Dixon Advisory seeks up to $80 million from Australian investors for US fund
Dixon Advisory will seek to raise up to $80 million from Australian investors to fund future acquisitions for its ASX-listed US Masters Residential Property Fund as it looks to take advantage of a recovering US housing market.
The fund has opened an offer to raise up to an additional $40 million, with the right to receive over-subscriptions for a further $40 million.
The minimum application amount is $2,000, with the offer closing on December 6 with an expected application price per share of around $1.57.
The fund's half-year results to June 30 showed it had cash reserves of $117 million after reporting a loss of $2.1 million.
The capital raising comes just a few days after managing director Alan Dixon estimated the repair bill for properties damaged by Hurricane Sandy at US$430,000, or 0.3% of the value of its net tangible assets.
The fund, which transferred to the ASX in July this year from the small-cap National Stock Exchange (NSX), is the first Australian property trust to invest directly in US residential property.
Since its IPO in June last year the fund has secured a US$165.4 million portfolio of properties comprising 430 freestanding houses and 15 multi-dwelling apartment complexes through two joint ventures. The properties are located in the New York metropolitan area, particularly Hudson County, New Jersey, and Brooklyn and Harlem, New York.
Yields on free-standing sub-divided houses in Hudson County have ranged from around 5% to in excess of 12%.
The fund’s previous capital raising was in January this year, when Dixon raised $1.27 million from 33 investors.
The January raising was third and final stage of a second round of capital raising, which raised total equity raised to $31.14 million from 929 investors, kicked off October 2011.
It raised almost $70 million from investors – mainly self-managed super find investors – ahead of its listing on the NSX at the end of June last year.
Alan Dixon says a combination of the US residential property market being “at an important turning point” and the strong Australian dollar convinced Dixon Advisory to launch the latest capital raising.
“Having recognised the opportunity presented by attractive property valuations, long-term returns, including long-term capital growth and attractive rental yields, and the strong Australian dollar, we are proud to have been an early mover in this market.
“And now with signs of a recovery in US housing prices, we’re in a leading position to take advantage of that recovery.
“When you hear reports that private equity giant Blackstone Group has spent more than US$1 billion this year alone on foreclosed homes, and there is also big demand from other big private equity firms, it’s confirmation that we’re presenting an exciting opportunity for Australian investors and that there’s plenty of scope to develop the Fund," says Dixon.
The fund intends to pay shareholders a $0.10 per unit minimum distribution for both calendar years ending December 31, 2012 and 2013.
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The current policy solves a short-term problem by creating jobs in the building sector, but in the long run it is likely to place young first home buyers under financial pressure.