Highlights of the Fund

Transcription

1 Highlights of the Fund 2 cent distribution declared for the quarter current forecast net return on the portfolio is 8.5% ungeared and 11.9% geared current portfolio value is approximately $4.5m approval to commence investing in two new cities unemployment continues to decrease and stands at 7.7% home prices increased year on year 7.4% as at November 2012 further 5 properties were acquired In this issue Highlights of the Fund Property Corner Unit Price Capital Raising Activities The US Residential Market Market Snapshot Portfolio Finance Other Cities Distributions Updates Investor Relations Sources Property Corner This quarter we look at a purchase we made in Dallas. What did we spend the money on refurbishing the property? 200 Rainsong Drive, Cedar Hill, Dallas, Texas Purchase Price $88,250 Expected refurbishment cost $25,000 (actual cost $25,750) Total Cost (incl closing costs) $114,750 (actual total cost $117,800) Forecast value after refurbishment $135,000 Uplift in property value (before fund fees & closing cost) 18.4% Expected rent $1,550 pcm Settled 28/8/12 Available for rent 2/10/12 Rented 9/11/12 at $1,550 Net geared yield 11.6% Item Cost Internal painting $2,800 External painting $2,200 Plumbing $2,300 Electrical $2,500 Tiling $2,250 Doors & hardware $1,300 Exterior works $500 Landscaping $2,200 Window dressing $1,200 Kitchen cabinets $350 Carpet $2,450 Pest treatment $650 Appliances $1,450 Air conditioning $2,650 Other $950 Total $25,750

2 Unit Price The current unit price of your investment is $1.08 ex dividend. The increase in the unit price reflects the revaluation of the properties from cost value to market value in both Dallas and Atlanta and currency movements between the AUD and USD. Unit Price History AUD $1.13 $1.12 $1.11 $1.10 $1.09 $1.08 $1.07 $1.06 $1.05 $1.04 $1.03 $1.02 $1.01 $1.00 $0.99 $0.98 Jun Jul 2011 Aug 2011 Sep 2011 Oct 2011 Nov 2011 Dec 2012 Jan 2012 Feb 2012 Mar 2012 Apr 2012 May 2012 June 2012 July 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec Capital Raising Activities During the quarter we received $800,000 in new commitments. The US Residential Market The USA economy continues to show signs of recovery. Home prices nationwide, including distressed sales, increased on a year-overyear basis by 7.4% in November 2012 compared to November This change represents the biggest increase since May 2006 and the ninth consecutive increase in home prices nationally on a year-over-year basis. Rental rates continue to improve. Period Statistic Average Real GDP Q % 3.2% Unemployment Nov % 5.8% Population Growth % 1.2% Single Family Starts Nov ,000 1,046,892 Single Family Permits Nov , ,965

3 Market Snapshot the National Association of Home Builders expects construction of single-family homes to surge nearly 22% in 2013 to 650,000 units and spike 30% to 844,000 in Whilst this is a significant increase it will still be 40% below the long term average. national foreclosure inventory fell 18% from foreclosure filings in 2012 were 2,304,941 properties, down 3% from 2011 and down 36% from the peak of 2.9 million properties in That s one in every 72 homes had at least one foreclosure filing during the year. short sales are starting to outnumber REO sales. U.S. Annual Foreclosure Activity U.S. Properties with Foreclosure Fillings 2,824,674 2,871,891 2,330,483 1,887,777 1,836,634 1,285, , , shadow inventory as of October 2012 fell to 2.3 million units, representing 7 months of supply. Figure 1. Shadow Inventory Detail Count in Millions, Not Seasonally Adjusted Source: CoreLogic October 2012

4 as at January 2013, 10.9 million homeowners (representing 26%) of all outstanding homes with mortgage - were seriously underwater, meaning they owed at least 25% more on their home than what it was worth. Negative Equity Share by Country foreclosure activity in 2012 increased from 2011 in 25 states - 20 of which primarily use the longer judicial foreclosure process and decreased in 19 of the 24 states that use the non-judicial process Judicial States Foreclosure Inventory Foreclosure Inventory % point charge from a year ago Completed Foreclosures National 3.20% -0.30% 768,189 FL 10.40% -1.60% 94,427 NJ 7.30% 0.90% 3,015 NY 5.10% 0.50% 4,394 IL 4.70% -0.70% 28,481 ME 4.20% 0.00% 597 CT 4.10% 0.00% 3,752 HI 3.90% 0.20% 415 MD 3.30% 0.20% 3,257 OH 3.10% -0.50% 26,213 SC 3.10% -0.60% 11,388 NM 3.10% -0.20% 2,263 IN 3.00% -0.60% 18,016 OK 2.60% 0.10% 9,132 Non Judicial States Foreclosure Inventory Foreclosure Inventory % point charge from a year ago Completed Foreclosures National 3.20% -0.30% 768,189 NV 4.70% -0.90% 15,562 RI 2.90% 0.20% 1,885 OR 2.70% -0.10% 8,136 WA 2.40% 0.90% 11,922 ID 2.20% 0.00% 4,623 DC 2.20% -0.30% 62 NC 2.00% -0.50% 27,683 MS 2.00% -0.60% 1,359 GA 1.90% -0.70% 51,905 TX 1.10% -0.30% 57,853

5 realtytrac believe there could be a backlog of delayed foreclosures building up in some of the non-judicial states as the result of recent state legislation and court rulings that raise the bar for lenders to foreclose and expect to see continued increases in some non-judicial states near the end of the year as lenders adjust to the new laws and process that deferred foreclosures in those states. The influx of foreclosure activity in 2012 in many local markets should translate into more foreclosure inventory available for sale in 2013 in those markets. That is good news for buyers and investors, but could result in some short-term weakness in home prices as the often-discounted foreclosure sales weigh down overall home values. Georgia posted the nation s fourth highest state foreclosure rate, with 2.58% of housing units (one in 39) Best Performing Cities 2012 Where America s Jobs are created and sustained (Milken Institute) The annual Best-Performing Cities reports provides a data-driven, comprehensive measure of economic strength across metropolitan areas, illuminating the job, wage, and technology trends that shape prospects for success. The Best-Performing Cities index was designed to measure which U.S. metropolitan areas are promoting economic vitality based on job creation and retention, the quality of new jobs, and other criteria. The index pinpoints where employment is stable and expanding, wages and salaries are increasing, and economies and businesses are thriving. In 2012, high-tech was high-powered. Rewards accrued to communities that embraced technological know-how. Designing and producing communications and computing devices, and serving companies and consumers online, were good businesses to be in. It also helped to have the stuff in the ground to meet America s energy needs and host industries that lent stability to the local economy, if not spectacular growth. Among this year s key findings: Texas metros didn t dominate the rankings quite as much as last year but still took three of the Top 10 positions and seven of the Top 25. good news came in the form of a recovery in traditional manufacturing. elsewhere, in the South, Atlanta, GA. and Naples-Marco Island, Fla. moved up as their severe housing slumps bottomed out. Table 1. Best Performing Cities: Top 25 large metros Metropolitan statistical area (MSA) 2012 rank 2011 rank San Jose-Sunnyvale-Santa Clara, CA 1 51 Austin-Round Rock-San Macros, TX 2 4 Raiegh-Cary, NC 3 14 Houston-Sugar Land-Baytown, TX 4 16 Washington-Arlington-Alexandria, DC-VA-MD-WV 5 17 Salt Lake City, UT 6 6 Provo-Orem, UT 7 9 Cambridge-Newton-Framingham, MA 8 12 Charleston-North Charleston-Summerville, SC 9 11 Fort Worth-Arlington, TX New York-White Plains-Wayne, NY-NJ Fort Collins-Loveland, CO 12 3 Seattle-Bellevue-Everett, WA Dallas-Piano-Irving, TX 14 30

6 Table 3. Biggest gainers among large MSAs Metropolitan statistical area (MSA) 2012 rank 2011 rank Spots climbed Holland-Grand Haven, MI Minneapolis-St. Paul-Bloomington, MN-WI Memphis, TN-MS-AR Gary, IN Naples-Macro Island, FL Charlotte-Gastonia-Rock Hill, NC-SC Atlanta-Sandy Springs-Marietta, GA Bridgesport-Stamford-Norwalk, Ct Spartanburg, SC Warren-Troy-Farmington Hills, MI Indianapolis-Carmel, IN Portfolio Property Profile RENTED - 33 AVAILABLE FOR RENT - 4 UNDER CONTRACT - 3 REFURBISHING % 9% 7% 5% Rental Profile - Portfolio Portfolio Summary $5,000,000 $4,500, months 42% 0-6 months 30% AUD $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 Purchase Price Total Cost ARV 6-12 months 28% $1,500,000 $1,000,000 $500,000 $0 Refurb Cost

7 Finance The Dallas facility of $650,000 is fully drawn. The Atlanta facility of $459,000 is only partial drawn. The leverage on the portfolio after accounting for pending settlement will be approximately 28%. We are currently in discussion to obtain further lines of finance with the existing lenders. Other Cities We will be travelling to the USA this month to evaluate the opportunity to invest into a third and fourth city. We have shortlisted three preferred cities following our research of potential cities. The three cities we are considering are Charlotte, North Carolina, Indianapolis, Indiana and Oklahoma City, Oklahoma.

8 In considering the next cities to invest in we again worked from the matrix we first established to choose Dallas and Atlanta. The most significant attributes of these cities are the strong population growth and employment markets. Certainly in the case of Atlanta a lesson we have learnt is that whilst it is a large powerful city, it has become heavily supported by institutions and investors, which has put pressure on prices and increased the rental pool, a similar pattern to what happened in Phoenix and Las Vegas. In moving to a smaller market we don t expect that institutions will follow as they can t achieve the scale they require. The other conscience decision we have made is to avoid the judicial states and tenant friendly states which has discounted a number of the larger cities. It should be noted that other Texan cities have rated highly in our matrix for investment but at this time we have made a decision not to invest into a second Texan city to provide greater diversity for the Fund. To remind you the following criteria is what goes into our investment matrix. Income per capita verse the national average Net migration rate Population of the city and the metropolitan area Average house value The economic drivers of the city Unemployment rate and Future job growth prospects Projected property yields, based on rent vs. Purchase price Rental vacancy rates Level of foreclosures In the market Transport infrastructure Average household income State GDP per capita verse the national average

9 About Charlotte North Carolina largest city in the state of North Carolina. 17th largest city and 33rd largest MSA in the United States by population. MSA population of 1,795, hour plane ride from 60% of the US population. (6th busiest in the USA and the world by movements 2011) #1 fastest growing area from 2000 to 2010 (the population surged at a rate of 64.6% during that decade, the national rate was 14.3%). #1 homes prices increase 2011 (of 152 MSA). #4 fastest growing job market #5 highest migration of your educated workers. #7 highest wages (of 144 southern MSA). #8 next biggest boom town (of 52 largest metros). #10 economic growth (of 50 states). #14 fastest growing metro 2011 (of 353 MSA). highly diversified economy. one of the best education systems in the country. ranked 8th in the US for concentration of fortune 500 companies headquarters. 273 of the fortune 500 companies have a presence in the Charlotte metro. second largest financial centre after New York City. major base of energy-oriented organizations and has become known as The New Energy Capital. There are more than 240 companies directly tied to energy sector collectively employing more than 26,400. growing trucking and freight transportation hub. manufacturing, healthcare and the energy industry are key components of the Charlotte business community. About Oklahoma City Oklahoma largest city in the state of Oklahoma. 31st largest city and 43rd largest MSA in the United States by population. MSA population of 1,278,849. #1 ranked city for economic security. #17 fastest growing cities. #4 largest increase in private sector jobs over the past five years. 6th highest job growth rate % unemployment. population growth rate 2%. affordable housing with attractive yields and good discounts to highs. highly diversified economy. federal, state and local governments are the largest employer at 21.4%. oil and gas generate the largest revenues. other major industries include energy, health care, transportation, education and professional services. 3rd largest producer of natural gas in the USA. About Indianapolis Indiana largest city in the state of Indiana. 12th largest city and 35th largest MSA in the United States by population. MSA population of 1,795,472. well diversified economy. (Pharmaceuticals, Logistics, Technology, Automotive) fourth ranked U.S. city for high-tech job growth #2 most affordable city to buy a house. attractive yields and discounts to previous highs. 6.4% unemployment. growth rate 1.27%. 2nd largest FedEx base in the world. United States Postal Service network hub. distribution centres for Amazon, CVS Pharmacy, Target.

10 Distributions The Fund paid a 2.0 cent distribution for the quarter. All unit holders who nominated the DRP will receive additional units and these will be added to the unit register. Our online portal to access your holdings and distribution statements will go live next month. All investors will receive notification and logon details. Updates All and any updates to the Fund or the PDS will be made via the website at Investor Relations Should you have any questions regarding the fund and your investment please contact Brent Mulligan on or info@quantumgroup.com.au Sources Realtytrac CoreLogic CNN Forbes Bureau of Labour Statistics US Census Bureau National Realtors Association Oklahoma Chamber of Commerce Charlotte Chamber of Commerce Indianapolis Chamber of Commerce University of North Carolina Milken Institute Yours sincerely, Quantum Funds Management Ltd ACN AFSL Level 5, Fairfax House Pitt Street, Sydney NSW 2000 Contact investors@quantumgroup.com.au during business hours The information in this is not to be taken as taxation, investment or advice and is only an indication of the views of the writer and can not be relied upon by the receiver. Should the information be acted upon the receiver is doing so at their own risk. If the receiver requires this advice to be used and acted upon they will require this to be presented on the letterhead of the writer. This has been sent to you on behalf of Quantum. The new Spam Act commenced on 10 April This Act is aimed at reducing the amount of unauthorised s you receive. If you do not want to receive this type of electronic communication from Quantum, please send a reply to the following address unsubscribe@quantumgroup.com.au. In doing so, we will exclude you from our database for future marketing s.