Fraxtor was founded in 2017 to provide investors better access to high-quality real estate investments via a lower capital outlay and a secure, convenient digital platform. It received approval for its capital markets services (CMS) licence from the Monetary Authority of Singapore (MAS) in February 2022.
“Fraxtor was conceived by our founders Rachel Teo and Oliver Siah a couple of years ago predominantly to democratise real estate and make it accessible to more people,” says Samuel Lee, CEO of Fraxtor. Teo is the eldest daughter of Daniel Teo, chairman and managing director of Hong How Group and a director of Tong Eng Group. “The platform also allows issuers such as property developers to diversify their investments and access capital more effectively while allowing more investors to invest in niche high-quality real estate projects,” Lee explains.
Since its first product offering in 2019, Fraxtor has grown significantly as investors and product partners get increasingly comfortable and familiar with fractional real estate investing via a proven platform.
“In the last four years, we’ve participated in over 20 real estate projects,” Lee adds. “This is not a concept anymore. The investing and business model has been validated and it has been proven that our platform works. We have also gone through the entire real estate investment lifecycle for a number of our projects including realising and returning capital back to our investors. For example, we have realised five projects in the last 12 months alone with average returns of over 15% p.a.”
For issuers, the platform allows them to focus on what they do best, which is to buy the land and construct the development, without having to deal with hundreds of investors — which Fraxtor is handling on their behalf, says Lee. “Most developers don’t have a big team for investor relations. So we do all these for them and allow them to access this untapped pool of capital.”
“Most established developers usually tap on institutional funds, and they now get access to this untapped market of mass affluent to high-net-worth (HNW) investors and family offices, which is collectively quite meaningful but is not easy to deal with given the large volume and management of different investor needs,” Lee adds. “Most of the developers also prefer to deal with institutions and won’t deal with individuals as the investment quantum is too small and not sizeable enough. But if we come together in a professional, credible manner with a more significant amount collectively, these developers won’t mind dealing with one party.”
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Furthermore, these issuers, through Fraxtor, are now able to tap on capital in a timely and on a project-by-project basis.
“This gives them the flexibility, where if they need, say, $50 million or $100 million for their projects, they are able to raise the necessary funds quickly,” Lee continues.
More choices for investors
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Investors, on the other hand, get to have access to a diversified pool of projects at a lower quantum and receive higher returns on average. This enables them to better manage their risk profile and diversify their investment portfolio effectively across different geographies and asset classes.
Investors will also get to invest in deals that are usually reserved for institutional investors and various private equity (PE) real estate deals that they will not be able to access typically, says Lee. The minimum ticket size for investors via Fraxtor is typically about $25,000. Having said that, on average, each investor typically invests about $200,000 into each project on the platform, he shares.
The biggest advantage here, Lee adds, is that investors can pick and choose which projects they want to put money into, and get access to value-add, opportunistic and development opportunities which provide higher returns. They can also access alternative segments like residential development or private credit. “This is unlike a REIT, which has predominantly income-producing assets and where investors will have to go with the portfolio chosen by the REIT manager.”
Investors can sign up for Fraxtor’s platform via its website at no charge. When they have decided to invest in a project, they will then have to pay a one-time subscription fee. This is usually an upfront fee of between 1% and 3% to invest in the project. Other fees that may occur are charged by the developer partner and do not go into Fraxtor’s accounts.
“The returns presented typically already take into account the fees developers or fund managers charge,” says Lee.
Fraxtor may also take a “success” fee when the project achieves or outperforms its targeted returns.
“The fee is quite small and is typically around 0.5% to 1.0%. However, not all projects will have it and it’s done on a project-by-project basis,” he adds. “Naturally, if we don’t achieve our targets, we will not be paid the success fee.”
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So far, projects on Fraxtor have consistently reaped double-digit internal rate of returns (IRR). While the platform targets projects with an IRR of between 10% and 15% p.a., it has exceeded its goals in its last couple of projects, Lee says.
Over the past 12 months, the team has seen its realised projects yield IRRs of 10% to over 30%, with return on equities (ROEs) of 25% to over 100%.
One of its best returns came from a food factory in development in Mandai in District 26. The project saw an ROE of over 100% with an IRR of over 30%. The investment term was an average of 2.5 years and was fully realised in 3Q2024.
Another project, a semi-detached house development in District 11, had an IRR of 15% and an ROE of 50%. The investment was for a term of three years and matured in 4Q2023.
In comparison to the overall market, projects listed on Fraxtor’s platform have outperformed the iEdge Singapore REIT (S-REIT) Index, which fell by 29% over the last three years ended June 2024; the iEdge Singapore Real Estate Developers & Operators Index, which fell by 21% over the same period; and the benchmark Straits Times Index (STI), which inched up by a mere 7% in comparison.
Singapore real estate and beyond
Most of the projects listed on the Fraxtor platform are located in Singapore. The city-state is a market that Fraxtor investors gravitate towards given their familiarity, says Lee. After Singapore, Australia is the market where most projects listed on the Fraxtor platform are located.
“For Fraxtor platform project listings, projects located in developed markets are preferred currently as regulations are clear — not just from a legal perspective but from a tax, development and investment perspective, too,” says Lee. “Besides, data in such markets are transparent, which makes it easier for us to obtain reliable data when we conduct our due diligence.”
“Another thing we look out for when entering new markets is whether there are strong and reputable partners with a solid track record for us to work with,” he adds.
Beyond these two countries, Fraxtor is exploring partnering with reputable fund managers or developers to curate more project listings for the property markets in Japan and London, UK as investors seek to diversify and also take advantage of the strong Singapore dollar. For example, in London, investors on the Fraxtor platform were able to invest in the hospitality segment with a freehold property in Zone 1 of the city. Zone 1 in London covers the West End, Holborn district, Kensington, Paddington, the City of London, London Bridge, Earl’s Court and Marylebone, to name a few.
To Lee, the value-add hospitality segment in key gateway cities offers investors an interesting opportunity to take advantage of tailwinds in the hospitality space as global travel rebounds.
“It is a real estate value-add play where the developer and/or fund manager acquires the hotel, refurbishes it and enhances it by adding more rooms and increasing its branding from three to four stars, for example. The fund manager can then exit in three to four years,” he says.
In Japan, investors using the Fraxtor platform had the opportunity to invest alongside an established fund manager in multi-family housing properties. There is also potential for involvement in logistics and hotel properties. According to Lee, the country benefits from strong tailwinds, such as the relatively cheap Japanese yen and the positive carry between yields and interest rates. Fraxtor is currently exploring product listing opportunities in Europe, but these are being considered on a case-by-case basis.
In Singapore, while most real estate opportunities offered to investors are in the residential sector, Fraxtor is also seeking partnerships with reputable developers to provide more opportunities in the industrial and commercial sectors.
“Going forward, our product offerings will predominantly still be Singapore projects, and Australia projects are likely to be the second most popular market in terms of geography,” says Lee. The Australian market, in particular, is a familiar one to the group, with about six real estate projects fractionalised and distributed on its platform. At present, the residential market in Australia is still quite strong, he adds.
Fraxtor Group recently announced the successful dual listing of a tokenised real estate investment in Singapore and Australia, potentially the first such listing in the region. The tokens represented units in an Australian unit trust investing in a residential development project at 97 South Perth Esplanade with a gross payout to investors of 16% p.a. Investors from Singapore and Australia were able to subscribe to the same tokenised investment offering simultaneously through their respective regulated platforms. Investors’ demand for this project was strong and the offer was fully subscribed within two hours of its listing.
The group is planning to trade tokens of its developments, which would introduce secondary liquidity and potentially higher returns for investors, as they could sell these tokens on the market to other investors.
With secondary liquidity, the investments will also not be locked up, in comparison to the minimum of three to five years on a residential property or seven or more years on a private equity fund.
However, these plans, while in the works, will also depend on when the group achieves a certain critical mass to allow its marketplace to be more efficient.
“Our platform already has the technological capability to do that, but we are just waiting for the appropriate time to launch this,” says Lee. Fraxtor may also consider offering its products to the wider retail investor market in the future and not limit it to accredited and qualified investors as we have been seeing strong demand for our offerings and have received lots of reverse enquiries.
