Last checked at 16 Oct 2020 07:00
GRIT REAL ESTATE INCOME GROUP LIMITED (Registered by continuation in the Republic of Mauritius) (Registration number: C128881 C1/GBL) LSE share code: GR1T SEM share code: DEL.N0000 ISIN: MU0473N00036 LEI: 21380084LCGHJRS8CN05 ("Grit" or the "Company" or the "Group") |
DISPOSAL OF 17.35% INTEREST IN ACACIA ESTATE IN MOZAMBIQUE
The board of Directors (the "Board") of Grit Real Estate Income Group Limited, a leading pan-African income real estate company, focused on investing in and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multi-national tenants, announces today that the Company entered into a binding agreement to reduce its interest in Acacia Estate, a 76 residential units condominium property located in Maputo, Mozambique ("Acacia" or the "Property"), from 80% to a combined direct and indirect interest of 62.65%, at an implied property valuation of US$67,540,000 (the "Transaction") which is equivalent to Grit's carrying value at 30 June 2020.
While remaining a core asset, the Board believe that Acacia has reached an attractive valuation yield of 7.93% at 30 June 2020, representing a 9.4% increase on the August 2018 acquisition value. Grit will continue to asset manage the structure and shall continue providing full property management activities.
Upon completion, Grit Services Limited ("GSL") will realise US$11,812,908 in cash from the part disposal of its share in the Property which will be used to replenish its working capital reserves in the short term and for redeployment into Grit's yield accretive pipeline over the medium term.
Bronwyn Corbett, CEO of Grit Real Estate Income Group Limited, commented:
"We continue to execute on Grit's strategy of owning and managing high quality real estate assets let to high quality tenants across the African continent that deliver strong and sustainable income for shareholders, with the potential for income and capital growth. This transaction demonstrates the Group's ability to deliver value from its assets, as since 2018 we increased Acacia's net operating income from US$5.1m to US$5.4m and its valuation yield shifted from 8.25% to 7.93%. The Property remains core to the Group and with our remaining majority ownership, Grit remains committed to effectively servicing our tenants in their properties and property management needs."
TRANSACTION DETAIL
Acacia is owned by a Mozambican property SPV Cognis 1 Limitada ("Cognis") in which Grit Services Limited has an effective shareholding of 80.0% through its subsidiaries. The balance of the equity interest in Cognis (20%) is held by external third parties.
Gateway Real Estate Africa ("GREA"), a private real estate development company in which Grit has a 19.98% shareholding, is strategically increasing its exposure to assets with embassy and multinational tenant profiles, and has acquired the 19.9% interest in Acacia from the external third parties. Grit has additionally agreed to sell 26.65% of its stake in Acacia, reducing its direct interest to 53.35%. GREA's ownership in the Property will move to 46.6% at the conclusion of the Transaction.
By virtue of Grit's 19.98% ownership interest in GREA, the Group's combined direct and indirect interest in Acacia will only reduce to 62.65%. GREA is regarded as a related party as a result of common shareholding by the Public Investment Corporation of South Africa which owns 48.5% of GREA and 27% of Grit.
PURCHASE CONSIDERATION
The net proceeds of US$11,812,908 realised through the disposal of the Company's 26.65% share in Acacia are calculated as follows:
US$ | |
Property Value of Acacia | 67,540,741 |
Debt funding | (26,687,695) |
Prepayments | (6,857,863) |
Shareholder loans | (13,189,347) |
Other working capital adjustments | 1,288,409 |
Cognis NAV | 22,094,245 |
Sale to GREA (26.65%) | 5,888,116 |
Grit Shareholder Loans repaid | 6,462,780 |
Transaction Adjustments | (537,988) |
Net proceeds to Grit | 11,812,908 |
RATIONALE FOR THE DISPOSAL
Grit's interest in Acacia was acquired in August 2018, when the value of Acacia was US$61.7 million and the related net asset value ("NAV") of Cognis was US$13.7 million. At June 2020, Acacia has been valued at US$67.5 million (representing a 9.4% increase in property value). The Board supports the partial disposal of Acacia for the following reasons:
· The sale achieves the independent valuation as at 30 June 2020;
· The weighted average lease expiry in years equates to 3.15 years and is regarded as being within the optimal timeframe for value realisation;
· The transaction will free up capital for Grit to replenish its working capital reserves in the short term and for redeployment into yield accretive pipeline over the medium term;
· Grit will continue to asset manage the structure for a proportionate asset management fee;
· Grit will continue to property manage Acacia;
· Grit will maintain control and continue to consolidate Acacia; and
· Grit will decrease its exposure to Mozambique in line with the guidance of a maximum exposure of 25% per jurisdiction.
EFFECTIVE DATE
The effective date of the transaction is 1 November 2020 ("Effective Date") and the purchase consideration will be settled in cash on the completion date. The Transaction has a long stop date of 15 December 2020.
THE PROPERTY
At the Effective Date the details of the Property are as follows:
Property Name and Address | Geographical Location | Sector | Gross Leasable Area (GLA) (m2) | Key Tenants
|
Zone 5 A/B, Area da Costa do Sol, Maputo in Rua do Rio Inhamiara Road | Mozambique | Corporate Residential | 18,400 | The US Government Total Mozambique |
Exit Yield Attributable to Shareholders (Annualised) | Weighted Average Escalation | Weighted Average Lease Expiry in Years
| Vacancy % by Gross Lettable Area |
7.93% | 4.4% | 3.15 | 0% |
By Order of the Board
16 October 2020
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited | |
Bronwyn Corbett, Chief Executive Officer | +230 269 7090 |
Darren Veenhuis, Investor Relations | +44 779 512 3402 |
Maitland/AMO - Communications Adviser | |
James Benjamin | +44 20 7379 5151 |
Jason Ochere | Grit-maitland@maitland.co.uk |
finnCap Ltd - UK Financial Adviser | |
William Marle / Giles Rolls / Matthew Radley (Corporate Finance) | +44 20 7220 5000 |
Mark Whitfeld / Pauline Tribe (Sales) | +44 20 3772 4697 |
Monica Tepes (Research) | +44 20 3772 4698 |
Perigeum Capital Ltd - SEM Authorised Representative and Sponsor | |
Shamin A. Sookia | +230 402 0894 |
Kesaven Moothoosamy | +230 402 0898 |
Capital Markets Brokers Ltd - Sponsor Broker | |
Neetusha Aubeeluck | +230 402 0285 |
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African real estate company focused on investing in and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high quality assets are underpinned by predominantly US$ and Euro denominated long-term leases with a wide range of blue-chip multi-national tenant covenants across a diverse range of robust property sectors.
The Company is committed to delivering strong and sustainable income for shareholders, with the potential for income and capital growth. The Company is targeting net total shareholder return inclusive of NAV growth of 12.0%+ p.a.*
The Company holds its primary listing on the Main Market of the London Stock Exchange (LSE: GR1T), while its listing on the SEM is termed as a secondary listing (SEM: DEL.N0000).
Further information on the Company is available at http://grit.group/
* These are targets only and not a profit forecast and there can be no assurance that they will be met. Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of Directors and have not been reviewed or reported on by the Company's external auditors.
Directors: Peter Todd+ (Chairman), Bronwyn Corbett (Chief Executive Officer)*, Leon van de Moortele (Chief Financial Officer)*, Sir Samuel Esson Jonah+, Nomzamo Radebe, Catherine McIlraith+, David Love+, Jonathan Crichton+ and Bright Laaka (Permanent Alternate Director to Nomzamo Radebe).
(* Executive Director) (+ independent Non-Executive Director)
Company secretary: Intercontinental Fund Services Limited
Registered address: c/o Intercontinental Fund Services Limited, Level 5, Alexander House, 35 Cybercity, Ebène 72201, Mauritius
Registrar and transfer agent (Mauritius): Intercontinental Secretarial Services Limited
UK Transfer secretary: Link Asset Services Limited
SEM authorised representative and sponsor: Perigeum Capital Ltd
This notice is issued pursuant to the LSE Listing Rules, Article 19 of MAR, SEM Listing Rule 11.3 and Rule 5(1) of the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007. The Board accepts full responsibility for the accuracy of the information contained in this communiqué.