LEX: Democratizing CREF by Turning Buildings Into Stocks

By Published On: February 22, 20223.9 min read

For many, commercial real estate investing can seem out of reach, requiring large sums of income and capital. However, that’s not always the case. One company, LEX, is looking to solve real estate’s access and liquidity problems, allowing and encouraging people of all income brackets to invest in commercial real estate.

LEX is a real estate investment platform founded by Drew Sterrett and Jesse Daugherty, who hope to enable investors of all wealth backgrounds to participate in the commercial real estate playing field, while also adding value to the commercial real estate landscape.

The concept for LEX originated while Sterrett was working at a real estate private equity firm, structuring deals he himself couldn’t afford. He then asked the question, “How do we get one of the oldest and largest asset classes in the world — one of the largest wealth creators, no public and liquid securities market — to where everyone can have access?”

From there, Sterrett teamed up with his college friend, Daugherty, who comes from an engineering background and was working at Google Maps before they launched LEX.

“The idea resonated with me,” said Daugherty. So in 2018, he quit his job at Google and joined Sterrett to start LEX.

LEX provides a new way to invest in real estate, Daugherty said, adding, “We turn individual buildings into public stocks. We let any U.S. investor open a LEX account, browse specific, individual real estate deals — like multifamily or office, for example — and we let them buy shares in individual buildings.”

This way of investing, with an entry price of just $250, provides access that isn’t common in the real estate market. Shareholders or investors then earn income when owners pay dividends from the rent that tenants pay, and the shareholders are free to sell the shares whenever they like.

“The shares are single-building stocks essentially, and you can trade without lockup periods, without hold periods or restrictions,” Daugherty explained. “So you can really think of it as stocks for buildings. There’s more liquidity and access for these real estate deals than ever before. And each building has a ticker symbol — a stock chart.”

Each share, Sterrett pointed out, is also registered with the DTCC, and so it can be bought, sold and traded from any brokerage account in the world, opening infrastructure access to all. LEX is the first commercial real estate securities market completely dedicated to commercial real estate assets.

For new investors who want to get involved, Sterrett said, the easiest way to do so would be to open a brokerage account on the LEX brokerage platform, in the same way that you would with Robinhood, Ameritrade or any other financial service. There, users can access information about what they’re purchasing, who the tenants are, how the asset has been performing and how it’s expected to perform in the future.

“It takes a total of five minutes max just to fill out the questionnaire and create an account,” Sterrett said. “Then you can browse the individual deals from ones that are actively trading right now on the secondary market, or going through IPO or coming up soon. And so [investors] have the ability within three clicks of a button to purchase into commercial real estate once your brokerage account is created.”

In New York, one such property that shareholders can invest in is a Harlem office building located at 286 Lenox Ave., which has become the first publicly traded commercial real estate asset in New York City. The building is fully occupied, with Wells Fargo as the long-term, anchor tenant, and above the Wells Fargo are medical offices.

“We’re allowing, for the first time ever, people to invest in their communities,” Sterrett said. “And we are really excited about Harlem, since it’s appreciating like crazy.”

The building is stabilized, with cash flowing, Sterrett said, and it didn’t even miss a payment during COVID.

“I personally couldn’t go buy a multimillion dollar asset in New York City, but now you are side by side with these big institutional players, and you also get the tax benefits of direct real estate ownership,” Sterret said.

Through LEX, so many more people now have access to commercial real estate investing for the first time, granting people from all wealth brackets the ability to invest in their own neighborhoods.

“People are finally able to access some of the wealth creation that has been out of reach for hundreds and hundreds of years,” Sterrett said. “And so a market that was once just for a very small community is now being opened up to the entire ecosystem of investors and financial professionals at large.”

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