FinTech Startup Enticing Investors to Invest in Small Slices of Office Towers

Wall Street Journal writer Justin Baer reported late last month that, “A financial-technology startup is taking on the difficult task of enticing mom-and-pop investors to invest in small slices of office towers and other commercial buildings.

“Lex Markets aims to serve as the intermediary between investors and real-estate firms looking to sell stakes in individual properties, arranging securities sales in increments of $100 and listing the offerings on its platform.

“It is the latest effort to capitalize on retail investors’ growing anxiety over the lower returns that their stock and bondholdings are expected to produce amid ultralow rates.”

The Journal article noted that, “It is too early to tell if the platform will draw enough interest to enable the securities to be bought and sold easily. The property stakes will trade like stocks, but, as with any market, low liquidity will make it harder for investors to exit their trades.

“In addition, commercial real estate poses often-unfamiliar risks to retail investors. Buying into a specific property means adding exposure to the economic ups and downs of a particular region or business district, and to the financial health of specific tenants.”

Mr. Baer added that, “Efforts to sell alternatives to retail investments typically target wealthy individuals, so-called accredited investors, whom regulators believe are better able to handle losses and less-liquid investments. The drawback is that such offerings often charge high fees that limit returns, said Dave Bragg, managing director at Green Street Advisors, a real-estate research firm.”

This entry was posted in Real Estate Law. Bookmark the permalink. Both comments and trackbacks are currently closed.