NEW YORK STATE OF MIND DRIVES DIXON DEMAND

This article has been republished with permission from 13 December 2014
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Long-term prospects for Dixon Advisory’s listed US Masters Residential Property Fund will become clear in the coming few years as the Australian dollar weakens and US property prices return to normal levels, according to Alan Dixon.

New York-based Mr Dixon, chief executive of Dixon Advisory, is visiting Australia with investment manager David Orr as part of a $100 million notes issue.

He said investor demand had been strong, with the offer oversubscribed and on track to hit its $150m limit by Monday.

“What’s going to be interesting, we’ll see a good four-year window as properties recover and return to normal levels,” Mr Dixon said.

“We’ll get a feel for how much New York will go forward, whether it’s an excellent trade and investors will make good money now, or if it is a long-term investment for 20 years or more.”

The US Masters fund has $527m invested in residential property in New York since 2011, with 545 freestanding homes and investments in 27 apartment blocks. “Acquisitions in the first years were very easy, because the market was so low, but now we have to be more selective,” Mr Dixon said.

“The price boom until 2006 had meant a large amount of new housing supply, but there hadn’t been overbuilding in New York.

“So when we looked to invest there was an upside, that there wasn’t the oversupply.”

Mr Dixon said the bulk of the notes issue, which was aiming to raise a minimum of $50m, would be used to renovate properties already acquired or under contract, although funds raised over the $100m mark could be used for acquisitions.

Mr Orr said 85 per cent of the investors in the US Masters trust were self-managed super funds.

“When it comes to these notes, it’s the kind of things investors want with cash rates down and term deposits down,” Mr Orr said.

“It’s a good fixed-income ­alternative.

“There is $560 billion in the SMSF sector, so if you can design products that they find attractive you will find investors.”

The five-year notes have a fixed interest of 7.75 per cent per annum.

Story by Kylar Loussikian

Published in the Australian 13 December 2014