LEX Markets: Commercial Real Estate Investing for All

About LEX

What is LEX and how does LEX work?

LEX is a commercial real estate marketplace.

LEX offers investors a new way to access the benefits of commercial real estate investment. Investors can buy equity shares of commercial real estate buildings, earn income if and when buildings pay distributions, and exit holdings by placing their shares for sale on the LEX Alternative Trading System or via OTC Markets without lockups or hold periods. All investors - accredited and non - can invest through LEX.

LEX offers owners a novel means to access permanent capital by taking assets public. Owners of commercial real estate buildings use the marketplace to sell equity in their property, enabling them to raise capital while retaining control.

All assets on the LEX platform are first offered to the public in an IPO, and then trade on the secondary market. Investors can purchase their shares either in the IPO or on the secondary market. Liquidity is not guaranteed.

Owners of commercial real estate buildings use the marketplace to sell equity in their property, enabling them to raise capital while retaining control.

How is LEX different?

LEX has several features that make it unique compared to any other real estate investing option:

Our securities can be purchased by both accredited and non-accredited investors. Most other direct investment opportunities are only open to accredited investors.

LEX takes individual buildings public. We give you the ability to purchase shares in individual commercial real estate buildings, not groups of buildings as with REITs. Your investment is tied directly to a single asset and its cash flows. Publicly traded REITs may be more liquid than LEX securities.

LEX shares can be traded on our secondary market after the building IPOs, so you are not subject to the hold periods or lockups required by most other real estate investments. Liquidity is not guaranteed.

How does LEX make money?

Our two primary sources of revenue are one-time placement fees at the time of a property's initial public offering and a recurring annual fee.

LEX collects a one-time placement fee from an affiliate of the issuer of each LEX Security at the time of the initial public offering. The amount of that fee varies from offering to offering and is set forth in the offering circular or prospectus of each LEX Security, available on EDGAR. That cost is borne by the sponsor of each offering and is not borne by public unit holders.

LEX collects an annual fee from issuers of LEX Securities equal to 1% of the public float. That fee is collected out of income distributions paid by the issuer to its public unit holders, reducing the amount received by public unit holders.

For example, on a theoretical property with $10m of public float on LEX (in other words, $10m was raised in the IPO), LEX would receive an annual fee of $100,000. If that theoretical property produced an annual distribution yield of 8%, this fee would reduce the distribution paid to public unit holders to 7%.

LEX does not charge any trading commissions, and absorbs any clearing, SEC, and FINRA trading fees.

LEX also receives credit interest from our clearing firm, Apex Clearing, based on the total cash balances of client accounts held at Apex Clearing.

Getting Started

How do I create an account?

Federal law requires us to gather basic information about your investment goals and finances in order to set up a brokerage account with LEX. Click here to read our full privacy policy.

What am I investing in?

You are investing in an equity security issued by the property owner. Unlike a REIT, LEX shares are of an individual real estate property, not a pool of properties. Shares are issued under securities law provisions that allow unrestricted secondary trading (registered or Reg A).

Who can invest?

LEX is available to any U.S. citizen or permanent resident 18 years or older.

Can international investors invest?

Not at this time. LEX is working to support foreign accounts some time in the future.

Investing With LEX

Is LEX open to non-accredited investors?

All investments on the LEX platform are open to both non-accredited and accredited investors. Accredited investors on LEX do not have to document their accreditation status, unlike with traditional private placement offerings. Non-accredited investors are subject to certain limitations on the size of their investment. Email us at clientservices@lex-markets.com to learn more.

How are distribution amounts calculated?

Distributions are expected to be paid quarterly based on the financial results of the previous quarter and anticipated cash needs in the near future. Distributions are not guaranteed. Property owners are not required to pay distributions, but if they pay any equity shareholder (including themselves) a distribution, they are required to pay the LEX shareholders.

Distributions are calculated at the discretion of the property owner. There is no established formula but the distributions are generally derived from the net cash flows of the building after servicing debt payments on the property. The issuer typically makes a public filing on Edgar announcing the distribution amount and timing several weeks after the end of each quarter.

How do Instant Deposits Work?

Instant Deposits allow LEX users to trade or participate in active IPOs after initiating a deposit but before it has closed. Using Instant Deposits, LEX users may buy up to $5,000 worth of shares on the secondary market.

I referred someone to LEX. When does the $50 credit become available?

When a user that you refer completes their first deposit of at least $500, you will receive the $50 credit in your account. See the full terms and conditions of our referral program here.

My account balance is rising by a few cents every month. Why?

Deposited cash sitting in your LEX account is swept into an interest bearing FDIC-insured bank account as part of our clearing firm’s cash sweep program. The interest rates are dependent on the federal rate and may vary.

How can I earn returns on my investment?

LEX shareholders receive quarterly distributions when income is generated by the underlying real estate property.

The market value of LEX shares may fluctuate due to the performance of the underlying property or other market conditions. Investors may be able to sell their shares at a profit (or loss) on the LEX ATS.

Returns and distributions are not guaranteed.

I bought shares in an offering. When will I be able to trade them?

You will not receive shares in your account until the offering closes. As soon as the shares arrive in your account, you will be notified and you will then be able to trade them. For our first offerings there may be a short period of time between delivery of shares and the opening of trading as we configure our systems.

California residents may experience a brief delay (estimated to be several weeks) in their ability to sell shares purchased in an offering while the issuer obtains state resale qualification.

How do I trade on LEX?

After an offering closes, it will open for trading on the LEX ATS. You can enter BUY and SELL orders in the LEX app. We only allow limit orders, meaning you set the maximum price at which you are willing to buy or the minimum price at which you are willing to sell. If an opposite-side order is priced at a price that matches or overlaps with the limit price you enter, a trade will occur. If not, your order will rest in the LEX order book until a matching opposite-side order arrives, until the date or time you specify, or until you cancel it.

LEX shares can be held in other brokerage accounts and can trade on OTC Markets.

How are shares priced?

Offerings on the LEX platform are priced at $250 a share at initial offering.

LEX undertakes a robust underwriting process that includes 3rd party experts to determine a fair market value for each property. We then divide the equity being offered by 250 to determine how many $250 shares will be issued. While the price per share is fixed, the quantity of shares issued varies with the property’s market value and percentage of the building being sold.

After the initial offering is closed, share value is determined by the market.

Can share prices for a property fluctuate?

Yes. After an initial property offering, share value is determined by the market.

What is an Indication of Interest?

An indication of interest (IOI) is a non-binding preliminary signal that an investor is interested in buying a security before an actual offering has commenced. IOIs assist LEX in planning actual offerings. If you make an IOI and wish to purchase shares in the offering, you will need to reconfirm your interest with an actual purchase order during the initial offering.

What are distributions and how are they calculated?

A distribution is a cash payment made by an issuer to shareholders; it represents each shareholder’s proportional share of the issuer’s profits. A Schedule K-1 will be provided to each shareholder at the end of each year identifying total distributions earned that year and explaining how distributions were calculated.

How are distributions paid?

Distributions are deposited into the same brokerage account that holds the shares.

What fees do Investors pay?

Investors who purchase shares on the LEX platform pay a quarterly fee of 0.25% (1% annualized), based on a trailing 90 day market value. The fee is deducted from the quarterly distribution payments you receive from the issuer. LEX does not charge trading commissions or any other fees to investors.

Are there trading fees associated with making an investment on LEX?

No. LEX does not charge trading commissions to its brokerage customers.

Are there other property or operational fees associated with the investment?

Property owners may assess property or asset management fees incurred before calculating distributions. These fees are paid proportionately by public investors and the original property owners.

Investors can consult the most recent EDGAR filings of each issuer for the exact fees charged by each property manager.

Are shares tradable after the initial offering closes?

The LEX ATS (Alternative Trading System) allows investors to trade shares after an initial offering is completed. Liquidity is not guaranteed. If you are unable to trade out of your position, it can still be liquidated if and when the underlying property is refinanced or sold. There is no guarantee that the underlying property will be refinanced or sold.

What happens if a property is sold?

If a property is sold, investors will receive their pro-rata portion of the proceeds as a final distribution.

What is the holding time for securities offered on the LEX platform?

There are no required holding periods for securities offered on the LEX platform. Secondary trading opens after the initial offering is closed. While LEX has designed its platform and ATS to encourage liquidity, there is no guarantee that an investor will be able find a willing buyer when he or she wishes to sell.

How many shares are issued in an offering?

The number of shares offered in each offering is listed on the cover page of each offering circular, available under the “Documents” tab for each property, or on sec.gov/edgar.

The total number of shares is calculated by taking the total amount of equity being offered and dividing it by $250/share.

How do I make money on LEX?

Each property on the LEX platform has been screened by LEX’s investment bankers based on its anticipated ability to generate stable quarterly distributions to shareholders. Nevertheless, there is no guarantee that distributions will be made at the estimated rate, or at all.

LEX investors can also make money if they sell any purchased shares for more than they paid to purchase them.

Who are the Property Owners?

Owners can be individuals, institutions, funds, REITs, or family offices. All Property owners and properties affiliated with LEX pass rigorous due diligence checks.

Are Property Owners required to retain a significant equity stake in their properties?

Yes. Property Owners are required to maintain at least a 5% equity interest in each property. This helps maintain an alignment of interests between Property Owners and investors.

How do you make sure that your platform is not hosting illegitimate investors?

Each customer that creates a brokerage account on LEX goes through a Know Your Customer (KYC) process that meets the requirements of all applicable regulatory bodies. The financial institutions that connect to our technology systems must also meet regulatory standards.

What is the impact of COVID-19? Does it make any sense to invest?

COVID-19 has forced many real estate owners to seek new forms of financing. The LEX solution can address that need, and we have seen a sharp increase in potential offerings as a result. All offerings are priced and structured based on actual performance during the pandemic to-date.

Can I use my IRA?

At the moment you are not able to fund your purchase with funds from your IRA. We are planning to support IRA investments in the future.

When I post trades to the LEX ATS, who am I trading with?

Currently all trades are matched against other LEX customers on the LEX ATS. In the near future, your trades may be matched with professional market makers or with other brokers representing their customers, and your order may be routed to OTC Markets for execution if there is a better-priced quote displayed there.

Account, Privacy, & Security

How does LEX protect my personal and financial information?

LEX utilizes institutional grade security protections and undergoes periodic penetration testing to take an active approach to maintaining data security.

Are my money and my securities safe?

When you open an account with LEX, you also open an account with our custodian Apex Clearing Corp. which holds your cash and securities. Both LEX and Apex are members of SIPC, which insures the value of your account up to $500,000 in securities and $250,000 in cash.

How do I withdraw my money?

You can deposit and withdraw available cash from the Account page.

If you wish to transfer securities to another broker, you should contact clientservices@lex-markets.com.

Will LEX share my data with any third parties?

All personal data will be used by LEX solely for compliance with applicable FINRA and SEC rules. We may use certain browser data for internet marketing purposes as described in our Privacy Policy here.

Compliance, Risk, Taxes

Are the financial reports of properties listed on the platform audited?

Yes. Initial offerings of each asset offered on LEX include 2-years of audited financial statements (or since acquisition if sponsor-owned for less than 2 years). Once listed on the LEX platform, financial statements of each asset are independently audited annually.

How do I file my taxes if I purchase properties in different states?

The issuer will provide shareholders with the appropriate tax documentation needed to file their personal taxes as soon as it is available. You may be required to file additional state tax returns in the state in which a property you invest in is located. Consult your tax advisor to determine whether this will apply to you.

Are securities taxed as a partnership?

Potential investors are encouraged to consult with professional tax, legal, and financial advisors before making any investment in a securities offering.

Issuers intend to operate in a way to meet the “qualifying income exception” under Section 7704 of the Internal Revenue Code of 1986, as amended (Code). As a result, all taxable items including income and depreciation are passed directly to investors. Investors will receive a Schedule K-1 detailing those items each year.

Investors may have to file state tax returns in the state in which an underlying property is located, even if the investor does not reside there. Consult the offering circular of each security for additional details.

If I invest once, will I be required to contribute additional capital?

No. You will never be required to contribute additional capital beyond your initial investment. This protection is built into the operating agreements of each offering.

Why do you need my Social Security number and date of birth?

LEX is a FINRA registered broker-dealer and is required to perform Know-Your-Customer (KYC) and Anti-Money Laundering (AML) procedures similar to other financial firms. This information is required to be collected under the PATRIOT Act as well as other laws.

What happens in the event that LEX dissolves?

You own the shares you purchase on the LEX platform and will continue to own them in the unlikely event that LEX dissolves. LEX is independent from and holds no ownership or control interest in any of the platform issuers or properties. Without LEX, shares could still be sold through other brokers and/or liquidated upon the sale or refinancing of the underlying real estate property.

Is there risk associated with an investment made on the LEX platform?

Yes. Risk is inherent in all investments. LEX strives to offer stable assets managed by strong and experienced teams, but many factors can affect the value of a property.

LEX recommends that investors read each property's Offering Circular, each of which includes a ‘Risk Factors’ section.

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What actions does LEX take to assess the quality of the assets offered on the LEX platform?

LEX conducts thorough due diligence on each property prior to offering it on the platform. That due diligence process consists of a thorough review and analysis of sponsor and property financial records, commissioning third-party reports by engineers, appraisers, and title companies, interviewing building management, leasing agents, maintenance workers, physically inspecting each property, and conducting background checks of key personnel. The results of this due diligence are reviewed and approved by a committee of experienced real estate professionals prior to each offering.

What property management responsibilities do I have as an investor?

None. The Property Owner maintains day-to-day operational control of the asset.

Reporting

What information do I receive on performance and updates?

Each issuer is required to publicly file quarterly (for registered offerings) or semi-annual (for Reg A offerings) reports on the SEC’s EDGAR system. Additional details of each property’s performance are available on the LEX platform. You may check the day-to-day value of your holdings at any time on the LEX platform.

Legal

Does the state location of the investor impact how the security is regulated?

All securities are compliant with all state securities laws.

Do I have to be an accredited investor to invest?

No. For securities issued in Reg A offerings, non-accredited investors are limited in the amount they can purchase to no more than 10% of the greater of their annual income or net worth.

Are there limits to how much you can invest?

For securities issued in Reg A offerings, non-accredited investors are limited in the amount they can purchase to no more than 10% of the greater of their annual income or their net worth.

Property Owners

Can I collect new fees and a promote structure from these new investors?

No. An amended and restated operating agreement at the OpCo entity level is separate from the existing operating agreement between any existing partners. No new promote structure may be implemented, especially considering these are stable assets. In many cases, promotes are accelerated at the existing partnership entity level when conducting an offering. Existing asset management fees or general overhead expenses at the OpCo level will be attributed proportionately to the existing partners and new investors.

How do building owners benefit from issuing shares on the LEX platform?

Building owners receive the proceeds of the IPO, which they can use to redeem a departing partner's interest, make capital improvements, invest in other projects, or for any other purpose, all while retaining control of the building. Building owners do not receive any of the 1% annual fee.

When can I use the LEX platform for a recapitalization?

At any time in the lifecycle of the asset, so long as the asset is stable and cash-flowing.

Can I sell my asset after I use the LEX platform?

Yes. The sponsor has the discretion to manage the asset or sell it.

How is the price of my asset determined?

Sponsors and LEX’s real estate investment banking and sales teams analyze and value the asset. The LEX team works with the sponsor to gauge investor sentiment relative to the proposed valuation to price the offering.

What are my obligations post-closing?

The annual fee paid to LEX by the public investors covers the costs of required ongoing audit, disclosure, and tax obligations. The property owner must cooperate in providing necessary documents and information to the service providers preparing those filings.

Can I require capital calls from the new public investors?

No. Capital calls are prohibited for these offerings. The properties should be stable and past the point of needing additional capital expenses, but in the event of unforeseen capital needs, a sponsor can do one of the following:

● Retain distributions to build capital reserves

● Raise additional capital through a follow-on offering

● Raise new debt (limited to 75% LTV max)

● Use existing retained capital reserves

Can I use LEX for acquisitions?

No. This process occurs post closing on a deal as a way to conduct an equity recapitalization.

How much of my equity can I offer?

The GP (General Partner) must retain at least 5% of the equity and remain as the managing member and consent to the offering. Pre-existing loan covenants may restrict the amount of equity sold to under 50%.

Who are the investors in the securities?

Investors will be a mix of institutional, family office, and retail investors.

What are the basic requirements for a property to have its securities offered on the LEX platform?

● Minimum 12 months of stable, cash-flowing operating history and an expectation that the property will continue to have a positive cash flow

● Minimum equity value of $15 million

● Maximum equity value offered is subject to equity transfer and change-of-control provisions under surviving financing documents

● Multifamily, office, industrial, retail, hotel, and others

● No development or acquisition deals

● One asset per offering

● All U.S. real estate markets (e.g. primary, secondary, tertiary)

● International markets are currently restricted to Canadian assets

● Maximum LTV on asset post equity recap of 75%

● General Partner must retain an interest in the OpCo (Operating Company)

How are these deals structured?

LEX works with property owners to create a new entity that will purchase equity in the underlying property and sell shares (publicly traded partnership interests) in itself to the public. The new shares are issued under securities law provisions allowing unrestricted secondary trading (registered securities or Reg A securities).

Do You Have Any Questions?