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’s NAV per share for the year to the end of June 2020 was US$1.186 compared to US$1.471 at June 2019 (a fall of 19.4%).
The reduction is principally as a result of the decrease in the value of the group’s retail and hospitality assets, which make up 49.1% of its portfolio. Its portfolio fell 7.9% in the year on a like-for-like basis.
Movements in currencies against the US$, 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), which includes US$70.4m of acquisitions and capital expenditure.
Net property income increased 17.6% as a result of the acquisitions and the strong performance of its office and corporate accommodation assets.
The fall in the value of its portfolio has resulted in the group’s loan to value (LTV) ratio increasing to 50.2%, 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.
Operational highlights
Grit’s property portfolio comprises 52 assets across eight countries and five asset classes (office, corporate accommodation, light industrial, retail and hospitality), with 90.2% of revenue earned from multinational tenants.
A total of 9% of contracted rent for the four months to the end of June 2020 was permanently written off, predominantly in the retail sector, while a further 15.4% of rent in the four month period was placed upon agreed payment plans collectible through to 31 December 2021.
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.
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.
In September, it agreed a deal to dispose of a 39.5% stake in AnfaPlace Mall in Morocco, and in October 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%.
Proposed placing
Along with full year results, Grit announced the proposed placing of shares to raise around $10m (£7.5m). Existing shareholder M&G Investment Management has committed to acquire all the placing shares, subject to take up by other investors.
GR1T : Retail and hospitality weighs on Grit Real Estate