Monday, March 29, 2010

Natie Kirsh - Property Mogul

Not only is Natie Kirsh a venerable retailer (see post below), but he's also a property mogul!

Property has always been part of Natie Kirsh’s empire, from his first shopping centre in Swaziland in 1966 to his 1970s Nedbank Mall and the centers he built when he controlled Checkers.

Now it is where he wants to invest most of his free capital. Why? “There are many deals floating around,” says Kirsh. “The big guys have got indigestion and the little guys can’t raise funding.” Over the next two years as much as £160bn of property finance matures and must be renegotiated with UK banks that are not eager to lend on property.

“There are also large corporations that have decided to reduce their property exposure,” he adds. “It’s logistically impossible for them to sell their properties one at a time, so they look for investors with deep pockets to buy in bulk.” Kirsh points to a document on his desk. “This is a large US commercial property portfolio that would have a market value of US600m if the properties were valued and sold individually.”

He says there is the income stream that would value the property at a forward yield of say 8% and the price would be the value less the borrowings. “But if we buy the lot, we could pick them up for 350m or 400m, giving us a 14% yield. I then put in say 150m in cash, borrow the rest and I would have an excellent investment with positive cash flow.”

More friendly is his 30% acquisition of Australian listed property trust Abacus. Kirsh’s timing was good. He paid A25c for a 15% share last year and underwrote a rights issue at the same price. The price has since almost doubled. Abacus needed to raise funds to bring its loan to value ratio down to meet its covenants with its lenders. Kirsh showed how to do this and now everybody is doing it the same way.
That is small compared with the deal he has been negotiating in Europe — a huge financial services-owned portfolio of commercial and residential properties with a good cash flow but with a large debt that he will have to refinance. All other bidders have been eliminated, and it’s down to government giving the nod. As the interviews with Kirsh progressed last week, he became more hesitant about going into it. “It’s very complicated,” he says. “ I’ve already got deal fatigue.”

In 1980, he met the mayor of Herzlia in Israel who excited him about the idea of a marina that would transform the city. So with an Israeli partner, Moti Zisser, they built a massive development, that included Israel’s first Marina.

He has other investments in Perth. With his partners, they have a joint venture with the Western Australian Cricket Association to develop the land around the WACA stadium. He recently paid A80m (R550m) for a prestige office building, Westfarmers House, in the Perth CBD.

This will free up Kirsh to think big. “Property needs less management. But it is also a real asset,” says Kirsh.