TIDMGR1T
RNS Number : 3654Z
Grit Real Estate Income Group
18 September 2020
GRIT REAL ESTATE INCOME GROUP LIMITED
(Registered by continuation in the
Republic of Mauritius)
(Registration number: C128881 C1/GBL)
LSE share code: GR1T
SEM share code: DEL.N0000
ISIN: MU0473N00036
LEI: 21380084LCGHJRS8CN05
("Grit" or the "Company " or the "Group")
DISPOSAL OF 39.50% INTEREST IN ANFAPLACE MALL
BUSINESS, TRADING, NAV, RENT COLLECTION AND DIVID UPDATE
APPOINTMENT OF NON-EXECUTIVE DIRECTOR
The board of Directors (the "Board") of Grit Real Estate Income
Group Limited, a leading pan-African income real estate company,
focused on investing in and actively managing a diversified
portfolio of assets underpinned by predominantly US$ and Euro
denominated long- term leases with high quality multi-national
tenants, announces today that the Company entered into a binding
agreement with Gateway Real Estate Africa Ltd ("GREA") for Grit to
dispose a 39.50% interest in Delta International Bahrain SPC
("DIB"), the beneficial owner of AnfaPlace Mall ("Anfa") for a
total transaction value of US$25,488,440 (the "Transaction"). Anfa
forms part of a mixed-use complex on the Atlantic coast of
Casablanca, Morocco.
The Company today also provides a business, trading, NAV, rental
collection and dividend update and announces the appointment of a
new Independent Non-Executive Director .
Summary update
-- The Company disposes of a 39.50% indirect interest in
AnfaPlace Mall, reducing its retail sector exposure to c.24.9%.
-- Extension of US$15 million bullet payment on Anfa debt
facility to February 2022 . The Company now has no material debt
maturities before August 2021.
-- August rental collections of 98.5% of Grit attributable
contracted lease income. New Mauritius Hotels Group (Beachcomber),
which accounts for c.13.2% of the Group's attributable contracted
rental revenue, resumed rental payments on 1 August 2020 .
-- Redevelopment of the Company's light industrial asset in
Pemba Mozambique, on the strength of a new five year US$
denominated triple net lease executed with Bollore Transport &
Logistics ("Bollore"), for a total budgeted contract value of
US$7.62 million
-- The Board now expects Net Asset Value per Share at 30 June
2020 to decline by between 18% to 22% predominantly as a result of
downward valuations of its property portfolio (led mainly by the
Company's retail sector exposure), increased provisions for
financial liabilities and impairments of financial and other
assets.
-- Group LTV is expected to be c.50.6% as at 30 June 2020.
Movements in EUR exchange rates since that date have been
supportive to NAV and LTV.
-- The Group's dividend distributions are currently under review
by the Board, having regard to, among other things, the financial
position, LTV ratio and performance of the Group (including the
levels of rental income contracted and collected), levels of
economic visibility and the long-term interests of
shareholders.
-- Jonathan Crichton appointed as an Independent Non-Executive
Director of the Company with effect from 17 September 2020.
-- The Company intends to release its abridged audited
consolidated financial statements for the year ended 30 June 2020
on Monday, 26 October 2020.
Bronwyn Corbett, CEO of Grit Real Estate Income Group Limited,
commented:
"We remain positive on the medium-term prospects for AnfaPlace
Mall and the opportunities that recently promulgated Moroccan OPCIs
(REITs) will provide for strong capital appreciation, liquidity and
access to robust capital markets, however the uncertainty
surrounding the impact of Covid-19, specifically in the retail
sector, make it prudent for us to reduce our interest in the asset
at this time. This is aligned with the Groups strategy to diversify
from retail and focus on the industrial, corporate accommodation
and office sectors, which we expect to continue to be more
resilient and deliver enhanced value to our shareholders. The
disposal will contribute to the rebalancing of our sector exposure
with the sale reducing our retail exposure from 32.1% to
c.24.9%.
Covid-19 has created a challenging backdrop, which has impacted
Grit's business over the past six months, but we are continuing to
take actions to ensure Grit remains financially robust with
sufficient financial headroom and further strengthen its position
to successfully navigate this period of economic uncertainty. The
robust August rent collection of 98.5% leaves the Group
increasingly confident in the Company's outlook.
The Group continues to focus on delivering its investment
strategy and exciting growth opportunities that underpin the
Company delivering attractive, secure and sustainable income and
capital growth to our shareholders from across our high-quality
portfolio over the short and longer term."
ANFA TRANSACTION DETAIL AND RATIONALE
Retail assets constituted 32.1% of Grit's total Net Asset Value
as at 31 December 2019, above the Company's target sector exposure
of 25%. The Covid-19 pandemic has introduced significant disruption
to the operations of a number of the Group's retail assets and the
Board believes it appropriate to bring overall retail exposure in
line with its self-imposed targets.
-- Anfa has faced disruption as a result of its closure on 19
March 2020 due to the state of emergency declared by the Moroccan
government. Trading resumed once again on 25 June 2020.
-- The three-month closure resulted in increasing vacancies and
lower revenues as a result of rental concessions, while further
concessions and rent deferrals for the period through to 31
December 2020 are being considered as the mall returns to
normalised levels of trade.
-- Covid-19 lockdowns have resulted in delays in filling vacant
space, and along with start date delays of new incoming tenants ,
reported vacancy statistics at 30 June 2020 have risen to c.21.3%
from the reported figures of 11.7% at 31 December 2019
-- The Board remains positive on the medium-term prospects for
the Mall, but now expects the recovery trajectory, post its
relaunch in September 2019, to be delayed through the Company's
next financial year.
-- Knight Frank, a RICS accredited valuer, has provided a
valuation for Anfa at 30 June 2020 for the purposes of the Group's
annual results for the year ended 30 June 2020 of US$89,363,300
($109,110,000 at 31 December 2019). This represents a downward
movement of 18.1% over the past six months as a result of changes
to discount rates and net operating income assumptions (including
delayed vacancy take up), predominantly expected over the next 24
months.
-- For the purposes of the Transaction, further independent RICS
accredited valuations for Anfa were obtained, and a resulting
valuation of US$87,500,000 was agreed in the computation of Freedom
Property Fund SARL's ("Freedom Property Fund") total equity value
(which includes group loans from Grit's 100% owned Mauritian
finance company DIF1 Co Ltd ("DIF1")) of US$38,981,448 on 1 July
2020. Freedom Property Fund is the sole legal and beneficial owner
of Anfa which is 99% owned by DIB.
-- The disposal of Grit's 39.50% interest in DIB was achieved
through the equity injection of US$25,488,440 by GREA which
relieved Grit of an obligation of an equivalent amount in
liabilities that were due. Grit receives no net cash from the
disposal.
-- Following the completion of the Transaction, the Group's
retail exposure is expected to fall to c24.9%
The Transaction, with an effective date of 1 July 2020, is to be
executed through the issuance and subscription of Shares in DIB,
which owns a 99% interest in Freedom Property Fund, for US$7,200,
resulting in GREA owning a 39.5% equity interest in DIB. At the
same time, GREA will subscribe for class B Preference Shares in
DIF1, for a value of US$25,481,240 and Grit's shareholder loan in
DIF1 will be converted to class C Preference Shares, thus matching
the preference shares proportionately to the new effective
shareholding in AnfaPlace Mall. Both classes of Preference Share
will earn a coupon at a rate of 8% per annum, but the Class B
Preference Shares held by GREA shall rank in priority to the Class
C Preference Shares held by Grit Services Limited ("GSL") and to
the remaining GSL Shareholder Loan. The final effective
shareholding to be taken up by GREA in Anfa is subject to an
adjustment account (to be based upon audited 30 June 2020
accounts), which is to be concluded by no later than 30 November
2020.
Investec Bank, the current debt financier to Freedom Property
Fund, has approved GREA as a new incoming shareholder. A US$15
million bullet payment under this Investec facility, which was due
for repayment on 31 October 2020, has been extended to 28 February
2022, the date on which the full facility matures.
When Grit listed on the standard segment on the main board of
the London Stock Exchange ("LSE"), the Board voluntarily elected to
comply with the provisions of Chapter 10 and certain aspects of
Chapter 11 of the UK's listing rules. GREA (an associated company
in which Grit holds a 19.98% interest) is a private real estate
development company and is regarded as a related party by virtue of
common shareholding by the Public Investment Corporation of South
Africa, and as such, the Board has followed its policy as laid out
on pages 33-34 of the Company's 2018 listing document which
included inter alia independent fairness valuations and Board
approval.
The Transaction does not fall within the scope of Chapter 13 of
the Listing Rules of the Stock Exchange of Mauritius Ltd ("SEM")
relating to 'related party transactions'.
AUGUST RENT COLLECTION AND TRADING
-- As a percentage of Grit's attributable contracted rental
revenues for August 2020, the Group has collected 98.5% of rentals
due for the month and has provided rental concessions (and
therefore loss of revenue) of 3.4%.
-- For the period March to July 2020, the Group collected 85.4%
of the value of its attributable contracted rental revenue
-- New Mauritius Hotels Group (Beachcomber), which accounts for
c.13.2% of the Group's attributable contracted rental revenue,
resumed rental payments on 1 August 2020.
PIPELINE AND ASSET MANAGEMENT UPDATE
The Company has extended the target execution dates on all of
its announced pipeline opportunities and is assessing each one of
these in the context of Covid-19 impacts, return profiles and
capital allocation options including, inter alia, co-development
and co-funding models.
All announced pipeline opportunities are still under negotiation
and in certain instances announced terms may change. Further
announcements on these will be made in due course.
The Company has entered into a turnkey development agreement for
the redevelopment of its light industrial asset in Pemba Mozambique
on the strength of a new five year USD denominated triple net lease
executed with Bollore Transport & Logistics ("Bollore"). The
project entails a significant repurposing of the asset according to
agreed tenant specifications for a total budgeted contract value of
US$7.62 million. Upon completion, the lettable area of the asset
will have increased from 4817sqm to 7486sqm (a 55% increase in the
total lettable area). Sectional completion of the works, which will
trigger the commencement of the new Bollore lease agreement, is
expected in Q1 2021, with final completion of the remaining areas
targeted for Q4 2021.
UPDATED NAV AND DIVID GUIDANCE
Ahead of the release of the Company's abridged audited results,
the Board now expects Net Asset Value per Share at 30 June 2020 to
decline by between 18% to 22% predominantly as a result of downward
valuations of its property portfolio (which has been effected by
the Covid-19 pandemic and movements in foreign currencies against
the US Dollar), increased provisions for financial liabilities and
impairments of financial and other assets.
The portfolio continues to experience the greatest Covid-19
disruption in the retail and hospitality sectors, while the
corporate accommodation, office and light industrial segments have
seen only limited impact to date. The expected movement in property
valuations as at 30 June 2020, are summarised as follows:
Sector * Valuation 31 December Like for like valuation
2019 movements to 30 June
2020
(US$ 'm)
Office 201.9m -1% to 2%
---------------------- ------------------------
Corporate Accommodation 139.2m 0% to -1%
---------------------- ------------------------
Light Industrial 27.8m -1.5% to -2.5%
---------------------- ------------------------
Hospitality 151.5m -4% to -5%
---------------------- ------------------------
Retail 259.6m -16% to -17%
---------------------- ------------------------
*excluding LLR and development assets
Group LTV is now expected to be c.50.6% at 30 June 2020 while
the Company's lowest currently imposed LTV covenant stands at 53%.
As a precautionary measure, the Company continues to engage with
its lenders on the extension of LTV and interest cover covenants
and expects to make announcements in this regard in the coming
weeks.
Movements in EUR exchange rates since 30 June 2020 have been
supportive of NAV and LTV. The Group's medium-term target is an LTV
of between 35% and 40% and the Board is currently considering a
number of strategies to achieve this target over the next 24 months
including further asset sales, accessing government support
programmes and other funding instruments to fund growth.
Post the Anfa bullet payment extension, the Company has no
material debt maturities before August 2021.
In light of recent events, and until we have greater clarity on
the economic outlook, dividend distributions of the Group are under
review by the Board, having regard to, among other things, the
financial position, LTV and performance of the Group (including the
levels of rental income contracted and collected), levels of
economic uncertainty and the long-term interests of
shareholders.
EXTENSION OF DEADLINE TO RELEASE AUDITED FINANCIAL RESULTS
As a result of the Covid-19 pandemic, the UK's Financial Conduct
Authority has temporarily granted LSE Main Market listed companies
the option to delay the publication of annual audited financial
reports from four to six months after the end of their financial
year end, and have urged companies to avail themselves of the
additional two month period to fully assess the impact that
Covid-19 may have on their businesses.
The SEM Listing Rule 12.14 requires the publication of the
Company's abridged audited consolidated financial statements within
the 90 days after the end of its financial year, i.e. by Wednesday,
30 September 2020. The Company has obtained formal approval from
the SEM to delay the publication of its abridged audited
consolidated financial statements until Friday, 30 October
2020.
The Company intends to release its abridged audited consolidated
financial statements for the year ended 30 June 2020 on Monday, 26
October 2020.
APPOINTMENT OF NEW INDEPENT NON-EXECUTIVE DIRECTOR
The Board is pleased to announce that Jonathan Crichton has been
appointed as an Independent Non-Executive Director of the Company
with effect from 17 September 2020.
Mr. Crichton has extensive international banking experience as a
senior executive across Asia, Europe and the United Kingdom within
the HSBC Holdings Group and has been a member of numerous risk and
audit committees. He is currently an Independent Non-Executive
Director of MCB Ltd.
By Order of the Board
18 September 2020
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited
Bronwyn Corbett, Chief Executive Officer +230 269 7090
Darren Veenhuis, Head of Investor Relations +44 779 512 3402
Maitland/AMO - Communications Adviser
James Benjamin +44 20 7379 5151
Jason Ochere Grit-maitland@maitland.co.uk
finnCap Ltd - UK Financial Adviser
William Marle / Giles Rolls / Matthew Radley
(Corporate Finance) +44 20 7220 5000
Mark Whitfeld / Pauline Tribe (Sales) +44 20 3772 4697
Monica Tepes (Research) +44 20 3772 4698
Perigeum Capital Ltd - SEM Authorised Representative
and Sponsor
Shamin A. Sookia +230 402 0894
Kesaven Moothoosamy +230 402 0898
Capital Markets Brokers Ltd - Sponsor Broker
Neetusha Aubeeluck +230 402 0285
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African
real estate company focused on investing in and actively managing a
diversified portfolio of assets in carefully selected African
countries (excluding South Africa). These high quality assets are
underpinned by predominantly US$ and Euro denominated long-term
leases with a wide range of blue-chip multi-national tenant
covenants across a diverse range of robust property sectors.
The Company is committed to delivering strong and sustainable
income for shareholders, with the potential for income and capital
growth. The Company is targeting net total shareholder return
inclusive of NAV growth of 12.0%+ p.a.*
The Company holds its primary listing on the Main Market of the
London Stock Exchange (LSE: GR1T), while its listing on the SEM is
termed as a secondary listing (SEM: DEL.N0000).
Further information on the Company is available at
http://grit.group/
* These are targets only and not a profit forecast and there can
be no assurance that they will be met. Any forward-looking
statements and the assumptions underlying such statements are the
responsibility of the Board of Directors and have not been reviewed
or reported on by the Company's external auditors.
Directors:
Peter Todd+ (Chairman), Bronwyn Corbett (Chief Executive
Officer)*, Leon van de Moortele (Chief Financial Officer)*, Sir
Samuel Esson Jonah+, Nomzamo Radebe, Catherine McIlraith+, David
Love+, Jonathan Crichton+ and Bright Laaka (Permanent Alternate
Director to Nomzamo Radebe).
(* Executive Director) (+ independent Non-Executive
Director)
Company secretary : Intercontinental Fund Services Limited
Registered address : c/o Intercontinental Fund Services Limited,
Level 5, Alexander House, 35 Cybercity, Ebène 72201, Mauritius
Registrar and transfer agent (Mauritius) : Intercontinental
Secretarial Services Limited
UK Transfer secretary : Link Asset Services
Limited
SEM authorised representative and sponsor : Perigeum Capital
Ltd
This notice is issued pursuant to the LSE Listing Rules, Article
19 of MAR, SEM Listing Rule 11.3 and Rule 5(1) of the Securities
(Disclosure Obligations of Reporting Issuers) Rules 2007. The Board
accepts full responsibility for the accuracy of the information
contained in this communiqué.
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