Grit Real Estate looks to Indian Ocean islands for growth
The Africa-focused property group performed marginally below its market guidance, achieving 9.3% total return
Mauritius-based Grit Real Estate, the only pan-African property fund on the JSE, is set to expand into other Indian Ocean islands, in order to boost returns after its dividends barely grew in the 2019 financial year.
Speaking after the release of results for the year to June, CEO Bronwyn Corbett said the company had listed on the London Stock Exchange (LSE) in July 2018 to gain access to a broader capital base, which meant it could buy hospitality assets in Seychelles and Maldives.
Grit acts as a rand hedge for investors as it pays its dividends in dollars. It owns assets in Botswana, Ghana, Kenya, Mauritius, Morocco, Mozambique and Zambia and has a market capitalisation of R5.8bn.
Grit missed its 12% total shareholder return target because of the costs of listing on the LSE.
“We listed on the LSE in order to get access to more capital. About 12% of our shareholder base was in London when we listed. It’s now 20%. We have found that there is more interest in African commercial property among the UK base, so we are going to the UK market for future capital raises,” she said.
Corbett said the tourist markets in Seychelles and Maldives were performing well, which created opportunities for Grit to invest in these markets.
Grit performed marginally below its market guidance, achieving a reported total shareholder return of 9.3%.
The group raised its dividend for the period 0.1% to 12.20 dollar cents per share, with net property income rising 25.97% to $32.32m.
Grit’s headline earnings per share rose 27.4% to 8.09 dollar cents.
Corbett said the company would have delivered a total return of 12.4% had the listing costs been excluded, and expected further growth in net asset value in the current period.
“Our portfolio delivered in line with expectations and the company’s targets despite currency headwinds and significant corporate activity, including a successful listing and capital raise on the London Stock Exchange,” she said.
Corbett said Grit was disappointed that the dividend growth was marginal in the reporting period but the company had still managed to reward investors with dollar-based returns.
“It’s key that we are a diversified group now. We own African assets across the retail, hospitality, office and industrial sectors. Retail has especially been under pressure in parts of Africa, but our other asset types have made up for that. I think that compared with other property funds whose dividends have shrunk, our results are commendable,” said Corbett.
Grit’s listing in London raised a net $121.6m after costs, though administrative costs had risen due to a number of one-off costs related to the listing, such as additional advisers for the process.
During the period, Grit acquired two additional assets, the Acacia State development in Mozambique and a building in Ghana. This brought the company’s total portfolio to 25, with total income-producing assets valued at $825.2m at the end of the period, up 28% year on year.
Corbett said she was confident that Grit’s dividend would gain momentum in the June 2020 financial year.