LEX is a commercial real estate securities marketplace that makes commercial buildings public in single-asset IPOs, allowing users to invest in commercial properties with as little as $250. LEX is at the forefront of a big transformation in CRE investing, typically a place that has been previously limited to individuals with a high net worth. We had the chance to speak with John Todd, head of real estate investment banking for LEX.
THE GEORGETOWNER: Why is real estate a wise investment in a volatile market?
JOHN TODD: Investing directly in real estate can provide an attractive option to investors in times of economic uncertainty and volatility. Real estate has a history of performing well during inflationary environments, which is comforting given the current economic backdrop.
When consumer prices go up, the value of many assets do not, resulting in a loss in real value. Rents on real estate have historically increased when consumer prices go up, meaning that real estate can be a good hedge against inflation.
Inflation also tends to increase the cost to develop new real estate, mitigating the risk of new supply and benefitting underlying fundamentals for existing assets. Additionally, the underlying value of a real estate asset tends not to change much in the short term. This can be very attractive to investors who may want to diversify a portion of their investments away from volatile stocks and alternatives and into a more stable option.
When markets are volatile, many investors are looking for the core benefits that real estate investing offers—appreciation and tax-advantaged passive income. Direct real estate investments generally have low correlation to the public markets compared to a REIT and can help investors hedge inflation.
THE GEORGETOWNER: Tell us more about your LEX Platform.
JT: LEX provides a new way to invest in real estate. By turning individual buildings into public stocks, we allow any U.S. investor to build their own portfolio of individual buildings in minutes. LEX users browse opportunities in various asset classes such as multi-family and office buildings, different geographic markets, and buy shares of individual buildings. When a building generates income, investors earn their share. Each building has a ticker symbol and stock chart, letting investors trade their shares without lockups or hold periods. LEX opens direct and tax advantaged ownership in an asset class that has previously been inaccessible to most investors.
THE GEORGETOWNER: Do you have any real estate advice for Georgetowners who are typically wealthy?JT: While we don’t give investment advice at LEX, we do believe real estate is a powerful tool for wealth creation. My advice is to take advantage of the market disruption, revisit your investment strategy and redeploy capital into buildings that more closely align with your investment goals. Having a diversified portfolio with exposure to the benefits of direct real estate investing like capital appreciation, predictable cash flow, and amortization of debt can help your portfolio stabilize and grow. Andrew Carnegie famously said that 90 percent of millionaires become so through owning real estate. Many of today’s most wealthy investors have proven him right. The LEX platform, and real estate in general, can be a great tool for investors to expand their investment portfolios.