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US property delivers greater yield, less risk

The United States private rental apartment sector was providing investors with twice the rental yield and less associated risk compared to the Australian investment apartment sector, according to global investment manager Spire Capital.

Spire Capital said it had invested in a $5 billion portfolio of private rent seniors housing and multifamily apartment communities, demonstrating “stabilised unlevered” yields in the US of between 6 per cent and 8 per cent versus 3 per cent to 4 per cent in Australia.

Spire Capital director Dale Holmes said investing with a US partner in a broadly diversified portfolio of 30,000 apartments and about 8000 senior housing units provided Spire investors with exceptional risk-adjusted returns.

“The total net return target for our underlying ROC Seniors and ROC II and ROC III fund series ranges from 15 per cent to 20 per cent per annum, with approximately half of that paid as an annual yield over the life of the fund,” Holmes said. 

Focusing specifically on affordable private rental accommodation, Spire’s fund strategies aimed to reduce income risk to investors due to changes in government subsidies and major investment market shocks, the fund manager said.

“In this environment we want to invest in lower-cost, private rental accommodation in existing apartment inventory,” Holmes said.

“In the US multifamily apartment sector, monthly rents are on average $1200 per month and occupancy is 95 per cent across the nation, with rent growth at 4 per cent.”

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