•  Real Estate

LEX Markets Review -- 🏢 Fractional real estate investments you can trade like stocks

HQd in NYC, LEX Markets is a commercial real estate investment platform that offers equity investments in commercial real estate through single-asset IPOs. LEX Markets is open to both accredited and non-accredited investors.

LEX Markets

  • Founded: 2017
  • Investment Types: Real Estate
  • Sectors: Commercial Real Estate
  • Minimum Investment: $250
  • Open to all investors
 Pros
  • Low minimum investments
  • Open to all investors
  • Detailed price charts and excellent property and investment information
  • Liquidity via secondary market
 Cons
  • Short track record
  • Low number of available investments

Overview

This LEX Markets Review will help you learn more about LEX Markets's investment offerings, including how the alternative investments on LEX Markets are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.

New York based LEX Markets is an investment crowdfunding platform for fractionalized commercial real estate investing. Founded in 2017, while LEX is not the first real estate investment crowdfunding platform to use SEC Regulation A+ to facilitate offerings, they are the first we’ve seen that also offer their own secondary market trading platform and list the stock for each property on publicly traded markets (specifically the “OTC” market).

Types of investments LEX Markets offers

LEX Markets offers commercial real estate investments in the Northeast (New York, New Hampshire, and Maine to date). Offerings are for stable, cash-flowing properties with a minimum equity value of $15M.

Once you’ve registered with LEX Markets, you can review details of each prospective investment, including information about the property, tenant details, financials, and a business plan from the sponsor showing existing property details and amenities, anticipated improvements as well as any planned rent increases.

What do you get when investing with LEX Markets?

When you invest through LEX Markets, you’re receiving a security similar to a stock, representing a membership interest in a special purpose entity.

What makes LEX Markets unique compared with most other real estate investment crowdfunding platforms is that your LLC interest is also a stock that is tradable on secondary markets.

For each investment you make with LEX Markets, you’ll receive a separate K1 at tax time to report your share of the income received by the LLC.

How does LEX Markets make money?

There are no direct fees for investors to sign up or to invest with the LEX Markets platform.

LEX charges the sponsors a fee to list the offering, and they charge investors a 0.25% quarterly management fee, which is deducted from the rental income for the property. Investors should review the specific details for each offering for additional fees, for example those paid to a property manager (which may also be an affiliate of the sponsor).

All projected and actual returns shown on the LEX Markets website are net of all fees.

Potential returns and cashflow

Because of the option to trade shares on secondary markets, your expected returns will vary quite a bit based on how long you hold the shares in the property and the price available on those secondary markets.

A unique feature on the LEX Markets platform is an interactive calculator shown for each offering for estimating returns based on the number of shares purchased and the expected hold time. Plugging in a typical hold time of 4 years for one of the listed properties shows a cash-on-cash return of about 5% and an overall IRR of about 18%.

As with many real estate investments, investors receive regular cashflow from rental income (net of fees, and distributed quarterly), and then a pro-rata share of the profits when a property is sold.

Breadth of offerings on LEX Markets

As of this writing, only 2 projects are currently live for investment on the LEX Markets platform, with an additional property listed for expressions of interest.

Each available offering includes detailed financial models and information about the property, including photos, site plans, and tenant profiles.

Regulatory framework and due diligence expectations

According to LEX Markets, their property selection and due diligence process is as follows:

That due diligence process consists of a thorough review and analysis of sponsor and property financial records, commissioning third-party reports by engineers, appraisers, and title companies, interviewing building management, leasing agents, maintenance workers, physically inspecting each property, and conducting background checks of key personnel. The results of this due diligence are reviewed and approved by a committee of experienced real estate professionals prior to each offering.

LEX Markets also lists the basic property requirements on their website FAQ, which inculde:

  • Minimum 12 months of stable, cash-flowing operating history and an expectation that the property will continue to have a positive cash flow
  • Minimum equity value of $15 million
  • Multifamily, office, industrial, retail, hotel, and others
  • No development or acquisition deals
  • All U.S. real estate markets (e.g. primary, secondary, tertiary)
  • Maximum LTV on asset post equity recap of 75%

LEX also requires sponsors to hold at least a 5% equity interest in the property.

LEX Markets offers their investments under SEC Regulation A+, which means investments are open to all US investors.

LEX Markets is also a FINRA registered broker-dealer, meaning they are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!).

This review was first published on 27 September 2022.


Our Rating

Excellent

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