One of my goals in thew new decade is to learn about as many passive real estate investment opportunities available. I have over $500,000 of capital that should be returned over the next two years. The capital will be reinvested in various real estate opportunities to sustain and grow my passive income portfolio. This article is a comprehensive Streitwise review.
Because I want to diversify my real estate exposure to non-coastal markets, I thought it would be good to do some research on Streitwise, a real estate platform which is focused on secondary non-gateway markets that have the potential to generate higher dividends.
Streitwise approached me last year to do a review but I was too busy at the time. Now, with another year of operating experience under its belt and the economy gradually opening up, let's see how they are doing and what their plans are going forward.
Streitwise Review
Streitwise is a real estate investing company that enables you to invest in commercial real estate properties. Both accredited and non-accredited investors can now access a professionally managed portfolio of private real estate assets for as little as $5,000 online.
Streitwise's main product is the 1st Streit Office Inc. It is the real estate investment trust that is sponsored and managed by Tryperion Partners and offered for sale on the Streitwise website.
1st Streit Office is a public, non-traded REIT. So far it is invested in Midwest office buildings, producing a dividend yield from the cash flows generated by those assets. Tenants include New Balance, Panera Bread, and Allied Solutions.
Here are some questions for Streitwise so we can understand the company better.
How is Streitwise different?
Streitwise is for by real estate investors first, with a focus on Streitwise as a fintech platform second. This allows us as a company to primarily focus on current & future deals as every deal is done in-house with our Sponsor, Tryperion Partners.
Other companies are often technology platforms first and get their real estate deals from outside parties. This outside parties often charge high hidden fees. The underwriting may be more risky and not obvious to potential investors.
Since inception in 2017, Streitwise has generated strong returns for investors (8-10% dividends net of fees). Streitwise conducts conservative underwriting for our properties and focuses on acquiring high income-producing properties in secondary markets. We have a transparent fee structure and stable corporate ownership.
Streitwise has a Better Business Bureau rating of “A+”, on a scale of A+ to F.
What is the history of Tryperion Partners, the sponsor?
Tryperion Partners, the sponsor and manager of Streitwise and the 1st Streit Office REIT, has raised more than $160 million across three private funds that it has managed since 2013.
Its three founders worked together as executives at Canyon Capital Realty Advisors, which has managed tens of billions of dollars in real estate deals over the past 30 years. That's pretty legit.
Streitwise shares its management staff and employees with its sponsor, Tryperion Partners, which makes for a unique arrangement.
Is Streitwise open to non-accredited investors as well?
Streitwise is open to both accredited and non-accredited investors, subject to specified criteria and investment limits as outlined in the offering circular including, but not limited, guidelines according to one’s net worth or net income. The investment minimum is $1,000.
What is the dividend history and return targets?
Streitwise has generated historical average dividends of 9.8% annualized since 2017. Our last dividend was 8.4% in Q2 2020 after paying 8.4% in Q1 2020. The current NAV is $9.86/share for 3Q2020.
Our dividend target for 2020 is 8-9%, as we begin to make amortization payments on our property level debt and make both preventative and tenant improvement capital expenditures.
From April through June, Streitwise collected 100% of contractual rent obligations, which is quite impressive. April through June 2020 was the hight of the coronavirus pandemic and shelter-in-place orders.
Are the quoted dividend returns after fees?
That’s correct. 8.4% dividends distributed last quarter on an annualized basis, net of fees, based on the quarterly distribution of $0.21/share and a $10/share price.
How Is Streitwise property leveraged?
We consider our current property level leverage to be moderate-to-conservative at approximately 55% Loan-To-Value, which is consistent with our portfolio wide target of between 40-60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets.
During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (which will also result in greater leverage of the interim portfolio) in order to more quickly build a diversified portfolio of assets.
What is the fee structure at Streitwise?
Streitwise applies 3% of your invested funds towards organizational and offering costs. This one-time amount does not reduce the shares you own.
Our Sponsor is paid a 2% annual management fee. The fee is to pay for acquisition and operating expenses. The 2% management fee is net out prior to any distributions. All dividends quoted are net of fees. We do not charge acquisition fees, servicing fees, special servicing fees, financing fees, or disposition fees.
Does an investor receive a K-1 or a 1099?
The REIT is structured as a corporation and shareholders will receive 1099s around late January.
What is the ideal amount of equity a sponsor should put into a real estate investment?
We believe a significant amount of skin-in-the-game represents conviction in the investment thesis and aligns incentives with shareholders. The three founding partners of Streitwise have a total of over 500,000 units ($5 million total) invested alongside REIT shareholders.
How many office buildings does the REIT ultimately want to own?
We only purchase additional property when we find an acquisition target that we believe fits the long-term, sustainably product and location profile of the REIT.
We currently have the capacity to acquire additional properties. At the moment, the REIT owns two properties in strong suburban markets of St. Louis and Indianapolis.
What is the total size (funds) of the REIT at the moment?
Approximately $80mm of total asset value.
What are the details of the two office buildings in Indianapolis and St. Louis?
The 1st Streit Office REIT currently consists of two high-quality office buildings:
Streitwise Plaza in St. Louis, MO: This is a 290,000 square feet Class A office park that features the Panera Bread HQ’s, New Balance, Wells Fargo, Edward Jones, and Nationwide Insurance, among other household names. The property represents the premier asset in the Sunset Hills submarket of St. Louis and has been well occupied for the better of a decade.
Allied Solutions Building in Carmel (Indianapolis), Indiana. Allied Solutions Building is a new construction, mixed-use property. It is located in the heart of the affluent Indianapolis suburb of Carmel. The 142,000 square feet class A project serves as the centerpiece of the greater Midtown Carmel redevelopment. Tenants include Allied Solutions, LLC (108,000 leased until 2030), F.C. Tucker (15,750 leased until 2029), Fork+Ale House (3,191 leased until 2029), Java Cold Brew Coffee (2030) and Penn & Beech (2029).
You can click either image and watch the videos to learn more.
How does Tryperion view commercial real estate investing holding up during this COVID-19 pandemic?
Since Streitwise is funded exclusively by its founders as an extension of our existing commercial real estate investment business as well as our measured strategy, we believe we are in a strong position to capitalize on any opportunities presented as a result of the current market dislocations.
We are patient acquirers and seek to create a diversified portfolio of commercial real estate assets and cultivate an investor community that shares a similar long-term vision.
Today, we see our conservative approach to building a REIT – and a company – payoff:
- Despite the economic shock, we believe our rent roll is stable and well-positioned for the future.
- Our portfolio leverage is low, and we are able to cover our debt service.
- All our employees are still with us.
- We are well-positioned to take advantage of the market and acquire quality assets at a discount to prior pricing.
In May we have seen a nice uptick in investments. Things have moved in a solid direction after a few slow months.
With more employees working from home, how will Streitwise overcome these trends to provide profitable office properties in the offering?
We have been aware of changes in the use of office space far before the current concerns over work from home. By acquiring well located, Class A assets, we believe we will be the beneficiary of any flight to quality that occurs as a result of the changing nature of office demand.
To the extent that office users reduce space, we believe they will seek out the best, most amenitized office buildings to satisfy their existing demand.
We also do not believe that is a foregone conclusion that the work from home changes cannot be offset by a certain degree by the de-densification of individual office suites.
While we are aware that there may be ebbs and flows and changes to the way tenants use and demand office space, we feel comfortable owning quality assets in quality locations.
What markets does Streitwise specifically plan to expand in?
Today, the REIT consists of well-amenitized office properties in St. Louis, MO and Carmel, IN.
We are currently actively pursuing additional properties in target secondary markets including Columbus, Minneapolis, Kansas City, Indianapolis, and St. Louis.
We do intend on acquiring, over time, a diversified portfolio of quality suburban-urban office properties but we can not guarantee the timeline when or where our next acquisition is made.
We do anticipate further employment growth in these areas as we take on tenants with strong credit. Our anchor tenant in the Allied Solutions Building anticipates rapidly growing their headquarters workforce over the next 5 years in this fast-growing neighborhood of Midtown Carmel.
What is the holding period for Streitwise?
Investors who invest in Streitwise properties should expect to invest with a five-year or longer time horizon.
Investors are unable to sell during the first year of investment. If investors sell between 1-2 years, an investor will receive 90% of per-share net asset value, 92.5% of NAV if sold between 2-3 years, 95% of NAV if sold between 3-4 years, 97.5% of NAV if sold between 4-5 years, and 100% of NAV if sold after 5 years.
Real estate is a long-term investment and we want investors who are also focused on the long-term.
Is there a DRIP plan available for dividends? If so, does the same lockup period apply for each distribution?
There is a dividend reinvestment (DRIP) program you can enroll in when you invest. The lockup period will apply to the principal added, not the dividends reinvested through DRIP.
The 3% upfront fee does apply as well when adding funds. Just as an FYI, out of the up-front fee charged (3%), no amount will be taken out of the shares you’re purchasing. 97% of what you invested will go to the REIT & Operating Partnership as proceeds.
The 3% up-front fee is used for offering and organization expenses. Your ownership at any given time is the NAV multiplied by the shares you own so you would own 100% of the proceeds assuming you have held your investment past the Redemption Fee Schedule.
How is the dividend shaping up?
Our dividend target for Q2 (and entirety of 2020) continues to be 8-9% annualized distributions. Our belief has always been – and remains – that by using conservative financing and maintaining a creditworthy rent roll, we should have the financial flexibility and wherewithal to emerge on the other side should we incur economic turbulence. So far, we have avoided negative outcomes, but the road ahead remains uncertain.
Despite the negative shock, to date, we have only executed temporary rent modification agreements with two tenants, and received requests from fewer than five others (although no modification was ultimately granted). The amendments came in the form of short-term rent deferrals, with such deferred rent to be repaid by the end of 2021.
For April-June: We received 100% of contractual rent obligations. Not including the rent deferrals, our collections equate to 86% of the base budget over such months, although we remain confident that the rent deferrals will be fully repaid per the amended terms.
We just declared our latest dividend payout for Q2 2021, at $0.21/share, or 8.4% annualized dividends. This is our 17th straight quarterly distribution hit at our target return range, with every dividend payout over 8%. Our target return indefinitely is 8-9%.
We also had some new leasing activity, with a new 5-year lease tenant at Streitwise Plaza raising our occupancy at this office park to 98%, and a new 10-year lease tenant at Allied Solutions Building raising the occupancy of this building to 94%.
In terms of negotiating further rent modification requests, we will evaluate each request for rent relief on a case-by-case basis. In the long run, we believe the quality and location of our properties will allow us to weather economic storms better than most, and back-fill spaces that may ultimately become available.
What is the lease expiration schedule?
Here’s Lease Expiration Schedule by %:
2020 – 2.07%
2021 – 1.99%
2022 – 12.57%
2023 – 6.97%
2024 – 38.93%
2025 – 2.46%
2026 – 0%
2027 – 0%
2028 – 0%
2029 – 4.3%
2030 – 25.60%
2030+ – 0.24%
Total WALT (Weighted Average Lease Term): 5.44
Total sqft: 439,501
Strong rent collections performance through recession: As of June 2021, we have collected 100% of contractual rent obligations from every tenant in the portfolio. Overall, our strong credit tenants have done well through the recession and we’re confident going forward.
Streitwise Review Wrapup
Here are the positives about Streitwise from my Streitwise review:
- An 8.4% quarterly annualized dividend net of fees is high in this environment
- $5,000 minimum investment
- Investments in Missouri and Indiana
- Real estate investors first
- Focus on the long-term
- No K-1; a 1099 is much easier to file
- Since you're investing in a REIT, you can deduct up to 20% of your dividends from taxable income. Please check with your accountant.
- Streitwise limits leverage to the 40% to 60% range, which also minimizes investment risk.
- Three founding partners have $5 million of their own money invested.
- Plans are available for individual accounts, trusts, and self-directed IRAs. This can be a perfect fit, since real estate is a long-term investment providing higher than average returns.
Here are the negatives about Streitwise:
- 3% upfront fee for organizational and offering costs
- Don't get 100% of per-share NAV back until after five years
- 1st Streit Office, the REIT available to investors on Streitwise, only owns two properties as of this writing.
- Panera Bread and Allied Solutions generate more than half of the rents earned by the Streitwise REIT.
If you'd like more information, or you'd like to invest, visit the Streitwise website. During the sign-up process you will select whether you’re investing as an individual, LLC, Trust, or IRA/401(k). Once funds are received, your shares will be purchased and your Investor Center account will be created.
I hope you enjoyed this Streitwise review. If you have any specific questions, please feel free to ask. Streitwise also just launched a new iOS app for investors to keep track of their holdings and invest.
If anybody is from Carmel, IN or St. Louis, MO, I'd love to get some local color on how things are shaping up.
Things to consider
1. Reits – triple net REITs are giving similar yields today, no upfront fees to purchase (O, SRC, nnn, STOR)
2. 3 year lock up period, with other reíts stocks you get liquidity
3. Fees to buy in
4. Their technology platform is outsourced and it’s a pain in the butt to use
That said, very honest group. Will answer any questions
The one thing about publicly traded REITs is that they are often more volatile than stocks during a downturn. I know this full well, b/c I also have a large position in REITs like O and OHI, which got punished badly in March 2020.
So if you’re looking for less volatility or at least less visible volatility, private REITs is one solution.
Sam,
A lot of triple net REITs are down right now over long term highs, I think they’re good opportunity to buy.
I got it on O, STOR, NNN, SRC and some OHI as well.
All were nearly yielding 6-8% in March and some still.
My thought is if you have to wait 5 years to redeem full value of your money in private REITs you might as well invest in public REITs
Have you looked into STOR?
I live near Carmel, IN, and I can tell you the building they acquired is in a high income, very affluent area that has a lot of vehicle and foot traffic. The stores, shops, and businesses all seem to be doing very well. I’m very intrigued to see how this investment shapes up.
Thanks for the insights Brad! I’m hopeful as the economy slowly opens up, commercial real estate will recover as well.
You are correct, this is a very high foot traffic area in a very affluent area. When we purchased the Allied Solutions Building last year, the Midtown Plaza was still under construction ($4.4mm plaza paid for by the city) and no ground-floor restaurant/retail was signed/filled. Since then, it’s been filled by 3 retail tenants and a restaurant as well as a vacant office space. This property is now 94% filled.
I’m in St. Louis. It’s a great city, highly underrated IMO. Downtown is still pretty awful but there are a lot of great areas. Still low cost of living. Lots of great employers (many top hospitals, Boeing, etc), lots of free(!!) attractions (one of the best Zoos in the country, museums, science center, etc). It’s a good place.
Is there DRIP plan available for the divedends and if so does the same lockup period apply for each distribution?
Also if there’s is a DRIP plan do you take the 3 percent hit every time you reinvest?
There is a dividend reinvestment (DRIP) program you can enroll in when you invest. The lockup period will apply to the principal added, not the dividends reinvested through DRIP.
The 3% upfront fee does apply as well when adding funds. Just as an FYI, out of the up-front fee charged (3%), no amount will be taken out of the shares you’re purchasing. 97% of what you invested will go to the REIT & Operating Partnership as proceeds. The 3% up-front fee is used for offering and organization expenses. Your ownership at any given time is the NAV multiplied by the shares you own so you would own 100% of the proceeds assuming you have held your investment past the Redemption Fee Schedule.
St Louis real estate market is still very hot here, houses in my area being listed and receiving multiple offers and sold above asking within a day or two. Very hard time to buy. I’ve actually decided to sell a 2 family I bought in 2010. Hopefully it goes fast and above asking!
Good to hear! Good luck with your sale.
What a cool name. It’s great to see there are a lot of options available for investors in the passive real estate investment space, especially with low minimums. I love being able to diversify my asset allocation into different investment classes and platforms as well. I love real estate but not the property management and tenant aspects. Will be curious to see how Streitwise grows in the coming years.
Can Streitwise comment on the appreciation piece to the pie? How do they stand out. I can easily get 8-10% in annual returns somewhere excluding appreciation.
There is upside appreciation opportunities as well (with downside risk). Although we cannot guarantee these returns or future appreciation and there is a risk of loss.
Alex
Can the company share the defensibility of the dividend? What is the second quarter 2020 dividend expected to look like?
It’s hard to imagine a worse quarter than the second quarter of 2020. Then again, I’m assuming leases were still paid because many have been locked in for years.
How do you guys plan to negotiate the lease is going forward? What are you seeing from your tenants?
Hi DLo,
Our dividend target for Q2 (and entirety of 2020) continues to be 8-9% annualized distributions. Our belief has always been – and remains – that by using conservative financing and maintaining a creditworthy rent roll, we should have the financial flexibility and wherewithal to emerge on the other side should we incur economic turbulence. So far, we have avoided negative outcomes, but the road ahead remains uncertain.
Despite the negative shock, to date, we have only executed temporary rent modification agreements with two tenants, and received requests from fewer than five others (although no modification was ultimately granted). The amendments came in the form of short-term rent deferrals, with such deferred rent to be repaid by the end of 2021.
For April-June: We received 100% of contractual rent obligations. Not including the rent deferrals, our collections equate to 86% of the base budget over such months, although we remain confident that the rent deferrals will be fully repaid per the amended terms.
We also had some new leasing activity, with a new 5-year lease tenant at Streitwise Plaza raising our occupancy at this office park to 98%, and a new 10-year lease tenant at Allied Solutions Building raising the occupancy of this building to 94%.
In terms of negotiating further rent modification requests, we will evaluate each request for rent relief on a case-by-case basis. In the long run, we believe the quality and location of our properties will allow us to weather economic storms better than most, and back-fill spaces that may ultimately become available.
Alex
“For April-June: We received 100% of contractual rent obligations. Not including the rent deferrals, our collections equate to 86% of the base budget over such months, although we remain confident that the rent deferrals will be fully repaid per the amended terms.”
100% is impressive.
What is the average duration of these leases? Can you share what percentage of your leases run out in 1, 2, 3+ years?
Here’s Lease Exp Schedule by %:
2020 – 2.07%
2021 – 1.99%
2022 – 12.57%
2023 – 6.97%
2024 – 38.93%
2025 – 2.46%
2026 – 0%
2027 – 0%
2028 – 0%
2029 – 4.3%
2030 – 25.60%
2030+ – 0.24%
Total WALT: 5.44
Total sqft: 439,501
Thanks Sam. Perhaps my risk profile is too low…but commercial real estate is starting to look like print newspapers to me.
That would be extreme. I personally get excited looking for opportunities in any environment.
It’s good to plan ahead for future opportunities.
I believe people will eventually return to the office. It’s just a matter of when.
People will return to the office from the low in April, but not to the degree it once was.
I can assure you that the largest Architectural firms and Real Estate developers in the US have already formed the same hypothesis and are adjusting their plans accordingly. Based on the adjustments I have already heard are being made to currently designed projects and projects under development, I too think commercial real estate will shrink back considerably, but to what final extent is to be determined.
Commercial real estate obviously will not disappear, but I would be very cautious of what and where I was investing in as design and intended use are changing right now.
Personally, I would watch residential real estate over commercial real estate for the near and long term.
We agree with you, we’re definitely expecting some adjustments in office real estate and are cautious about what new office we focus on acquiring.
Right now, the focus is on class A office, which we believe will do better with social distancing and more WFH measures, and a focus on strong-creditworthy tenants that will better handle periods of financial hardship. Just an example, one of our larger tenants is New Balance, has a large portion of its global ecommerce operate out of our St. Louis building. We aim for tenants like these that are in strong positions to do well even with lockdown measures and more WFH employees.
I’m not sure how educating myself about investment opportunities will cost me, but noted.
Based on your previous comments, I know it’s been a difficult road for you. It’s always good to be cautious. Good luck and thank you.
Thanks for the review Sam.
Do you know how they were able to maintain such an outsize dividend yield compared to public REITS given their conservative leverage?
I see it was 10% for quite a number of quarters. Do they have some sort of dividend support or have they been returning capital?
Hi, Streitwise rep here:
To date, we have been able to cover our dividend distributions with operating cash flow, and have been enabled to do so by the cap rates at which we were able to acquire properties in our target markets. While we cannot guarantee what that looks like going forward, we still prefer the relative pricing of secondary markets vs primary markets, especially as it relates to cash flow generation.
More detail on the operating cash flow can be found in our 1-K in SEC filings here: https://streitwise.com/sec
Do you know how they were able to maintain such an outsize dividend yield compared to public REITS given their conservative leverage?
Hard to compare product, public REITs tend to invest in lower cap rate markets, but it’s case by case. You’d need to go into the specific financials for these public REITs.
For Streitwise, you can see info on total revenue, distributions and more here: https://www.sec.gov/Archives/edgar/data/1700461/000110465920046936/tm2015683-1_partii.htm