Grit Real Estate Income Group, the pan-African real estate company, has provided an update on its non-core asset disposal strategy and progress made on transactions.
The company has agreed non-binding heads of terms to sell the Tamassa resort, a Mauritian hospitality asset, at an implied net initial yield of 6.5%. It is also in preliminary discussions for the disposal of a further four non-core retail and non-strategic corporate accommodation assets.
Proceeds from these sales will be used to reduce the company’s more expensive debt facilities.
The group’s development subsidiary GREA is also exploring the merger of its Diplomatic Housing assets with Verdant Ventures, providing the combined entity with scale and opportunity for increased exposure in this sector.
Bronwyn Knight, chief executive of Grit, commented: “Grit continues to focus on refining its real estate portfolio and intends to apply proceeds from completed asset disposals to Group debt level reductions. The signing of heads of terms for the disposal of Tamassa resort demonstrates strong progress towards these targets and positions us for future growth in resilient sectors like embassy accommodation, where the Group are also exploring options to merge DH Africa with Verdant Ventures in a transaction that will position DH Africa as the leader in turnkey diplomatic housing solutions across the African continent for the US, UK and other governments.”
Asset disposals and capital allocation
Grit has already achieved its initial $160m disposal target (set out in 2022) and has redeployed these proceeds to the acquisition of GREA and to group debt reduction. Earlier this year the board extended the asset disposal strategy, with proceeds principally earmarked to reduce group debt. Four immediate opportunities have been identified in the non-core portfolio, including retail (portfolio exposure to which will reduce materially), corporate accommodation and hospitality asset disposals.
The disposal of the Tamassa Resort, a 4-star resort and spa located in the south of Mauritius, has been agreed at an implied net initial yield of 6.5% (excluding potential variable rentals). Grit acquired the resort in March 2017 for $40.0m and it has consistently been a high-performing asset. Hospitality is, however, a non-core sector for the company and the board said that it believes this transaction could present a good opportunity to realise its current value and apply the net sales proceeds to reduce the company’s debt.
The transaction is expected to be concluded by the end of December 2024 upon which Grit’s exposure to the hospitality sector (by value) is expected to fall to below 4%. Further updates will be provided when binding transaction agreements have been executed.
GREA’s proposed merger with Verdant Ventures
GREA is currently in discussions with US-based diplomatic housing developer Verdant Ventures on a possible merger of its diplomatic housing arm DH Africa and Verdant, with GREA expected to take a majority interest in the enlarged entity. GREA and Verdant have co-developed two US embassy-let housing projects – Elevation Diplomatic Residences in Addis Ababa, Ethiopia and Rosslyn Grove in Nairobi, Kenya.
A framework agreement has been signed and the proposed merger will see, upon conclusion, Verdant transfer its interest in Elevation and Rosslyn Grove for an interest in the merged entity. These assets are currently 50% owned by GREA.
The company said that the merger will provide impetus to its “co-investment” strategy, with a much larger and sustainable substructure, including an enhanced focus on its main tenant (and one of the group’s largest clients), the US government. Further details on valuations, expected balance sheet and financial impacts will be announced in due course, should a final transaction be concluded.
