Dixon Advisory to undertake ‘significant clean-up' of New Jersey properties damaged by Hurricane Sandy
The ASX-listed US Masters Residential Property Fund, which invests directly in residential real estate in Hudson County, New Jersey and Brooklyn, will undertake “significant clean-up” operations following damage suffered to its portfolio from Hurricane Sandy.
The worst affected properties were those in low-lying areas of Jersey City, Bayonne and Hoboken, where the fund spent US$1.3 million on a four-bedroom terrace house in September.
The Dixon Advisory-managed fund has acquired 249 rental properties at a cost of $67 million since launching on the small cap National Stock Exchange in June last year.
The fund transferred to the ASX main board in July this year.
In an update following the devastation of the hurricane, managing director Alan Dixon along with head of construction Dan Bailey undertook an inspection of some of the fund’s properties, with other members of the management team also undertaking inspections.
Dixon says there was only minor "wind-based damage" to properties in Weehawken, Union City, West New York, North Bergen and the Heights district of Jersey City, which are all “well above sea level and were not affected by storm surge flooding”.
“These areas contain all the multi-family properties held by the fund as well as a significant number of the fund’s one- to four-family homes,” he says.
Dixon says the lower lying areas of Hudson County were more heavily affected.
“The remainder of Jersey City and Bayonne have had many houses affected by flooding of basements, but this has only on rare occasions affected the living space in any of the properties.
“Many of the properties remain without power, so it is too early to be certain of the extent of damage to mechanical items such as boilers and hot water heaters.”
Dixon says that inspections of a large number of properties in the Downtown section of Jersey City revealed no material damage to the properties, “just loss of some cosmetic walling and flooring materials”.
“The area worst affected was the township of Hoboken. The fund has closed only two properties in this town, and both have experienced some flood damage.
“One property is a future construction site and as such there was not much potential for damage. It is expected that there will be more significant damage to the other property. The fund’s management team has not been able to visit this property yet due to floodwaters.
In its most recent property purchasing update in September, the fund purchased a four-bedroom apartment for $1.3 million, less than half a mile to the nearest ferry stop. It was by far the most expensive property purchased over the month.
“There will be significant clean-up work required across the fund’s portfolio,” says Dixon.
“As many tenants of the fund are still without power or mobile phone coverage, it is too early to precisely estimate the final clean-up bill.
“However, given the limited nature of the damage and the insurances carried by the fund, the responsible entity currently estimates that there will be no material effect on the net tangible assets of the fund and that the effect on the profitability of the fund will be relatively limited given the scale of the tropical storm.”
Dixon says management will keep the market informed over coming days as more information comes to hand.
Since launching, the fund has primarily invested in multi-family sub-divided homes in Hudson County, New Jersey directly across the Hudson River from Manhattan.
The fund has since expanded to Kings County New York, more commonly known as Brooklyn.
It has also expanded beyond sub-divided homes to invest in small and medium-sized apartment blocks of between five to 100 units.
In May the fund entered into a joint venture with Urban American LLC to acquire, renovate, manage and lease 13 apartment blocks in Hudson County comprising 398 apartments in total.
In August it entered into another similar joint venture arrangement with Excelsior Equities to acquire and manage two apartment blocks comprising 122 units.
The US Masters Residential Property Fund reported a loss of $2.1 million for the six months to June 30, attributing this to the fund being in a start-up phase.
The directors of the fund say it has the capacity to invest in and manage around 1,000 properties.
It paid Australian shareholders a distribution of five cents per ordinary share for the six month period to June 30.
The fund was last trading at $1.55 per unit at a premium to its net tangible asset value of $1.43 per unit (as of September 30).