When you were in school and considering your career, the standard advise was to become a doctor, and the reasoning is obvious; you’ll always have a job that’s in demand, and of course, following supply and demand, you’ll always have financial security. But, if you take this same logic to your investments, where doctors are always in demand, medical real estate will also be. In a hierarchy of needs within a medical ecosystem, few factors rank higher than a place to work. Medical facilities are so well regulated and exacting in their requirements that, as places of permanence within rental circles, you’d struggle to find more reliable tenants.
It’s with this kind of reasoning in mind that Wealth Migrate has aggressively sought out medical real-estate investments at a global level. Wealth Migrate has successfully targeted a very strategic price point in the market, continuously pursuing real-estate investments that are north of $1 million but south of $15 million, a sweet spot that predominantly excludes individual investors while remaining free from larger fund money.
That being said, South African investors will always struggle to take money offshore via a real-estate vehicle, short of being mega wealthy. To give you an idea, pumping money into a US real-estate investment usually requires upwards of $2 million, not to mention that if you’re unfamiliar with the market growth areas, you could be making an unsound investment. However, Wealth Migrate’s crowdfunding strategy is one that opens up the option to invest offshore for as little as $10k, giving South Africans access to investments at a far more accessible rate.
Wealth Migrate has always been meticulous in its due diligence as well as seeking out expert local knowledge. Having partnered with real-estate veterans SG Property Services LLC, its President, Paul Shailendra, further unpacks the local conditions, specifically with reference to the recent global economic uncertainty that has seen money taking flight towards historically trusted currencies.
“Economic uncertainty has lead to a flight of capital, but because we specialize in healthcare and medical, we have a track record in this market. We are trying to focus on deals that are under the radar, as they get less institutional money involved”.
If you look at why these portfolios are so sound, the specifics make a lot of sense. Medical 1 was a space that Wealth Migrate first saw over two years ago, identifying growth points where they could add value, rather than just relying on the market to grow. Licenses stay with the building, not the tenants, so even if tenants left, the licenses wouldn’t. There are also land pockets around here that Wealth Migrate can further develop in order to build a critical mass. The value play with an investment like this is that when the vacant land is developed, Wealth Migrate will have created an even higher ROI for their clients, and with 97% of the current space already leased, growth is a given.
Adding to this, medical equipment installation costs are high, as well as difficult and costly to move and so the consistency of the healthcare industry offers security that you’d struggle to find in others. It also means that there is a high probability of renewal, making growth forecasts as accurate as possible. Within the US context, President Obama’s Affordable Care Act has not only driven home the need for healthcare, but also created higher demand for properties that can serve this sector. Factor in growing demographic rates for those 65 and older and medical demand has created a recognizable investment, ultimately leading the DLA Piper State of the Market Survey to rate healthcare real estate as the most attractive opportunity for investors for the third consecutive year in their 2016 survey.
While the first medical portfolio, Medical 1 – a portfolio of 7 medical buildings in Georgia – has seen growth rates at over 8% (outperforming markets such as the NASDAQ in 2015), it is still only forecast to reach maturity by 2019. Predictions are that the portfolio will then offer returns as high as 11%. From Wealth Migrate’s side, Medical 1 drew 27 investors, but since lowering minimum investment amounts, the subsequent portfolios have captured steadily growing numbers, with Medical 5 already backed by 47 people.
Hennie Bezuidenhout, Co-Founder and Chairman of Wealth Migrate, reflects on his personal experience in the industry, noting “In all the time I’ve been doing medical office suites and day-hospital development in Africa, I’ve never had a day’s vacancy.” When the facts are presented, medical real-estate investments make sense, even if you don’t come from a financial or investing background. Paul Shailendra closes with what is more a fact than an argument; “Wherever you are in the world, you’re going to pay for two things: healthcare and education, regardless of whether you have the money or not. I don’t think that that fundamental ever changes.’ So then, why aren’t you investing in this opportunity?”
Read more here: WM -Investment Performance Review – 2016 Q1