It’s time for my midyear report on the state of my real estate equity crowdfunding and syndication portfolio. This year 3 investments have gone full cycle. A RealtyShares retail in Las Vegas retail parcel sold in February and the 2-year hold netted a 28% IRR. Also, the Real Crowd O’Donnell Phoenix industrial building project went full cycle in June of this year. This 18 month hold also generated a 28% IRR. The last investment that went full cycle was iFunding’s Milwaukee fix and flip. This is my fist loss of principle on a deal. Including distributions my loss was 36% or about a -12% IRR. The sales price net of fees came out to a 56% haircut. Luckily, the home was rented for almost 2 years to half offset some of the loss.
Cash flow for my equity portfolio was 9.8% for the first half of 2017. The annualized cash on cash yield includes quarterly distributions from 39 equity investments, the iFunding loss and the two full cycle deals with Real Crowd and Realty Shares. 14 equity investments did not make a quarterly distribution in 2017. 9 of the 14 were ground up investments or deals that were not projecting a cash flow for 2017.
That leaves me with 5 problem investments out of my 53 equity investments. While its 9% of the number of investments, they represent only 4% of my dollars invested. At this point, none of the five seem to be in serious jeopardy of losing capital. The Real Crowd San Dimas Multi-family project was slow to lease up, but as of the end of q2, they had only once vacancy. My Peer Realty Chicago office deal has been very slow in its lease up plan. They made some headway this quarter and may be cash flow positive by year end. A Realty Mogul Memphis motel deal is struggling. Occupancy is an issue here and only time will tell if they can figure right the ship. (no update and its almost 60 days after the end of q2) A RealtyShares New Orleans retail is exploring a sale. Any gain would be welcomed. A series of setbacks, but still close to full occupancy. Fundrise Chapel Hill office building is also struggling. This investment was forecasted to have low returns. I really invested because I knew the building and went to school in Chapel Hill. They lost their major tenant and time will tell if they can recover. The most problematic investment in my equity portfolio. Luckily, I went in at the minimum investment amount or .4% of the portfolio. Lesson learned, do not invest for sentimental reasons.
Most of the other investment are performing close to projections. The top performing deals are:
- Texas mobile home park (9% of portfolio) direct with a Sponsor yielding 20% cash on cash in 2017
- A Real Crowd Stratford extended stay hotel (2% of portfolio) yielding 18% cash on cash in 2017
- A South Dakota mobile home park (12% of portfolio) direct with sponsor yielding 15% for 2017
- A Realty Shares medical office building (1% of portfolio) in Ohio yielding 14% for 2017
At least 2 investments are forecasted to sell by the end of the year and a few more are on the market. The 2 deals under contract are self-storage facilities direct with sponsors and should yield close to a 30% IRR.
This year, I’ve made seven new equity investments that add another 10% to my portfolio. A hotel with the same Stratford hotel sponsor from above. A ground up Charleston SC industrial development with a repeat sponsor. A Georgia self-storage facility direct with a repeat sponsor. Investment with a repeat sponsor on a TIC/DST vulture fund. An investment with a diversified fund that does single family homes, raw land, and tax liens. A preferred equity investment yielding 14% on a multifamily property. Making another investment into an Alabama mobile home park next month. As you can see, at this stage of the cycle I am looking for unique and counter cyclical investments. The average office, retail or multi-family deal is of little interest to me now.