Grit Real Estate taking big strides in Africa

Bronwyn Corbett, the woman behind the formation, has patiently developed Grit Real Estate into a company which owns US dollar-based income generating shopping centres and offices in Africa.

Grit Real Estate (JSE: GTR) is leading the charge of investing in the African property industry. It should double its asset base in the next two years and expand beyond owning investments in 7 African countries.

South Africans have understandably been skittish about investing in the rest of Africa after the sharp oil, commodity price slump and the currency crises that hit a number of countries in 2015-2016.

In those years the sudden shift in the continent’s economic growth outlook forced a number of developers and JSE-listed property funds, which had entered the continent earlier this decade in search of US dollar-based returns, to reassess their investment strategies.

Meanwhile, Grit Real Estate Income Group Limited, the only listed pan-African property company is soaring and now has a pipeline of opportunities in Africa worth.

In a trading update released recently, the landlord said it sees potential investment opportunities worth R8.5 billion (USD $600m), predominantly in the industrial, corporate accommodation and hospitality sectors.

At the end of December 2018, the company’s property portfolio and other income-producing assets were valued at R11.1 billion (USD $796.4m). The company has grown from strength to strength since it was called Delta Africa some five years ago.

The company's asset base are spread across Morocco, Botswana, Ghana, Kenya, Mauritius, Zambia and Mozambique.

Portfolio Activity

For the year ending 30 June, Grit made acquisition of an additional 20 completed units leased to Barloworld at VDE corporate accommodation compound in Tete, Mozambique, including the remaining 15.5 hectares of land earmarked for further development at a total acquisition price of US $3.6 million.

The additional units are adjacent to Grit’s existing 122 unit corporate accommodation asset currently let to Vale and Barloworld.

It further acquired additional 25% equity stake in Mukuba Mall in Kitwe, Zambia for US$8.2 million, which moves the company’s total interest to 75% in one of the best performing retail assets in the region.

The significant redevelopment of the company’s flagship retail asset, Anfa Place Shopping Centre in Casablanca, Morocco, at a capital cost of US$25.09 million, is expected to be delivered materially on time and on budget.

EPRA portfolio occupancy rate rose to 97.2% from 96% reported at the end of December last year. Post the completion of Anfa Place redevelopment, the portfolio was expected to be 98.5% occupied, the company said.

Successful leasing activity in the period included a new five-year office lease to Exxon Mobil in Commodity house Phase 2 in Maputo, a Vale lease extension at VDE in Mozambique and a 10-year lease renewal to Anadarko in Commodity House Phase 1 in Maputo.

The group expects to double its asset base within the next two years given its current pipeline of acquisitions and the demand for new property developments and landlords which provide world class services across the continent.

The woman behind the formation

Bronwyn Corbett, the woman behind the formation, has patiently developed Grit into a company which owns income generating shopping centres and offices. The group has set up a management team on the ground which looks after the assets.

Initially, a number of analysts didn't believe Corbett could get Grit to perform adequately. They said she was operating in an overly risky market and spreading her team across too wide a geographic area.

"Grit’s earnings and dividends are underpinned by the company’s secure, diversified and growing index-linked income stream as well as attractive capital appreciation from across our high-quality portfolio, which is delivering attractive returns to our shareholders.

We are well placed with an excellent platform for growth and we look forward to capitalising on a significant and growing pipeline of investment opportunities that the Company has currently identified,” said Corbett told SA Commercial Prop News.

The company attracts investors partly because it manages to pay dividends in US Dollars. This means it works as a hedge against other African currencies. Investors would rather receive dividends in dollars which keep their value and aren’t too volatile.

Grit is actually on track to deliver a 12% total return to shareholders, and positive dividend growth, for the financial year to end-June.

The company is listed on the JSE and the London Stock Exchange which exposes it to vast array of investors. It wants to get a premium listing on the London exchange so that it can raise capital more easily and join indices which index trackers invest in.

Bridge Fund Managers, which has had an exposure to Grit since inception on the back of its strong management team, says the London listing is helping the company to achieve its long-term growth ambitions.

Unlike in the case of SA, there are large pools of foreign capital in the UK with mandates to expand into Africa.

Other property companies finally investing in Africa include Investec and Growthpoint Properties who are investing together.

The companies have a joint venture which recently bought a Ghanaian shopping centre from Attacq and Hyprop who were part of the AttAfrica venture.

Grit's results are expected to be published around September 26, 2019.