Why managed leasing is the next big CRE offering - MYRE Capital bringing this revolution to investors

MYRE Capital is India’s first Neo-Realty Investment platform which aims to revolutionize Commercial Real Estate (CRE) investments in the country. A venture by architect firm Morphogenesis, MYRE Capital is a tech-enabled platform that helps investors to create their Grade-A asset portfolio by investing in pre-leased commercial properties at a fraction of cost. The assets are selected based on stringent criteria involving tech expertise and 25 years of industry knowledge.

MYRE Capital has successfully aggregated INR 100+ Crore of A-grade properties in its assets under management in 2021. The 15,000+ user base ranges from 20+ cities and 8+ countries with Resident & NRI investors showing keen interest. The newest offering by MYRE Capital, The Times Square Opportunity, is bringing managed leasing to investors at a fraction of cost. The LEED Gold-rated office asset is situated in the heart of Mumbai- Andheri and is expected to offer a gross yield of 10.5% and 13.6% of the target Internal Rate of Return (IRR) to investors.

In the last few years, commercial real estate has emerged as the preferred asset class for institutional investors and High Net worth Individuals (HNIs). Taking into consideration the current market situation, collateral-backed fixed-income products have become scarce. Institutional funds and HNIs have increasingly gravitated to CRE as an alternative investment avenue due to the dual advantage it offers. Investors can enjoy stable monthly rental income (8%-10%) that is secured by long-term lease agreements with MNC tenants and also the annual capital appreciation (13%-20%).

Fractional ownership of property in India is gaining momentum with each passing day aided by economic recovery as it offers investors an easy way to invest in an institutional-grade commercial property. As per The Knight Frank-FICCI-Naredco real estate sentiment index, there is a rebound in stakeholder sentiments in residential and office segments, as the second Covid-19 wave subsided. The new age tech-based platforms like MYRE Capital offer fractional ownership which eliminates the disadvantage of high ticket sizes of properties and also, the management of tenants.

Managing tenants and workspaces demand expertise and also, have heavy costs involved. Therefore managed leasing is a solution that has become increasingly popular in a post-pandemic world where affordable, configured, and scalable workspaces are what companies are now looking for.

What is Managed Leasing?

Managed leasing is when an agency or company takes up a large part or the entire office space and further leases it to large enterprises, SMEs, and high - growth startups. The managed leasing partner provides value-added services to enterprise tenants such as taking up fit-out expenses, turnkey interiors, operational overhead management, facility management, and maintenance along with common amenities such as gym, cafés, entertainment, etc. which ensures high stickiness.

Difference between Managed Leasing and Co-working spaces

We should not get confused between managed leasing and co-working spaces as co-working spaces deal with startups and small businesses and such tenants are more susceptible to COVID-19 induced vacancies and usually sign shorter-term agreements. On the other hand, managed leasing partners deal with marquee enterprise clientele who have expanded their footprint from traditional office space to managed leasing office space post-COVID-19. Such tenants sign longer lease deals and are hence more stable. As a testament to the success of this model, some of the most prominent MNC’s and Corporates have transitioned to the managed leasing model.

Another very important difference between the two is the rental model. In co-working spaces profit share model is followed whereas in managed leasing the partner is obligated to pay the rent agreed upon irrespective of subtenant occupancy. This is protected with a security deposit and registered lease agreement. The managed leasing model provides rental stability and security to the landlords.

Smart works, an award-winning market leader in ‘Managed Workspace Solutions’, has developed a compelling business model favourable to both landlords and subtenants. Leveraging economies of scale and managing entire buildings, Smart works can provide competitive rentals to subtenants with value-added services and has been the market leader in establishing the category.

Managed leasing is one the fastest growing solutions when it comes to office spaces especially post COVID-19. Smartworks’s revenue tripled, and they expanded to 4 million sq. ft. in just a year which shows how fast this segment is expanding.

Benefits of managed leasing

Many corporates and MNC’s are preferring to transition into the “managed leasing” model because of being provided with customised office spaces also taking care of their enterprise's requirements of office design, fit-outs, amenities, and overall operations.

For investors and landlords, the most important benefit of managed leasing is stable tenancy, secured rental and tenant-vacancy risk mitigation. The other benefits include superior asset upkeep such as value added facilities like workspace digitization and professional building management which makes the property extremely attractive to sub-tenants leading to longer lease periods and high stickiness among tenants. Some of the MNCs that have adopted this model include Amazon, Microsoft, IFtas, EY, TATA etc. As per a recent report by CBRE titled- ‘India Market Monitor - Q3 2021’ office assets to continue to remain high on the investor radar as mobility improves and a comeback to the physical office environment picks up.

MYRE Capital brings to the table the first-ever fractional ownership opportunity in managed leasing with its newest property offering in Times Square, Andheri, Mumbai. The entire tower is pre-leased to India’s largest and profitable provider of agile workspaces, Smart works, and the 10th floor is further subleased to IFTAS (A RBI Subsidiary) with a total lease tenure of 15 years. Smart works focuses on large enterprise clients only which makes the investment proposition extremely attractive for investors.

The proposed space of 17,817 Sq. ft. spans the entire 10th floor of the newly constructed Tower-C in the Times Square development. The LEED Gold-certified asset offering has access to state-of-the-art infrastructure with proximity to major metro lines and the airport. This micro-market is an established residential and commercial hub of Andheri, Mumbai. This opportunity will enable investors to participate in the growing managed leasing trend!

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