Grit real estate income group limited's strategic acquisitions and hard currency lease escalations support robust performance

Posted On Friday, 09 February 2018 13:56 Published by
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Strategic acquisitions and hard currency lease escalations support Grit's robust half-year perfomance- US$6.07 cps target distribution achieved for the half-year


- Rental income including income from associates up 82% versus the first 6 months of financial year 2017

- Full-term contribution from acquisitions to result in buoyant second half

- Weighted Average Cost of Debt reduced to 5.69% (FY17: 5.78%)

- Total Property Investments increased by 16.7% from US$508m in June 2017 to US$592m at period end

- NAV per share increased from US$150.9 cents to US$158.7 cents for the period

- Net of dividends, NAV per share increased 2.08% from US$149.6 cents to US$152.7 cents per share

- On track to deliver US Dollar distribution growth forecast of 3% to 5%

Thursday, 08 February 2018. Mauritius. Grit, the only listed Africa-focused distribution group to offer international property investors access to high growth opportunities in thriving African economies outside of South Africa, today reported strong financial results for the six months ended 31 December 2017. “These results are exceptionally encouraging, given the context within which they were achieved,” commented Bronwyn Corbett, Chief Executive.

“Rental income including income from associates increased 82% versus the first six months of 2017, mainly because of three main contributors: - Rental income from acquisitions during the latter part of the preceding financial year as well as the current six months under review

- Hard currency lease escalations achieved; particularly those in Mozambique - The maintenance of operating costs despite the larger portfolio

Asset acquisitions of Tamassa Resort (Mauritius), Cosmopolitan Mall (Zambia) and Mall de Tete (Mozambique) in the latter half of the previous financial year, the transfer of Imperial Distribution Centre (Kenya) and Beachcomber Hotels (Mauritius) in August 2017, together with the completion of Commodity House Phase 2 in November 2017 drove the 82% increase in rental income. Cosmopolitan Mall and the three Beachcomber assets were the main drivers of the increase in income from associates, with the remainder of the associate portfolio performing as expected.

“Excluding the transfer, when comparing the average monthly rental from this half year sector to the previous financial half year, we see an increase of 7%, despite macro-economic headwinds in Mozambique,” she added.

As a result of the transfers, the overall portfolio increased 16.7% from US$508 million in June 2017 to US$592 million at the end of the review period.

Operating costs were maintained at expected levels despite the larger portfolio. As a percentage of income, operating costs reduced considerably from 25.3% in the prior comparative period to 15.3% because of the nature of triple net leases* on some of the transferred properties. Administration expenses reduced to 1.1% of total property investments, despite the larger head-count and specialist skills onboarded.
Grit declared its eighth consecutive dividend in line with management guidance since formation of the Company in 2014. Dividends for the period of US$6.07 cents per share was declared. It is important to note that Imperial Distribution Centre and Beachcomber assets did not become effective until August 2017 and Commodity House Phase 2 only contributed to income from November 2017. Management therefore expects a comparatively better second half of the financial year.

“A large part of our value unlock for shareholders is based on how effectively we structure debt. I am very pleased that our multi-banked approach and pro-active negotiations on refinancing has resulted in a further reduction in our cost of debt, which is down to 5.69% compared to 5.78% at the end of the 2017 financial year,” continued Corbett.

Corbett attributes the reduction in cost of capital mainly to the inclusion of Euro based loans over the period as the Company continued to match debt to the underlying cashflow of the asset. The increase in Euro based assets has resulted in an increase in the proportion of debt transactions concluded in Euros, offsetting the increase in the USD three-month Libor.

Grit’s net asset value per share increased from USD$150.9 cents per share in 30 June 2017 to US$158.7 cents per share at 31 December 2017. Net of dividends, NAV per share increased 2.08% from US$149.6 cents per share in June 2017 to US$152.7 cents per share in December 2017. The key driver of this growth over the past 6 months were revaluations to the existing portfolio and capitalising on the net asset Euro position against the US dollar through foreign exchange gains.
Vacancies remained stable at 3.9% of the overall portfolio as at 31 December 2017. Excluding structural vacancies because of the Anfa Place Shopping Centre refurbishment, vacancies across the portfolio is 1.3%.

“Going forward, our focus will remain on asset management opportunities within the existing portfolio, as well as initiatives in thriving African economies to support net asset value growth and ongoing portfolio diversification,” concluded Corbett.

The Company maintains its distribution growth forecast for the full year at between 3% and 5% based on a stable economic environment across its operations.

Last modified on Tuesday, 13 February 2018 16:35

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