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IWC real estate makes third property buy in recovering US market

Published:Wednesday | April 18, 2012 | 12:00 AM

Real estate fund IWC Opportunity Fund I Limited has acquired three properties in the US Tri-State area, financed from funds raised last December from mostly Jamaican investors.

A fourth acquisition is said to be pending, funded from this pool of investors.

The third property acquired on March 23 for an undisclosed price is a multi-family residential complex located in University City, Philadelphia.

University City, home to educational institutions such as the University of Pennsylvania and Drexel University, has recently experienced urban renewal and has seen rising rentals, according to a Mayberry Investments press release on the acquisitions.

IWC Capital Management raised nearly US$5 million (J$436m) in the private placement market to fund purchases of undervalued real estate in New York and Philadelphia, according to Mayberry, the deal's lead broker and arranger.

Dennise Williams, vice-president of marketing at Mayberry, said that IWC's previous property acquisitions in Brooklyn cost US$2 million for an eight-bedroom apartment complex near the affluent 5th Avenue district, and an additional US$945,000 for a complex of nine family units.

Target properties

IWC Opportunity Fund I aims to buy small to middle-market residential and commercial properties of up to US$10 million in value, primarily located in Brooklyn.

Matthew Wright, investment manager for IWC Opportunity Fund I, noted that the acquisition will provide rental yield of 10 per cent.

"The fund's small asset acquisition programme in Philadelphia provides the benefit of very attractive capitalisation rates and cash returns. This University City asset, which recently underwent major renovation, now delivers an unleveraged rental yield of 10 per cent," he said in the press release issued via Mayberry.

Wright added that it represented the fund's targeted acquisition profile where income yields in the small asset multi-family space are a relatively "high component of total return".

Comparatively, New York City with its stronger capital appreciation and total return potential remains the fund's core investment focus.

"The Philadelphia market provides some geographic diversification and increases the income component of total fund return," Wright said.

Enjoying an upswing

Mayberry said that amid signs of an emerging recovery in the US housing market, real estate prices in the Tri-State area have enjoyed an upswing during 2011, with average studio prices up 10 per cent; one-bedroom prices up 8.7 per cent; and two bedroom prices up 5.6 per cent.

One caveat, according to Mayberry's analysis, related to larger apartments. "According to New York-based rental price tracker, Citi Habitats, prices on three-bedroom and four-bedroom apartments dropped by 3.1 per cent and 2.8 per cent year-over-year. Citi Habitats also proclaims that rents are at the highest they've been since the firm started collecting data in 2002," the investment firm said.

IWC Opportunity Fund was launched in Kingston in August at a forum organised by VM Wealth. IWC ultimately wants to raise up to US$83 million (J$7.2b) over time - a maximum US$25 million from equity, and US$58 million of debt, according to the IWC Opportunity Fund I term sheet.

The fund aims for an above 18 per cent average annual return on equity.

IWC Opportunity Fund I is managed by IWC Capital Management LLC, a private equity investment management firm established in December 2009 to acquire undervalued real estate created by the downturn in the US housing market and economy.