If you are looking at earning #passiveincomeindia #passiveincome income through #realestate this is a good opportunity. Get #fixedincome every month by investing in this #fractionalownership real estate #preleased #preleasedproperty opportunity. Get the added benefit of capital appreciation too! We consider over 25 parameters when evaluating the opportunity.
Here’s a category-wise breakdown of their score/out of the total.
Asset Manager: .75/2
Our View: 0.2/0.25
Total = 5.9/10
📍 Hi, we’rated BHIVE fund’s MT tower, fractional ownership preleased opportunity where BHIVE itself is the tenant as 5.95 on 10. We are from invest in preleased. We help you profit from curated preleased proposals. We have one more fractional real estate proposal from a very new tenant in the market and that’s BHIVE.
📍This is about 22,385 built. Square feet and all the gross prices, 15,635. When you do your legal costs, etc., the price is coming to 17,199 per square feet.
📍 This is an independent plot, which is a big plus you can start with as little as 10 lac of investment and this is in Kormangala.
📍 this asset is in the heart of the Kormanagala. And so does the tenant is also heart of the Bengaluru. So we have BHIVE, which is having a thriving business in Bengaluru. BHIVE is again in the co-working space as in the managed workspace business model.
📍 And they have been in existence since 2014. And they are one of the largest managed workspace owners in the industry right now in Bengaluru. And oldest also? Oh yes. Oldest. So 2014. If you look at those two years, 2012 to 2014, that’s where the lot of managed workspaces started getting into operation, then things started moving, but yes, so Bengaluru and BHIVE, they are very Synonymous.
They’re one of the largest players and that’s the reason we have rated them 0.4 on 0.5 the only reason that we have taken away that 0.1 is because we have seen it is still stuck to Bengaluru they have a lot of potential to grow nationally as well.
Coming to the next point that we have, that is whether this is a fortune 500 global or India fortune hundred. Unfortunately BHIVE is not yet an entrant of India, fortune hundred, that’s the reason we have taken that zero
what’s your take on the profitability and tenant industry outlook? So profitability the are profitable. We’ve got it on record from them. So we gave it a 0.25 on 0.25 there, in terms of the tenant industry outlook, we’ve discussed it earlier. Everybody in the flexi office space or the managed office space or the co-working space, it’s a big plus one is that people want lower capital cost.
On their property so they can deploy that money into their business. That’s the economic reason. The other thing is that people want distributed offices. So today BHIVE is available in so many different locations in Bangalore that a company can tell their team members that you can work from any spots.
So these are the flexibilities that they give.
📍 Also while BHIVE the co-working bit is. Called BHIVE, they have another brand called honeycomb, which takes care of the managed office spaces. So our tally for the tenant comes to 0.9 on 1.25 because the tenant industry outlook of course looks good. So it, it gets 0.25 on 0.25 there, in terms of knowing the asset, We were in Bengaluru two months back that’s somewhere in the first week of may. And we have visited this. and we will definitely rate this as a good asset because I will, we are not grading it as a grade, a per se, because this is at least a seven to eight year old construction, which is there in place.
It is constructed by Salarpuria. It is one of the marque assets because of the location where it is, and it’s a standalone structure. Looking at all these aspects that we have it’s a glass facade structure at of course maybe a seven to 8 year old structure, but yes, it’s very well maintain and an independent road touching asset.
And that’s the reason we are going ahead with 0.3 on 0.5. Again, like I said this is an 7, 8 year old structure. And since it, at that point in time, probably IGBC was not the norm or probably a trend. This particular structure is not having any rating for now. And that’s the reason it is going ahead with zero, whether it has the OC and whether the property can be subdivided with an independent access. IGBC rating is the Indian green building council. It’s also equivalent to LEEDS where fundamentally we wanna see how many less resources the building, is using whether it’s water management getting power from solar, etc.. So there it gets zero on 0.25.
OC has come occupation certificate, because this is like you mentioned is an old building. So therefore it gets 0.25 on 0.25. It can be subdivided with independent access. Absolutely. In fact, this is one of the key things a great USP here. This is an independent plot.
📍 Now the reason why we get very excited with an independent plot is because. Obviously it’s your own property. Therefore you can create independent access from the first floor to, ground first, etc.. Also tomorrow, once the FSI increases, you have the potential of creating more floors or more space and then renting it out.
So therefore a property which can be subdivided. With independent access. This absolutely fits the bill. So therefore 0.25 on 0.25 there.
📍what about the asset location? Kormangala is considered to be one of the best locations of Bengaluru and there’s already a billionaires club that’s existing in the vicinity.
I would just want to name a few tenants, which are there in the vicinity. So you have Flipkart, you have Wipro, you have Accenture, you have Toshiba all these names that are already existing in the vicinity of Kormangala. And the biggest element of this asset is basically right on the a hundred feet
main road where you have that kind of, of frontage that you enjoy, where you have that kind of access. You have metro, that’s going to be right opposite to you. The station is probably in the 500 meters vicinity that’s coming up. So all in all, if you look at this location, this is a location to keep. And as they say in the market we went to our local sources, Who told us that you cannot get this kind of asset per se, as fast or as easily as this one has come on the table right now.
📍 What is the billionaires club? Billionaire’s club is basically there’s a locality where all the who’s who of Bengaluru are staying right from the ministers to secretariat, to business billionaire like Nandan Nilekani they’re all in the vicinity. And that’s why that particular region is called us billionaire.
And it is right. Stones throw from the asset location. That’s Kormangala . So all in all we are happy with the location of the asset and that’s the reason we are definitely going with 0.75 on 0.75. So that takes the tally to 1.55 on 2. And now coming to knowing the deal in terms of the duration, it’s a 10 year agreement.
So therefore it gets a 0.25 on 0.25 there, in terms of the lock in it’s a seven year lock. So therefore 0.3 on 0.3 there, in terms of the penalty and corporate guarantee currently it’s on a letter of intent. The agreement is not out. So unfortunately we can’t give any marks there, including, like I just mentioned because it’s a letter of intent.
Again, we cannot give it any mark. So we take away 0.5 there as well.
📍 what about the increment and rent starts? The increment is 5% every year. And that is one good thing about this particular transaction. we are yet to get information in terms of the LOI getting converted to a agreement to lease or properly a lease deed.
So as of now, as for the information that we have we are definitely going ahead with that 0.5 on 0.5, but yes, we would definitely would want to wait. For that agreement or the leads to come in and get so that this thing also gets it, but yes whatever information or whatever deck has been provided was it mentions that you have 5% increment year on year.
And that’s the reason we are going ahead with 5.5 on 0.5. The rent start date. This particular asset is in the process of getting funded and BHIVE is definitely going to do some of the work in terms of the fit outs all. So all in all, what we have understood from the BHIVE team is that the rent probably will start from December 2022.
And that’s the reason, again, we always keep mentioning that once you have a draw down, that happens and the investors’ money is. They would definitely would want to have returns. And since this is not fulfilling that criteria, we have taken over that 0.25. And that is why we been a zero that what’s your take on the deposit and the notice period.
So, it’s three month deposit, which doesn’t qualify in our criteria because we need a six month deposit. So unfortunately we have to take that 0.25, away. And in terms of the notice period the notice period is three months. Again, if it’s three to five months, we would’ve awarded it 0.15.
And if it was six months, which is an ideal spot, now, the reason why we want longer notice periods is because typically finding a new tenant takes time and that’s the level of comfort as any investor we would want so therefore, unfortunately we also have to take that zero point to five away there and it comes to zero. So in terms of the deal, it’s 1.05 on 2.5.
📍kitna degi? So we are our obsessed and we keep rerating this question kitna deti hai?. The reason is finally investor wants to know to agar maine paisa lagaya to ROI kya hai? Now what’s ROI basically is written return on investment. The rental yield that we call and like we have always kept mentioning in all our reviews that we have now stuck. And we have, we are doing a net average ROI for the first three years as to understand whether tenant is actually going to stand whether is actually going to stand here. So the net average ROI for the first three year turns out to be 7.1% for this particular asset. And that’s the reason we have taken away the 0.25.
And that’s the reason we’re giving. What is the ideal ROI? Yeah we always stick to 8% and above as our ideal case for calculating the net average ROI for the first three years, because that’s where I think the investor is going to make some money. If the increment kicks in. And that’s the reason we keep always 8% for getting that one point complete one point.
what about tenant stickiness and the capital expenditure? So tenant stickiness, basically, these guys are paying about 102 rupees per square feet. And the range, there is anything between 80 to going up to hundred.
So we would’ve ideally liked it to be lower than this. And therefore, because the lower, the the rental, the higher the stickiness so therefore we are awarding it half the mark, which is 0.25. And capital expenditure when BHIVE slash honeycomb takes it, they’re definitely putting in money for the fit outs because that is their business model.
They’re gonna take the place make it ready as plug and play for their corporate clients. And then they’re gonna sublet it to those clients of theirs. So therefore capital expenditure will be there. And which is an added advantage. Why this is important is because once somebody spent money at the premise that’s they have a lower propensity to leave that premises because they need to recover their, the cost that they’ve already put into this. So 0.5, on 0.5 there, ROI they get 1.50, on 2,
📍 What about the asset manager? Have you met the co-founders that you guys always claim that you all will meet before working on a proposal of theirs? Yes we have met the team of BHIVE.
And we are fortunate enough to meet Shesh over a call as well. So we had a video call with them. We couldn’t meet them when we were in Bengaluru, but yes, they have promised us to meet whenever we are next in Bengaluru.
Shesh is basically a very known face in the Benagaluru market and he’s considered to be one of the pioneers for. Co-working space. That is the managed workspace. If you ask him in terms of the tenants that are looking or the industry, how it is opening up, he doesn’t even need to blink an eye with regards to his data with regards to his numbers.
So he is that crisp and he’s that spontaneous. You can see that passion in the way he’s conducting himself. So all in all, we had a very fantastic interaction with them.
📍 Are they funded? yes. So BHIVE fund has basically received commitments from two good names for that matter, rather 4 good names, they have Nikhil Kamat who’s the founder they have Abhijeet Pal from GRUHAS they have Alok Bajpai CFO Adani Connex and Sreeram Reddy Wanga Co-founder of Kofluence we also have some commitment from Blume ventures which is also one of their institutional investors. So all in all, yes, the background is excellent. The team is excellent.
The only, and only reason that we have taken with that 0.25 is basically it’s a fresh team and we are looking forward to them with regards to a lot of more info, lot of more stuff. So that’s the reason we want to give them that 0.25 on the initial interactions that we have done and the background that they have created rest, I think we will definitely will look forward for their performance to come on board.
And that’s the reason we have taken that 0.25 from here. So probably would want to take that in terms of asset manager is being profitable. Here, unfortunately they are losing this 0.25 of far because this being their first asset that is going live and they are yet to make a mark. And that’s the reason they are yet to become profitable. And that’s the reason they don’t score here.
📍 what about client dashboard and profitable exit payment to any of the assets? So currently their client dashboard again, because they’re starting afresh. They have a lot of ground to cover in terms of getting these things ready.
So that client dashboard is getting ready we’ve been told. So when it is ready, we’ll give them the marks. So currently zero out of 0.25 in terms of profitable exit, given that’s not possible, this is their first asset. So again, 0 out of 0.25, in terms of the total assets under management.
Again, it’s all linked. It’s their first. So therefore 0 on 0.25. Now, the reason why this is important is we see that there is a learning curve. We’ve discussed this earlier. There’s a learning curve. When an asset manager is at hundred cr, 200 cr, 500 cr, hopefully that learning and the interaction with their investors and channel partners and the entire even peers for that matter would ensure that they come to a position where the entire process is seamless.
But to get there, it’ll, it will take. And obviously it does also mean investment in technology and people. So therefore currently 0 on 0.25 there, in terms of the total assets under management,
📍 in terms of the hurdle rate, they have a healthy 12% hurdle rate, which is excellent. And they will charge a 20% performance fee at the time of exit.
So just for our viewers and investors, hurdle rate is basically. Rate after which the performance fee kicks in. Let’s say for example they get you a IRR or annual returns of 14%, and the hurdle rate is 12. So they’re gonna charge you 20% on their two rupees, which is 40 paise.
It’s a great thing because if the asset manager has skin in the game, in this case, they do then it means that they’re gonna be careful while selecting the asset. They’ll also be careful at what price point they’re getting in . So all these things are very critical. what is your 25 paise or 2 cents
So I think all in all we have been to this site, we have met the team. We have seen the asset. We feel that these guys are promising enough to come on board with regards, to doing a lot of innovative work. They are actually veterans in the industry. That’s how I would want to look at them. They have good control or command over the market.
They know their numbers. So I’m sure the future prospects look really good for them. With regards to our two paise or 2 cents, I think we would definitely say that we can look at giving them an opportunity to perform and we can definitely look forward and expect a lot of stuff from them in the future. So that’s the reason we are giving them 0.2
We feel that their single strongest USP that came across was the fact that they know the Bangalore market so well, and they have a fantastic experience and
hold on the market in terms of leasing it out now, please understand that this is very critical for any asset manager. This could be their single most biggest differentiator. And something that could snowball into something, which is fantastic because as of now, as we speak current asset managers that are there in the market are building a team, a leasing team, so that if the current tenant leaves they have to look for somebody else.
But because these guys are already in the market and doing this on a regular basis, since a very long time, that is their core strength. And which is why we think that in that. It’s a great USB to have, and therefore we are avoiding it. 0.2 on 0.25 that 0.05
We’ve taken away because we, again, we are recapping this, but they will have to get a few tech things in place, etc., because we’ve seen that the investor journey, right from the time they say yes to the time the investment happens is. There is a lot of communication, a lot of tech enabled things that need to happen.
And once all of that is in place, I think we’ll be able to better that rating. So as of now 5.95 on 10, I would also like to point out here that BHIVE also has, this is their fixed fractional ownership opportunity. They also have a revenue share opportunity, which we not reviewing but there, the yield is much higher, but again, the risk also would be higher.
This is a pure fixed rental income opportunity. And that’s what we are reviewing with that. There is one more thing that the people should know that or the investors should know that BHIVE also has a sister concern, which is taking care of the interiors of the premise.
And they are quite active that we have also has a fund that’s going to come which is going to be active in terms of taking up investments as well. So all in all, if you look at the combination is good because they have in-house teams. Of course this, a lot of investors will always have this question in mind that it’s a double edge sword, because at times you really don’t know what’s happening in the background.
But looking at this team we expect that there will be a lot of great results to look forward to. Yes 5.95 on 10. a lot of people when you initially speak about BHIVE, they said that, The asset manager is somebody who has a sister concern, which is also the tenant, right?
Isn’t that risky. Now the thing is, please understand that the asset manager is separate and when you are owning, once you invest, that company is independent of the asset manager. So let’s assume, and this is true for all asset managers. So if the asset manager was to go bust for whatever reason your entity does not get affected by that.
It’s a separate, independent. And as a tenant, they are profitable, BHIVE per se is profitable. So from that perspective we have to understand that while they’re all. BHIVE is the going to be the asset manager and the tenant. We have to keep that in mind that these two things are separate and it’s gonna be independent of the asset manager, the private limited company that’s going to come up.