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GRIT Real Estate Income Group: exposure to Africa’s rapid growth

GRIT Real Estate Income Group is a leading pan-African property investment company with an actively managed and diversified portfolio of assets worth $849.2m.

There are three key aspects to GRIT’s business model. Firstly, the company’s client base consists of high-quality blue-chip multinationals which means its agreements are backed by guarantees. Secondly, GRIT’s revenues are denominated mostly (93%) in the US dollar or the euro, allowing the company to protect itself from currency risk. Finally, GRIT is diversified across the continent of Africa.

Why Africa?

With many of the world’s youngest populations, Africa is poised for growth both in the coming year and for decades to come. Following the pandemic, regional growth is forecasted at 3.4% in 2021. By 2030, 40% of Africans will be middle-upper class, while 50% of the continent will be urbanised. 

Strong population growth, a growing middle-class and increasing economic growth are trends that suggest Africa will be able to deliver strong and sustainable income, in addition to potential for income and capital growth for investors.

Diversification

GRIT’s holdings are well diversified across Africa and by sector. The countries where GRIT has its largest investments are Mozambique (39.3%), Mauritius (23.4%), Zambia (9.9%) and Morocco (8.7%). Office space (27.7%), retail (24.7%), hospitality (22.9%) and corporate accommodation (15.5%) are among the top revenue generating industries for GRIT. Out of a host of multinational tenants, Beachcomber (11.8%), Total (9.9%) and Vale (9.8%) are GRIT’s top three income generating clients.

Retail

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At the recent UK Investor Magazine conference, Bronwyn Corbett, CEO of GRIT Real Estate Income Group, outlined the company’s decision to change its retail weighting based on trends that emerged prior to the pandemic.

Highlighting the changing shape of consumption in Africa and how GRIT are harnessing the opportunity, Corbett outlined recent projects adapted to the needs of the African consumer.

“The retail in Africa that we believe in is convenience shopping. We’ve got malls in Zambia that have brought a 12,000 sqm space to 4.5m people in an area where people previously had to walk for 6 hours to shop,” Corbett said.

Performance

GRIT controlled its costs throughout the pandemic in order to offset the impact on revenue. This leaves the company well positioned to rebound once the impact of Covid-19 falls away. 

The company’s profit rose by 19.7% to $12.9m in 2020, while gross rental income fell by 0.1% to $31.6m. GRIT’s assets performed well during 2020 with the total income produced rising by 3.1% to $849.2m. GRIT’s EPRA NAV per share rose by 6.3% to 124.4 cents per share, suggesting an undervaluation by the stock market.  

GRIT’s board suspended its dividend payout for the second half of 2020 to protect the company during the pandemic. However, the property firm has proposed a resumption of its dividend of 1.5 cents per share in 2021 due to its LTV reduction and strong rent collections.

Outlook

GRIT has three developments underway in Mauritius and Kenya, each with yields above 10%. The company also has two redevelopments being processed in Mozambique and Senegal with target closing dates before the end of 2021. 

The group had an LTV of 50.2% in 2020, which is expected to fall to 49.3% in 2021, and remains a focus for GRIT.

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