Grit Real Estate Income Group Limited ( 2019 Abridged Report

We have extracted the Chief Executive Officer’s  statement from the 2019 abridged report for Grit Real Estate Income Group Limited (, listed on the Stock Exchange of Mauritius:

The day after accomplishing our LSE listing on the 31 July 2018, we turned our attention to refining the vision for the Company and on implementing the next stage in the evolution of Grit’s strategy. Our team continued its exciting and careful expansion on the African continent. We have reaffirmed our vision of pioneering real estate owners, generating sustainable returns for generations to come, for all stakeholders including the people of Africa in each of the countries we operate. This vision, and what we now define as our Code of Honour, could not be fulfilled without a solid foundation and the relentless implementation of our values.

During the year under review, the portfolio grew to 24 property assets after our successful entry into the Ghanaian office property market and the acquisition of Acacia Estate in Maputo which is tenanted to, amongst others, the US embassy and is already providing opportunities for similar assets across other countries. We were pleased with the operational performance of our existing portfolio which delivered secure and growing income in line with our expectations. Country and sector diversification combined with proactive asset management initiatives offset some minor challenges we faced in the retail sector, and although we do not have further retail assets in our acquisition pipeline, we continue to believe our strip mall and convenience offerings are a compelling proposition for the African continent.

Operational and investment overview

We continued to internalise asset management and facilities management services and the successful implementation of Broll Online has standardised reporting processes. We bolstered our teams across our current geographic footprint to support near term growth aspirations which will be integral in achieving our medium term target to reduce administration costs as a percentage of assets towards 0.8%.

The most significant activity this year was the redevelopment of our flagship retail asset, Anfa Place Mall in Casablanca, Morocco at a total capital cost of US$25.09 million (inclusive of VAT, not all of which was incurred in the year). Post completion valuations and assets returns are expected to be enhancing to the portfolio in the current and future financial years. We recently hosted the official relaunch and have already been encouraged by positive footfall trends and market acceptance. Successful pre-letting and re-tenanting activities have reduced vacancies at Anfa Place Mall to 12.9% as at 30 June 2019. Strategic vacancies of 20% were maintained during the redevelopment stage. Significant new tenants to the centre include new anchor tenant Alpha 55 (1,908 sq m), a well-known Moroccan general merchandiser, while food and entertainment offerings have also been increased as a percentage of overall GLA.

During the year, the Group also acquired an additional 20 completed units leased to Barloworld at VDE corporate accommodation compound in Tete, Mozambique, including the remaining 15.5 hectares of land earmarked for further development at a total acquisition price of US $3.6 million. The additional units are adjacent to Grit’s existing 123 unit corporate accommodation asset. Post year end, the Group concluded a new lease contract with Vale for a period of five years, with a material requirement of this lease being the supply of an additional 60 accommodation units. By December 2019, 203 units are expected to be completed, representing an increase of 65% in units available for Vale and their subcontractors. We increased our stake in Mukuba Mall in Kitwe, Zambia from 50% to 75% for a net (excluding debt) consideration of US$8.2 million. Mukuba Mall remains one of the better performing retail assets in the region, due to its location and offering.

Significant Leasing activity

91.4% of expiring GLA was either renewed or replaced (as part of active asset management activities) with significant activity during the year under review including a new five-year office lease to Exxon Mobil in Commodity house Phase 2 in Maputo. Exxon Mobil has also been granted first option on any further Grit controlled office space in Maputo that becomes available. We successfully concluded a new 10-year office lease, including an increase in GLA, with Anadarko (1,910 sq m) after the exit of an existing local tenant at Commodity House Phase 1. We introduced the Macau Casino (947 sq m) to Mall de Tete on a new five-year lease and concluded a new five-year lease with VIP Spar (1,780 sq m) as anchor tenant in Zimpeto Square shopping mall in Maputo.


A US$140 million syndicated debt refinancing program pertaining to the Mozambique portfolio was agreed with a syndicate of banks led by Standard Bank of South Africa and was implemented post year end. More information on this is available in the CFO review. At year-end, Grit’s Property Loan to Value was 40.6%. We continue to target a range of between 35% and 40% over the medium term.

Capital allocation

The portfolio has reached a level of maturity where certain assets may be recycled and proceeds reinvested into higher returning projects. The finalisation of real estate collective investment schemes (OPCI) in Morocco provides us with an opportunity to unlock value through yield compression should Anfa Place Mall be put into an OPCI structure. In line with our strategy of being the real estate partner of choice, we are considering a number of co-investment opportunities with pension and sovereign wealth funds on the continent. In addition to equity ownership, it is anticipated that Grit will also provide asset management services, which we would expect to generate additional revenue and to support NAV growth.

Strategy update

The Board has recently broadened the Company’s mandate to include the pre-funding of risk mitigated development projects as it looks to deploy surplus cash into business units demonstrating higher returns, strong fee generation and strategies that further accelerate NAV growth. The Group aims to deliver superior returns through three primary areas, namely:

  • Property Investment
    – A targeted 12% US$ total return* including secure and growing distributions underpinned by high-quality hard currency leases and contracted rental escalations.
  • Property Development
    – Pre-funding of risk-mitigated development projects which, together with the investment in the Group’s development associate Gateway Delta, is limited to 20% of Group gross asset value (“GAV”). The turnkey nature of developments are not expected to impact dividends. Profits are applied as a reduction in acquisition cost of future assets, which will make it a key component of delivering sustainably higher targeted future NAV growth from Grit’s strong multinational tenant relationships.
  • Asset Management fee income
    – Fees charged on full property asset values where Grit owns less than 100% of the portfolio has the ability to further leverage on Grit’s operational cost base. The provision of Asset Management Services, both internally and to external property owners is a strategic focus area for the Group and is expected to drive strong fee generation and should assist in lowering a number of the Group’s operating cost ratios into the future.


During the year under review management has positioned the business to optimise our growth ambitions in a sustainable, predictable way.

The successful execution of the pipeline is expected to further diversify the portfolio, significantly reducing the exposure to retail and increasing our footprint in logistics, hospitality, corporate accommodation and office real estate sectors.

I am grateful to serve as CEO of Grit, and wish to thank all members of our audacious, innovative team. We are built to perform: every member of my team has met the challenges during the past year and have already prepared themselves to optimise all opportunities in the coming year. The quality of the Group’s diversified portfolio and our strong multinational tenant base have once again helped us to deliver a strong set of results despite a number of headwinds. This solid foundation leaves us confident of continuing to deliver attractive returns over the short and longer term.

We are excited about the opportunities we have identified to continue adding attractive, accretive assets to the portfolio at prices that create value for our shareholders and that will underpin our EPRA NAV growth and our progressive dividend policy over the medium term.

Bronwyn Corbett
Chief Executive Officer