Donald Trump built his wealth through estate investments and development. He inherited a portion of his father’s real estate business, which he then expanded through strategic property deals, hotel developments, and branding.
Trump also ventured into entertainment, including his popular show The Apprentice and his new social media app Truth Social, which recently went public via a SPAC merger and now trades as Trump Media & Technology Group Corp. (NASDAQ:DJT).
Investing in real estate is not as easy as it once was, especially with rates at elevated levels. However, investors can explore alternative routes to enter the real estate market, including investing in real estate investment trusts (REITs) or participating in real estate crowdfunding.
So, how can you invest like Donald Trump? Well, his portfolio is highly concentrated in two states – New York and Florida. Let’s focus on New York, which he is more known for.
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New York State of Mind
Alexander’s (NYSE:ALX) is a REIT that leases, manages, develops, and redevelops properties in New York, making it a great way to get exposure to the city where Donald Trump began building his portfolio. Alexander’s portfolio consists of five properties in greater New York City, including 731 Lexington Avenue, the Rego Center, and The Alexander apartment tower.
Alexander’s currently pays a quarterly dividend of $4.50 per share, equating to an annualized rate of $18.00 per share, which gives its stock a yield of about 8.1% at the time of this writing.
It’s important to note that Alexander’s has maintained its $18 annual dividend since 2018, making it a very reliable source of income to go with the potential price appreciation in its world-class assets.
Another way to invest like Trump
You can also get started in real estate like Donald Trump by using a real estate crowdfunding platform, like Bezos and Khosrowshahi-backed Arrived Homes or Marcus and Millichap-backed EquityMultiple. Real estate crowdfunding platforms allow you to connect with other investors and pool your money to purchase property for passive real estate income.
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Investors can now have fractional ownership of rent-yielding real estate assets by making a minimum investment of Rs 10 lakh, with markets watchdog Sebi notifying the amended regulations for real estate investment trusts.
Amid rising demand for high-value realty assets, the Securities and Exchange Board of India (Sebi) has notified the framework for Small and Medium Real Estate Investment Trusts (SM REITs), and experts opined that the development will have a significant positive impact on the emerging fractional ownership sector in the country.
The watchdog notified the amended regulations for REITs on March 8, permitting fractional ownership of REITs and it will encompass commercial and residential properties.
In November last year, Sebi board cleared the amendments to REITs Regulations, 2014, in order to create a regulatory framework for the facilitation of SM REITs, with an asset value of at least Rs 50 crore vis-a-vis minimum asset value of Rs 500 crore for existing REITs.
As per the notification, the minimum price of each unit of the scheme of the SM REIT shall be Rs 10 lakh or such other amount as may be specified by Sebi from time to time.
“The size of the asset proposed to be acquired in a scheme of the SM REIT is at least rupees fifty crores and less than rupees five hundred crores…,” it added.
The framework for SM REITs provides for the structure, migration of existing structures meeting certain specified criteria, obligations of the investment manager, including net worth, experience, and minimum unit holding requirement, investment conditions, minimum subscription, distribution norms and valuation of assets.
Also Read : Selling Your Home? Here’s A Checklist Of Mistakes To Avoid
Shiv Parekh, Founder and CEO of fractional ownership platform hBits, said the notification reflects Sebi’s confidence in the potential of the fractional ownership model in democratising access of retail investors into real estate.
The reduction in the minimum investment threshold to Rs 10 lakh will attract a larger pool of retail investors, he added.
Shravan Gupta, Founder and CEO of YOURS, said the move is expected to have a significantly positive impact on the emerging fractional ownership sector in the country.
It is a platform for fractional ownership of luxury second homes.
Sudarshan Lodha, Co-Founder & CEO of Strata, said the migration of fractional ownership platforms is still an option.
About the notification, Aryaman Vir, CEO of WiseX, said it will pave the way for enhanced opportunities in the real estate investment Aankush Ahuja, CEO and Founder of FOIP, said the regulations of the fractional ownership industry under this framework will encompass both commercial and residential properties, thereby enhancing investor protection.
All these entities are Fractional Ownership Platforms (FOPs).
Typically, fractional investment of real estate through FOPs is an investing strategy in which the cost of acquisition of real estate is split among several investors, who invest in securities issued by a Special Purpose Vehicle (SPV) established by an FOP. Such SPVs purchase real estate assets.
FOPs allow investors to own a certain percentage or fractional share in the real estate asset through the securities issued by the SPVs.
“Being a pioneer of this fractional ownership model, hBits is also keen to be the first one to list our SM REITs thereby allowing our investors to make the most of this,” hBits’ Parekh said.
(This report has been published as part of an auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
Real estate as an asset class has long been a mainstay for investor portfolios, both small or large. While it has mostly been focused on residential real estate, the turn of the century brought in another sub-asset class in the form of commercial real estate, which became the go-to product for high net-worth individuals (HNIs), since the rental yields were far higher than residential real estate.
However, the large ticket size meant that the asset class was always exclusive to HNIs or institutional investors. Over the last half a decade, with the advent of tech platforms and listing of Real Estate Investment Trusts (REITs), this asset class has become more accessible to the general public due to smaller ticket sizes in which investors can invest. In order to further stimulate the growth of this asset class, SEBI plans to introduce MSM REITs – a new way to invest into commercial real estate.Also Read: MSM REITs: How SEBI’s game-changing move will transform India’s real estate investment landscape
What are REITs and why is there a need for MSM REITs?
In simple terms, REITs own a portfolio of commercial properties and investors can purchase units of REITs to gain exposure to this portfolio. Similar to investing in units of a mutual fund scheme, investors gain exposure to the portfolio of assets the scheme owns. REITs manage those properties and collect rentals from the tenants occupying them, which is further distributed to its investors.
Currently, there are four listed REITs in India, 2 sponsored by top developers namely Embassy REIT and Mindspace REIT and 2 sponsored by investment managers namely Brookfield REIT and Nexus REIT. Each of these 4 REITs have a diversified portfolio of underlying properties across Tier 1 and Tier 2 cities in India.
However, certain investors want to gain exposure to specific assets, where they know the entire characteristics like the property, tenant, lease structure, yield profile etc. This is where MSM REITs will enable investors to make property specific investments. Extending our example of regular REITs being equivalent to owning units of a mutual fund scheme, MSM REITs can be thought of as being equivalent to owning a share of a single company. It would allow investors to create their own customized portfolio based on their own unique requirements, just like investors can create their own portfolio by picking up shares in multiple stocks.Also Read: Are real estate investors keen on fractional real estate? 3 experts share insights
How can one find the right MSM REIT to invest in?
An investor should understand and research extensively the underlying asset held by a MSM REIT. To get an investor started on the research, have listed a few parameters which an investor should look for:
Quality and location: These two are arguably the most important features, which an investor needs to assess before investing as the best quality tenants occupy the best buildings in the best locations. Therefore, it is important to visit the asset physically, which enables the investor to ascertain the asset quality as well as the surrounding micro-market.
Grade A properties are usually located in Central or Secondary Business Districts of the city. They come with quality amenities, impressive lobbies, LEED or IGBC certification, high ceiling heights and are built by Grade A developers. In case an investor is unable to visit physically, the location of the building along with the quality of the developer and tenant (like Fortune 1000 or Indian top 100 companies) can serve as a good proxy to assess the quality and location.
Lease structure: In a typical commercial lease, the tenant has lock-in for only a small duration of the lease (3-5 years), while the landlord is ‘locked-in’ for the entire lease period (5-15 years). During the lock-in period, the party which is ‘locked-in’ can’t terminate the contract. An attractive MSM REIT would be one in which the remaining lock-in period is at least 2-3 years and the remaining lease period is at least 5 years.
Moreover, it is important to also understand who has invested in the fit-outs. One should prefer an asset where the fit-outs are done by the tenant, as that improves the stickiness of the tenant and reduces the chance of vacation by the tenant.
Demand/supply dynamics: A good quality asset with a good tenant, has to be understood along with the expected demand and upcoming supply in the location. When compared to the demand, if a micro-market sees a much larger upcoming supply, it pushes the vacancy higher, which puts a significantly downward pressure on the rentals as it gives the bargaining power to the tenants to renegotiate the rents.
Hence, an investor should look for markets which have a vacancy below 10% and favorable demand and supply characteristics. The vacancy and demand/supply data are published regularly by research teams of large IPCs (International Property Consultants) like JLL, CBRE and Knight Frank which can be a good starting point for research.
Management quality: The performance of a MSM REIT will be heavily influenced by the quality of its management team. Poor decision-making, lack of experience, or ineffective property management can impact returns. Therefore, an investor is advised to invest in a MSM REIT, whose management team has a proven track record in investing and exiting assets.Also Read: Real estate dominates Indian household savings with highest allocation: Report
Is diversification necessary in MSM REITs?
Just like in any other investment, diversification is important in MSM REITs as well. However, the diversification will now be under the control of individual investors. We have suggested a couple of ways in which an investor can diversify:
Based on asset class: As the industry matures, there will be MSM REITs available across multiple asset classes like office, retail, warehousing, industrial, hospitality, etc. An investor should be able to invest in assets across all of these and benefit from the upward movements of any particular asset class in a cycle. For example, we are beginning to see asset class diversification in regular REITs as well – the first three REITs to be listed were office, post which the first retail REIT got listed last year. MSM REIT can also be expected to follow a similar trend.
Based on geography: Another way to diversify would be investing across multiple cities and minimizing the city risk at a portfolio level. In fact, this risk is present in some of the listed REITs as well. For example, embassy REIT has a significant majority of its portfolio in Bangalore. Having this flexibility to diversify, would allow the investor to pick and choose markets with strong fundamentals like low vacancy and consistent rental growth.
What are the risks involved?
Like any other financial investment, the MSM REITs will come along with its own set of risks which an investor must be aware of before investing. Some important ones are listed below:
Tenancy: Given that the MSM REIT will have only a single or maybe a handful of tenants, the risk of the tenant vacating the property will always be there. To mitigate this, we recommend investors to conduct a thorough research about the market, tenant, as well as the lease structure. Diversifying across multiple MSM REITs will reduce this risk over time as it is unlikely that all of the tenants vacate at the same time.
Interest rate: Similar to any yield oriented product, MSM REITs also have an underlying interest rate risk. When interest rates go up, an investor would expect higher yield as safer investments like FDs and government bonds start offering higher returns. This leads to fall in REIT prices as prices move inversely to yields.
Liquidity: As MSM REITs are expected to be listed on stock exchanges, they will be much more liquid as compared to a direct real estate investment. However, in times of market stress, it may be challenging to sell MSM REIT units at a desired price, just like a regular REIT. Investors can mitigate this risk by allocating capital for the long term (over 4-5 years).
MSM REITs vs. Regular REITs
A key point to note is the difference in the ticket size. While regular REITs have a ticket size of only one unit (having unit size of less than Rs. 400), MSM REITs are expected to have a minimum ticket size of Rs. 10 lakhs. This large ticket size is to ensure that investors perform thorough research before investing given the nascent stage of the industry. However, as time progresses, the ticket size restriction may be relaxed, similar to the way minimum ticket size in REITs was reduced to one unit from Rs. 2 lakhs initially.
In conclusion, MSM REITs will present a unique opportunity to invest in rent generating commercial assets. For investors who want to choose the assets and micro-markets they invest in, it will reduce the minimum ticket size. Moreover, for the developers and holders of institutional asset managers, it will allow them to bring those assets to market, which were earlier too small for regular REITs and too big for HNIs, thereby providing further boost to commercial real estate.Kunal Moktan is CEO and Co-founder, Property Share.
Here’s your comprehensive 3-minute summary of all the things Finance Minister Nirmala Sitharaman said in her Budget speech: Click to download!
Commercial real estate (CRE) has long been an attractive investment avenue for those seeking to diversify their portfolios and capitalise on the stability and income potential of real property. Real Estate Investment Trusts (REITs) have been a game-changer in the global investment landscape, providing investors with a unique proposition to participate in the commercial real estate market. In a bid to catalyse the growth of the real estate sector in India, the Securities and Exchange Board of India (SEBI) has plans to introduce an innovative concept – the MSM REITs.
These MSM REITs, with a reduced minimum asset size of ₹25 crores, aim to foster a broader range of real estate investments while ensuring transparency, control, and credibility for investors. The minimum ticket size of Rs10 lakhs provides accessibility to retail investors while maintaining a certain level of sophistication.
This article explores the key features and advantages of MSM REITs, comparing them to traditional models and drawing parallels with global small-cap REITs.
Transparency, control and niche targeting
MSM REITs adopt a niche-targeted approach that allows investors to choose specific asset-focused schemes, offering transparency and control that goes beyond traditional blind pool investments. This provides investors with a clear understanding of the modalities and fundamentals of their investments ensuring a level of customisation and transparency that aligns with their evolving preferences.
Mandatory sponsor commitment and credibility
MSM REITs maintain the core structure of traditional REITs, comprising a Trustee, Sponsor/sponsor group, investment manager, and investors as primary stakeholders. Notably, in these MSM REITs, the Investment Manager and Sponsor can be the same entity. The proposed regulations ensure mandatory Sponsor commitment, fostering a ‘skin in the game’ mindset, and set minimum net worth requirements for the investment manager and sponsor, enhancing overall credibility.
Enhanced liquidity, easy transferability and low volatility
Listing units on stock exchanges introduce fair pricing, robust risk management, guaranteed settlement, high liquidity and easy transferability. Unlike the traditional models in the CRE investing space with long investment horizons, MSM REITs allow investors to exit at a time and price of their own choosing. Despite being a listed product, volatility remains low due to the backing of fairly stable assets.
Standardised regulations, risk mitigation and investor protection
The transition from the earlier models to a more structured approach in MSM REITs is a paradigm shift towards investor protection. Standardised regulations, Know Your Customer (KYC) norms, grievance redressal mechanisms, and the oversight of regulatory bodies collectively fortify investor confidence. The non-permissibility of investing in under-construction assets mitigates the risk of non-completion and disruption in returns. This prudent measure safeguards investors from uncertainties associated with projects still in progress, aligning with the aim of providing secure, stable and predictable returns.
In conclusion, incorporating MSM REITs into an investment portfolio offers investors a unique combination of stability, income generation, and growth potential. Drawing inspiration from global practices, the introduction of MSM REITs in India has the potential to mirror the success of small-cap REITs, single-asset REITs in other markets, such as the United States and the UK. This represents a progressive stride in the Indian real estate investment landscape.
By incorporating transparency, control, credibility, and investor protection, these REITs aim to stimulate further growth in the real estate sector and related segments of the economy. As India embraces this innovative approach, the MSM REITs have the potential to become a catalyst for a more inclusive and vibrant real estate investment ecosystem.
Abhishek Katiyar, VP of Strategic Initiatives at Property Share
Here’s your comprehensive 3-minute summary of all the things Finance Minister Nirmala Sitharaman said in her Budget speech: Click to download!
Published: Jan. 8, 2024 at 2:19 a.m. ET
By Joe Hoppe
Home REIT said it collected 12% of the rent invoiced for the month of December, after investment manager AEW UK Investment Management made further progress obtaining control over its assets from non-performing tenants.
The real-estate investment trust said Monday that auction sales have continued, having agreed sales on a further…
By Joe Hoppe
Home REIT said it collected 12% of the rent invoiced for the month of December, after investment manager AEW UK Investment Management made further progress obtaining control over its assets from non-performing tenants.
The real-estate investment trust said Monday that auction sales have continued, having agreed sales on a further 81 properties for 16.4 million pounds ($20.9 million) in December, with completion expected in January.
Total borrowings were reduced to GBP172.7 million, from GBP198.3 million a month prior. The company’s cash balances at Dec. 31 stood at GBP15.8 million, of which GBP5.4 million is unrestricted.
Home REIT had said in early September that AEW engaged with all of its tenants and carried out a number of actions to begin inspecting and valuing its portfolio. It said the manager was focused on stabilizing Home REIT’s property portfolio and financial condition, and planned to maximize income and capital returns.
Write to Joe Hoppe at joseph.hoppe@wsj.com