Wilson Investment Properties: Comprehensive Review and Ranking
What is Wilson Investment Properties?
IMPORTANT 2021 COVID-19 UPDATE: The investment repercussions of the global pandemic continue to change and evolve with unusual speed. As such, this review might be dated, no longer accurate, irrelevant and/or missing crucial information necessary to making an effective investment. For the latest and greatest information on analyzing investments in this new era, see the latest article in the series: "How will Covid-19 / Coronavirus Affect my Alternative Investment Portfolio?"
Wilson Investment Properties (a.k.a. WilsonInvest.com) specializes in commercial real-estate (CRE) investments (spanning multifamily, retail, industrial and much more). If offers both single property and multi-property funds, investing in equity. They also claim to offer thorough bankruptcy protection. At the same time, they can take extremely high sponsor compensation, compared to other options. Also volume is extremely low and minimums much higher than competitors. (More on these in the "pros and cons" section).
How does Wilson Investment Properties work?
Wilson Investment Properties sources all of its own deals from itself and affiliated companies. So on one hand, there is no additional fee which some platforms who source third-party deals charge. Also, you have direct access to speak to the sponsor (since the platform is the sponsor) which can make communication easier than it is with those (few) platforms who choose to put themselves in between the investor and sponsor.
On the other hand, it does mean that there has been no additional level of third-party due diligence done, as some other companies claim they do, to vet the deals.
What are Wilson Investment Properties Pros and Cons?
Advantages: Diverse offerings, industry leading bankruptcy protection.
Disadvantages: Un-competitively high sponsor compensation, low volume, high minimums, very little skin in the game.
Most smaller commercial real estate platform specialize in just a single CRE asset class. Wilson Investment Properties offers a diverse selection. For example, they currently have a multi family, assisted living and an industrial flex deal.
It also has exceptional bankruptcy protection. The individual LLCs are bankruptcy remote, and a partner can auto
matically take over administration if the platform goes bankrupt. And in addition, investors can vote out the existing managers for any reason. This is exceptionally good protection.
Why? Another platform (RealtyShares) recently ran out of money. Their deals did not have this protection and so investors have been forced to a new administrator that most know nothing about and some claim they are very unhappy with. But they are probably stuck with the situation because of the contract. With Wilson Investment Properties, this could never happen. In my opinion, all platforms should do this. So kudos to Wilson Investment Properties for being one of the first in the industry to do this.
Also, the diversity and length of the claimed track record of Wilson Investment Properties looks impressive. They claim they have invested in 20 different commercial real estate deals since 2004, including land entitlement, retail centers, business centers, industrial centers, manufacturing, multifamily and more. (Full track record is here). They claim they during that time that investors have never lost any money (and that they have never even requested an emergency capital call from investors). Note: there is no way to definitively verify this track record because much of it is not audited. But if true, then in my opinion it would be a big positive.
On the downside, if the offerings do well, the cost to the investor can be higher or much higher than competitors. The typical waterfall has a 5-8% preferred return and then gives the investor 75% to 85% of all the profit. This means 15% - 25% goes to the sponsor.
Wilson Investment Properties has a more complicated structure with 2 different waterfalls (one for profits on sale and another for distributions). Both were an 8% preferred return on the deals I saw, which is within the 5-8% average. (The site claims they have ranged from 6%-11% in the past). After that:
On sales profits, they keep anywhere from 20-30% for itself. So their high-end split deals are more expensive than most sponsors (who max out at 25%).
For dividends, a paltry 50% of the profit goes to the investor and the platform keeps a huge 50% to itself. Out of the hundreds of deals I see every month, there are only a handful I've seen charging this much.
So for me personally, it's hard to imagine me loving the deals so much to agree to these kinds of terms when there are so many other choices. Others, though, may love the sponsor/deals enough that they're willing to overlook it.
Additionally, some other deals have very little co-investment. Skin in the game mitigates the fact that the performance split incentivizes the sponsor to push the risk envelope. So this may be a deal-breaker for conservative investors. More aggressive investors might want the sponsor to be incentivized to push risk, so they will see this as an advantage.
The site is new so currently suffers from very little volume compared to others (with only three open investments currently). So it's not going to be a one-stop shop for any investor looking to invest their portfolio. (The platform claims that they typically do 4-6 deals per year).
Another negative is that minimums are significantly above the industry average at around $50,000 (versus $5,000).
For more raw data on the site (including investor and sponsor fees, legal structure etc.), or to easily compare it with the data of competitors, see the feature by feature comparison matrix.
Is Investing In Wilson Investment Properties Legal?
Wilson Investment Properties markets to investors under 506B and 506C. They claim 506b offerings make up 80% of the available investments and allow for both accredited and non-accredited investors to take part. 506c offerings accept accredited only.
506c offerings require investors to prove their accredited status (and update it periodically). 506b offerings allow accredited investors to self-accredit.
What does a Wilson Investment Properties deal look like?
Here is my step-by-step due-diligence on a random Wilson Investment Properties investment. So it may or may not be a typical investment. Also I'm a very conservative investor, so something that's way too risky for me might be the perfect fit for someone else who is more aggressive. Finally, I'm not a financial advisor, attorney or accountant. So this is just my personal opinion and always consult your own financial professionals before making any financial decisions.
The investment is in a Business Plex at Florence Park in Cincinnati Ohio. This is an industrial flex asset (a mix of service, office, industrial and retail) class B with 100% occupancy and claimed rent is 70% lower than comparable properties. The plan is to invest $75,000 on deferred maintenance and increase rents to market with 3% annual increases. The projected return is 16.8% annualized, and a 1.8 X multiple over five years. The minimum investment is $50,000.
The first step is to make sure that the asset class and strategy even make sense for my portfolio. (If you don't know how to do this, please see The Conservative Investor's Guide to Due Diligence). Let's assume it does make sense for me, and dive in.
Sponsor experience: I believe we are late in the cycle. As a conservative investor, I don't want to be taking chances with my money on a sponsor was not been through a downturn, and could learn expensive mistakes if we have a severe one. So in a mainstream asset class like this, I require full real estate cycle experience in the exact asset class and strategy (in this case value-added industrial flex).
Looking at the track record, the company does not have full real estate cycle experience. The majority of the purchases have been from 2015 through 2017 which were periods of economic expansion. They do have two additional purchases in 2002 and 2003, but these also did not experience the most dangerous part of the cycle, which is when it changes from expansion to downturn. Additionally, only five of these were in industrial. For me, this is a red flag and I would not consider this deal. A different investor who is not as concerned about the next downturn, might be fine with this.
Skin the game: as a conservative investor, I want at least 5 to 10% coinvestment by the sponsor. (I will accept less if the sponsor is new and doesn't have deep pockets. The amount just has to be a significant amount to them). This is because skin in the game mitigates the fact that the performance split incentivizes the sponsor to push the risk envelope.
In this case the sponsor is not new but skin in the game is only 2.72%. In my opinion, this is a yellow to a red flag. I would have to really love every other part of the deal to overlook this. Someone who is more aggressive will actually prefer less skin in the game, since they want the risk envelope to be pushed aggressively. So that kind of investor would view this as a plus.
Debt: at this stage of the cycle, I want to see conservatively underwritten debt at a maximum 65% LTV. This deal has debt at 60% LTV, which to me is a big plus. I also want to see interest rate risk and refinancing risk eliminated is much as possible with a loan that locks in a fixed rate for a long-term of 7 to 10 years. In this case, the loan is more than seven years so that to me is a good sign. It starts off at seven years at 5.3% fixed and then flips to floating (0.5% plus New York prime rate). If I were interested in this deal, I would want to see what options they have to get out of the loan before it flips to floating (sometimes there are penalties which can cause issues). Assuming they can get out with no penalty, I would be personally be fine with this set up.
Fees and splits: The fees are as follows. Acquisition fee: 2.5%. Financing fee 1%. These are all within averages to me are fine. There is also an asset management fee 2% of gross rents. This is a little strange because usually it's based on the amount of assets and not rent, and is usually about 1 to 1.5% of assets. So if I were interested in this deal, I would take a look at gross rents and translate that into a percentage based on assets. If this is 1.5% or below then to me that's a great sign. If it is significantly above that, then it would be a yellow to red flag for me. An investor who loves every other part of this deal might be willing to overlook higher fee. (LATER EDIT: WIP says that this comes out to 0.2% of assets on gross rents of $11,300 annually on asset valued at purchase price of $4.16M. If accurate this seems very good to me.).
The preferred return is 8% which is within the average of 5 to 8% and to me is fine. After that, distributions are split 50% investor/50% sponsor. This is very un-competitive and much out of line with the average which is a 75 to 85% split to the investor and 15 to 25% split the sponsor. If it was a little bit off (65 to 70% to the investor) maybe I would be okay with overlooking this, if I loved every other part of the deal. But it's hard for me to imagine any situation where I would be okay with a 50/50 split when there are so many other alternatives.
The other issue with an overly generous split to the sponsor is that it further incentivizes them to push the risk envelope. As a conservative investor, this is a showstopper for me. For a more aggressive investor, they might actually prefer this kind of compensation, since they know it will financially incentivize the sponsor to be more aggressive with risk.
On liquidations, the split is a little bit better at 70% investor/30% sponsor. However, it is still below average.
If the investment passed all my initial checks, I would have dived in further to check out the sponsor, the property itself, the projections, etc. To learn how I do those things, check out The Conservative Investors Guide to Due Diligence.
Where can I discuss other Wilson Investment Properties deals?
You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.
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Code of Ethics: To maintain objectivity, I do NOT accept any money from any outside sponsor or platform for ANYTHING (including but not limited to affiliate ads, advertising etc.). See code of ethics for more.
Personal opinion only: All info is my personal opinion only as an investor. I am not an attorney, nor an accountant, nor your financial advisor. Always do your own due diligence and consult with your own licensed professionals before making any investment decision. Information is believed to be correct but may have errors, so use at your own risk. If you find an error, please let me know.
Ratings are general: In my opinion, every investor comes from a different risk tolerance and financial situation, so there's no such thing as a single investment or platform that's great for everyone. There are many deals that aggressive investors love, which I won't touch, and vice versa. And every investor has their own way of doing due diligence. I believe there's no one right way to do it.
So, the site ratings are based on criteria which I feel are important to the broadest range of investors (transparency, volume, bankruptcy protection, etc). And even though I have my own personal, conservative, due diligence method (and talk about how the site's deals measure up in the "deep dive section"), I don't use my personal criteria as a factor in the ratings. So for example, a high ranking/rating doesn't mean that I would personally invest in a site (and vice versa). Click here to see what's in my own portfolio.
About Ian Ippolito
Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News, USA Today, Bloomberg News, Realtor.com, CoStar News, Curbed and more.
Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.
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This site has been ranked and reviewed as part of our in-depth, 100+ site industry review. All data is believed to be correct, but may have mistakes. Please contact us if you notice one. All non-data (including rankings, investor comment summaries, etc.) are my opinion only. I'm just an investor and not an attorney, accountant, or certified financial advisor. To maintain neutrality: I do not own a portion of any of the companies reviewed.