African real estate investments that go beyond buildings

A recently concluded R5.4bn refinance agreement between Grit Real Estate Income Group and Standard Bank marks the largest sustainability-linked real estate debt refinancing and syndication in Sub-Saharan Africa — excluding SA. This has set a new benchmark for African real estate investment. 

A recent FM, Grit Real Estate Income Group and Standard Bank webinar discussed the African debt market landscape, the challenges they faced putting the transaction together, the barriers to cross-collaterization, the importance of environmental, social and corporate governance (ESG) factors in the negotiation of refinancing transactions, target setting and the key drivers that support funding objectives.  

Grit is a pan-African real estate company which invests in and actively manages a diversified portfolio of assets in carefully selected African countries. The company has its primary listing on the premium segment of the London Stock Exchange and a secondary listing on the Stock Exchange of Mauritius. It has grown its portfolio from two assets valued at R2.4bn to 59 income producing assets and investments valued at more than R69.6bn in Africa, across multiple asset classes.

Grit CEO Bronwyn Knight said when the process to put this transaction together started 11 months ago, there was much to consider and understand, given it was across multiple geographies, legal jurisdictions, asset classes, currencies and languages. Key to the successful achievement of the transaction was finding the right partners, which included Standard Bank as the lead arranger. 

The deal includes global benchmarks for impact, with a number of key performance impact indicators in place. Knight said the transaction is ground-breaking and transformational for the real estate sector, Africa and emerging markets. She said it’s a tremendous accomplishment to be able to create a sustainability-linked funded structure that is scalable for the future.

Volatility is a challenge when doing business in Africa, said Niyi Adeleye, head of real estate finance for Africa at Standard Bank. However, when you are dealing with property you have to consider the investment through cycles. Though macro shocks will have an impact, these need to be layered against the underlying property fundamentals and potential market recoveries. 

Standard Bank has historically funded deals on a country by country basis, he said. However, this transaction created an overarching platform that allows the investment to ride out any volatility and build scale. If you can create scale you can attract more capital, he said. 

Simon Gouweloos, head of real estate finance at Standard Bank agreed the transaction was pioneering, given the cross-collaterization. He expected to see more transactions of this nature in the future. 

Each jurisdiction had to be considered in its own silo and the conditions met and risks mitigated in each, said Ntombentsha Odolo, investment banking legal adviser at Standard Bank. Other banks that come into the syndication rely on the fact that Standard Bank has mitigated the risks as far as possible. 

Grit CFO Leon van de Moortele said that having one party to deal with rather than multiple parties, particularly when it comes to refinancing, has made things easier. 

Making the security pool more attractive has helped with pricing and provided a blueprint, said Jaco van Zyl, head of treasury at Grit. This facility replaces R4.9bn of existing debt and secures additional funding earmarked for the Club Med Senegal redevelopment project.

This article was paid for by Grit Real Estate Income Group.