AMERICAN RESIDENTIAL PROPERTY: DREAM OR NIGHTMARE?
Dixon Advisory attracts 815 more Aussies to take a punt on US housing investment
Shares in Dixon Advisory’s US Masters Residential Property Fund have risen 4.3% over the last three weeks as 815 Australian investors poured $26.9 million in the first round of a three-stage capital-raising exercise.
Listed on the small-cap National Stock Exchange, shares in the US Masters fund are currently trading at $1.67, up from $1.61 at the start of November. The fund listed at $1.60 on June 29.
Just over 16.3 million units will be issued to 815 new investors at an issue price of $1.64, representing 27.4% of issued units in the fund.
The fresh round of funding will be used to increase the size of the fund’s residential property portfolio, which invests in residential property in the New York metropolitan area, with a specific focus on multi-family properties in Hudson County, New Jersey.
Managing director Alan Dixon says the initial response to the capital raising was very strong with investors understanding the potential of “pooling their funds and buying into residential property in the US in attractive areas while the greenback is low and while yields are historically high”.
According to its most recent report ending October 31, the fund had acquired 55 properties at a combined cost of US$11.18 million with 22 acquired in October alone at a combined cost of US$4.66 million.
The 22 properties acquired in October each provide sub-divided, self-contained apartments for between two to four families. Yields range from 7.7% to 12%.
All properties are located in Jersey City on the west side of the Hudson River.
The highest-yielding property, a three-storey wood-panelled house painted red-brown on Vreeland Terrace in Greenville, was acquired for $140,000.
It is located less than half a mile from the nearest light rail station connecting Jersey City to Manhattan and features two three-bedroom apartments with monthly rents of $1,200 each.
During October the fund also received conditional acceptances for an additional 43 properties, with an estimated combined acquisition cost of US$7.7 million taking total conditional acceptances to 106 properties.
The fund estimates that the 43 conditional properties will achieve annualised net yields of 7.9% to 17.0%.
As at the end of October, the fund had secured commitments (including closed properties and conditional contracts) to acquire 161 residential properties with a total upfront cost of US$31.2 million.
In total, the 161 properties (those bought plus conditional acceptances) are forecast to achieve annualised net yields ranging from 8% to 12%. At the time of the fund’s IPO, the aim was to achieve an annualised net yield of greater than 8% on properties purchased.
The second round of the offer will close on December 12 and the final round on January 9, with Dixon Advisory expecting another $35 million to flow into the fund.
Ahead of the fund’s IPO at the end of June, it raised $69.5 million from more than 1,500 investors.
The current trading price equates to a market capitalisation of the fund of $73.77 million.
Investors will receive a minimum distribution of 10¢-a-unit for the calendar year ending December 31, 2012, a yield of 6.25% on the initial public offer price of $1.60 per unit.