Grit Real Estate Income Group Limited And Its Senegalese Property Market Foray

Background

Grit Real Estate Income Group Limited (GR1T) is a Mauritius-based company concentrating on real estate assets in the continent of Africa (excluding South Africa). It is listed both on the London Stock Exchange with ticker name GR1T and on the Johannesburg Stock Exchange with ticker name GTR. Also listed on the Stock Exchange of Mauritius Ltd with the ticker name DEL.N0000. The group has investments in light industrial, retail, corporate accommodation, and office sectors. The company was earlier known as Mara Delta Property Holdings Limited.

Recent Developments

July 24, 2019

Grit Real Estate Income Group Limited announced that its subsidiary Casamance Holdings Limited has entered into a contract with Club Med SAS. As per the agreement Grit Real Estate Income Group Limited would acquire all shares of Société Immobiliére et de Gestion Hôteliére du cap Skirring (SIGHC). The company would buy the shares from Club Med SAS.

June 26, 2019

Grit Real Estate Income Group Limited published a trading update for the twelve months ending June 30, 2019. The company held twenty-five investments in its portfolio spread across seven countries in the African continent. As on December 31, 2018, the company’s cumulative assets valued at USD 796.4 million. As per the company’s board expectations, the existing portfolio continues to deliver a secure and growing income. In the current period, the company’s successful leasing activity contains a Vale lease extension at VDE in Mozambique, a ten-year lease renewal to Anadarko in Commodity House Phase 1 in Maputo and a new five-year office lease to Exxon Mobil in Commodity house Phase 2 in Maputo, and. Looking forward, the management identified a pipeline of attractive potential investment opportunities, differentiated across geography and sector with a cumulative value of around USD 600 million. Overall the company is on track to deliver its targeted total shareholder return of around 12 per cent and positive growth in dividend for FY 2019.

Financial Highlights (H1 FY 2019, USD Thousands) -February 14, 2019

(Source: Interim Report, Company Website)

Grit Real Estate Income Group Limited reported the gross rental income increased to USD 18.7 million in H1 FY 2019 as compared to USD 14.9 million in H1 FY 2018. Total revenue increased from USD 15.3 million in H1 FY 2018 to USD 19.4 million in H1 FY 2019. Net property income stood at USD 15.4 million in H1 FY2019, an increase from USD 12.0 million in the corresponding period of the last year data.

Profit from operations rose by 75.7 per cent to USD 7.3 million in H1 FY 2019 against the USD 4.1 million in H1 FY 2018. Profit for the period before tax was USD 24.6 million in H1 FY 2019, a surge from the USD 17.5 million in H1 FY 2018. Profit for the period climbed from USD 17.3 million in H1 FY 2018 to USD 20.9 million in H1 FY 2019.

Distributable earnings were USD 6.06 per share in H1 FY 2019, a slight decrease from the previous year same period data. EPRA (European Public Real Estate Association) NAV portfolio performance surged by 5.15 per cent to USD 143.1 per share. The Loan-to-value ratio stood at 43.4 per cent. The board declared the interim dividend per share of USD 5.25, a decrease of 13.5 per cent against the USD 6.07 in H1 FY 2018, representing 87 per cent of distributable earnings generated.

Share Price Performance – Grit Real Estate Income Group Limited

Daily Chart as of July 25, 2019, after the market closed (Source: Thomson Reuters) 

On July 25, 2019, after the market close Grit Real Estate Income Group Limited shares were at USD 1.375, up 0.36 per cent versus the previous day closing price. Stock’s 52 weeks High and Low is USD 1.48/USD 1.29. The outstanding market capitalisation was around USD 364.43 million.

Next Catalyst for Grit Real Estate Income Group Limited

Grit Real Estate Income Group Limited would release its annual results for FY 2019 on September 26, 2019.

The strategy of Grit Real Estate Income Group Limited

Grit Real Estate Income Group Limited always focuses on the economy of the African country. The company is also the largest pan-African focused real estate group listed on the London Stock Exchange, Johannesburg Stock Exchange and The Stock Exchange of Mauritius (stock exchanges in London (United Kingdom), Johannesburg (South Africa) and Port Louis (Mauritius) respectively). The company till date has consistently achieved United States dollar-based annual distribution exceeding 7 per cent.

Real Estate and Gross Domestic Product Connect

The fortunes of both the real estate industry and a country’s Gross Domestic Product is tied directly.  We can safely conclude that a weak trend in real estate demands attributes to a sluggish economy and vice versa. Thus, Grit Real Estate Income Group Limited’s strategy is to invest in stable African countries only. The approach ensures there will be no shortage of tenants for leases on its assets. The company is Mauritius based, which led the company to benefit immensely from an array of Double Taxation Agreements (DTAs) and a favourable tax regime.

Good Numbers from Grit Real Estate Income Group Limited

Grit Real Estate Income Group Limited management has divested its investment in a geographically diversified portfolio spread over five asset classes. As of now, the highest quantum of assets by value for Grit Real Estate Income Group Limited lies in the country of Mozambique. As of December 31, 2018, the value of asset holdings in Mozambique was at USD 280 million with nine properties. Next country in terms of asset value is Mauritius at USD 162 million with five properties. Morocco comes third with an asset value of USD 92 million with one property. Other countries in the portfolio are Zambia (three properties), Ghana (three properties), Kenya (three properties), and Botswana (one property).

Grit Real Estate Income Group Limited management is also prudent in managing the lease transition for tenants. As of January 31, 2019, it has a vacancy rate of only 3.4 per cent. The company also strives for diversification over the type of clients. As of December 31, 2018, its client type distribution is as follows, retail, 31.6 per cent; Office, 28.7 per cent; Hospitality, 20.5 per cent; Corporate Accommodation, 13.7 per cent; Light Industrial, 4.6 per cent; and Others, 0.9 per cent.

Grit Real Estate’s First Step in Senegal Real Estate Space

Grit Real Estate Income Group Limited’s decision to enter the real estate space in Senegal is a prudent move. It is because currently, Dakar’s property prices are moving northward. Dakar, the capital of Senegal, is a useful yardstick to gauge the trend in real estate prices in Senegal. The upside is because Senegal, compared to its Western African neighbours, provides investors with stability. Also, real estate prices in Dakar witnessed double-digit annual growth in recent times. The demand spurred by the high growth of inhabitants fueled by people from rural areas and neighbouring nations.

Grit Real Estate Income Group Limited to capitalise on this wave decided to acquire a hotel in Kabrousse at Senegal. The name of the hotel is Club Med Cap Skirring. The company would buy the whole 100 per cent of the shares for EUR 11.6 million. The acquired asset would be given to a new tenant by Grit Real Estate Income Group Limited for a long term twelve-year lease. Further, Grit Real Estate brought the property with the clause that post-renovation rent would be recalculated to let it earn a decent eight per cent yield.

The transaction spread the investment portfolio of Grit Real Estate Income Group Limited to eight African countries. Management of Grit Real Estate Income Group Limited is bullish over the large and fast economy of Senegal, and views it as one of the most politically stable nations in the continent of Africa. The company already has a presence in the African countries of Mauritius, Ghana, Morocco, Botswana, Zambia, and Mozambique. Earlier at the end of December 2018, Grit Real Estate Income Group Limited valued its asset portfolio at USD 796.4 million.

It has been the strategy of Grit Real Estate Income Group Limited to pinpoint and invest in assets of high quality. Also, its assets are concentrated predominantly by United States dollars, and Euro denominated long-term leases. Management of the company also has set a target of the annual dividend yield over eight per cent alongside an overall shareholder return of twelve per cent per annum.

Facebook Comments