Investor deep dive
Grit Real Estate Income well placed to deliver attractive shareholder returns
GRIT Real Estate - The next level
GRIT Real Estate Income Group (LON:GR1T), the leading pan-African real estate company, has released a trading update for its financial year ending June 2019. The company is on track to deliver its targeted 12% total shareholder return for FY June 2019, and an increased dividend. Furthermore, the occupancy rate stands at 97.2%, and 95% of expiring Gross Lettable Area has been renewed or replaced.
Against a mixed backdrop, with headwinds from EUR/USD translation effect and some weakness in the African retail sector, this performance fully delivers on the expectations set out at the time of the London listing in August 2018.
The company states that it has an identified pipeline of investment opportunities totalling US$600m, from existing tenants and other multi-nationals operating in Africa. This pipeline compares with an existing portfolio of US$796m (December 2018), i.e. a near doubling of the asset base.
The statement indicates that the company will consider options for financing these investments, in the short and medium term.
The company has also outlined initiatives to drive incremental returns on investment, which could enable the company to exceed its 12% TSR target in future years, in our view. Measures include: 1) Participating in risk-limited development opportunities, as a route to enhancing NAV growth without impacting the dividend. 2)Opportunities to provide Asset Management services internally and to external property owners, to drive fee generation and to reduce the group's operating cost ratios.
GRIT offers a 9.2% dividend yield, and the prospect of good ongoing NAV growth. We believe that the FY June 2019 performance also demonstrates the robustness of GRIT's business model.
Quick facts: Grit Real Estate Income Group
Market Cap: $404.66 m
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