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 diversified SA 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 because of its variety of niche property sectors.
CEO Geoff Jennett said Emira’s partnership with US private Dallas-based group Rainier has been highly successful since the two started coinvesting in grocery-anchored convenience retail centres a year ago.
Jennett said Emira has interests worth $32m in four centres and that 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 is a misconception that online retail is killing bricks and mortar retail, which has prompted many listed funds to sell shopping centres. Private companies including Rainier have seen this as an opportunity to invest in well-priced “power centres”.
Power centres are unenclosed shopping centres typically between 250,000 square feet or 23,000m² and 600,000 square feet or 56,000m² which usually contain three or more big box retailers and various smaller retailers, most often located in strip plazas, with a common parking area.
Rainier was founded in 2003 and is run by four principals, including Lovell.
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 is experiencing a period of strong growth, which is helping bricks and mortar retail throughout the country.
“The US’s GDP is estimated to grow at 4% on an annuallised 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,” said Lovell.
Emira has exposure to a Belden Park Crossings in North Canton, Ohio, 32 East in Cincinnati, Ohio, Moore Plaza in Corpus Christi, Texas and Stony Creek in Noblesville, Indiana.
Emira and Rainier are 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.
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