Are You Recession-Protected?

Here’s a question we get all the time: What happens to the REIT in a recession? Am I protected? Unsurprisingly, the concern comes in waves, usually after a volatile day for stocks and “MARKETS IN TURMOIL” headlines flashing across CNBC.

It’s an incredibly broad topic and if you get me started on why everyday investors should get out of the habit of picking individual properties or stocks or checking their portfolios daily or trying to time investments around recessions, you may regret that you asked. What I’ll say for now is:

It’s harder to sit on your hands and let your assets do the work for you if you check your accounts daily.
Beating the stock market is hard.
Picking individual properties is as difficult as always picking winning stocks.

More specifically to the original question, what happens to the REIT in a recession? Let’s be upfront about one thing: All investing involves risk. There’s no asset on the planet (save for perhaps US treasuries) that is “recession proof.”

Commercial Real Estate in Desirable Locations
Are there risk assets that are more recession resistant than others? Sure, there’s a scale. Hotels tend to respond poorly to economic slowdowns because of daily revenue resets and short-term bookings, whereas a long-term net leased property to strong corporations ought not be affected as much by near term GDP or job market fluctuations.

Our objective as investors is to find the appropriate balance between risk and reward and to find those properties that have moats in an appealing product, an ‘A’ location, with quality tenants.

Strong Rent Roll & Tenant Portfolio
We believe that the portfolio we have today (and continue to construct) exhibits strength in each of these areas and believe we are well positioned to ride out a recession.

We have strong tenants and are well occupied with in-place leases. For example, Allied Solutions has 108K sqft until 2030 and is a tenant that is seeking to grow its employee base in the future.
Our tenants’ financial strength should protect the REIT’s income stream from any potential economic headwinds in the near-to-medium term.
It’s not impossible for a tenant to experience hiccups in its business, but unlike apartments or hotels or other products that generate income from short term contracts or non-credit customers, we have gone through an extensive process to ensure as best as possible that our customers (our tenants) will be able to withstand market fluctuations and honor their leases.

Suppose instead, that a tenant doesn’t default on their lease, but that we come upon a recession during a period when several leases expire, and our tenants opt not to renew. This is a plausible scenario. And in these times, we are supported by our moat of differentiated product in desirable locations.

In this scenario, when tenants return to the market, our buildings are at the top of the list because we have curated a portfolio of first-to-lease buildings. Vacancies in the portfolio may temporarily dip, but we focus so singularly on the attractiveness of our properties that we believe our properties are able to bounce back quickly.

Efficiently Leveraged with Long Term Debt
Lastly, we believe our balance sheet, with low leverage (53% portfolio average currently) and long term debt, put the REIT in a position to allow us the flexibility to operate in weak economic environments significantly better than would our higher-leveraged competitors.

We launched the REIT when we saw an opportunity to buy well-located assets in secondary markets at prices that offer protection against a slower economic backdrop while still providing risk-adjusted dividends that we think are attractive. The Motley Fool rated Streitwise as the best investment for conservative investors among real estate investing services for this exact reason.

Reasonable Expectations of Return
We never intended to shoot for the moon and post the highest returns and we never set out with a growth-at-all-costs mentality. We wanted, for ourselves and for our investors, the ability to look past the doom and gloom news when the market screens are exclusively red. Look past the headlines, look past the recessions, focus on positioning to withstand corrections and come out strong on the other side.

Alex Wills

Mr. Wills is the Marketing Director and Head of Product for Streitwise.

Prior to joining Streitwise, Mr. Wills was Head of Paid Media at Bitcoin IRA and Fortress Gold Group. Previously, Mr. Wills was the Director of Lead Generation at GTMA, a real estate marketing agency, where he founded the paid media department that oversaw a large nationwide portfolio of multifamily properties. Mr. Wills holds a Bachelor of Science degree in Marketing from the University of Florida.

SW Manager, LLC (“Manager”) is a wholly-owned subsidiary of and controlled by Tryperion Holdings, LLC (our “Sponsor”). Manager is the external manager and advisor of 1st Streit Office Inc. (“1st Streit Office”) and 1st Streit Office Operating Partnership LP (our “Operating Partnership” and, together with 1st Streit Office, “Our Current Offering”). 1st Streit Office is the sole general partner of our Operating Partnership, through which all of our assets will be owned and substantially all of our operations will be conducted. All references herein to “Streitwise” refer, as applicable, to Manager, 1st Streit Office, the Operating Partnership, or any of their affiliates (collectively, the “Streitwise Entities”). Unless explicitly stated to the contrary, all references to “we,” “us,” and/or “our” shall refer to the Streitwise Entities. By using Streitwise, you accept our Terms of Service and Privacy Policy.

An offering statement regarding this offering has been filed with the SEC. This offering is structured as a non-traded real estate investment trust, or “REIT,” under Regulation A+ of the JOBS Act. The SEC has qualified that offering statement which only means that Streitwise may make sales of the securities described by that offering statement. It does not mean that the SEC has approved, passed upon the merits or passed upon the accuracy or completeness of the information in the offering statement. You should read the Offering Circular before making any investment which is available here: streitwise.com/oc

You may have been referred to Streitwise by a third-party (“Solicitor”). Compensation to any Solicitor may be up to $200 per email registration. A Solicitor may promote and/or may advertise Streitwise’s investment services and may offer independent analysis and reviews of Streitwise’s services. Streitwise and any Solicitor are not under common ownership or otherwise related entities. We cannot ensure the accuracy of the data provided from any Solicitor.

Performance: Past performance is not a guarantee of future results. All historical returns, target returns, or hypothetical projections may not reflect actual future performance.
Risk: This investment involves a certain level of risk and may result in partial or total loss. We cannot guarantee that we will reach our target return for our investors.
Tax: Prospective investors should confer with their tax advisors regarding the tax consequences based on their particular circumstances. Neither Streitwise nor any Solicitor assumes responsibility for the tax consequences for any investor.
Liquidity: Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term should not invest. See Stockholder Redemption Plan in the OC.

¹ Dividends & returns: Current annualized dividend based on the most recent dividend declaration as of the quarter ending 3/31/2024. Dividend return calculations based on NAV at the time of dividend return. 1Q24 dividend payout of $0.11/share equates to a 6.2% dividend based on the current NAV. The REIT has averaged a 7.2% annualized return since 2020 and a 8.3% annualized return since 2017 based on the average NAV for the respective periods. See Quarterly Report for all returns history.
² Source: FTSE NAREIT All Equity REITs vs S&P 500.
³Sponsor Performance: Related to investments by Sponsor, Tryperion Holdings, as part of one of its prior programs, and not of any of the Streitwise Entities. Reflects gross IRR on realized investments in the Sponsor’s investment portfolio since inception. Sponsor performance data as of 4Q23.
⁴Target returns: We will seek to invest in real properties and other real estate-related assets that we believe can produce a strong return through a combination of cash flow and appreciation. We cannot guarantee that we will reach this target return for our investors.

This page may contain forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates”. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in the Offering Circular. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the Company’s filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

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