US Masters Reports 2.84% Portfolio Dip, US$119M H1 Sales, and 8% NOI Growth

Portfolio Valuation and Market Dynamics

US Masters Residential Property Group (URF) has reported a 2.84% decrease in its portfolio valuation for the half-year ended 30 June 2025, primarily due to a 4.38% decline in the New York Premium segment. This segment’s softness reflects a slight slowdown in sales velocity amid market uncertainty following the nomination of Zohran Mamdani for New York City mayor. Despite this, the Group continues to execute sales contracts at a robust pace across New York and New Jersey, leveraging a mix of on-market and off-market sales strategies, including direct-to-tenant transactions and multi-property packages in the New Jersey Workforce segment.

Sales Performance and Debt Reduction

The Group closed 47 property sales in Q2 2025, generating US$70.92 million and bringing total sales for the first half of the year to US$118.99 million. Proceeds from these sales were strategically deployed to repay US$40.88 million of the Global Atlantic Term Loan, reducing the outstanding balance to US$150.82 million. Notably, the expiry of the early repayment penalty period and a successful amendment to the Tangible Net Worth covenant have enhanced the Group’s financial flexibility, enabling the repatriation of US$51.2 million to Australia for distribution to security holders.

Operational Highlights and Income Growth

On the operational front, the Group’s Net Operating Income (NOI) on a same-home basis increased by 8% year-on-year to US$4.9 million. This growth is attributed to significant rental increases on lease renewals, a deliberate strategy to drive vacancy in preparation for sales while boosting income where tenants accept higher rents. The portfolio’s occupancy stood at 74%, with a focus on maintaining a balance between leased and vacant units to optimise sales outcomes.

Financial Position and Capital Management

Despite recording a Funds From Operations (FFO) loss of A$19.7 million for the half-year, the adjusted FFO loss excluding disposal and one-off costs narrowed to A$4.6 million, consistent with expectations during the portfolio sell-down phase. The Group also continued its on-market buyback of URF Stapled Securities, acquiring 2.09 million securities for A$0.78 million in the quarter. The post-tax Net Asset Value (NAV) stood at A$0.541 per security as of 30 June 2025, reflecting the ongoing impact of portfolio disposals and associated transaction costs.

Outlook and Strategic Focus

With a sales pipeline valued at US$175.64 million, including US$61.40 million under contract or in attorney review, the Group remains optimistic about meeting its 2025 sales target of US$200 to US$225 million. The Directors continue to evaluate the optimal use of net proceeds, balancing distributions to security holders, further debt reduction, and security buybacks. Market conditions, particularly in New York, will be closely monitored as the Group navigates a cooling buyer sentiment and the evolving political landscape.