We hope you’ve enjoyed learning more about the LEX mission and investment opportunities in commercial real estate. In this post, we explain how the LEX platform is unique.
Traditional commercial real estate investment opportunities generally fall into one of three categories:
(1) Direct Investment requires substantial minimum capital commitments and may require the investor to actively manage the property.
(2) Private Investments into funds and limited partnership structures, which are mostly illiquid, require long investment hold periods, are only open to accredited investors, and require high minimum investment thresholds.
(3) Publicly Traded REITs do provide access to institutional quality real estate and are managed mostly by institutional asset managers. These traded REITs can be highly correlated to equity markets and can be volatile when equity markets and fixed income markets fluctuate, not reflecting the value of the underlying real estate. The volatility in REIT shares is the trade-off for the liquidity they provide.
LEX is different.
LEX’s unique deal structure incorporates the best features of commercial real estate investing, resulting in these five advantages for investors:
1. Access. LEX securities are open to all investors, and there are no investor accreditation requirements. LEX owns and operates its own FINRA-member brokerage platform that is custom tailored to help investors review, evaluate, and invest in LEX securities.
2. Liquidity. LEX securities are freely tradable without lockup periods. LEX securities clear and settle in traditional brokerage accounts and can be held in street name at any brokerage firm or investment adviser. The real estate owners/sponsors who list their assets on the LEX platform provide periodic financial reports on their assets as required by the SEC, thus providing investors with transparency into the specific asset. LEX owns and operates its own SEC-licensed trading platform, which is custom-tailored to match trades in LEX securities. Liquidity is not guaranteed, but the above features encourage liquidity and are not available in private real estate investments.
3. Alignment. LEX securities are structured as part of the equity of a specific asset and participate pari passu with the other equity owners, sharing in any cash distributions and sale proceeds produced by the asset. The owner/sponsor is not required to make distributions, but if they do, holders of LEX securities receive their pro rata share of cash distributions from rental income as well as proceeds from a sale of the property. The interests of owners/sponsors are aligned with those of LEX investors, and all equity investors have the same motivation for investment success.
4. Existing Assets. LEX sells securities only in buildings that are already built and generating rental income. Investors are not betting on the success of a development or renovation plan that will take years to execute and that may not turn out as intended. You can see, research, and even visit each asset with your own eyes before investing.
5. Access to Assets that Aren’t for Sale. LEX allows for investment in buildings that are not for sale. LEX’s securitization process creates a broader range of investment options for LEX investors than the market for buildings that are for sale outright. Most real estate assets are held for a long time, and the owners/operators are not interested in selling an asset after a short hold period. In many cases, owners want to create value in an asset and hold the asset to be managed for decades. The LEX equity recap strategy is a perfect solution for owners who do not want to sell an asset but are interested in creating some liquidity for themselves and other existing equity owners. Working with owners who are not selling outright makes the total addressable market for LEX deals larger and more interesting compared to the market for buildings that are for sale outright, giving LEX investors access to investment opportunities in buildings that are not otherwise available.
Interested in investing in real estate but don’t know where to start?
Visit our site to set up your account, or speak with us directly by scheduling time with our team here or contacting us at firstname.lastname@example.org. We’ll be providing more information about our next IPO soon!
September 20, 2022
The goal of this article is to offer practical guidance on how to begin building a real estate portfolio, and how the risk and return profiles of different assets fit together.