African real estate investor Grit Real Estate announced full year results to the end of June 2021, with a 12.6% drop in net asset value (NAV).
EPRA net reinstatement value (NRV – the group’s EPRA equivalent for NAV) per share contracted to $1.024 (2020: $1.171). The reduction was principally as a result of a decrease in the value of the group’s retail assets and its VDE Housing Estate, as well as increased impairment charges.
The portfolio was independently valued at $801.9m (2020: $823.5m), including acquisitions and capex additions amounting to $18.8m. On a like-for-like basis, property valuations fell 7.8%.
Group loan to value (LTV) increased to 53.1% (2020: 50.2%) predominantly as a result of the decrease in the value of the group’s property portfolio. The group has successfully extended its lowest applied LTV debt covenants to 55% to April 2023 and secured additional liquidity facilities. It said it was committed to reducing LTV levels to its near-term target of 45% and then to its medium term target of between 35% to 40% through capital recycling initiatives, issuance of quasi equity instruments and select NAV accretive acquisitions to be completed only upon the securing of appropriate funding.
Dividends per share declared for the year ended 30 June 2021 was $1.50 per share (2020: $5.25), comprising the interim dividend declared in February 2021. The board has decided against declaring a final dividend for the year, but plans to resume payments in the current financial year ending 30 June 2022.
EPRA earnings per share was $2.57 (2020: $3.82), while adjusted EPRA earnings was $4.91 per share (2020: $9.02 per share).
Operational highlights
Grit’s property portfolio now comprises 54 investments, across eight countries and five asset classes.
- 90.9% (2020: 90.2%) of revenue is earned from multinational tenants;
- 92.7% (2020: 89.1%) of income is produced in hard currency;
- EPRA portfolio occupancy rate of 94.7% as at 30 June 2021 (2020: 94.1%);
- Weighted average annual rent escalations at 3.8% (2020: 2.8%).
- Contractual rental collections, which represents the cash collections as percentage of contractual revenue (before adjustments of rental deferrals and concessions), was 92.5% (2020: 88.6%);
- Weighted average cost of debt moved down to 5.7% (2020: 5.9%) as a result of movements in libor over the reporting period and refinancing activities by the group.
Corporate highlights
On 29 July 2020, Grit delisted from the Main Board of the Johannesburg Stock Exchange and on 3 August 2020, the trading of Grit’s shares on the Main Board of the London Stock Exchange (LSE) converted from a US$ quotation to a Sterling quotation.
On 22 January 2021, the group stepped up to premium segment of the LSE and in February redomiciled to Guernsey.
Post balance sheet events
The group obtained an equity classified perpetual note and IFC debt funding for the acquisition of the Orbit Africa manufacturing facility and redevelopment site, that is expected to be accretive to both the company’s net asset value and earnings, delivering value to Grit’s shareholders.
Grit also extended the maturity of $116m of debt to between April 2023 and April 2025.
Chief executive Bronwyn Knight comments:
“We have a high-quality portfolio of attractive property assets leased to very strong tenant covenants that is continuing to deliver a resilient performance with 92.5% of contracted revenue collected this period, versus 88.6% in the prior year, despite the headwinds of the pandemic. We are increasingly confident that the Group’s property occupancy rate of 94.7% at the period end will continue to improve during the balance of 2021 and beyond, supported by our hospitality sector assets benefitting from the easing of travel restrictions and further leasing activity in both our Ghanaian office portfolio and retail sector assets. Trading is also showing encouraging signs of normalising, especially in the hospitality and retail sectors.
“Although we delivered a robust operational performance, with our Property Portfolio Net Operating Income rising 3.5% for the year to 30 June 2021, our LTV ratio rose to 53.1% over the same period impacted by valuation pressures, predominantly in the retail sector. We expect Grit’s LTV to benefit from improvements in our property valuations over the medium term, the acceleration of our asset recycling strategy and target of recycling 20% by property portfolio value by the end of 2023, which we continue to pursue, and our perpetual note issuance, which has now been concluded. Our LTV will additionally benefit from the potential sale of AnfaPlace at no lower than the 30 June 2021 book value, which would also be expected to impact positively on the Group’s distributable earnings per share.
“Although our short-term focus remains on continuing our strong rental collections, balance sheet optimisation and the reduction of our LTV to below 45%, we are pursuing select accretive growth, co-investment and pre-funded development opportunities across resilient sectors. These high-quality, diversified opportunities, if successfully concluded, hold the potential to significantly improve the Group’s net asset value, distributable earnings and yield.
“Our strategy remains effective, and I am increasingly confident that we are well positioned and that the steps we are taking will not only safeguard Grit for the near term but ensure that we proactively seize the opportunities that arise to return to growth, acceptable shareholder returns and an attractive cash dividend.”
GR1T : Grit Real Estate sees NAV drop 12.6% but optimistic for future growth