Business Wire India
BHIVE Investech has got commitments towards a million-dollar Seed round from a combination of its current and fresh investors. BHIVE Investech is an asset-light FinTech company aimed at democratizing the Commercial Real Estate market by providing shared ownership of large value properties. The seed fund will be used for team building, technological development, legal, compliance and marketing.
Shesh Rao Paplikar, Co-Founder & CEO of BHIVE says, “We are overwhelmed by the kind of support we have got from current investors for launching the fintech entity, most of whom are NRIs beyond institutional investors. The FinTech entity will add strong value to the existing business by bringing in the capital for growth while it also creates a lot more value to our existing shareholders. This is a US-headquartered company, which came in as a natural choice as most of our investors reside in the US. A significant amount of the customer base for the FinTech platform to invest in commercial real estate will also be coming from the US. A very senior person who is a veteran in real estate industry and with very strong domain expertise in fractional investment space is coming in as a cofounder to the new FinTech entity.”
Current investor of BHIVE, Alok Bajpai – Global Chief Financial Officer of Netmagic Solutions says, “BHIVE Investech is another innovative and interesting concept from the BHIVE family, which not only will solve – through technology platform – many business and commercial space related needs in the community, but will also provide sound financial and investment needs of small and large investors. Just the way BHIVE was conceptualised and then executed ahead of its time as a solution to few office-space related gaps in India, this venture showcases the forward thinking and problem-solving mindset of its founders, particularly Shesh.”
BHIVE started as the first professionally run coworking brand of Bangalore in 2014 with backing from investors like Blume Ventures, Raghunandan of TaxiForSure, Harshil & Shashank – founders of RazorPay. Today, BHIVE operates properties whose hard asset value is over $30 million. Apart from raising $2 million of equity capital for the workspace business, BHIVE raised about $4 million from HNIs to fund its expansions over the past 2 years. “In a way, we had already become a wealth management company for HNIs by raising money from them, giving regular reports and giving the returns as promised. We have huge brand equity with the HNI community in our ability to give them returns. BHIVE Investech FinTech entity is a very natural progression of that journey,” says Shesh.
Fractional Real Estate Investment is an established venture category of FinTech globally but yet nascent in India. Global players such as CADRE, Fundrise, Realty Mogul, Brickwork, etc., have already bagged billions of dollars of equity money from marquee investors gaining the likes of Goldman Sachs, General Catalyst, Guggenheim Partners, and so on. It has been a global success as hundreds of properties are already being fractionalized. This business has already created unicorns and many more are expected to get created around the world given the size of the opportunity.
Indians have always been attracted towards Real Estate, a premise supported by RBI data that shows ~80% of household wealth is invested in Real Estate. As a primary first home, this is understandable. However, surplus investable capital of the Middle Class and HNI’s has also usually been deployed in rental seeking residential assets. Hence this segment has become overinvested with rental yields languishing at a dismal 2 – 4%. Consequently, the resale market and price appreciation have also suffered over the past few years.
In contrast, Commercial Office Real Estate can provide monthly rental yields of over 8% with the long term capital growth potential intact. As a result, sophisticated institutional capital has been bullish on Indian Commercial Real Estate despite the pandemic. The Commercial Office real estate has witnessed $1.8 billion YTD (October) 2020 being invested by the likes of Brookfield, Blackstone and others. Until recently, major beneficiaries of CRE investments in India have been the Sophisticated Institutions such as Private Equity firms, Sovereign funds, pension funds, etc. However, the retail investors hitherto have not been able to participate because of the large ticket size and unavailability of leasing expertise.
BHIVE Investech now brings the same opportunity to the Indian Middle Class and HNIs through a data driven tech platform with a highly intuitive investor dashboard allowing for a hassle free investment experience. These investments will not give Fixed Deposit like monthly yields but also the Equity or Mutual Fund like long-term appreciation to retail investors. BHIVE Investech will also provide a seamless diversification mechanism which was not available earlier to the retail investors.
While REITs are a great new evolving opportunity, they still are part of the Capital Markets attracting ~2% Indian investments. Indians are more inclined towards directly investing in tangible assets such as Real Estate and gold. BHIVE Investech will facilitate direct participation in specific commercial offices in opportunistic locations through Fractional Investments.
Post COVID, the Commercial Real Estate occupiers are rethinking their office strategy and therefore considering more flexible leases with lower lock-ins. Also, they are increasingly willing to occupy spaces where the interiors are done professionally and ergonomically, without having to spend their own Capex on fitouts. BHIVE has already benefited from this shift with numerous clients increasing their Head Count in BHIVE offices, especially for back office staff.
Fully compliant properties are now available at a distressed pricing potentially leading to even higher yields to the investor. Commercial Real Estate, especially the office space sector, has shown robust and resilient performance and has attracted a large amount of capital. Many giant multinational companies have already leased millions of sqft of office space in 2020. Also, pre-leasing for 2021 is on the rise. In a recent report, Knight Frank says Asia-Pacific prime office rents are likely to decline between -3% and 0% in 2021, but Bengaluru, where BHIVE is a dominant operator, is likely to see a surge in prime rents. In a way, COVID has provided more tailwinds for BHIVE Investech rather than the otherwise.