UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT
Pursuant Regulation A of the Securities Act of 1933
January 15, 2019
(Date of Report (Date of earliest event reported))
FUNDRISE MIDLAND OPPORTUNISTIC REIT, LLC
(Exact name of registrant as specified in its charter)
| Delaware | 32-0479856 |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
| 1601 Connecticut Ave., Suite 300, Washington, DC | 20009 |
| (Address of principal executive offices) | (ZIP Code) |
(202) 584-0550
(Registrant’s telephone number, including area code)
Common Shares
(Title of each class of securities issued pursuant to Regulation A)
| Item 9. | Other Events |
Attached as Exhibit 15 is a copy of a shareholder letter distributed to our investors on January 15, 2019.
Safe Harbor Statement
This Current Report on Form 1-U contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in our Offering Statement on Form 1-A dated August 10, 2018, filed with the Securities and Exchange Commission (“SEC”), as such factors may be updated from time to time in our periodic filings and prospectus supplements filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FUNDRISE MIDLAND OPPORTUNISTIC REIT, LLC | |||
| By: | Fundrise Advisors, LLC | ||
| Its: | Manager | ||
| By: | /s/ Bjorn J. Hall | ||
| Name: | Bjorn J. Hall | ||
| Title: | General Counsel | ||
Date: January 15, 2019
Exhibit 15
Progress update: San Marcos property management making headway
Over the past year, the apartment building had some setbacks but is now getting back on track.
About a year ago, we purchased the Cedars of San Marcos, a 168-unit stabilized apartment building in San Marcos, Texas, located halfway between Austin and San Antonio. We invested in the property due to the region’s strong demographic growth and Texas State University’s steady expansion. San Marcos is one of the fastest growing cities in Texas and in the United States. Since 2010, the city has grown by more than 33%. Employment growth in Hays and Comal County (37%) has outpaced Austin (31%) and is more than 6 times the pace of the country overall.
Upon purchasing the property, however, we and our operating partner uncovered unexpected repairs and maintenance needs, as well as property management issues. During the first few months of owning the property, occupancy fell and operating expenses rose. We ceased property cash distributions during the later part of last year and took a more hands-on approach, eventually choosing to replace the property management company.
With new management and steady attention, occupancy has now recovered to about 95%, and with it expected cash flows. In other good news, the apartment units that we have renovated so far with new kitchens and bathrooms are achieving approximately $125 to $150 per month higher rents, which is the upper end of our forecasts. We will be paying close attention to the property and our operating partner’s performance. Over the coming year, we expect the property to perform well again.
Of the dozens of apartment communities we have purchased, Cedars of San Marcos has been the first “false start”. It is a good reminder that even a well underwritten acquisition can have unforeseen problems and why a well-diversified portfolio is a good hedge against the unexpected. We are optimistic over the long term that focused management coupled with strong demographics will drive healthy income and appreciation. In particular, the 4.25% interest rate (locked in for 12 years) on the senior loan we took out to buy the property looks very attractive with rates closer to 5% today, and expected to rise.
How this impacts your portfolio
Our decision to temporarily cease cash distributions from the property reduced the overall income of the Heartland eREIT. In conjunction with a longer than expected ramp-up period for two of the construction investments also held by the Heartland eREIT, we determined that it was most prudent to temporarily pause its dividends for the months of November and December 2018. Now that this property’s performance is returning to its expected levels, and the pace has picked up on the construction projects, we have resumed dividends effective January 1. As the Heartland eREIT begins to stabilize, we expect that distributions will be more in line with the other, more mature eREITs on the platform (but as with any investment, there can be no guarantees of future dividends or performance more generally).
We remain optimistic about the long-term outlook for both this project and the Heartland eREIT, and look forward to providing ongoing updates about the progress of each. As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.