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Fundrise Income eREIT VI

Filed: 30 Mar 20, 8:52pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 1-K

ANNUAL REPORT

 

ANNUAL REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

For the fiscal year ended December 31, 2019

 

Fundrise Income eREIT VI, LLC

(Exact name of registrant as specified in its charter)

 

Commission File Number:024-11105

 

Delaware 84-1993754

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

   

11 Dupont Circle NW, 9th Fl, Washington, DC

(Address of principal executive offices)

 

20036

(Zip Code)

  

(202) 584-0550

Registrant’s telephone number, including area code

 

Common Shares

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

 

 

 

 

TABLE OF CONTENTS 

 

Statements Regarding Forward-Looking Information3
Business5
Management’s Discussion and Analysis of Financial Condition and Results of Operations7
Directors and Officers11
Security Ownership of Management and Certain Securityholders12
Interest of Management and Others in Certain Transactions12
Other Information12
Index to the Financial Statements of Fundrise Income eREIT VI, LLC13
Exhibits14

 

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Part II.

 

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

 

We make statements in this Annual Report on Form 1-K (“Annual Report”) that are forward-looking statements within the meaning of the federal securities laws. The words “outlook,” “believe,” “estimate,” “potential,” “projected,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” “could” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Annual Report or in the information incorporated by reference into this Annual Report.

 

The forward-looking statements included in this Annual Report are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

 

 ·our ability to effectively deploy the proceeds raised in our offering (the “Offering”);

 

 ·our ability to attract and retain members to the online investment platform located atwww.fundrise.com(the “Fundrise Platform”) of Rise Companies Corp., (our “Sponsor”);

 

 ·risks associated with breaches of our data security;

 

 ·public health crises, pandemics and epidemics, such as those caused by new strains of viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS) and, most recently, the novel coronavirus (COVID-19);

 

 ·changes in economic conditions generally and the real estate and securities markets specifically;

 

 ·limited ability to dispose of assets because of the relative illiquidity of real estate investments;

 

 ·increased interest rates and operating costs;

 

 ·our failure to obtain necessary outside financing;

 

 ·risks associated with derivatives or hedging activity;

 

 ·our ability to retain our executive officers and other key personnel of our advisor, our property manager and their affiliates;

 

 ·expected rates of return provided to investors;

 

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 ·the ability of our Sponsor and its affiliates to source, originate and service our loans and other assets, and the quality and performance of these assets;

 

 ·our ability to retain and hire competent employees and appropriately staff our operations;

 

 ·legislative or regulatory changes impacting our business or our assets (including changes to the laws governing the taxation of REITs and Securities and Exchange Commission (“SEC”) guidance related to Regulation A (“Regulation A”) of the Securities Act of 1933, as amended (the “Securities Act”), or the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”));

 

 ·changes in business conditions and the market value of our assets, including changes in interest rates, prepayment risk, operator or borrower defaults or bankruptcy, and generally the increased risk of loss if our investments fail to perform as expected;

 

 ·our ability to implement effective conflicts of interest policies and procedures among the various real estate investment opportunities sponsored by our Sponsor;

 

 ·our ability to access sources of liquidity when we have the need to fund redemptions of common shares in excess of the proceeds from the sales of our common shares in our continuous offering and the consequential risk that we may not have the resources to satisfy redemption requests;

 

 ·our failure to maintain our status as a real estate investment trust (“REIT”);

  

 ·our compliance with applicable local, state and federal laws, including the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Investment Company Act of 1940, as amended, and other laws; and

 

 ·changes to U.S. generally accepted accounting principles (“U.S. GAAP”).

 

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Annual Report. All forward-looking statements are made as of the date of this Annual Report and the risk that actual results will differ materially from the expectations expressed in this Annual Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.

 

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Item 1.Business

 

Fundrise Income eREIT VI, LLC is a Delaware limited liability company formed on June 4, 2019 tooriginate, invest in and manage a diversified portfolio primarily consisting of commercial real estate loans (including senior mortgage loans, subordinated mortgage loans (“B-Notes”), mezzanine loans, and participations in such loans), as well as commercial real estate-related debt securities (including commercial mortgage-backed securities (“CMBS”), collateralized debt obligations (“CDOs”), and REIT senior unsecured debt) and other select real estate-related assets, where the underlying assets primarily consist of commercial real estate properties. We may make our investments through majority-owned subsidiaries, some of which may have rights to receive preferred economic returns.The use of the terms “Fundrise Income eREIT VI”, the “Company”, “we”, “us” or “our” in this Annual Report refer to Fundrise Income eREIT VI, LLC unless the context indicates otherwise.

 

As a limited liability company, we have elected to be taxed as a C corporation. We intend to make an election to be taxed as a REIT under the Internal Revenue Code of 1986 commencing with our taxable year ending December 31, 2020.

 

We are externally managed by Fundrise Advisors, LLC, (our “Manager”), which is an investment adviser registered with the SEC, and a wholly-owned subsidiary of our Sponsor, the parent company of Fundrise, LLC, our affiliate. Fundrise, LLC owns and operates the Fundrise Platform, which allows investors to hold interests in real estate opportunities that may have been historically difficult to access for some investors.Our Manager has the authority to make all of the decisions regarding our investments, subject to the limitations in our operating agreement and the direction and oversight of our Manager’s investment committee. Our Sponsor also provides asset management, marketing, investor relations and other administrative services on our behalf. Accordingly, we do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us.

 

Investment Strategy

 

We intend to acquire and operate real estate and real estate-related assets on an opportunistic basis. Our management has extensive experience investing in numerous types of properties. We will seek to create and maintain a portfolio of investments that generate a low volatility income stream of attractive and consistent cash distributions. Our focus on investing in debt instruments will emphasize the payment of current returns to investors and preservation of invested capital as our primary investment objectives, with a lesser emphasis on seeking capital appreciation from our investments, as is typically the case with more opportunistic or equity-oriented strategies. We expect that our portfolio of investments will be secured primarily by U.S. based collateral and diversified by security type, property type and geographic location. We expect that our portfolio of debt investments, if any, will be secured primarily by U.S. based collateral and diversified by security type, property type and geographic location.

 

We may enter into one or more joint ventures, or other co-ownership arrangements for the acquisition with third parties or affiliates of our Manager, including present and future real estate investment offering and REITs sponsored by affiliates of our Sponsor. We also may serve as mortgage lender to, or acquire interests in or securities issued by, these joint ventures, arrangements.

  

In executing on our business strategy, we believe that we benefit from our Manager’s affiliation with our Sponsor given our Sponsor’s strong track record and extensive experience and capabilities as an online real estate origination and funding platform. These competitive advantages include:

 

·our Sponsor’s experience and reputation as a leading real estate investment manager, which historically has given it access to a large investment pipeline similar to our targeted assets and the key market data we use to underwrite and portfolio manage assets;

 

·our Sponsor’s direct and online origination capabilities, which are amplified by a proprietary technology platform, business process automation, and a large user base, of which a significant portion are seeking capital for real estate projects;

 

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·our Sponsor’s relationships with financial institutions and other lenders that originate and distribute commercial real estate debt and other real estate-related products and that finance the types of assets we intend to acquire and originate;

 

·our Sponsor’s experienced portfolio management team which actively monitors each investment through an established regime of analysis, credit review and protocol; and

 

·our Sponsor’s management team, which has a successful track record of making commercial real estate investments in a variety of market conditions.

 

Investment Objectives

 

Our primary investment objectives are:

 

·to pay attractive and consistent cash distributions; and

 

·to preserve, protect and return shareholders’ capital contributions.

 

We also seek to realize growth in the value of our investments by timing their sale to maximize value.However, there is no assurance that our investment objectives will be met.We cannot assure you that we will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, our Manager has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets. Our Manager’s investment committee will review our investment guidelines at least annually to determine whether our investment guidelines continue to be in the best interests of our shareholders. We expect to seek a liquidity transaction within five to seven years from the qualification of our initial offering.

 

Competition

 

Our net income depends, in large part, on our ability to source, acquire and manage investments with attractive risk-adjusted yields. We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, private real estate funds, and other entities engaged in real estate investment activities as well as online lending platforms that compete with the Fundrise Platform, many of which have greater financial resources and lower costs of capital available to them than we have. In addition, there are numerous REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, amount of capital to be invested per project and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential investments than we are, our investment volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.

 

Risk Factors

  

We face risks and uncertainties that could affect us and our business as well as the real estate industry generally. These risks are outlined under the heading “Risk Factors” contained in our latest offering circular filed with the SEC (the “Offering Circular”), which may be accessedhere, as the same may be updated from time to time by our future filings under Regulation A. In addition, new risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. These risks could result in a decrease in the value of our common shares.

 

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in theStatements Regarding Forward-Looking Information. Unless otherwise indicated, latest results discussed below are as of December 31, 2019.

 

Offering Results

 

We have offered, are offering, and will continue to offer up to $50.0 million in our common shares in our Offering. As of December 31, 2019, we had raised total gross offering proceeds of $15,000 received in the private placements to our Sponsor, and Fundrise, LP, an affiliate of our Sponsor and had settled subscriptions in our Offering and private placements for an aggregate of approximately 1,500 of our common shares. Assuming the settlement for all subscriptions received as of December 31, 2019, approximately 5,000,000 of our previously qualified common shares remained available for sale to the public under our Offering.

 

We expect to offer common shares in our Offering until we raise the maximum permitted based on the maximum number of common shares we are able to qualify under Regulation A at any given time, unless terminated by our Manager at an earlier time.Until September 30, 2020, the per share purchase price for our common shares will be $10.00, an amount that was arbitrarily determined by our Manager. Thereafter, the per share purchase price for our common shares will be adjusted at the end of each semi-annual period, or such other period as determined by our Manager in its sole discretion, but no less frequently than annually. Our Manager has initially determined to adjust the per share purchase price semi-annually, as of April 1st and October 1st of each year (or as soon as commercially reasonable and announced by us thereafter), to be no less than our net asset value (“NAV”) divided by the number of our common shares outstanding as of the end of the prior semi-annual period (“NAV per share”). Although we do not intend to list our common shares for trading on a stock exchange or other trading market, we intend to adopt a redemption plan designed to provide our shareholders with limited liquidity on an ongoing basis for their investment in our shares.

 

Distributions

 

To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our shareholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain), and to avoid federal income and excise taxes on retained taxable income and gains we must distribute 100% of such income and gains annually. Our Manager may authorize distributions in excess of those required for us to maintain REIT status and/or avoid such taxes on retained taxable income and gains depending on our financial condition and such other factors as our Manager deems relevant. Provided we have sufficient available cash flow, we intend to authorize and declare distributions based on daily record dates and pay distributions on a quarterly or other periodic basis. We have not established a minimum distribution level.

 

While we are under no obligation to do so, we expect in the future to declare and pay distributions monthly or quarterly in arrears; however, our Manager may declare other periodic distributions as circumstances dictate. In order that investors may generally begin receiving distributions immediately upon our acceptance of their subscription, we expect to authorize and declare distributions based on daily record dates.

 

As of December 31, 2019, we have not yet declared our first distribution to shareholders. 

 

Any distributions that we make will directly impact our NAV by reducing the amount of our assets. Our goal is to provide a reasonably predictable and stable level of current income, through quarterly or other periodic distributions, while at the same time maintaining a fair level of consistency in our NAV. Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative) will produce your total return.

 

Our distributions will generally constitute a return of capital to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder’s adjusted tax basis in the holder’s shares, and to the extent that it exceeds the holder’s adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares.

 

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Redemption Plan

 

Through December 31, 2019, our redemption plan provided that, on a monthly basis, after observing a mandatory 60-day waiting period, a shareholder could obtain liquidity as described in detail in our Offering Circular. Our Manager may, in its sole discretion, amend, suspend, or terminate the redemption plan at any time, including to protect our operations and our non-redeemed shareholders, to prevent an undue burden on our liquidity, to preserve our status as a REIT, following any material decrease in our NAV, or for any other reason.

 

As of December 31, 2019, there have not been any common shares submitted for redemption.

 

Effective as of January 1, 2020, we have adopted revisions to our Redemption Plan to implement quarterly instead of monthly redemption requests, and the elimination of the 60-day waiting period. Further, our new policy includes the provision for separate redemption rights in the case of death or “qualifying disability” that eliminates any penalty for redemption in such circumstances and permits the redemption of shares at 100% of the per share price for our common shares in effect at the time of the redemption request.

 

Critical Accounting Policies

 

Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements.

 

We believe our critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements. Please refer toNote 2,Summary of Significant Accounting Policies in our financial statements, for a more thorough discussion of our accounting policies and procedures. 

 

Recent Accounting Pronouncements

 

The Financial Accounting Standards Board has released several Accounting Standards Updates (“ASU”) that may have an impact on our financial statements. SeeRecent Accounting PronouncementsinNote 2, Summary of Significant Accounting Policies in our financial statements for discussion of the relevant ASUs. We are currently evaluating the impact of the various ASUs on our financial statements and determining our plan for adoption.

 

Extended Transition Period

 

Under Section 107 of the JOBS Act, we are permitted to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. This permits us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these financial statements may not be comparable to companies that adopt accounting standard updates upon the public business entity effective dates.

 

Sources of Operating Revenues and Cash Flows

 

We expect to primarily generate revenues from net interest income on our real estate debt investments and for income to primarily be derived through the difference between revenue and the cost at which we are able to finance our investments. We may also seek to acquire investments which generate attractive returns without any leverage. SeeNote 2, Summary of Significant Accounting Policies, Revenue Recognition, in our financial statements for further detail.

 

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Results of Operations

 

As of December 31, 2019, we had not yet substantially commenced operations. Accordingly, for the period beginning June 4, 2019 (inception) through December 31, 2019, we had total net income of $0.

 

Our Investments

 

As of December 31, 2019, we had not yet entered into any investments. See “Recent Developments” for a description of any investments we have made since December 31, 2019. 

 

Liquidity and Capital Resources

 

We will require capital to fund our investment activities and operating expenses. Our capital sources may include net proceeds from our Offering, cash flow from operations, net proceeds from asset repayments and sales, borrowings under credit facilities, other term borrowings and securitization financing transactions.

 

We will be dependent upon the net proceeds from our Offering to conduct our operations. We will obtain the capital required to primarily originate,invest in and manage a diversified portfolio of real estate investments and conduct our operations from the proceeds of our Offering and from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of December 31, 2019, we had not yet deployed any capital for investments, and had approximately $15,000 in cash and cash equivalents. As of December 31, 2019, we anticipate that once we commence operations that proceeds from our Offering will provide sufficient liquidity to meet future funding commitments and costs of operations.

 

We may employ leverage to enhance total returns to our shareholders through a combination of senior financing on our real estate acquisitions, secured facilities, and capital markets financing transactions. We currently have no outstanding debt and have not received a commitment from any lender to provide us with financing. Our targeted portfolio-wide leverage after we have acquired an initial substantial portfolio of diversified investments is between 50%-85% of the greater of the cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the initial portfolio) in order to quickly build a diversified portfolio of assets. Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. However, other than during our initial period of operations, it is our policy to not borrow more than 85% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. We cannot exceed the leverage limit of our leverage policy unless any excess in borrowing over such level is approved by our Manager’s investment committee.

 

If we are unable to raise $50.0 million in common shares, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make. The Company may be subject to more fluctuations based on the performance of the specific assets we acquire. Further, we have certain direct and indirect operating expenses. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income and would limit our ability to make distributions.

 

Outlook and Recent Trends

 

While the country has entered a period of a high degree of uncertainty and volatility as a result of the impact of the novel coronavirus (COVID-19), as of March 30, 2020, the Company has not yet substantially commenced operations. Such uncertainty and volatility may lead to the forced selling of assets as loans come due and companies seek to cover unexpected liquidity demands, which in turn can lead to a temporary plunge in asset prices for those forced sellers. When the Company does substantially commence operations in the near future, it will be well positioned to take advantage of the dislocations and distress that is starting to occur throughout the market, and pursue more opportunistic real estate investments at much more attractive prices than was the case only a short while ago.

 

The Manager expects the current economic fallout from COVID-19 to continue for some time, substantially increasing the value of liquidity during this difficult period. The current interest rate environment has dramatically eased as a result of the Federal Reserve materially lowering rates and injecting liquidity into the market (similar to previous Quantitative Easing). Historically, when the market recovers, hard assets, such as real estate, see an increase in value as a result of the expanded monetary base.

 

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Off-Balance Sheet Arrangements

  

As of December 31, 2019, we had no off-balance sheet arrangements.

 

Related Party Arrangements

 

For further information regarding “Related Party Arrangements,” please seeNote 3,Related Party Arrangements in our financial statements.

 

Recent Developments

 

Investments

 

There have been no real estate investments acquired by or repaid to the Company since December 31, 2019 (through March 15, 2020).

 

Other

 

Event Date Description
     
Status of our Offering 3/15/2020 We have not yet substantially commenced operations. As of March 15, 2020, we had raised total gross offering proceeds of approximately $27,000 from settled subscriptions (including the $15,000 received in the private placements to our Sponsor, Rise Companies Corp., and Fundrise, LP, an affiliate of our Sponsor), and had settled subscriptions in our Offering and private placements for an aggregate of approximately 2,700 of our common shares.
     
Revisions to the Redemption Plan 12/31/2019 

On December 31, 2019, we filed an offering circular supplement pursuant to Rule 253(g)(2), revising our Redemption Plan to reflect the following changes effective January 1, 2020:

-Quarterly instead of monthly redemption requests and elimination of the 60-day waiting period.

-Separate redemption rights in the case of death or “qualifying disability” that eliminate any penalty for redemption in such circumstances and permit the redemption of shares at 100% of the per share price for our common shares in effect at the time of the redemption request.

     
Initial Contribution to National Lending LLC 1/15/2020 

On July 15, 2019, our Manager formed a self-sustaining lending entity, National Lending, LLC (“National Lending”), which is financed by each of the eREITs affiliated with our Sponsor. National Lending is managed by an independent manager (the “Independent Manager”) through a management agreement at a market rate that is customary for the industry. Each eREIT contributes an amount to National Lending in exchange for ownership interests, generally not to exceed 3% of its assets under management to National Lending. National Lending then may provide short-term bridge financing through promissory notes to any of the eREITs who have contributed in order to maintain greater liquidity and better finance their individual real estate investment strategies. The promissory notes bear a market rate of interest and are generally repaid via the capital raised by each of the borrowing eREITs’ Offerings. All transactions between National Lending and the borrowers are reviewed by the Independent Manager. 

 

As a means to provide liquidity during capital raising periods, the Company entered into a Subscription Agreement for Partnership Interest in National Lending LLC on January 15, 2020, at an initial purchase price of $1,000.

 

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Item 3.Directors and Officers

 

Our Manager

 

We operate under the direction of our Manager, which is responsible for directing the management of our business and affairs, managing our day-to-day affairs, and implementing our investment strategy. Our Manager has established an investment committee that makes decisions with respect to all acquisitions and dispositions. The Manager and its officers and directors are not required to devote all of their time to our business and are only required to devote such time to our affairs as their duties require.

 

We follow investment guidelines adopted by our Manager and the investment and borrowing policies set forth in our Offering Circular unless they are modified by our Manager. Our Manager may establish further written policies on investments and borrowings and will monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled. Our Manager may change our investment objectives at any time without approval of our shareholders.

 

Our Manager performs its duties and responsibilities pursuant to our operating agreement. Our Manager maintains a contractual, as opposed to a fiduciary, relationship with us and our shareholders. Furthermore, we have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities.

 

Executive Officers of Our Manager

 

As of the date of this Annual Report, the executive officers of our Manager and their positions and offices are as follows:

 

Name Age Position
Benjamin S. Miller 43 Chief Executive Officer and Interim Chief Financial Officer and Treasurer
Brandon T. Jenkins 34 Chief Operating Officer
Bjorn J. Hall 39 General Counsel, Chief Compliance Officer and Secretary

 

Benjamin S. Millercurrently serves as Chief Executive Officer of our Manager and has served as Chief Executive Officer and a Director of our Sponsor since its inception on March 14, 2012. As of the date of this Annual Report, Ben is also serving as Interim Chief Financial Officer and Treasurer of our Manager. Prior to Rise Companies Corp., Ben had been a Managing Partner of the real estate company WestMill Capital Partners from October 2010 to June 2012, and before that, was President of Western Development Corporation one of the largest mixed-use real estate companies in the Washington, DC metro area, from April 2006 to October 2010, after joining the company in early 2005 as its Chief Operating Officer. From 2003 until 2005, Mr. Miller was an Associate and part of the founding team of Democracy Alliance, a progressive investment collaborative. In 2001, Mr. Miller co-founded and was a Managing Partner of US Nordic Ventures, a private equity and operating company that works with Scandinavian green building firms to penetrate the U.S. market. Mr. Miller has a Bachelor of Arts from the University of Pennsylvania.

 

Brandon T. Jenkinscurrently serves as Chief Operating Officer of our Manager and has served in such capacities with the Sponsor since February of 2014, prior to which time he served as Head of Product Development and Director of Real Estate which he continues to do currently. Additionally, Brandon has served as Director of Real Estate for WestMill Capital Partners since March of 2011. Previously, Brandon spent two and a half years as an investment advisor and sales broker at Marcus & Millichap, the largest real estate investment sales brokerage in the country. Prior to his time in brokerage, Brandon also worked for Westfield Corporation, a leading shopping center owner. Brandon earned his Bachelor of Arts in Public Policy and Economics from Duke University.

 

Bjorn J. Hallcurrently serves as the General Counsel, Chief Compliance Officer and Secretary of our Manager and has served in such capacities with our Sponsor since February 2014. Prior to joining our Sponsor in February 2014, Bjorn was a counsel at the law firm of O’Melveny & Myers LLP, where he was a member of the Corporate Finance and Securities Group. Bjorn has a Bachelor of Arts from the University of North Dakota and received a J.D. from Georgetown University Law Center.

 

Compensation of Executive Officers

 

Each of the executive officers of our Sponsor also serves as an executive officer of our Manager. Each of these individuals receives compensation for his services, including services performed for us on behalf of our Manager, from our Sponsor. As executive officers of our Manager, these individuals serve to manage our day-to-day affairs, oversee the review, selection and recommendation of investment opportunities, service acquired investments and monitor the performance of these investments to ensure that they are consistent with our investment objectives. Although we indirectly bear some of the costs of the compensation paid to these individuals, through fees and reimbursements we pay to our Manager, we do not pay any compensation directly to these individuals.

 

Compensation of our Manager

 

For information regarding the compensation of our Manager, please see “Management Compensation” in our Offering Circular andNote 3,Related Party Arrangements – Fundrise Advisors, LLC, Manager in our financial statements.

 

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Item 4.Security Ownership of Management and Certain Securityholders

 

Principal Members

 

The following table sets forth the approximate beneficial ownership of our common shares as of March 15, 2020 for each person or group that holds more than 5.0% of our common shares, for each director and executive officer of our Manager and for the directors and executive officers of our Manager as a group. To our knowledge, each person that beneficially owns our common shares has sole voting and disposition power with regard to such shares.

 

  

Number of

Shares

Beneficially

  Percent of 
Name of Beneficial Owner (1) Owned  All Shares 
Benjamin S. Miller  0   0% 
Brandon T. Jenkins  0   0% 
Bjorn J. Hall  0   0% 
All directors and executive officers of our Manager as a group (3 persons)  0   0% 

 

(1)Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest.

 

Item 5.Interest of Management and Others in Certain Transactions

 

For further details, please seeNote 3,Related Party Arrangements inItem 7,Financial Statements.

 

Item 6.Other Information

 

None.

 

 12 

 

 

Item 7.Financial Statements

 

Index to the Financial Statements of

 

Fundrise Income eREIT VI, LLC

 

Independent Auditor’s ReportF-1
  
Balance SheetF-2
  
Statement of OperationsF-3
  
Statement of Members’ EquityF-4
  
Statement of Cash FlowsF-5
  
Notes to the Financial StatementsF-6 to F-12

 

 13 

 

 

Independent Auditor's Report

 

To the Members

Fundrise Income eREIT VI, LLC

 

 

Report on the Financial Statements

We have audited the accompanying financial statements of Fundrise Income eREIT VI, LLC (the Company), which comprise the balance sheet as of December 31, 2019, the related statements of operations, member’s equity and cash flows for the period from June 4, 2019 (Inception) to December 31, 2019, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fundrise Income eREIT VI, LLC as of December 31, 2019, and the results of its operations and its cash flows for the period from June 4, 2019 (Inception) to December 31, 2019 in accordance with accounting principles generally accepted in the United States of America.

 

/s/ RSM US LLP

 

McLean, Virginia

March 30, 2020

 

 F-1 

 

 

Fundrise Income eREIT VI, LLC

 

Balance Sheet

(Amounts in thousands, except share data)

 

  As of 
  December 31, 2019 
ASSETS    
Cash and cash equivalents $15 
Total Assets $15 
     
LIABILITIES AND MEMBERS’ EQUITY    
     
Commitments and Contingencies    
     
Members’ Equity:    
Common shares; unlimited shares authorized; 1,500 issued and 1,500 outstanding as of December 31, 2019 $15 
Total Members’ Equity  15 
Total Liabilities and Members’ Equity $15 

 

The accompanying notes are an integral part of these financial statements.

 

 F-2 

 

 

Fundrise Income eREIT VI, LLC

 

Statement of Operations

(Amounts in thousands, except share and per share data)

 

  

For the Period

June 4, 2019

(Inception)

 
  to December 31, 2019 
Income (loss)    
Interest income $- 
Total income (loss)  - 
     
Expenses    
General and administrative expenses  - 
Total expenses  - 
     
Net income (loss) $- 
     
Net income (loss) per basic and diluted common share $0.00 
Weighted average number of common shares outstanding, basic and diluted  427 

 

The accompanying notes are an integral part of these financial statements.

 

 F-3 

 

 

Fundrise Income eREIT VI, LLC

 

Statement of Members’ Equity

(Amounts in thousands, except share data)

 

  Common Shares  

Retained

Earnings

(Accumulated

  

Total

Members’

 
  Shares  Amount  deficit)  Equity 
June 4, 2019 (Inception)  -  $-  $          -  $- 
Proceeds from issuance of common shares  1,500   15   -   15 
December 31, 2019  1,500  $15  $-  $15 

 

The accompanying notes are an integral part of these financial statements.

 

 F-4 

 

 

Fundrise Income eREIT VI, LLC

 

Statement of Cash Flows

(Amounts in thousands)

 

  

For the Period

June 4, 2019

(Inception)

to December 31, 2019

 
OPERATING ACTIVITIES:    
Net income (loss) $- 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Net cash provided by (used in) operating activities  - 
INVESTING ACTIVITIES:    
Net cash provided by (used in) investing activities  - 
FINANCING ACTIVITIES:    
Proceeds from issuance of common shares  15 
Net cash provided by (used in) financing activities  15 
     
Net increase (decrease) in cash and cash equivalents  15 
Cash and cash equivalents, beginning of period  - 
Cash and cash equivalents, end of period $15 

 

The accompanying notes are an integral part of these financial statements.

 

 F-5 

 

 

Fundrise Income eREIT VI, LLC

 

Notes to the Financial Statements

For the Period June 4, 2019 (Inception) to December 31, 2019

 

1.Formation and Organization

 

Fundrise Income eREIT VI, LLC was formed on June 4, 2019, as a Delaware limited liability companyand had not substantially commenced operations as of December 31, 2019. As used herein, the “Company,” “we,” “our,” and “us” refer to Fundrise Income eREIT VI, LLC except where the context otherwise requires.

 

The Company was organized primarily to originate, invest in and manage a diversified portfolio of real investments and other real estate-related assets. The Company may make its investments through majority-owned subsidiaries, some of which may have rights to receive preferred economic returns.

 

The Company’s business is externally managed by Fundrise Advisors, LLC (the “Manager”), a Delaware limited liability company and an investment adviser registered with the Securities and Exchange Commission (the “SEC”).Subject to certain restrictions and limitations, the Manager is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company.

 

We believe we have operated in such a manner as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes beginning with the year ended December 31, 2020. As of December 31, 2019 have not established an operating partnership or any taxable REIT subsidiary (“TRS”) or qualified REIT subsidiary (“QRS”), though we may form such entities as required in the future to facilitate certain transactions that might otherwise have an adverse impact on our status as a REIT.

 

The Offering is being conducted as a continuous offering pursuant to Rule 251(d)(3) of Regulation A, meaning that while the offering of securities is continuous, active sales of securities may happen sporadically over the term of the Offering. A maximum of $50.0 million of the Company’s common shares may be sold to the public in its Offering in any given twelve-month period. However, each Offering is subject to qualification by the SEC. The Manager has the authority to issue an unlimited number of common shares. The Company qualified its initial $50.0 million of common shares on December 4, 2019.

 

As of December 31, 2019, the Company has net common shares outstanding of approximately 1,500, including common shares to Rise Companies Corp. (the “Sponsor”), the owner of the Manager. As of December 31, 2019, the Sponsor owned 500 common shares. In addition, as of December 31, 2019, Fundrise, L.P., an affiliate of the Sponsor, had purchased an aggregate of 1,000 common shares common shares at $10.00 per share in a private placement for an aggregate purchase price of approximately $10,000. As of December 31, 2019, the total amount of equity outstanding by the Company on a gross basis was approximately $15,000, and the total amount of settling subscriptions was approximately $0. Both of these amounts were based on a $10.00 per share price.

 

2.Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Article 8 of Regulation S-X of the rules and regulations of the SEC.

 

Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

 

 F-6 

 

 

Cash and Cash Equivalents

 

Cash and cash equivalents may consist of money market funds, demand deposits and highly liquid investments with original maturities of three months or less.

 

Cash may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash with major financial institutions. To date, the Company has not experienced any losses with respect to cash.

 

Earnings per Share

 

Basic earnings per share is calculated on the basis of weighted-average number of common shares outstanding during the period. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period.

 

Organizational and Offering Costs

 

Organizational and offering costs of the Company were initially being paid by the Manager on behalf of the Company. These organizational and offering costs include all expenses to be paid by the Company in connection with the formation of the Company and the qualification of the Offering, and the distribution of shares, including, without limitation, expenses for printing, and amending offering statements or supplementing offering circulars, mailing and distributing costs, telephones, internet and other telecommunications costs, charges of experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees. The Company anticipates that, pursuant to the Company’s amended and restated operating agreement (the “Operating Agreement”), the Company will be obligated to reimburse the Manager, or its affiliates, as applicable, for organizational and offering costs paid by them on behalf of the Company. The Manager has decided that the Company shall only reimburse the Manager for the organizational and offering costs subject to a minimum net asset value (“NAV”), as described below.

 

After the Company has reached a NAV greater than $10.00 per share (“Hurdle Rate”), the Company is obligated to start reimbursing the Manager, without interest, for organizational and offering costs incurred, both, before and after the date that the Hurdle Rate is reached. The total amount payable to the Manager will be based on the dollar amount that the NAV exceeds the Hurdle Rate, multiplied by the number of shares outstanding. Reimbursement payments will be made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from the offering provided. No reimbursement shall be made if the reimbursement would cause the NAV to be less than the Hurdle Rate. If the sum of the total unreimbursed amount of such organizational and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.50% limit), calculated on an accumulated basis, until the Manager has been reimbursed in full.

 

The Company will record a liability for organizational costs and offering costs payable to the Manager when it is probable and estimable that a liability has been incurred in accordance with ASC 450, Contingencies. As a result, there will be no liability recognized until the Company reaches the Hurdle Rate. When the Company’s NAV exceeds the Hurdle Rate, it will book a liability with a corresponding reduction to equity for offering costs, and a liability and a corresponding expense to general and administrative expenses for organizational costs. 

 

As of December 31, 2019, the Manager had incurred and allocated total organizational and offering costs of approximately $70,000 to the Company. However, because the Hurdle Rate was not met as of December 31, 2019, no costs were eligible to be reimbursed to the Manager.

 

Settling Subscriptions

 

Settling subscriptions presented on the balance sheet represent equity subscriptions for which funds have been received but common shares have not yet been issued. Under the terms of the Offering Circular for our common shares, subscriptions will be accepted or rejected within thirty days of receipt by us. Once a subscription agreement is accepted, settlement of the shares may occur up to fifteen days later, depending on the volume of subscriptions received; however, we generally issue shares the later of five business days from the date that an investor’s subscription is approved by our Manager or when funds settle in our bank account. We rely on our Automated Clearing House (ACH) provider to notify us that funds have settled for this purpose, which may differ from the time that cash is posted to our bank statement.

 

 F-7 

 

 

Share Redemptions

 

Share repurchases are recorded as a reduction of common share par value under our redemption plan, pursuant to which we may elect to redeem shares at the request of our members, subject to certain exceptions, conditions, and limitations. The maximum number of shares purchasable by us in any period depends on a number of factors and is at the discretion of our Manager.

 

Through December 31, 2019, the Company’s redemption plan provided that, on a monthly basis, an investor had the opportunity to obtain liquidity monthly, following a minimum 60-day waiting period after submitting their redemption request. Pursuant to the Company’s redemption plan, a shareholder may only (a) have one outstanding redemption request at any given time and (b) request that we redeem up to the lesser of 5,000 shares or $50,000 per each redemption request. In addition, the redemption plan is subject to certain liquidity limitations, which may fluctuate depending on the liquidity of the real estate assets held by the Company. Redemptions are also subject to declining discounts on the redemption price over the course of the time the shareholder has held the shares being redeemed.

 

In light of the SEC’s current guidance on redemption plans, we generally intend to limit redemptions in any calendar month to shares whose aggregate value (based on the repurchase price per share in effect as of the redemption date) is less than or equal to 0.50% of the NAV of all of our outstanding shares as of the first day of such calendar month, and generally intend to limit the amount redeemed in any calendar quarter to shares whose aggregate value (based on the repurchase price per share in effect as of the redemption date) is 1.25% of the NAV of all of our outstanding shares as of first day of the last month of such calendar quarter (e.g., March 1, June 1, September 1, or December 1), with excess capacity carried over to later calendar quarters in that calendar year. However, as we intend to make a number of commercial real estate investments of varying terms and maturities, our Manager may elect to increase or decrease the number of common shares available for redemption in any given month or quarter, as these commercial real estate assets are paid off or sold, but we do not intend to redeem more than 5.00% of the common shares outstanding during any calendar year. Notwithstanding the foregoing, we are not obligated to redeem common shares under the redemption plan.

 

In addition, our Manager may, in its sole discretion, amend, suspend, or terminate the redemption plan at any time without prior notice, including to protect our operations and our nonredeemed shareholders, to prevent an undue burden on our liquidity, to preserve our status as a REIT, following any material decrease in our NAV, or for any other reason. However, in the event that we amend, suspend or terminate our redemption plan, we will file an offering circular supplement and/or Form 1-U, as appropriate, and post such information on the Fundrise Platform to disclose such amendment. Our Manager may also, in its sole discretion, decline any particular redemption request if it believes such action is necessary to preserve our status as a REIT.

 

Therefore, a shareholder may not have the opportunity to make a redemption request prior to any potential termination of the Company’s redemption plan.

 

Income Taxes

 

As a limited liability company, we have elected to be taxed as a C corporation. The Company intends to elect to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and intends to operate as such, commencing with the taxable year ending December 31, 2020. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its shareholders (which is computed without regard to the distributions paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with US GAAP). As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent it distributes qualifying distributions to its shareholders. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. No material provisions have been made for federal income taxes in the accompanying financial statements during the period June 4, 2019 (inception) to December 31, 2019. No gross deferred tax assets or liabilities have been recorded as of December 31, 2019.

 

All tax periods since inception remain open to examination by the major taxing authorities in all jurisdictions where we are subject to taxation.  

 

Revenue Recognition

 

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. Interest income is recognized on real estate debt investments classified as held to maturity securities, and investments in joint ventures that are accounted for using the cost method if the terms of the equity investment includes terms that are akin to interest on a debt instrument.

 

 F-8 

 

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”),Leases, which changes the accounting for leases for both lessors and lessees. The guidance requires lessees to recognize right-of-use assets and lease liabilities for virtually all of their leases, including leases embedded in other contractual arrangements, among other changes. In July 2019, the FASB voted to delay the fiscal year effective date of this standard by one year, and in November 2019, the FASB voted to delay the interim period effective date by one year. The standard will now be effective for annual reporting periods beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. We are currently assessing the impact of this update on the presentation of these financial statements.

 

In June 2016, the FASB issued Accounting Standards Update 2016-13 (“ASU 2016-13”),Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2020. We are currently in the process of evaluating the impact of the adoption of this standard on our financial statements. In November 2019, the FASB voted to delay the effective date of this standard by two years. The standard will now be effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2022, with early adoption permitted.

 

Extended Transition Period

 

Under Section 107 of the Jumpstart Our Business Startups (“JOBS”) Act of 2012, we are permitted to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. This permits us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have difference effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these financial statements may not be comparable to companies that adopt accounting standard updates upon the public business entity effective dates.

 

 F-9 

 

 

3.Related Party Arrangements

 

Fundrise Advisors, LLC, Manager

 

The Manager and certain affiliates of the Manager will receive fees and compensation in connection with the Company’s Offering, and the acquisition, management and sale of the Company’s real estate investments.

 

The Manager will be reimbursed for organizational and offering expenses incurred in conjunction with the Offering subject to meeting the Hurdle Rate. SeeNote 2,Summary of Significant Accounting Policies – Organizational and Offering Costs for the amount of organizational and offering costs incurred and payable for the period June 4, 2019 (inception) through December 31, 2019.

 

The Company will also reimburse the Manager, subject to the reimbursement limit described in Note 2, for actual expenses incurred on behalf of the Company in connection with the selection, acquisition or origination of an investment, to the extent not reimbursed by the borrower, whether or not the Company ultimately acquires or originates the investment. The Company will reimburse the Manager for out-of-pocket expenses paid to third parties in connection with providing services to the Company. This does not include the Manager’s overhead, employee costs borne by the Manager, utilities or technology costs. Expense reimbursements payable to the Manager also may include expenses incurred by the Sponsor in the performance of services pursuant to a shared services agreement between the Manager and the Sponsor, including any increases in insurance attributable to the management or operation of the Company. For the period June 4, 2019 (inception) through December 31, 2019, the Manager did not incur any such costs on our behalf, and as such no expenses are payable as of December 31, 2019.

 

The Company will pay the Manager a quarterly asset management fee of one-fourth of 0.85%, which, until September 30, 2020, will be based on our net offering proceeds as of the end of each quarter, and thereafter will be based on our NAV at the end of each prior semi-annual period.  

 

The Manager has agreed, for a period from inception until June 30, 2020 (the “Fee Waiver Period”), to waive its asset management fee. Following the conclusion of the Fee Waiver Period, the Manager may, in its sole discretion, continue to waive its asset management fee, in whole or in part. The Manager will forfeit any portion of the asset management fee that is waived.

 

Accordingly, during the period June 4, 2019 (inception) through December 31, 2019, we did not incur any asset management fees, and as of December 31, 2019, no asset management fees were payable to the Manager.

 

The Company may be charged by the Manager a development management fee of 5.0% of total development costs, excluding property. However, such development fee is only intended to be charged if it is net of a fee being charged by the developer of the equity investment project or if there is no outside developer of the equity investment project. Our Manager may, in its sole discretion, waive its development management fee, in whole or in part. The Manager will forfeit any portion of the development management fee that is waived. As of December 31, 2019, no development management fees have been incurred or paid to the Manager.

 

The Company will reimburse the Manager for actual expenses incurred on our behalf in connection with the special servicing of non-performing assets. The Manager will determine, in its sole discretion, whether an asset is non-performing. As of December 31, 2019, the Manager has not designated any asset as non-performing and no special servicing fees have been incurred or paid to the Manager.

 

The Company will reimburse our Manager for actual expenses incurred on our behalf in connection with the liquidation of equity investments in real estate, and we will also pay the Manager an equity disposition fee of up to 1.50% of the gross proceeds from such sale if our Manager is acting as the real estate developer or is engaged by the developer to sell the project.As of December 31, 2019, no disposition fees have been incurred or paid to the Manager.

 

Fundrise Lending, LLC

 

As an alternative means of acquiring loans or other investments for which we do not yet have sufficient funds, and in order to comply with certain state lending requirements, Fundrise Lending, LLC , a wholly-owned subsidiary of our Sponsor, Rise Companies Corp., or its affiliates may close and fund a loan or other investment prior to it being acquired by us. This allows us the flexibility to deploy our offering proceeds as funds are raised. We then will acquire such investment at a price equal to the fair market value of the loan or other investment (including reimbursements for servicing fees and accrued interest, if any), so there is no mark-up (or mark-down) at the time of our acquisition. During the period June 4, 2019 (inception) through December 31, 2019, the Company did not make any investments that were owned by Fundrise Lending, LLC.

 

 F-10 

 

 

For situations where our Sponsor, Manager, or their affiliates have a conflict of interest with us that is not otherwise covered by an existing policy we have adopted or a transaction is deemed to be a “principal transaction”, the Manager will appoint an independent representative (the “Independent Representative”) to protect the interests of the shareholders and review and approve such transactions. Any compensation payable to the Independent Representative for serving in such capacity on our behalf will be payable by us. Principal transactions are defined as transactions between our Sponsor, Manager or their affiliates, on the one hand, and us or one of our subsidiaries, on the other hand. Our Manager is only authorized to execute principal transactions with the prior approval of the Independent Representative and in accordance with applicable law. Such prior approval may include but not be limited to pricing methodology for the acquisition of assets and/or liabilities for which there are no readily observable market prices. During the period June 4, 2019 (inception) through December 31, 2019, no such fees were incurred by or paid to the Independent Representative as compensation for those services.

 

Fundrise, L.P., Member

 

Fundrise, L.P. is a member of the Company and held 1,000 shares as of December 31, 2019. One of our Sponsor’s wholly-owned subsidiaries is the general partner of Fundrise, L.P.

 

Rise Companies Corp, Member and Sponsor

 

Rise Companies Corp. is a member of the Company and held 500 common shares as of December 31, 2019.

 

For the period June 4, 2019 (inception) through December 31, 2019, the Sponsor did not incur any operational costs on our behalf. As such, $0 was due and payable as of December 31, 2019.

 

4.Economic Dependency

 

Under various agreements, the Company has engaged or will engage Fundrise Advisors, LLC and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition decisions, the sale of the Company’s common shares available for issue, as well as other administrative responsibilities for the Company including accounting services and investor relations. As a result of these relationships, the Company is dependent upon Fundrise Advisors, LLC and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.

 

5.Commitments and Contingencies

 

Reimbursable Organizational and Offering Costs

 

The Company has a contingent liability related to potential future reimbursements to the Manager for organizational and offering costs that were paid by the Manager on the Company’s behalf. As of December 31, 2019, approximately $70,000 of organizational and offering costs incurred by the Manager may be subject to reimbursement by the Company in future periods, based on achieving specific performance hurdles as described inNote 2,Summary of Significant Accounting Policies – Organizational and Offering Costs.

 

Legal Proceedings

 

As of the date of the financial statements, we are not currently named as a defendant in any active or pending litigation. However, it is possible that the company could become involved in various litigation matters arising in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, management is not aware of any litigation likely to occur that we currently assess as being significant to us.

 

6.Subsequent Events

 

In connection with the preparation of the accompanying financial statements, we have evaluated events and transactions occurring through March 30, 2020 for potential recognition or disclosure.

 

Offering

 

As of March 30, 2020, we had raised total gross offering proceeds of approximately $28,000 from settled subscriptions (including the $15,000 received in the private placements to our Sponsor, Rise Companies Corp., and Fundrise, L.P., an affiliate of our Sponsor), and had settled subscriptions in our Offering and private placements for a gross aggregate of approximately 2,800 of our common shares.

 

 F-11 

 

 

Investment in National Lending, LLC

 

On July 15, 2019, our Manager formed a self-sustaining lending entity, National Lending, LLC (“National Lending”), which is financed by each of the eREITs affiliated with our Sponsor. National Lending is managed by an independent manager (the “Independent Manager”) through a management agreement at a market rate that is customary for the industry. Each eREIT agreed to contribute an amount to National Lending in exchange for ownership interests, generally not to exceed 3% of its assets under management to National Lending. National Lending then may provide short-term bridge financing through promissory notes to any of the eREITs who have contributed in order to maintain greater liquidity and better finance their individual real estate investment strategies. The promissory notes bear a market rate of interest and are generally repaid via the capital raised by each of the borrowing eREITs’ Offerings. All transactions between National Lending and the borrowers are reviewed by the Independent Manager. The Company initially entered an agreement with National Lending on January 15, 2020, with an initial contribution of $1,000.

 

On March 23, 2020 the Company entered into an Amended and Restated Operating Agreement with National Lending, which increased the contribution for partnership interest from 3% to 5% of a partner’s assets under management. As the Company has not yet substantially commenced operations it has not contributed additional capital to National Lending. Upon commencing operations, the Company will be expected to increase its contribution in accordance with the terms of the agreement.

 

The Company’s total ownership in National Lending is 0.002% as of March 30, 2020. As ofMarch 30, 2020, the Company has not entered into any promissory notes with National Lending.

 

Revisions to the Redemption Plan

 

Effective as of January 1, 2020, we have adopted revisions to our Redemption Plan to implement quarterly instead of monthly redemption requests, and the elimination of the 60-day waiting period. Further, our new policy includes the provision for separate redemption rights in the case of death or “qualifying disability” that eliminates any penalty for redemption in such circumstances and permits the redemption of shares at 100% of the per share price for our common shares in effect at the time of the redemption request.

 

Coronavirus Impact

 

As a result of the global outbreak of a new strain of coronavirus, COVID-19, economic uncertainties have arisen that continue to have an adverse impact on economic and market conditions. The global impact of the outbreak has been rapidly evolving, and the outbreak presents material uncertainty and risk with respect to the Company’s performance and financial results. The Company is unable to quantify the impact COVID-19 may have on its financial results at this time.

 

 F-12 

 

 

Item 8.Exhibits

 

INDEX OF EXHIBITS

 

Exhibit No. Description 
2.1** Certificate of Formation
2.2** Form of Amended and Restated Operating Agreement
4.1** Form of Subscription Agreement
6.1** Form of License Agreement between Fundrise Income eREIT VI, LLC and Fundrise LLC
6.2** Form of Fee Waiver Support Agreement between Fundrise Income eREIT VI, LLC and Fundrise Advisors, LLC
6.3** Form of Shared Services Agreement between Fundrise Advisors, LLC and Rise Companies Corp.
11.1* Consent of RSM US LLP

 

Filed herewith
**Filed previously

 

 14 

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Washington, DC on March 30, 2020.

 

 Fundrise Income eREIT VI, LLC 
 By:Fundrise Advisors, LLC, a Delaware limited liability company, its Manager

 

 By:/s/ Benjamin S. Miller
  Name:Benjamin S. Miller
  Title: Chief Executive Officer

 

Pursuant to the requirements of Regulation A, this Annual Report has been signed below by the following persons on behalf of the issuer in the capacities and on the dates indicated.

 

Signature Title Date
     
/s/ Benjamin S. Miller Chief Executive Officer of March 30, 2020
Benjamin S. Miller Fundrise Advisors, LLC  
  (Principal Executive Officer)  
     
/s/ Benjamin S. Miller Interim Chief Financial Officer and Treasurer of March 30, 2020
Benjamin S. Miller Fundrise Advisors, LLC  
  

(Principal Financial Officer and

Principal Accounting Officer)

  

 

 

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