Property Flash


It’s fair to say that Emira Property Fund was right to invest in the world’s largest real estate market, the US, almost five years ago, as its exposure there continues to be a buffer against a weak South African economy.

Many property market analysts had criticised Emira when it chose to spend hundreds of millions in the US. They said the company had no business sending South Africans had-earned pension money to a highly competitive market which operates at different time zones to SA.

But the diversified real estate investment trust (Reit) reported this week that its distributable earnings climbed 3.8% to R673 915m in the year to end-June 2022, largely because of a strong performance from the grocery anchored American shopping centres which it has exposure to.

Americans have returned to shopping centres in droves after Covid-19 restrictions were eased or scrapped altogether in different states.  

Emira’s management reported that its South African asset base was worth R9.8bn and its US exposure was worth R2.4bn at the end of June 2022. CEO Geoff Jennett said Emira’s American exposure had performed especially well as the economy there climbed out of the Covid-19 pandemic.

“As a fund, the past few years have been incredibly challenging for us. We faced an economic recession and the Covid-19 pandemic. During this period, we reinvested into assets which have helped us through and now have exposure to twelve American assets through our partnership with the Rainier Group of Companies,” Jennett said.

Emira and Rainier co-own American strip mall type assets, called power centres in the US. These are neighbourhood centres which are anchored by large super markets and maybe one large clothing retailer.  

“Currently, American assets account for 18% of our total asset base, while 82% is SA. Over the long term, America will account for between 20% and 30% of our assets. We have been investing in the US since 2017 and we want the market to understand that we are in it for the long haul,” Jennett said.    

The American adventure began in October 2017 when Emira was in a spot. It was batting with managing a mix of offices, many of which were B and C grade and not premium and A grade properties.

The SA Property Owners’ Association (Sapoa) defines P-grade office space as brand new or almost new top-quality office space.  

Grade A office space is generally not older than 15 years or it is space which has had major renovations, has high-quality modern finishes, air conditioning, adequate onsite parking and is getting rents near the top of the range.

Grade B office space refers to older buildings with accommodation and finishes close to modern standards as a result of refurbishments, with onsite parking and air conditioning. Grade C office space refers to buildings with older finishes and services that may have onsite parking and air-conditioning.

It was difficult for Emira to find buyers for the weaker offices as well as underperforming retail properties. Emira had to take a chance and the US offered an attractive opportunity.

Emira established its co-investment strategy with Rainier, a Dallas-based investment and real estate business back in 2017. Where opportunities met predefined investment criteria, Emira and Rainier would partner on a 49% to 51% equity basis, respectively, at the individual property level.

Emira hold its share in these US investments through a US based subsidiary, managed by in-country fund manager Continuum Investments LLC, based in Dallas. Continuum is headed by CEO Rick Makin, a US-based South African entrepreneur.

The Reit now has exposure to malls in places such as Cincinatti and North Canton Ohio, Dawsonville Georgia, Corpus Christi Texas, Newport Kentucky, San Antonio Texas and Noblesville, Indiana.

Emira has in the past faced takeover interest from Redefine Properties, Arrowhead Properties and SA Corporate Real Estate.  Emira is now in another much sweeter position than it was a few years ago, while Arrowhead has been bought by Fairvest. Redefine has looked elsewhere for deals and SA Corporate is trying to rationalise its portfolio.

Picture supplied by Emira

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