OrbVest offers simple, stable income-producing investments

‘It is very reliable, and it produces great cash dividends. It’s as simple as that.’ – Martin Freeman, CEO of OrbVest.

RYK VAN NIEKERK: OrbVest is a global real estate company based in New York, which offers investors from around the world to invest directly into US commercial properties, most notably in the medical sector. I’m now speaking to Martin Freeman. He’s the CEO of OrbVest and he is in New York. Martin, thank you so much for joining me. Our previous discussion – we looked at the history of OrbVest. I would like to talk today about the actual investment offering. What is OrbVest offering investors?

MARTIN FREEMAN: So Ryk, firstly, thanks again for having me on your show. What we offer investors is during any particular time the opportunity to invest in stable income-producing assets in the USA and in the healthcare niche specifically, and if you then take it a step further, specifically in this time right now where people are concerned about where to put their money, what to invest in, the equities markets are going up and down, there’s chaos in the world. We offer simple, stable income-producing investments so that you will buy a share in a building in the United States, that building has probably been there for the past 10 or 20 years, it will continue to be there for the next 10 or 20 years. It is very reliable, and it produces great cash dividends. It’s as simple as that.

RYK VAN NIEKERK: Well if I’m in South Africa and I would like to invest in this, how is it structured? What am I actually buying?

MARTIN FREEMAN: You are buying, through the Seychelles, a share in security. We then invest the money in two main areas, either from the USA directly, or via the Seychelles and our international structure, into the investment in the USA. And that investment then acquires the asset, meaning the building. In terms of all of the information, this is disclosed upfront in our PPM, our property management document. And what happens then is that people get to understand, well in advance, exactly what the rental income is, in this building, what the expenses are and what the profit is that it’s going to generate, and what their returns are going to be.

The difference between these kinds of investments and the stock market, or any other building, is there is very little change. They’re very stable. You know, think about a building in Joburg where you’ve got medical practitioners, they’ve got a very long lease, five to 10 years, [and] there’s five or 10 of these tenants that are paying their rent every month and the numbers don’t really change. So it really is very stable and that’s the reason why we feel so comfortable that we are very different to other segments and most importantly we are so resilient to any kind of recession or any kind of correction.

RYK VAN NIEKERK: So as I understand it, there is a company in the Seychelles, it’s a listed company, and you buy a share in that company, and that company then owns the property. Is that the structure?

MARTIN FREEMAN: Yes. Essentially, if you can think about it from a different perspective, there is a building in the USA. That building is then owned by, for example, an LLC, which is similar to what is known in South Africa as a Pty [company]. And then the next level up is where did the investment come from. It either came from investors in the US or came directly from a structure in the Seychelles and then people invest into those structures in the Seychelles or further internationally.

So what happens is the money comes in, we give it to lawyers just like you would anywhere else in the world, they then buy the asset on the closing date and transfer the money and we own the building. We then obviously ensure that it generates the required returns and when it produces a profit, we then pay it back in the form of, to people, as dividends and they then should declare it in their country as dividend income.

RYK VAN NIEKERK: Of course, regulators are important. Which regulators regulate this investment?

MARTIN FREEMAN: One of the important things in our industry is regulation, as you say. More so when you’re dealing in the USA, you’re under the scrutiny of the SEC (US Securities and Exchange Commission). Don’t forget that we also deal in over 10 countries, so in each country, there is a regulator. We need to make sure we are compliant. It’s a huge part of our business. Specifically, in South Africa, we are under the auspices of the FSCA [the Financial Sector Conduct Authority], which [was previously] known to people as the Financial Services Board, and certainly we meet their criteria.

RYK VAN NIEKERK: What is the minimum amount you can invest?

MARTIN FREEMAN: One of the things that really makes it simple for South Africans in particular to become owners of real estate in the United States, is that we’ve made life simple. For only $5 000, you can invest in a building and over time invest again and again and again, and become an owner of this real estate and build yourself a nice little portfolio.

You know, sometimes we have people approach us and they say, look, I just want to try, I want to come in for $3 000 [and] we’re very accommodating. You know, for us it’s all about helping people get into the position that they can invest their hard-earned money in real estate and really build a portfolio over time and earn these dollar dividends because that’s what everyone’s wanting, Ryk. They’re wanting to earn stable dollar dividends being in South Africa or any other part of the world.

RYK VAN NIEKERK: What can investors expect in terms of dividends? What are the yields?

MARTIN FREEMAN: We target 8% cash on cash, which means, for example, put in $100 000 [and] you will get $8 000 a year. I also want to reiterate that it’s not an exact number because every single building is different, but on average that is our target. We have consistently, for over six years, produced that number because those are the buildings we go for.

And then at the end of five years, which is generally our hold period, we then sell the building, and we produce another profit, known as capital appreciation. Those two numbers together are known as an IRR, your internal rate of return. So let’s assume you earn 8% a year, and when you then sell the building, you make another, for example, 20-25%, which equates to 4 or 5% a year. You add those two numbers together, you are getting 12 to 13% per year in US dollars, which is amazing. So to summarise, we target 8% cash on cash, on average, and we target a 12 to 17% total return.

RYK VAN NIEKERK: Just lastly, what is the investment term?

MARTIN FREEMAN: The investment term is usually five years. Sometimes we have gone a little bit longer, but really when you’re investing in this kind of asset, you need to understand that, like anything, you wouldn’t buy a building in Joburg and try and sell it four months later and expect to make a profit because what you hope is over time, you’re adding value to the building. You know your escalations are kicking in between 2 and 2.5% per annum in the USA, and so you’re building over time in the right area, right location, [it] becomes more valuable and is more profitable.

RYK VAN NIEKERK: Martin, thank you so much for your time. That was Martin Freeman, he’s the CEO of OrbVest.

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Thanks Ryk
Interesting – but the man can not make any firm commitments (I know its difficult) regarding returns and given how property companies in SA are suffering, I would give this a pass. But, I am not nearly an expert on these matters – what do I know.
Keep up the great MWeb!

With the Rand dollar exchange at almost R 19 to the dollar I will wait awhile.

End of comments.

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