Detailed update for the year ended 30 June 2020

RNS Number : 1283D

Grit Real Estate Income Group

26 October 2020

 

GRIT REAL ESTATE INCOME GROUP LIMITED (Registered by continuation in the Republic of Mauritius) (Registration number: C128881 C1/GBL) LSE share code: GR1T SEM share code: DEL.N0000 ISIN: MU0473N00036 LEI: 21380084LCGHJRS8CN05 ("Grit" or the "Company" or the "Group")

DETAILED UPDATE FOR THE YEAR ENDED 30 JUNE 2020

Grit Real Estate Income Group Limited, a leading pan-African real estate company focused on investing in 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 releases a detailed update for the 12 months ended 30 June 2020. The Company now intends to publish its audited results in line with Covid-19 reporting timelines set out by the UK's Financial Conduct Authority (i.e. by no later than 31 December 2020) and has obtained formal approval  from the SEM for a similar timeline dispensation. The Company had previously announced that it intended to release its audited results for this period on 26 October 2020 .

Bronwyn Corbett, Chief Executive Officer of Grit Real Estate Income Group Limited, commented:

"Covid-19 has created a challenging backdrop, which has impacted Grit's business over the past six months, but we are continuing to take actions to ensure the stability of the portfolio and that Grit remains financially robust. Our actions have included strategic asset sales, successful renegotiations with key lenders and innovative financing solutions which will enhance shareholder returns over the short and longer term.

Our office, light industrial and corporate accommodation sector assets have remained relatively unaffected by the pandemic, and with Group rent collection continuing to improve, including robust August and September rent collection that has averaged over 90%, the Group is increasingly confident in its outlook. This increasing confidence is further reinforced by the recovery of the Euro post year-end, footfall showing steady improvement in our retail assets and arrears balances starting to improve. We continue to make positive strides in our asset recycling initiatives, and we have further increased our headroom through the recent lifting of the Group's lowest enforced debt covenants to 55%.

The Group is well positioned for a recovery in the economies we operate in and continues to focus on delivering its investment strategy and exciting growth opportunities that underpin the Company delivering attractive, secure and sustainable income and capital growth to our shareholders from across our high-quality portfolio over the short and longer term."

Financial highlights

	Unaudited 30 June 2020	30 June 2019
Dividend per share	US$5.25 cps	US$12.20 cps
EPRA NAV per share	US$118.0 cps  to US$119.9 cps	US$147.1 cps
Adjusted EPRA earnings per share	US$8.70 cps to US$9.12 cps	US$9.92 cps
EPRA cost ratio (incl. associates)	14.6%	17.0%
Total Income Producing Assets	US$823.5m	US$825.2m
WALE	5.4 yrs.	6.3 yrs.
EPRA portfolio occupancy rate	94.1%	97.1%
Group LTV	c.50.5%	43.1%
Property LTV	46.5%	40.6%

· EPRA net asset value ("NAV") per share is expected to fall to between US$1.180 to US$1.199 (2019: US$1.471). The reduction is principally as a result of the decrease in the value of the Group's retail and hospitality assets, the impacts of movements in currencies against the US$, mark to market adjustments on interest rate swaps and increased impairment charges.

· Group LTV increased to c.50.5% (2019: 43.1%) predominantly as a result of the decrease in the value of the Group's property portfolio. All debt covenants have, and continue to be met but as a precautionary measure the Group has successfully lifted its lowest applied LTV debt covenants to 55% and secured additional liquidity facilities. The Board remains committed to reducing LTV levels through capital recycling initiatives, issuance of quasi equity instruments and selected NAV accretive acquisitions.

· Dividends per share declared for the year ended 30 June 2020 total of US$5.25cps (2019: US$12.20cps), comprising the interim dividend declared in February 2020. The Board has decided against declaring a final dividend for the year ended 30 June 2020, but expects to resume dividend payments in the current financial year ending 30 June 2021

· The Group's property portfolio was independently valued at 30 June 2020, with total income producing assets valued at US$823.5 million (2019: US$825.2 million) and like-for-like property valuations decreasing 7.4% in the s ix month period from December 2019.

Operational highlights

· Property portfolio now comprises a total of 52 investments, across eight countries, five asset classes.

· 86% of the value of contracted revenues for the four months to 30 June 2020 were collected, including arrears balance recoveries and rental prepayments.

· 90.2% (2019: 93.6%) of revenue is earned from multinational tenants1.

· 89.1% (2019: 95.4%) of income is produced in hard currency2.

· c.14.4% of contracted rents for the four months to 30 June 2020 were placed upon agreed payment plans and are predominantly collectible through to 31 December 2021.

· c.8.7% of total contracted rentals for the four months to 30 June 2020, predominantly in the retail sector, were permanently written off as rental concessions.

· EPRA portfolio occupancy rate of 94.1% as at 30 June 2020 (2019: 97.1%).

· Total Grit proportionately owned lettable area ("GLA") increased a further 6.2% in the second half of the financial year to 334,589 sqm (2019: 260,709 sqm) as a result of acquisitions.

· Weighted average annual rent escalations at 3.3% (2019: 2.8%).

· Weighted average property capitalisation rate 7.6% (2019: 7.7%), impacted by Covid-19 uncertainty upward movements that were offset by favourable portfolio mix effects from acquisitions.

· Weighted average cost of debt moved down to 5.9% (2019: 6.4%) as a result of movements in LIBOR over the reporting period and refinancing activity.

· Leases over 96,654 sqm of GLA (on a 100% basis), representing 17.6% of total Group GLA, expired in the year. New leases over 93,368 sqm of this GLA were concluded by 30 June 2020.

· Successful leasing activity with Bollore, Shoprite, Game and Tsebo over the period.

Notes

1	Forbes 2000, Other Global and pan African tenants.
2	Hard (USD and EUR) or pegged currency rental income.

Post balance sheet activity

· On 29 July 2020, Grit delisted off the Main Board of the Johannesburg Stock Exchange and introduced two strong African institutional shareholders.

· On 17 August 2020 the Group secured a short-term facility of one year from Nedbank South Africa for US$7.0 million, bearing interest at Libor plus 7%.

· On 3 August 2020 the trading of Grit's shares on the Main Board of the LSE converted from a USD quotation to a GBP Sterling quotation.

· On 18 September 2020 the Company entered into a binding agreement for the disposal of a 39.5% interest in AnfaPlace Mall in Morocco, thereby reducing the Group's exposure to the retail sector.

· On 16 October 2020 the Company entered into a binding agreement for the disposal of a 26.35% interest in Acacia Estate, capitalising on value improvement that the Group has introduced since acquiring the asset in 2018.

· Collection rate of over 90% of the value of contracted revenue for August and September, increasing from c.87.6% for the three months to 30 September 2020.

BUSINESS REVIEW

The impact of Covid-19 (or the "pandemic") continues to test the resilience of the Group's portfolio, as the Group remains focused on its strategy, its tenants and continued leasing performance in order to navigate the current period of uncertainty while positioning itself to take advantage of future opportunities.

The safety and wellbeing of Grit's staff and their families, its tenants, communities and wider stakeholders remains the Group's top priority while the Company continues to work tirelessly to contain and mitigate the potential effects of the pandemic.

The Group's high-quality assets have a weighted average lease expiry of 5.4 years, a weighted average contracted lease escalation of 3.3% per annum and are underpinned by a wide range of blue-chip multi-national tenants across a variety of sectors who account for over 90% (2019: 93.6%) of our contracted revenue. Grit's property portfolio comprises a total of 48 operating assets (including 24 properties held in Letlole La Rona ("LLR")) with rentals predominantly collected monthly, of which 89.1% are collected in US$, Euro or pegged currencies.

Management's modelling indicates that the Group has adequate financing facilities through to December 2022. Hospitality and retail assets, which now make up 49.1% of the Group's property portfolio, are currently in the re-opening and recovery phase and their current trading performance and collection trends are ahead of budget for the three-month period July 2020 to September 2020.

Collections have remained strong since the onset of the pandemic and, despite the economic headwinds, collection trends have continued to improve in recent months with August and September collection rates averaging over 90% of contracted rental revenue.

Short term concessions, primarily in the retail segment, were agreed and have resulted in lost revenue of c.2.9% in the financial year end to 30 June 2020. Short-term payment deferrals of a further c.4.8% of Grit full year attributable contracted revenue were agreed driven primarily by the hospitality sector assets in Mauritius. These balances are predominantly now due over the period to 31 December 2021.

Financial update

Notwithstanding rental concessions granted, total rental income is still expected to increase for the year ended 30 June 2020 as a result of annual contractual lease escalations and as a result of asset acquisitions in the period.

	Unaudited for the year ended 30 June 2020	Audited for the year ended 30 June 2019
	US$'000	US$'000
Contractual rental income	38,798	36,921
Retail parking income	1,567	1,532
Other rental income (lease incentives)	2,240	-
Recoverable property expenses	5,349	5,105
Total rental income	47,954	43,558

The results are expected to reflect a lower NAV per share mainly as a result of the decrease in the value of the Group's property assets, the impacts of movements in currencies against the US$, mark to market adjustments for interest rate swap contracts, increased impairment charges and provisions associated with the Drive-In-Trading ("DIT") facility guarantee.

Reduced property valuations were predominantly impacted by net operating income movement and upward movement in discount and capitalisation rates in the hospitality and retail sectors. The balance of the portfolio, consisting of corporate offices, corporate accommodation and light industrial assets performed well, highlighting the continued importance of a diversified portfolio, both in terms of geography and asset class.

Sector	Valuation 30 June 2020 (US$ 'm)	Valuation 31 Dec 2019 (US$ 'm)	Like-for-like valuation movements
Office	199.4	201.9	-1.0%
Corporate Accommodation	138.2	139.2	-1.5%
Light Industrial	27.2	27.8	-4.5%
Hospitality	162.3	151.5	-5.4%
Retail	217.8	259.6	-16.9%

Investment properties are valued at each reporting date with valuations performed every year by independent professional valuation experts accredited by the Royal Institute of Chartered Surveyors' ("RICS") and compliant with International Valuation Standards. A summary of the portfolio valuations is presented below:

Investment Properties summary

		Valuer			Unaudited as at	Audited as at
	Most recent	(for the most			30 June 2020	30 June 2019
Summary of valuations by reporting date	independent valuation date	recent valuation)	Sector	Country	US$'000	US$'000
Commodity House Phase I building	30-Jun-20	REC	Office	Mozambique	48,095	46,236
Commodity House Phase II building	30-Jun-20	REC	Office	Mozambique	19,348	17,200
Hollard Building	30-Jun-20	REC	Office	Mozambique	21,332	20,800
Vodacom Building	30-Jun-20	REC	Office	Mozambique	49,438	48,101
Zimpeto Square	30-Jun-20	REC	Retail	Mozambique	5,848	7,616
Bollore Warehouse	30-Jun-20	REC	Light industrial	Mozambique	5,795	6,800
ABSA House	30-Jun-20	Knight Frank	Office	Mauritius	13,825	14,312
Anfa Place Mall	30-Jun-20	Knight Frank	Retail	Morocco	89,363	106,145
Tamassa Resort	30-Jun-20	Knight Frank	Hospitality	Mauritius	49,734	54,100
Vale Housing Compound	30-Jun-20	REC	Accommodation	Mozambique	70,654	49,900
Imperial Distribution Centre	30-Jun-20	Knight Frank	Light industrial	Kenya	21,370	20,200
Mara Viwandani	30-Jun-20	Knight Frank	Light industrial	Kenya	3,070	3,250
Mall de Tete	30-Jun-20	REC	Retail	Mozambique	19,991	25,416
Acacia Estate	30-Jun-20	REC	Accommodation	Mozambique	67,540	65,800
5th Avenue Building	30-Jun-20	Knight Frank	Office	Ghana	19,210	21,880
Mukuba Mall	30-Jun-20	Knight Frank	Retail	Zambia	55,130	69,100
Club Med Cap Skirring Resort	30-Jun-20	Knight Frank	Hospitality	Senegal	17,479	-
Total valuation of investment properties directly held by the Group					577,222	576,856
Deposits paid on Imperial Distribution Centre Phase 2					1,500	5,500
Deposits paid on Capital Place Limited					3,000	3,000
Total deposits paid on investment properties					4,500	8,500
Total carrying value of investment properties including deposits paid					581,722	585,356
Investment properties held within associates and joint ventures - Group share
Buffalo Mall - Buffalo Mall Naivasha Limited (50%)	30-Jun-20	Knight Frank	Retail	Kenya	6,395	5,449
Kafubu Mall - Kafubu Mall Limited (50%)	30-Jun-20	Knight Frank	Retail	Zambia	9,658	12,300
CADS II Building - CADS Developers Limited (50%)	30-Jun-20	Knight Frank	Office	Ghana	16,920	18,230
Cosmopolitan Shopping Centre - Cosmopolitan Shopping Centre Limited (50%)	30-Jun-20	Knight Frank	Retail	Zambia	31,375	37,350
Canonniers, Mauricia and Victoria Resorts and Spas - Beachcomber Hospitality (44.42%)	30-Jun-20	Knight Frank	Hospitality	Mauritius	95,066	98,736
Capital Place - Capital Place Limited (50%)	30-Jun-20	Knight Frank	Office	Ghana	11,210	11,714
Letlole La Rona Limited (30%) - 19 Investment properties	30-Jun-20	Knight Frank	Light industrial	Botswana	15,536	-
Letlole La Rona Limited (30%) - 1 Investment property	30-Jun-20	Knight Frank	Hospitality	Botswana	193	-
Letlole La Rona Limited (30%) - 2 Investment properties	30-Jun-20	Knight Frank	Retail	Botswana	4,957	-
Letlole La Rona Limited (30%) - 1 Investment property	30-Jun-20	Knight Frank	Office	Botswana	1,316	-
Letlole La Rona Limited (30%) - 1 Investment property	30-Jun-20	Knight Frank	Accommodation	Botswana	1,221	-
Gateway Real Estate Africa Ltd (19.98%)	30-Jun-20	Directors' valuation	Other investments	Mauritius	5,009	-
Total of investment properties acquired through associates and joint ventures					198,856	183,779
Total portfolio					780,578	769,135

· US$9.0 million capital expenditure was spent on Anfa Place Mall. The reduction in the fair value of Anfa Place Mall was driven by an increased discount rate and capitilisation rate for the ongoing vacancies and risk provision made on the retail sector coupled with lower cashflows due to Covid-19 concessions made as well as foreign currency translation differences.

· The capital expenditure spent on Vale Housing Compound was US$16.7 million with the remainder being an increase in fair value.

Interest bearing borrowing

Cost of debt further reduced from a weighted average rate of 6.4% in the comparative year to 5.9% for the year under review. Several refinancing negotiations were successfully concluded, including replacing a number of the Mozambique loans with a cross-collateralisation programme with the Standard Bank of South Africa. The new US$140 million facility resulted in a c.100bp drop in interest rates versus the replaced facilities. More recently the Group has extended a  US$15 million bullet payment on an Investec Bank facility to February 2022, has extended maturities on several Group facilities and has secured an additional US$7 million revolving credit facility from Nedbank. Total Interest-bearing borrowings increased by US$41 million in the financial year to 30 June 2020, comprising funding for the Club Med Senegal asset, the additional VDE units and additional drawdown of working capital facilities.

	Unaudited as at 30 June 2020	Audited as at 30 June 2019
	US$'000	US$'000
Currency of the interest-bearing borrowings (stated gross of unamortised loan issue costs)
United States Dollars	271,560	214,345
Euros	119,419	131,561
Mauritian Rupees	1,778
Mozambican Meticais	-	2,658
	392,757	348,564
Unamortised loan issue costs	(5,106)	(2,467)
As at 30 June	387,651	346,097

Analysis of facilities and loans in issue
			Unaudited as at 30 June 2020	Audited as at 30 June 2019
Lender	Borrower	Initial facility	US$'000	US$'000
Standard Bank Mozambique	S&C Immobiliaria Limitada	US$10.4m	-	10,451
Standard Bank South Africa	Sal Investments Holdings Limited	US$12.0m	-	12,000
Standard Bank South Africa	Commotor Limitada	US$38.0m	-	38,000
Standard Bank South Africa	Commotor Limitada	US$140.0m	140,000	-
Standard Bank South Africa	Cognis 1 Limitada	US$28.0m	-	27,239
Standard Bank South Africa	Grit Services Limited	RCF - EUR26.5m	29,730	30,128
Standard Bank (Mauritius) Limited	Transformers Holdings Limited	US$11.7m	-	10,110
Total Standard Bank Group			169,730	127,928
Bank of China	Warehously Limited	US$8.5m	8,555	8,555
Bank of China	Gerania Limited	US$13.3m	-	13,300
Bank of China	Zambian Property Holdings Limited	US$77.0m	76,405	76,405
Total Bank of China			84,960	98,260
State Bank of Mauritius	Leisure Property Northern (Mauritius) Limited	EUR9.0m	10,097	10,395
State Bank of Mauritius	Leisure Property Northern (Mauritius) Limited	EUR3.2m	3,590	3,474
State Bank of Mauritius	Mara Delta Properties Mauritius Limited	EUR22.3m	25,018	25,353
State Bank of Mauritius	Grit Real Estate Income Group Limited	Equity Bridge US$20.0m	20,000	-
State Bank of Mauritius	Grit Real Estate Income Group Limited	RCF MUR 72.0m	1,778	-
State Bank of Mauritius	Grit Real Estate Income Group Limited	RCF US$20.0m	-	11,115
Total State Bank of Mauritius			60,483	50,337
Investec South Africa	Freedom Property Fund SARL	EUR36.0m	37,027	36,198
Investec South Africa	Freedom Property Fund SARL	US$15.7m	8,722	8,860
Investec Mauritius	Grit Real Estate Income Group Limited	US$0.5m	378	425
Total Investec Group			46,127	45,483
ABSA Bank Mauritius	BH Property Investment Limited	EUR7.4m	7,081	7,174
ABSA Bank Ghana Limited	Grit Accra Limited	US$9.0m	9,000	9,000
Total ABSA Group			16,081	16,174
Maubank Mauritius	Grit Real Estate Income Group Limited	EUR3.7m	3,642	3,691
Maubank Mauritius	Freedom Asset Management	EUR4.0m	3,234	4,033
Total Maubank			6,876	7,724
ABC Banking Corporation	Grit Services Limited	Equity bridge US$ 8.5m	8,500	-
Total ABC Banking Corporation			8,500	-
Bank Unico of Mozambique	Zimpeto Immobiliaria Limitada	MZN182.7m	-	2,658
Total Bank Unico			-	2,658
Total loans in issue			392,757	348,564
less: unamortised loan issue costs			(5,106)	(2,467)
As at year end			387,651	346,097

The reduction in NAV has increased the Group's LTV to a level of c.50.5%. As a precautionary measure, Grit continues to engage with all of its lenders on extension to LTV and interest covenants as well as interest holidays on loans attached to Covid-19 impacted properties. The lowest applied Group LTV covenant has been lifted to 55%, providing further headroom. 

Protection of the balance sheet and debt reduction have become a strong focus for the Group and will continue for the near term. The capital recycling programme is performing in line with expectations; the Group has sold minority interests in AnfaPlace and Acacia Estate and are currently in advanced discussions for the sale of other non-core assets. The Board remains committed to reducing LTV levels through a combination of continued asset recycling, quasi-equity instruments issuance to Development Financial Institutions  and various government support programmes, selected NAV accretive acquisitions and some respite from both EUR exchange rate moves and valuation uncertainties, predominantly across our hospitality and retail sector assets. Cost saving measures aimed at permanently eliminating US$3 million of identified annual costs have been implemented over the last six months.

Grit continues to pursue a medium-term LTV target of between 35%-40%, but now additionally has a near term focus to reduce LTV to below 45%.

I n light of recent events, the Board has decided against recommending a final dividend for the financial year ended 30 June 2020. The Board are encouraged by current collection trends and anticipate that dividend payments will resume in the new financial year ending 30 June 2021.

Despite a number of these ongoing challenges, there are positive trends which are expected to position Grit favourably in the short and medium term.

· The Euro recovered post year-end.

· The strength of our contracts and transparent tenant relationships were underscored with the resumption of payment by the Group's Mauritian hospitality partners from August and September 2020.

· Footfall in our retail assets has shown steady improvement and arrears balances have now stabilised and have started to improve.

Leasing and rental income update

Grit achieved notable success in rent and arrear balance collection, and in a challenging environment, reported notable new lettings activity. In the year, leases over 96,654 sqm of GLA (representing 17.6% of total Group GLA) expired, of which c.89% has successfully been relet to the same or new tenants.

A summary of notable leases concluded during the financial year (presented on a 100% basis)

PROPERTY	Type	TENANT	SECTOR	AREA M2	Years to expiry
Mukuba Mall	Renewal	Game	Retail	5,060	4.9
5th Avenue	Renewal	GC NET	Office	2,700	5.0
Vale Housing Estate	Replacement	Tsebo	Corporate Accom	3,600	3.0
Botswana LLR (1)	Renewal	Various	Botswana LLR	29,700	5.0
Commodity House Phase 2	New Deal	Exxon	Office	1,294	4.6
Mukuba Mall	Renewal	Pick and Pay	Retail	2,240	4.9
Mukuba Mall	Renewal	SHOPRITE	Retail	4,262	4.9
Anfa Place Shopping Mall	New Deal	Alpha 55	Retail	2,145	6.5
Bollore Logistics	Renewal	Bollore	Light Industrial	2,511	5.0
Mukuba Mall	Renewal	Mr Price	Retail	984	4.9
Total				54,496	4.9

The weighted average Group EPRA vacancy rate increased to 5.9% at 30 June 2020 (2019: 3.1%) and was mainly impacted by near term disruptions to the Group's retail assets, specifically in AnfaPlace Mall, where country wide Moroccan lockdowns resulted in delays to start dates of previously agreed tenancies and led to the termination of a number of existing leases. The vacancy rate at Anfa, which stood at 21.5% as at 30 June 2020, has continued to rise with the recent termination of a lease over 1,800 sqm by H&M. The leasing team has made significant progress on filling vacant space and is currently concluding leases which are expected to bring the mall's vacancies to under 20% by December 2020.

On 18 September 2020, the Company entered into a binding agreement for the disposal of a 39.5% interest in AnfaPlace Mall and has thereby reduced its retail sector exposure in-line with its self-imposed sector exposure limit target of 25%.

Mukuba Mall, which marked its five-year anniversary, had lease expiries over 25,212 sqm of its total 28,236sqm GLA falling due on 30 March 2020. Covid-19 related travel restrictions and the failure of the Edcon Group, a South African based fashion retailer, resulted in renewal delays. As at 30 September 2020, 75% of expiring leases have been renewed or re-let and offers are in place for a further 3,893 sqm which will result in a vacancy rate in the Mall of under 1% by January 2021 should these be successfully concluded.

	Corporate Accom	Hospitality	Light Industrial	Office	Retail	LLR	Other	Total
Number of Properties/Investments	2	5	2	8	7	24	4	52
Grit attributed Asset Value (US$ '000)	138,194	162,279	27,165	199,378	217,760	23,223	8,081	776,081
Weighted Average Property Cap rate	8.5%	6.7%	7.2%	7.9%	7.1%	8.8%		7.6%
Wale by GLA % Owned	3.6	10.3	6.9	4.0	3.4	3.1		5.4
Weighted Avg. Lease Escalations (Income) % Owned	3.1%	0.7%	3.0%	3.0%	3.9%	6.9%		3.3%
Grit attributed Weighted Avg US$ Rental / sqm per month	$22.07	$12.26	$9.50	$27.18	$16.62	$3.63		$15.48
Full GLA	43,955	128,239	16,213	52,276	118,838	176,582		536,103
Grit attributed GLA	43,955	78,103	16,213	46,010	97,335	52,975		334,589
EPRA Operating Cost to Income Ratio	13.4%	0.0%	2.5%	11.6%	29.7%	7.8%		14.6%
EPRA Vacancies	0.0%	0.0%	0.0%	2.5%	16.2%	10.3%		5.9%

Drive in Trading contingent liability update

By virtue of the Group's historic listing on the Johannesburg Stock Exchange, the Company's largest shareholder, the Public Investment Corporation ("PIC"), facilitated the Group's black economic empowerment and transformation partner, Drive in Trading ("DIT"), in the acquisition of 23.25 million Grit shares in June 2017 by providing a guarantee against their external debt facility. Separately, Grit indemnified the PIC for up to 50% of any potential losses suffered by PIC as a result of the guarantee, capped at US$17.5 million. Following the expiry of the loan facility, PIC has assumed the position of lender to DIT, and continues to reserve its rights under the Grit indemnity.

The PIC's Investment Committee has recently approved, subject to documentation, a formalisation of a revised US$ lending facility to DIT on the following terms:

· Duration: Initial two-year facility with an option to extend for a further three years

· Interest rate: 9% per annum (increased from the current 5.85%)

· A requirement for Grit to fully guarantee / remedy any shortfall in interest payment obligations

· Guarantee agreement between Grit and the PIC to remain in place for the duration of the loan. The Board and PIC continue to engage on this aspect and expect to finalise details on this shortly.

Should the transaction be concluded, it would be subject to an independent fairness opinion and considered under Grit's related party policy as a result of PIC's shareholding in Grit of 26.75%. The DIT guarantee provision is currently accounted for under "Other Financial liabilities" and at 30 June 2020 had a fair value of US$3.6 million (2019: US$1.1 million).

Further extension of reporting deadline

On 18 September 2020, the Company announced that the SEM had approved the extension of the deadline for publishing the Company's abridged audited consolidated financial statements for the year ended 30 June 2020 ("abridged audited consolidated financial statements") until Friday, 30 October 2020.

T he UK's Financial Conduct Authority has temporarily granted all LSE Main Market listed companies the option to delay the publication of annual audited financial reports from four to six months after the end of their financial year end and has urged companies to avail themselves of the additional two month period to fully assess the impact that Covid-19 may have on their businesses. Accordingly, the Company has formal approval from the SEM to further delay the publication of its abridged audited consolidated financial statements to the latest date of Thursday, 31 December 2020 if required,  which is now in line with the UK reporting timeframe limits.

Looking to the future

The impact of Covid-19 remains topical and continues to introduce uncertainty in managing a multi-jurisdictional real estate company. The situation remains fluid and the long-term impact, especially on the retail and hospitality sectors is difficult to quantify at this stage. The Board draws comfort from the structure of its contracts, the quality of its multi-national tenants and the diversification of its portfolio across multiple geographies and asset classes.

As reported in the prior period, Grit is seeking eligibility to the UK FTSE Index series and will be seeking shareholder approval to redomicile its corporate seat to Guernsey, alongside the already implemented conversion to a Sterling quotation on the LSE. The Group is making good progress toward its intention to step up to the premium listing segment of the Main Market of the LSE. These collective actions are expected to enable UK-oriented investors better access to Grit's shares, to support the Group's eligibility for inclusion in the FTSE UK Index Series, to significantly improve liquidity in the Company's shares and to further diversify Grit's investor base, all positioning the Group for growth through the Company's 2021 financial year and the long term.

The Company expect to deliver value to its shareholders by continuing to focus on maximising the yield of the current portfolio and unlocking value through the Company's operational expertise and proactive asset management, financial strength, and selective asset divestment strategies. The Board expects to resume recommending both interim and final dividends once again in the financial year ending 30 June 2021.

By order of the Board

26 October 2020

FOR FURTHER INFORMATION, PLEASE CONTACT:

Grit Real Estate Income Group Limited
Bronwyn Corbett, Chief Executive Officer	[phone]
Darren Veenhuis, Chief Strategy Officer and Head of Investor Relations	[phone]
Maitland/AMO - Communications Adviser
James Benjamin	[phone]
Jason Ochere	[e-mail]
finnCap Ltd - UK Financial Adviser
William Marle/Giles Rolls/Matthew Radley (Corporate Finance)	[phone]
Mark Whitfeld/Pauline Tribe (Sales)	[phone]
Monica Tepes (Research)	[phone]
Perigeum Capital Ltd - SEM Authorised Representative and Sponsor
Shamin A. Sookia	[phone]
Kesaven Moothoosamy	[phone]

NOTES:

Grit Real Estate Income Group Limited is a leading pan-African real estate company focused on investing in and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high-quality assets are underpinned by predominantly US$ and Euro denominated long-term leases with a wide range of blue-chip multi-national tenant covenants across a diverse range of robust property sectors.

The Company is committed to delivering strong and sustainable income for shareholders, with the potential for income and capital growth. The Company is targeting net total shareholder return inclusive of NAV growth of 12.0% p.a.*

The Company currently holds primary listings on both the Main Market of the London Stock Exchange (LSE: GR1T), while its listing on the Official Market of the Stock Exchange of Mauritius Ltd is termed as a secondary listing (SEM: DEL.N0000).

Further information on the Company is available at http://grit.group/

*

This is a target only and not a profit forecast and there can be no assurance that it will be met. Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of directors and have not been reviewed or reported on by the Company's external auditors.

Directors: Peter Todd⁺ (Chairman), Bronwyn Corbett (Chief Executive Officer)*, Leon van de Moortele (Chief Financial Officer)*, Jonathan Crichton⁺, Sir Samuel Esson Jonah^+, Nomzamo Radebe, Catherine McIlraith⁺, David Love⁺, and Bright Laaka (Permanent Alternate Director to Nomzamo Radebe).

(* Executive Director) (⁺ independent Non-Executive Director)

Company secretary : Intercontinental Fund Services Limited

Registered office address : c/o Intercontinental Fund Services Limited, Level 5, Alexander House, 35 Cybercity, Ebène 72201, Mauritius

Registrar and transfer agent (Mauritius) : Intercontinental Secretarial Services Limited

Sponsoring broker : Capital Markets Brokers Ltd

SEM authorised representative and sponsor : Perigeum Capital Ltd

UK Transfer secretary : Link Assets Services Limited

This notice is issued pursuant to the LSE Listing Rules, Article 19 of MAR, SEM Listing Rule 11.3 and Rule 5(1) of the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007. The Board accepts full responsibility for the accuracy of the information contained in this communication.

 

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