So, You Want to Talk About Inflation

At this point, you are no doubt being bombarded by articles and financial mailers sounding the alarms on the prospects of inflation.

Inflation sounds scary, except that it’s a terminology so muddled by whatever narrative it is being used to support, that for all intents and purposes it has approached meaninglessness. Most of the inflation content generated in the last few weeks conflates so many different factors that one cannot even have a reasonable conversation about its existence, let alone an actionable one about its practical implications.

So let’s slow down and simplify. There are many factors beyond inflation that affect how much something costs. Primarily, supply and demand. Perhaps we can say that inflation is in the background then, a phenomenon that increases the overall price level of acquiring goods/services/assets and reducing the cost of extinguishing liabilities/obligations.

What’s causing the most recent flare up in inflation talk are the recent prints of consumer price index (CPI) increases, rising 4.2% in April, the fastest year-over-year change since 2008.

But before everyone freaks out, we have to realize that:

There was something pretty big going on last April with a global pandemic that interrupted both supply chains and demand.
Turning the economy off and on again ought to come with an expectation of aberrational outcomes in the short term. For example, used car shortages and price increases were a huge contributing factor. Other notable products with similar shortages and consumer price hikes include lumber and gas.

Whether the acceleration in inflation trends is transitory or persistent remains to be seen, but a portfolio allocation to investments that protect against stronger than expected inflation doesn’t need to hinge on the outcome, nor does it need to consume an entire investment philosophy.

How do I protect my portfolio in the event we do get significant inflation? Why is real estate a standard choice for investors?

The answer ultimately lies in the pricing power of real estate owners and the ability to charge increasingly higher rents. And that is a matter of localized supply and demand for a particular property type in a particular location, and the price paid to generate the desired return. The focus should first and foremost be fundamentals and basis, with inflation protection a secondary outcome.

Real estate: A natural hedge against inflation

One of the most direct reasons real estate can properly hedge general inflation risk is its ability to support long term, fixed rate debt financing. Supply and demand aside, this type of leverage in an inflationary regime is indisputably a win for property owners. Short term, floating rate financing, less so.

Which is why, whether inflation runs hot or not, having real estate in your portfolio that includes these characteristics will help you sleep well at night:

Pricing power
At the right basis
Appropriate downside protection
Paired with appropriate leverage

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 9/30/2024. Dividend return calculations based on NAV at the time of dividend return. 3Q24 dividend payout of $0.13/share equates to a 7.2% dividend based on the current NAV. The REIT has averaged a 7.2% annualized dividend yield since 2020 and a 8.3% annualized dividend yield 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.

© 2024 Streitwise. All Rights Reserved. Apple, the Apple logo and iPhone are registered trademarks of Apple Inc. Streitwise is not affiliated with nor related to NAREIT or its annual REITwise conference.