Pooled Real Estate Funds | Lumicre Insights

Once upon a time, commercial real estate was considered an ‘alternative’ investment. In the last decade, this isn’t the case any longer. However, given the high cost of owning income-property and not having the proper means to manage it, most investors are limited in the size of their investments. As investing in commercial real estate has become more ‘normalized’, investors look for alternative ways to invest and funds provide another entry point for those looking to invest in commercial real estate.

Lumicre Capital provides investors with the pooled equity fractional investment model, whereby Lumicre leads a group of investors in the acquisition or development of a fund or properties, from sourcing to investment oversight and disposition. The goals of these investors may be quarterly distributions, short or long hold periods and exposure to niche real estate strategies to complement an existing real estate holding portfolio. With a pooled real estate equity investment model, Lumicre Capital provides limited partner investors a variety of benefits, such as property sourcing negotiations and property contracting, pro forma financial modeling and business planning from acquisition to disposition, due diligence oversight, and offering memorandum summary for investors to consider the current investment and investment oversight, construction coordination and financing. This provides a diversification across a wide variety of properties with a given parameters and theses points. High Net Worth investors and family offices typically invest in such pooled Real Estate Fund opportunities. As a part of the diversification strategy. We provide these investors the opportunity to invest in a pooled fractional ownership of asset types across a wide variety of types. If you’re an accredited investor, please contact us today to learn more about our fund offerings.

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What is a Pooled Real Estate Fund?

/wp:heading /wp:paragraph wp:paragraph A pooled investment fund takes in investments from a group of investors, rather than a single investor. The smaller investments made by individuals are ‘pooled’ together to make the investment fund. These funds are combined to invest in larger investments. Groups like trusts and partnerships use pooled funds to invest. Individual investors in pooled funds investment accounts are treated as single holders of the account. This process lets them purchase more shares than they would be able to on their own and at times, gives them the advantage of lower prices. /wp:paragraph wp:heading {"level":3}

What services are offered by Lumicre Capital in a pooled real estate investment fund?

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Property sourcing, negotiations and property contracting,
Pro Forma financial modeling and business planning from acquisition to disposition, due diligence oversight,
An offering memorandum summary for investors to consider co-investing alongside Lumicre Capital,
Professional property management, leasing, construction management and financing services, and
Diversification across a wide variety of properties within given parameters and thesis points.

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What types of structures and offerings exist?

/wp:heading wp:paragraph A real estate fund can be classified as an LLC or a REIT. Underneath these two umbrellas are three different types of offerings. The first is a specified offering, where the proposed investment is for a specific property. The second is a semi-specific offering, where the proposed entity will invest in a particular property and also in other similar types of properties. The last is a blind pool, where investments are based on the decisions of the sponsor. /wp:paragraph wp:heading {"level":3}

What are some advantages of investing in a pooled real estate investment fund?

/wp:heading wp:paragraph Investing in a real estate fund gives the investor flexibility, profitability, tax efficiency, diversification, preferred returns, absolute returns, qualifications, and correlation to other asset classes. /wp:paragraph wp:heading {"level":4}

Flexibility

/wp:heading wp:paragraph If an investor invests in a single asset, they have placed all of their opportunities in that one property. However, if that investor vested their funds in a pooled investment, they’ve created a multitude of opportunities for themselves. Because there are different types of funds that focus on different geographic locations and asset classes, the opportunity is endless. It’s up to the investor to choose which fund they want to invest in. However pooled funds help investors create a diversified portfolio without having to invest directly into individual assets. /wp:paragraph wp:heading {"level":4}

Profitability

/wp:heading wp:paragraph The sponsor is usually highly motivated to achieve profit goals because funds are typically structured to return profit to investors, regardless of whether any profit has been made for the fund. Funds typically have a goal to keep all parties aligned as best as possible. As such, investors enjoy a more regular return on their investment. /wp:paragraph wp:heading {"level":4}

Tax Efficiency

/wp:heading wp:paragraph As tax matters are mainly dependent on information from investors’ own accountants and each unique circumstance, there are still tax benefits to investing in a real estate fund. Because most funds have a lifetime longer than one year, an investment is taxed at long term capital gains rate instead of the short term capital gains rate. Investors may also benefit from pass through depreciation. /wp:paragraph wp:heading {"level":4}

Diversification

/wp:heading wp:paragraph As mentioned above, the flexibility of investing in a fund lets you diversify your portfolio. Doing so helps investors mitigate their risk of owning one investment in the event of an economic downturn. /wp:paragraph wp:heading {"level":4}

Preferred Returns

/wp:heading wp:paragraph Unlike other investments, investing in a real estate fund typically assures the investor of receiving their initial profits (carried interest). While no fund (or investment) can guarantee a return, most funds offer a preferred return in addition to the pro rata share of the fund’s overall net profits. /wp:paragraph wp:heading {"level":4}

Absolute Returns

/wp:heading wp:paragraph An absolute return is the amount of profit the fund has earned. It includes returns beyond the preferred return. And funds that perform well will offer absolute returns higher than the preferred return. Investors should ensure that the structure of the fund is built to mitigate investment risk. They should not base it only on past performance. /wp:paragraph wp:heading {"level":4}

Qualifications

/wp:heading wp:paragraph When investing individually, an investor may not have professional guidance to benefit from. Investing in a fund, the investor gets this additional benefit. Having a sponsor who does this professionally can help an investor to ensure the fund is qualified and deployed appropriately. Not only that, an investor can expect to receive professional reports from a professional. They will be available to answer questions about the fund to show they are willing to work to be successful. /wp:paragraph wp:heading {"level":4}

Correlation to Other Asset Classes

/wp:heading wp:paragraph Because real estate investments are highly liquid in nature, they have a low correlation to other asset classes. Real estate investing has proved to be a more protected way of investing. As if the market were to take a downward turn, a real estate portfolio wouldn’t necessarily spiral with the market. While there is no guarantee of how much of a hit a real estate portfolio would take, it would not be as harmful as the hit the other asset classes would experience. /wp:paragraph wp:paragraph If you are an accredited investor, please complete our brief Register to Invest form. We would be happy to connect with you about all our opportunities! /wp:paragraph