RYK VAN NIEKERK: OrbVest is a niche international real estate company offering investment opportunities in commercial medical properties in the United States. OrbVest allows investors to invest directly into individual properties and earn dividends in dollars. Martin Freeman joins me now. He is the CEO of OrbVest and talks to us from New York.
Martin, you are in the Big Apple. What is the mood like at the moment, with Covid concerns seemingly fading quite slowly there and the US economy showing some very promising growth?
MARTIN FREEMAN: Hi Ryk. Thanks for having me on your show today. Well, the update from New York and the US is that Covid is, as you say, pretty much behind us, and things are back to normal – obviously notwithstanding a potential curveball from the Delta variants. We’re in the middle of a beautiful hot summer. It really does feel like the entire America has exploded back into action. Everyone is talking about travelling somewhere for the summer holidays. Most important from a business and economic perspective, the country is awash with cash, and it’s very, very busy with most businesses now activating their plans that have been on ice for the past 15 months. In summary, the US is roaring back into action.
RYK VAN NIEKERK: Hopefully South Africa can follow suit quite quickly. We spoke relatively early last year, I think, with the onset of the first lockdown in the US, and there was a lot of uncertainty regarding the impact of the pandemic on the US economy. You stated that you thought medical buildings offered protection against this uncertainty. How did your investments and the properties in the portfolios stack up, and what were the returns you achieved?
MARTIN FREEMAN: There is no doubt that there are a couple of sectors that achieved significant acclaim during Covid in an unfortunate way. Those were areas like healthcare online logistics that did incredibly well; that proved they were very resilient. In fact, most people invested into those sectors were unaffected, primarily with existing tenants. Obviously with regard to lease-ups of new tenants and some of the buildings, there were minor delays.
But as far as the OrbVest portfolio is concerned, it has done exceptionally well and has continued to do so into this year. So this year OrbVest continues to grow from strength to strength. We are now six-for-six, which means we’ve acquired six buildings in six months, and things are looking very promising for the rest of the year.
RYK VAN NIEKERK: And the yields? What did you manage to achieve?
MARTIN FREEMAN: I always state that we acquire buildings that are cash-generative on day one, that are low risk. They will produce 7% to 8% cash dividends in the year on the money that you invest that is paid out on a quarterly basis.
So they’re profitable from day one.
And then when we sell the building after five years, the total investment should generate a total return of between 10% and 17% in US dollars, which we believe is more than acceptable to all our investors around the world. Remember, we are not only in South Africa; we have investors in over 20 countries.
RYK VAN NIEKERK: That 7% to 8% is definitely not bad, given the uncertain times we are living in, as well as some of the fixed-income products you see in the US, where interest rates are really at all-time lows. But how did these returns stack up against other investment options such as Reits [real estate investment trusts] – and even equity investments?
MARTIN FREEMAN: The difference with OrbVest is that firstly we certainly are not a Reit, which is a real estate investment trust listed on the stock market, and which fluctuates according to sentiment. We all saw how Reits performed last year; many of them were decimated. Yes, they’ve come back, but they had a really tough year. And so with OrbVest what happens is that everything is transparent – and that’s what people like about it. You know exactly what you buying into, you know exactly how it’s going to perform, and who the tenants are. It’s like buying a great medical office building in Sandton in South Africa, with everything transparent and predictable.
Certainly we believe we have outperformed many of the other options in the market. And a reminder: while the cash dividends are 7% to 8%, the total returns you’re going to earn on a yearly basis, if you also include your profits, is actually 10%-plus in dollars.
RYK VAN NIEKERK: That is significant. But tell us about the portfolio and which properties you really, really target.
MARTIN FREEMAN: The portfolio now, of the team acquiring buildings for seven years, is approaching $400 million. We only acquire in the United States, and in certain states in the country. In terms of what we target, we target a typical beautiful medical office building of about 40 000 to 70 000 square feet that’s multi-tenanted – or, if it’s a single tenant, it needs to be a tenant that’s very, very strong with a long lease, possibly listed on the Nasdaq.
The buildings are, as I said, low risk. That means that on day one these ecosystems of tenants are able not only to pay your mortgage, but to generate a profit, and that profit then gets paid out to investors on a quarterly basis.
And so again, you’ve got a building that has long leases and profitable tenants, tenants that are going to stay. As we all know, these healthcare practitioners don’t move around. And so from our perspective it’s a great investment option compared to other options.
RYK VAN NIEKERK: Tell us about Medical 33 – West Orange in Florida, your latest investment opportunity. What is so attractive about this property?
MARTIN FREEMAN: Ryk, the one thing that we always try to find is great buildings, great locations. And so we’ve been trying to target additional areas in Florida for certainly the past year. This particular opportunity came up. It was an off-market opportunity. I’ve been there myself. I’ve seen these two buildings. They really are in an amazing position, right opposite the hospital campus and the new cancer centre that’s just opened, which means they get a lot of traffic from across there.
The parking lot was absolutely packed on the day that I went there. The two buildings have a plethora of healthcare practitioners that have been there a long time. They are very profitable. The buildings are well maintained all around. I’ll tell you something, when you look at medical office buildings – these are certainly the kind of buildings that we seek. This is one of the better ones we’ve found in a long time. The building itself is $10 million. We are raising $4 million equity and I don’t expect it to be on the platform for very long, considering that the equity pulls in from around the world.
RYK VAN NIEKERK: Is this the only investment opportunity currently offered by OrbVest?
MARTIN FREEMAN: We at the moment are launching one every month. We also have our traditional ODH product – OrbVest Diversified Holdings – where again from any $5 000 you can invest into real estate in the United States. That’s only about R75 000. You then are invested into eight buildings on your behalf.
These are the two options that we offer at the moment, and every month there is essentially a new product coming to our platform. So we always encourage people: ‘Diversify, diversify’; take your amount, whatever you’re going to invest over time – or even if you are going to do it every quarter – and acquire a building, before you blink, in the next couple of months. It’s so simple nowadays, [and] you’ll end up with a small little real estate portfolio in the United States.
RYK VAN NIEKERK: How is the investment structured? If somebody from South Africa would invest in one of these opportunities, in which entity would you invest, and which regulators are keeping watch over those structures?
MARTIN FREEMAN: Firstly, we are a registered financial services provider in South Africa. The way that we structure our investments is that in the United States you can come in via two mechanisms. We have our international investors who go via our broker dealer in America. And for South Africans, they traditionally will move their money to our international structure offshore, which is a Merj [a fully-fledged securities exchange], which is in the Seychelles. From there what happens is you’re buying a listed security that gets invested via our structures into the building directly. And then what happens is we help South Africans seamlessly get their money back into their hands, which is declared as a dividend. We do everything else in between. We’ve made it so simple for people to invest – literally in a couple of days. You get hold of us and we’ll make sure that you’re in real estate in the United States, and we’ll make sure the rest of the process is taken care of for you.
RYK VAN NIEKERK: Do you need some sort of tax clearance to invest?
MARTIN FREEMAN: Most South Africans are allowed their R1 million discretionary amount for themselves and their spouse. And then obviously if you want to get to the larger amounts, we deal with people like Sable [International] and other accredited players who will then help you achieve a tax clearance if it is larger amounts, which many of our investors are in a position to do.
RYK VAN NIEKERK: You referred earlier to several properties that have been sold after a period of five years. Why would you sell these properties if they are so attractive, or offer such attractive yields?
MARTIN FREEMAN: That’s a great question. New investors and investors in real estate certainly want to know ‘I’m investing, there’s a start date and there’s an end date’. It’s not forever. And so you want to know that at the end of a certain period you’re going to cash in your profit. You’re going to get your capital back and we actually encourage people to take the profit. If they want to reinvest with us, that’s great. As long as I can cash someone out with a profit and offer them a similar great investment opportunity, I think it’s important that people actually then vote with their own feet and decide what they want to do with their money.
Going forward, if investors were to decide that we should rather hold a building for a longer period of time because it is a great investment, that would be considered.
But generally, every single building we go into is for a five-year period, so investors know there’s a start and an end and they’re going to make a cash dividend throughout the process, and then a profit when we sell.
RYK VAN NIEKERK: What would the tax implications be? Would there be capital gains tax payable or dividend tax?
MARTIN FREEMAN: What happens is that for the profit that we generate on the bolding, all tax is paid in the US; it then goes via the Seychelles back to investors, and investors have to submit that as obviously a dividend received or an exit amount on foreign earnings. They are then to consult their accountants and their advisors, as we don’t offer tax advice. But it is pretty transparent and it’s simple, and we have the necessary skills to be able to assist anyone who wants to get hold of us and get the opinions, or certainly the referrals.
RYK VAN NIEKERK: Then, just lastly, how do South Africans invest in these properties? What are the mechanics of such an investment?
MARTIN FREEMAN: It’s so simple nowadays, Ryk. You just go onto orbvest.com. You register. One of our skilled consultants will get back to you. This is what we do all the time. There’s no pressure to invest. You can ask us any questions. If you like, we’ll take you on a journey. We’ll show you every single investment as it comes up. Hopefully, over time, you’ll consider even dipping your toe in with $5 000, and then slowly but surely in each successive product, you’ll build a portfolio.
But the thing I want to end off on is to say the following: we help people get into real estate where it’s reasonably predictable. It certainly doesn’t have the volatility, and they’re able to sleep well at night, knowing they are building wealth in dollars and earning dividends in dollars. That’s something that I think is generally unattainable for most people in countries outside America or in South Africa.
RYK VAN NIEKERK: Martin, thank you so much for your time. That was Martin Freeman. He’s the CEO of OrbVest.
Brought to you by OrbVest.
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.