Grit Real Estate Income Group (Mauritius) – Co-investment with Letlole la Rona into Orbit Africa Warehousing Kenya

By Published On: May 20th, 2022Categories: Corporate announcement

The board of Directors (the “Board”) of Grit Real Estate Income Group Limited, a leading pan-African income real estate company, focused on investing in, developing and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multi-national tenants, today announces the introduction of Letlole La Rona Limited (“LLR”) as a 30% co-investor to Grit’s industrial facility in Nairobi, Kenya (the “Asset”), currently tenanted to Orbit Products Africa Ltd (“Orbit”)

LLR, a variable rate loan stock company listed on the Botswana Stock Exchange, recently defined a “GoTo-Africa” strategy and described its intentions to form strategic partnerships with credible and experienced African investment entities. LLR’s current portfolio is predominantly comprised of Botswanan premiumgrade industrial warehouse assets, and while today’s transaction not only marks LLR’s first acquisition outside of the country, it also positions LLR as a preferred funding partner alongside Grit to make further yield-enhancing industrial sector investments that create positive social and environmental impacts. The Company sees significant opportunities across Africa in this structurally undersupplied asset class and expects to make further investments over the short and medium term alongside its partners and African focused development finance institutions (“DFIs”) that are expected to enhance value to Grit’s shareholders.

LLR has signed a conditionally binding agreement to subscribe to a 30% shareholding in the Mauritian holding entity of the Asset (the “Transaction”) (currently 100% owned by Grit), and an injection of approximately US$7.23 million via a shareholder loan to the Mauritian holding entity, being its pro-rata share of equity contributions to date. Grit will realise an acquisition fee of US$ 600,000 from LLR upon completion of the Transaction and Grit will also earn an annual asset management fee of 0.5% of the value of the Asset as a result of the asset management agreement now concluded. The Transaction is subject to LLR shareholder, local regulatory and Asset financier approvals, which are currently underway. Grit expects to utilise the cash proceeds, from the repayment of its pro rata shareholder loan, towards further increasing the Company’s interests in Gateway Real Estate Africa by 31 July 2022 (as recently announced by Grit – link here).

The Asset, originally acquired after Grit raised US$31.5 million in perpetual notes and US$25 million in debt from the International Finance Corporation (“IFC”) (the investment arm of the World Bank), forms part of a broader industrial sector focused investment strategy being pursued by the Company. The total investment in the Asset is expected to be US$53.6 million (incl. VAT), comprising the initial sale and leaseback on a new 25-year US dollar denominated triple net lease to Orbit at a net acquisition yield of 9.60% alongside the redevelopment and the expansion of the facility at an attractive contractual development yield of 16.0%. The Company continues to expect the investment to be accretive to Grit’s NAV and earnings from inception and to realise attractive sustainable capital value enhancement and rental income growth.

The Asset upgrades are additionally expected to create long lasting positive social, economic and environmental benefits for local communities, whilst the property will also benefit from being significantly improved to today’s modern FMCG industry standards and achieving an IFC EDGE green building certification. The redevelopment and expansion is expected to be completed in the fourth quarter of 2023 when it will be let on a new 20-year triple net lease to Orbit. Grit holds a minority stake of 30% in LLR, which is classified as an associate in Grit’s consolidated accounts.

Bronwyn Knight, CEO of Grit Real Estate Income Group Limited, commented:

“We are pleased today to welcome LLR as co-investor to the Orbit facility, which is expected to deliver enhanced sustainable value to Grit’s shareholders, whilst creating long lasting positive social, economic and environmental benefits for local communities.
This landmark transaction provides opportunities for Grit to collaborate further with LLR as one of the Group’s preferred funding partners for further yield-enhancing industrial sector investments that create positive social and environmental impacts, as LLR rolls out its Go-To-Africa strategy.
The Board continues to see a structural undersupply of quality industrial sector assets across the African continent and expects to make further accretive investments over the short and medium term that will deliver further value to our shareholders.”

By Order of the Board
20 May 2022