A real estate investment trust based in Australia learned a difficult lesson about owning rentals in New York City. It’s learning a difficult lesson about selling them, too.
US Masters Residential Property Fund — a REIT rarely covered by United States real estate publications — is looking to part with its 479-property portfolio piecemeal, City Limits reported. It appears to have sold a few of them, as its website lists 459 properties as of June, reducing a billion-dollar portfolio to one worth $858 million.
The publicly traded fund made a habit of buying one- to four-unit properties in the city, renting them out at premium prices after renovations. At least 84 of the homes are Brooklyn brownstones, nearly half of which are in Bedford-Stuyvesant.
US Masters was the largest identifiable institutional investor operator owning a single-family rental operation in New York City from 2012 to 2022, according to City Limits.
Things haven’t gone to plan for the investors, though. The fund was frustrated by the same factors that often keep REITs out of the New York City market in the first place: high acquisition costs and taxes, heavy regulation and tenant-friendly laws.
The REIT’s share price has dropped precipitously in recent years, leading US Masters to begin liquidating its portfolio. It started the disposition in 2019 by selling one property at a time before agreeing to unload the rest of the portfolio as a whole last March.
That deal fell apart, though, as rising interest rates made the acquisition a larger pill for the buyer to swallow. Instead, US Masters returned to its individual sales, targeting cash buyers that were likely to be fellow institutional investors. Meanwhile, it moved to cut costs, replacing its management company, which has led to declining repairs and maintenance, according to tenants.
The selloff has some renters worried. While a buyer would need to abide by the terms of the lease agreements in place, all bets are off when those leases expire.
— Holden Walter-Warner
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