Grit Real Estate Income Group (GR1T) has announced its annual results for the year ended 30 June 2022. While GR1T says that it produced a “robust underlying portfolio performance”, there was a 21.6% EPRA net reinstatement value (NRV) per share reduction, which predominantly relates to the dilutive impacts of the Company’s equity issuance in December 2021 and increased impairment charges (the rational for the dilutive issuance was well explained at the time and was covered off in detail in our December 2021 note – click here to read).
Other key takeaways are as follows:
- Total dividends per share declared for the year ended 30 June 2022 total US$4.50cps (2021: US$1.50cps), representing an 89.8% pay-out ratio and a 12.67% dividend yield on the current share price. Distributions comprise the interim dividend declared in February 2022 and final dividend declared today of US$2.00cps. The Board has also said that it is complementing second half distribution with a limited share buyback programme, as it looks to support liquidity in the shares on both LSE and SEM with the share currently presenting compelling inherent value.
- The portfolio was independently valued at 30 June 2022, with like-for-like property valuations increasing 6.9% in functional currencies. Moves in EUR:USD exchange rates have however resulted in 0.3% like for like valuation declines in the reported USD values. Acquisitions and capex additions amounted to US$59.2m in the period.
- Group loan-to-value (LTV) meaningfully decreased to 46.7% (2021: 53.1%) in the financial year to 30 June 2022. The Company issued shares worth US$76.3m in December 2021, the net cash proceeds of which were utilised to decrease overall levels of debt. Additionally, and as a direct result of the equity placement being lower than targeted at that time, the acquisition of a controlling interest in GREA was restructured, settled in cash from revolving debt facilities, and the further direct LTV benefits of financial consolidation delayed. LTV is expected to fall by 3.9% upon consolidation of GREA.
- GR1T’s Board says that it remains committed to reducing LTV levels to below its near-term target of 45% and then to its medium term target of between 35% to 40%. Capital recycling initiatives to support this target in the financial year included the sale of 100% of ABSA house and part sales of the Orbit manufacturing facility and the Group’s holdings in LLR.
GR1T has provided the following key corporate highlights from its results:
- The Company acquired a 77.95% stake in APDM, the external asset manager over GREA, giving it operational control over GREA by virtue of the management alignment from that date (note that neither APDM or GREA are currently consolidated in these results as the definition of control per IFRS10 has not yet been met). Additionally, a further 6.31% in GREA was acquired taking GR1T’s stake to 26.29% by the year end 30 June 2022 (and was further increased to 35.01% post year-end).
- GREA notably delivered several completed projects including a US embassy accommodation compound in Ethiopia, a data centre in Nigeria and an office park in Ghana and has made good progress on further projects, with the Kenyan US embassy accommodation compound completed on 31 August 2022, and two further projects targeted for completion by March 2023.
- The Orbit Africa sale and leaseback transaction was completed in March 2022 at an accretive net acquisition yield of 9.60% under a 25-year US Dollar denominated triple net lease and cash cost of US$37.7m (inclusive of VAT). An additional redevelopment and expansion of the facility at a contractual development yield of 16.0% is expected to commence in late 2022. The total expected investment across the sale and leaseback and redevelopment and expansion is expected to be US$53.6m and is funded through US$25m senior debt financing from the IFC, a division of the World Bank, and a preference note issued to Ethos Mezzanine Partners GP Proprietary Limited and BluePeak Private Capital GP.
Since the financial year end
There have been a number of events since the company’s year end on 30 June 2022:
- On 18 July 2022, GR1T introduced a 30% co-investor (Letlole La Rona (“LLR”)) to the Orbit Africa asset for an investment of US$7.23m. LLR’s shareholders have approved a “Go-to-Africa” strategy and have aligned with GR1T as their recognised specialist real estate partner.
- Upon the completion of phase 2 of the GREA acquisition on 31 August 2022, the Company increased its stake in GREA to 35.01% and has an option to acquire Gateway Partner’s remaining 1% in APDM and 13.61% stake in GREA.
- On 19 October 2022, the Group concluded a syndicated sustainability linked cross-collateralised debt refinancing facility of up to US$306m, refinancing seven existing debt facilities of US$279.1m of existing debt facilities across Mozambique, Zambia, Ghana and Senegal, agreed a corporate revolving credit facility, and secured additional funding for the future redevelopment of Club Med, Senegal. The landmark transaction, the largest sustainability-linked real estate largest debt transaction in Sub-Saharan Africa (ex-South Africa) creates for GR1T increased diversification and tenor in its debt, with optimal funding costs and a scalable long term debt solution.
- On 20 October 2022, the Group additionally entered into a further US$100m of notional interest rate hedges, minimising the impact of expected global interest rate movements on the Group’s weighted average cost of debt. The Group now has 26.7% of its USD denominated debt exposed to floating rate exposure.