Value Investing: There’s a Price For Everything

Read the following two paragraphs from a recent real estate brokerage house white paper and tell me which real estate markets seem riskier to you, primary (gateway cities like New York or Los Angeles) or secondary (smaller cities like St. Louis or Phoenix):

“Notable shift back to primary markets indicating a current resistance to market risk. After the continued expansion into secondary markets over the last two years, volumes are moving back toward primary markets. In the second quarter of 2016, 70.1% of total transaction volume took place in primary markets. This represents only the second occurrence of the last eight quarters in which primary volumes exceeded 70.0%.

Pull back in risk evident on submarket level as well with investment clustering increasing. Office investment ‘sprawl’ is declining as investors adopt a heightened focus on lower risk submarkets amidst market jitters and cycle longevity concerns.”

Did you say secondary markets? Why?

The word “risk” is mentioned three times in those two paragraphs, while the word “price” doesn’t get a single mention. How is that possible? Price is the number one determinant of risk. Without knowing the price of something, how can you reasonably assess the risk? Hint: you can’t.

There’s a price for everything. Value investors understand this, while others choose to ignore it. Is New York City a more dynamic market than St. Louis? Of course. Would you pay one price for a building in St. Louis and double that price for the same building in New York City? How about triple that price? The answer may differ for different investors, but one thing is for sure: price matters.

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.

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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.
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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.

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