Jamaican investor pitches US$83m real-estate fund
Published:Wednesday | August 17, 2011 | 12:00 AM
Jamaican-led IWC Capital Management says it will use the uncertainty around the United States (US) downturn and downgrade as pitch for a US$83 million (J$7.1 billion) fund that will invest in undervalued real estate in New York for rental to professionals.
"We would like the market to be bad for another three years. We would like the economy to be soft. We would like confidence in the United States to weaken," said IWC principal Matthew Wright as he launched IWC Opportunity Fund 1 at a seminar hosted by Victoria Wealth Management Limited in Kingston on Thursday.
"It sounds selfish, but it will allow us over the next three years, while we are executing our acquisition strategy, to acquire assets at the most favourable prices," he said of renewed fears of a double-dip recession in the US and its implications for the already depressed housing market.
IWC Capital is based in New York.
"It is a selfish motivation, but what I see is an extension of my opportunity," said Wright.
The Jamaican fund manager wants local and regional investors to take up US$25 million of the fund, with the remaining US$58 million raised with debt, according to the IWC Opportunity Fund 1 term sheet.
The fund's management team includes Wright and Perrin Gayle. The "lead arrangers" include NCB Capital Markets and Pan Caribbean Financial Services Limited, and the selling agent is VM Wealth. The minimum investment in the fund is US$250,000.
The fund aims for an above 18 per cent average annual return on equity.
Wright explained that under the plan, rentals are projected to earn about eight per cent return on investment and that another eight to nine per cent would be earned when the properties are sold. The fund, slated to last for seven years, is projected to earn US$1.23 million in net operating income in the initial year; US$4.6 million in the second year; US$6.9 million in the third; US$7.1 million in the fourth; US$7.35 million in the fifth; US$7.57 million in the sixth and US$7.8 million in the final year.
IWC Capital Management, which specialises in offering real-estate opportunities at "attractive risk adjusted returns", was founded during the US downturn, which cut housing values but kept rentals mostly steady.
"The firm was established in December 2009 in response to attractive opportunities for investments in the US real-estate market created by the downturn in the US housing market and economy which began in 2007," said the company's term sheet.
The fund aims to purchase three residential properties in Brooklyn, including a 20-unit building on Halsey Street, for US$3.69 million, a 15-unit complex on Meserole Street for US$3.3 million and an eight-unit complex on Pacific Street for US$1.35 million.
All three properties are existing income-generating units, said Wright, who described Brooklyn as a dormitory community of swelling professionals keen on avoiding high rentals in Manhattan. The fund will ignore the Manhattan skyscrapers which offered little opportunity for short-term investments, he said.
Wright has more than 13 years' experience in real estate and previously held the position of vice-president in the Infrastructure Finance Group of Citi Global Markets in New York.
He previously rented a studio in Manhattan for US$3,000 a month, he said, but eventually moved into a one-bedroom apartment in Brooklyn for nearly half the cost or US$1,800.
Wright said that the fund managers are familiar with New York real estate and that Brooklyn offered the best return on investment when compared with other burroughs, due to its higher rate of "gentrification" or urban renewal.