- Financial highlights for the six months to 31 December 2023:
- Contractual rentals collected up 13.5% to 108.4% from 94.9%
- Portfolio net operating income up 9.14% from US$27.1 million to US$29.6 million
- Interim dividend of US$2.0 cents per share declared for the period (H1FY22: US$2.50 cps)
- US$306 million sustainability-linked debt refinance concluded, significantly reducing Grit’s refinance risk amidst turbulent global financial markets
- Phased acquisition of a controlling interest in Gateway Real Estate Africa (“GREA”), the leading African focused real estate developer, expected to reinforce solid growth and reduce LTV whilst having a positive social impact
- Potential to introduce new revenue and fee income streams to Grit
- Aggregate announced asset disposals (including the potential Beachcomber Hotel Investments Ltd exit) now more than US$126.3 million, representing 15.8% of the recycling target of 20% of portfolio value by December 2023
- Group LTV decreased to 45.5% and weighted average debt expiry rate is 3.6 years
- Operational highlights include:
- Property portfolio comprises a total of 60 investments across 12 countries with exposure to seven property asset classes
- Grit’s total proportionally owned gross lettable area (“GLA”) is 343,038m2
- 85.9% of revenue is earned from multinational tenants (H1FY22: 85.6%)
- 92.4% of income is earned in hard currency (H1FY22: 91.5%)
- EPRA occupancy rate improved marginally to 95.7% (H1FY22: 95.3%)
- Weighted average contracted annual rent escalations of 4.1% (H1FY22: 5.4%)
- ESG and sustainability highlights:
- On track to achieve sustainability targets of a 25% reduction in carbon emissions and a 25% improvement in building efficiency by 2025
- Post the balance sheet date Grit took occupation of its new head office, the first 5-Star Green Star corporate office building in Mauritius and the Indian Ocean Island region
- 40% women in leadership positions
- 79% localised employees
London listed Grit Real Estate Income Group Limited (“Grit” or “the Company”), a leading and award-winning pan-African impact real estate company focused on investing in, developing and actively managing a diversified portfolio of assets in carefully selected African countries announced solid interim results for the six months ended 31 December 2023 today.
Ms. Bronwyn Knight, CEO of Grit commented:
“Grit was in a transitionary phase in 2022, characterised by the continued recovery of our property portfolio and strong cash collections. Substantial strides were also made in refinancing our debt facilities, managing interest rate risk and securing long-term growth with phased acquisitions of controlling interests in Gateway Real Estate Africa and its asset manager, APDM.”
Portfolio Net Operating Income increased 9.14% during the interim period to US$29.6 million, with contractual rentals collected increasing to 108.4% from 94.9% in the comparative prior period.
Management’s continued drive towards a “family of partnerships” approach, combined with active tenant and asset management resulted in a marginal improvement in the portfolio occupancy rate to 95.7% (H1FY22: 95.3%).
During the period, Grit finalised the largest sustainability-linked debt refinance transaction to be concluded in the sub-Saharan African real estate sector (outside of South Africa) with a US$306 million facility that will significantly reduce the Group’s refinance risk at a time where especially emerging market debt rates are extremely volatile.
Grit also increased its stake in Gateway Real Estate Africa (“GREA”) to 35.01%. Together with its controlling interest in GREA’s asset manager, Africa Property Development Managers (“APDM”), the acquisition is expected to materially accelerate Grit’s ability to access development returns from risk mitigated development projects which will introduce the potential for new revenue and fee income streams for the Group.
Ms. Knight continued:
“Significant progress was made in our capital recycling strategy, as we transition to impact real estate assets which is expected to deliver near and longer-term value creation and growth opportunities in net asset value and income.
“Our mandate is to recycle 20% of our property portfolio by value before 31 December this year, with the proceeds allocated towards reducing debt and for investing in high-growth, resilient impact real estate assets.
“Our recycling strategy will also see us focusing on
- Reducing our exposure to local currencies not pegged to the US dollar or Euro; and
- Exiting investments where we do not have majority control.
“Currently, the aggregate announced asset disposals, including the potential Beachcomber Hotel Investments exit, now total more than US$126.3 million, representing 15.8% of the 20% recycling target of 20%.”
The resurgence in the hospitality sector provided Grit with an opportunity to strategically exit its investment in Beachcomber Hotels Limited (“BHI) whilst maintaining a strong relationship with New Mauritius Hotels Limited (“NMH”).
Grit’s exit will be managed through a Scheme of Arrangement and will give effect to their divergent strategies as Grit focuses on resilient African impact assets and BHI embarks on a hotel and tourism sector growth strategy, creating a larger and more diversified portfolio across market segments.
BHI was established in 2016 as a business venture between NMH and Grit to recapitalize NMH. BHI currently owns three 4-star hotels in the north of Mauritius, namely Victoria Beachcomber, Mauricia Beachcomber and Cannonier Beachcomber, operated by NMH under the Beachcomber brand.
In December 2022, Grit’s interests in BHI were diluted from 44.4% to 27.1%, after BHI declared a dividend whereby Grit received €14.5 million in cash and NMH elected to receive a scrip dividend.
In terms of the Scheme of Arrangement, Grit’s subsidiary, holding the BHI interest and debt will merge into BHI. At the same time, BHI will raise capital by way of a public offer of preference shares to be listed on the Stock Exchange of Mauritius.
The proceeds of this capital raise will be used to settle Grit’s remaining interest in BHI, together with the transfer of debt facilities to BHI. The remainder of the funds will be used to recapitalise BHI as it embarks on acquiring a larger and more diversified portfolio across market segments and geographies.
Ms. Knight remarked:
“Our joint venture with NMH set new benchmarks in the real estate sector when it was formed in October 2016, particularly with regards to sale-and-leaseback structures and the recapitalization of NMH at the time.
“Our relationship has since been guided by a “family of partnerships” approach, allowing both parties to have an impact that transcends buildings, especially during the pandemic-related economic lockdowns.
“With the resurgence in the hospitality sector, this transaction provides for Grit’s strategic exit whilst maintaining a strong relationship with BHI. Grit will however not completely exit the sector, as we still hold hospitality assets in Bel Ombre, Mauritius and in Senegal, but it does allow for both Grit and NMH to pursue growth strategies across different asset segments and geographies.”
Grit’s commitment to Mauritius remains firm, with the completion of Unity House, the first of three commercial office developments at The Precinct in Grand Baie, GREA’s development of healthcare assets in Curepipe and Coromandel as well as other exciting pipeline opportunities that go beyond buildings to be announced in due course.
In line with its strategy to reduce its local currency exposure and exit investments where it does not hold majority control, Grit recently announced its intention to dispose of the balance of its investment in Botswana listed property loan stock company Letlole La Rona (“LLR”). Botswana however remains a key strategic investment geography for Grit and LLR remains a strategic investment partner on large-scale opportunities across the continent.
Grit will exit its investment in LLR at a premium of 15% to LLR’s net asset value (“NAV”) and acquired the shares at a 20% discount to NAV, resulting in a significant value-unlock for shareholders. The Group remains open to further investment opportunities in Botswana that meets its benchmark criteria.
Grit’s loan-to-value (“LTV”) decreased to 45.5% during the period under review, with a weighted average debt expiry rate of 3.6 years.
Its portfolio comprises a total of 60 investments in 12 African countries with exposure to seven property asset classes and a total portfolio GLA of 343 038m2. Property fair valuations increased by 0.4%, indicative of stabilizing valuations as the impacts of the pandemic resides, although headwinds as a result of rising interest rates continued during the period.
85.9% of revenue is earned from multinational clients, up marginally from 85.6% in the first half of the prior financial year, whilst 92.4% of income is earned in hard currency, up from 91.5% in the prior comparative period. The weighted average contractual escalation rate is 4.1%.
On the sustainability front, Grit continues to make great strides towards reducing carbon emissions and improving building efficiency by 25% by 2025. Post the reporting period, Grit took occupation of its new head office, Unity Building at The Precinct in Grand Baie, Mauritius. This state-of-the-art asset was developed by GREA and is the first 5-Star Green Star rated commercial building in the Indian Ocean Island region.
In addition, Grit reported solid diversification numbers, with 40% of women in leadership positions and 79% of employees localized.
Going forward, Grit will continue to deliver on its capital recycling mandate.
“We are excited about Grit’s transition towards more resilient, higher-growth assets gaining traction. We will increasingly focus on co-investment opportunities within selected high-growth asset classes where we are able to leverage our considerable expertise and experience in asset, property and development management to generate additional fee income.
“The conclusion of the GREA acquisition will be a significant catalyst for immediate balance sheet optimization and ongoing NAV and NOI growth in the medium to longer term.”
An interim dividend of US$2.0 cents per share was declared.
