Our streak of above pro forma marketplace exits continues! We are pleased to announce our ninth realized offering on the marketplace with the closing of Urban Green’s Burnside project earlier this summer. Investors earned a 66.5% IRRThe Internal Rate of Return (IRR) is the rate at which each invested dollar is projected to grow for each period it is invested. It differs from other metrics in that it accounts for the concept of the “time value of money”, or the fact that a dollar received and reinvested elsewhere today is worth more than a dollar expected... More and a 1.7x equity multipleIn commercial real estate, the equity multiple is defined as the total cash distributions received from an investment, divided by the total equity invested. Essentially, it’s how much money an investor could make on their initial investment. An equity multiple less than 1.0x means you are getting back less cash than you invested. An equity multiple greater than 1.0x means... More with a holding period of just over one year on this offering (vs. a 22.0% IRR and 1.93x equity multiple on a targeted 4-year hold).
With this closing, our average annualized realized return across all nine realized offerings is now a 36.3% XIRRThe xIRR is a way of calculating the IRR for a series of cash flows that may not be periodic by assigning specific dates to each individual cash flow. xIRR is a complicated calculation done in Excel or other financial modeling software. The main benefit of using the XIRR Excel function is that these unevenly timed cash flows can be... More (we must use an XIRR calculation given the varied holding periods) and a 1.6x equity multiple on a 1.9-year holding period. Here’s how this compares to the average of our original pro forma returns:
| XIRR / IRR | Equity Multiple | Hold PeriodIn commercial real estate, the hold period is the time between when the investment is made and when the property sells. Since real estate investments are illiquid, investors are unable to sell their investment before the end of that hold period, unlike public stocks which can be sold at any time. Sponsors generally target a hold period of 3-5 years,... More | |
| Actual | 36.3% | 1.6x | 1.9 years |
| Pro Forma | 18.9% | 1.7x | 4.1 years |
Our early returns continue to fall well above pro forma (e.g. sponsorsIn commercial real estate, the sponsor is an individual or company in charge of finding, acquiring and managing the real estate property on behalf of the partnership. The sponsor is usually expected to invest anywhere from 5-20% of the total required equity capital. They are then responsible for raising the remaining funds and acquiring and managing the investment property’s day-to-day... More achieving business plans and reaching stabilized values ahead of schedule), and we acknowledge that this pattern may become unsustainable at some point; nonetheless, we are exceedingly pleased with our marketplace realized returns thus far. Please view our Marketplace Performance page to see details on all realized marketplace offerings.
