Australian REIT is Selling $1B NYC Portfolio

An Australia-based REIT that accumulated about $1B in NYC assets, primarily single-family homes including a large number of Brooklyn brownstones in gentrifying neighborhoods, is looking for buyers.

US Masters Residential Property Fund is offloading the 479-property portfolio in bit and pieces, according to a report in City Limits. As of June, the REIT was listing 459 properties worth an estimated $858M. The remaining portfolio of 459 properties encompasses 853 housing units. 

US Masters was the largest institutional investor operator owning a single-family rental portfolio in NYC from 2012 to 2022, according to the report. The publicly traded fund targeted acquisitions of one to four units, upgrading them with renovations, the report said.

The largest concentration of the REIT’s assets is in Brooklyn brownstones; the company owns 84 brownstones, 38 of them in Bedford-Stuyvesant. According to the REIT’s website, the fund targeted “undervalued neighborhoods experiencing growth and gentrification.”

The firm is liquidating the single-family portfolio, which traded at more than $1.50 a share from 2013 to 2018, but now trades for roughly 30 cents, the report said.

US Masters tried to emulate the SFR success of huge players like Invitation Homes and American Homes 4 Rent, who grew their portfolios in emerging Sun Belt markets, but the speculative mojo that spurred growth in the South and Southwest didn’t work as well when applied to the high-cost market of NYC, City Limits said.

The largest REITs generally don’t target NYC due to high acquisition costs, high taxes, a stricter regulatory environment and more tenant-friendly housing laws. Less than 3% of NYC’s single-family lots are owned by institutional investors, including REITs, and less than 2% of the city’s single-family tax lots are rentals, the report said.

However, in rapidly gentrifying communities like Bed-Stuy, institutional investors made more than half of the purchases of single-family homes in the past decade.

Rent stabilization laws carve out exemptions for smaller properties and those that are owner-occupied; the Good Cause eviction tenant bill that failed to pass in the NY legislature earlier this year included an exemption for small properties like those in US Masters’ portfolio, the report said.

US Masters Residential Property Fund was established in 2011 and is listed on the Australian Securities Exchange. The fund conducts all of its NYC-area residential investment through its controlled entity US Masters Residential Property (USA) Fund, a Maryland-based REIT, according to the company’s website.

According to reports, US Masters had an agreement in hand in March to sell the portfolio as a whole, but the deal fell through, so the REIT resumed selling the properties on an individual basis.