Grit Real Estate Income Group, the pan-African real estate company, has reported a big drop in net asset value (NAV) as a result of the impact of COVID-19 on its retail and hospitality properties.
The group said its NAV per share for the year to the end of June 2020 would be between US$1.18 and US$1.199 compared to US$1.471 at June 2019 (a fall of between 19.8% and 18.5%).
The reduction is principally as a result of the decrease in the value of the group’s retail and hospitality assets, which make up 49.1% of its portfolio.
Movements in currencies against the US$, mark to market adjustments on interest rate swaps and increased impairment charges also impacted NAV.
Grit’s property portfolio was valued at US$823.5m at 30 June 2020 (2019: US$825.2m), with like-for-like valuations falling 7.4% in the six months from December 2019.
Its retail properties fell 16.9% in the six months alone, due to the impact of COVID-19 on its tenants’ ability to pay rent. Its hospitality assets, mainly hotels in Mauritius that have been closed for much of this year, were down 5.4% in value in the six months.
The fall in the value of its portfolio has resulted in the group’s loan to value (LTV) ratio increasing to around 50.5%, from 43.1% at June 2019.
Grit said as a precautionary measure, it had lifted its lowest applied LTV debt covenants to 55% and secured additional liquidity facilities. The company said it would look to reduce LTV levels through capital recycling initiatives, issuance of quasi equity instruments and selected NAV accretive acquisitions.
Due to the impact of COVID-19, the company did not declare a final dividend for the year, meaning it paid US$5.25 cents per share for the year (2019: US$12.20 cents per share). The board said it expects to resume dividend payments in the current financial year ending 30 June 2021.
Grit’s property portfolio comprises 52 assets across eight countries and five asset classes (office, corporate accommodation, light industrial, retail and hospitality).
Grit collected 86% of rents in the four months to 30 June 2020 (including rental prepayments). Around 14.4% of rents in the four months (4.8% of annual rent), predominantly in the hospitality sector) was placed on agreed payment plans and are predominantly collectible through to 31 December 2021.
Around 8.7% of rent for the four months (2.9% of annual rent), predominantly in the retail sector, was permanently written off.
During the year occupancy fell to 94.1% (from 97.1%), while gross lettable area in the portfolio increased 6.2% to 334,589 sqm.
The weighted average annual rent escalation was 3.3% (2019: 2.8%), with 90.2% of revenue earned from multinational tenants (2019: 93.6%).
During the year Grit leased over 93,368 sqm of space, while leases on 96,654 sqm of space expired.
Post balance sheet activity
In July 2020, Grit delisted from the Johannesburg Stock Exchange and in August its shares on the main board of the London Stock Exchange converted from a USD quotation to sterling.
Last month, it agreed a deal to dispose of a 39.5% stake in AnfaPlace Mall in Morocco, and earlier this month it agreed a deal to sell a 26.35% stake in Acacia Estate corporate accommodation asset.
It has also secured a short-term debt facility of one year from Nedbank South Africa for US$7m, bearing an interest rate of Libor plus 7%.
GR1T : Grit Real Estate reports sharp fall in NAV