Us Masters Residential Property Fund · ASX:URF
Us Masters Residential Property Fund — Investor Presentation (November 2012)
49 slides from Us Masters Residential Property Fund's investor presentation, Nov 12, 2012
Slide 1: Fund Update & Capital Raising
For personal use only Fund Update & Capital Raising November 2012
Slide 2: Tropical Storm Sandy update
Tropical Storm Sandy update For personal use only • On 29 October 2012, Tropical Storm Sandy impacted the New York metropolitan area • Majority of Fund’s portfolio suffered minor or no damage – cosmetic wind-based damage and water damage to a small number of properties • Near-term operational focus
Slide 3: Tropical Storm Sandy update — multi-dwelling properties
Tropical Storm Sandy update — multi-dwelling properties For personal use only Urban American JV Excelsior Equities JV 13 apartment buildings and 398 1 apartment building with 67 units units: closed: - 4 apartments with window - no issues leaks - 1 apartment building with a 2nd apartment building (se
Slide 4: Tropical Storm Sandy update — freestanding properties
Tropical Storm Sandy update — freestanding properties For personal use only Estimated Cost (US$) Downtown water damage $110,000 Bayonne water damage $160,000 West Bergen, Hoboken and $70,000 Jersey City water damage Wind-related storm damage $90,000 TOTAL $430,000 4
Slide 5: Fund Update, Macro Outlook, Capital Raising
For personal use only Fund Update Macro Outlook Capital Raising November 2012
Slide 6: Disclaimer
Disclaimer For personal use only This presentation is not financial product advice and is intended to provide information only. It does not take into account your individual objectives, financial situation or needs. The information is taken from sources which are believed to be accurate, but Dixon A
Slide 7: Introduction
For personal use only Introduction 7
Slide 8: Overview of US Masters Residential Property Fund (URF)
Overview of US Masters Residential Property Fund (URF) For personal use only • First Australian-listed property trust focused on the US residential property market • c.$165 million raised since IPO in June 2011 • Initially targeting the New York metropolitan region • Successfully secured US$165.4 mi
Slide 9: Macro Outlook
For personal use only Macro Outlook 9
Slide 10: Capitalising on an historic opportunity
Capitalising on an historic opportunity For personal use only • Most severe US housing downturn since the Great Depression has created a unique opportunity to acquire high quality residential housing stock at attractive valuations • Current housing market dynamics unsustainable – monthly mortgage pa
Slide 11: Capitalising on an historic opportunity
Capitalising on an historic opportunity For personal use only “…if I had a way of buying a couple hundred thousand single- family homes and had a way of managing [them] I would load up on them and I would…take mortgages out at very, very low rates.” “…but management is enormous, [it] is really the p
Slide 12: Increased institutional interest
Increased institutional interest For personal use only Validation of investment thesis and early entry • While the Fund is unique for Australian investors, other high quality institutions are pursuing similar strategies • Recent entry of key private equity players focused on bulk purchases of forecl
Slide 13: Valuations no longer stretched
Valuations no longer stretched For personal use only Even as valuations collapsed, rents continued to rise… • Home prices have fallen – down 36% from peaks – decline not seen since the Great Depression – appear to be stabilising • While rents continue to grow – up 16% since 2006 – only suffered mode
Slide 14: Supply / demand dynamics shifting
Supply / demand dynamics shifting For personal use only Market is turning as housing supply shrinks and home starts bottom… Existing Home Inventory (1992-2012) Housing Starts: up 15% in September (43% up YOY) Source: Bloomberg, US Census Bureau, National Association of Realtors …and very supportive
Slide 15: Strong A$
Strong A$ For personal use only Opportunity to invest in US assets at time of strong A$ • Australian dollar is facing AUD v USD Exchange Rate significant headwinds – declining terms of trade – falling interest rates – strains from ‘two speed’ economy • US dollar facing increasing tailwinds as econom
Slide 16: New York metropolitan area
New York metropolitan area For personal use only Initial focus on residential properties in Hudson County and more recently, Brooklyn and Harlem • Solid economic base • Deep and well-established housing stock, limited development sites • Positive demographics Manhattan • Excellent access to mass tra
Slide 17: Portfolio Update
For personal use only Portfolio Update 17
Slide 18: Investment strategy
Investment strategy For personal use only • Target properties with attractive rental income and/or potential for long-term capital growth • Mix of freestanding properties (1 - 4 dwellings) and multi- dwelling properties (>4 units) – diversity: structural, geographic, tenant – complementary: segmente
Slide 19: Overview of Hudson County
Overview of Hudson County For personal use only • Population of 634,2661 • Smallest and densest county in New Jersey and 6th densest in the nation • Deep rental market with low vacancy • Substantial rental growth • Diverse communities and housing stock • Substantial opportunities created by downturn
Slide 20: Overview of Brooklyn
Overview of Brooklyn For personal use only • Population of 2,504,7001 • Largest population of all New York City boroughs • 44% of workers have local jobs the rest commute • Commuting is excellent • High density of housing stock • Deep rental market with low vacancy • Substantial rental growth • Rapi
Slide 21: Overview of Harlem
Overview of Harlem For personal use only • Population of approximately 350,000 • Part of Manhattan, the densest county in the USA and a county with a GDP as big as Australia’s • Excellent mass transport access to downtown Manhattan and 15 minutes to midtown on express subway line • Columbia Universi
Slide 22: Highly attractive urban living
Highly attractive urban living For personal use only Coldwell Banker annual survey of best places to live in USA for urbanites… Rankings based on: Target markets ranked – Public transport among best places to live – Restaurants in US for urbanites – Median income – #1: Manhattan – Safety – #2: Hobok
Slide 23: Investment update
Investment update For personal use only US$165.4 million of properties secured3 NUMBER TOTAL ACQUISITION AVERAGE COST COST (US$m) PER UNIT (US$) Properties Units FREESTANDING Properties purchased 277 626 76.6 122,500 Conditional acceptances 153 322 53.0 164,500 Total Freestanding 430 948 129.6 136,5
Slide 24: Multi-dwelling strategy
Multi-dwelling strategy For personal use only 1 Focus on small & medium sized multi-dwelling properties – attractive niche market – below size threshold of larger institutions – beyond financial scope of individual investors or local groups – require specialised skills in management and construction
Slide 25: Multi-dwelling JV partners
Multi-dwelling JV partners For personal use only • Urban American – owned and managed by the Eisenberg family – 15 years of operations and over 12,000 units under management, headquartered in West NY – JV agreement to manage 13 apartment buildings in Union City, West New York and North Bergen – 398
Slide 26: Multi-dwelling portfolio overview
Multi-dwelling portfolio overview For personal use only 15 multi-dwelling apartment complexes acquired for US$49.2 million 15 APARTMENT COMPLEXES TOTALLING 528 UNITS HIGHLY EXPERIENCED US-BASED JOINT VENTURE PARTNERS AVERAGE PRICE PER UNIT OF US$93,000 26
Slide 27: Freestanding property strategy
Freestanding property strategy For personal use only Strategy Comments Identify properties worthy of inspection. Sources – Still significant levels of supply. Only 1 area that has competition is end user- New Jersey and New York multiple listing services, outside real estate agents & direct marketin
Slide 28: Freestanding property strategy
Freestanding property strategy For personal use only Strategy Comments If property is pursued, the acquisition manager Over 1,500 properties inspected for 6 430 properties owned or under commences negotiations. They are rewarded based on transactions and beating the MAO contract Due Diligence Commen
Slide 29: Freestanding property strategy
Freestanding property strategy For personal use only Strategy Comments Maintenance Costs are minimised. Use of both Property Management team is focused 11 on timely service but keeping costs internal and external resources under control Property security is kept high and tenants are The use of law e
Slide 30: Complete property lifecycle management
Complete property lifecycle management Construction For personal use only Dan Bailey + 2 + outside contractors Due Diligence Leasing & Closings Priscilla Lebron Lisa Gozza + 4 + outside + 1 + outside agents consultants Acquisitions Portfolio Managers Analysis Property Alan Dixon – CEO, Management Ze
Slide 31: In-house construction capability
In-house construction capability For personal use only • Led by Dan Bailey, Head of Construction • In-house construction specialists supported by external contractors • Standardised rehabilitation work (painting, flooring, appliances) minimises costs and offers scale benefits • Market mispricing for
Slide 32: Hartley Pl, Bayonne
19 HARTLEY PL, BAYONNE For personal use only Region Bayonne Property type 1-family detached Apartment type 2 bedroom / 1 bathroom Price paid US$137,000 Renovation cost US$30,000 Total acquisition US$172,895 cost 32
Slide 33: Before – estate sale in poor condition
Before – estate sale in poor condition For personal use only 33
Slide 34: After – attractive single family home
After – attractive single family home For personal use only 34
Slide 35: Before – estate sale in poor condition
Before – estate sale in poor condition For personal use only 35
Slide 36: After – attractive single family home
After – attractive single family home For personal use only 36
Slide 37: Before – estate sale in poor condition
Before – estate sale in poor condition For personal use only 37
Slide 38: After – attractive single family home
After – attractive single family home For personal use only 38
Slide 39: Hartley Pl, Bayonne
19 HARTLEY PL, BAYONNE For personal use only Total acquisition cost US$172,895 Appraised price US$195,000 % Change 12.8% Estimated net yield 5.2% 39
Slide 40: Freestanding portfolio overview
Freestanding portfolio overview 430 freestanding properties secured for For personal use only US$129.6 million 430 ONE-TO- FOUR FAMILY PROPERTIES TOTALLING 948 UNITS ALL LOCATED WITHIN EASY ACCESS TO PUBLIC TRANSPORT TO MANHATTAN AVERAGE PRICE PER HOUSE OF US$301,000 Independent freestanding portfol
Slide 41: Freestanding investment locations
Freestanding investment locations For personal use only Investments largely focused in Jersey City % of No. of No. of $(m) Area 2 Portfolio Houses Units 1 Downtown (Jersey City) 28% 47 114 $35.8 2 Hoboken 7% 8 19 $8.2 3 Weehawken 4% 8 16 $5.5 4 Heights (Jersey City) 10% 53 123 $13.1 5 Journal Square
Slide 42: Debt financing
Debt financing For personal use only Targeting gearing ratio of c.50% Freestanding properties Multi-dwelling properties Tender process, short-listed several regional relationship banks Tranche 1: US$3 million, 10-year loan, Urban American JV: US$23 million, 7- 3.99% fixed for 5 years against 32 year
Slide 43: Capital Raising
For personal use only Capital Raising 43
Slide 44: Purpose of the Offer
Purpose of the Offer For personal use only • Take advantage of unique opportunity in US housing as market conditions show signs of improvement – Attractive valuations for high quality housing while rents are rising – Capital growth potential – Attractive rental income and rental yield for investors
Slide 45: Offer details and key dates
Offer details and key dates For personal use only Opening Date 12 Nov 2012 Offer Closing Date 6 Dec 2012 Announcement of Offer Price 10 Dec 2012 Offer Allotment Date 11 Dec 2012 Despatch of holding statements 12 Dec 2012 Trading of Units to commence 17 Dec 2012 Offer size (if no oversubscriptions) $
Slide 46: Appendix
For personal use only Appendix 46
Slide 47: Buy vs. rent
Buy vs. rent For personal use only No other asset can secure such favourable financing… • Mortgage financing extremely attractive – Long-term fixed rates • 30-year 3.36% (record low); 15-year 2.66% (record low) – Non-recourse, no prepayment penalties, tax deductible interest • Cheaper to buy vs. ren
Slide 48: Buy vs. rent: Greenville / West Bergen case study
Buy vs. rent For personal use only Greenville / West Bergen case study Rent vs Own • Pay US$1,250 • Purchase 2-family MONTHLY COST OF OWNERSHIP (US$) per month home for US$215,000 (annual rent using FHA loan (3.5% Property Expenses 400 increase) equity deposit) Property Taxes 480 • No tax • Live in
Slide 49: Buy vs. rent: willingness to lend
Buy vs. rent WILLINGNESS TO LEND For personal use only …if you can qualify • Banks have tightened mortgage standards – Bigger down payments – Tougher appraisal standards – Higher credit scores Source: ISI and Federal Reserve • Drop in mortgage applications FHA FIRST-TIME CREDIT SCORES despite record
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