Us Masters Residential Property Fund · ASX:URF
Us Masters Residential Property Fund — Investor Presentation (April 2013)
84 slides from Us Masters Residential Property Fund's investor presentation, Apr 15, 2013
Slide 1: Welcome
For personal use only APRIL 2013 WELCOME
Slide 2: 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 3: Overview
For personal use only Overview
Slide 4: US Masters Residential Property Fund (URF)
US Masters Residential Property Fund (URF) For personal use only • First Australian-listed trust focused on US residential property; easily tradable • New York metropolitan region • Market cap: $304.4m1 • Member of the All Ords • Properties secured: US$240.5m1 • Local expert staff, partners, advisor
Slide 5: Macro Opportunity
For personal use only Macro Opportunity
Slide 6: Supply back to trend
Supply back to trend For personal use only AVERAGE NUMBER OF MONTHS TO SELL INVENTORY • Housing starts unsustainably low • Distressed housing sales reducing • Stock of vacant homes back to trend Source: National Association of Realtors, Census Bureau 6
Slide 7: Pent up demand
Pent up demand For personal use only POPULATION GROWTH (MILLIONS) UNEMPLOYMENT RATE 5-Year change • Population growth remains strong • Labour markets healing • Household formation improving Source: Bloomberg, Bureau of Labor Statistics 7
Slide 8: Valuations are now compelling
Valuations are now compelling For personal use only HOUSING AFFORDABILITY INDEX COST OF OWNING V COST OF RENTING (1995-2012) (1972-2012) Source: National Association of Realtors, Census Bureau, Harvard State of Nations Housing (2012) 8
Slide 9: Hard to get mortgages
Hard to get mortgages For personal use only PURCHASE MORTGAGE APPLICATIONS • Banks still reluctant to lend Source: Federal Reserve Bank of St. Louis, Mortgage News Daily 9
Slide 10: Homebuilding activity rising
Homebuilding activity rising For personal use only HOUSING STARTS V PERMITS RESIDENTIAL CONTRIBUTION TO GDP GROWTH (%) Source: US Census Bureau 10
Slide 11: Prices are shifting upward
Prices are shifting upward HOME PRICES For personal use only INDEXED TO 100, SEASONALLY ADJUSTED • Case-Shiller Index up 8.1% to January 2013 • Significant scope for further increases Sources: US Federal Reserve, US Census Bureau Data,, Bloomberg 11
Slide 12: Strong A$
Strong A$ Opportunity to invest in US assets at time of strong A$ For personal use only AUD V USD EXCHANGE RATE • Australian dollar remains strong • US dollar has upside potential • Appropriate time to move portfolios in to the US dollar Source: Bloomberg Sources: Bloomberg 12
Slide 13: Now is the time to invest
Now is the time to invest For personal use only • Historic opportunity • Infrastructure built • Compelling valuations • Upward shift in prices • Favourable exchange rates 13
Slide 14: The New York Opportunity
For personal use only The New York Opportunity
Slide 15: New York metropolitan area
New York metropolitan area Initial focus on residential properties in Hudson County, For personal use only NJ and more recently Manhattan & Brooklyn, NY • Solid economic base • Deep, well-established housing stock • Limited development sites Manhattan • Positive demographics Island • Excellent acces
Slide 16: New York metropolitan area: why not the same states as the big boys
New York metropolitan area Why aren’t we in the same states as the “big boys”? For personal use only • In those states, properties are foreclosed in a non-judicial way • Typically sold to highest bidder with one days notice Manhattan • Suits high volume, low diligence Island • In NJ & NY: low volume
Slide 17: 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 apartment buildings (>4 units) • Initially focused on Hudson County, NJ • New focus on Manhattan & Brooklyn
Slide 18: Hudson County, NJ
Hudson County, NJ For personal use only • Population of 600k1 • 6th densest county in the nation • Deep rental market, low vacancy, substantial growth • Diverse communities and housing stock • Big opportunities created by downturn • Fantastic commuting to Manhattan • Under-researched & invested by l
Slide 19: Manhattan, NY
Manhattan, NY • Population 1.6m (3.9m daytime), with For personal use only GDP as big as all of Australia • Major focus on Harlem, home of Columbia University • Excellent mass transport • Favourable demographic shift; increasing young professionals and young families • Excellent stock of historic br
Slide 20: Brooklyn, NY
Brooklyn, NY For personal use only • Population of 2.5m1 • 4th largest “city" in US • 44% of workers have local jobs; great commute • High density, high quality housing stock • Deep rental market, low vacancy rates, continued growth • Rapid gentrification – young workers and young families 1. United
Slide 21: Highly attractive urban living
Highly attractive urban living Coldwell Banker annual survey of best places to live in For personal use only USA for urbanites… Fund target markets: #1: Manhattan #2: Hoboken #3: Brooklyn #13: Weehawken #18: Jersey City #22: Secaucus #33: West New York 21
Slide 22: Purchasing Update
For personal use only Purchasing Update 22
Slide 23: Purchasing strategy
Purchasing strategy For personal use only • Identify properties – MLS, agents, attorneys • Estate, short, construction, particularly attractive • Inspections and initial due diligence • Detailed modelling 23
Slide 24: Purchasing strategy
Purchasing strategy For personal use only • Investment Committee • Negotiate to contract (AR or draft) • Advanced due diligence • Commit to contract • Close the property – most head to construction 24
Slide 25: In-house construction capability
In-house construction capability For personal use only • Dan Bailey, BEc in Construction Management / Head of Construction 17 years experience, 9 in NY – 3 project managers • Kirk Mitchell, B Arch MS, Senior Architect — 13 years experience (including NY) – 3 architects • Finance / administration • E
Slide 26: In-house construction capability
In-house construction capability For personal use only • Every house individually studied for value add opportunities – From simple repair-and- replace to complete redesign, renovation • Standardised style manual – Painting, flooring, appliances, etc. – Minimises costs, offers scale benefits • Subst
Slide 27: Example properties
For personal use only Example properties
Slide 28: West 47th St, Bayonne
39 WEST 47TH ST, BAYONNE For personal use only Region Bayonne Property type 2-family attached Apartment 1 2 bedroom / 1 bathroom Apartment 2 2 bedroom / 1 bathroom Price paid US$125,000 Renovation cost US$61,000 Total acquisition US$198,519 cost 28
Slide 29: Before – short sale under-managed
Before – short sale under-managed For personal use only 29
Slide 30: After – great family rental property
After – great 2 family rental property For personal use only 30
Slide 31: Before – tired kitchens and baths
Before – tired kitchens and baths For personal use only 31
Slide 32: After – clean fresh makeover
After – clean fresh makeover For personal use only 32
Slide 33: Before – tired kitchen and bath
Before – tired kitchen and bath For personal use only 33
Slide 34: After – clean fresh makeover
After – clean fresh makeover For personal use only 34
Slide 35: West 47th St, Bayonne
39 WEST 47TH ST, BAYONNE For personal use only Total acquisition cost US$198,519 Appraised price US$230,000 % Change 15.9% Estimated net yield 7.5% We also obtained & renovated the sister property at 41 West 47th street for $184,234 appraised at $230,000 for a 24.8% gain 35
Slide 36: Mercer St, Jersey City, NJ
143 MERCER ST, JERSEY CITY, NJ For personal use only Region Downtown Property type 1-family attached (1-side) Apartment type 5 bedroom / 3 bathroom Price paid US$969,536 Renovation cost US$148,962 Total acquisition US$1,118,498 cost 36
Slide 37: Before
For personal use only Before – 37
Slide 38: After
For personal use only After – 38
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Slide 40: After
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Slide 41: Before
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Slide 42: After
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Slide 43: Before
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Slide 44: After
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Slide 45: Mercer St, Jersey City, NJ
143 MERCER ST, JERSEY CITY, NJ For personal use only Total acquisition cost US$1,118,498 Appraised price US$1,250,000 % Change 11.8% Estimated net yield 5.9% 45
Slide 46: Hampton Ct Terrace, Jersey City
6 HAMPTON CT TERRACE, JERSEY CITY For personal use only Region Downtown Property type 1-family attached (1-side) Apartment 1 2 bedroom / 1.5 bathroom Apartment 2 3 bedroom / 1.5 bathroom Price paid US$914,264 Renovation cost US$77,663 Total acquisition US$991,927 cost 46
Slide 47: Before
For personal use only Before – 47
Slide 48: After
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Slide 49: Before
For personal use only Before – 49
Slide 50: After
For personal use only After – 50
Slide 51: Hampton Ct Terrace, Jersey City
6 HAMPTON CT TERRACE, JERSEY CITY For personal use only Total acquisition cost US$991,927 Appraised price US$1,150,000 % Change 15.9% Estimated net yield 5.0% 51
Slide 52: Laidlaw Ave, Jersey City
69 LAIDLAW AVE, JERSEY CITY For personal use only Region Heights Property type 3-family detached Apartment 1 3 bedroom / 1 bathroom Apartment 2 4 bedroom / 1 bathroom Apartment 3 2 bedroom / 1 bathroom Price paid US$170,000 Renovation cost US$125,000 Total acquisition US$306,846 cost 52
Slide 53: Before – property in need of total renovation
Before – property in need of total renovation For personal use only 53
Slide 54: After – as new family rental property
After – as new 3 family rental property For personal use only 54
Slide 55: Before – tired kitchen
Before – tired kitchen For personal use only 55
Slide 56: After – refreshed
For personal use only After – refreshed 56
Slide 57: Before – old bathrooms
Before – old bathrooms For personal use only 57
Slide 58: After – as new
For personal use only After – as new 58
Slide 59: Laidlaw Ave, Jersey City
69 LAIDLAW AVE, JERSEY CITY For personal use only Total acquisition cost US$306,846 Appraised price US$330,000 % Change 7.5% Estimated net yield 9.8% 59
Slide 60: Spruce St, Jersey City
53 SPRUCE ST, JERSEY CITY For personal use only Region Heights Property type 2-family detached Apartment 1 2 bedroom / 1 bathroom Apartment 2 3 bedroom / 1 bathroom Price paid US$160,000 Renovation cost US$31,000 Total acquisition US$203,650 cost 60
Slide 61: Before – short sale vacant since 2009
Before – short sale vacant since 2009 For personal use only 61
Slide 62: After – refreshed 2-family home
After – refreshed 2-family home For personal use only 62
Slide 63: Before – completely neglected
Before – completely neglected For personal use only 63
Slide 64: After – ready to rent
After – ready to rent For personal use only 64
Slide 65: Before – tired kitchen
Before – tired kitchen For personal use only 65
Slide 66: After – cleaned and painted
After – cleaned and painted For personal use only 66
Slide 67: Spruce St, Jersey City
53 SPRUCE ST, JERSEY CITY For personal use only Total acquisition cost US$203,650 Appraised price US$252,000 % Change 23.7% Estimated net yield 8.5% 67
Slide 68: Portfolio Update
For personal use only Portfolio Update
Slide 69: Freestanding portfolio overview
Freestanding portfolio overview 475 freestanding properties secured for For personal use only US$204.7 million 475 ONE-TO- FOUR FAMILY PROPERTIES TOTALLING 948 UNITS ALL LOCATED WITHIN EASY ACCESS TO PUBLIC TRANSPORT TO MANHATTAN AVERAGE PRICE PER HOUSE OF US$431,000 First set of appraisals resulted
Slide 70: Freestanding investment locations
Freestanding investment locations For personal use only Investments well diversified around the region % of No. of No. of $(m) Area 2 Portfolio Houses Units 1 Downtown (Jersey City) 21.4% 56 141 $43.7 2 Hoboken 5.3% 10 23 $10.8 3 Weehawken 3.5% 11 22 $7.1 4 Heights (Jersey City) 6.0% 50 115 $12.3 5
Slide 71: Portfolio update
Portfolio update US$240.5 million of properties secured3 For personal use only NUMBER TOTAL ACQUISITION ESTIMATED PROPERTY COST (US$m) YIELD RANGE (%PA) Properties Units FREESTANDING Properties purchased 383 858 140.3 3.8% to 15.1% Conditional acceptances 92 205 64.4 4.0% to 7.7% Total freestanding
Slide 72: Public Offering
For personal use only Public Offering
Slide 73: Purpose of the Offer
Purpose of the Offer For personal use only • Take advantage of an unique opportunity • Gather scale – Maximise efficiency and take advantage of cost benefits • Larger fund will have greater trading liquidity • Delay draw-down of debt as terms continue to improve 73
Slide 74: Offer details and key dates
Offer details and key dates For personal use only Opening Date 18 April 2013 Offer Closing Date 21 May 2013 Offer Allotment Date 28 May 2013 Despatch of holding statements 29 May 2013 Trading of Units expected to commence 3 June 2013 Offer Size (if no oversubscriptions) $50,000,000 Maximum Offer Siz
Slide 75: Summary
Summary For personal use only • Fund is uniquely well- placed to capture benefits from improving market • Portfolio is solid and expanding judiciously • Public offering will provide long-term financial benefits • Now is the time to invest 75
Slide 76: Appendix
For personal use only Appendix
Slide 77: 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, 3.99% fixed for 5 years against 32 7- year
Slide 78: 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 3.54%; 15-year 2.72% (both near record lows) – Non-recourse, no prepayment penalties, tax deductible interest • Cheaper to buy vs. rent
Slide 79: 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$1,250 per • Purchase 2-family home MONTHLY COST OF OWNERSHIP (US$) month (annual for US$215,000 using rent increase) FHA loan (3.5% equity Property Expenses 400 • No tax deduction deposit) Property Taxes 480
Slide 80: Buy vs. rent: if you can qualify
Buy vs. rent …if you can qualify WILLINGNESS TO LEND For personal use only • 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
Slide 81: 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 82: Multi-dwelling joint venture partners
Multi-dwelling joint venture 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 Be
Slide 83: Multi-dwelling portfolio overview
Multi-dwelling portfolio overview For personal use only 15 multi-dwelling apartment complexes acquired for US$49.2 million 83
Slide 84: Complete property lifecycle management
Complete property lifecycle management For personal use only 84
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