After many years, when investments in real estate through funds were mere plans of promises and legislation prevented their realization, home investors were able to do so. In a relatively short time, two special funds for retail clients investing directly in real estate appeared on the market.
Unlike equity real estate funds, which have been operating in our country for some time, portfolio portfolios (maximum 80%) of special real estate funds should form real estate. In addition to the growth in the value of the property itself, their income also includes, for example, income from renting the property he owns. In addition to the real estate itself, in order to liquidate, it must determine a certain percentage of funds in liquid form (at least 20 percent). The main attraction for investors should be interesting returns in the long run at a relatively low risk.
There are currently two such special real estate funds available on our market. The first was the S real estate fund, which is managed by REICO investin společnost esk spoitelny. In the course of this year, the First Real Estate Fund was acquired by the management company Realtia investin společnost (it was established in January this year). Although a lot of pages have been described about real estate funds as such, we have tried to supplement the information related to the functioning of these funds with the opinions of the people responsible for their functioning.
Both funds recently published information on the acquisition of the first real estate in their portfolio in a short period of time, which may be a positive signal for investors. However, in the case of Realtia, this is not entirely true, points out Radim Bajgar, who is responsible for investing in the real estate portfolio.
“We have the first property, but it will be transferred to the portfolio at the middle of the year, after the necessary acquisition of a sufficient volume of acquisition funds from investors. For the time being, this property, or real estate company for our fund and our investors, is parked on the subsidiary of the sole owner of IS Realtia, the company Nationwide Holding as ”Specifically, it is Palc Andl in Prague 5, which consists of 4 multifunctional buildings. The real estate fund has owned the Platinium office building in Brno since the end of August.
How will the demand
Special real estate funds are a long-awaited novelty in our country, which could in itself be a reason for high demand. According to Tom Trka, CEO of REICO, the biggest challenge should be to make investments in large commercial buildings accessible to the general public. Experienced investors will be interested in the regular possibility of portfolio diversification through real estate.
Radim Bajgar sees benefits for both large and retail investors. Large institutional investors are attracted not only by our previous results and experience in the field of real estate investments, premium first real estate, but also by flexible entry and entry policies. For small investors, we have prepared long-term savings programs that will allow them to charge a significant pension on entry fees. At the same time, small investors can catch the year-round real estate, from which they can indirectly buy it. Thus, the client, unlike various equity funds investing in development companies, will receive investments following market developments in the real estate market without speculative movements and volatility caused by the stock market mood.
Accounting for fees means that the entry fee for regular investment is required by the amount of money that the client pays after several years. Fees are an important factor for many investors when deciding to join the fund. Entry fees are similar for both companies, the maximum is 5%, the current values vary. Lpe is doing S real estate fund (see table). Also for the management fee, the maximum is set the same, here is the realt of the Realtia fund, which does not cover until the end of the year. In addition, this fund must be met with an additional performance fee of more than 20% of the growth in the value of the share certificates above 5%. The problem with the Realtie fund may be the minimum entry fee, but I personally would not take it as an accident. In the case of real estate investments, it is necessary to meet the amount needed for investment.
Basic information about both real estate funds
At the meeting of the functioning fund, the companies were forced to introduce an entry fee in order to avoid short-term purchases of share certificates. For the REICO fund, it will be initially 3% for three years, for the Realtia fund it is currently a maximum of 3%, within three years the bag will fall to zero. Due to the liquidation of real estate and the lack of liquidity to arrest the functioning fund, the deadlines for repurchase of share certificates were also extended. In the US real estate fund, this should be a standard 15 days from the delivery of enough redemption, in the first two months this period was extended to one month. For the First Realtia Real Estate Fund, the standard should be 30 days, the first two years of operation, this period will be extended to half a year and for three years it will be a quarter of a year.
Due to the low investment limits for investors, there is a question of how companies will use me to buy real estate bank loans, which can have a great impact on the overall risk and returns (for example, in the event of unfavorable movements in annual rates). It is quite common for real estate companies to be co-financed by bank banks. The first structure of real estate financing has a major impact on its return to Trka and continues: What is happening in debt financing, then we must not exceed 50% of the fund’s assets. So let’s use a very simplified one to buy real estate from half the source of the fund and the other half externally financed.
According to Bajgar, there is little to do with the policy of applying the leverage effect. We intend to use the pitting effect, but at the same time it allows the use of the maximum pitting effect and 70% of the value of the investment when investing through the real estate company. On average, however, we will certainly not exceed the level of 60%, which we see as relatively healthy in terms of the long-term security of mortgages and pay for the related years.
We will make money on them
As for the type of real estate that wants to buy both funds in their portfolios, their fullness was different. We primarily focus on commercial real estate, especially office buildings, shopping centers and logistics units. Put an interesting area can be bt hotels. We will not deal with residential projects at the moment. As for the regional distribution, we would like to cover all significant cities in the Czech Republic. k Trka z S real estate fund and continues: At the turn of November and December, another 5 commercial real estate should be added to the fund. As for the regional distribution, we would like to cover all significant cities in the Czech Republic. At the beginning of this year, we have prepared a property in Slovakia, and in the horizon of 2 or more years we will start to focus on the entrance to the entrance and to the south. We are ready to go beyond the borders of the republic for quality real estate, which the fund has a high return. At present, however, we still see the high potential of domestic real estate.
Bajgar from Realtia also: The long-term location, quality and structure of the property and the effective way to use it are the longest, in this order. We will not give development, we will not buy residential projects for the fund. We will compete on first-class locations and quality real estate in them, especially office complexes, shopping centers. Outside the capital, we see the complexities in the centrally located shopping centers of regional and former district towns. However, these shopping centers must also meet the criteria of quality and critical size. We will only focus on hotels, logistics centers, etc. What will be fully in the future will be followed by five years, but their volume and time will depend on the growth of the volume of funds under the management of our fund, added Bajgar.
Due to the recent real estate crisis in the US, the consequences of which are still noticeable in the market, the question is whether the timing of the emergence of real estate funds is possible (although the investment companies themselves are not responsible) and whether it does not affect the investor. But I don’t see it again from real estate funds. We took advantage of the baldness and entered a market in which we see great potential. The situation on the market of American sub-prime mortgages is in itself negative at first, which is reflected in other economic sectors. It is important to emphasize that a fund buys commercial real estate, which is an area different from the first problematic mortgages in the USA, me Trka. I like Bajgar. We see the sub-prime crisis as baldness. We know that the sub-prime crisis together with the slowdown of the US economy, which will push up rates on the dollar in the same years, will lead to a stable, ie mineral, environment in Europe and the Czech Republic. Stable years of rates combined with a strong economy lead to an attractive environment for commercial real estate.
In addition to the mortgage crisis in the US, there are other risks that may adversely affect the fund’s returns. One of the most important is the real estate price in time. Due to the sharp rise in property prices in recent years, it is questionable how it will develop and whether there should be any stagnation in the future. We do not decide to buy real estate, let’s perform a very detailed analysis with the projection of income and for 7 years. Most of the income that generates commercial buildings comes from soft contracts, which are usually long-term. It is interesting that the first quality of bills and the length of bills are known to affect the price of real estate. It is true that prices have risen in the last few years. This is a fact that is taken into account in our calculations. However, let us still assume that the EU has room for price growth, although it will not be as dramatic as in the past, Trk said.
A similar view is made by Bajgar: We will not forget that at least half of the fund’s performance is generated by the same income from it, ie it is not speculative. At the same time, in the spade localities, during the last 18 months, what we have been waiting for in Central Europe for almost 10 years has come, ie growth is still equal. This means that even if the percentage of income on the market stagnates, there will be an increase in property prices due to the increase in cash flow that these properties produce. That is the reason for this type of fund. And during the last two years, the market has started to behave as a stable market.