Demand for commercial real estate assets growing among retail investors

Retail investors are increasingly looking at making investment in commercial real estate assets, which have always been reserved for high net worth individuals owing to the ticket size. However, many new age alternate asset platforms are making high quality commercial real estate assets accessible for retail and upper retail investors. Assetmonk is one such new age startup that provides high value assets to retail investors through its innovative structuring. In a conversation with the Bizz Buzz, Prudhvi Reddy, Founder & Chief Executive Officer of Assetmonk, said that the company curates these assets through a rigorous evaluation process. The company is witnessing strong interest from investors for assets available on its platform. It has already seen investment worth Rs 270 crore so far, which is growing at a fast pace. He said that there is a high interest in assets like office spaces, warehouses and new age housing like co-working and co-living among others. The company is likely to be break even by the end of this year. As trend for fractional ownership grows, Assetmonk is confident of achieving higher growth in coming years.

Please provide a brief overview about the inception of Assetmonk. What is the motivation behind setting up the company?

In 2019, we worked on the concept. We went live on the market in 2020. Primarily, we are working on the vision that the retail and upper retail investors should have an equal access to quality real estate investments. During this entire journey, we are working on these structures across different asset classes like office spaces, co-living among others. We are trying to give access to retail investors on these asset classes. The journey has been fairly good and satisfying. A lot of investors have invested in these properties. We have a quality relationship with all stakeholders, and robust backend technology. We are putting in structures to it, making it a lot smoother and transparent. These investments are safer and trust worthy now compared to beforehand.

Can you provide some overview on the three verticals that Assetmonk is currently operating in?

We have done a quite bit of research on real estate space on why people invest in this asset class. Apart from end users, most of the buyers fall into three categories that invest for rentals, structured debt, and growth. Investors look at investing for long-term growth or before the asset matures. The other set of investors look at capital appreciation or growth. There are other set of investors who are looking for another stream of income, who usually invest in rentals. Some investors want to park their money for sometime in real estate for which structured debt as a category is suitable. But quality structured instruments are only available for those investors who can invest high amount of money. So, after interacting with a lot of potential and existing investors, we have categorised our products into three segments.

How do you choose a particular real estate asset for investment? What are the investment criteria for selecting an asset? Can you provide some view on this aspect?

We have 90-100 parameters based on which we choose a particular real estate asset. We keep on adding to these parameters as we grow. Tenant analysis, growth potential, micro-market, comparable, quality of the asset, and interiors are some of the parameters, we use for selection process. We see it in multiple lenses. We evaluate every asset very thoroughly. Our rejection rates are very high. We almost reject 90 per cent of the assets that we evaluate. We have different teams for due diligence that include diligence on developers, tenants, asset titles, encumbrances, and related aspects. We take the help of a reputed legal firm, which does the due diligence for us. We check the regulatory and compliance aspects on those assets. There are enough number of checklists before selection of an asset.

Many private wealth management firms are providing alternate assets like real estate to their clients for quite some time now. What are the key differentiations between private wealth management companies and new age alternate asset service providers like you?

Private wealth firms are doing a fabulous job. These firms are predominantly providing debt instruments to High Net worth Individuals (HNIs) and Ultra HNIs. But, they have not come down to provide these assets to retail or upper retail class of investors. We cater to the needs of upper retail investors. These investors are sophisticated and think and invest. In valuation also, we take extra caution. Most of the investments that others provide take collateral on the project cashflow but we try to make sure that there is a hard asset which is enforceable even if the project stops. We also don’t take total project exposure. We only do the bridge financing. We take a maximum of 3-5 per cent exposure and also take external non-project linked assets depending on the stage of the project. All these things make sure that the asset is safer, and cleaner.

What is the minimum ticket size for taking exposure in any of the assets that you provide? Does that vary for different kinds of assets under your portfolio?

For fractional ownership, we take a minimum investment of Rs 25 lakh. As far as debt is concerned, we are looking at a minimum of Rs 10 lakh. For growth vertical, there are people who want to take ownership of the asset. Our role is to scout for those kinds of assets and give them to our investors. Obviously, the ticket size is slightly higher for growth segment assets.

How much investment have you attracted so far through Assetmonk’s platform? How do you see it growing in coming years?

We have seen investment of around Rs 270 crore so far, which is growing very fast. During the last three years, the growth was very healthy.

Which is the growing area within the commercial real estate where you are witnessing large interest from investors?

Office space has always been an area of interest for investors. Warehouse is another stable asset that investors are looking at. Fractional ownership is also growing in co-living and co-working assets.

Are you adequately capitalised now? Have you raised money from any investors? What are your plans in this aspect?

We have a strategic investment from a family office. At an equity level, we are comfortable. We may look at raising funds from debt instruments. We are looking at it but we have not decided yet. We don’t want to raise equity capital as there is no emergency requirement. We want to raise at right valuation. As far as profitability is concerned, we are going to be break even this year. We will be EBIDTA positive this year. We are around 45 people now with operations in Hyderabad, Bengaluru, Chennai and Mumbai. We don’t have any presence in tier-II but we are actively scouting for opportunities in these cities.