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As financial advisors increasingly prioritize lowering correlations with public markets and allocating to inflation-fighting asset classes within client portfolios, private commercial real estate is gaining prominence.[1]
Because not all commercial real estate investing is equal, advisors need the right partner when it comes to recommending these options for clients. Enter CrowdStreet Advisors. A wholly owned subsidiary of CrowdStreet, Inc., CrowdStreet Advisors enhances the commercial real estate investing proposition by providing access to middle-market private commercial real estate. This is a segment of real estate investing that has been a well kept secret of institutional investors—often made available in private funds with high investment minimums that puts them out of reach for most individuals.
“Through its private-market products and services—REITs, thematic funds, and custom solutions—CrowdStreet Advisors provides unique exposure to middle-market private commercial real estate (projects with gross asset values typically ranging from $40 million to $100 million), offering investments that are historically less correlated to public-market assets at minimums that finally put them in the reach of advisors and their accredited clients,” according to the firm.
CrowdStreet Advisors: Providing Portfolio Diversification with CRE
Real estate is generally viewed as an alternative asset class. With that, it should theoretically provide portfolio diversification benefits, including reducing correlations to bonds and stocks. However, recent historical data indicate listed real estate’s correlations to stocks is surprisingly high. From Nov. 1 2015 through Aug. 21, 2022, the S&P 500 Real Estate Index’s correlation to the S&P 500 was 0.76.
That’s high on a relative basis and higher than clients are looking for from a supposedly “alternative” asset class. With correlations increasing across the board among traditional asset classes, private commercial real estate is a relevant avenue for advisors seeking to provide clients with income and upside potential while reducing links to other equities and fixed income.
“Generally speaking, investors seek to build an optimal portfolio by including assets like real estate that tend to have a low correlation to existing portfolios of stocks and bonds,” notes CrowdStreet Advisors. “Private commercial real estate has become an increasingly important allocation for some of the world’s most sophisticated institutional investors, helping them complement their CORE, CORE+ real estate holdings with growth-oriented Value-Add and Opportunistic strategies.”
Consider the significance of CrowdStreet Advisors’ offerings in 2022 – a time when the S&P 500 is in a bear market and the Bloomberg US Aggregate Bond Index is saddled with a double-digit year-to-date loss. Beyond return potential and possible mitigation of volatility impact, CrowdStreet Advisors offers investments that make investing in private commercial real estate accessible. While many private funds providing access to this market segment typically have investment minimums in the $5M - $10M range, CrowdStreet Advisor's funds can have minimums as low as $25K.
For example, the CrowdStreet REIT I (C-REIT) was created to provide exposure to roughly 20 commercial real estate projects, with a minimum investment of $25,000. The REIT structure also makes 1099 tax reporting possible instead of the usual K-1 tax reporting provided by private funds.
When Experience Matters, Call on CrowdStreet Advisors
Private commercial real estate isn’t an exotic asset class, but it’s one that can be daunting to advisors that don’t possess deep experience with non-listed real estate. CrowdStreet Advisors ameliorates that scenario with a deep bench of experience and a well-defined investment review process.
Historically, CrowdStreet – the parent company – has funded over 660 transactions with 138 realized deals to date. CrowdStreet Advisors has a proven track record of its own as an investment manager with over $400M in assets under management across 20+ funds and managed accounts.
“At CrowdStreet, a team of 78+ cross-organizational professionals engage in all aspects of sourcing, selection and monitoring of CRE projects,” notes the firm. “The CrowdStreet Advisors portfolio management team hand-selects the properties they deem to be attractive and most capable of meeting each fund’s stated investment objectives.”
The point: When financial advisors venture into private commercial real estate in an effort to bolster client outcomes, experience matters. CrowdStreet Advisors provides just that.
To learn more about CrowdStreet Advisors visit www.crowdstreetadvisors.com.
CrowdStreet, Inc. (“CrowdStreet”) offers investment opportunities and financial services on its website. Broker dealer services provided in connection with an investment are offered through CrowdStreet Capital LLC (“CrowdStreet Capital”), a broker dealer registered with FINRA and a member of SIPC. Advisory services are offered through CrowdStreet Advisors, LLC (“CrowdStreet Advisors”), a wholly-owned subsidiary of CrowdStreet and a federally registered investment adviser. CrowdStreet Advisors provides investment advisory services exclusively to privately managed accounts and private funds and does not otherwise provide investment advisory services to the CrowdStreet Marketplace or its users.
Investing in commercial real estate entails substantive risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. All investors should consider their individual factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. An investment in a private placement is highly speculative and involves a high degree of risk, including the risk of loss of the entire investment. Private placements are illiquid investments and are intended for investors who do not need a liquid investment.
All information provided in this article has been prepared solely for informational purposes and does not constitute investment, legal, or tax advice, or an offer to buy or sell any security or investment product. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness.
[1] Private real estate is, by nature, generally less volatile than the stock market. This lack of volatility does not necessarily translate to private real estate not fluctuating in or losing value. Further, the value of private real estate investments will fluctuate, and the value of real estate often lags behind general market conditions.