Troubled property fund optimistic after $583m debt refinancing
The US Masters Residential Property fund (URF) has detailed how it has closed on a US$430 million ($583 million) debt refinancing following troubles last year.
In an announcement to the Australian Securities Exchange (ASX), the firm said previous loans from Well Fargo and Centennial Bank had been replaced by a new facility by insurance company Global Atlantic Financial Group. This would allow the firm to repay the previous two loans and the outstanding portion of the URF Notes III balance.
It would also address the currency mismatch between the fund’s US-denominated assets and the Australian dollar as the large exposure to AUD via the URF Notes III meant the fund was heavily affected by currency swings.
Shares in URF, which invested in New York residential property and was run by Evans Dixon, had fallen 65% since the start of the year. Since inception in 2012, it was down 71%. In September, it was announced the Australian Securities and Investments Commission (ASIC) had launched court proceedings against Dixon Advisory for advising clients to invest in the product or URF-related products between 2 September 2015 and 31 May 2019.
“This new loan facility is the result of a robust six-month refinance process including working with a specialist debt advisory firm. Ultimately, this was the most attractive offering after comparing terms with other prospective lenders,” Brian Disler, co-head of US REIT said.
Share price performance of URF versus ASX 200 since start of the year to 30 November 2020
There would be two tranches of loan; a $360 million term loan which would house the stabilised assets and a $70 million bridge loan which would house the sales pipeline. The first loan would have a fixed interest of 4% per annum over a five-year term while the latter would have a 5% per annum interest rate over a two-year term.
The firm said this would “significantly extend the fund’s debt maturity profile” and would provide additional flexibility for debt repayments which was important in an uncertain macro environment, although the firm maintained it was operating an “aggressive” repayment structure.
Kevin McAvey, co-head of US REIT, said: “There is a lot of work ahead of us but we are pleased with the improvements and the direction the fund is heading. While external factors are a challenge in the short term, New York City remains the financial capital of the United States and we have no doubt that the city will bounce back from this challenge like from other Black Swan events such as 9/11 and the GFC [Global Financial Crisis]”.
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