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GRIT Real Estate Income determined to unlock Africa's commercial property potential

GRIT operates in seven African countries and sees plenty of growth opportunities
oil ship
Oil exploration in Africa is just starting to revive

Africa can be a hard sell to investors at times, something Bronwyn Corbett knows well.

She has just completed a London listing of Mauritius-based GRIT Real Estate Income Trust PLC (LON:GR1T) raising US$132mln in the process.

WATCH: Grit Real Estate Group makes London debut after $132mln raise

A lot of time was spent educating investors in London about Africa, she says, and particularly the growth opportunities that exist in commercial property.

Corbett has big plans for GRIT, as it is known.

Already quoted in Johannesburg and Mauritius, the standard listing in London is designed to kick-start a new growth spurt.

The portfolio was worth US$382mln in January, but Corbett is eyeing US$1bn as a first step and then up to as much as US$3bn.

It’s all doable, says the effervescent Corbett, who is chief executive and one of the founders.

International corporates

Grit’s focus is on international corporate clients such as BP, Vodacom, or retail outlets for such as Shoprite, which helps to reduce both the local currency risk and provide comfort over the tenant quality.

The company operates in seven African countries currently, three of which – Morocco, Mauritius and Botswana- she describes as soft Africa as they are relatively well-developed and stable.

Four other countries, Mozambique, Kenya, Ghana and Senegal – are more risky but have the growth appeal.

One notable absentee is South Africa, where Corbett says there are fifty property investment funds already fighting for assets.

That is not the case in the countries where GRIT operates, which means it is able to get very attractive prices for deals.

In these places, Grit has been able acquire good quality properties on yields of between 8-10% she says, while the average cost of its funding has dropped from 8% to 5.5%.

Corbett highlights Mozambique, which has had its issues in the past but where oil exploration is booming again.

Tenants here include oil giants Anardarko, Vale, Bollare and the American Embassy.

Dollar payment is critical. As tenants are often multi-nationals, payment comes in hard currencies from offshore.

“Some 96% of our revenue stream is collected in euros and dollars.”

Swimming upstream 

According to Corbett, Grit has been investing in Africa when others have been hesitant or pulling out.

“We know Africa and that give us a competitive advantage to identify quality real estate, good property deals and be a property partner of choice for international corporates.“

Investors, meanwhile, are getting a very punchy 12% annual total return target.

That is a combination of a 9% target dividend yield and growth in net asset value.

The yield is higher than comparable property trusts in the UK, which in part reflects the additional risk of Africa compared to other parts of the world, but Corbett is confident that the target can be met.

Leases run for an average of seven years with an annual rent escalation of 3.5%.

Voids are low currently at 2.8%, which reflects the stature of the tenants.

Mauritius base

Grit is based in Mauritius because there are substantial tax advantages and from there it can report in dollars without the rand volatility of a sole listing in Johannesburg.

London, though, will be the liquidity focus from now on, with a bond issue under consideration to take advantage of the newly strengthened balance sheet.

Corbett says the intention is also to achieve a premium listing for the group after six months, something she says is not for the faint-hearted but having gone a through a rigorous listing process already is confident Grit can achieve.

The mood about Africa is also improving, she believes.

“Good stories are starting to emerge again after a real downward turn over the past couple of years.”

And as interest revives, the pipeline of international corporates looking for offices in Africa will keep on growing.

At a share price of US$1.46 currently, Grit is valued at US$447mln.

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