‘Kangaroo County’: Odell’s lease highlights Dixon’s insider deals & gentrification of Jersey City
Odell Beckham Jr is probably the most famous tenant of a Dixon Advisory USA-owned property in Hudson County, but it was the Australian firm’s decision to market their relationship with the NFL star that’s brought light to some of the company’s internal operation and tactics.
Sometimes big stories have small beginnings.
The small beginning of this Real Jersey City investigation starts with a luxury pad in Weehawken leased by NFL star Odell Beckham Jr, and promoted by Dixon Advisory USA (Dixon), but ends with tactics that are contributing to the gentrification of working class neighborhoods in Jersey City.
Who is Dixon Advisory USA and Walsh & Co.?
Dixon is the U.S. subsidiary of Evans Dixon Limited, an Australian financial services firm which was established in February 2017 through the merger of Evans & Partners and Dixon Advisory.
The firm manages the US Masters Residential Property Fund (URF), a Real Estate Investment Trust (REIT) listed on the Australian Securities Exchange (ASX), which owns approximately $475 million worth of property in New Jersey (primarily Jersey City/Hudson County) and their subsidiaries include Dixon Leasing (property management) & Dixon Projects (construction).
Of interest to this story, Dixon is a related entity of the “Responsible Entity” of the URF – which is Walsh & Company. According to the URF’s website, “the Responsible Entity is responsible for the overall operation of the Fund including the determination of its strategic direction with the aim of increasing Unitholder wealth through the performance of the Fund.”
Additionally, the URF is a financial product that was established by Dixon Advisory in 2011 and is managed by its U.S. subsidiaries – which charges the REIT heavy fees. Most notably, Dixon Projects charges a fee of approximately 20% of construction costs for developing URF-owned properties.
Property leased by Odell was sold back-and-forth between URF and Walsh & Co. Chairman
The video above starring Odell Beckham Jr was published by Dixon on September 13, 2018, six months before the New York Giants traded the superstar wide receiver to the Cleveland Browns.
More importantly, it was published more than three years after Alexander MacLachlan, chairman of Walsh & Co., completed a pair of back-and-forth transactions with the URF involving the property at 997-999 Boulevard East in Weehawken. Below is a relevant timeline of the property’s ownership history, according to tax records:
- On November 14, 2012, the URF purchased the Weehawken property for $1,630,000 from the prior owners.
- Ten months later, on September 10, 2013, MacLachlan purchased the property from the URF for $1,900,000. Additionally, MacLachlan received a $1,881,000 adjustable rate mortgage from the URF to purchase the property.
- Eighteen months after that, on March 23, 2015, MacLachlan sold the property back to a Delaware LLC related to the URF for $2,645,000 – which was eventually transferred between two other LLCs associated with the fund for $1.
According to real estate sources, the transferring of properties for $1 between Delaware LLCs – a common practice for Dixon – is likely related to financing agreements with banking institutions.
Regardless, the transactions are at the heart of a report by Carrie LaFrenz and Jonathan Shapiro of the Australian Financial Review (AFR) questioning Dixon on the MacLachlan deal – specifically the lack of disclosure to Australian investors.
“The transactions regarding the director have never been disclosed to investors and Dixon says it had no obligation to do so,” according to the AFR report. “The company said the director paid for the renovations and sold the property for a price that reflected the spend, and because there was “no economic value” it did not have to be disclosed as a related party transaction.”
Additionally, a spokesperson for Dixon told the AFR that the firm “lawfully conducts its business to maximise value to unitholders and always complies with the laws of New Jersey and New York as well as all relevant Australian accounting standards,” and that they “reject in the strongest possible terms any inference that suggests otherwise.”
If Dixon’s claim that “no economic value” was gained by MacLachlan is true, one must assume the Managing Director & Head of Strategy for the“Responsible Entity” paid for all of the construction costs despite not being the only entity identified on permits for the property.
According to permit records obtained via an Open Public Records Act (OPRA) request with the Township of Weehawken, most of the construction permits identify MacLachlan and the US Masters as Owner in Fee – including after MacLachlan sold the property back to the URF. There was only one permit that was an exception and it identifies Dixon Advisory as the owner – which was an electrical permit applied for by ADT Security on February 18, 2015, while MacLachlan still owned the property.
Given the high fees charged to the fund’s investors by Dixon Projects, approximately 20% of construction costs for developing URF-owned properties, it’s worth wondering whether or not MacLachlan paid similar fees to renovate the Weehawken property – which may have made the transaction a loss instead of having “no economic value.”
Beyond questions regarding “who paid for what” — similar to the controversy reported on by Bloomberg News surrounding Dixon’s renovation of Mayor Steven Fulop’s properties — Australian investors should be most alarmed by what the Weehawken property was estimated to earn in rent vs. what it was actually able to fetch on the market.
Dixon’s profitable joint venture with landlords and a Manhattan brownstone
First reported in America by Real Jersey City, Dixon announced that they will “commence selling the property portfolio” as shares have fallen by 50% over the past two years and investors are beginning to panic about the URF’s financial health.
In spite of that news, Golden Peaks II, a joint venture between Dixon (67%) and mega-landlord Urban American Management (33%) which owns about a dozen Hudson County multi-family properties, will likely not be part of the portfolio sale.
That’s because the joint venture is one of Dixon’s relatively profitable investments – so it shouldn’t be surprising that Dixon hired the wife of a top Urban American stakeholder as a “contractor,” according to the AFR.
Despite being identified on Dixon’s website as a “Senior Project Manager and Designer with the Private Client Team at Dixon Projects,” Megan Eisenberg, whose husband Josh Eisenberg is a top executive with Urban American, is apparently an “independent contractor,” and not an employee of Dixon.
That could be significant because, if Megan were actually an employee, Dixon may have needed to disclose to Australian investors – as a related party transaction – that the Eisenberg couple received a $6.9 million loan from the URF to purchase and renovate a Manhattan Brownstone on the Upper West Side.
“The Eisenberg’s transaction was affected on an arm’s length basis at a price the fund considered attractive and vendor financing was provided at market rates, all of which benefited unitholders,” Dixon’s spokesperson stated to the ARF regarding the matter.
Dixon employee Jameel Mohammed’s “10% ownership” joint ventures with URF and gentrification tactics in Jersey City
While he didn’t get a photo-op with Patrick Mahomes II of the Kansas City Chiefs, getting to pose with Odell Beckham Jr is a nice consolation prize for Jameel Mohammed – an associate director at Dixon.
Mohammed is such a trusted Dixon employee that he’s been a “10% owner” of several properties acquired by joint venture with the URF, via Hudson County Sheriff’s Foreclosure Sales, only to transfer his ownership stake to the fund months later for $1.
That’s because the joint venture with Mohammed – as an individual vs. a corporate entity – is part of a strategy to make it easier for Dixon to legally remove tenants through the courts.
Dixon’s spokesperson told the AFR that its investment strategy targeted foreclosed homes, and in order to “maximise value for its investors,” the UFR used a “well-established strategy consistent with market practice of acquiring these properties in joint venture with a natural person.”
The spokesperson added that conducting transactions in this way meant “properties are able to be more easily vacated prior to renovation and disposal when purchased in joint venture with a natural owner than alone,” and the URF’s plan achieved “an average gain on disposal of 15%.”
According to the URF’s website, Dixon owns around 400 “workforce” housing properties worth nearly $200 million in New Jersey (primarily in Jersey City & Hudson County).
In conclusion, even if Mohammed’s joint venture with the URF is completely legal, it does raise ethical questions – especially when such tactics are being employed in working class neighborhoods and contributing to hyper-gentrification in Jersey City.