ArborCrowd (the “Company”), the first crowdfunding platform launched by a real estate institution, announced today that it has exited its investment in the Sioux Falls Multifamily Portfolio, a collection of Class B apartment communities located in Sioux Falls, S.D. This strategic decision generated a net internal rate of return (IRR) of over 16 percent, exceeding the original targeted net IRR of 12 to 14 percent.
The Company’s decision to exit the 707-unit Sioux Falls Multifamily Portfolio investment was based on a number of factors, including changes the sponsor sought to make to the business plan that could have materially impacted the initially projected returns and investment horizon. These changes were determined to be too much of a deviation from the original business plan, and the Company was able to negotiate an exit from the investment that generated strong profits for investors in a challenging market environment.
“What sets ArborCrowd apart from our competitors is not only our approach to sourcing and underwriting investment opportunities, but also our commitment to active asset management and our unique ability to identify and mitigate potential risks,” said Adam Kaufman, Co-Founder and COO of ArborCrowd. “Our longstanding philosophy of responsible investing doesn’t stop when we commit capital to a deal – we closely monitor and continually evaluate each investment throughout its lifecycle. This approach is particularly important as we enter an economic and real estate downcycle.”
The exit from the Sioux Falls Multifamily Portfolio after a 13-month period came well ahead of the initially projected three- to five-year hold period. The outsized IRR generated by the sale marks the third ArborCrowd investment to exceed its targeted IRR. The other two investments – the Southern States Multifamily Portfolio and Quarry Station Apartments – were realized ahead of schedule in 2018 and 2019, respectively.
Kaufman added, “Now more than ever, it’s incumbent upon real estate crowdfunding platforms to work even harder on behalf of investors to monitor the performance of current investments and to rigorously evaluate new deals they bring to the crowd – especially as the real estate industry at large works to determine how the current market environment will impact asset valuations. At this point in time, we believe it is irresponsible to not take a pause before introducing new offerings to the crowd until the initial impact of the current economic challenges are better known.”
ArborCrowd is the first real estate crowdfunding platform launched by a real estate institution, opening up an exclusive network to a new class of investors. As part of The Arbor Family of Companies, which includes Arbor Realty Trust (NYSE: ABR), a leading publicly traded commercial mortgage real estate investment trust, ArborCrowd is backed by more than 30 years of leadership experience. ArborCrowd reviews more than 500 deals a year from its proprietary network and only chooses the ones that survive its rigorous underwriting process. ArborCrowd prefunds capital to a deal prior to launching the offering to investors. This ensures the deal closes and allows ArborCrowd to offer investors accurate and detailed information about the property. Additionally, ArborCrowd chooses to present one deal at a time, so there is no guessing what property investors will actually own.