As a real estate crowdfunding platform allowing everyone to invest, Streitwise has paid a strong dividend yield for years.

But it has its fair share of downsides, and despite being a long-time investor myself, I have more doubts about them today than I had a few years ago.

Before investing in Streitwise, make sure you understand both the pros and the cons, along with the risk inherent in office real estate right now.

What Is Streitwise?

Streitwise is a real estate crowdfunding platform that offers a pooled fund that owns commercial office buildings, first launched in 2017.

Those commercial properties include three office parks in St. Louis and an office building in Indianapolis. Streitwise boasts household names such as New Balance, Wells Fargo, and Panera Bread among its tenants. When you buy in, you effectively buy shares in those buildings as a fractional owner.

These commercial real estate properties have loans against them, but they’re conservatively leveraged at around 50% LTV. The sponsors at Streitwise have over $5 million of their own money invested in the buildings.

It’s been a difficult few years for commercial landlords of office space, and Streitwise has weathered them better than many. But the future of commercial office buildings remains murky, even for those in the industry. Worse, Streitwise recently announced that Panera has decided not to renew its lease agreement and will be vacating in early 2024. That’s a major blow, given that Panera is their largest tenant.

How Streitwise Works

Streitwise offers a single REIT that owns all four of its commercial properties. They set the net asset value (NAV) share price based on the properties’ current value and performance, but historically it’s hovered at around $10 per share.

You buy shares through their transfer agent platform Computershare, and from there, begin receiving quarterly dividends. You can set up automated recurring investments and automatic dividend reinvestment if you prefer through the Computershare platform.

Originally, Streitwise paid a 10% dividend. Then it dropped to 8.4%, and most recently, to 7.0% of its current NAV (6.8% of the original $10 NAV). That’s a worrying trend, especially given that the NAV price is lower today than when the fund first launched.

Streitwise Pros

There’s a lot to like about Streitwise, even given the worrying recent announcements about Panera leaving and the lower dividend yield.

Allows Non-Accredited and Foreign Investors

Streitwise allows any adult to invest. They don’t restrict investment to accredited investors like many crowdfunding platforms do, leaving it open to middle-class investors.

Nor does Streitwise restrict access to U.S. citizens and residents. Foreign nationals may also invest in Streitwise, a rarity in the real estate crowdfunding market. Streitwise charges a $5 fee for mailing a physical check overseas for dividend payouts or $10 for wire transfers. Foreign investors should consider reinvesting dividends so their returns don’t get eaten alive by fees.

High Yield

Streitwise still pays 7% in annual dividends even at the new lower dividend yield. Not many investments consistently pay yields that high.

Once Streitwise replaces Panera Bread as a tenant, there’s every reason to believe that the dividend yield will return to the 8% to 10% range.

Transparent Fee Structure

I’ve always appreciated Streitwise’s transparency. They charge a 2% annual fee from the dividend payment, but the 7% to 10% dividend yield is net of fees.

They don’t bury fees in the offering circular, like some crowdfunding platforms do (*cough* HappyNest *cough*).

Streitwise still charges hefty fees for early redemption if you sell back your shares within five years of buying (more on that shortly).

Low Leverage, High Skin in the Game

Streitwise's total property leverage comes to around 50% of their property values. That’s quite conservative, even by commercial real estate standards.

The founders also have over $5 million of their own money invested in the properties, a comforting sign for investors.

Automated Investing

Like most real estate crowdfunding investments, you can automate your investments in Streitwise.

That automation comes in two forms: scheduled recurring investments and a dividend reinvestment plan. There are no bells or whistles, but you can automate your investments to be completely passive.

Streitwise Cons

Despite those strengths, Streitwise comes with some significant drawbacks. Make sure you understand them completely before investing.

High Minimum Investment

Streitwise requires a minimum investment of 500 shares, or around $5,000, depending on the current NAV.

That’s not chump change, especially for investors looking to dip their toe in the waters of real estate crowdfunding before diving in head first.

Shrinking Yield

The yield and the NAV are smaller today than when Streitwise launched in 2017. That’s a troubling trend.

I’ve historically invested in Streitwise for the yield, assuming the NAV will remain relatively stable. Seeing yield shrink over time has led me to stop investing in Streitwise.

No Appreciation to Date

Streitwise has made noises about buying more properties to add to its REIT, which would drive up the NAV.

But it hasn’t happened, and I’ll believe it when I see it.

Fees for Early Withdrawals

Shares in Streitwise are a long-term investment.

If you try to redeem shares before owning them for five years, Streitwise buys back the shares at a discount of up to 10%. In fact, in the first year, they don’t let you sell back shares at all:

• 1st year: No share buybacks permitted
• 2nd year: 10% penalty
• 3rd year: 7.5% penalty
• 4th year: 5% penalty
• 5th year: 2.5% penalty
• After 5 years: No penalty—they buy back shares at full NAV share price

Read the full details of their early redemption plan here.

Few Properties/Weak Diversification

Some real estate crowdfunding platforms—Fundrise—own hundreds of properties. Others, like Groundfloor, let you spread your money across hundreds of property-secured loans.

Streitwise only owns four properties, three of which are part of the same broad office complex. That leaves them with effectively two large properties in two cities.

Low-Tech Platform

I honestly don’t have much beef with Streitwise over this one, but the Computershare platform indeed feels like a 1998 dial-up website.

I asked Streitwise about this once, and my contact there said, “We’re a real estate investing company, not a software company. We keep it simple.”

Fair enough.

How Streitwise Compares

At an 8% to 10% dividend yield, I could stomach leaving my money invested for the five-year minimum.

But at 7%, I start to wonder why I’d tie my money up so long when I could invest it for a 5.5% to 6.5% dividend yield from Concreit and access it at any time. Or invest it in Groundfloor loans at 2 to 12 months at a stretch, earning 8% to 15% returns with far easier diversification.

Seth earned an average 14% return on his Fundrise investments, and I’ve had similarly positive experiences with them. They, too, hit you with a penalty for selling shares in less than five years, but it’s a 1% penalty and only imposed on some of their funds. That strikes me as far more reasonable.

Fractional property ownership platforms like Arrived Homes pay similar returns as Streitwise, with similar holding periods. But Arrived Homes lets you invest a minimum of $100, which makes it both more accessible to new investors and easier to diversify your portfolio.

Another popular crowdfunding platform, RealtyMogul, offers two fund options. Their Growth REIT pays a 4.5% annual dividend yield, aiming for strong appreciation, and their Income REIT pays a 6.0% dividend yield. That latter is not far off from Streitwise’s current yield and boasts appreciation to sweeten the deal.

When I look at the other players in the field, it’s hard to see a clear reason to invest in Streitwise after they reduced their dividend yield.

Final Thoughts

I still believe Streitwise will get its act together and return to paying high dividends.

But it’s a difficult market for office real estate right now. The pandemic forced many businesses to reevaluate whether they need to spend so much on office space, and many have concluded that smaller flex space will do just fine. If they’re returning to in-person office work at all, that is.

Streitwise is caught in the thick of that sea change, owning premium-grade office buildings. Eventually, they’ll stabilize their portfolio, and I’m not worried about my investment disappearing. But I also can’t get excited about investing with them in the current market, so I’ve stopped investing new capital.

Keep an eye on them in the coming months to see how well they navigate the roiling waters of office real estate—and how well they return capital to their investors.