Emira to step up exposure to booming US
Emira Property Fund is selling down its stake in Growthpoint Australia and turning its focus to the world’s largest real estate market, the US, where it plans to entrench its position.
CEO Geoff Jennett said his team felt that its investment in Growthpoint Properties’ Australian arm is fully priced and that the US is offering better returns as its economy continues to grow strongly, thanks to healthy consumer spending and a low unemployment rate.
Emira owns a 24% stake in Growthpoint Australia, worth about R8OOm based on a share price of A$4.29. This investment has achieved a capital return of about 194% given the initial cost price of R272m.
Emira will gradually sell down its Australian investment rather than exit it in one move.
Emira became the first SA real estategroup to buy assets in the US in 2017 when it partnered with The Rainier Companies, a Dallas-based private commercial real estate investor.
The partnership invests in grocery-anchored shopping centres that serve people living in second-tier American cities.
The partnership has given Emira exposure to nine centres located in the south and southeastern part of the country, in states such as Ohio, Texas, Indiana, Florida, Missouri and Oklahoma. The centres provide Emira with tenants operating in nearly 250,000m’ of trading space in the world’s largest economy.
THEY WILL FACE MORE COMPETITION IN THE NEXT COUPLE OF YEARS AS COMPANIES THERE SEE THE VALUE IN POWER CENTRES
Emira’s American investment is worth about R1.1bn, about 9% of its R12bn asset base, and it remains the only JSE-listed fund with exposure to US commercial property. Jennett said he wanted to increase its portfolio in the US so that it accounts for 15%of Emira’s asset base in the next two years.
The Rainier Companies are run by four principals, including – Texas-based Danny Lovell. Texas is one of the fastest growing states in the US and Emira and Rainier have said their largest American investments will be there.
Lovell, speaking at a presentation in Johannesburg, said there are many investment opportunities involving “power shopping centres” – large, outdoor shopping malls that usually include three or more big box stores and in which the tenant mix is geared to convenience.
He said the “US economy is on a strong run”, with inflation at about 1.7% and unemployment at a 50-year low of 3.5%.
“There has been a lot of noise around how online shopping is hurting bricks-and-mortar stores, but while very large shopping malls may not be as popular as they were in the past, convenience centres are doing well,” he said.
E-commer ce sales accounted for only about 10.4% of total retail sales in the US in 2019 compared with 10% in 2018 and 9.5%in 2017.
Ahmed Motara, a property analyst at Stanlib, said Emira is “becoming an SA-US play” that could reap rewards for investors in the fund over time, with it having established its investment platform there.
“Growthpoint Australia has performed well over the past decade and it has been a good investment for Emira,” he said.
“They’ve decided to change strategy by shifting to the US market. It’s working well so far but they will facemore competition in the next couple of years as companies there start to see the value in these power centres, and buying assetsthatboost earnings will become harder.”
EMIRA BECAME THE FIRST SA REAL ESTATE GROUP TO BUY ASSETS IN THE US IN 2017 WHEN IT PARTNERED WITH THE RAINIER COMPANIES