Form 1-U Rise Companies Corp For: May 18

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 1-U

 

CURRENT REPORT

Pursuant to Regulation A of the Securities Act of 1933

 

May 18, 2022

(Date of Report (Date of earliest event reported))

 

RISE COMPANIES CORP.

(Exact name of registrant as specified in its charter)

 

Delaware	45-4862460
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

 

11 Dupont Circle NW, 9th Floor, Washington, DC	20036
(Address of principal executive offices)	(ZIP Code)

 

(202) 584-0550

(Registrant’s telephone number, including area code)

 

Class B Common Stock

(Title of each class of securities issued pursuant to Regulation A)

 

 

 

Item 9.    Other Events

 

Attached as Exhibit 15 is a copy of the letter sent to investors on or about May 18, 2022.

 

Exhibits

 

15.1    Investor Letter (May 18, 2022)

 

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, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 the most recently qualified Offering Statement on Form 1-A 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.

 

	RISE COMPANIES CORP.
	By:	/s/ Bjorn J. Hall
	Name:	Bjorn J. Hall
	Title:	General Counsel
Date: May 18, 2022

 

Exhibit 15.1

 

Mid-Quarter Market Update

 

As public markets falter, we remain confident in Fundrise as a fortress for investor portfolios.

 

 

 

In an effort to continually increase the frequency with which we communicate to investors, and given the increasing level of uncertainty in the market, we felt it worthwhile to provide a mid-quarter update, sharing our most recent thinking on where things stand today and what may lay ahead.

 

We can’t promise that it will be feasible (or warranted) to provide such additional analysis each quarter but, when relevant, we feel it best to share more with our investors rather than less.

Scenario planning, put to the test

 

At the end of Q1, we reiterated our concerns from the beginning of the year that the overall level of uncertainty in the market that was building with inflation was likely to be both greater in magnitude and more persistent than most “experts” were predicting.

 

More recently, in our second episode of the Onward podcast, we discussed the potential impacts of this inflationary environment and the concept of scenario planning as a tool that we often rely on when attempting to think through the multitude of possible outcomes of an inherently unknown future.

 

 

As a quick crash course for those who aren’t familiar (or weren’t able to listen to the podcast), this process of scenario planning involves playing out three different scenarios simultaneously:

 

●

Scenario 1: “More of the same”

●

Scenario 2: “Things get worse”

●

Scenario 3: “Something unexpected happens”

 

The markets may be facing critical crossroads

 

Today, 45 days later, it feels increasingly clear to us that we are going through the initial stages of scenario #2 where, over the next several weeks and months, things are likely to get worse from an economic standpoint before they get better.

 

The root causes of this now feel mostly known. Inflation in fact turned out NOT to be transitory. Supply chain problems initially brought on by pandemic disruptions have become a series of dominoes, each bottleneck triggering the next. And of course the Russian invasion of Ukraine has added a whole new level of risk to an already highly combustible mix.

 

At this point, the question in our mind is not if things will get worse but instead how much worse and how quickly.

 

As of Monday, the stock market had already given back nearly half of all the gains earned from the beginning of 2020.¹ Meanwhile, the technology-heavy NASDAQ index is down roughly 26% just this year.²

 

And this after only the first few of what is expected to be an extended series of rate hikes by the Fed, which has outlined a target Fed Funds rate of 2-3% by 2023. (After the most recent 50 bps hike on May 4, the rate stands at just 1.00%.)

 

Of course it is possible that the Fed will be successful in walking the extremely narrow tightrope of taming inflation while not overly restricting growth such that it causes a collapse. However, the Fed has never (at least in modern history) successfully brought inflation down by more than 2% without causing a recession.

 

What does this mean for you, as an investor?

 

Relative to the rest of the market, we continue to feel as confident today in the current portfolio’s ability to outperform as we have at any point.

 

 

While future performance can't be guaranteed, we believe the combination of the right assets (multifamily residential, single-family rental, and last-mile industrial), owned at reasonable basis (often at or below replacement cost), in the right markets (Sunbelt), and at relatively conservative leverage (generally less than 50% LTV at a portfolio level) all work together to create a remarkably stable foundation (or fortress) able to weather a severe storm.

 

Again, this is not to say that real estate is not susceptible to market corrections, as the Great Financial Crisis of 2008 made abundantly clear. Depending on the length and severity of a possible recession, even the best performing real estate can experience periods of negative performance.

 

However, in many ways, it is the hangover of 2008 — the increased regulation around real estate lending and decimation of the homebuilding industry — that has led to the lower leverage and chronic undersupply that puts real estate and, more specifically, our Fundrise portfolio in such a strong position.

 

As we look ahead, we expect to take a more patient position as we continue to grow the portfolio. The repricing that we’ve seen in the public markets is only just starting to work its way into the private market and we expect asset prices to either moderate or, in some cases, come down over the next several months, creating attractive buying opportunities for groups like us.

 

More specifically, we will be intently watching the Treasuries market and in particular paying close attention to how things unfold in June when the Fed begins “quantitative tightening,” effectively pulling money out of the financial system by shrinking its $9 trillion balance sheet. Four years ago, this process created a series of seemingly unpredictable mini liquidity crises, forcing the Fed to step back in to calm markets. If they do end up successfully burning off much of the balance sheet, it could result in sustained downward pricing pressure on a large swath of assets.

 

Those who’ve been with us for a while will not be surprised that we tend to believe “only the paranoid survive.” And as always, we’ll continue to move forward within the spirit of great value investors like Seth Klarman with the belief that by taking care of the downside the upside will take care of itself.

 

Interesting times lay ahead. We look forward to once again proving out the core proposition of the Fundrise platform.

 

Until then, onward.

 

Ben & the entire Fundrise team

 

¹ As measured by the S&P 500 Index from January 1, 2020 through May 16, 2022.

² As measured by the Nasdaq Composite Index from January 1, 2022 through May 16, 2022.

 

 

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