IPO offers portfolio of US houses with exciting growth prospects
Retail and institutional investors have the opportunity to tap into a recovering US residential property market with the announcement of an Initial Public Offering (IPO) in a property fund that aims to raise up to $60 million.
“With local housing markets looking fully priced, the Fund is a ‘no fuss’ gateway for Australian investors into the US residential market as it continues its recovery from the GFC,” said Owen Lennie, Chairman of the US Residential Fund.
He was announcing details of the Fund that has been specifically designed to capture capital growth in residential property investments in selective US cities.
The experienced Fund management team, based in Dallas, Texas, and Melbourne, finds the houses and apartments, as well as the tenants, and looks after details like insurance, taxes, repairs and compliance with landlord and tenant legislation.
Andrew Meakin, Managing Director of the Fund, said that the Fund had well-researched acquisition criteria and would invest selectively in cities with faster economic, job and population growth.
“These regions have higher household formation numbers with rental growth supported by an under-supply of new dwellings dating from 2009,” he said.
The US Residential Fund (ASX USR) has lodged its Offer Document with ASIC and intends to raise $60 million via an IPO of stapled securities at A$1 each. A free option will be issued for every two stapled securities.
The Fund is open to retail investors, with a minimum investment of just $2000.
The Fund has set an initial benchmark total return of 10% to 12% a year with distributions between six and eight cents a year per stapled security paid in A$ with no requirement for investors to file US tax returns.
The efficient tax ‘flow through’ REIT structure of the Fund allows net rental income to flow through to Australian investors in the Fund before income taxes.
“The Fund provides portfolio managers with diversification by providing US dollar investment exposure to residential property markets with low correlation to Australian equities and fixed interest investments,” Meakin said.
Lennie, as non-executive chairman, heads an experienced Fund board of Meakin and Stuart Morton as a non-executive director. The Fund manager, Nimble Asset Management, has Jodie Hannaford and Stuart Morton as Joint Managing Directors, and Maya Clark, Vice President USA, heads the Dallas office.
A total 149 rental houses will be owned by the Fund from the outset with the initial portfolio valued at US$14.1 million. Preferred locations include the fast-growing areas of Atlanta (Georgia), Dallas and Houston (Texas).
“Operating in the US market since 2011, the executives of the Fund have hands-on property due diligence and management expertise, and experience in arranging property loans in the US, giving comfort to Australian investors who have always appreciated the value of property investment but lacked an avenue to gain exposure to the recovering US residential property market,” Meakin said.
In addition to the buying for rental income strategy, the Fund aims to take advantage of opportunities to make capital gains through profitable renovation of houses in neighborhoods that have home owner appeal.
The Fund has the flexibility to adapt to changing local conditions and the ability to recognise future opportunities, for example co-investing with local service providers in residential property opportunities such as an apartment fund.
Research by the Fund shows that household growth is above the US national average in Atlanta, Dallas and Houston, but the supply of rental housing has not kept pace with the resulting increasing demand. New construction is significantly less than a decade ago according to statistics from the US Department of Housing and Urban Development.
Meakin says: “The team is ready to implement the strategies outlined in the offer document with a pipeline of investments already identified and in due diligence.”
Examples of houses in the initial portfolio can be found in the offer document that can be obtained from www.usresi.com.au.
The US Residential Fund is a specialist REIT focused on US residential property investment for rental income and capital growth. The Fund has a strong network of local US property service providers, specialising in management of houses and apartments, finance and rehabilitation, as well as key advisors such as legal, accounting and tax specialists.
Simrita Virk (Shed Media)
M: 0434 531 172