The world is changing fast and to keep up you need local knowledge with global context.
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When considering where to invest their money, people tend to fall into one of two categories: Those who are biased towards their home country and like to keep their portfolio in local shares; and those who like to put their eggs in many baskets by spreading their investments across markets and currencies.
While the one-country-fits-all approach may be the most comfortable option, it may not be the safest as the local investment landscape can be unpredictable at best. South Africa is the second biggest economy in Africa but those who only concentrate on local asset allocation are exposed to a lot more market swings as the country struggles with debt, a falling fiscus, and a stagnant economy.
Investing offshore is an excellent portfolio diversification strategy that can help balance risk against rewards. Offshore markets enable investors to capitalise on the opportunities that offer greater market stability and smoother returns.
The choice of asset class will be the most critical investment consideration when planning an offshore diversification move, and for many, global real estate is the most precious. It’s an asset vehicle that can be recession resistant and has the ability to grow at wealth producing rates. And whilst many are used to investing in residential property, commercial real estate has historically been the holy grail for those seeking to preserve their wealth.
Direct investments in offshore commercial property used to be an elite practice, reserved for ultra-wealthy institutional investors and venture capitalists. However, OrbVest is helping to level the playing field by allowing regular investors to participate in international real estate.
Our niche is the US healthcare real estate sector where we put ordinary investors in the same camp as the big investors of the world. They can sit back and watch their money grow at the same rate as everyone else’s, without having to deal with the headaches that come with offshore real estate investment such as tenant management, exchange control and tax considerations.
We secure capital from investors around the world, enabling them to become shareholders in multi-tenanted medical real estate across the US for as little as $5,000.
Real estate investment trusts and crowdfunding are terms that get mentioned a lot with this type of investment, and yes, we raise equity from a large pool of investors. But we are different than these property trusts in that stakeholders invest directly into their preferred building, which is ring fenced in its own public listed company. The investment does not lose its value and will continue to generate reliable and stable dividends in US dollars even when the stock markets underperform (the average cash on cash dividend paid quarterly over the last five years exceeded 8% per annum).
With these medical buildings, you get what you paid for. So, if someone invests $10,000, their investment value is exactly that, set up costs included. The investors are entitled to a cut on anything above the hurdle rate of 7%, as well as a share in the profit at the end when the building is sold.
Why medical real estate in the US is a good investment opportunity
The United States’ reputation as a premier destination for foreign direct investment is uncontested. The country has a proven track record of strong economic output. In 2018, the US gross domestic product, or GDP, grew by 2.9% whilst South Africa’s GDP experienced growth rates of 0.8% for the same period. It seems that investors who take their money to the US stand to benefit from stronger currencies, lower market volatility, and higher returns.
In addition to this, the US market for medical office buildings is ripe with opportunities for investors to capitalise on. This is fuelled by the growing health care needs of an ageing population. In 2050, the number of people aged 65 or older will have doubled according to the 2018 Healthcare Real Estate Outlook report by JLL. They are also expected to spend five times more annually on medical expenses by then.
As this demographic shift unfolds, healthcare providers will embrace innovative ways to provide health care, particularly, a new type of real estate – medical campuses or medical malls that can handle cutting-edge devices and procedures, and which are closer to where patients live and work.
In order to optimise the opportunities for increased life expectancy, we’re seeing a move away from large hospital networks to state-of-the-art free-standing outpatient medical facilities and micro hospitals.
When we identify potential investment opportunities, our purchase decisions are carefully considered on the basis of growth, income return, and demand in that area. Once the property has been secured, our independent investment committee with a proven track record of recognising quality real estate opportunities, performs a rigorous end-to-end analysis. After due diligence has satisfied the panel, is it offered to investors.
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. Most healthcare providers sign a lease for 10 years or even longer. Case in point – with our recent opportunity in Atlanta, Old Milton Medical 25, the average lease lasted 17.5 years. So even if there is a recession, the strong demand for healthcare means that tenants continue to pay rent.
Following up on the success of our first medical buildings in Atlanta in August 2014, we have made significant progress in growing our asset portfolio; we now have 25 medical buildings under management with a floor area of over 1 million square feet, valued at over $300m, with equity from more than 10 countries around the world.
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 contact them on +27 (0) 21-948-2130 or [email protected].
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