Back-office real estate with MNC tenants to be less affected by viruses
Mayur Shetty | TNN
Mumbai: Commercial real estate servicing administrative operations for multinationals is expected to be least affected by the current economic crisis caused by the coronavirus pandemic. This is because tenants are financially sound multinationals, spending only a fraction of their expenses even when they earn on the weakened rupee.
TOI had reported how residential and real estate properties were badly affected with many on the brink of default. According to Kunal Moktan, co-founder of real estate investment platform Property Share Capital, the first impact has been on the hotel industry, which has been shaken by travel restrictions. This is reflected in stocks. Shopping malls are also affected worldwide. Retail REITs worldwide have fallen 40-50% and we expect renegotiations on rental. The storage business has also been affected by the slowdown, ”said Moktan.
“Administrative properties would be the least affected. In dollar terms, there has been no rent increase since 2007. If there is an office closure like in Italy, some tenants could probably ask for rent relief, which will not have an impact on a long-term agreement, he said. Moktan.
Moktan, a former Blackstone executive, partnered with colleague Hashim Khan to establish Property Share, which buys commercial real estate and allows individual investors to purchase fractional shares in each property. The company, which is registered as a portfolio manager with Sebi, is targeting a rental return of 8-9% on a property and a capital gain on it when it is sold. He has bought around Rs 330 crore from real estate assets. Properties are purchased by creating special vehicles (registered companies) to own each asset and investors can sell the property.
According to Moktan, now is the best time for alternative investors to buy premium properties, as homeowners who have taken out contracted loans are under stress. If you look at Blackstone, most of the major real estate assets were acquired after the foam left the markets, he said. “From our portfolio of Rs 330 crore, only one property in the Capital building, bought for Rs 30 crore, is a reception space. This has been leased to SBM Bank for three years, said Moktan.