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LEX Markets Review

LEX Markets Review

Has LEX Markets created a stock market for commercial real estate owners and investors?

What is LEX Markets?

LEX Markets was founded in 2017. The company takes a new approach to crowdfunding real estate. Much like other crowdfunding platforms, LEX Markets pools investors' money within the real estate realm. However, LEX Markets doesn’t buy, sell, rent, or manage the properties.

LEX Markets has created a trading platform for shares of real estate.

A property owner can partner with LEX Markets and sell shares of their property in an IPO. These initial shares are purchased via the LEX platform and then can be traded on the secondary market. The shares can not be traded until the IPO is over and the initial offering is fully funded. Currently, one share costs $250. Once fully funded, investors can sell their shares via the platform whenever they want to, without having a specified holding period.

Once the shares hit the secondary market, that price of $250 can go up or down - similar to a stock price. Investors will also receive quarterly distributions if the property is profitable. Distributions are not guaranteed.

When a shareholder wants to sell their shares they must be matched with a buyer using the same LEX platform. Therefore, liquidity is not guaranteed. They currently do not utilize market makers and other third parties to provide liquidity.

If you purchase shares of a property during the initial offering you can not sell those shares until the property has been fully funded. The amount of time that that takes varies greatly. Once shares are eligible to trade on the secondary market they can be bought and sold repeatedly.

LEX Markets charges the property owners to list the property and manage the process. Additionally, the platform charges a 1% fee. The 1% fee is taken directly from the distribution. So, if a property has a quarterly distribution of 4% then LEX gets 1% and investors receive 3%.

Get started with LEX Markets here.

Property Owners

Property owners must meet several requirements before they are allowed to sell (equity) shares on the platform. One important requirement is that owners must keep at least a 5% stake in the property. Many property owners will end up keeping over a 50% stake in the equity that they own due to other loan requirements.

The following is a brief example of the requirements placed on property owners:

  • Minimum of 12 months of stable cash flow
  • The minimum equity value of $12 million
  • One asset per offering
  • Can not be used for development or acquisition deals

Investors 

Investors need to realize what they are investing in. LEX Markets is not a REIT. LEX Markets does not own or manage these properties. The property owner still maintains day-to-day operational control of the property. Investors are buying an equity share of one specific property. This is similar to buying a share of a company on the stock market.

Both accredited and non-accredited investors are eligible to buy and sell shares with LEX Markets. The only minimum is $250 for one share. Investors do not have to purchase shares during the IPO phase. Just like the stock market, investors can enter the secondary market and look for bargain prices or great properties that are already trading.

What are the benefits of investing in LEX Markets?

LEX Markets is trying to solve the liquidating problem within crowdfunded real estate investing. Several other crowdfunded platforms require investors to stay fully vested for a minimum of 3 years and some require 5 years. With this platform, the plan is to allow investors to purchase shares and then trade when they want to. This liquidity will need to be provided by other investors interested in buying these shares.

Another benefit of investing with LEX Markets is the ease of use and barriers of entry. It only took me about 10 minutes total to open my account. LEX Markets has an easy-to-use website and a quality app.

LEX Markets also does not charge any trading fees, commissions, or regulatory fees. Additionally,  they partner with NASDAQ for some of their backend trading functions. They seem to be on the cutting edge of security and technology.

Cons of LEX Markets

OK, here is the current state of LEX Markets. It’s an awesome concept. It seems to be up and operational and functioning. LEX Markets is legit and legal. However, LEX Markets only has two properties currently fully funded and trading. They also have one property that is on their website as “indicate interest.” Potential investors must keep in mind that LEX Markets is a new company and upon reviewing their current listings, I don’t believe they have the liquidity that they want to offer yet.

Current Properties Overview

286 Lenox Ave, New York, NY

  • Implied Valuation $11.29M
  • 52W range $251-$285
  • Last close: $254
  • Shares Outstanding 7,133
  • Recent Declared Quarterly Distribution was $1.92/unit
  • Based on Q2 distribution and $258.99 NAV - 3% annualized distribution rate (really 4% - but LEX Markets takes their fee from the distribution)
  • 18,759 sq. ft. office space - currently leased out to a bank and a couple of medical companies

181 High Street, Portland, ME (parking garage)

  • Implied Valuation $22.25M
  • 52W range $211-$251
  • Last Close: $224
  • Shares Outstanding 4,000
  • The last Quarterly Distribution was paid in Dec 2021 at $1.25/share

Pending Property is at 1 Chestnut Street, in Nashua, NH

  • Current Valuation $17.8M
  • 425,592 sq ft
  • Multi-use property with 80% leased and over 50 tenants
  • The top 4 tenants rent 57% of the space

Bottom Line

The technology is in place and the real estate experience helps to build a great real estate investing platform. The low price of $250 per share is a great entry point for new and established investors to try out this platform and explore it in detail.

You could potentially buy a few shares and monitor LEX Markets for a while before you jump in with several thousand dollars. This review should prepare you to at least understand what you would be getting into.

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