Wide ranging residential yields in Dixon Advisory’s US housing fund as shares debut on ASX

Yields ranging from 4.7% to 12.2% are being achieved on properties acquired to date by the US Masters Residential Property Fund, which has listed on the Australian Stock Exchange (ASX) last Friday.

The pioneering Australian fund – the first to invest directly in US residential property – is managed by financial planning firm Dixon Advisory.

It has steamed ahead with its New York metropolitan area property acquisitions since launching mid-last year, acquiring 167 properties to date with a total value of US$38.3 million.

It also has conditional acceptances on a further 114 properties worth a further US$29.5 million, which would take its total portfolio to 281 properties should all these conditional purchases proceed to settlement.

In addition, the fund is in a good position to add substantially to its portfolio with a net asset position of $95.6 million, no borrowings and $77 million in cash at its disposal.

Since launching, the fund has targeted residential property in the New York metropolitan area, with a specific focus on multi-family properties in Hudson County, New Jersey – a short commute from Manhattan across the Hudson River.

In its most recent update prior to its ASX listing issued on July 15, the fund said it acquired a further 21 properties in May at a cost of $7 million, including buying a number of subdivided brick terraces in downtown Jersey City – a departure from the more common purchases of wood-panel sub-divided houses.

The most expensive recent purchase was US$936,000 spent on a four-level, two-apartment block in downtown Jersey City, acquired on June 22 with a modest net annual yield of 4.7%.

In March, Dixon Advisory managing director, Alan Dixon told Property Observer that while the US market “remains hugely regional” with “significant differences in the performance of each region and the sub regions within them” the fund’s target areas “have now either reached neutral or are showing signs of recovery”.

“Buying is still very attractive, with most housing well below the replacement cost for the buildings, hence you are getting the land for free,” he says.

“There is still a significant shadow inventory in relation to housing heavily under water with the banks yet to act. We see this as a significant opportunity for the fund as we are the best placed investor in the Hudson County area to deal with a large number of home purchases in a short period.

“We think that housing in our target areas is likely to enter a very long, slow increase in value over coming years. This cycle is potentially poised to be very long compared to historical averages but there is significant room for capital gains and strong income returns given the very low starting level of valuations,” he said at the time.

At the same time as it listed on the ASX, the fund released annual results for the period from April 15 to December 31.

The results show earned rental income of $323,980 of an investment property portfolio worth $18.74 million.

The fund earned an after-tax profit for the eight and a half month period of $366,049.

The fund initially listed on the small-cap National Stock Exchange (NSX) on June 29 at a price of $1.60.

It closed unchanged at $1.57 yesterday on the ASX, giving it a market capitalisation of $161.7 million.

Since its IPO on the NSX the fund has raised $160 million from mainly small investors, including self managed super funds.