Opportunities to benefit from property investment income on the African continent
When it comes to property investment, many investors have steered clear from investment opportunities on the African continent after the 2015 to 2016 slump in commodity prices. However, the continent has since then shown tremendous economic growth potential, with UK investors revisiting the investment income potential of African countries.
Grit Real Estate Income Group led the way. As the only property investment group on the JSE focused on income from properties in Africa, but excluding South Africa, the group managed to raise R1,73 billion from UK fund managers prior to the listing on the London Stock Exchange (LSE). The group is also listed on the Mauritius Ltd Stock Exchange (official market). The company focused on purchasing and acquiring shareholdings in high-quality assets and portfolios in eight regions spread across Africa. With a property portfolio diversified by asset class and spread across eight regions, the group, under the leadership of co-founder Bronwyn Corbett, carefully applies a de-risked investment strategy to minimise risk for investors, while ensuring healthy income growth.
Grit was contrarian in its investment approach – when many were avoiding investment on the continent, it saw the downturn in some African economies as an opportunity to expand its African footprint by acquiring selected high-quality properties with excellent potential for growth and investment returns, mostly in economies not exposed to fluctuations in commodity prices. For the group, the focus is on securing long-term leases with large, stable, multinational tenants that pay their rent in hard currency. With this approach, Grit has been able to generate a stable, hard-currency revenue stream and growing returns for its shareholder pool.
Grit has more than 45 properties in its portfolio and over 94% of the revenue from lease income is from international tenants paying in euro and US dollar. The property portfolio ranges from world-class hotels and corporate offices to retail centres and mixed-use premises. Corporate tenants such as Vodacom and Total form part of the tenant base. When it comes to retail, anchor tenants such as Carrefour, LC Waikiki, Game and Shoprite are among the major tenants.
Our group has retail centres in Morocco, Kenya, Zambia and Mozambique, while we also have corporate accommodation assets tenanted by the US Embassy, Vale, and Barloworld in Mozambique. Risk management forms an integral part of our investment strategy; as such, risk is balanced through property investments in countries with investment grade status accorded by one of the international ratings agencies, including Botswana, Mauritius and Morocco, and high-growth economies with limited exposure to commodity cycles including Kenya, Ghana, Senegal, Zambia and Mozambique.
The recent acquisition of a hotel in Senegal, which is leased by Club Med, is another example of the strategic investment expansion. The group intends to become the preferred real estate partner for Club Med in other countries on the continent. With fewer operational buyers and developers now than five years ago, Grit has been able to considerably expand its footprint in selected countries at the bottom of the real estate cycle.
Grit’s track record since listing is impressive. It has been able to double its total income-producing asset value, bringing it to US$ 860 million in February 2020 and has recently paid its 12th consecutive distribution, in line with management guidance. Several new developments are also planned. Investors interested in property investment income will do well to consider Grit’s investment proposition offering a stable income and attractive total returns.
