INVESTMENTS

Investment Thesis

• Attractive financial performance 
• 5 Year IRR of 12%+ – targeting 15%+
• Initial Distribution Yield to shareholder of 6+% p.a.
• Targeted Distribution growth of 5% p.a.
• Fixed-term interest-only senior debt
• Internally managed

Other Investment Considerations

Commentary on Vacancies

Vacancies of up to 10% are acceptable and can add value to the AmCon investment. Our property managers usually have a detailed asset-tailored plan on back-filling the space, which will consequently provide a marked uplift to year-on-year growth going forward. The vacancy remains outside the Portfolio purchase price and is factored into the NOI upside in terms of future financial reporting. In conjunction with Pad development opportunities that remain to be unlocked, the combined value-add that is inherent in the transaction is a positive driver and underpins the Investment Thesis for the Assets. The AmCon thesis of acquiring value-add assets, rather than fully stabilized assets with limited or no growth potential, is a key factor in our acquisition strategy.

Commentary on LTV exposure differences between the USA and Europe/South Africa

The CRE Market in the US offers a different approach to LTV analysis and debt covenants to those experienced in the European/South African property sector. The key element of the EU/SA approach is based on periodic asset revaluation to events and circumstances, which in turn requires greater amounts of equity input to maintain debt covenants at required ratios. In economic downturns, EU/SA Reits are negatively affected by the decline in their asset values and have had to constrain cash outflows accordingly, in order to maintain and top-up on their LTV covenants. However, financial institutions in the US adopt a very different approach to the same issue, whereby the focus is centered on debt serviceability coverage ratios and not on asset value, thus LTV’s are secondary to cash flows, which allows for US Reits, particularly in the private sector, to maintain LTV levels in the 50% to 65% range on the back of debt serviceability ratios of 2x to 3x. It remains a truism that cash-on-cash investor yield will be more advantageous to a fund geared to a 50% LTV ratio than at extremely conservative levels of 30% – 40%. Of further assistance to the US LTV model, is the availability of lower cost money, interest only ( IO ) and fixed for 10 years. This yield spread is unobtainable in the EU/SA Markets, thus requiring the EU/SA Reits to maintain lower LTV ratios.

Value Proposition

• Direct investment offering 100% direct exposure to superior US CRE Assets and returns
• US economy stands out Globally – robust CRE market performing strongly (particularly Neighbourhood centres). Steady, dependable history of industry growth showing resilience over time. 
• In Sep 2020 retail sales returned to pre-pandemic trajectory
• Proven investment thesis – grocer-based Neighbourhood retail; Power Centres in Central & Eastern USA
• Proven standing in US property and banking sectors
• Proven track record of retail asset sourcing, acquisition, value-add and returns in USA
• Established network of reputable strategic retail real estate partners in USA
• Distinct access to substantial assets and positioned to negotiate off-market assets
• Early bird opportunity due to ‘on-the-ground’ market presence
• Agile to capitalise on the dynamic playing field

US retail landscape

Retailer summary

Online retail