February 24 2023
London Stock Exchange-listed Grit Real Estate, the pan-African landlord, is refocussing its portfolio nine years after its formation.
Grit reported in financial results released for the six months to end-December 2022, that it had made steady progress in its pursuit of its 20% recycling target by December 31 2023.
Grit disposed of its interests in assets worth US$53.3m (R988m) in the period and a further $56.7m (R1bn) announced after the balance sheet date. Its announced asset disposals, including a pending sale of its investment in Beachcomber Hospitality were now in excess of $126.3m (R2.3bn) which represented 15.8% of the targeted 20%.
“We are looking to invest in impact assets which are tenant led. These include healthcare, data centres and other specialised assets. We will exit our hospitality assets which no longer suit the fund. They were opportunistic acquisitions at the time, often bought through sale and leasebacks and have performed well for us. They are largely being sold at book value,” said CEO Bronwyn Knight.
“The sale of of Beachcomber, for example, will also reduce our exposure to euros, and let us focus our earnings in dollars. Being able to sell the asset a book value proves its value in the market, which can be difficult as few assets are sold with frequency in Africa,” she said.
Grit had four American embassies as tenants so far attached, and four more to come at its accommodation assets.
“These are highly resilient tenants that have served us well. Our strategy has shifted to exit retail and hospitality assets in favour of the specialised assets like corporate accommodation,” said Knight.
On August 22 2022, Grit had increased its stake in Gateway Real Estate Africa (GREA) to 35.01% and, in conjunction with its interest in Africa Property Development Managers (APDM), was expected to accelerate materially the group’s ability to access development returns from risk mitigated development projects and introduce the potential for new revenue and fee income streams. Grit has the option to acquire a further 13.61% interest in GREA and an additional 1% of APDM by May 15 2023, giving it control over both entities at that date.
Grit had a portfolio worth around $832m prior to the GREA deal. As it acquires more of GREA, $400m worth of assets will be consolidated into its portfolio. GREA will act as Grit’s development arm.
One project which is set to enhance Grit’s returns is a call centre being developed by GREA in Kenya. This 12000m2 call centre will bring with 1.5-million workers from the Philippines.
Grit independently values all its assets at the financial year-end and at least 50%, by value, at the interim
reporting date. For the six months ended December 31 2022, 60% of the portfolio was independently valued with total income producing assets valued at US$832.8m, including positive local
currency like-for-like fair value gains of US$3.0m, net disposals of US$27.6m and additions and capital
expenditure of US$13.7m.
The group’s loan-to- value (LTV), which measures its debt compared with its assets, decreased to 45.5% at December 31 2022. The Board remained committed to reducing LTV to its medium-term target of between 35% to 40% through capital recycling initiatives, acquisitions and through the consolidation of GREA upon gaining control of the company.
Grit’s property portfolio now comprises a total of 60 investments, across twelve countries and seven asset
classes. Its net operating income in the six month reporting grew 9.1% versus the comparable period,
positively affected by leasing activity and rent escalations achieved.
Grit’s board declared an interim dividend, out of operating profits, of $2.0c per share for
the six months ended December 31 2022 compared with the 2021 comparable period’s $2.50c per share.
The board continues to target paying a dividend in the current financial year of between $4.5c per share and $5.0c per share distributing out of net operating income generated from its existing property assets, in line with its stated policy of paying out at least 80% of distributable earnings.
In January 2023, in anticipation of potentially acquiring the remaining 13.61% of GREA from Gateway Africa Real Estate Limited, Grit paid a deposit of $10m, with a further deposit of $10m to be paid in March 2023. On final execution of the option on its GREA shares, a final payment of $14.1m will be paid in May 2023.
At the end of 2022, as much as 40% of Grit’s shareholders were London-based, showing the group’s decision to list in the UK capital city in 2018 has paid off.
Grit’s share price fell 4.45% to 31.53 GBX (penny sterling) in late trade on Friday.