Sep 23 2019

Catch us on Money FM 89.3

Oliver Siah

Listen to our podcast on MoneyFM89.3 to find out more about how Fraxtor is democratising real estate investment.  

Michelle Martin:

With blockchain technology, Fraxtor which is an innovative real estate co-investment platform, allows investors to invest in any type of property worldwide with a small amount of capital and even before the projects get completed. How are real estate fractional investments benefiting you, the investor?

We’re going to find out with Oliver Siah, CEO and Co-founder of Fraxtor. We are also joined by Rachel Teo, she’s the co-founder, executive director of Fraxtor. And I want to say Good morning to both of you, how are you?

Oliver Siah:

Good Morning, thanks for having us.

Michelle:

Thanks for joining us, does Fraxtor have a mission at the heart of what it’s doing? Are you trying to democratize real estate access and investment?

Oliver:

Yes, I think we are, so real estate investment usually has a few big hurdles. One of it is the high capital outlay required just to invest in traditional real estate, the next one is the illiquidity of the investment, so once you invest in real estate, you get locked in for a really long time, and also for normal investors like myself, it’s about the access to the market, you don’t get access to global real estate opportunities.

Michelle:

Help us understand how fractional ownership works?

Oliver:

Basically what we have done is to make the investment quantum low so that investors are able to come in safe from SGD $10,000 to about SGD $50,000 and investors are able to participate in global real estate opportunities like hotels in Tokyo, commercial buildings in Australia. So this really allows the everyday investor to come in and invest together with the veterans in the industry

Michelle:

Right now you’re only open to accredited investors, am I right?

Oliver:

Yes that’s correct

Michelle:

But the aim is to widen that pool?

Oliver:

Yes, so I think a big part of why we only target accredited investors is because of regulations. If you’re going to target non-accredited investors, it’s going to require a lot more work in terms of compliance and also licensing and prospectus requirements. We are working on that so that we can bring this product to the wider audience

Michelle:

Okay, so what are some of the pain points that Fraxtor is trying to address in real estate investment?

Oliver:

First is the capital outlay, so instead of investing hundreds of thousands to millions of dollars, you can invest say $10,000 in a very big project. We also provide access on the platform, so if you can come onto our platform and take a look, you’re able to properties from all over the world that you can participate in

Michelle:

And also to diversify the risk, what does your portfolio look like on fraxtor?

Oliver:

I mean now we have one, we’re going to launch a few more projects in the coming months

Michelle:

And is that one of the freehold development in Singapore

Oliver:

Yes, that’s right

Michelle:

So there we’ll be a range, I hope that there will be a range. So what kind of global real estate investment deals are you looking at? Like a hotel maybe in Japan

Oliver:

Commercial offices, maybe residential. So actually what you see is what the founders are familiar with. We would not want to bring other investors to invest in areas we are not familiar with. So that’s the added advantage that we have been there and we have done that. Rachel has done development work in Australia.

Michelle:

Yea, I mean collectively you have over 30 years of experience in real estate, correct? Maybe you can share a little bit of your background in the area

Rachel Teo:

Well, Daniel Teo and Associates actually have been co-investing with various business partners through the years, and what we found is that it is a good way to raise capital and also to diversify our risks.

Michelle:

Do you want to share a little bit about your experience in the field Oliver?

Oliver:

I don’t have so much experience compared to Rachel

Michelle:

Ten years, a decade

Oliver:

Actually, it ranges more than that, I mean my first ever investment made was a real estate investment, it was a commercial real estate investment, that was when I was 21 when I first entered university. From that experience, I fell in love with real estate investment. So from one office unit, I grew my own portfolio into a much larger portfolio, consisting of residential, retail malls etc. I also ventured into other types of indirect real estate investments such as REITs and also invested in property development companies.

Michelle:

That’s fascinating. So that first one was based here in Singapore?

Oliver:

It is.

Michelle:

Fantastic, and you were 21 at that time, it was self-taught?

Oliver:

Yeah, I think a lot of the influence in real estate came from my father. I mean being young you don’t know where to spend your money right? So he just said to buy a piece of real estate and you’ll see the rewards

Michelle:

Why did you choose commercials?

Oliver:

So back then that commercial unit was yielding quite a lot, and also at that time, you can use your CPF to buy a commercial unit, but now you’re not allowed to.

So I had spare cash in my CPF, I had some spare cash so it made sense to buy a commercial unit

Michelle:

Love these stories, our listeners do as well, but let’s move to the present and the future. So blockchain is the backbone of Fraxtor, tell us a little bit of what blockchain is enabling, in terms of real estate investment.

Oliver:

We see blockchain as a means to replace traditional ownership instruments such as share certificates, centralised registries and even title deeds, and I mean technology has advanced so much that we are able to put anything in a digital form, from music to videos. So why not ownership in an asset?

So what we have done is that we have essentially placed an asset, a physical asset like real estate in the digital realm and issued tokens that represented shares in real estate. 

Michelle:

So how is it different from a REIT for example?

Oliver:

So for REITs, I mean REITs have been around and REITs usually invest in a big basket of real estate whereas Fraxtor concentrates more on individual buildings/project, so it’s more singular in that aspect

Michelle:

What are some of the benefits of blockchain as you see it?

Oliver:

Blockchain is a very secure way to independently record ownership information so you no need to rely on shared certificates or centralised registries to hold that kind of information. One of the key benefits, once we have deployed, once we have seen it work, I think the clearest benefit is actually the instantaneous transaction process because when you perform a real estate transaction, you would normally need to hire a lawyer who’s going to check the title deed, who owns it and you need to do the conveyancing. That process takes two to three months and if you buy something on the stock exchange, the settlement is T+3 because they need to check who is the owner and whether you have enough funds. The blockchain, coupled with smart contracts allows us to instantaneously do that entire process within a few seconds. We are able to determine who’s the rightful owner of that share, how much money or whether the buyer has sufficient funds. Once these two meet, then the transaction instantaneously takes place. So money will be transferred over to the other investor and the share will be transferred back.

Michelle:

Tell us how Fraxtor is building an ecosystem of investors, co-investors and owners.

Rachel:

So basically we are hoping to build ecosystem where different parties can come forward with what they would like to invest with and we’ll share it with our co-investors

Michelle:

Okay, and the way you are looking at Singapore’s Real estate market, how does Fraxtor fit in with the way you see the market moving?

Oliver:

I think the market has changed a lot in the last 20 years since I last invested. In the past, you could just buy something and then sit on it for a few years and it’s going to double in value. Right now, I think it’s very difficult to achieve that kind of return. I think what Fraxtor is looking at is also to create value by doing an asset enhancement for example, or strategically repositioning assets to be able to create more value. This includes development work as well. Maybe you can buy an old house and build a new one and try to sell it on the market or you can buy a really rundown commercial unit and do some renovations to push up the value. Other than that, I don;t see any way that people are just going to buy and hold an asset and hope that it’s going to double in price in the next five years. Another point is that accessing the global market is also very important, there are good deals in the market and we are actively looking for those good deals. I think that these are good opportunities for people who have always invested in Singapore. With nowhere to go, we tend to look outwards, so Fraxtor is a platform that is able to bring these investments to them.

Michelle:

So getting to know the people behind Fraxtor Real Estate Co-investment platform, powered by blockchain, looking at fractional investing but right now we are getting to know the people behind Fraxtor you’ve heard Oliver Siah for the last 10 mins or so, he’s CEO and Co-founder. Rachel Teo is Co-founder and executive director. Okay, let’s get to know you Oliver, fascinating background, ex-Apache pilot turned prop-tech co-founder, you are pursuing your fourth university degree. Tell us about the decision to switch careers.

Oliver:

I love studying, I love learning new things. It has opened my network and perspective. For example, blockchain technology and all these. These are some of the up and coming things I learned during my MBA, for example, which I wouldn’t have learned 20 years ago in my engineering degree because it didn’t exist. So I feel that getting new educational qualifications actually helps you look into the future and how do you deploy new technology into the market.

I was in the air force for 17 years, I love flying, I still fly as an NS man in my squadron. My first love was also real estate like I mentioned. So I wanted to take time off to really spend time on my first love, which is real estate. But aviation is definitely my second love.

Michelle:

Nerves of steel yeah, Rachel over 30 years of a track record in real estate development you have in Singapore and around the world, we should have you as a regular commentator for investing, what excites you about Fraxtor and its potential?

Rachel:

Well, I think it allows people to come in bite-size and to try different investments. I have a lot of people who have come up to me and said, ‘I have 50,000’, ‘I have 100,000’, ‘what can I invest in Singapore?’ and I know it is difficult to find investments and I’m very excited about Fraxtor because it allows people to explore what they would like to invest in, whether it could be a hotel, commercial unit or residential unit overseas.

Michelle:

Okay, I’ve saved the most important question for last, how do people get their returns?

Oliver:

Like any real estate project, that does not involve development works, you get rental yield and also after we sell it, there’s a big capital appreciation at the end (how much you sell it – how much you paid for it, that’s how much you earn). I think that’s one of the best things about real estate, you buy a property that doubles in value and you get to enjoy that at the end. Fraxtor is more into direct real estate investments. If you buy a REIT, you are just earning constant dividend income, but when the REIT divest the asset, they will not issue you a big lump sum, instead, they are going to reinvest that money back into the market. That is a very income-driven approach. For us, I think we love the capital appreciation upside at the end for real estate investments

Michelle:

Thank you very much for cluing us into what Fraxtor does and a great pleasure getting to know both of you.

Rachel and Oliver:

Thank you.