US Masters Faces Market and Tax Risks in 2026 Portfolio Wind-Down

Strategic Wind-Down Accelerates

US Masters Residential Property Group has delivered its full-year results for 2025, reporting a net loss of $57.3 million. This outcome reflects the Group’s transition to a non-going concern accounting basis, driven by the directors’ decision to cease operations through the targeted disposal of its entire US residential property portfolio by the end of 2026. While this timeline remains a target rather than a forecast, it marks a significant strategic pivot from ongoing property management to an accelerated capital return phase.

Sales Performance Surpasses Expectations

The Group set an ambitious sales target of US$200-225 million for 2025, a substantial increase from prior years. Impressively, US Masters exceeded this target, achieving US$244.2 million in property sales. This strong sales momentum reduced the portfolio to 161 remaining properties with a net realisable value of US$166.4 million. The sales pipeline remains robust, with a mix of settled properties, assets under contract, and those actively listed or being prepared for sale.

Accounting and Taxation Implications

Following the decision to wind down, the Group adopted a non-going concern basis for its 2025 financial statements. This change required investment properties to be measured at net realisable value, factoring in disposal costs estimated at approximately 7.25% of gross sales price, rather than fair value. Concurrently, the Group reclassified its US vehicle from a Real Estate Investment Trust (REIT) to a taxable corporate (C-Corp) structure effective 1 January 2025. This reclassification eliminated the previously recognised deferred tax liability of $40.2 million, reflecting a fundamental shift in the Group’s US tax position and cash flow outlook.

Capital Management and Distributions

Capital management has been a key focus throughout the sales program. The Group paid distributions totaling $75.8 million during 2025, including a 10 cents per stapled security distribution declared in July and paid in August. A further distribution of 10 cents per security, amounting to $68.8 million, was declared post-year-end and paid in February 2026. These distributions underscore the Group’s commitment to returning capital to security holders as assets are realised.

Risks and Market Conditions

The Group continues to face several risks that could affect the timeline and outcomes of its wind-down strategy. These include the concentrated exposure to the New York metropolitan residential property market, foreign currency fluctuations given the US dollar-denominated assets, refinancing risks related to its Global Atlantic loan facility, and potential regulatory or tenant-related delays. Notably, the New York Premium segment of the portfolio experienced a 9.67% fair value decline in 2025, influenced by softer market conditions in areas such as Harlem. However, New Jersey segments maintained relatively firm pricing and activity.

Governance and Outlook

The Board, led by Chair Stuart Nisbett, remains focused on navigating the final stages of the asset sales program. Monthly and quarterly updates will continue to provide transparency to security holders. The Group’s governance framework, including risk management and compliance policies, supports this orderly wind-down. While the 2026 disposal target is ambitious, the Group acknowledges potential timing risks and is proactively addressing them in collaboration with its brokers and management team.