- Commercial real estate securities marketplace company LEX announced it raised $4 million in seed funding
LEX, a commercial real estate securities marketplace available to retail investors, announced recently that it closed $4 million in seed financing co-led by Greycroft and Thor Equities. With LEX’s platform, everyday Americans will be able to buy and sell shares of individual commercial properties thus giving retail investors the flexibility to create customized income-producing real estate portfolios and allowing property owners to unlock equity while retaining operational control of their properties. As a result, LEX is democratizing the commercial real estate asset class and redefining real estate investing.
Founded by two brothers Drew Sterrett and Dean Sterrett, who serve as CEO and Head of Product, respectively, and Jesse Daugherty, a former Google engineer, LEX offers a unique solution to a two-sided capital markets problem that has been difficult for both retail investors and real estate owners for decades. While working in real estate private equity beforehand, Drew had become frustrated at how the best investment opportunities were reserved for institutional investors. LEX was built to break down those barriers and provide access to the investing public.
“LEX is creating a simple solution to a complex problem that has been around as long as I’ve been investing,“ said Alan Patricof, co-founder and managing director of Greycroft. “There’s clearly a large demand for access to commercial property investments, and the LEX team is meeting that demand.”
Generally, retail investors have had limited access to commercial real estate. And the best opportunities have been reserved for real estate private equity funds and high net worth investors. While REITs enable public investment in pooled holding companies, they are not customizable and do not pass through many of the tax benefits of real estate ownership to shareholders. Plus other direct investment platforms are restricted to accredited investors and only offer securities that are not freely tradable.
And property owners have had limited ability to realize liquidity on the equity they own. They typically have sell their entire property to liquidate their investments thus incurring high transaction costs and losing control of properties they care about. LEX solves both of these problems.
How? LEX will enable retail investors to directly invest in individual commercial real estate properties. And the shares offered on LEX’s platform will be issued under Regulation A thus allowing purchases by non-accredited retail investors. Then the shares offered will be publicly traded partnership interests, allowing the full tax benefits of direct real estate ownership to pass through to investors.
LEX’s platform will provide users with tools to research and compare properties. And securities will be priced initially at $100 when offered, making it easy for investors to build customized income-producing portfolios. Then property owners selling ownership interests through LEX will retain operational control of their properties while gaining access to a broad pool of equity capital. The shares will be publicly tradable in the open market, resulting in greater liquidity and more accurate and current asset valuations.
“LEX creates a whole new way for real estate owners to realize equity appreciation on their assets,” added Joseph Sitt, Founder and Chairman of Thor Equities. “The new marketplace is going to make a huge impact on liquidity in the asset class.”