US property manager makes second play in Australia

US property company Sentinel Real Estate Corporation is having a second crack at the Australian institutional investment market after an initial, unsuccessful attempt three years ago.

The company is offering access to New York rent-stabilised apartments through a vehicle aptly called The Gotham City Residential Trust. The fund had its first close last week and David Weiner, Sentinel Real Estate Corporation vice chairman, said the group was now optimistic of some Australian investors in the second close before the end of June after a week of visits with clients, researchers and asset consultants. The fund will have its final close March 16 next year and is targeting $250 million in funds under management and 15 per cent per annum returns. Sentinel sent a team to Australia three years ago to offer a core plus fund with target returns of 10 to 11 per cent. “There was very little interest in sending money to the US at that time,” Weiner said. Following legislation changes in 1997 owners of rent-stabilised apartments and rent controlled apartments are now allowed to increase rents to cover the cost of capital expenditure on buildings and newly vacated apartments. Once monthly rent has reached $2000 per week it is released from rent control and gives the owner more freedom to raise rents in line with market increases. While rent controlled apartments have seen their rents rise by inflation levels of approximately 3.75 per cent, market rents have been rising at closer to 6 per cent per annum in New York. The fund charges 1.5 per cent of commitments during the investment period and 1.5 per cent for all unreturned capital contributions thereafter. Larger investment amounts also attract discounted management expense ratios. “There’s a very limited downside,” Weiner said.