an alternative means of acquiring loans or other investments for which we do not yet have sufficient funds, Fundrise Lending or its affiliates may close and fund each loan or other investment prior to it being acquired by us. This ability to warehouse investments allows us the flexibility to deploy our offering proceeds as funds are raised. We may then acquire such investment at a price equal to the fair market value of such investment, which will generally equal the cost of the investment (including reimbursements for servicing fees and accrued interest, if any), so there is no mark-up (or mark-down) at the time of our acquisition.

Promissory Grid Note

On December 10, 2015, we entered into a Promissory Grid Note (the “Promissory Grid Note”), as borrower, with Rise Companies Corp. (“Lender”) as the lender. Lender is the parent company and sole member of our Manager. Accordingly, prior to entering into the Promissory Grid Note, the Independent Representative reviewed and approved of the terms of the Promissory Grid Note.

The terms of the Promissory Grid Note are summarized below:

Availability. The Promissory Grid Note is a revolving line of credit in the aggregate principal amount of $5 million. The aggregate amount of the loans made under the Promissory Grid Note that is from time to time outstanding may not exceed $5 million.

Collateral. The Promissory Grid Note is an unsecured line of credit.

Interest. Any principal drawn down under the Promissory Grid Note shall bear interest at a rate equal to 2% per annum, calculated on a 30-day month / 360-day year basis.

Maturity Date. All outstanding principal and interest on the Promissory Grid Note is due and payable on March 30, 2016.

On March 28, 2016, we entered into an amended and restated promissory grid note, as borrower, with Rise Companies Corp, our Sponsor, as lender. The amended and restated note provides up to $10,000,000 in credit, subject to certain limitations. The expiration date was extended to July 31, 2016, and the 2% interest rate was not changed. We did not pay any extension or other fees related to the amendment of this note.

On July 29, 2016, we entered into an amended and restated promissory grid note, as borrower, with Rise Companies Corp, our Sponsor, as lender. The amended and restated note provides up to $10,000,000 in credit, subject to certain limitations. The expiration date was extended to October 31, 2016, and the interest rate was increase to 2.5%. We did not pay any extension or other fees related to the amendment of this note.

On October 25, 2016, we entered into an amended and restated promissory grid note, as borrower, with Rise Companies Corp, our Sponsor, as lender. The amended and restated note provides up to $10,000,000 in credit, subject to certain limitations. The expiration date was extended to January 31, 2017. We did not pay any extension or other fees related to the amendment of this note.

On January 31, 2017, we entered into an amended and restated promissory grid note, as borrower, with Rise Companies Corp, our Sponsor, as lender. The amended and restated note provides up to $10,000,000 in credit, subject to certain limitations. The expiration date was extended to April 30, 2017, and the interest rate was increase to 3.0%. We did not pay any extension or other fees related to the amendment of this note. As of February 23, 2017, we had no amounts outstanding under the note.

Results of Operations

Fundrise Real Estate Investment Trust, LLC is a recently organized Delaware limited liability company formed on May 15, 2015 to originate, invest in and manage a diversified portfolio of commercial real estate investments. Through our recently completed initial offering, we raised approximately $50 million in capital from 6,587 investors. We have used, and continue to expect to use substantially all of the net proceeds from this and our initial offering to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (also referred to as B-Notes), mezzanine loans, and participations in such loans) and investments in commercial real estate. We are externally managed by Fundrise Advisors, LLC, or our Manager, which is an investment adviser registered with the Securities and Exchange Commission, or SEC, and a wholly-owned subsidiary of our sponsor, Rise Companies Corp., the parent company of Fundrise, LLC, our affiliate. Fundrise, LLC owns and operates an online investment platform www.fundrise.com. On December 5, 2015, we commenced operations upon our satisfying the $1.0 million minimum offering requirement (not including the $200,000 received in the private placements to our sponsor and Fundrise, LP).

We have offered, are offering, and may in the future offer up to $50,000,000 in our common shares over any 12-month period in our Offering. As of December 5, 2016, we had received subscriptions for approximately $50 million in our initial offering (not including the approximate $1.2 million received in private placements to our sponsor, Rise Companies Corp., and Fundrise, LP, an affiliate of our sponsor, and the distribution support commitment). We are offering up to $20,889,420 in our common shares, which represents the value of shares available to be offered as of the date of this offering circular out of the rolling 12-month maximum offering amount of $50 million in our common shares.

As of February 2017, pursuant to the distribution support agreement, Fundrise, LP had purchased 100,000 of our common shares for an aggregate purchase price of $1,000,000, thus fulfilling its obligations under the distribution support agreement. Fundrise, LP is not obligated to make any further purchases of our common shares.

Our primary investment types are as follows:

• Commercial Real Estate Debt – Our commercial real estate debt investments include first mortgage loans, subordinate mortgage and mezzanine loans and participations in such loans and preferred equity interests and unconsolidated joint ventures.

• Select Commercial Real Estate Equity Investments – Our commercial real estate equity investments include direct and indirect ownership in real estate and select real estate assets that may be structurally senior to a third-party partner’s equity and frequently have rights to preferred economic returns.

We believe that these investment types are complementary to each other due to overlapping sources of investment opportunities and common reliance on real estate fundamentals and application of similar portfolio management skills to maximize value and to protect capital.

We have operated in a manner intended to qualify as a REIT for federal income tax purposes beginning with the year ended December 31, 2015. We elected REIT status on our initial tax return filing for our taxable year ended December 31, 2015.

Our Investments

Overview

In 2016, our Manager continued to execute on our strategy of providing investors with consistent cash distributions. Our strategy has focused on acquiring high-quality debt and debt-like investments to generate a low-volatility income stream, while producing an attractive annual risk-adjusted return. Assuming we continue to acquire and hold substantially similar assets, we expect to continue to pay an average annualized dividend between 10-11%; however, there can be no assurance that we will achieve our investment objectives, that such projections will be accurate that we will continue to pay dividends at such level in the future.

We believe that we have been able to achieve compelling returns largely by targeting the underserved small-balance commercial loan market, and by capitalizing on regulation-induced inefficiencies. We believe that we are poised to continue providing a robust income stream thanks to our focus on high-quality assets in core urban infill locations, partnerships with experienced sponsors, and proactive management to help mitigate potential downside risk.

Portfolio Highlights as of December 31, 2016:

Total Committed Capital: $45,121,355

Average Origination Size: $3,008,090

Weighted Average Leverage (LTC or LTV) at Property Level: 78.2%

Asset Highlights

Pittsburgh Ace Hotel – Controlled Subsidiary: The 63-room hotel opened in December 2015 in the revitalized East Liberty neighborhood of Pittsburgh. Housed in a restored pre-war YMCA building, the trendy hotelier is located within walking distance of Google’s campus—situated in a former Nabisco factory.

Downtown Washington, D.C. Apartments – Controlled Subsidiary: This recently completed 56-unit luxury mixed-use property is located at the intersection of 14^th and U Streets NW—among the District’s highest-demand residential and retail corridors. As of March 2017, roughly 32% of its apartments are already leased, and Lululemon opened a retail outpost on the ground floor in early February 2017. We expect strong demographics will continue to support both the residential and retail components of the project.

Los Angeles Arts District Land Loan – Senior Loan: This Los Angeles land site sits in the heart of LA’s Arts District, just two blocks south of At Mateo, an $80 million commercial project adding hundreds of thousands of square feet of creative office and retail space.

Long Island City Condos – Senior Loan: As would-be Manhattanites face a median condo price north of $2.6 million, or nearly $2,000/square foot, burgeoning outer-borough neighborhoods like Long Island City are seeing a surge in demand for housing. Priced under $1,500/square foot, with our basis well below that cost, we expect that these condos will see robust demand from the city’s underserved entry-level luxury buyers. Local office developments may also bolster demand.

Seattle Ground-Up Construction – Project Dependent Note: The Keelson—a 106-unit apartment project in Seattle—is just a 15-20 minute drive from Amazon’s Belltown and South Lake Union campuses. The fast-growing tech behemoth is predicted to add enough office space to accommodate 14,000 employees by 2022, which we believe will continue to drive robust rental demand in the area.

Investments Summaries

The following tables summarize the asset acquisitions the Company has made as of February 26, 2017. Fuller descriptions of each of these assets may be found in the Investments Overview sections below. As of February 26, 2017, we had total investment commitments equal to approximately $45.1 million spread across fifteen different assets, with an average commitment amount of approximately $3 million and a weighted average LTV or LTC of approximately 79.1%.

Senior Secured Loans	Location	Type of property	Date of Acq.	Interest Rate (1)			Maturity Date (2)	Total Commitment (3)		LTV (4)			LTC (5)

New York Senior Loan *	Long Island City, NY	Condo	12/15/2015		11.0	%	12/11/2017	$	1,990,000		—			80.0	%
CPG Senior Loan(7)	Phoenix, AZ	Multifamily	12/30/2015		11.0	%	12/29/2016	$	837,000		—			60.0	%
Clermont Senior Loan*	Atlanta, GA	Hotel	01/07/2016		10.0	%	01/31/2022	$	3,019,355		67.0	%		—
Fairmount Senior Loan (8)	Atlanta, GA	Retail	01/21/2016		12.0	%	01/20/2017	$	4,600,000		—			82.0	%(6)
Ascent Senior Loan	Long Island City, NY	Condo	01/27/2016		11.0	%	01/27/2018	$	3,177,000		—			80.6	%
Van Nuys Senior Loan	Van Nuys, CA	Land	02/19/2016		12.0	%	10/11/2017	$	4,900,000		—			72.6	%
Continuum Mateo Senior Loan*	Los Angeles, CA	Land	04/06/2016		9.0	%	04/05/2017	$	7,315,000		—			75.0	%
Stradella Court Senior Loan	Los Angeles, CA	Land	09/14/2016		8.5	%	08/24/2017	$	1,760,000		—			62.0	%
Otsego Homes Senior Loan	Los Angeles, CA	Land	01/10/2017		9.0	%	06/26/2018	$	2,460,000		—			71.0	%

* Acquisition was reviewed and approved by the Independent Representative prior to its consummation, with such determination that the transaction was fair and reasonable to us and at a price to us that is not materially greater than the cost of the asset was to the affiliated seller.

(1)

Interest Rate refers to the projected the annual interest rate on each senior loan. The interest rate presented does not distinguish between interest that is paid current and interest that accrues to the maturity date, nor does it include any increases in interest rate that may occur in the future.

(2)

Maturity Date refers to the initial maturity date of each senior loan, and does not take into account any extensions that may be available.

(3)

Total Commitment refers to the total commitment made by the Company to fund the senior loan, not all of which may have been funded on the acquisition date.

(4)

LTV, or loan-to-value ratio, is the approximate amount of the total commitment amount plus any other debt on the asset, divided by the anticipated future value of the underlying asset at stabilization as determined by our Manager. There can be no assurance that such value will be achieved. We generally use LTV for properties that are generating cash flow.

(5)

LTC, or loan-to-cost ratio, is the approximate amount of the total commitment plus any other debt on the asset, divided by the anticipated cost to complete the project. We generally use LTC for properties that are subject to construction. There can be no assurance that the anticipated completion cost will be achieved.

(6)

LTC presented is a combined LTC of the Fairmount Senior Loan and the Fairmount Controlled Subsidiary.

(7)

On June 14, 2016, the entirety of the CPG Senior Loan was paid off and is no longer outstanding.

(8)

On January 19, 2017, the Fairmount Senior Loan was paid off and is no longer outstanding.

Commercial Real Property Controlled Subsidiaries	Location	Type of property	Date of Acq.	Annual Return (1)			Redemption Date (2)	Total Commitment (3)		LTV (4)			LTC (5)
Ace Hotel Controlled Subsidiary*	Pittsburgh, PA	Hotel	12/15/2015		15.0	%	11/13/2018	$	2,275,000		75.0	%		37.0	%
Fairmount Controlled Subsidiary (7)	Atlanta, GA	Retail	01/21/2016		16.0	%	01/20/2021	$	910,000		—			82.0	%(6)
Grove Controlled Subsidiary	Cordova, TN	Multifamily	03/02/2016		12.5	%	12/01/2022	$	3,750,000		87.3	%		—
Vukota Stratus Controlled Subsidiary	Colorado Springs, CO	Multifamily	04/29/2016		12.0	%	09/01/2023	$	4,000,000		85.0	%		—
Elysium 14 Controlled Subsidiary	Washington, DC	Multifamily	05/10/2016		12.5	%	11/10/2017	$	4,475,000		—			89.0	%

(1)

Annual Return refers to the projected annual preferred economic return that we are entitled to receive with priority payment over the other equity invested in the property. The annual return presented does not distinguish between returns that are paid current and those that accrue to the redemption date, nor does it include any increases in annual return that may occur in the future.

(2)

Redemption Date refers to the initial or redemption date of each asset, and does not take into account any extensions that may be available.

(3)

Total Commitment refers to the total commitment made by the Company in acquiring the asset, not all of which may have been funded on the acquisition date.

(4)

LTV, or loan-to-value ratio, is the approximate amount of the total commitment amount plus any other debt on the asset, divided by the anticipated future value of the underlying asset at stabilization as reasonably determined by our Manager. There can be no assurance that such value will be achieved. We generally use LTV for properties that are generating cash flow.

(5)

LTC, or loan-to-cost ratio, is the approximate amount of the total commitment plus any other debt on the asset, divided by the anticipated cost to complete the project. We generally use LTC for properties that are under construction. There can be no assurance that the anticipated completion cost will be achieved.

(6)

LTC presented is a combined LTC of the Fairmount Senior Loan and the Fairmount Controlled Subsidiary.

(7)

On January 19, 2017, the Fairmount Controlled Subsidiary redeemed our equity in full.

Other Real Estate Related Investments	Location	Type of property	Date of Acq.	Annual Return (1)			Redemption Date (2)	Total Commitment (3)		LTV (4)			LTC (5)
Woodlands Preferred Equity	Snoqualmie, WA	Multifamily	12/18/2015		12.0	%	09/1/2022	$	2,000,000		76.4	%		—
Pryde Project Dependent Note*	Seattle, WA	Multifamily	01/07/2016		14.0	%	07/29/2018	$	1,000,000		—			—
RPQ Preferred Equity*	Richland, WA	Multifamily	01/07/2016		13.0	%	07/01/2021	$	2,000,000		—			—
JOSS Preferred Equity*	Santa Monica, CA	Office	01/27/2016		12.0	%	04/13/2020	$	1,000,000		87.0	%(6)		82.0	%(6)

(1)

Annual Return refers to the projected annual economic return that we are entitled to receive with priority payment over other equity invested in the property. The annual return presented does not distinguish between returns that are paid current and those that accrue to the redemption date, nor does it include any increases in annual return that may occur in the future.

(2)

Redemption Date refers the initial or redemption date of each asset, and does not take into account any extensions that may be available.

(3)

Total Commitment refers to the total commitment made by the Company in acquiring the asset, not all of which may have been funded on the acquisition date.

(4)

(5)

LTC, or loan-to-cost ratio, is the approximate amount of the total commitment plus any other debt on the asset, divided by the anticipated cost to complete the project. We generally use LTC for properties that are under construction. There can be no assurance that the anticipated completion cost will be achieved.

(6)

Aggregated with the other preferred equity held by affiliates of our sponsor, as well as the senior debt.

Investment Overviews – Senior Secured Loans

New York Senior Loan – Long Island City, NY

On December 15, 2015, we acquired from Fundrise Lending, LLC, an affiliate of our Manager (“Lending”), a first mortgage loan (the “New York Senior Loan”) for a purchase price of $1,286,319. We purchased the New York Senior Loan with proceeds from our Offering at the loan’s initial principal amount of $1,286,319. The borrowings under the New York Senior Loan were originally used to acquire the property and to fund an interest reserve. As of December 31, 2015, the New York Senior Loan had not been fully drawn down by the borrower, with the maximum size of the loan being $1,990,000, and the amount drawn as of December 31, 2015 being $1,286,319.

The borrower is expected to use the loan proceeds for the acquisition and renovation of an existing building into a luxury 2-unit condominium project in Long Island City, NY. Once the New York Senior Loan is fully drawn down by the borrower, the amount of the New York Senior Loan would represent approximately a 79.1% loan-to-cost, or LTC, ratio. The LTC ratio is the amount of the New York Senior Loan divided by the anticipated cost to acquire and carry the project. There can be no assurance that such estimated costs will prove to be accurate.

The New York Senior Loan bears an interest rate of 11% per annum, comprised of 7% per annum being paid current on a monthly basis and 4% per annum accruing and compounding annually until the maturity date. In addition, Lending earned an origination fee of approximately 1.0% of the New York Senior Loan amount, paid directly by the borrower. The initial maturity date of the New York Senior Loan is December 11, 2017, with one 6-month extension.

As the New York Senior Loan was purchased from Lending, an affiliate of our Manager, the Independent Representative reviewed and approved of the transaction prior to its consummation.

CPG Senior Loan – Phoenix, AZ

On December 30, 2015, we directly acquired a first mortgage loan (the “CPG Senior Loan”) with a maximum principal balance of $837,000. CPG Casa Bravo, LLC, a Delaware limited liability company (the "CPG Borrower"), intends to use the CPG Senior Loan proceeds for the renovation of an existing 11-unit multifamily building in Phoenix, AZ, located at 4128 N. 22nd Street, Phoenix, AZ 85016 (the “CPG Property”).

The CPG Senior Loan was funded with proceeds from our initial offering with an initial funding amount of $326,000 of the $837,000 maximum loan size as of the property closing date of December 30, 2015. On the original closing date of the CPG Senior Loan, the CPG Borrower was capitalized with approximately $570,000 of equity capital. Once the CPG Senior Loan is fully drawn down by the borrower, the amount of the CPG Senior Loan would represent an approximately 59.6% LTC ratio. There can be no assurance that such estimated costs will prove to be accurate.

The CPG Senior Loan bears an interest rate of 11% per annum, comprised of 8% per annum being paid current and 3% per annum accruing and compounding annually until the maturity date. In addition, Lending earned an origination fee of approximately 2.0% of the CPG Senior Loan amount, paid directly by the CPG Borrower. The initial maturity date of the CPG Senior Loan is December 29, 2016, with one 12-month extension available to the CPG Borrower, subject to the payment of all accrued but unpaid interest.

On June 14, 2016, the entirety of the CPG Senior Loan was paid back by the CPG Borrower through a refinancing that brought in a new $1,000,000 longer-term bank loan at a much lower rate as a result of the successful renovation of the property. We believe that refinancing is typical for a project of this nature after construction has concluded and we anticipated from the outset this was a likely exit possibility for our original investment.

Prior to paying off the CPG Senior Loan, the CPG Borrower informed us that, by the beginning of June 2016, it had leased two of the units for $1,095 per month—over 15% above the projected proforma rents of $950 and 114% above the in-place rents of $511 when the sponsor purchased the property. The CPG Borrower informs us it is in talks with interested prospects for the remainder of the units.

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As part of our due diligence process before making an investment, we create a sensitivity table that projects the performance of the investment based upon potential changes in future income and capitalization rates. Now less than 12 months later, the investment successfully exited at 1.25x takeout coverage, well inside our margin of safety.

Exit via Refinance (DSCR Based)
Int Rate Interval	NOI Interval
0.25%	2.00%			Exit NOI Adjustment
	Takeout Cover			0.00%		2.00%		4.00%		6.00%		8.00%		10.00%		12.00%		14.00%		16.00%		18.00%
Interest Rate		4.00	%		1.45		1.42		1.39		1.36		1.33		1.31		1.28		1.25		1.22		1.19
		4.25	%		1.41		1.38		1.35		1.32		1.29		1.27		1.24		1.21		1.18		1.15
		4.50	%		1.37		1.34		1.31		1.28		1.26		1.23		1.20		1.18		1.15		1.12
		4.75	%		1.33		1.30		1.27		1.25		1.22		1.19		1.17		1.14		1.11		1.09
		5.00	%		1.29		1.26		1.24		1.21		1.19		1.16		1.14		1.11		1.08		1.06
		5.25	%		1.25		1.23		1.20		1.18		1.15		1.13		1.10		1.08		1.05		1.03
		5.50	%		1.22		1.20		1.17		1.15		1.12		1.10		1.07		1.05		1.02		1.00
		5.75	%		1.19		1.16		1.14		1.12		1.09		1.07		1.04		1.02		1.00		0.97
		6.00	%		1.15		1.13		1.11		1.09		1.06		1.04		1.02		0.99		0.97		0.95
		6.25	%		1.12		1.10		1.08		1.06		1.03		1.01		0.99		0.97		0.94		0.92

Clermont Senior Loan – Atlanta, GA

On January 7, 2016, we acquired from Lending a first mortgage loan (the “Clermont Senior Loan”) for a purchase price of $100. The borrower is expected to use the loan proceeds for the renovation of an existing 94-unit boutique lodging facility located at 789 Ponce De Leon Avenue, Atlanta, GA 30306 (the “Clermont Hotel”). The Clermont Senior Loan is secured by the Clermont Hotel. Other than as a result of the Clermont Senior Loan, neither our Manager nor we are affiliated with the borrower.

The borrower on the Clermont Senior Loan is Hotel Clermont, LLC (the “Clermont Borrower”). The Borrower is managed by the principals of BNA Associates, LLC (“BNA”), a Nashville, Tennessee based development firm that focuses primarily on developing unique urban projects that fulfill underserved demand in secondary and tertiary markets where there is less competition.

The Clermont Borrower plans to renovate the existing building and construct a boutique hotel with 94 rooms, a 100 seat restaurant + lobby craft cocktail lounge, a café, a retail space with cutting edge collaborations, and a rooftop bar with skyline views. The famous Clermont Lounge, which has been located in the basement space of the Clermont Hotel for over 50 years, is projected to remain as a tenant.

We purchased the Clermont Senior Loan with proceeds from our initial offering at the loan’s initial principal amount of $100. The Clermont Senior Loan has not been fully drawn down by the Clermont Borrower, with the maximum size of our obligations under the Clermont Senior Loan being $3,019,355, and the amount drawn as of January 7, 2016 being $100. For purposes of funding the Clermont Senior Loan, we formed a lending syndicate with a New York-based multi-billion dollar hedge fund, with the combined maximum total size of the Clermont Senior Loan (including our funding obligations) being $15,600,000. The Clermont Senior Loan is being servicing by Fundrise Servicing, LLC (“Servicing”), a wholly-owned subsidiary of our sponsor. On the original closing date of the Clermont Senior Loan, the Borrower was capitalized with $5,500,000 of equity capital and approximately $2,900,000 of Federal Historic Tax Credit commitments and approximately $3,100,000 of State Historic Tax Credit commitments (collectively, over 100% of the minimum equity projected to be needed for the project).

The Clermont Senior Loan bears (i) an initial interest rate of 10% per annum, paid current on a quarterly basis during the renovation period, (ii) an interest rate of 7.5% per annum, paid current on a quarterly basis, from the expiration of the renovation period through January 31, 2020, (iii) an interest rate of 8.5% per annum, paid current on a quarterly basis, from February 1, 2020 through January 31, 2021, and (iv) an interest rate of 9.5% per annum, paid current on a quarterly basis, from February 1, 2021 through the maturity date. In addition, Lending earned an origination fee of approximately 0.34% of the Clermont Senior Loan amount, paid directly by the Clermont Borrower.

The initial maturity date of the Clermont Senior Loan is January 31, 2022. The Clermont Senior Loan may be prepaid in whole or in part without penalty during the term of the Clermont Senior Loan.

As of its closing date, the Clermont Senior Loan’s loan-to-value ratio, or the LTV ratio, was approximately 67%. The LTV ratio is the amount of the Clermont Senior Loan divided by the anticipated appraised value of the Property at stabilization. There can be no assurance that such value will be achieved.

The principals of the Clermont Borrower have provided standard carve-out, completion, and springing guaranties.

As the Clermont Senior Loan was purchased from Lending, an affiliate of our Manager, the Independent Representative reviewed and approved of the transaction prior to its consummation.

Fairmount Senior Loan – Atlanta, GA

On January 21, 2016, we directly acquired a first mortgage loan with a maximum principal balance of $4,600,000 (the “Fairmount Senior Loan”). The borrower, Fairmount Flats, LLC, a Georgia limited liability company (“Fairmount”), is expected to use the loan proceeds for the conversion of a property, located at 1429 Fairmount Avenue NE, Atlanta, GA 30318 (the “Fairmount Property”), from industrial to retail. The Fairmount Senior Loan is secured by the Fairmount Property. Other than with regard to the Fairmount Investment (as described below), and certain other real estate transactions, neither our Manager nor we are affiliated with Fairmount.

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Fairmount is managed by the principals of Kim King Associates LLC (“Kim King”), an Atlanta, GA based full service real estate firm that creates value through commercial, residential and mixed-use development and through select acquisition and repositioning of underperforming assets. Formed in 1972 by a former standout Georgia Tech quarterback, the firm has completed real estate and other business transactions in excess of $800 million. Kim King and its subsidiaries provide a full range of real estate services including development, leasing and property brokerage, asset, property and project management, general contracting, construction management and equity investment.

The Fairmount Property currently includes a vacant 81,634 square foot industrial flex building. The building was constructed in 1964 and 1974. The existing clear height is between 17 and 19 feet and there are 8 dock high doors. The improvements are situated on a 6.29 acre site, of which 5.29 acres are useable due to a creek bed. The Atlanta Beltline traverses the subject site through the creek bed area.

Following acquisition of the Fairmount Property, Kim King has estimated a period of approximately six months to complete the improvement of tenant spaces. In addition to tenant space improvements, Kim King intends to spend approximately $400,000 on base building and site improvements including fire and life safety system upgrades, utility upgrades, parking and building shell improvements. Kim King has provided a full contractor’s budget to complete the improvements totaling approximately $2,000,000.

Once complete, the Fairmount Property is expected to have undergone the necessary changes to complete the conversion from industrial use to commercial retail/mixed use.

As a condition to the closing of the Fairmount Senior Loan, Kim King has secured three (3) leases, accounting for 100% of the leasable square footage of the asset, including (i) one lease with a well known music venue for 30,400 square feet of space, (ii) and two leases with a music equipment rental, production, storage, and rehearsal space company for 10,000 square feet and 30,000 square feet of space, respectively.

Fairmount intends to capitalize the future redevelopment potential of the Fairmount Property, while potentially benefiting from excess floor area ratio (“FAR”) existing on site. During the term of the Fairmount Senior Loan, it is anticipated that the Fairmount Property may see greater benefit from increased security as asset values increase with the completion of the Atlanta Beltline, a master plan initiative linking Atlanta’s neighborhoods via proposed light rail and walking paths; however, there can be no assurance that such increase in security or value will ever be realized. The projected net operating income (“NOI”) at stabilization is approximately $575,000, with a total projected value of approximately $7,625,000. However, there can be no assurance that such projected values shall prove to be accurate.

The Fairmount Senior Loan was funded with proceeds from our initial offering, with an initial funding amount of $2,142,942. The Fairmount Senior Loan has not been fully drawn down by the Borrower, with the maximum size of our obligations under the Fairmount Senior Loan being $4,600,000, and the amount drawn as of January 20, 2016 being $2,142,942. On the original closing date of the Fairmount Senior Loan, Fairmount was capitalized with $2,147,605 of equity capital, including the $910,000 capitalized through the Fairmount Investment described below (100% of the minimum equity projected to be needed for the project). The Fairmount Senior Loan is being serviced by Servicing, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor.

The Fairmount Senior Loan bears an interest rate of 12% per annum, to be paid current on a monthly basis through the maturity date, January 20, 2017 (the “Fairmount Maturity Date”). In addition, Lending, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor, earned an origination fee of approximately 2% of the Fairmount Senior Loan amount, paid directly by Fairmount.

Fairmount has the ability to extend the Fairmount Maturity Date for a period of 180-days; provided, however, to exercise such extension, Fairmount is required to pay to us an extension fee consisting of 1% of the outstanding principal amount of the Fairmount Senior Loan. The Fairmount Senior Loan may be prepaid in whole or in part without penalty during the term of the Fairmount Senior Loan.

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As of its closing date, the Fairmount Senior Loan’s loan-to-cost ratio, or the LTC ratio, was approximately 68%. The LTC ratio is the amount of the Fairmount Senior Loan divided by the anticipated cost to build the project. There can be no assurance that such estimated costs will prove to be accurate.

The principals of Kim King have provided full recourse guaranties.

The Fairmount Property is located in the western section of Atlanta’s Midtown neighborhood. The neighborhood is evolving to establish its own identity as “Midtown West”. The area has seen significant redevelopment activity following a lull after 2008, with a number of projects completed, underway or planned. The attractiveness of the area, the lack of available land, and the optimism surrounding new projects create upward pressure on sale prices in this in-town Atlanta industrial submarket.

Some of the new uses in the area include: (i) MWest a mixed-use townhome community located on the site of a former lumberyard, featuring 183 loft-style townhomes along with office/retail lofts; (ii) Apex West Midtown (by Perennial Properties), located just southeast of MWest along the south side of Huff Road, featuring 340 apartment units along with retail shops and restaurants, and (iii) a recent commercial project including a Top Golf entertainment complex located at Ellsworth Industrial and Chattahoochee Avenue.

In addition to some of the new and existing uses listed above, the Fairmount Property is adjacent to the BeltLine, a large-scale planned public redevelopment project in Atlanta that is expected to combine greenspace, trails, transit, and new development along 22 miles of historic rail segments that encircle the urban core. The BeltLine project has the potential to positively transform the Atlanta, is one of the most comprehensive economic development efforts ever undertaken by Atlanta, as well as one of the largest, wide-ranging urban redevelopment currently underway in the U.S.

On January 19, 2017, the Fairmont Controlled Subsidiary paid off the investment for the full amount of the Fairmont Senior Loan principal drawn to date. All interest payments were paid in full during the investment period, amounting to approximately 12% interest received per annum. Principal drawn to date amounted to $2,576,540 as of the redemption date. The Fairmont Controlled Subsidiary successfully refinanced with a new $5,182,500 longer-term local bank loan at a lower rate.

Ascent Senior Loan – Long Island City, NY

On January 27, 2016, we directly acquired a first mortgage loan with a maximum principal balance of $3,177,000 (the “3-Unit Condo Senior Loan”). The borrower, 10-27 Real LLC (“10-27 Real”) will use the loan proceeds for the ground-up construction of a 3-unit condominium property located at 10-27 47^th Road, Queens, NY 11101 (the “3-Unit Condo Property”). The 3-Unit Condo Senior Loan is secured by the 3-Unit Condo Property. Other than as a result of the 3-Unit Condo Senior Loan and certain other real estate transactions, neither our Manager nor we are affiliated with 10-27 Real. 10-27 Real is managed by the Ascent Development, LLC (“Ascent”), a New York, NY based development firm that that focuses primarily on development in New York City. Ascent performs every step of the development process in-house, from site acquisition through construction. The firm was founded in July-2008 and has been actively developing multifamily and mixed-use projects since inception..

The 3-Unit Condo Property is currently the site of a two-story batten vinyl siding structure with a full cellar and backyard. The structure was built in 1901 and has 3,360 SF of built area. The cellar has 8’ ceilings and houses all the building’s heating and ventilation systems. The backyard is only partially landscaped and is, primarily, finished with a thin concrete slab.

Ascent plans to demolish the existing structure to make way for a three-unit condominium. Ascent anticipates that the building will fully utilize the allowable floor area and provide a unique amenity to each unit. Per the appraisal, the ground floor unit is expected to be a three-bedroom unit comprised of 1,225 SF of net livable space, 774 SF of basement space, 40 SF of storage area, and a 1,000 SF private backyard. The 2nd floor units are intended to be two three-bedroom units and that will be a mirror image of each other. The combined units are expected to have 3,212 SF of net livable space, 60 SF of storage space, and a combined 1,046 SF rooftop terrace.

The proposed development of the 3-Unit Condo Property will be to renovate using the same brick façade as neighboring buildings in the neighborhood. The major differences between this building and the neighbors constructed earlier last century are anticipated to be the interior finishes, high-efficiency HVAC system, and low-voltage wiring for today’s internet and entertainment requirements.

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Ascent has indicated that the finishes and unit amenity schedule will be similar to a recently developed luxury property nearby. An expired listing for the largest unit in that complex states: “...the kitchen encompasses top of the line appliances that include, a Viking Gas Range and Wall Hood, Viking French Door fridge, Bosch Dishwasher and Avanti built in Wine Cooler. Custom Wood Shaker style cabinetry and 6 inch wide, custom stained White Oak Hard Wood Floors run throughout.... Appointed baths, outfitted with Artos rain showers, pull down Teak benches, and Kohler fixtures.” There is not expected to be any off-street parking and exterior amenities are in the planning stages. Ascent forecasts a gross sales price of $6,200,000, which equates to roughly $1,300 per square foot. Comparative sales obtained from Zillow.com within the past 6 months for similar 2-bedroom units have had an average sales price of $1,121 per square foot. However, there can be no assurance that such projections will prove to be accurate.

The 3-Unit Condo Senior Loan was funded with proceeds from our initial offering, with an initial funding amount of $1,626,136. The 3-Unit Condo Senior Loan has not been fully drawn down by 10-27 Real, with the maximum size of our obligations under the 3-Unit Condo Senior Loan being $3,177,000, and the amount drawn as of January 27, 2016 being $1,626,136. $416,942 of the 3-Unit Condo Senior Loan proceeds were held back as an interest reserve to fund the payment of current interest payments. The 3-Unit Condo Senior Loan is being serviced by Servicing. On the original closing date of the 3-Unit Condo Senior Loan, 10-27 Real was capitalized with $769,000 of equity capital (100% of the minimum equity projected to be needed for the project).

The 3-Unit Condo Senior Loan bears an interest rate of 11% per annum, with 7% per annum paid current on a monthly basis, and 4% accruing and compounding annually through the maturity date, January 27, 2018 (the “10-27 Real Maturity Date”). In addition, Lending, earned an origination fee of approximately 1% of the 3-Unit Condo Senior Loan amount, paid directly by 10-27 Real.

The 10-27 Real Maturity Date may be extended for a period of 6 months; provided, however, that in order to extend the 10-27 Real Maturity Date, 10-27 Real is required to pay to us an extension fee consisting of 1% of the outstanding principal amount of the 3-Unit Condo Senior Loan. The 3-Unit Condo Senior Loan may be prepaid in whole or in part without penalty during the term of the 3-Unit Condo Senior Loan.

As of its closing date, the 3-Unit Condo Senior Loan’s loan-to-cost ratio, or the LTC ratio, was approximately 80.6%. The LTC ratio is the amount of the 3-Unit Condo Senior Loan divided by the anticipated cost to build the project. There can be no assurance that such estimated costs will prove to be accurate.

The principals of Ascent have provided standard carve-out, completion, and springing guaranties.

The 3-Unit Condo Property is located in the Hunters Point subdistrict section of Long Island City, one of New York City’s fastest growing, and appreciating, neighborhoods. The Hunters Point section is located on the waterfront and has produced, on average, the highest price/SF and rental rates in Long Island City due to its proximity to Manhattan, exceptional views, and growing retail presence.

On August 12, 2004, the City Planning Commission amended the Zoning Resolution, creating a “Special Purpose District” that allowed dense residential development along the Long Island City waterfront. These sites were purchased by large developers and became the catalyst for the neighborhood’s growth. The 3-Unit Condo Property is located half a block east of the newly rezoned Special Purpose District and is, therefore, surrounded by low-rise structures. Ascent believes that the location allows them to develop unique products that can offer high level finishes, privacy, and more space than high-rise competitors, while still benefiting from neighborhood amenities created by nearby developments.

The main draw of the neighborhood is the proximity to Manhattan. The 3-Unit Condo Property is less than a 4-minute walk to the 7 train and one stop from Grand Central Station. In addition, there is a water taxi service provided by NY Waterways that travels between Hunters Point and 34th Street in Manhattan in 5 minutes and Wall Street in under 25 minutes.

Van Nuys Senior Loan – Van Nuys, CA

On February 19, 2016, we closed a first mortgage loan with a maximum principal balance of $4,900,000 (the “Van Nuys Senior Loan”). The borrowers, jointly and severally Saviers Van Nuys, LLC, a California limited liability company (“Saviers”) and 6569 Van Nuys LLC, a California limited liability company (together with Saviers, “Van Nuys”), is expected to use the loan proceeds for the up-zoning of a 24,862 square foot two-tenant retail property located at 6569 Van Nuys Blvd, Van Nuys, CA 91401 (the “Van Nuys Property”). The Van Nuys Senior Loan is secured by the Van Nuys Property. Other than with regard to certain other real estate transactions, neither our Manager nor we are affiliated with Van Nuys.

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Van Nuys is managed by the principals of Index Real Estate Investments (“Index”), a Van Nuys, CA based real estate firm focused on small-scale apartment developments.

The Van Nuys Property is currently leased to two tenants, producing $285,769 of triple net revenue, meaning Index was purchasing the Van Nuys Property at an in-place 5.2% capitalization rate and the Van Nuys Senior Loan is at an in-place 6.08% debt yield. Index plans on doubling the buildable area of the 56,250 square foot site from a 1.5:1 floor area ratio (“FAR”) (84,375 buildable sf) to a 3.0:1 FAR (168,750 buildable sf) through a zoning change from the current LA-C2 to RAS-4. If the desired zoning is not achieved, we believe that the Van Nuys Property could be sold at the retail valuation at an amount sufficient to pay off the Van Nuys Senior Loan.

The current improvements on the Van Nuys Property were originally constructed in 1954, and are situated on a 1.291-acre site. Currently, the property is 100.0% occupied and appears to be in average overall condition. Access and commercial exposure of the Van Nuys Property is good due to its direct frontage along Van Nuys Boulevard, a main arterial within the trade area.

The Van Nuys Property is comprised of a two-tenant storefront retail building located at the southwest corner of Van Nuys Boulevard and Kittridge Street in Van Nuys, CA. The building is currently occupied by two tenants, WSS Shoe Store, and La Tapachulteca supermarket. The WSS suite is 6,630 SF and the La Tapachulteca suite totals 18,232 SF which includes an 11,667 SF ground floor, and a 6,565 SF mezzanine level. The lease for WSS expires in February 2017 and La Tapachulteca is currently month to month.

The local area is dominated by average to good quality office and retail properties along arterial streets and relatively dense residential uses along secondary streets. Physically, the Van Nuys Property appears to have been maintained, and has an average physical appeal compared to other properties in the local area. Overall, the Van Nuys Property is generally attractive due to the limited number of available retail properties for sale and appealing debt options. Specifically, the Van Nuys Property has stabilized occupancy and is attractive to potential tenants.

Index’s current plan is to up-zone the Van Nuys Property, complete construction drawings, obtain permits and construction financing, and pay-off the Van Nuys Senior Loan within 18 months. Index believes they will have the ability to build a 162,255 square foot, 140-unit apartment project, requiring a zone change from the existing C-2-1L & P-1VL zoning to a RAS4 zoning designation. Although project plans are unclear, we believe that there are several exits scenarios for the Van Nuys Senior Loan at land values well above the basis of the Van Nuys Senior Loan. The Van Nuys Property optionality includes following Index’s plan for 140 apartment units, building a project at the by-right zoning allowing for approximately 80 residential apartment units, or renovating and re-leasing the current retail building.

The Van Nuys Senior Loan was funded with proceeds from our initial offering, with an initial funding amount of $4,700,000. The Van Nuys Senior Loan has not been fully drawn down by the Borrower, with the maximum size of our obligations under the Van Nuys Senior Loan being $4,900,000, and the amount drawn as of February 19, 2016 being $4,700,000. On the original closing date of the Van Nuys Senior Loan, Van Nuys was capitalized with $1,771,474.33 of equity capital. The Van Nuys Senior Loan is being serviced by Servicing, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor.

The Van Nuys Senior Loan bears an interest rate of 12% per annum, with an amount equal to 6.5% per annum paid current on a quarterly basis, and 5.5% per annum accruing through the maturity date, October 11, 2017 (the “Van Nuys Maturity Date”). In addition, Lending, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor, earned an origination fee of approximately 1.5% of the Van Nuys Senior Loan amount, paid directly by Van Nuys.

Van Nuys has the ability to extend the Van Nuys Maturity Date for a period of 6 months; provided, however, to exercise such extension, Van Nuys is required to pay to us an extension fee consisting of 0.5% of the outstanding principal amount of the Van Nuys Senior Loan, as well as pay off any accrued but unpaid interest. During the extension period, the interest rate of the Van Nuys Senior Loan will increase to 13% per annum. The Van Nuys Senior Loan may be prepaid in whole or in part without penalty during the term of the Van Nuys Senior Loan.

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As of its closing date, the Van Nuys Senior Loan’s loan-to-cost ratio, or the LTC ratio, was approximately 72.6%. The LTC ratio is the amount of the Van Nuys Senior Loan divided by the anticipated cost to acquire and carry the project. There can be no assurance that such estimated costs will prove to be accurate.

The principals of Index have provided full recourse guaranties.

The Van Nuys Property is located along Van Nuys Boulevard, a centrally located and highly amenitized area of the San Fernando Valley. The site is adjacent to grocery stores, shopping and restaurants.

Jons International Marketplace, Walgreens, Starbucks, Wells Fargo, Big 5 Sporting Goods, Bank of America and the Van Nuys Postal Branch are all located adjacent to the Van Nuys Property. There are more than 740,300 permanent residents supported by more than 243,600 daytime employees within a 5-mile radius of the subject property.

The Van Nuys Property is located within a mile from Van Nuys Airport; supporting over 12,300 jobs and contributing over $707 million into the local economy. The Metro Orange line is less than a mile from the Property, providing future residents access to the LNR Warner Center and the Metro Red Line Terminus in North Hollywood.

The line connects riders to several major destinations including the Warner Center, Pierce College, Lake Balboa Park, LA Valley College, Valley Village, the North Hollywood Arts District and the Metro Red Line. From the Metro Red Line, riders have access to Universal City, Hollywood, LA City College, Koreatown, Downtown Los Angeles, and Union Station.

Continuum Mateo Senior Loan – Los Angeles, CA

On April 6, 2016, we acquired from Lending a first mortgage loan with a maximum principal balance of $7,315,000 (the “Continuum Mateo Senior Loan”). The borrower, Continuum 647 Mateo, LLC, a Colorado limited liability company (“Continuum Mateo”), used the loan proceeds to purchase land located at 647 Mateo Street, Los Angeles, CA 90021 (the “Continuum Mateo Property”, and currently plans to develop a two-phase mixed-use project. The Continuum Mateo Senior Loan is secured by the Continuum Mateo Property. Other than with regard to certain other real estate transactions, neither our Manager nor we are affiliated with Continuum Mateo.

Continuum Mateo is managed by the principals of Continuum Partners (“Continuum”), a real estate company, established in 1997, that is based out of Denver, CO, and which specializes in mixed use developments in infill locations.

The Continuum Mateo Property is an industrial zoned site located at the southwest corner of Mateo St. and Conway Place (a private street), in the Arts District of Downtown Los Angeles. The gross land area is approximately 37,236 square feet, that is currently a truck yard and truck wash facility, with only minor improvements. The Continuum Mateo Property is surrounded by older industrial and commercial uses as well as new conversions to new multi-family and retail uses.

Continuum’s current plan is to develop a two-phase mixed-use project. The first phase is expected to be an approximate 49,900 square foot by-right office and retail project, with the second development phase requiring a longer entitlement process.

The Continuum Mateo Senior Loan was funded with proceeds from our initial offering, with a funding amount of $7,315,000. On the original closing date of the Continuum Mateo Senior Loan, Continuum Mateo was capitalized with approximately $2,577,674 of equity capital from the borrower. The Continuum Mateo Senior Loan is being serviced by Servicing, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor.

The Continuum Mateo Senior Loan bears an interest rate of 9% per annum, with an amount equal to 9% per annum paid current on a quarterly basis through the maturity date, April 5, 2017 (the “Continuum Mateo Maturity Date”). In addition, Lending, an affiliate of our Manager and a wholly-owned subsidiary of our sponsor, earned an origination fee of approximately 1.5% of the Continuum Mateo Senior Loan amount, paid directly by Continuum Mateo.

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Continuum Mateo has the ability to extend the Continuum Mateo Maturity Date for a period of One Hundred Eighty (180) days; provided, however, to exercise such extension, Continuum Mateo is required to pay to us an extension fee consisting of 1.0% of the outstanding principal amount of the Continuum Mateo Senior Loan. During the extension period, the interest rate of the Continuum Mateo Senior Loan will increase to 10% per annum. The Continuum Mateo Senior Loan may be prepaid in whole or in part without penalty during the term of the Continuum Mateo Senior Loan.

As of its closing date, the Continuum Mateo Senior Loan’s loan-to-cost ratio, or the LTC ratio, was approximately 75% and was approximately 82% of the property purchase price. The LTC ratio is the amount of the Continuum Mateo Senior Loan divided by the anticipated cost to acquire and carry the project. There can be no assurance that such estimated costs will prove to be accurate.

The principals of Continuum have provided carve-out and springing guaranties.

The Continuum Mateo Property is located along Mateo Street, within the Downtown Los Angeles Arts District. The Arts District is located in the south portion of Downtown Los Angeles. The area is generally bound by the Hollywood (101) Freeway to the north, the Los Angeles River to the east, 7th Street to the south (although the district is clearly and rapidly expanding further south), and Alameda Street on the west.

According to the First Quarter 2015 Market Report, published by the Downtown Center Business Improvement District, there were two large apartment projects under construction, totaling 792 units. Five projects were proposed – totaling 1,102 potential units. The prior inventory consisted of approximately 28 apartment and/or residential condominium properties, with a combined total of 1,471 residential units. Major projects include the Artisan on 2nd (118 apartments), Barker Block (242 residential condos), Biscuit Company Lofts (105 residential condos), Factory Place Arts Complex (180 apartments), and the Mura (190 residential condos). They are a mix of new construction and conversions of older industrial buildings.

Two blocks North of the Continuum Mateo Property is At Mateo, a brand new mixed-use development that is currently under construction and anticipated to deliver in the fall of 2016. At Mateo includes 130,000 sf of retail, 50,000 sf of creative office, and a 540 space parking structure.

The Arts District also contains many popular and acclaimed restaurants/bars, such as Bestia, Café Metropol, Church & State, K-Town Barbeque, Novel Café, R23, Urth Café, Wurstkuche, Villain, and Zip Fusion Sushi.

Acquisition of Senior Mortgage Loan – Stradella Court Marathon

On September 14, 2016, we acquired from Lending a first mortgage loan with a maximum principal balance of $1,760,000 (the “Stradella Court Marathon Senior Loan”). The borrower, SC Group 3012 Marathon, LLC, a Delaware limited liability company (“SC Marathon”), used the loan proceeds to refinance recently entitled land located at 3008-3012 Marathon Street, Los Angeles, CA 90026 (the “Stradella Court Marathon Property”), and currently is designing the 13 approved Small Lot Homes on the 18,204 square feet of land. The Stradella Court Marathon Senior Loan is secured by the Stradella Court Marathon Property. Other than with regard to certain other real estate transactions, neither our Manager nor we are affiliated with SC Marathon.

SC Marathon is managed by the principals of Stradella Court, LLC (“Stradella Court”), a real estate company, established in 2012, that is based out of Los Angeles, CA, and which specializes in real estate located in infill Los Angeles.

The Stradella Court Marathon Property is a recently entitled Small Lot Subdivision located at 3008-3012 Marathon Street, Los Angeles, CA 90026. The gross land area is approximately 18,204 square feet that is currently developed with a single-family home. The Stradella Court Marathon Property is surrounded by older single-family homes in a residential neighborhood with several nearby new residential and retail developments.

SC Marathon recently entitled the site for 13 Small Lot Homes, and plans to fully design and permit the project during the course of the Stradella Court Marathon Senior Loan. The Stradella Court Marathon Senior Loan is expected to be repaid from either construction loan proceeds or sale proceeds.

The Stradella Court Marathon Senior Loan was funded with proceeds from our Offering, with a funding amount of $1,760,000. On the original closing date of the Stradella Court Marathon Senior Loan, SC Marathon was capitalized with approximately $1,080,000 of equity capital from the borrower that had been paid since acquiring the property partially in 2013 and partially in 2014.

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The Stradella Court Marathon Senior Loan bears an interest rate of 8.5% per annum, with an amount equal to 8.5% per annum paid current on a monthly basis from a $149,600 interest reserve through the maturity date, August 24, 2017 (the “SC Marathon Maturity Date”). In addition, Lending earned an origination fee of approximately 1.5% of the Stradella Court Marathon Senior Loan amount, paid directly by SC Marathon.

SC Marathon has the ability to extend the SC Marathon Maturity Date for a period of six (6) months; provided, however, to exercise such extension, SC Marathon is required to pay to us an extension fee consisting of 1.0% of the outstanding principal amount of the Stradella Court Marathon Senior Loan. During the extension period, the interest rate of the Stradella Court Marathon Senior Loan will increase to 9.5% per annum. The Stradella Court Marathon Senior Loan may be prepaid in whole or in part without penalty during the term of the Stradella Court Marathon Senior Loan.

As of its closing date, the Stradella Court Marathon Senior Loan’s loan-to-cost ratio, or the LTC ratio, was approximately 62% and was approximately 92.7% of the property purchase price. The LTC ratio is the amount of the Stradella Court Marathon Senior Loan divided by the cost to acquire, entitle, and the approximate costs to take the project through design, construction drawings and shovel ready permits. There can be no assurance that such estimated costs will prove to be accurate.

Christopher Schwanitz, the Manager of Stradella Court, and Brian Schwanitz have both provided full recourse guarantees.

The Stradella Court Marathon Property received its Vesting Tentative Tract Map No. VTT-72779-SL approval on March 22, 2016 with an appeals period expiration date of April 1, 2016. There was an appeal by a neighbor and a subsequent settlement agreement with the neighbor on May 20, 2016, with an Addendum dated June 14, 2016, limiting the maximum number of homes from the fourteen approved by the City to thirteen per the settlement agreement.

The Stradella Court Marathon Property is located in the Silver Lake neighborhood of Los Angeles, located between Downtown, Hollywood, Koreatown and Echo Park. Silver Lake’s amenities include food trucks, organic farmers’ markets, locally owned boutiques, progressive coffee shops, and popular nightlife. A Whole Foods Grocery Store (365) located 2 miles from the site opened May 2016.

Investment Overviews – Commercial Real Property – Controlled Subsidiaries

Ace Hotel Controlled Subsidiary – Pittsburgh, PA

On December 15, 2015, we acquired from Lending ownership of a “majority-owned subsidiary” in which we have the right to receive a preferred economic return (the “Ace Hotel Controlled Subsidiary”) for a purchase price of $2,275,000 (the “Ace Hotel Investment”), which is the initial stated value of our interest in the Ace Hotel Controlled Subsidiary. In connection with our ownership of the Ace Hotel Controlled Subsidiary, we received various control rights.

The proceeds from the Ace Hotel Investment are expected be used by the Ace Hotel Controlled Subsidiary to renovate an historic building in Pittsburgh, PA into a 63-room Ace Hotel branded hotel. Pursuant to the Ace Hotel Controlled Subsidiary operating agreement, the Ace Hotel Investment is entitled to receive a 15% annual preferred economic return, paid current on a quarterly basis, during through the redemption date. As of its closing date, the Ace Hotel Investment featured an approximately 75% loan-to-value ratio, or LTV ratio based on an independent appraisal, and an approximately 37% LTC ratio.

It is anticipated that Ace Hotel Controlled Subsidiary will redeem the Ace Hotel Investment (for a price equal to the original purchase price plus any accrued but unpaid preferred economic return) on or before November 13, 2018; provided, however, the Ace Hotel Controlled Subsidiary has the option of two (2) extensions, one (1) twelve (12) month extension and one (1) eighteen (18) month extension.

We are pleased to announce that since the date of our investment, the Ace Hotel has officially opened for business.

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Fairmount Controlled Subsidiary – Atlanta, GA

On January 21, 2016, we directly acquired ownership of a “majority-owned subsidiary”, Fairmount, in which we have the right to receive a preferred economic return, for a purchase price of $910,000, which is the initial stated value of our equity interest in Fairmount (the “Fairmount Investment”). In connection with this controlled subsidiary, we received, various control rights described more fully below. Other than with regard to the Fairmount Senior Loan and certain other real estate transactions, neither our Manager nor we is affiliated with Kim King, the sponsor of the project, which oversees day-to-day operations of the Controlled Subsidiary.

The proceeds from the Fairmount Investment are expected to be used for the conversion from industrial to retail of the Fairmount Property.

Pursuant to the agreements governing the Fairmount Investment (the “Fairmount Operative Agreements”), our consent is required for all major decisions regarding the Fairmount Property. In addition, pursuant to the Fairmount Operative Agreements we are entitled to receive a 16% per annum preferred economic return on our Fairmount Investment, comprised of : (i) during years 1-3, 8% per annum paid current on a quarterly basis and 8% per annum accrued, (ii) in year 4, 9% per annum paid current on a quarterly basis and 7% per annum accrued, and (iii) in year 5, 10% per annum paid current on a quarterly basis and 6% per annum accrued. $73,000 of the Fairmount Investment proceeds were held back as a reserve to fund the payment of the preferred economic return. In addition, Lending earned an origination fee of approximately 2% of the Fairmount Investment, paid directly by Fairmount.

Fairmount is required to redeem our Fairmount Investment on January 20, 2021 (the “Fairmount Redemption Date”); provided, that Fairmount has the ability to extend the Fairmount Redemption Date through one 6-month extension. To exercise such extension and avoid default under the Operative Agreements, Fairmount is required to pay to us an extension fee consisting of 1% of our purchase price for the Fairmount Investment. In the event that the Fairmount Investment is not redeemed following any extension, pursuant to the Fairmount Operative Agreements, we have the right, in our discretion, to force the sale of the Fairmount Property outright. Fairmount may redeem our Fairmount Investment in whole or in part without penalty during the term of the Fairmount Investment.

As of its closing date, the Fairmount Investment represented approximately 42.4% of the equity capitalizing Fairmount. The combined LTC ratio of the Fairmount Senior Loan and the Fairmount Investment is approximately 82% LTC. The combined LTC ratio is the amount of the Fairmount Senior Loan plus the amount of the Fairmount Investment, divided by the anticipated cost to build the project. There can be no assurance that such estimated costs will prove to be accurate.

The principals of Kim King have provided full recourse guaranties.

Additional information regarding Fairmount, Kim King, and the Fairmount Property may be found above in the section titled “Fairmount Senior Loan – Atlanta, GA”.

On January 19, 2017, the Fairmont Controlled Subsidiary redeemed us for the full amount of the Fairmont Controlled Subsidiary Investment, including the annualized 16% preferred return thereon. The redemption amount was repaid after the Fairmont Controlled Subsidiary Investment successfully refinanced with a new $5,182,500 longer-term local bank loan at a lower rate.

Grove Controlled Subsidiary – Cordova, TN

On March 2, 2016, we directly acquired ownership of a “majority-owned subsidiary”, CEAI Grove, LLC (the “Grove Controlled Subsidiary”), in which we have the right to receive a preferred economic return for a purchase price of $3,750,000, which is the initial stated value of our equity interest in the Grove Controlled Subsidiary (the “Grove Investment”). The Grove Controlled Subsidiary used the proceeds to acquire a stabilized, 464-unit garden-style multifamily property, Grove at Trinity Pointe, located at 555 Wood Arbor Parkway, Cordova, TN 38018 (the “Grove Property”). The Grove Controlled Subsidiary intends to increase the value of the Grove Property by raising rents, and is anticipating redeeming the Grove Investment via refinancing or sale by December 2022.

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Grove Controlled Subsidiary is managed by the principals of Cohen-Esrey Apartment Investors, LLC (“Cohen-Esrey”), a Kansas based real estate company. Generally, Cohen-Esrey pursues apartment communities of 75-units and larger in stable metropolitan and non-metropolitan locations covering a 30-state region. Its primary focus has tended to be on B and C+ class multifamily properties that present the opportunity for Cohen-Esrey to leverage their expertise to add value. Cohen-Esrey’s principals presently own and manage a real estate portfolio with 31 multifamily assets totaling 2,403 units valued in excess of $120,000,000. Other than with regard to certain other real estate transactions, neither our Manager nor we are affiliated with Cohen Esrey.

Pursuant to the agreements governing the Grove Investment (the “Grove Operative Agreements”), our consent is required for all major decisions regarding the Grove Property. In addition, pursuant to the Grove Operative Agreements we are entitled to receive a minimum 12.5% per annum economic return on our Grove Investment, comprised of : (i) during years 1-3, 12.5% per annum paid current on a quarterly basis, and (ii) in years 4-7, 10.50% plus 30-day LIBOR (adjusted on a quarterly basis and subject to a LIBOR floor of 3.0%). In addition, Lending, an affiliate of our sponsor, earned an origination fee of approximately 2% of the Grove Investment, as well as a approximately $10,000 in due diligence fees and third party reimbursements, paid directly by the Grove Controlled Subsidiary.

The Grove Controlled Subsdiary is required to redeem our Grove Investment by December 1, 2022 (the “Grove Redemption Date”); provided, that the Grove Controlled Subsidiary has the ability to extend the Grove Redemption Date through one 6-month extension. To exercise such extension and avoid default under the Grove Operative Agreements, the Grove Controlled Subsidiary is required to pay to us an extension fee consisting of 1% of our purchase price for the Grove Investment. In the event that the Grove Investment is not redeemed by the Grove Redemption Date (after giving effect to any applicable extensions), pursuant to the Grove Operative Agreements, we have the right, in our discretion, to force the sale of the Grove Property outright. The Grove Controlled Subsidiary may redeem our Grove Investment in whole or in part without penalty during the term of the Grove Investment.

Concurrent with the closing of the Grove Investment, the Grove Controlled Subsidiary closed on the acquisition of the Grove Property on March 2, 2016, for a purchase price of $31,100,000, which included a senior secured loan by Fannie Mae with a projected unpaid balance of $19,248,000, as well as a supplemental loan totaling $4,150,000 (collectively, the “Grove Fannie Mae Senior Loan”), with concurrent maturity dates on 12/1/2022. Aggregate with the senior debt totaling approximately $23,398,000, the Grove Investment of $3,750,000 features an LTV of 87.3%, based on the purchase price of approximately $31,100,000, with approximately $3,952,000 of equity junior to the Grove Investment at closing. The combined LTV ratio is the amount of the Grove Fannie Mae Senior Loan plus the amount of the Grove Investment, divided by the purchase price of the Grove Property.

As of the date of closing, the Grove Property consists of 25 two/three split-story apartment buildings containing a total of 464 dwelling units. Additional buildings include a single story leasing office building, a two-story amenity building and a maintenance shop. Construction of the buildings was completed in 1986. The rent roll of the Grove Property, dated as of January 6, 2016, reflected a current occupancy rate of 93.3%. The Grove Controlled Subsidiary intends to spend approximately $1,700,000 to upgrade the units allowing them to increase the value of the Grove Property by raising rents, and is anticipating redeeming the Grove Investment via a refinancing or sale by December 2022.

As of the date of closing, the apartment buildings are conventionally wood framed with vinyl siding and painted wood trim exterior wall finishes. The building foundations appear to be constructed of concrete slabs on grade with spread footings at perimeter and bearing wall locations (no basement areas). The pitched roofs are wood truss framed with oriented strand board (OSB) sheathing, and are covered with asphalt composition shingles.

As of the date of closing, amenities at the site include the amenity building that contains a fitness center, meeting room, aerobics room and racquetball court. Outdoor amenities include two in-ground swimming pools with interconnected wading pools, an in-ground heated spa, a tennis court, sand volleyball court and barbeque areas. The remainder of the property consists of asphalt paved drive aisles and parking areas, concrete pedestrian walkways, a storm water retention pond and moderate landscaping.

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The city of Cordova, TN is a suburban market located approximately 15 miles east of downtown Memphis, TN. Benefiting from its close proximity to the affluent suburb of Germantown, which neighbors Cordova, to the south with a median household income of approximately $107,000, Cordova’s median household income of approximately $69,000 greatly exceeds Memphis’s median household income of approximately $47,000.

Economic and demographic growth in Cordova was stimulated by the opening of a 1,152,554 square foot super regional mall, Wolfchase Galleria, in 1997, which is located 4 miles north of the Grove Property. The Wolfchase Galleria contains 150 stores, and is anchored by Dillard’s, Macy’s, JC Penny, and Sears. Retail development has continued along the N. Germantown Parkway commercial corridor, including the opening of a Wal-Mart, Target, Kroger, and Starbucks within walking distance of the Grove Property. Continuing 4 miles south along S. Germantown Parkway presents upscale retail options in Germantown including Whole Foods and an Apple store.

Vukota Stratus Controlled Subsidiary – Colorado Springs, CO

On April 29, 2016, we directly acquired ownership of a “majority-owned subsidiary”, Vukota Stratus Apartments, LP (the “Vukota Stratus Controlled Subsidiary”), in which we have the right to receive a preferred economic return for a purchase price of $4,000,000, which is the initial stated value of our equity interest in the Vukota Stratus Controlled Subsidiary (the “Vukota Stratus Investment”). The Vukota Stratus Controlled Subsidiary used the proceeds to acquire a 216-unit stabilized garden-style apartment complex located at 4255 Airport Road, Colorado Springs, CO 80111 (the “Vukota Stratus Property”). The Vukota Stratus Controlled Subsidiary intends to increase the property value by raising rents before taking out the Vukota Stratus Investment via refinancing or sale by September 2023.

Vukota Stratus Controlled Subsidiary is managed by the principals of Vukota Capital Management, LLC (“Vukota”), a privately-held investment firm focused exclusively on alternative investments. The firm, founded in 2010, identifies properties with below market rents in communities where there are strong long-term fundamentals and where there is the potential to reduce operating costs. Vukota’s multifamily portfolio presently consists of 8 properties with 1,068 units (not counting subject) worth over $65,000,000. Other than with regard to certain other real estate transactions, neither our Manager nor we are affiliated with Vukota.

Pursuant to the agreements governing the Vukota Stratus Investment (the “Vukota Stratus Operative Agreements”), our consent is required for all major decisions regarding the Vukota Stratus Property. In addition, pursuant to the Vukota Stratus Operative Agreements we are entitled to receive a 12.0% per annum economic return on our Vukota Stratus Investment, comprised of a minimum of 9.0% economic return paid on a current basis, with the remainder accruing until the Vukota Stratus Investment is redeemed. In addition, Lending, an affiliate of our sponsor, earned an origination fee of approximately 1.5% of the Vukota Stratus Investment, as well as a approximately $10,000 in due diligence fees and third party reimbursements, paid directly by the Vukota Stratus Controlled Subsidiary.

The Vukota Stratus Controlled Subsdiary is required to redeem our Vukota Stratus Investment by September 1, 2023 (the “Vukota Stratus Redemption Date”); the Vukota Stratus Controlled Subsidiary does not have the ability to extend the Vukota Stratus Redemption Date. In the event that the Vukota Stratus Investment is not redeemed by the Vukota Stratus Redemption Date (after giving effect to any applicable extensions), pursuant to the Vukota Stratus Operative Agreements, we have the right, in our discretion, to force the sale of the Vukota Stratus Property outright. The Vukota Stratus Controlled Subsidiary may redeem our Vukota Stratus Investment in whole or in part without penalty during the term of the Vukota Stratus Investment.

Concurrent with the closing of the Vukota Stratus Investment, the Vukota Stratus Controlled Subsidiary closed on the acquisition of the Vukota Stratus Property on April 29, 2016, for a purchase price of approximately $17,375,000, which included a senior secured loan by Freddie Mac with a projected unpaid balance of $10,767,000 (the “Vukota Stratus Freddie Mac Senior Loan”), with a maturity date of September 1, 2025. Aggregate with the senior debt totaling approximately $14,767,000, the Vukota Stratus Investment of $4,000,000 features an LTV of approximately 85.0%, based on the purchase price of approximately $17,375,000, with approximately $2,608,000 of equity junior to the Vukota Stratus Investment at closing. The combined LTV ratio is the amount of the Vukota Stratus Freddie Mac Senior Loan plus the amount of the Vukota Stratus Investment, divided by the purchase price of the Vukota Stratus Property.

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As of the date of closing, the Vukota Stratus Property consisted of 216 units of 2-story garden style apartments located in Colorado Springs, CO. The rent roll dated as of March 15, 2016, reflects a current occupancy rate of 94%. The apartments and property are generally well maintained and feature rocky mountain landscaping, outdoor swimming pools, playground, fitness center, Resident lounge with Wi-Fi, laundry facilities, picnic area, and courtyards.

The Vukota Stratus Property is located on Airport Road, one of Colorado Springs’ major east-west thoroughfares, and significant retail, restaurants and entertainment. Less than five minutes north of the Vukota Stratus Property is the one million-square-foot Citadel Mall, which consists of over 100 stores from Dillard’s to Bath & Body Works, as well as The Citadel Crossing Shopping Center, which includes Lowes, Office Depot and Petco.

In the past two years, the prior owners of the Vukota Stratus Property had invested approximately $2,500,000 (or approximately $11,500 per unit) in capital improvements. Highlights include new roofs, a completely renovated clubhouse, fitness center and pool area, exterior paint, select unit renovations, new signage and landscaping upgrades.

Located in El Paso County and just 60 miles south of Denver, Colorado Springs is the second largest metropolitan area in Colorado. Known for its natural attractions and mild climate, the Colorado Springs area experiences an average of 300 days of sunshine annually. The community’s beautiful setting and high quality-of-life has helped to build a growing community of academic, government, high-tech, non-profit, and defense-related businesses.

With its strong military population and large concentration of strategic bases, the Greater Colorado Springs Economic Development Corporation estimates that military and defense-related employers make up just over a third of the metropolitan area’s economy. Technology, health care, financial services, non-profits, and light manufacturing companies make up the bulk of Colorado Springs employment.

Elysium 14 Controlled Subsidiary – Washington, DC

On May 10, 2016, we directly acquired ownership of a “majority-owned subsidiary”, 14th Street L.L.C. (the “Elysium 14 Controlled Subsidiary”), in which we have the right to receive a preferred economic return for a purchase price of $4,475,000, which is the initial stated value of our equity interest in the Elysium 14 Controlled Subsidiary (the “Elysium 14 Investment”). The Elysium 14 Controlled Subsidiary is expected to use the proceeds to continue the construction of a 56-unit apartment building with ground floor and below grade retail space located at 1921 14^th Street NW, Washington, DC 20009 (the “Elysium 14 Property”). The Elysium 14 Controlled Subsidiary intends to take out the Elysium 14 Investment via refinancing or sale by November 2017.

Elysium 14 Controlled Subsidiary is managed by the principals of Madison Investments, LLC (“Madison”), is a family owned and operated real estate firm located in Washington, DC. Madison’s focal point is the renovation and ground-up development of buildings. Madison’s management team has worked together in Washington, DC and its surrounding markets in varying capacities for over 25 years.

Pursuant to the agreements governing the Elysium 14 Investment (the “Elysium 14 Operative Agreements”), our consent is required for all major decisions regarding the Elysium 14 Property. In addition, pursuant to the Elysium 14 Operative Agreements we are entitled to receive a 12.5% per annum economic return on our Elysium 14 Investment, paid current on a quarterly basis until the Elysium 14 Investment is redeemed. In addition, Lending, an affiliate of our sponsor, earned an origination fee of approximately 1.5% of the Elysium 14 Investment, as well as a approximately $10,000 in due diligence fees and third party reimbursements, paid directly by the Elysium 14 Controlled Subsidiary.

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The Elysium 14 Controlled Subsdiary is required to redeem our Elysium 14 Investment by November 10, 2017 (the “Elysium 14 Redemption Date”); provided, that, the Elysium 14 Controlled Subsidiary has the ability to extend the Elysium 14 Redemption Date through two (2) twelve (12) month extensions. To exercise each such extension and avoid default under the Elysium 14 Operative Agreements, the Elysium 14 Controlled Subsidiary is required to pay us an extension fee 1% of the outstanding stated value of the Elysium 14 Investment. During the first extension period, the per annum economic return on the Investment will increase to 13.5% per annum. During the second extension period, the per annum economic return on the Investment will increase to 14.5% per annum. In the event that the Elysium 14 Investment is not redeemed by the Elysium 14 Redemption Date (after giving effect to any applicable extensions), pursuant to the Elysium 14 Operative Agreements, we have the right, in our discretion, to force the sale of the Elysium 14 Property outright. The Elysium 14 Controlled Subsidiary may redeem our Elysium 14 Investment in whole or in part without penalty during the term of the Elysium 14 Investment. In addition, the Elysium 14 Investment is secured by membership interests of the managing member of the Elysium 14 Controlled Subsidiary.

Concurrent with the closing of the Elysium 14 Investment, the Elysium 14 Controlled Subsidiary closed on the First Amendment of the Loan Agreement (“First Amendment of the United Loan”) of the Elysium 14 Property on May 10, 2016. The First Amendment of the United Loan modified an existing senior secured construction loan on the property by United Bank. The First Amendment of the United Loan increased the amount of available funds by approximately $1,500,000, increasing the loan amount from $22,900,000 to $24,400,000 (the “Elysium 14 United Senior Loan”), with an updated maturity date of September 10, 2017. Aggregate with the Elysium 14 United Senior Loan, totaling approximately $24,400,000, the Elysium 14 Investment of $4,475,000 features an LTC of approximately 89%, based on the construction budget of approximately $32,421,507, with approximately $3,546,507 of equity junior to the Elysium 14 Investment at closing.

The Elysium 14 Property, a projected 56-unit apartment building with ground floor and below grade retail space, is currently under construction on 14th Street NW, at its intersection with Wallach Place, about half a block south of U Street, NW in Washington, DC, situated in the midst of a substantial concentration of new apartment construction, and retail activity along both 14th and U Streets. The Elysium 14 Property is being constructed on an approximately 9,540 square foot lot, and is expected to include space in several existing two and three townhouses that have been gutted, as well as a 9 story tower that is new construction. The project is planned with approximately 12,712 square feet of retail space, with approximately 5,029 square feet of this amount located on the lower level, below grade, without visibility. In addition, the project is planned with 56 apartment units, including studio, one bedroom, and two bedroom units. Several of the penthouse units on the 9th floor are planned with private roof top terraces.

The Elysium 14 Property is planned with a limited amenity package. Many larger projects in the area include such amenities as resident lounges, fitness centers, rooftop decks, and swimming pools. As of the date of the Elysium 14 Investment, the only planned amenity is an 8th floor resident lounge area, with an outdoor balcony that is approximately 10’ by 35’. Plans also include a smaller balcony on the 8th floor, approximately 10’ by 18’, that would be accessible to tenants. Furthermore, the property is not planned with any on site parking, however it does include basement storage for 30 bikes.

The Elysium 14 Property is located at the intersection of 14^th corridor and the heart of the U Street Corridor, Washington, DC’s storied, artistic center. The U Street Corridor brings a variety of boutiques, art galleries, theaters and music venues including Lincoln Theater, Howard Theater, 9:30 Club and U Street Music Hall. Within a one-mile radius of the Elysium 14 Property there are numerous upscale restaurants and bars, as well as vibrant nightlife.

Investment Overviews – Other Real Estate Related Investments

Woodlands Preferred Equity – Snoqualmie, WA

On December 18, 2015, we entered into a subscription agreement with Sno Woodlands, LLC, a Delaware limited liability company (“Woodlands”) managed by Evergreen Housing Development Group, LLC, a Washington limited liability company (“Evergreen”), whereby we acquired $2,000,000 in Class B Units of Woodlands (the “Woodlands Units”). The proceeds of the purchase of the Woodlands Units are to be used by Woodlands for the refinancing of a stabilized 100-unit townhome apartment complex located at 34626 SE Swenson Drive, Snoqualmie, WA 98065 (the “Woodlands Property”).

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As of its closing date, our investment in the Woodlands Units represented approximately a 76.4% LTV ratio based on an independent appraisal from January 2015. Pursuant to the Woodlands operating agreement, which was amended at closing, the Woodlands Units are entitled to receive a 12% annual preferred economic return during each of the first two years of our ownership, a minimum of a 12.5% annual preferred economic return during years three, four and five, and a minimum of a 13% annual preferred economic return during years six and seven.

It is anticipated that the preferred economic return will be paid quarterly, and, in the event such amounts are not paid, such unpaid amount shall accrue at a higher rate of preferred economic return. It is anticipated that Woodlands will redeem the Woodlands Units (for a price equal to the original purchase price plus any accrued but unpaid preferred economic return) on or before September 1, 2022. In the event that Woodlands does not redeem the Woodlands Units before September 1, 2022, we have the right to force the sale of the Woodlands Property or purchase the Woodlands Property outright.

Pryde Project Dependent Note – Seattle, WA

On January 7, 2016, we acquired from the National Commercial Real Estate Trust, a Delaware statutory trust (the “Trust”), an unsecured Project Dependent Note with a principal amount of $1,000,000 (the “Note”). The Trust is an affiliate of our Manager, Fundrise Advisors, LLC, as the Trust’s manager trustee, National Commercial Real Estate Trustee, LLC, is a wholly-owned subsidiary of our sponsor, Rise Companies Corp.

The Note is backed by and wholly dependent upon the performance of Pryde Johnson Ballard 56^th, LLC, a Washington limited liability company (“Pryde”). Pryde is a Controlled Subsidiary of the Trust. Other than through Pryde and certain other real estate investments, neither our Manager nor we are affiliated with the sponsor of the project, Pryde+Johnson LLC (the “Pryde Developer”), which oversees the day-to-day operations of Pryde.

On July 29, 2015, the Trust acquired from Lending ownership of Lending’s position in Pryde, for a purchase price of $3,550,000, which was the initial stated value and purchase price of Lending’s position in Pryde. Lending, as originator of Pryde position, earned an origination fee of 2.0% of the stated value of the position acquired in Pryde by Lending, payable by Pryde.

The proceeds from the Pryde acquisition are expected to be used by Pryde to pay for a portion of the ground-up construction costs of a 106-unit apartment building, The Keelson, located at 5711 24^th Avenue, NW, Seattle, WA 98107. The Pryde Developer has owned the land since 2004 and used half of the site to deliver 79 high-end condos in 2008. The Pryde Developer has successfully completed several projects in the immediate area.

The Pryde Developer began construction in August of 2015 and anticipates completing construction by the fall of 2016 with stabilization occurring by the spring of 2017. The Pryde Developer expects to either refinance or sell the asset after stabilization by the summer of 2018. The sponsor is projecting an as-stabilized net operating income (NOI) of roughly $1,900,000, which would value the asset at over $40,000,000 based on prevailing average market cap rates of 4.75% as of July 2015.

The Pryde Developer has budgeted total project cost of approximately $28.7 million, to be funded with a $20.25 million construction loan, $3.55 million in equity from Lending (as acquired by the Trust), and $4.9 million in equity from the Pryde Developer.

Pursuant to the agreements governing of Pryde (the “Pryde Operative Agreements”), the Trust’s consent is required for all major decisions regarding the property. In addition, pursuant to the Pryde Operative Agreements, the Trust is entitled to receive a 14% per annum economic return, comprised of 6% per annum being paid current on a quarterly basis and 8% per annum accruing and annually compounding. The initial redemption date of the Trust’s position in Pryde is July 29, 2018, although the Pryde Developer retains the right to redeem out the Trust at any time earlier to such date.

The economics of the Note mirror those of the Trust’s position in Pryde, with the Note bearing an interest rate of 14% per annum, comprised of 6% per annum being paid current on a quarterly basis and 8% per annum accruing and annually compounding. Further, the initial maturity date of the Note is July 29, 2018, although the Note may be redeemed by the Trust at any time prior without prepayment penalty, and the Trust is not obligated to redeem the Note in the event that its position in Pryde has not also been redeemed.

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The Note is part of a $3,550,000 series of Project Dependent Notes, the remainder of which had been issued solely to accredited investors by the Trust pursuant to a private placement conducted pursuant to Rule 506(b) of Regulation D. Accordingly, any payments of principal and interest on our Note and the other Project Dependent Notes outstanding in the series will be made pro rata and pari passu.

The principals of the Pryde Developer have provided personal recourse guarantees regarding the position in Pryde held by the Trust.

As the Note was purchased from the Trust, an affiliate of our Manager, the Independent Representative reviewed and approved the transaction prior to its consummation.

RPQ Preferred Equity – Richland, WA

On January 7, 2016, we acquired from Lending ownership of Class B Units (the “RPQ Units”) of RPQ Delaware, LLC, a Delaware limited liability company (“RPQ”), which is managed by Evergreen Housing Development Group, LLC. a Washington limited liability company (“Evergreen”), for the purchase price of $2,000,000, which is the initial stated value of the Class B Units. Other than with regard to the purchase of the RPQ Units and other real estate investments, neither we nor our Manager is affiliated with Evergreen, which oversees day-to-day operations of RPQ.

The proceeds from the RPQ Units are to be used for the refinancing of a stabilized 228-unit garden style multifamily apartment property located at 3003 Queensgate Drive, Richland, WA 99352 (the “RPQ Property”). Evergreen completed construction of the second phase of the 228-unit property in the 2013.

As part of the refinancing, RPQ closed a new 7-year, fixed rate senior loan from the lender, Federal Home Loan Mortgage Corporation (“Freddie Mac”), in the amount of $22,268,815 based upon a third party appraised value of the Property equal to $28,920,000. The October 2015 rent roll provided by Evergreen on behalf of RPQ reflects an occupancy rate of 92.5% for the property and a trailing 12-month NOI of approximately $1,904,613.

Pursuant to the agreements governing the RPQ Units (the “RPQ OperativeAgreements”), we are entitled to receive a 13% annual preferred economic return to be paid current, on a quarterly basis, during the term of the investment. RPQ is required to redeem the RPQ Units on or before July 1, 2021. In the event that such amounts are not paid when due, such unpaid amount shall accrue at a higher rate of preferred economic return. Lending, as originator of Pryde position, earned an origination fee of 2.0% of the stated value of the RPQ Units acquired by Lending, payable by RPQ.

The principal of Evergreen has provided the holder of the RPQ Units with standard carve-out and springing guaranties.

As the RPQ Units were purchased from Lending, an affiliate of our Manager, the Independent Representative reviewed and approved of the transaction prior to its consummation.

JOSS Preferred Equity – Santa Monica, CA

On January 27, 2016, we acquired from Fundrise Investments 15, LLC, a Delaware limited liability company (“Fundrise Investments”) and wholly-owned subsidiary of our sponsor, ownership of Special Member Preferred Units (the “1315 Lincoln Units”) of 1315 Lincoln Venture LLC, a Delaware limited liability company (“1315 Lincoln”), for the purchase price of $1,000,000, which is the initial stated value of the 1315 Lincoln Units. Other than with regard to the purchase of the Units and certain other real estate investments, neither our Manager nor we are affiliated with JOSS, which oversees day-to-day operations of 1315 Lincoln.

1315 Lincoln is managed by the principals of JOSS Realty Partners B LLC, a Delaware limited liability company (“JOSS”), New York, NY based real estate firm. Since 2005, JOSS has successfully utilized its real estate operating and investment management expertise to maximize returns for investors. JOSS has made over $750 million of commercial office acquisitions since its founding.

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The initial proceeds from the 1315 Lincoln Units, when purchased by Fundrise Investments, were used by JOSS for the acquisition of a stabilized, 100% leased 23,557 SF Class A Office building located at 1315 Lincoln Blvd., Santa Monica, CA (the “1315 Lincoln Property”). 1315 Lincoln Boulevard is located in the heart of Silicon Beach— Southern California’s technology center and home to over 600 tech, media, entertainment, and creative companies. The 1315 Lincoln Property is surrounded by exceptionally affluent residential communities, including Santa Monica, Beverly Hills, Malibu, Pacific Palisades, Bel Air, Brentwood, Westwood, and Marina del Rey. Over the past decade, Downtown Santa Monica has witnessed a consistent influx of upscale retail, office, and residential components.

At the time of acquisition, existing leases of the 1315 Lincoln Property featured an average annual rent increase of 3%, and the sponsor, JOSS, is targeting further rent increases at rollover in 2017 and 2020, and is anticipating redeeming the 1315 Lincoln Units through proceeds from a sale of the 1315 Lincoln Property via sale by April 2020.

JOSS closed on the acquisition of the 1315 Lincoln Property in April 2015, at a purchase price of $23,650,000, and anticipates the following timeline: (i) April 2015 – acquisition of 1315 Lincoln Property; (ii) 2015-2020 – lease-up at rollover and increase rents; and (iii) April 2020 – exit via sale. Assuming the JOSS-projected year 5 NOI of $1,436,520 and the appraiser's concluded cap rate of 5.4%, the 1315 Lincoln Property is projected to yield a sale value of over $26,500,000. However, there can be no assurance that such projected events shall ever occur or that such projected valuation will ever be achieved.

The 23,557 square foot property is 100% leased, and features the following rent roll:

City National Bank (2,757 SF) – Los Angeles-based City National Corp. (NYSE: CYN) is the parent company of City National Bank. It offers a full complement of banking, trust and investment services through 75 offices, including 16 full-service regional centers, in Southern California, the San Francisco Bay Area, Nevada, New York City, Nashville and Atlanta.

Dethrone Basecamp (3,400 SF) – Workout and cardio studio founded by Nick Swinmurn, founder of Zappos.com.

Centro Media (5,534 SF) – Founded in 2001, the Centro Media is an “ad tech” company headquartered in Chicago with operations in 30 other cities, including New York, Dallas, Los Angeles and Toronto. In November 2014, Advertising Age ranked Centro as the #1 best place to work. Centro Media has approximately 480 employees.

O’Gara Coach Company (5,374 SF) – O’Gara Coach Company is an award winning New and Pre-owned retailer for Aston Martin, Bentley, Bugatti, Lamborghini and Rolls-Royce Motor Cars. O’Gara’s show rooms are located in Beverly Hills and Westlake, and its operations and social networking office is now located at 1315 Lincoln.

Chandler Chicco Agency (6,492 SF) – Chandler Chicco Agency (CCA) is the world's largest pure-play healthcare communications firm with a long-standing reputation for doing some of the best work in the industry. CCA is owned by inVentiv Health, Inc., a leading global provider of best-in-class clinical, commercial and consulting services to companies seeking to accelerate performance. The growing client roster includes more than 550 pharmaceutical, biotech and life sciences companies. With 13,000 employees servicing clients in 70 countries, inVentiv supports clients across every part of a product’s lifecycle.

The 1315 Lincoln Property was constructed in 2005 and consists of one office building with two sub-grade levels of parking. The 1315 Lincoln Property comprises of 23,531 square feet of rentable building area and 17,202 square feet of garage space. The 1315 Lincoln Property was designed and constructed to the highest institutional quality standards and is highlighted by a unique curvilinear façade with attractive window lines that allows for an abundance of natural light and spectacular views. Interior features include 20-foot high ceilings on both floors, above-average power capable of meeting the demands of the most technology driven user, high-efficiency air conditioning units, and modern creative office space with in-suite restrooms and private kitchens. Moreover, the 1315 Lincoln Property includes 136 parking spaces, which equates to 5.77 spaces per 1,000 rentable square- feet—a rare amenity given Santa Monica’s infill location.

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Pursuant to the agreements governing the 1315 Lincoln Units (the “1315 Lincoln Operative Agreements”), we are entitled to receive a 12% per annum preferred economic return, with 6% per annum to be paid current on a quarterly basis and 6% per annum to accrue during the term of the investment. The initial redemption date of the 1315 Lincoln Units is April 13, 2020 (the “1315 Lincoln Redemption Date”). The 1315 Lincoln Redemption Date may be extended for a period of 6 months, provided, that in order to extend the 1315 Lincoln Redemption Date, 1315 Lincoln is required to pay to the holders of the 1315 Lincoln Units an extension fee consisting of 1% of the stated value of the 1315 Lincoln Units. Lending, as originator of 1315 Lincoln Units, earned an origination fee of 2% of the stated value of the 1315 Lincoln Units acquired by Lending, paid directly by 1315 Lincoln.

Based on the purchase price of the 1315 Lincoln Property, the 1315 Lincoln Units (when aggregated with the other 1315 Lincoln Units outstanding) features an 87% LTV (aggregate with senior debt), with $3,050,000 of JOSS/LP equity junior to the 1315 Lincoln Units. Based on the total projected cost, the 1315 Lincoln Units features an 82% LTC (aggregate with senior debt), with over $4,400,000 of JOSS/LP equity junior to the 1315 Lincoln Units. However, there can be no assurance that such projections will prove to be accurate.

The principal of JOSS has provided the holders of the 1315 Lincoln Units with standard carve-out and springing guaranties.

As the 1315 Lincoln Units were purchased from Fundrise Investments, an affiliate of our Manager, the Independent Representative reviewed and approved of the transaction prior to its consummation.

Located on the southern coast of California, Los Angeles County covers 4,061 square miles and includes San Clemente and Santa Catalina islands. Los Angeles County is the most heavily populated county in the country with approximately 10.8 million residents within the city limits and the unincorporated areas of the county. Los Angeles County is home to one of the most educated labor pools in the country and offers a labor force of more than 4.7 million, of which more than 1.5 million are college graduates.

Los Angeles County is comprised of approximately 88 vibrant and diverse cities hosting more than 244,000 businesses establishments-the greatest concentration in the state of California. Los Angeles County has a Gross Domestic Product (GDP) of approximately $446 billion. If Los Angeles County were a nation, its economy would be the 18th largest in world. Los Angeles is recognized worldwide as a leader in entertainment, health sciences, business services, aerospace and international trade. The city also has more museums than any other city and some of the best hotels in the world.

Throughout its history, Los Angeles County has developed a diverse economic base, supported by a number of Fortune 500 companies with headquarters in the area including Walt Disney, Computer Sciences, DirecTV Group, Health Net, KB Homes, Jacobs Engineering Group, Avery Dennison, Mattel and Ryland Group. Key factors positively influencing the region’s economic position include: increased local media production by the entertainment industry, a continuing expansion of import flows, and growth in aerospace, homeland security, and in the private business sector. Over $25 billion in on-going infrastructure construction activity is underway to support the local economy, including expansions of the ports of Long Beach and Los Angeles and an extension of the Metro Gold Line. Los Angeles County’s world class infrastructure will enable Greater Los Angeles to continue to be a world leader in economic and cultural influence.

Los Angeles County is served by one of the largest freeway networks in the country, providing access to the five neighboring counties of Orange, Riverside, San Bernardino, Kern and Ventura, as well as the rest of the nation. Los Angeles County’s extensive freeway network facilitates the movement of people and freight throughout the region, the state, and the nation.

Market Outlook — Real Estate Finance Markets

We are encouraged by continued improvement in commercial real estate capital and credit markets, as well as the positive macroeconomic growth supporting the CRE industry. As we look ahead the next three years, we believe improving fundamentals, transactions, and commercial real estate lending activities will continue to strengthen in core United States metro markets. Further, assistance provided by governmental support programs and commitments over the immediate future are expected to further support U.S. capital markets over the immediate future.

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