A Private REIT Worth Investing In?


Looking to invest in commercial real estate, but don’t have several million dollars lying around?

Real estate crowdfunding platform Streitwise makes it easy to add commercial properties to your investment portfolio. I invest my own money with them. 

But as with any other investment, Streitwise comes with its own pros and cons. As you explore investing in Streitwise, keep the following risks and rewards in mind.

 

Streitwise Review At a Glance

Minimum Investment: $5,000

Prospective Returns: 8-9% annual dividends, little appreciation to date

Fees

    • One-Time Fee: 3% of investment goes to Sponsor
    • Annual Management Fee: 2% goes to the Sponsor

My Take: Streitwise offers reliably high dividends with low risk factors, including low LTVs on loans, high levels of skin in the game by the owners, and high-end corporate tenants. But the high investment minimum intimidates many novice investors, and you should leave your money invested for at least five years to avoid penalties.

What Is Streitwise?

Streitwise operates a private real estate investment trust (REIT) that owns two large commercial office buildings. Retail investors (not just accredited investors) can buy shares in this REIT, for fractional ownership in these office space properties.

These properties include the Allied Solutions Building in Indianapolis, with 142,000 square feet, and the Streitwise Plaza office park. The latter is a large corporate campus in St. Louis with three buildings, totaling 290,000 square feet. 

All four buildings owned by the Streitwise REIT (called 1st Streit Office Inc.) cater to high-quality tenants. These include the Panera Bread headquarters, New Balance’s regional headquarters, Wells Fargo, Edward Jones, Nationwide Insurance, and, of course, Allied Solutions.

Streitwise was founded by the team behind Tryperion Partners. And in fact, Tryperion serves as the Streitwise Sponsor: the real estate investor team in charge of buying and managing the REIT’s properties. Tryperion Partners has owned and managed over $750 million in commercial buildings since 2013, and earned an average return of 30.3% per year. 

 

How Streitwise Works

You buy shares in Streitwise’s private REIT, the shares pay you dividends (more on them shortly), and, hopefully, the shares rise in value. 

As with most real estate crowdfunding investments, you buy shares directly from the company. To sell shares, you also redeem them with the company directly. 

However real estate is an inherently illiquid, long-term investment. Crowdfunded real estate companies don’t want much share turnover, so they often put a minimum holding time on when you can sell back shares. Streitwise doesn’t let you sell back shares within the first year of buying, and they impose decreasing penalties for early buyback for the next four years after that. If you sell in the second year of ownership, they buy back shares at a 10% discount, then a 7.5% discount in Year 3, a 5% discount in Year 4, and a 2.5% discount in Year 5. 

After five years, they buy back shares at the full net asset value (NAV) share price at that time. Which ideally has risen handsomely!

But appreciation isn’t the only way investors make money with Streitwise shares. In fact, Streitwise is best known for its high dividend yield of 8-9% annually. They pay quarterly dividends, and have done so consistently since inception.

 

Streitwise Fees

Streitwise does charge both a 3% upfront fee and 2% ongoing annual fees. These fees go to the Sponsor (Tryperion Partners).

However, the distributions are net of fees — you collect 8-9% of the money you invested in annual dividends. Streitwise explains the fee structure like this: “If you invest 500 shares at $10/share ($5,000), $4,850 (97%) goes towards the REIT and $150 (3%) goes to the Sponsor. You will still own 500 shares.” Read more about Streitwise’s fees here.

Individual investors new to crowdfunded real estate investment platforms often fixate on fees. But the cynical truth is the stated fees just don’t mean very much, because these platforms can jigger the expense numbers behind the scenes to pad their profits if they choose. In light of that, I virtually ignore the stated fees of these investment types, and focus on their returns. I consider both their past returns, and my confidence level that they can continue producing those returns in the future.

 

Streitwise Advantages

There’s a lot to like about Streitwise. I invest money with them myself for the following reasons.

 

High Dividend Yield

As someone pursuing financial independence at a young age, I build up many streams of passive income. That includes rental income from properties I own myself, but it also includes dividends from both stocks and real estate crowdfunding investments. 

And a reliable 8-9% annualized dividend yield is hard to beat.





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