Shares for the U.S. Masters Residential Property Fund, which owns approximately $475 million worth of property in New Jersey (primarily Jersey City/Hudson County), have fallen by 50% over the past two years.
When most Jersey City residents hear the name “Dixon,” the first thing that likely comes to mind is the renovated Downtown buildings of the former Joseph Dixon Crucible Company – which produced crucibles, pencils, crayons, stove polish and lubricants in the 19th century – not an Australian financial services firm operating a property fund that owns nearly half a billion worth of real estate in New Jersey (primarily Hudson County).
That might change soon as the U.S. Masters Residential Property Fund (URF), a Real Estate Investment Trust (REIT) listed on the Australian Securities Exchange (ASX) that’s managed by Dixon Advisory USA (U.S. subsidiary of Evans Dixon Limited), announced today that they will “commence selling the property portfolio.”
“It is an appropriate time to commence this process as the key macroeconomic drivers that formed part of the initial investment thesis, being appreciating US housing values and US dollar appreciation, have come to fruition, and the construction pipeline for the renovation of Fund properties is nearing completion,” according to a press release from the URF.
Among the steps that will be taken as part of a plan to “maximize value for investors” and reduce the “discount at which the Fund’s ordinary units trade relative to net tangible assets (NTA) per unit,” the URF will dispose of “single assets” and “sub-portfolios of assets where there are institutional purchasers.”
Additionally, Evans Dixon Limited announced today that Alan Dixon, the son of Dixon Advisory founder Daryl Dixon, has agreed to step aside from his role as Chief Executive Officer and will focus on the management of URF. Of note, Evans Dixon Limited was established in February 2017 through the merger of Evans & Partners and Dixon Advisory.
Though the press release calls it an “appropriate time to commence the process” of selling the property portfolio, the announcement comes at a difficult time for Evans Dixon as shares for the URF have fallen by about 50% over the past two years and a series of reports by The Australian Financial Review (AFR) have raised troubling questions about the business practices of the fund.
Specifically, the AFR reports raise questions regarding the fees charged to the URF – most notably by Dixon Projects to renovate URF properties, which charges 20% of construction costs for its services – and how the fund is marketed to their clients (mainly Australian retirees).
One of the recent AFR reports states that “while Dixon has defended the estimated $230 million of fees it has reaped from the fund in the past five years despite its underperformance, property experts have openly questioned the sustainability of the URF in its current form. That is because its rental income does not cover its financing costs while it still incurs expenses, extracts fees and pays distributions.”
As part of the plan announced today, distributions (dividends) were cut from 5 cents to 1 cent per share.
“Whilst the program may take time, the Fund believes this will result in a better outcome for unitholders than having the Fund trade at such a significant discount to pre and post tax NTA as reported to the ASX,” according the URF press release.
A representative who answered the phone for Dixon Advisory USA said to “call back at a later time” when Real Jersey City reached out for comment on today’s announcement. Jersey City Spokesperson Kimberly Wallace-Scalcione did not respond to an email asking if the Fulop Administration had any concern regarding how today’s announcement might impact the city’s housing market.
Of note, Dixon Advisory USA donated $300,000 to a Super PAC, Coalition for Progress (CFP), linked to Mayor Steven Fulop’s 2017 gubernatorial ambitions. In 2018, CFP spent money to help elect New Jersey Democrats to the U.S. House of Representatives, according to a Politico NJ report.