Benzinga Money is a reader-supported publication. We may earn a commission from the advertisers associated with this article. Read our Advertiser Discloser.
Portfolio diversification is a vital part of risk mitigation for institutional and individual investors, yet only one group has enjoyed large-scale access to one of the best diversifiers and inflation hedges available: private-market real estate.
Individual investors typically allocate 3% of their portfolio to private real estate, according to NAREIT, whereas institutional investors allot 10-20%. As a result, individuals have lost out on significant income potential as the private real estate market has historically delivered competitive returns with a low volatility rate.
And while many crowdfunding platforms have promised investors access to the $13T market, issues such as poor risk controls, lack of transparency, misalignment with sponsors, and fee-heavy structures have caused some to balk at the opportunity.
With a four-decade track record and $12B+ portfolio, Lightstone DIRECT goes beyond the crowdfunding model. Their direct-to-manager approach cuts out middlemen and aligns interests while providing institutional-grade access to individual accredited investors.
What’s more, Lightstone coinvests a minimum of 20% in each Lightstone DIRECT deal, aligning their outcomes with investors.
Highly sought-after real estate investments are now within reach.
Why You Should Invest in Private Real Estate
Private real estate has historically offered stock-like returns with bond-like stability.
The NCREIF Property Index, an index of U.S. institutional private real estate, has produced nearly 9% annualized returns over 45+ years with ~7% coming from steady income, and had positive annual returns in 41 of the past 45 years. By this index, private real estate has also exhibited less volatility than stock market indices for many periods since NCREIF data began.
It also provides a hedge against inflation or other macroeconomic risk factors, since private real estate has historically exhibited far less correlation with stocks or bonds than public REITs or other major asset classes. Savvy private real estate operators are also able to offset or outpace inflation through active lease management, and manufacture healthy returns during all phases of the cycle through careful asset selection and skilled management.
The Problem With Most Real Estate Crowdfunding Platforms
Real estate crowdfunding, or when many dozens of investors pool their money to invest in a property, isn’t new. Numerous platforms popped up between 2012 and 2022, many with the help of generous VC money, though there have been multiple issues that have since scared away individual investors.
In the rush to scale their operations, some platforms had loose or nonexistent risk controls that led to investors being defrauded. Others offered overly optimistic returns – 25% IRRs or more – only to underdeliver and in some cases even lose investors’ money.
A lack of transparency in how these platforms operate, along with layered fees that eat into investors’ returns, are other reasons why many individual investors have become wary of these opportunities.
Lightstone DIRECT Provides Accredited Investors Something New
With Lightstone DIRECT, investors are working directly with a well-established real estate firm that holds a $12B+ portfolio of multifamily, industrial, hospitality and other properties (over 25,000 residential units, 3,100 hotel keys, plus retail, office, and life science sites). Other platforms require an intermediary or third-party operator, which may result in higher fees and a greater risk of misalignment.
Lightstone’s commitment to put 20% of equity into each deal proves that it has skin in the game, and that these are investments Lightstone would make, with or without capital from individual investors. The company has a four decade track record in real estate dating back to the 1980s and has operated through multiple recessions, credit crises, and recoveries.
Qualified individuals can enjoy direct access to investment opportunities on carefully vetted properties with clear terms. With Lightstone DIRECT, accredited individuals can access the same single-asset multifamily and industrial deals that Lightstone pursues with its own capital.
All investments involve risk. Past performance does not guarantee future results.
Disclaimer: Please be advised that alternative investments carry a risk of monetary loss. Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice. Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
