All right, thanks everybody for joining. My name is Cameron Woo and I am the VP of investments at Arrived. Been here about five and a half years. Uh usually we have Karen Hedland who’s head of our investor relations. Um but she’s on some well-deserved time off so you get me today. Um so happy to answer all the questions in the chat as well as any questions you may have additionally about real estate, rentals, credit, investing. um you know happy to answer the full spectrum of questions you all may have. So let’s start with some of the ones earlier in the queue. Uh we’ve got one here. During an offering investment open period, is there any difference in returns to investors um for the money received from the first investor versus the last investor before the offering is closed? Um so the the short answer to this question is no. there’s not really going to be any difference. And typically our investment offerings, they close within 2 to 3 weeks or so from the time that they open. I think the instructive part of the answer is that when we offer something for investment and it shows up on the website and you can invest, all of the financials start acrewing to the balance sheet of that investment. So each individual property, they’re going to be in their own self-contained LLC. So all the rental income as well as all the costs are getting attributed to that entity. So as you’re coming in and investing, let’s say that you may not have your shares yet, but you know the rental income is ready to be distributed. Then those shareholders that are invested, they do receive that um that dividend, you know, presuming it’s generating cash and everything like that, but all of the financials are acrewing to that entity. Um, so there can be minor variations in whether you received the dividend or not based on that timing, but again, all of those financials from from the moment that it hits the website and it’s open for investing, then all of those acrew. The slight difference is if you’re invested in one of our fund products, so that could be the single family residential fund, the Seattle city fund, the real estate uh income fund. All of those are what are called evergreen, meaning that they’re always open and you can invest at any time. And based on when you’re investing, you may qualify for a dividend that somebody coming in later does not qualify for. Works exactly like the stock market in the sense with X dividend dates where if you are a shareholder by a certain date, you would be entitled to that next quarterly dividend or however that public company is paying it out. It works the same for our fund investments. All right, let me know if there’s any other follow-up questions from that. The next question is, is there a way to defer taxes by transitioning principal and returns from one investment to the next with arrived? So, the short answer to that is no when it comes to individual properties. Um, but there are some tax advantage possibilities in funds and I’ll and I’ll give you example. So, first at a high level, each investment when you’re individually investing in properties like one 123 Main Street, they are that self-contained LLC, but it’s a security. Okay? And what that means is your your limited partners that own the company, which the shareholders, and that LLC is on title to the property. So every single one of our investments, it’s like a different company of a thousand different shareholders. So typically, if you would, if you owned your own property and you wanted to do a 1031 exchange and you’re the only individual owner of that property, it does become possible to take all of the sale proceeds and the gains and roll it in to that next property. But the requirement for a 1031 exchange is that the owner of the prior property that’s being sold has to be on the same title holder as the next one. So we can’t really force a thousand people to be shareholders of the next property because they’re indiv you’re individually investing in um all sorts of different properties. So if we sold one, that entity gets closed out and then proceeds are returned to the thousand different shareholders. Then some other groups of people, maybe they want to reinvest it, some want to take it out and transfer it back to their bank account, but that’s one of the reasons why we can’t really roll you into the next one because that LLC will have to be the same LLC that purchases the next property. Um, so that’s one of the constraints. Now, with that said, we are opening up our 1031 program and currently growing it. So, if you have a piece of property that you’re wanting to sell, arrived can help you source the next property and then roll those funds into the next one. And then we would basically replicate the program that we manage for all of our fractional investments where there’s, you know, the 123 Main Street in Main Street LLC, then there’s the thousand different fractional shareholders. We would run it the same as um you know managing on your behalf, monetizing it, distributing it to your arrived cash balance, but you would be the sole shareholder of that or however your LLC um is capitalized that they would be the same owner of that next property and we could help you with that 1031 exchange. The part where we’re there could be some uh beneficial tax gains within an arrived product is in our funds. So our single family residential fund has close to 60 properties and if we were to sell one of those then you know that is the arrived uh you know single family rental fund that one could buy the next property. So there wouldn’t be a t tax consequence for the fund for which you would be a shareholder of. So that’s a way that we can get those rollover tax benefits in a 1031. We can do that within our own SFR fund, but for individual properties, we’re not able to because we’d be forcing all thousand people in those fund in that individual company to be an investor in the next property, which they may not want to be. All right, next question. Liquidity. Okay, so what does liquidity look like for each of the investment products? So really two two primary products, individual offerings and then funds. and you get liquidity for both which is um a a pretty novel idea. So first on the fund side we have what we call our redemption program and the redemption program works a lot actually exactly like mutual funds where on a quarterly basis we update the share value and the or the net asset value is probably the more technical term and what that um net asset value is is really a reflection of the equity side of the balance sheet. Um that’s basically cash balances. Um a real traditional accounting statement where you know assets minus liabilities equals stockholder equity. So the stockholder equity is the numerator and you divide it by how many shares you have and that’s the um that’s the NAV for that quarter. The largest factor for the NAV in the equity side of the balance sheet is the change in the property prices. So what are all of the properties worth in that particular fund? um that’s one of the main drivers of what do you have um for equity in that fund. Um so that redemption program allows you to uh redeem on a quarterly basis where you can then you know for that period you can exchange your shares for that uh p for for that net asset value. So if it’s an $11 share price and you have a 100 shares then you could liquidate partial, you could liquidate full. Um there is a limitation of 20% of the total fund value in any trailing 12 months, but we we’ve never come close to that. Um you know, it may be a percent or two um on a on a quarterly basis. So it’s it hasn’t really um gotten to that amount. Um so that’s that’s on our funds. So whether it’s our real estate income fund, single family residential fund, Seattle city fund, those any any of our funds, they work the same with the redemption program. And there’s always liquidity in the sense that arrived is providing that liquidity. It’s not like a stock exchange where you have to have a seller on the other end. Arrived will redeem that that share um and then that’s how you get your cash from that investment. On the individual offering side, this works more like the stock market where um you have I I believe after six months of being in that particular property, you could list it and this is much more of a traditional market matching type function where you as a seller of shares can put any quantity that you own available for sale. on the 123 Main Street if you wanted to sell that and then uh buyers will look through the order book and say you know I’ll bid this uh you know and then we have a market um matching mechanism that will match together like who is willing to bid a price versus the asking price and if there’s a match then it’ll execute. Uh so that secondary market went live in um August of 2025. So it was a real nice achievement because um for the first time investors could really get liquidity through shares for something that’s traditionally liquid like a piece of real estate. Um so you know arrive could make the decision to sell the property on behalf of all investors in which case everybody would get liquidated out and that’s really the traditional way that most funds offer or most um you know real estate would get liquidated. But there’s a second layer which is investor level liquidity where you could sell your shares just like on the stock market. Um so that’s the liquidity on both types of investment products and and those are the two that are offered right individual offerings. So you have the secondary market and then fund investments which you have the redemption program. All right. Um so there was a clarifying question here. So you mean when you acquire a new property from a private seller you’ll offer a 1031? Yes, exactly. So, if um not necessarily acquiring it from, you know, any seller, but we do offer a 1031 program. So, if you’re wanting to sell your property and then place funds into reinvest into a different property like in a different part of the country or you know there would be a need for you to um you know want to do that to avoid having to pay the capital gains and depreciation recapture then we could facilitate a 1031 for you and then um operate it in this in the same way as the rest of our real estate portfolio.
All right. Um Okay. So, as I’m scrolling through here, let me just make sure I’m getting all the questions. Um, so we got a next one. Has there been a thought to establishing a vacation rental fund? Yeah. Um, you know, we we considered earlier on whether, you know, the fund would be the right investment or not. And one of the decisions of not doing that was vacation rentals are just so different. They’re very non-homogeneous. Whereas rental properties, they you almost want kind of a homogeneous um type of investment that’s optimized for getting the most rent per purchase price. And then they are not furnished. Um, and they’re pretty passive once they have a renter in it. So, we could construct funds that had a lot more of a, you know, consistent profile for single family rental funds. Um, and then, you know, with vacation rentals, they were just so active. Um, so we never really went through the idea of that. And then the the other consideration is that um vacation rentals are not eligible for real estate investment. Um the re basically re-qualification um and they’re a much more active operation. So we tend to look for more passive investments that get requalified um tax uh treatment. So real estate investment trust tax treatment because it avoids a second layer of taxation. Um, and then we can send out an easy 1099 div. So, there’s there’s a couple structural reasons why we didn’t do it, but primarily it’s because the asset types are just like so very different with vacation rentals that we decided to not put it into the fund structure. Whereas things like credit assets where, you know, it’s a piece of paper that guarantees you an interest um payment from a borrower or a single family rental home that is a very kind of homogeneous asset that we buy in different parts of the country. those are much more conducive to our fund structures. Um but with respect to vacation rentals, um we’ve recently internalized the large majority of the portfolio. So out of the 40 active assets that we have, 32 of them are now in-house managed. Um and once we get more of those stabilized, then we’ll, you know, consider adding more vacation rentals uh to the portfolio. But, you know, having a fund was never out of the question, but the timing just wasn’t right for um when we bought the majority of our vacation rentals in 2022.
Okay, let’s see. We got another question here. Mark, a question.
Okay, so the returns on arrive properties have been less than a percent after holding them for more than 3 years. The 8% return shown in RI’s calculation appears to be projected or scientifically calculated return rather than the actual ground truth return experienced by investors. Secondary markets also not effective making these investments highly illquid. It is difficult to sell the properties um or recover the invested capital when needed. Overall the value of the value and performance of these let me just continue reading it. Properties appear to be declining significantly with many properties showing poor returns. Um, okay. So, yeah, I mean, you know, there’s some fair points in here, so I can address these. On single family rentals, our average long-term rental return is about 3.8% to 4.2. It’ll depend. So, as far as um individual properties, there’s definitely properties that have returned lower than that or if they’ve gone through evictions or if they’ve had declining property values. Um, that’s definitely to be expected in a nearly 600 unit portfolio. Um so definitely there’s you know kind of the luck of the draw on some properties timing of the market. Um so fully recognize that not 100% of the properties have delivered that 8% return. One of the constraints on that projected return is uh we operate within a regulatory framework called reggg A+ and that is to allow nonacredited investors to be able to invest in securities. Otherwise you have to go through a pretty burdensome um process and like you just really wouldn’t be uh in a position to offer securities to nonacredited investors. The whole world of private capital investment is oriented around accredited investors which is like less than 5% of the population because you have to have a certain income and um wealth qualification. So the majority of funds and investments that are accessible to people are through a regggd framework but we go through the reggg a plus and incur significant expense and going through the securities offering to be able to offer access to people. One of the constraints though of operating in reggga plus is that we’re not allowed to make forward projecting returns. So the 8% to your point is a combination of two things. It’s the expected first dividend that will be paid out and then the projected 20-year average of the appreciation for um that particular zip code. And it’s a constraint, right? We can’t have the forward-looking projection because our securities regulation framework, it just doesn’t allow it. Um, and if you were to look at any trailing 20-year period kind of from modern American history, there’s about a four to 5% return on the appreciation component. Um, so I think that it’s not an unfair representation, especially when our dividend yields have been hitting around that uh 4ish% mark. If you look at our single family rental fund, it’s 4.2% return. Our Seattle city fund paid a 5% um return on the income. So monetization wise, we are in that range that we expected and we underwrote to. And then on the appreciation component, you know, it’s fair to say that we’re in a pretty stable and flat market right now. Um, and there’s and there’s properties that have declined as well in the portfolio because there could have been an eviction. We have to tap into the cash balances. So, as I’d mentioned earlier, the the equity component of the um of the balance sheet is what what the stock representation is. Um, so those can decline even if the property is not declining in value because the cash could be drained from the bank and the reserves because we had to pay for an eviction where we weren’t getting rent and then we have costs associated with that. It’s one of the unfortunate things about having real estate is that those situations do happen, especially on a portfolio um, you know, numbering in the 600. So, I I think about appreciation kind of as you got to be able to stay in the game and then it’s it’s not linear, right? It can be flat for a while or maybe it’ll inch up 1% 2% or go down 1% 2%. Those are perfectly normal oscillations, but then there’s going to be bull markets where for a 2-year period, three-ear period, 5 years, it can increase pretty significantly. So, we saw one of those during COVID era 2021, 2022. there was really high property appreciation and we caught the wave of that with some of our properties. Um similarly if you go back to the crash of ‘ 08 through 01 there was about a 25% decline peak to trough in the market and then there was you know stable appreciation from that point. So markets will operate on like a 15 to 25 year cycle. Um but historically you know that 4% number is coming from just picking any point looking back in a trailing 12 or 20 and what has been the annualized uh appreciation. That’s how we generate that number but it’s really born from a constraint of offering um securities to nonacredited investors. Um so you know we like rental real estate because it’s it’s tax advantage. It’s highly leverable. um you can get some of the best financing rates on it, but one of the you know reasons that allows you to stay in the game is that rental income. So, as we’ve been generating the 3.8 to 4.2% range on our overall portfolio, that allows us to hold the real estate and then once we catch that upward wave, then we’re able to capitalize on that, sell some properties for some good gains and then kind of continue the investing cycle. So that’s traditionally how you you know like the rationale behind why invest in single family residential real estate. High demand for rentals, highly leverable tax advantage through depreciation where a lot of the cash flow doesn’t incur income tax. Um and then you’re catching the right market cycles. But from my experience certainly hasn’t been linear. So hopefully that addresses some of the concerns they have. Um but happy to answer more.
All right, let’s see. Does site.
So, does the site have the capability to download your holdings with initial cost and current value to Excel? Yep. So, Larry, if you go to your portfolio page, there is an export where you can uh export your holdings, uh the number of shares you have, the recent market value, the cost basis on all of our individual investment offerings. They all start at $10. And then on your funds, based on when you invested, you’re going to have a different starting price, but that information is available on your portfolio page as an exportable spreadsheet.
Okay, let’s see. Um, we got another question here. If you just start investing uh starting to invest in a real estate site like this, is it better to do individual properties or residential fund where you can only start with $100 in shares? So great question, Jessica. Yeah, so any arrived investment has a minimum of a $100. And I would say the best way to start out is to at least get a couple of holdings just so you can get the base amount of diversification. Um, and that that can mean a lot of things. You could you could be really bullish on a certain state or a certain market and you would still want diversification because you may want to hedge against a tenant, you know, tenant performance. So, let’s say that you really like Knoxville, Tennessee, and you only want to invest in Knoxville, Tennessee, and that’s perfectly fine. You would still want to pick up a couple of properties because any one property might go vacant, go through an eviction. There could be any reason that the, you know, the core thesis is still good, but you’ll want to not put all all of your eggs necessarily in one basket. And this is agnostic to the amount that you’re investing. So whether it’s $100, $1,000, $10,000 per property, that still holds true that your capital always wants to be kind of hedged against any one factor that you would be concerned about. when people think of diversification the clear one in a lot of people’s minds are is relating to geographic diversification um and you know from from my point of view I think it’s good to have concentrated beds and it’s good to have a concentrated thesis as well um but you still want some measure of separation between like the operating performance and not putting all your eggs in one tenant basket so that’s really one of the benefits of arrived is that for a low dollar amount that you can get some of these um hedges and exposures. Now, to your question about individual properties versus a residential fund, a fund is an even more efficient version of what I just described because you can invest $100 into our single family residential fund and then you’re a partial owner of nearly 60 properties. So, you’re really not ever going to be in a position where your money is not being put to work because, you know, 60 homes are not going to go vacant all simultaneously, right? We’ve historically had about 97% occupancy on the SFR fund and then you know if a few people move out that may drop down to 90% and then you lease it back up and then it and you know comes back up to that 95% plus level. So your money is always being put to work and the SFR fund is a good example of some some of that diversification um accessible at a $100 price point. So you know it kind of goes my my message is uh twofold. one, get that little bit of exposure just to hedge yourself against any one tenant vacating and then your money is not being, you know, um is not earning you any sort of rental income. And if that’s $100 or if that’s $300 or $500, you know, it’s it’s still a pretty accessible price point relative to something as expensive as real estate. If you want to kind of just dip your toes in the water but then get max diversification then the then our funds are going to be the the best way to do that um at that dollar amount because it is for 100 bucks you can get the equivalent performance of those 60 properties. You just own a much smaller stake in all 60 of those um properties. So that’s that’s the first part of it. The the second part though I would say is you know investing is a long-term game especially in real estate and you want to have conviction in what you’re investing in. So, if what helps you sleep at night is the safety of um having your investment just automatically spread out across those 60-ish properties, then then that’s what I would recommend is to like have conviction help you sleep at night. If your convictions are I love Tennessee and I know that that market is going to be the higher returning one, you know, from from all the things that you know, like you’re thinking, then go ahead, have conviction in in those markets. Um, but still, you know, spread your money out a little bit so that’s not all indexed to just one asset. Um, but have conviction and make sure that your money’s always being put to work for you are the are the two ways that I would recommend it. But both can be played as individual stocks, you know, and to analogize to the stock market. You can be an individual stock picker or you could be an ETF investor or like an index investor. So playing funds is more akin to index investing and then being a stock picker because you have a you know a a conviction around something that you think will work into the future is necessary to um support being a long-term investor.
All right.
And I think that’s all the questions that we went through, but I’ll give it another minute or two if anybody has any further questions.
All right. Not seeing or any other questions. So, you know, with that, um, appreciate everybody’s time for, uh, sitting through the prepared marks as well as all the thoughtful Q&A questions. If you have any other, um, questions, you know, feel free to always reach out to supportive.com or click the chat bot. Uh, we’re on most social media platforms. Um, and we have a pretty quick response time with our chat. But, um, thanks so much again for coming on and happy investing. Take care.