In this sponsored interview, the chairman and CEO of Orbvest’s sat down with Biznews’s Alec Hogg to unpack how a quest to diversify their own investments evolved into a fund that is now over $200m and growing fast. Successful entrepreneurs in their own right, Hennie Bezuidenhout and Martin Freeman are applying lessons learnt in their homeland to the US market with predictable and profitable consequences.
Hello I’m Alec Hogg. At Biznews we believe in long term partnerships with our community i.e. people like you who visit our site read articles and listen to our podcast and our live radio show. And with our advertisers, companies that share our values and whose products enhance the lives of the community that we serve. In that context, I’m really excited about our new business partnership with Orbvest, a $200m and growing investment company that specialises in syndicating medical properties it secures in the United States. Orbvest was created by a group of successful and highly credible South African entrepreneurs motivated by a desire to diversify their own asset base externally. To grow this business into the billion dollar operation that they envisage, the entrepreneurs have opened up opportunities for other investors including South Africans and those elsewhere in the world who want to invest in a high yielding low risk asset class in the United States. Through the use of technology and a low cost structure Orbvest’s investment entry point is a relatively modest $5,000. Its chairman is Hennie Bezuidenhout a successful South African entrepreneur who is applying much of what he learned in his home market.
Yes I started my business career back in 1988 where I got involved in the health care industry. Initially I was involved in the funding side of the business but from about 1993 we started to get involved in a clinical management site – managed care which they called it in those days and then I built the business which I sold in 2003. And by coincidence I got involved in the healthcare real estate side of the business building hospitals and medical facilities all over the country and realised what a stable asset class this is and that there’s also an opportunity on a global basis to get involved in healthcare real estate.
Who are you involved with in South Africa.
We provide facilities for some of the operators. I do some stuff for Netcare for cure and for advanced healthcare. On medical office blocks there are a variety of clients that we provide facilities for.
You’re the chairmen of Orbvest. Tell us a bit about the story. How did it all come to being?
One of the great opportunities in the world these days is where industries converge. We saw an opportunity where the real estate side and IT get together. This creates opportunity where people can invest in real estate on a global basis where it’s comfortable to transfer money and buy an asset – own an asset, which was very difficult without the enabling factor of IT.
But it’s a very specific type of real estate.
It is very specific. The world is a big place and we don’t try to be everything to everybody. We focused on the healthcare side and we focused in the United States because their healthcare system and the African health care system are very similar, so we could use our experience here and apply it abroad.
Orbvest’s chief executive who is now on the ground in the United States is another well-known and very successful South African entrepreneur.
My name is Martin Freeman. I’m originally from Durban. I’m a South Africa now living in Westchester, New York and I am an entrepreneur, a serial entrepreneur that’s done startups for 30 years. I’ll take a concept and I grow it very large scale.
What kind of startups have you been involved in.
So my early days were in the cloning game. Then I went through two financial services and I was the co-founder of Bayport South Africa. I then ended up growing a fintech business which was then acquired by one of the banks and now I’m in real estate. I get a real joy out of starting businesses growing a team and growing businesses around me.
And how did you get involved in Orbvest?
I was very fortunate. Many years ago I ended up going to the US and doing an Executive Management Program at Harvard and Boston and I fell in love with the country in terms of also wanting to invest in real estate in the USA. So like most of the people in the team we started to invest in family homes to start off with. Then it ended up being in commercial. So we’ve gone through multiple channels and areas and definitions, and we finally ended up in the healthcare space in America.
And the big opportunity here as Hennie was saying, integrating the tech as well. So it’s very easy to make an investment.
It does. I think that tech is purely an enabler. I think that the most important thing is that high net worth individuals have a specific requirement, they need somebody to teach them and hold their hand. There is the perception out there and I think a lot of people go online to just simply invest. I do believe that we offer great client service because a high net worth individual who is going to invest a hundred thousand dollars or more really wants to know the ins and outs, and every bit of the transaction. We go in and we find off market transactions, then what we do is we generally find buildings that are multi-tenanted, they are already producing income, there is upside in terms of us bringing an ideal tenant mix to it. Our buildings are transitioned to technology enabling businesses in the USA that are changing the healthcare industry and where we can add value to the building to take the occupancy up to 90-95% – we build in escalations. But most importantly we bring this all together in an ecosystem in a building that is a destination place for medical offices with various technologies and therefore these buildings become desirable. They become high producing assets and they become very stable producing assets in the USA.
Hennie, the problem here though from a South African perspective is that there have been a lot of people burned. What do you say to people – your shareholders or prospective investors that you guys are safe?
Firstly it would be our track record. I’ve been involved in this industry for many years. I really understand the industry and it is very similar in America. Secondly we’ve established a very experienced investment committee consisting of industry leaders in South Africa with years of experience.
Who are these people?
We’ve got David von Dracht who was involved in First National Bank on the credit committee and various other banks with a long track record in approving credit. Secondly we’ve got Alan Kynoch who has a degree in building management and been involved in the industry for 30 years. He has helped banks and others to solve problems in finalising and completing construction projects. So a deep understanding of managing the critical factors of successful investment. On top of that we’ve got a well-developed investment criteria that we follow to make sure that we tick all the boxes and make sure there’s no surprises in any transaction.
But what about compliance? This is the big thing today. Investors need to know that you are registered with the Financial Services Board, that you do have the boxes ticked internally as well as externally.
I think the first thing is just to reiterate what Hennie was saying in terms of how do shareholders feel comfortable. One of the things that differentiates Orbvest from all the other companies out there is that the investors invest directly into a building. It’s not a fund. So we bring various buildings to the platform each each month and quarter, and they choose the ones they like and the ones that they’d like they become a physical shareholder in those buildings. They get their quarterly dividends and that way it’s completely transparent in terms of what they are earning and what they’re achieving and what they hold in the building. All of our buildings are generally held on a five year basis and that is from the investment side and giving clarity in terms of the confidence of the investors.
You say this team has built big businesses.
In terms of Hennie, you’ve heard about him, I’ve been doing as I mentioned startups for many years, 30 years, in fact I was also the founder of business called Bayport South Africa. Justin Clarke is our other partner. He was the founder of Private Property. So together we make a formidable team and we believe that we have everything in place to be able to grow this business exponentially in the coming years.
So why are you making it available to other people? Bayport is a serious business. Private Property as you know was sold by Justin. And I’m sure Hennie as well, you must have banked quite a lot of cash. Why are you opening it up to others.
Well, I think at the end of the day, as entrepreneurs you always seeking the same thing. It’s almost like a drug of wanting growth. So when we got involved in Orbvest, we thought it would be a nice business, we would build it nicely over the next couple of years. The demand has just been there. If you look at the typical investors in South Africa, a tremendous amount of people in South Africa, are desperately at this point – whether rightly or wrongly, wanting to externalise their funds. They need to find a credible team they can trust with their money because as you’ve mentioned we’ve all heard the stories before. That’s one of the reasons why we allow people to invest directly into the buildings and get ownership and not go through any complicated structure. People need to invest, they need to know that they own a piece of a building and that they can see the management accounts and get their money every quarter. In terms of the rest of the world, you’ve got to build a wide distribution and if there’s demand for any particular country to invest in the US it will simply accelerate our growth.
Why the US why specifically this geographic nation.
So I think in terms of a strategy you have to pick your laser sharp focus. As Hennie said, you can go anywhere in the world, the world’s a big place. We believe that the fundamentals in America stack up. We believe that America is the dominant economy in the world. We believe that in terms of America, it has the assets that we are seeking and that investors are seeking. Most people that we speak to in the world, when we say that we are investing in America they say great, when we say we are investing in very stable high growth states. They say fantastic. And when we say this is our niche. They say brilliant. Our next point is come try, invest some money with us. See how we perform and over time our track record speaks volumes.
I was interested to see as well Hennie that your buildings – in your annual report you said that you had 20. Are they still there ? Mainly in the south east of the country Texas, Georgia.
Yes. America is a big place. And you know focus is also very important for us. So we started in Atlanta. It’s a growing city. We’ve got criteria so we don’t go anywhere. We go to places that we identified with a strong population growth, strong economic growth. So we focused initially in Atlanta. So now we’ve expanded into Texas which is all growing states with population growth as I indicated. So yes, that’s the areas we go in. We’ve got this focused strategy so we are expanding now to other states in America. But the strategy will always be – we go into the area, we get some dominance there, we find the right partners and as soon as we are established, we will move on to the next state or city.
Now the big problem for South Africans going into the United States is they usually get a hiding. We saw what happened with Markus Jooste with Mattress Firm, even he couldn’t make a go of it. How come you guys are getting it right.
We invest in real estate – the asset will always be there. I think if you understand the market if you understand the trends going forward make sure that you make investments because we don’t buy buildings. We invest in future income streams. And if the future income stream is there from a reliable source that’s got a balance sheet that we know is going to be there for the future in an industry where the demand will always be there. I think that’s a reason why we differentiate ourselves from other players. It’s not a business where you can make losses. It’s a business that you know your income is secure from a reliable person for years to come.
You’ve got a portfolio of $200m. Where does the deal flow come from?
The deal flow comes from going into America, not thinking we know everything. So a local partner is one of the things that differentiate ourselves.
Locally in what sense?
In a city, maybe in a part of the city because the US has got big cities. So we find somebody that’s in the industry for 10 years or longer. That’s got a dominant role to play and that’s highly respected. We then sign a partnership agreement with them. They find the off-market deals for us. They know where the developments are that will take place in future and where the demand is. And with that, then we build our pipeline for the future.
But why would they be doing business with Orbvest, a South African company, why wouldn’t they be doing business with their local friends from America?
That’s always a possibility but I think our track record, now the fact that we deliver every time where we’ve entered into an agreement with these guys, the fact that we understand the industry, the fact that I think we really understand the trends that breakthrough, what’s happening in our healthcare industry because like all other industries, healthcare is going through and will be going through dramatic transformation in the next 10 years. We understand that we agree on the strategy and that I think differentiates us and makes it easy for these guys. it’s also industry leaders that work with us.
Fascinating story isn’t it. That was Hennie Bezuidenhout and Martin Freeman, the chairman and chief executive respectively of Orbvest, the South African created investment business that has built a portfolio of 20 medical properties in the United States with over $200m. If you’d like more information about investing with Orbvest, click here. This special Podcast was brought to you by Orbvest. Until the next time. Cheerio.
