QUANTUM USA RESIDENTIAL PROPERTY FUND

Transcription

1 QUANTUM USA RESIDENTIAL PROPERTY FUND

2 Disclaimer Important Notice: This is only an outline of the information that is presented to potential investors via an Offer to Professional Investors (offer document). A offer document has been lodged with the Monetary Authority of Singapore MAS. Any forecast figures provided in this presentation document are estimates only. This is only an outline of the information that is presented to potential investors in the offer document. The information contained herein is in relation to the opportunity to invest in the Quantum USA Residential Property Fund (ARSN ) (the Fund) offered by Quantum Funds Management Limited (ACN ) (the RE) holding Australian Financial Services Licence number who is the responsible entity of the Fund and is the issuer of the offer document (PDS), Scheme Number 111TDZ This information is a summary only and potential investors should only rely on the information in offer document which can be obtained from the RE. Neither the RE, the Custodian nor their related entities, directors or officers makes any promise or representation, or gives any guarantee as to the success of the Fund, distributions including any foreign tax credits, amount you will receive on withdrawal, income or capital return or the taxation consequences of investing. Neither the RE, nor any of its related entities, directors or officers makes any promise or representation, or gives any guarantee as to the success of the Fund, the amount of distributions that may be paid, the amount an Investor will receive on redemption, any particular rate of income or capital return or the taxation consequences of investing in the Fund. Investors are subject to the risk that income may not be paid and that their capital invested may not be returned. The PDS is not investment advice nor financial product advice. This presentation and the offer document has been prepared without taking into account the investment objectives, financial situation or particular needs of any applicant Investor. Investors should not invest in the Fund unless you understand and are comfortable with the risks of investing in the Fund (including with respect to the risks of investing in leveraged property). You should carefully consider all of the risks in light of your investment objectives, financial situation and particular circumstances (including taxation and financial issues) and seek independent financial advice from your financial adviser or other professional adviser before deciding whether to invest in Units in the Fund. Issued by; Quantum Funds Management Limited, ACN , AFSL number Phone: , info@quantumgroup.com.au Level 5, Fairfax House, Pitt Street, SYDNEY NSW 2000 No person is authorised to give any information, or to make any representations, in connection with this offer which is not contained the offer document. Printed copies of the offer document and application form are available free of charge during the Offer period to persons in Singapore by calling This PDS is also available on Quantum's website at If the PDS has been accessed electronically, it must be downloaded in its entirety (including the Application form).

3 What others are saying Colony Capital - the 3 rd largest private equity real estate firm in the world with $30 billion under management. Click to view Colony's Barrack on U.S. Housing Market The interview highlights the opportunity that exist in the USA foreclosed home markets and reinforces the Quantum USA Residential Property Funds strategy. Warrant Buffet Click to view what Warren Buffet has to say about the USA residential market Warren Buffet on USA Housing Donald Trump Click to view what Donald Trump has to say about the USA residential market Donald Trump on USA housing Quantum Funds Management 3

4 Key points Quantum Funds Management 4

5 The State of Play Foreclosures across the USA Quantum Funds Management 5 5

6 Foreclosed Market Foreclosed properties represent around 12% of market sale activity. Source: RealtyTrac Quantum Funds Management 6

7 World Economies 16,000,000 14,000,000 The USA remains the most powerful economy in the world 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 United States China Japan Germany France Brazil United Kingdom Italy California Russia Canada Australia Texas Singapore Source: The International Monetary Fund Large US cities (which include Dallas and Atlanta) are expected to generate more than 10% of the global GDP in the next 15 years, a larger contribution than all the large cities of other developed countries combined. Of the 20 global cities ranked as hot spots for growth in commercial floor space by 2025, nine (or 45%) of the cities are in the USA with Dallas and Atlanta ranked 7 th and 14 th. American is building less homes today than they were in World War II, yet the population is three times as large Source: The McKinsey Report 2012 Quantum Funds Management 7

8 Global Property Values % Change in house prices around the world since GFC USA property values have fallen further than its neighbours France Germany China USA Britian Britain Australia -45% -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Source: The Economist Quantum Funds Management 8

9 Global Property Values The USA is one of the most undervalued residential markets globally when prices are compared to rent and income -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Australia Britain Canada China France Germany Hong Kong Ireland Japan New Zealand Singapore United States Undervalued Overvalued Source: The Economist Quantum Funds Management 9

10 USA Homes Prices $300,000 Average Price of Foreclosed Homes v Existing Homes $280,000 Average Foreclosure Sales Price Average Sales Price $260,000 $240,000 $220,000 $200,000 The Opportunity Average discount of 30% $180,000 $160,000 $140,000 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Source: Realtytrac Quantum Funds Management 10

11 Inventory levels Homes (Millions) Existing Home Inventory New Housing Starts 0.00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct year lows The inventory trends for both existing and new homes should therefore provide some reassurance that home price growth (at the national level) could be just around the corner. Source: National Realtors Association Quantum Funds Management 11

12 Residential Rental Market Rental Vacancy Rates 10.10% 9.70% Rental Prices (pcm) $694 $ % $ (Q1) Renters to grow by 20% through to (Q1) 37.7m 45.9m More than 50% of those planning to move in the next 2 years say they intend to rent (Source: The Demand Institute May 2012) 33.8m 33.9m Source: US Census Bureau, John Burns Real Estate Consulting, LLC forecasts (Feb 2012)

13 Risk of doing it yourself? Quantum Funds Management 13

14 The Good Expected Purchase Price $110,000 Rent $1500pcm Gross Ungeared Yield 16.4% Quantum Funds Management 14

15 The Good Community facilities Quantum Funds Management 15

16 The Good Expected Purchase Price $125,000 Rent $1800pcm Gross Ungeared Yield 17.3% located in Fort Worth Schooling, Keller ISD close to shops and amenities close to the brm, 2.5 bathrooms, 2,691 sqft 2005 build minimal repair to rent Strong rental market Low crime Quantum Funds Management 16

17 The Good Quantum Funds Management 17

18 The Bad May look good on paper and in the pictures. 5 miles from Atlanta CBD Fully renovated Affordable at $44,500/duplex 4 bedroom, 2 bathroom Good lot size Attractive yield at 21.5% Quantum Funds Management 18

19 The Ugly Problem is your neighbour! Your neighbourhood Target rental market Poor schooling district High maintenance Crime Quantum Funds Management 19

20 The Bad Quantum Funds Management 20

21 The Ugly Quantum Funds Management 21

22 What to look for Roofing Sidings Gutters Mould Quantum Funds Management 22

23 What to look for Soil movements Structural soundness Did I not mention the power lines out back Quantum Funds Management 23

24 10 Refurbishment Example What we do Quantum Funds Management 24

25 Where to invest? Quantum Funds Management 25

26 Why Atlanta & Dallas? Dallas Atlanta Job growth prospects to 2014 Ranked 6 th Ranked 2 nd Fortune 500 companies Ranked 3 rd globally Ranked 3 rd globally Fast growing metropolitan areas in the USA Ranked 3 rd Ranked 2 nd House affordability Ranked 5 th Ranked 1 st State GDP Ranked 2 nd Ranked 10 th Population growth Ranked 1 st Ranked 4 th Airports (busiest worldwide) Ranked 4 th Ranked 1 st Population 6,300,0000 5,400,0000 Metropolitan size 4 th largest 9 th largest Source: Real estate centre at Texas A&M University, Fortune magazine, Forbes, US Census, Cushman & Wakefield Quantum Funds Management 26

27 Where to buy once you pick your city? Atlanta Metropolitan Area Quantum Funds Management 27

28 The Fund Objective provide investors with an opportunity to invest in USA residential property take advantage of the distress and large decline in property values take advantage of the weak USD generate regular income distributions to investors benefit from the anticipated recovery in property values Quantum Funds Management 28

29 The Fund Strategy Outcome 1 buy bank foreclosed properties in up to 7 preferred cities; Buy at a steep discount to existing property values 2 complete any refurbishment or repair work required prior to renting the property; Create uplift in investment value 3 lease the property on 1-2 years lease terms; Secure income for the investment 4 secure finance for the property Maximise use of capital 5 Pay income distributions Benefit from the investment 6 exit the property at the appropriate time (expected to be 3-10 years). Realise potential capital gain

30 Current Portfolio Atlanta Address 323 Winchester Way, Woodstock, Atlanta 805 Omaha Drv, Norcross, Atlanta List Price $84,900 $79,800 Purchase price $78,500 $68,000 Previous high $148,500 (2005) $146,500 (2004) Discount to high 47% 54% Refurbishment cost $7,500 $7,000 ARV 1 $110,000 $95,000 Value uplift 28% 27% Rental estimate $15,000 pa $13,200 pa Forecast ungeared net yield 10.4% 9.9% Forecast geared net yield % 14.2% 1 ARV mean after repair value 2 assuming 50% debt, 5% interest cost and after all fund and property expenses Quantum Funds Management 30

31 Current Portfolio Dallas Address 721 Oteca Dr, Desoto, Dallas 309 Ironbark Dr, Arlington, Dallas List Price $96,000 $69,000 Purchase price $71,449 $65,250 Previous high $145,000 (2006) $117,500 (2006) Discount to high 51% 44% Refurbishment cost $23,561 $12,850 ARV 1 $108,000 $115,000 Value uplift 14% 47% Rental estimate $17,940 pa $15,000 pa Forecast ungeared net yield 10.67% 9.1% Forecast geared net yield % 12.8% 1 ARV mean after repair value 2 assuming 50% debt, 5% interest cost and after all fund and property expenses Quantum Funds Management 31

32 Refurbishment example Purchase Price $71,449 Previous High $145,000 (2006) Repairs $23,561 Total Costs $95,010 After repair value $108,000 Rental Income $1,495 Forecast net 15.75% geared yield Uplift in Value 14% Quantum Funds Management 32

33 Refurbishment example Breakdown of Refurbishment Costs Appliances $1,475 Foundations $5,300 Painting $4,425 HVAC system $3,000 Flooring $1,975 Kitchen cabinets $1,961 Fencing and landscape $1,100 Bathroom repairs $1,414 Tiling $1,250 Other $1,661 Total costs $23, Quantum Funds Management 33

34 Invest direct or via the Fund Via the Fund (REIT) Direct Tax ^ ~8-10% with ~35% USA Tax returns Not required Annual lodgements Capital Gain Tax ^ ~15% ~35% Diversification Exposure to up to seven cities seven sub economies seven market variables Market knowledge Benefit of locals experience on the ground Team consistently watching the market Eyes on the grounds Quantum consistently monitoring the investment Incentivised to maximise returns Time Complete acquisition, refurbishment, management and sale process handled by the fund. All research and travel managed by Quantum Legal Most efficient legal structure established to invest via No personal legal risk One market One house One street Reliant on local agent Reliant on your own market knowledge None Requires large amount of time Travel to the USA Ongoing monitoring Need to establish legal structure ($$) Increased legal risk Finance Organised by the fund, non recourse Hard to obtain, more expensive, personal guarantees required Buying power Buying daily in the market, access to better terms One off buyer with no tract record ^ can vary depending on how you structure your investment Quantum Funds Management 34

35 Where is the Fund at? Purchased 40 homes in Atlanta and Dallas; Portfolio value $4,000,000; Average increase in property value of 20% after refurbishment; Forecast geared return of 12.4% or 8.75% ungeared. Acquisition Summary As at August 2012 Portfolio Profile Atlanta Homes 32% Dallas Homes 68% 4,500,000 4,000,000 3,500,000 3,000,000 Available for Rent 12% Portfolio Status 2,500,000 2,000,000 1,500,000 1,000,000 Refurbishing 10% Rented 55% 500,000 - Purchase Price Refurbishment Costs Total Cost Forecast Value Under Contract 18% Sold 5%

36 How is the investment structured? 1. Complete an application form with your advisor 2. You can invest USD (SGD) or AUD 3. You can have distributions paid in SGD, USD or AUD 4. Unit price determined monthly in AUD and USD 5. Distributions paid quarterly 6. Investment is into the Australian Unit Trust 7. Asset held by independent custodian Quantum Funds Management 36

37 Sample Properties in the Portfolio

38 Quantum Funds Management 38