stREITwise Makes Big Investment in Carmel

Writer // Janelle Morrison            Photography // Courtesy of stREITwise

Recently, stREITwise, a Los Angeles-based real estate investment trust, announced its latest acquisition. The Allied Solutions Building, a $32 million mixed-use building, is in the center of the Midtown development, a major mixed-use redevelopment project, in Carmel, Indiana.

The 142,000-sq. ft. Class A office and retail building was developed in 2017 as part of a public-private partnership with the City of Carmel. Carmel was recently rated the Best Place to Live in America, and the project serves as the centerpiece of the greater Midtown Carmel redevelopment, a live-work-play destination that has attracted over $310 million in public and private investments over the past decade.

Since 2012, more than 100 real estate crowdfunding sites have been established as a direct result of the JOBS Act that made it legal to crowdsource funding online. stREITwise is one of a handful of sites that makes it possible for accredited and unaccredited investors to realize the same benefits of investing in private real estate: passive income through free cash flow, higher returns and a hedge against inflation that were once only accessible to the uber-wealthy and large institutional investors.

Eliot Bencuya, co-founder and CEO of stREITwise

We spoke with Eliot Bencuya, co-founder and CEO of stREITwise, about the recent acquisition as well as the online real estate movement. Bencuya has extensive experience identifying, underwriting and executing value-add real estate investments.

Prior to forming stREITwise, he was vice president of acquisitions for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds. He holds a bachelor’s degree in economics and international studies from Yale University and an MBA from the Haas School of Business at the University of California, Berkeley.

“Historically, real estate investment has been available to two sets of groups, generally speaking: accredited and unaccredited investors,” Bencuya explained. “The accredited investors are investors who invest in offline syndication through their country clubs or people they know in specific projects. Nonaccredited investors, generally, did not have access to that type of investment, and their investments were limited to public REITS [real estate investment trusts].”

Bencuya discussed how the JOBS Act of 2012 allowed startups and smaller companies to have access to more investors, including accredited and unaccredited, and allowed them access to these investors through the internet.

‘’What developed after that was a series of online real estate platforms where it started off that these platforms would post specific real estate transactions, and accredited investors could invest in those deals,” Bencuya said. “Over the years, it has further developed to where some companies are allowed to offer online REITS.

Public nontraded REITS

Now the online REITS are generally public nontraded REITS that were registered with SEC (Securities and Exchange Commission) through Regulation A+ (Reg A+). The benefit of those public nontraded REITS being offered directly to people is that in the past, nontraded REITS were sold through very expensive broker/dealers and financial advisors that would charge high commissions, and those same public non-traded REITS had high fees associated with them as well.

The public nontraded REITS that were issued as a result of Reg A+ were, typically speaking, able to offer much lower fees and much lower commissions because they were going directly to the consumer, both accredited and nonaccredited, as opposed to going to the high commissioned broker/dealers.”

Bencuya further explained that stREITwise was an outcome of that second generation of online real estate investing along with the other online REITS.

“Our sponsor, Tryperion Partners, has been making real estate investments on behalf of high net worth investors for approximately six years,” Bencuya shared. “Those are value-add opportunities that have a little more risk to them, but the nature of those investors is more sophisticated and are willing to take on that additional risk.

stREITwise launch

We launched stREITwise a couple of years ago because we saw an opportunity to acquire really well-located, quality office buildings in noncoastal markets that, in our view, still offer an interesting risk/reward on stabilized office properties more focused on generating income through stabilized operations and dividends as opposed to through a major repositioning and/or renovation and trying to generate most of the appreciation through improving the property.”

Why Carmel Indiana

When asked why stREITwise was interested in investing in the Midwest, specifically the Carmel area, Bencuya replied, “We’ve had a lot of experiences in the Midwest over the years. We already own, in some other vehicles, an asset in Carmel, Indiana, and we’ve always liked Indianapolis and we really like Carmel.

We had been tracking the Midtown development, and when the opportunity presented itself to acquire the Allied Solutions Building, we saw it as a flag-bearer development for Carmel and its future.”

The Allied Solutions Building and its location in Midtown are strategic for stREITwise because, according to Bencuya, “We are looking at places that have long-term staying power. What we have seen in the office market is that tenants, because of their employees, are really focused on walkable amenities. And what the project does for Carmel is create that urban feeling in a suburban environment, and we view that as the next generation of development across the country.”

Bencuya spoke of the recent phenomenon of New Urbanism and how an entire generation of Americans is driving that.

“Younger people have been moving to city centers and living in apartments with walkable amenities for a long time, but now those younger people are a little bit older, and some are having families and are moving to the suburbs,” Bencuya said. “They don’t want to give up their walkable amenities during or after their work days that they had when they were living in city centers. You have this phenomenon of creating urban places within suburbs, and we think that has the staying power for an entire generation of office users.”

When asked what stREITwise likes most about Carmel’s Midtown development, Bencuya said, “What we really like about Midtown in particular, because of the way it was planned so thoughtfully in the beginning, is that everything works together very well.

The reason we are targeting noncoastal properties is because we think there is a relatively attractive return opportunity to the prices that are offered in the Midwest versus the prices that you have to pay to buy similar property in a coastal market where the yields are much lower.

If we can buy quality office buildings at higher yields in the Midwest and other noncoastal markets, maybe we don’t get that same rent increase over time, but we’re buying it at yields that we are very happy to earn today, and we’re buying top quality buildings in these markets. That’s a tradeoff we like.”

Bencuya went on to explain how stREITwise’s acquisition of the Allied Solutions Building will benefit the residents and employees who live, work and play in Carmel.

“What it does for the residents of Carmel is one of a couple of things: First and foremost, our goal is to bring additional retail to the ground floor of that building and to bring in retail that is consistent with the local flavor and the local vibe,” he emphasized. “The retail is going to be more experiential-oriented. That means restaurants, coffee shops, yoga and fitness. It means the kind of retail that is both inherently local and cannot be displaced by online shopping.”

Bencuya continued, “Our intention is to invest in those spaces to bring the appropriate users that will then activate the Monon and that area. The second thing it does is validates the initial thesis that it [our investment] will earn the support of continued investment in Carmel along these lines. Our investment represents support for projects like this, and I think that builds on itself over time.”

A prospective investor interested in online real estate investing, real estate crowdsourcing and passive income opportunities has a plethora of resources to research online. Bencuya highly recommended that interested individuals research what it is that he/she is looking to get out of their investment.

“It is investor-specific,” he said. “There are opportunities out there to invest in specific transactions and specific properties. There are opportunities to invest in loans, and there are opportunities to invest specifically in apartment buildings and apartment REITS. There are a variety of things that you can invest in online.”

Please see streitwise.com/oc for more details.

Investment Strategy

stREITwise aims to acquire and manage a diversified portfolio of value-oriented investments home to creditworthy tenants that provide a source of steady and growing dividends.

stREITwise focuses on non-gateway markets typically more fairly priced at higher capitalization rates (or cap rates) and finance our acquisitions with modest leverage to minimize the risk of principal loss.

Value-Oriented Investments

stREITwise seeks to identify properties that demonstrate the following characteristics:

stREITwise targets strategically located properties proximate to transportation, nearby amenities and a base of established employers and industries. In particular, stREITwise concentrates on high quality of construction properties with a track record of sustained occupancy well-positioned to outperform the broader market.

Lower Fees Leads to Higher Returns

 stREITwise charges a fraction of the fees the other guys charge because it sells its shares directly online instead of through expensive brokers. In fact, the upfront cost can be up to 80 percent cheaper than many of stREITwise’s non-traded REIT competitors.

stREITwise’s upfront fee discount could translate to 42 percent more profit over a five-year investment based on the same underlying property performance.

stREITwise Historical Dividends vs. Public Alternatives

stREITwise combines institutional quality commercial properties, experienced management and the #1 rated lowest fee structure among qualified real estate crowdfunding sites according to the Real Estate Crowdfunding Review website.

As of today, since inception stREITwise has generated 10 percent annualized dividends.

stREITwise Carmel IN Investment By the Numbers

Current Offering: 1st stREIT Office

Latest Acquisition: Allied Solutions Building

Size: 142,000 sq. ft.

Market: Carmel (Indianapolis); highest asking rent submarket in Indianapolis

Total Value: $32 million

Leverage: 10-year term senior loan; 55 percent loan-to-cost

Current Tenants: Allied Solutions, LLC (108K leased until 2030), F.C. Tucker (15,750 leased until 2029)

Value-Add Opportunities: Ground floor retail space for two to three tenants, two office suites available

Learn more about stREITwise