The Opportunity

Here’s an excellent pre-leased fractional ownership opportunity for you by hBits.

Licensee: SmartWorks

Entry Yield: 9.12% Gross (8.12% Net)

Duration: 5+5+5 Years (2 years lapsed, 13 years remaining)

Lock-In: 5years (2 years lapsed, 3 years remaining)

CALL 9820855056 Or 9930881999

The Investment Memo

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Our Review

Our Pre-Leased opportunities are reviewed on the following parameters.

No. Deal Evaluation Rating/Rating Out Of Proposal Scenario
1 Tenant – Company with strong fundamentals 1/1 SmartWorks is a profitable and India’s largest managed offices solutions provider. They focus on enterprise-grade clients that give them a long contract and a good lock-in. ‘Smartworks provides convenient and flexible office space solutions for enterprises and SMEs to minimize their overhead expenses. Smartworks offers a holistic experience to all its member companies by offering modern cost-effective solutions, state-of-the-art infrastructure with a tech-enabled working environment.’ From their website – Their clients include Amazon, Microsoft, Jaguar, Samsung, Hitachi, Starbucks, and many more.
2 Tenant Industry Outlook – Industries that can bear the ups and downs of the market cycles are recommended. 0.5/0.5 Post-Covid managed offices are in demand as clients want to have a hub and spoke model of operations where their employees could work from spaces closer to where they live. Hence the demand for managed offices is on the rise and SmartWorks is in the right position to capitalize on this opportunity.
Tenant Stickiness (Lower than Market Rent & Capital Expenditure by Tenant) Ideally rentals should be lower than market
The tenant should have ideally spent CAPEX on the property.
0.5/0.5 Lower than the market rate. Capital expenditure by the tenant.
3 Asset Grade – This should be an A grade asset as such assets are always in demand and are easy to exit. 1/1 Times Square is a landmark IT Park with retail and office spaces spread over 6.5 acres of land.
4 Asset Location – Should be a business district/SEZ/Industrial Hub with excellent travel infrastructure. 1/1 Andheri East is one of the largest commercial micro-markets in the city and has unparalleled connectivity like 300m from the Metro station, 1.5Km from the airport, and 4.3Kms from Andheri Station.
5 Lock-In: 3+ years recommended 0.5/0.5 3 Years
Tenant agreement signed or LOI yet – Agreement should be signed & registered. 0.5/0.5 Yes, signed with the current owner.
6 Duration – 5+ years recommended 0.5/0.5 5+5+5 (13 years pending as 2 years have lapsed)
Increment – 5% per year or 15% every 3 years is recommended 0.5/0.5 15% after 3 years
7 Rent Start Date – Immediate recommended. 0.5/0.5 Jan 2022 – Immediate
Deposit – 6 months recommended. 0.5/0.5 6 months
8 ROI (Rental Yield) – 8% + is recommended. 1/1 9.12% Gross (8.12% Net)
9 Capital Appreciation – Industrial – 2 to 3%, Offices – 5% 0/0.5 Targeted 5% – There’s significant supply that is coming in the market so whether we will get the desired appreciation or not, only time will tell.
Exit Options & Exit Load/Hurdle rate – “For exit, there should be no lock-in.

Exit should be possible immediately.

The hurdle rate should only be on Capital appreciation of more than 8% and should not include income from rentals.

0/0.5 Ownership is the form of shares – physical CCD will be given. The exit will take 4-6 months after the initial 1 year lock-in period.

Hurdle rate of 10% over 8% IRR (Internal Rate of Return) which only includes capital appreciation and income from rentals. Assuming you make 14 rupees on investment of 100 per year. You will be charged 10% of Rs.6 (Over and above 8% return) which is 60 paise.

10 Asset Manager – Asset Management company should be experienced and backed by the right resources to fetch value transactions on the table & also provide timely exits with good returns. They should be tech-enabled and investor-friendly in the form of structuring & execution. 0.5/0.5 hBits is a tech-driven real estate platform for investments in rent-yielding commercial properties. Backed by the Raycon group, they have a cumulative experience of 100+ years in the commercial real estate space.
Remarks – Our 2 paise (Or cents if you like) on the overall proposal. 0.5/0.5 The Time Square pre-leased proposal checks all the right boxes in terms of the tenant, duration, lock-in, and other parameters as shared above. We would recommend you to invest in this asset if you have a 5-7 year investment horizon.
While SmartWorks has a 3-year lock-in, Persistent System (the sub-tenant) has a 5-year lock-in starting Feb ’22 and so we expect SmartWorks to also continue beyond their lock-in without any hassles.
Total 9/10

Why Fractional Ownership?

Here’s a quick comparison of fractional ownership opportunities vs other asset classes. Image courtesy – Myre Capital.

If you are looking at stable recurring income with a possible upside/appreciation on the principle, fractional ownership is highly recommended. And as given above, this is an excellent opportunity.

What the above chart does not mention is liquidity – Commercial CRE scores low on that. While one could argue that the shares are in Demat format – what we mean is that exiting it would still take about 4-6 months.

The ecosystem is still developing – probably in a year or so we would be able to trade your shares as easily as stocks – that’s when we could truly add ‘liquidity’ as a benefit.

For any more questions, you may have, please call

Raj Shah on 9820855056 or Rishi Dedhia on 9930881999

Final Note

For any questions, you may have on fractional ownership click here to view

For this opportunity specifically, you can download the below documents.

  • How it Works – How will the entire investment process work?
  • Financial Model – Download the financial model to understand the entire working on the opportunity. What if you get only 3% appreciation or 7% – you’ll be able to play around with the numbers and evaluate all kinds of scenarios.
  • Investment Memo – Detailed explanation in the opportunity.

Property Features

  • Fractional