Emira to invest further in the US
Bricks and mortar retail offers opportunities to SA firm
Emira Property Fund, the only JSE-listed SA real estate company invested in the US, plans to increase its asset base fourfold in that country to R1.7bn in the next 18 months. The group plans to reach the target by July 2020, saying the world’s largest real estate market is the most appropriate region for it to invest in because of its variety of niche property sectors.
Emira Property Fund, the only JSE-listed SA real estate company invested in the US, plans to increase its asset base fourfold in that country to R1.7bn in the next 18 months.
The group plans to reach that target by July 2020, saying the world’s largest real estate market is the most appropriate region for it to invest in because of its variety of niche property sectors.
CEO Geoff Jennett said Emira’s partnership with Dallasbased group Rainier had been highly successful since the two started co-investing in grocery-anchored convenience retail centres a year ago.
Jennett said Emira had interests worth $32m in four centres and this would increase to $120m within 18 months. The $32m accounted for 3.1% of Emira’s R15.1bn asset base.
He expected the group’s US exposure to be 4% of its total assets by the end of the 2019 June financial year. The following year it would be about 12% of its total assets.
Jennett said Emira “freed up a large amount of cash from the sale of B and C-grade offices” which would be used to invest in the US.
“The macro and micro [economics] work well for us. We really like the relationship we have created with Rainier and are focusing any money we would invest offshore on the US and not other countries,” he said.
Emira only has interests in one other country Australia through its investment in Growthpoint Australia.
US bricks and mortar retail is offering many investment opportunities to Emira and Rainier. Rainier principal Danny Lovell said that there was a misconception that online retail was killing bricks and mortar retail, which had prompted many listed funds to sell shopping centres. Private companies including Rainier had seen this as an opportunity to invest in well-priced “power centres”.
Power centres are unenclosed shopping centres typically between 23,000m² and 56,000m²
Where opportunities meet predefined investment criteria, Emira and Rainier partner on a 49% to 51% equity basis, at the individual property level.
Lovell said the US economy was experiencing a period of strong growth.
“The US’s GDP is estimated to grow at 4% on an annualised basis. Nationally, unemployment is as low as 3.9%. These strong macro factors are driving investment in a very large retail market. As many as 14,000 new stores opened while only 10,000 closed in 2017. The retail apocalypse has been exaggerated,” Lovell said.
Emira and Rainier were considering the purchase of a retail centre in a southern US state and a deal could be completed in the next few months, Jennett said.
Stanlib’s head of listed property funds, Keillen Ndlovu, said Emira appeared to be investing in the US at attractive prices.
“They are acquiring assets at around 8% yield, on average, which looks cheap if the income proves to be immune from the negative impact of retail market saturation as well as the growing online shopping phenomenon,” he said.
WE REALLY LIKE THE RELATIONSHIP WE HAVE CREATED WITH RAINIER AND ARE FOCUSING MONEY ON THE US AND NOT OTHER COUNTRIES