Accessing foreign markets should be a natural next step for South Africans looking to diversify their investment portfolio and balance risk against reward. South Africa is the second biggest economy in Africa but faces huge challenges in the form of burgeoning debt, falling fiscus and a stagnant economy. Even the most optimistic investor should consider holding some of their assets offshore, especially in a growing economy where the fundamentals are strong, and the wind blows behind any investment decision that you make. But moving outside South Africa’s borders is fraught with hurdles such as exchange control and tax considerations. The question that is on everyone’s lips is, who do I trust and where will my money be safe?
So, where do investors start with their offshore diversification strategy?
With so many different asset classes available, picking a low-risk investment can be challenging. Global real estate, however, is an asset class that can be recession resistant and a great wealth builder. And whilst many would consider houses and apartments as the most logical approach, passive investments in commercial real estate are the holy grail. It’s where the smart money goes.
Direct participation in commercial real estate investments has in the past been limited to ultra-wealthy institutional investors and venture capitalists. But OrbVest, a global real estate investment company with South African roots, is helping to change the game. The company offers growth-focused entrepreneurs a gateway to tangible property investment opportunities in U.S healthcare real estate. “You get to invest like the big investors in the world and generate and earn the same returns as they would,” Martin Freeman, CEO of OrbVest, said in an interview with BizNews.
OrbVest raises equity around the world and enables investors to become shareholders in multi-tenanted medical real estate across the U.S for as little as $5000.
Unlike traditional property funds and real estate investment trusts, investors that partner with OrbVest put their money directly into a building that they like. The investment does not fluctuate based on the sentiment of a stock market and is always underpinned by the value of the actual real estate. Additionally, each building is ring fenced in its own public listed company.
Stakeholders can build their own portfolio with confidence as OrbVest gives them a secure, transparent, and hassle-free means to generate reliable and stable dividends in US dollars. As the company puts it assuredly on their site: “we take the unknowns out of the equation.”
Part of how they are resolving uncertainty is encouraging their investors to fly over to the U.S with them to visit the property that they have invested in as well as get previews of new opportunities that are still in the planning phase. OrbVest claims its investor roadshows have resulted in a 100% conversion rate.
“Every investor or potential investor who has done the roadshow with us makes the investment,” Freeman said.
Why the U.S, and why medical real estate in particular?
As the most robust and business-friendly economy, there is no doubt the United States is one of the most favourable markets in the world to invest in. In 2018, the US gross domestic product, or GDP, increased by 2.9 %. South Africa’s GDP experienced growth rates of 0.8% for the same period. It seems that a more developed market can offer better wealth growth opportunities than South Africa as investors stand to benefit from stronger currencies, reduced market volatility, and higher returns.
Furthermore, the U.S market for medical office buildings is thriving. To a large extent, the drivers of this healthy amount of activity goes to the increasing need for healthcare services as the U.S population ages. The 2018 Healthcare Real Estate Outlook report by JLL predicts a long-term stability for this demand as the number of people 65 years and older will nearly double by 2050 and is estimated to spend five times more on annual medical expenses.
Technology is also significantly impacting the sector. It’s changing the way healthcare is provided, with a move away from the large hospital networks and the introduction of new drugs and better diagnostics that will help extend the lifespan of people.
As healthcare providers look to better serve their patients and stay ahead of these rapid changes that are disrupting the traditional models of ‘sick care’, they are creating increased demand for a new type of real estate – medical campuses or medical malls that are closer to where patients live and work.
The high-value tenants occupying these buildings and the need for long term leases make medical real estate a low-risk and profitable investment with long term reliable cash flows. In OrbVest’s recent opportunity in Atlanta, Old Milton Medical 25, the average lease term was 17.5 years. So, regardless of what will happen in the economy, this sector will continue to see strong performance in terms of revenue.
With a targeted internal rate of return of up to 17%, OrbVest can generate a steady flow of income, which is redistributed to investors as quarterly dividends (the projects’ average cash on cash dividend paid quarterly over the last 5 years exceeded 8% per annum).
The business model
OrbVest has a simple business model. They identify stable, profitable medical office buildings to purchase, located in areas of high growth and demand, that fit with their very tight investment criterion. Once the property has been secured, it is evaluated by an independent investment committee made up of well-known risk and real estate members. After due diligence has satisfied the panel, is it offered to investors.
If, for example, someone invests $10,000, their investment value is exactly that. All setup costs are taken into account in the project. The interesting part about the OrbVest model is that they turn a profit only if the investor profits. The investor earns an “above hurdle” if they exceed the 7% cash dividend. They also get a share of the profit at the end when the building is sold.
Normally, these types of deals would be purchased by ultra-wealthy institutional investors or a fund. But, OrbVest always makes a portion of this equity available to small investors.
Since launching their first medical buildings in Atlanta in August 2014, they have posted exceptional results. Their portfolio of real estate under management has grown to 25 medical buildings with a floor area of over 1 million square feet, valued at over $300 million, with equity from more than 10 countries around the world.
The other question that investors need to consider is how can they trust OrbVest. OrbVest has solved this by listing the actual company that people invest in on MERJ, which has to comply with the same regulations as all major stock exchanges. These listed companies operate under these specific rules and the property supplement, as approved by MERJ, discloses the relevant information of the investment opportunity, such as tenancy, rentals in respect of the medical office building.
So, anyone investing in real estate with the help of OrbVest will not only benefit from a global leading investment platform that puts wealth preservation first but also, judging from the company’s track record, gives them excellent returns paid as dividends in US dollars.
Investors interested in building a stable foundation for their future financial goals can sign up at OrbVest to receive a brochure with the latest offshore real estate opportunities available. For more information visit www.orbvest.com, contact them on +27 (0) 21-948-2130 or [email protected] BM
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