US Masters Fund moves upmarket with historic Hell’s Kitchen and Harlem acquisitions
Dixon Advisory’s US Masters Residential Property Fund has moved distinctly upmarket spending US$3 million on a historic four-storey apartment building in trendy Hell’s Kitchen in the heart of Manhattan.
In addition it has also bought a “limestone mansion” in Harlem for US$1.8 million dating back to the 1880s and a row house in Hoboken dating back to 1901 for US$1.54 million.
The ASX-listed Australian fund, managed by Dixon Advisory, was the first listed entity to invest directly in US residential rental properties, beginning in Jersey City across the Hudson River, but has extended into Manhattan and Brooklyn as well.
It raised a $100 million in its most recent oversubscribed public offer, having initially targeted between $40 million and $80 million with managing director Alan Dixon saying the investment would allow the fund to take advantage of “highly favourable market conditions” to expand its portfolio of acquisitions into areas such as Brooklyn and Harlem.
The Hell’s Kitchen and Harlem acquisition are two of 31 properties purchased by the US Masters Fund over December, increasing its portfolio to 332 properties worth US$107.9 million with yields ranging from 3.4% to 9.3%.
The fund also has conditional acceptances on 21 properties with an estimated combined acquisition cost of US$18 million, with pre-purchase due diligence suggesting they will achieve annualised net yields of 3.5% to 13%.
The Hell's Kitchen acquisition (pictured below) is a distinctive red-brick four-and-half-storey walk-up building with a penthouse addition at 458 West 50th Street.
It was purchased with vacant possession for US$2.988 million and has six one- and two-bedroom apartments with estimated monthly rents of US$2,650 and US$4,000 respectively.
US residential data indicates the US Masters Fund acquired it at a discount of around 14% to the February 2012 asking price of US$3.5 million
Hell’s Kitchen – officially the neighbourhood of Clinton – was once an Irish-American working-class district and one of the grimmest parts of Manhattan, but it is currently undergoing gentrification.
The name is said to derive from descriptions of slum tenements in the districts.
The US Masters Fund has also acquired a fully renovated five-storey limestone mansion (pictured below) at St Nicholas Avenue & West 146th Street in Harlem for US$1.82 million, which has two apartments bringing in estimated combined monthly rent of US$9,000 – an estimated net annual yield of 4%.
The New York Times reported in 2009 that the carriage trade made St Nicholas Avenue, one of the best addresses in Upper Manhattan in the 1880s – a “broad boulevard … was a natural resort for the gentry and their fine horses and rigs”.
However, the arrival of the motor car turned St Nicholas Avenue into an “internal combustion highway”, with the limestone townhouses demonstrating the “highs and lows of this unusual street”.
The building acquired by the US Masters Fund was designed by Boston-based architect Theodore Minot Clark in 1885, who most noted work is the 1877 Trinity Church in Boston.
The US Masters Fund also acquired a historic row house on Bloomfield Street in New Jersey in Hoboken for US$1.54 million with an estimated annual yield of 3.6%.
Not all the acquisitions are as expensive or prestigious – but they do offer higher yields.
They include a characterless, single-apartment building on Liberty Avenue in New Jersey, bought for just US$179,000 on a yield of 5.1%.
The highest estimated yield is 9.3% on a four-apartment on Neptune Avenue in Jersey City in the West Bergen region, which was bought for US$305,000.
The fund reported an after-tax loss of $2.1 million for the six months to June 30, 2012, which it said reflected the start-up phase of the group.
The share price has traded up strongly since November, rising from $1.55 to currently stand at $1.80.
Hell's Kitchen picture by Ed Gaillard courtesy of Flickr.