Capital,
Democratized

It used to be that only institutions and the wealthiest of investors who could invest in commercial real estate. But increasingly, individual investors can take advantage of this attractive asset class. CRE Income Fund helps investors like you personalize and diversify their portfolios and maximize returns with confidence.

An alternative to the broader market

With a shrinking public market, investments within the stock market and across stocks and bonds, are becoming increasingly correlated. As a result diversification is getting much harder to achieve in the public market.

A conventional recommendation to reduce portfolio risk and in turn maximize portfolio potential was to allocate at least 20% of an investment portfolio toward alternatives with low or no correlation with traditional, publicly traded assets. Institutional investors have a long history of diversifying into alternative investments, with pensions and endowments often allocating 28-52% of their portfolios respectively to alternatives.

In today’s market, individual investors are likewise increasing the percentage of their portfolios devoted to alternatives. Private commercial real estate can play a unique and important role.

Private, not public

Commercial, not residential

Passive, not active

Private, not public

When many people think of real estate investment, they think of public Real Estate Investment Trusts (REITs). However, REITS are traded on the same exchanges as stock and bond securities and are subject to the same risks as traditional equity and fixed-income securities. Simply put: REITs do not protect investors from overall market risk.

Private real estate investments, however, are weakly correlated to the public markets, and thus provide better protection against capital loss as well as market volatility.

Investing across multiple private real estate asset types and sectors (such as Industrial and Technology) provides additional diversification and risk protection.

Commercial, not residential

Commercial properties on average have higher returns for investors that residential properties, due to higher quality tenants, longer term leases, and more predictable income. Additionally, most commercial properties are NNN (triple net) which means that the taxes, insurance, and maintenance costs are passed on to the tenants.

An important distinction for investors is that commercial real estate asset value is correlated to Net Operating Income (NOI). NOI in turn is not correlated with the broader market: it can stay steady or increase when the market declines or inflation rises. Thus, commercial real estate is a better hedge against market volatility.

Commercial real estate asset classes

OFFICE

Single and multi-tenant

RETAIL

Power centers, neighborhood retail centers, strip centers, regional shopping centers

INDUSTRIAL

Single and multi-tenant, manufacturing, R&D, warehouse/distribution

Passive, not active

Active investing is high risk, high responsibility. Active real estate investing typically involves rental properties and house-flipping. Return potential for each of these options is limited to rental income and appreciation. Both require a significant amount of personal knowledge, time, and/or contracted expertise. Large capital commitments are required upfront and for the lifetime of the investment, which reduces an investor’s ability to diversify. Risk is concentrated in specific asset classes and geographies, and as sole owners, investors bear the losses when properties sit idle, require unexpected maintenance, or sell below expectations. 

Passive investing is more flexible and predictable. Passive real estate investors typically provide only capital and allow professionals to invest in real estate on their behalf. Passive investors bear responsibility only for their investments, not the buildings themselves. Passive investments usually offer investors a portfolio of real estate, which offers greater diversification potential, and unlike active investments, which earn returns primarily through rental income and appreciation, passive investments can also earn returns through interest payments on debt investments. Passive investment options often carry lower investment minimums, which offers greater accessibility to investors of all sizes.

Increasing Institutional Allocations to Commercial Real Estate