MUMBAI:Commercial real estate catering to back-office operations for multinationals is expected to be the least affected by the current economic crisis triggered by the coronavirus pandemic. This is because the tenants are financially strong multinationals, spending only a fraction of their expenses on rent even as they gain by the weakening rupee.
TOI had reported how the residential and retail real estate was badly hit with many on the verge 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 reeling under travel restrictions. “This is reflected in hospitality stocks. Retail malls are also hit all across the world. Retail REITs worldwide are down 40-50% and we expect there to be renegotiations on rent. Warehousing business has also been impacted because of the slowdown,” said Moktan.
“Back-office properties would be the least affected. In dollar terms, there has not been an increase in the rent from 2007. If there is a lockdown of offices like in Italy, some tenants might probably ask for relief on rent, which will not have an impact on a long-term agreement,” said Moktan.
Moktan, a former Blackstone executive, partnered his colleague Hashim Khan to set up Property Share, which buys commercial real estate and enables individual investors to pick up fractional shares in each property. The company, which is registered as a portfolio manager with Sebi, targets a rental yield of 8-9% on a property and a capital gain on the same when it is sold. It has purchased around Rs 330 crore of real estate assets. The properties are purchased by creating special purpose vehicles (registered companies) for owning each asset and investors can sell the property.
According to Moktan, now is the best time for alternate investors to buy prime properties as landlords who have borrowed against rent are under stress. “If you look at Blackstone, most of the prime real estate assets were acquired after the froth went out of the markets,” he said. “Out of our Rs 330-crore portfolio, only one property in Capital building in BKC — purchased for Rs 30 crore — is front-office space. This has been leased to SBM Bank for three years,” said Moktan.
March 26, 2020