Single-Building IPO Platform Raises $6M, Adds Brookfield's Ric Clark To Board
LEX, an online platform that allows people to buy and sell shares in individual commercial properties for as little as $250, has closed $6M in new financing and appointed a commercial real estate veteran to its board.
The funding to the platform comes from investors including the family office of Tim Callahan, who is the former CEO of Sam Zell’s Equity Office Properties, as well as Two Lanterns Venture Partners and star NFL wide receiver DeAndre Hopkins, the firm announced Wednesday.
Ric Clark, who late last year co-founded a new real estate investment firm called WatermanClark after stepping back from daily duties as chairman of Brookfield Property Partners, participated in the funding round and has joined LEX’s board of directors.
“I am excited to work with the LEX team as an investor and advisor as they reinvent the capitalization of the commercial real estate asset class,” Clark said in a statement. “The LEX platform provides a creative solution to some of the industry’s long-standing pain points and empowers institutional and retail investors with new tools to diversify their portfolios while providing property owners with a unique model of accessing liquidity."
LEX co-founder and CEO Drew Sterrett, who formed the company in 2017, said in an interview that the platform has created the first commercial real estate securities market — one that essentially allows real estate owners to bring a portion of individual assets to the public market.
Investors, both accredited and non-accredited, are able to invest in commercial buildings via shares that are offered on LEX as publicly traded partnerships. The idea of the platform came to Sterrett in 2017 when he and his brother were seeking to invest in real estate but were short of the funds and accreditation to access deals.
“It led to the question: ‘How does one of the oldest and largest asset classes in the world have no public and liquid securities market?’” he said.
LEX acts as the intermediary between the owners and investors, and its aim is to allow wealth advisers, banks, family offices and any brokerage firm to access and trade securities in individual buildings.
It also allows for mom-and-pop investors to invest in the notoriously hard-to-access real estate market; single shares can be purchased for $250 at the time of initial offering, according to the website. Owners of the buildings are able to trade up to 49% of the property through the platform. LEX partnered with Nasdaq to use its software to power the trading.
Sterrett said the platform has created a “brand-new active class, providing true liquidity and making available otherwise illiquid assets to the entire public, democratizing the asset class as a whole.”
He said all types of assets were available on the platform, though he noted there is increasing caution around retail and hospitality in the current environment.
The coronavirus pandemic, he said, has driven more activity to the platform, similar to the surge in participation of stock-trading apps like Robinhood.
“There’s been more demand from both institutional real estate sponsors and from the investment side," Sterrett said. "We're in a very low-yield environment, and real estate is a risk-adjusted yield play. Since we're dealing with core and core-plus assets with long-term leases, and long-term financing … you're buying into a high-yield structure to capture all of the tax benefits of direct real estate ownership.”
He added there has been increased interest from the owners of properties looking to do equity recapitalizations throughout the crisis. This year, Sterrett said LEX will target larger institutional assets and aim to do billion-dollar recapitalizations on individual commercial assets.