In almost five years since it began investing in thriving states in the world’s largest economy in 2017, Emira has grown its equity investments in the US on an incremental deal-by-deal basis into a sizeable 350,000sqm portfolio of a dozen dominant open-air power centres. The portfolio’s value is a substantial US$660m, of which Emira’s equity investment is R2.2bn (US$140m).
Total offshore equity investments in the US now represent a meaningful 17% of Emira’s total asset base, further strengthening its diversification, which is a key strategic philosophy for Emira.
Geoff Jennett, CEO of Emira, says: “Our US equity investments have become a critical and core strategy. They enhance Emira’s diversification by geography, tenant and economy. We have established a track record and built good relationships in the US market with our partners, which enabled us to access this great investment at an approximately 10% annual cash on cash return in US$ per year. However, we anticipate a much higher total return from our investment in US$.”
This is the first time Emira has made an investment in the US with the express aim of undertaking a significant asset management initiative to create a capital value uplift while still satisfying its yield requirements. It intends to add a second grocer anchor to reinforce the centre’s dominance and unlock further value from the property.
“This transaction is positive for Emira’s balance sheet and income statement,” reports Jennett. Supporting the investment, the debt for the acquisition was raised in the US at property level before US interest rates increased substantially. Emira has recycled capital from certain disposals together with using existing debt on its balance sheet to fund its investment, which was locked in before some of the recent devaluation of the ZAR against the US$.
The large, best-in-class, grocery-anchored Summit Woods Crossing aligns strongly with all measures of Emira’s US investment strategy. It has grocer Target as a shadow anchor with tenants including hardware giant Lowes, Kohl’s, BestBuy and TJ Maxx. The centre is 98% let and over 90% occupied by national tenants with a high credit quality underpin. It has an excellent 5.6-year weighted average lease expiry (WALE).
Jennett adds, “Our international strategy enables capital recycling and allocation into more resilient environments than South Africa’s constrained economy, and provides US$-denominated returns. Subject to the right opportunities being found, we intend to continue on this investment path, taking an opportunity-by-opportunity approach with our American partners, staying focused on our chosen segment of retail property and delivering on value for our shareholders.”
Emira is a leading diversified REIT invested in a quality, balanced portfolio of retail, office, industrial and residential properties. It has total assets of R12.6bn, including 77 directly-held properties valued at R9.8bn in South Africa, various other associate equity investments in SA as well as its equity investments in grocery-anchored open-air convenience shopping centres in the USA.