LISTED REAL ESTATE
Grit’s patient investors likely to be rewarded as fund targets 12% return
Real estate entrepreneur Bronwyn Corbett says investors who have stuck by pan-African property fund Grit Real Estate in its various guises over the past few years are finally to be rewarded.
Grit CEO Corbett expects the company’s share price, which has underperformed over the past three years, to gain momentum during the rest of 2018. She says investors will also be attracted by the opportunity to receive dollar income from the fund, something most JSE-listed real estate companies do not offer.
The group, which listed in 2014 with R2.2bn of assets, has grown from being a company searching for opportunities across an array of African countries into a fully fledged property fund that pays US dollar-denominated dividends and manages about $600m (R7bn) worth of assets across seven African countries.
By June 1 the fund will own assets worth more than $1bn (R11.86bn), according to group director Greg Pearson.
Based in Mauritius, Grit was spun out of Delta Property Fund, a real estate company that owned a substantial number of government-tenanted buildings, in July 2014.
Initially called Delta International, its name changed to Mara Delta following a merger with Mara Diversified Property Holdings, which involved a significant asset injection. In 2017 it was renamed Grit Real Estate.
Grit is now listed on the JSE and the Stock Exchange of Mauritius. It is planning a listing on the main board of the London Stock Exchange.
Corbett says "the company can compete with property funds in any country".
Grit’s assets have exposure to retail centres including the Anfa Place Shopping Centre in Casablanca, offices such as Barclays House in Mauritius and various hotel interests, also in Mauritius.
It has targeted a total dollar return of 12% for its 2018 financial year as well as an 8.25% dividend yield and 3.75% net asset value growth.
Having Africa in its name worked in the group’s early life when it was trying to build a profile. It has since matured and is completing a landmark group of deals in its seventh investment destination, Ghana.
"At first, we had to advertise what we were. We were the only property investors who had the nerve to list a fund in Africa. It took a while but we understand the markets which hold investment grade income-paying assets. We are now able to approach investors as the African property fund which can compete with European and South African funds," Corbett says.
Grit will invest $200m (R2.36bn) in Ghana through a number of deals over the next few months.
"Ghana has been earmarked as an expansion country based on its strong fundamentals. We have been following the economic reform within the country since 2014. Things have fallen into place and the real estate market has sufficiently repriced to meet our various investment hurdles."
Grit already owns properties in Morocco, Kenya, Zambia, Mozambique and Mauritius.
It has an equity investment in a listed real estate company in Botswana.
Corbett is looking for opportunities in Rwanda and Senegal, which have been approved by its investment committee. The group would consider investing in the Seychelles but this has not yet been approved by the investment committee.
Chris Segar, a portfolio manager at Ivy Asset Management, says Grit’s asset base growth has been impressive since it listed and the fund has achieved sector-based diversity into hotels as well as a distribution centre.
He says recent acquisitions had resulted in a longer weighted average lease expiry.
"Grit has strengthened its management team over the past couple of years. As the asset base grows, it should become more scalable and efficient in managing costs," says Segar.
Stanlib property analyst Lawrence Koikoi says investors have been attracted by Grit’s ability to find more opportunities in a diverse mix of African countries.
"Grit is proving itself as a defensive play despite operating in tough markets on the continent," Koikoi says.
"They have put together a portfolio of good assets with low vacancies and long lease terms," he says.
Grit could also remain the sole Africa-only listed property group for a couple of years.
Marna van der Walt, CEO of global real estate group Cushman & Wakefield Excellerate (CWE), says new investment into African real estate has tended to come from Chinese and Canadian pension funds, which have not indicated an intention to list any African assets on the JSE or elsewhere.