Bloomberg News

Dixon Plans to Borrow to Boost Australia’s First U.S. Home Fund

November 16, 2011

Nov. 16 (Bloomberg) -- Dixon Advisory, the Australian financial services firm that has set up the country’s first U.S. housing fund, is considering borrowing up to 50 percent of the value of the equity in the vehicle as it boosts its investments to the world’s biggest economy.

Dixon, which has raised A$70 million ($71 million) for the U.S. Masters Residential Property Fund since June, and expects as much as A$35 million more by January, is seeking to take advantage of record-low interest rates in the U.S. to add debt to its financing mix, Alan Dixon, managing director of the firm, said in a telephone interview.

“We’re sitting with some of the lowest interest rates in the world, the lowest interest rates in history,” he said. “You combine that with the Fed’s decision with Operation Twist, to even lower longer rates. So to find, say, five-year-plus debt at very low prices, that becomes quite attractive.”

Sydney-based Dixon listed the fund on the National Stock Exchange of Australia in June, to allow domestic investors to buy into property values that are nearly half Australia’s with double the rental yields. The average home in the U.S. cost $171,500 as of Sept. 30, data from real estate website Zillow.com showed, compared with A$322,000 in Australia, according to researcher RP Data. Australian houses yielded 4.3 percent and apartments 5 percent, RP Data figures show, compared with the 10 percent rental returns the group is achieving with its U.S. investments after costs, Dixon said.

Dixon has so far spent A$32 million on 161 properties in Hudson County in New Jersey, many of them two-to-four family homes, and about half needed up to $15,000 of renovation work, he said.

The U.S. Federal Reserve said on Sept. 21 it will swap $400 billion of short-term debt in its portfolio for longer-term securities to reduce borrowing costs further, a move dubbed “Operation Twist” after a similar Fed action in 1961.

--Editors: Malcolm Scott, James Gunsalus

To contact the reporter on this story: Nichola Saminather in Sydney on nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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