Emira Property Fund has acquired its twelfth grocery-anchored, open-air shopping centre in the US.
With its in-country US investment partners, the Rainier Group of Companies, Emira has now invested a further US$18.45 million into the equity of a +- 50 000m2 super-regional, open-air shopping and dining power centre, Summit Woods Crossing in the Lee’s Summit suburb in Kansas City, Missouri, Emira’s biggest and highest value single US investment to date.
In the five years since piloting its investment journey in the USA in 2017, the REIT has grown its equity investments on an incremental deal-by-deal basis into a sizeable 350 000m2 of a dozen dominant open-air power centres with a portfolio value of US$660 million, of which Emira’s equity investment is R2.2 billion (US$140 million).
Total offshore equity investments in the US now represent 17% of Emira’s total asset base, further strengthening its diversification.
“Our US equity investments have become a critical and core strategy. They enhance Emira’s diversification by geography, tenant, and economy. We have established a track record and built good relationships in the US market with our partners, which enabled us to access this great investment at an approximately 10% annual cash on cash return in US$ per year. However, we anticipate a much higher total return from our investment in US$”, comments CEO of Emira, Geoff Jennett.
This is the first time Emira has made an investment in the US with the express aim of undertaking a significant asset management initiative to create a capital value uplift while still satisfying its yield requirements. It intends to add a second grocer anchor to reinforce the centre’s dominance and unlock further value from the property.
“This transaction is positive for Emira’s balance sheet and income statement,” reports Jennett. Supporting the investment, the debt for the acquisition was raised in the US at property level before US interest rates increased substantially. Emira has recycled capital from certain disposals together with using existing debt on its balance sheet to fund its investment, which was locked in before some of the recent devaluation of the ZAR against the US$.
The large, best-in-class, grocery-anchored Summit Woods Crossing has 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).
“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“, concludes Jennett.