On Tuesday, Finance Minister Tito Mboweni told the media in his pre-Budget briefing: “We have to get our house in order. And it is going to be a painful process.” It may be too little too late for South African investors who have already made up their minds that they want to put their money elsewhere. And for good reason.

Our Finance Minister’s budget speech has made it clear that battle lines have been drawn in South Africa’s political economy – which to any good investor spells more uncertainty.

It may only be February, but 2020 has already been a tough year. Between the new coronavirus (Covid19) and what seems like the umpteenth government bailout of our underperforming SOEs, South African investors are looking to divest and diversify offshore.

Stability is hard to find

As shipping, distribution and tourism screeched to a halt in the wake of Covid19 outbreaks in almost 30 countries, investors all over the world are looking for blessedly stable growth vehicles.

The trick to finding this unicorn among assets is the same one being used by big tech companies to innovate: look for the pain points and solve them end-to-end. We must look to participate in the safest investments out there – products and services that people will always need.

People will always need good healthcare, and properly managed medical real estate represents a boon to both the healthcare providers, who are tenants, and communities in densely populated areas, who need healthcare close to where they live and work.

Hot property

Real estate remains an attractive asset class for savvy investors. You’d be hard-pressed to find a better income-generating asset than an occupied, working building with a stable mix of tenants. 

It’s typically easier for investors to picture residential developments when they want to invest in real estate, but in truth the most desirable real estate asset remains commercial property. Not every investor can afford the massive amount of capital required to acquire shopping malls or warehouses. Add to this the additional complication of investing offshore and many South African investors are priced right out of the commercial real estate asset class. 

Medical real estate, however, is enjoying some very healthy returns across the Atlantic. 

Where to invest

A recent JLL report sums up the opportunity very eloquently with its findings on the medical real estate outlook in the United States (US). Not only is America (the largest economy in the world) a top destination for foreign investment, it boasts the third-most transparent real estate market globally and it has a highly skilled labour market with growing and sophisticated healthcare needs. The trend is indicative of an ageing population.

World Population Review reports that by 2060, the US population will, on average, be older than it is today. Almost one in four people will be 65 or older. The percentage of working-age people (18-64) is projected to fall, from 63% today, to 52% in 2060. 

Spotting the unicorn

An ageing population needs extra medical attention and high-tech outpatient care. And doctors need modern office space that caters to the growing needs of their practices. South African investors need a safe offshore asset class with good, reliable returns.

OrbVest’s newly packaged medical real estate offerings based in the US are perfectly suited to the current needs of South African investors.

Through six gruelling years of laying the groundwork, making the connections and investing in American medical real estate, OrbVest can now offer South Africans the most stable and transparent offshore asset available.

Medical campuses and offices are occupied by healthcare professionals in diverse fields, such as rehabilitation, surgery centres, dentists and most notably specialists – who don’t want to be part of a hospital system and now have the technology to perform procedures at their own facilities, without the long recovery period associated with invasive operations. These tenants are stable and typically have long leases. When was the last time your dentist moved buildings?

Medical real estate presents a low-risk and profitable investment opportunity with long-term, reliable cash flows. OrbVest’s Old Milton Medical 25 in Atlanta, for example, boasts an average lease term of 17.5 years. What better way to protect your wealth? 

Trust & predictability

OrbVest’s executive and technical leadership team is what has made our business the most innovative offshore investment option for South African investors. My 27-odd years in the local medical real estate industry, coupled with the extraordinary entrepreneurial talents of OrbVest’s CEO, Martin Freeman, have resulted in our company’s hyper-focused investment strategy into offshore medical real estate. Martin (who has emigrated and now lives in New York) was part of the team that co-founded and led Bayport Management Limited. Others on the OrbVest team include award-winning entrepreneur Justin Clarke, who also co-founded South Africa’s premier online real estate portal, Private Property.

So who is OrbVest? We’re experts in commercial healthcare real estate investment. In a world that is diversifying, our company has chosen to specialise. We have established respected and capable real estate networks in America and we are experts offering a very specific product – Class A medical real estate in the US. We have more than 25 medical buildings and we manage a portfolio worth in excess of $320m.

What makes OrbVest different from real estate investment trusts (REITs) is that every property we buy is ring-fenced as its own investment vehicle, listed on the MERJ stock exchange and strictly regulated. 

We’ve also made offshore investing more frictionless than ever before. Using our online platform, investors can pick exactly which building they want to invest in. We keep open records of our revenue and report regularly to all our investors. It’s completely transparent and investors have no exposure to the other properties in our portfolio unless they specifically choose to invest in multiple buildings. 

The secret sauce

OrbVest’s investors own a tangible asset that produces a steady income. The entry-level investment sits at around $5,000 and the typical investment term is five years. Investors in 10 countries are already seeing excellent returns, paid in US dollars – the cash-yield portion of which is generating over 8%. When we exit and sell properties in our portfolio at the end of the investment period, we share with our investors the capital growth we generate, and our overall projected internal rate of return ranges between 12% and 17%. 

Considering our investors’ dividends are paid quarterly in US dollars, when you factor in a weakening rand, our South African investors are seeing an incredible yield at a time when things at home aren’t looking too stable.

And that’s the point, really. OrbVest doesn’t buy buildings; we acquire future income streams for our investors. DM

Hennie Bezuidenhoudt is the Chairman of OrbVest, a company that invests in real estate all over the world. Find out more here.