For many businesses, the past year has been a lesson in how to pivot and respond to the unexpected changes brought about by a pandemic. This has certainly been the case for the local real estate investment fund that I help manage, for the various types of investments and markets we are involved in.
These have included several late payoffs and foreclosure delays on loans, slow approval and permit signoffs on several of our development projects, and a pair of bad partnerships that needed to be addressed. In spite of these factors, we managed an annualized return of 9.6% for our investors over the course of the year, and we are poised for increased returns in the coming months.
The ways in which we adapted and collaborated to create workable outcomes varied, in response to each particular project or situation, most of which were directly related to the pandemic, but not all:
For one partnership which had simply ceased to operate in good faith, we took active steps to recover the capital, with our management team stepping up to help cover the costs of doing so.
For two smaller investments in hotel redevelopment projects that missed their seasons due to the pandemic, we agreed to accept accruals instead of monthly disbursements while our partner in those gets things back on track, both paying preferred returns under their Operating Agreements.
And in the case of two different non-productive partnerships we had participated in on a series of homes in several states, the solution was to convert our equity in each partnership to a single note against properties in the partner’s portfolio.
Along the way, the upward trends in real estate values prompted a mark-to-market portfolio adjustment based on increases in valuation for two of our larger investments which are on track to sell in the coming months—and one of them is already in escrow at a price that is well above even its adjusted accrual estimate.
Following is a summary of earnings for our fund rounding out our seventh year of success:
Year % IRR Value per $100
2014 10.039 $110.04
2015 24.930 $137.47
2016 11.522 $153.31
2017 18.330 $181.41
2018 7.535 $195.08
2019 9.023 $212.68
2020 9.604 $233.11
Average IRR: 12.998% 19.02 %
Moving into 2021 we are excited to see our multiple investments and development projects evolve, as we continue to build on our solid portfolio and track record over the past seven years.