TIDMGR1T
RNS Number : 8777H
Grit Real Estate Income Group
11 April 2022
GRIT REAL ESTATE INCOME GROUP LIMITED
(Registered in Guernsey)
(Registration number: 68739)
LSE share code: GR1T
SEM share code: DEL.N0000
ISIN: GG00BMDHST63
LEI: 21380084LCGHJRS8CN05
("Grit" or the "Company" or the "Group")
UPDATE ON THE PROPOSED ACQUISITION OF MAJORITY CONTROLLING
INTERESTS IN
GATEWAY REAL ESTATE AFRICA LIMITED
AND
AFRICA PROPERTY DEVELOPMENT MANAGERS LIMITED
Grit Real Estate Income Group Limited, a leading pan-African
real estate company focused on investing in, developing and
actively managing a diversified portfolio of assets underpinned by
predominantly US Dollar and Euro denominated long-term leases with
high quality multi-national tenants, today provides a further
update on the proposed acquisition of majority controlling
interests in Gateway Real Estate Africa Limited ("GREA") and Africa
Property Development Managers Limited ("APDM") (the "Proposed
Acquisition"). The Proposed Acquisition was announced by the
Company on 22 November 2021 and in the combined prospectus and
circular published on the same date (the "Prospectus and
Circular"). Today's update is provided further to the long stop
date extension announced by the Company on 31 March 2022 (link
here) . Terms not otherwise defined in this announcement have the
meanings given to them in the Prospectus and Circular.
Background to the transaction
The Proposed Acquisition was announced in conjunction with an
open offer and placing of new ordinary shares of nil par value
("Ordinary Shares") at an issue price of US$0.52 per new Ordinary
Share (the "Issue Price") to reduce Grit's overall indebtedness and
to provide future capital for the further expansion of Grit's core
and expanded business .
The Proposed Acquisition will provide Grit with access to GREA's
attractive pipeline of accretive development opportunities, and the
Grit Board believes the medium-term NAV growth prospects of the
Grit Group will be significantly improved upon completion. The
acquisition of a controlling interest in APDM provides Grit with
significant influence over GREA's operational activities and is
further expected to allow Grit to earn substantial development and
asset management fees into the future from internal and third-party
clients and joint venture partners.
On 20 December 2021, the Company issued 146,342,312 new Ordinary
Shares at the Issue Price, raising gross proceeds of US$76.1
million. The completion of the acquisition of majority controlling
interests in GREA and APDM were subject to the fulfilment or waiver
(as applicable) of certain conditions precedent before the long
stop date of 31 March 2022, which was recently extended to 8 April
2022.
Summary of Amendments to the Proposed Acquisition
Grit has agreed certain amendments to the existing sale and
purchase agreements in relation to the Proposed Acquisition (the
"SPAs"), allowing them to proceed, and has now agreed the
acquisition of 77.95 per cent. of APDM and an increase in its
interest in GREA to 26.29 per cent.
Additionally, Grit has committed to acquiring a further 8.72 per
cent. of GREA by 31 July 2022 for a further payment of US$19.44
million (payable in either cash and/or by the issue of new Ordinary
Shares at the Issue Price, at the election of the Seller), which
will increase its shareholding to 35.01 per cent.
Grit has also been granted an option by Gateway Africa Real
Estate Limited ("Gateway Partners") (the "Option") to acquire their
remaining 13.61 per cent. interest in GREA and an additional 1 per
cent. of APDM owned by Gateway Partners, by 15 December 2022 which,
if exercised, would increase Grit's direct shareholding in GREA to
48.62 per cent. and APDM to 78.95 per cent. The Option exercise
price will be settled either in cash and/or by an issue of new
Ordinary Shares at the Issue Price at the option of Gateway
Partners.
Furthermore, Grit's total (direct and indirect) shareholding in
GREA would increase to 51.66 per cent. following the issue of
APDM's 10.0 per cent. free carry in GREA, which is to be issued to
APDM upon the achievement of minimum performance requirements,
measured and issued at year five or year seven from GREA's
inception or upon on a defined exit event, which the Option
exercise is expected to be.
GREA's year five anniversary from inception is in December
2022.
The acquisition by Grit of interests in GREA and APDM (together
the "Transaction"), when aggregated, is considered a Class 2
Transaction under the FCA's Listing Rules.
Bronwyn Knight, CEO of Grit Real Estate Income Group Limited,
commented:
"We are pleased to announce today the acquisition of a majority
controlling interest in APDM and to agree amendments to the SPAs
that set out a clear path for Grit to purchase a controlling
shareholding in GREA by December 2022. These are expected to
contribute meaningfully to Grit delivering enhanced profitable
growth and superior returns to our shareholders, through GREA's
extensive attractive pipeline of accretive development
opportunities and for Grit to capitalise on new fee income streams
through APDM's substantial development and asset management fees.
We also expect to deliver additional value to our shareholders from
the potential optimisation of the balance sheets of Grit and
GREA.
We continue to be well positioned to capitalise on the
significant recovery potential across Grit's unique high-quality
property portfolio. As a Board, we expect significant further
potential value to be created through increasing Grit's capital
allocation to limited, risk mitigated development returns through
servicing existing and target tenants."
Details of the Amendments to the Proposed Acquisition
APDM
Grit acquires a 77.95 per cent. controlling interest in APDM, as
previously envisaged, and on broadly the same terms announced in
November 2021 and set out in the Prospectus and Circular, through
the acquisition of:
-- Dorado's 21.05 per cent. interest in APDM for US$5.16 million
through an issue of 9,917,788 new Ordinary Shares, at the Issue
Price;
-- The GREA Executive Share Trust's 26.32 per cent. interest in
APDM for US$3.73 million through an issue of 7,173,077 new Ordinary
Shares, at the Issue Price; and
-- Gateway Partner's 30.58 per cent. interest in APDM for
US$7.59 million paid in cash by 15 April 2022 following the
confirmation of closure of the final administrative conditions
precedent. This is paid in cash, which is a change to the terms of
the original agreement with Gateway Partners that envisaged the
consideration would be satisfied by an issue of new Ordinary Shares
at the Issue Price.
Grit has an Option to acquire an additional 1 per cent. of APDM
owned by Gateway Africa Real Estate Limited ("Gateway Partners"),
by 15 December 2022. The Option exercise price will be settled
either in cash and/or by an issue of new Ordinary Shares at the
Issue Price, at the option of Gateway Partners
APDM provides development management, asset management, advisory
and administrative services to GREA under the provisions of Asset
Management and Advisory Services Agreement (" AMASA "), whereby
APDM is entitled to charge development management fees to GREA
equal to approximately 4.0 per cent. of the total project costs of
each development owned by GREA. APDM is also further entitled to a
standard annual fee of 1.5 per cent. payable on fair value of the
completed properties owned by GREA.
Grit's controlling interest in APDM affords the Company
significant influence over GREA's operations by virtue of the
services APDM provides under the AMASA, and APDM's management team
will additionally become participants of Grit's long term incentive
scheme, further aligning the objectives of GREA and APDM to long
term value creation for Grit shareholders.
GREA
Grit also increases its interest in GREA from its existing
ownership of 19.98 per cent. to 26.29 per cent. as a result of the
following two transactions:
-- Grit is purchasing a 0.10 per cent. interest in GREA held by
Dorado for US$0.22 million satisfied by the issue of 423,616 new
Ordinary Shares issued at the Issue Price, as described in the
Prospectus and Circular; and
-- Grit is acquiring an additional 6.21 per cent. shareholding
in GREA from Gateway Partners at a purchase price of US$13.86
million paid in cash by 15 April 2022 following the confirmation of
closure of the final administrative conditions precedent. This is a
change to the terms of the original agreement with Gateway Partners
that envisaged the consideration would be satisfied by an issue of
new Ordinary Shares at the Issue Price.
Additionally, Grit is committed to acquire a further 8.72 per
cent. shareholding in GREA for a further payment of US$19.44
million, which will increase its shareholding to 35.01 per cent.
This payment is to be made no later than 31 July 2022 and is
payable in either cash and/or by the issue of new Ordinary Shares
at the Issue Price, at the option of Gateway Partners. Grit will
not therefore, at this time, gain control of GREA as originally
envisaged.
However, Grit has been granted an option by Gateway Partners
(the "Option") to acquire their remaining 13.61 per cent. interest
in GREA by 15 December 2022 which, if exercised, would increase
Grit's direct shareholding in GREA to 48.62 per cent. The Option
exercise price will be settled either in cash and/or by an issue of
new Ordinary Shares at the Issue Price at the option of Gateway
Partners. Grit's total (direct and indirect) shareholding in GREA
would increase to 51.66 per cent. following the issue of APDM's
10.0 per cent. free carry in GREA, issued upon the achievement of
minimum performance requirements, measured and issued at year five
or year seven from GREA's inception or upon on a defined exit
event. GREA's year five anniversary from inception is in December
2022.
Applications have been made with the FCA, the LSE and the SEM
for the listing of, in aggregate, 17,514,481 new Ordinary Shares
being issued on the premium segment of the Official List of the FCA
and to be admitted to trading on the Main Market of the LSE and for
such new Ordinary Shares to be admitted to trading on the Official
Market of the SEM with effect from commencement of trading on
Tuesday, 19 April 2022 ("Admission").
Following Admission of the new Ordinary Shares issued pursuant
to the Transaction, Grit will have a total of 495,092,339 Ordinary
Shares in issue.
1. Description of the Business
1.1. Grit
Grit is a leading pan-African real estate company focused on
investing in, developing and actively managing a diversified
portfolio of assets in carefully pre-selected African countries
(excluding South Africa). These high-quality assets are underpinned
by predominantly US Dollar and Euro denominated long-term leases
with a wide range of blue-chip multinational tenants across a
diverse range of property sectors, with the aim of delivering
strong sustainable long-term income. Grit currently has a premium
listing on the Official List of the FCA and a secondary listing on
the Official Market of the SEM.
Given the high economic growth experienced in a number of
countries in Africa and the resultant rapid expansion of, and
investment in, infrastructure to support this growth, Grit was
founded to offer investors direct participation in property markets
in Africa (excluding South Africa), whilst earning predominantly
Euro and US Dollar-based income from leading international tenants
at emerging market yields. The Grit Group's current portfolio
includes assets in Mauritius, Morocco, Mozambique, Zambia, Kenya,
Botswana, Senegal and Ghana. Further details on the Existing
Portfolio are set out in paragraph 9 (Existing Portfolio) of Part
II of the Prospectus and Circular.
The Company has a strong management and support team, supported
by in-country asset and property management teams.
1.2. GREA
GREA is a private real estate development company specialising
in risk mitigated turnkey construction of real estate solutions for
multinational companies wishing to expand their operations in
Africa.
GREA partners with blue-chip multinationals seeking real estate
solutions on the African continent and develops properties for
these companies backed by USD-denominated or USD-linked long-term
lease contracts.
GREA:
-- was co-founded in 2018 by Grit and Gateway Partners with the
support of anchor shareholders such as the PIC and Prudential
Financial. At launch GREA raised US$175 million in equity
commitments from these principal shareholders;
-- is managed by APDM, an experienced team of professionals with
an established track record in African property development,
investment and management, delivering projects on time and within
budget;
-- has strong risk management policies in place to mitigate
developmental, operational and other risks associated with African
real estate investments;
-- is equipped with an extensive knowledge and understanding of
Africa, as well as benefiting from an extensive network of trusted
partners;
-- targets value creation through the active management of both
assets under development and completed as tenanted by blue-chip
multinational companies; and
-- provides investors with high-yielding US Dollar denominated
real estate exposure with robust growth potential maximising return
for its shareholders.
As at 30 June 2021, GREA had unaudited net assets of US$193
million, gross assets of US$199 million and pre-tax profits for the
six months ended 30 June 2021 of US$5.7 million.
1.3. APDM
GREA has appointed APDM, a private company incorporated and
domiciled in Mauritius, as its asset manager and adviser with
respect to the investment, reinvestment, administration and
disposal of GREA's investments. APDM holds a Category 1 Global
Business Company license issued by the Mauritian Financial Services
Commission (FSC) as well as an Asset Management license pursuant to
Section 14 FSC Activity License.
APDM provides development management, asset management, advisory
and administrative services to GREA under the provisions of the
AMASA.
APDM's services to GREA are mandated under the AMASA with terms
of service and fees summarised as follows:
Services
-- provide a senior management team and directors to deliver
strategic planning, operational control, and management advice and
services to GREA's portfolio companies;
-- to source and investigate potential projects/investments;
-- to provide management services in respect of projects during
and post construction, which includes (but is not limited to)
leasing, maintenance, financial management, and marketing services
with a view to maximising the returns possible from a project;
-- to hire, oversee, manage and control the functioning of
third-party contractors, local parties and support services engaged
with regard to the acquisition, development and management of a
project;
-- to provide finance, risk and compliance services to GREA and
portfolio companies as required by GREA from time to time in
connection with the management of its risk, compliance with
applicable laws, reporting, and its general financial
functions;
-- to provide ongoing portfolio management and monitoring of
projects, including where applicable the provision of nominating
and providing directors to sit on the boards of portfolio
companies;
-- to assist GREA in preparing its operational and financial
budget, and to prepare APDM's budget in accordance with the agreed
budgeting process;
-- to furnish all administrative services, including,
bookkeeping, secretarial and clerical personnel and services, as
may be necessary for the proper conduct of the affairs of GREA and
its portfolio companies; and
-- to make recommendations to the GREA Board with respect to the disposal of investments.
Fees
-- APDM shall charge development management fees to GREA equal
to approximately 4 per cent. of the total project costs of each
development owned by GREA;
-- a standard fee of 1.5 per cent. per annum is payable on fair
value of the completed properties owned by GREA; and
-- on achieving minimum performance requirements, APDM is
entitled to a free carry of 10 per cent. of GREA, to be measured
and issued at year five and year seven of GREA's inception or on a
defined exit event. The year five anniversary is in December 2022,
upon which date the relevant return hurdles will be measured.
Further details on businesses to be carried on by Grit, GREA and
APDM are available in the Prospectus and Circular, which can be
viewed on the Company's website. (link here)
2. The assets the subject of the Transaction
2.1. Acquisition of ADPM
In relation to the acquisition of a controlling stake in APDM
(an entity that will be consolidated into Grit):
-- Gross Assets the subject of the Transaction are US$1.36 million.
-- Liabilities assumed as part of the Transaction are US$0.71 million.
-- Net Assets the subject of the Transaction are US$0.65 million.
The loss attributable to the assets the subject of the
Transaction is US$ 0.30 million, being 100% of the profits
attributable to APDM.
All figures as per the latest signed financials of APDM dated 31
December 2020.
2.2. Acquisition of GREA
In relation to the increased shareholding in GREA (an entity
that shall continue to be an associate of Grit):
-- The Gross and Net Assets the subject of the transaction are
US$33.52 million (being the consideration payable for 15.03 per
cent. being acquired in GREA).
3. The effect of the Transaction on Grit
The amendments to the Acquisition agreed today will result in
Grit paying, at minimum, US$21.45 million in cash to Gateway
Partners to effect the Acquisition. This would have increased Group
reported LTV on a pro forma basis as at 31 December 2021 by 0.7% to
42.10%.
Should Grit exercise its Option and gain control, and therefore
consolidation, of GREA, the current low leverage in GREA would
still be expected to result in a reduction in consolidated Grit
Group LTV, as further described in the Prospectus and Circular.
The Grit management team has sought to improve the growth rate
of Grit, and specifically views incremental risk mitigated
development returns, limited to no greater than 20 per cent. of the
Grit Group's gross asset value, as being key to achieving this
goal.
Grit's ability to control its own pipeline and fully service its
tenants' real estate needs remains strategically important.
Although Grit remains confident of delivering superior total
returns in the medium to longer term and is well positioned to
capitalise on the significant recovery potential across its unique
high-quality property portfolio, the Grit Board additionally sees
significant further potential value creation through increasing its
capital allocation to limited, risk mitigated development returns
and would expect these to increase the Grit Group's total targeted
shareholder return over time from 12 per cent. to 13-15 per cent.
per annum ( this is a target only and is not guaranteed. It is
based on a number of assumptions which may or may not
materialise).
APDM has a team of highly skilled development staff and can
develop in over 15 African countries. With extensive experience
delivering projects across the continent, there exists
opportunities to provide fee generating professional services to
clients external to GREA and to further deliver value to its
shareholders.
The Grit Board believes that the Proposed Acquisition therefore
brings the following benefits for the Grit Group:
-- GREA is the only development company covering every region in
Africa and with a multi asset class focus delivering real estate
solutions for international global tenants within Grit's existing
and target client lists;
-- GREA's existing pipeline is fully funded through the existing
shareholders' equity contributions (as well as secured construction
debt facilities) and is expected to deliver strong NAV growth as
projects are completed over the next 24 to 36 months;
-- GREA has access to an extensive further pipeline of OBO (US
diplomatic housing) and data centre development opportunities which
are expected to be accretive to NAV, are extremely resilient asset
classes and offer exposure to highly rated tenants to underpin
future income levels;
-- acquiring a majority stake in APDM offers Grit the potential
for new revenue and fee income streams, asset and facilities
management with respect to OBO and other discrete asset classes and
accelerates Grit's strategy of increasing its exposure to the
provision of professional services to its clients and other third
parties;
-- the Proposed Acquisition would further diversify the Grit
Group's geographic exposure (and in particular, will reduce the
Company's current exposure to Mozambique, which is currently
greater than the target of 25 per cent. of the portfolio in any one
country);
-- the transaction builds upon an already close working
relationship between the management teams of Grit, GREA and APDM;
however significant benefits may arise under a streamlined group
structure because of current "duplicate functions" within each
business; and
-- debt funding for the Enlarged Group could be further
optimised due to increased geographic and sector diversity and
balance sheet size.
Grit would have the ability to significantly influence (and
should Grit exercise the Option, ultimately control), additional
activities that would create potential value, which include:
-- Balance sheet optimisation and disposal of non-core assets
specifically reducing exposures to the retail segment. Such asset
recycling would be expected to free up capital that can be recycled
into new project opportunities within GREA.
-- When combined with Grit's balance sheet upon potentially
gaining control, and therefore consolidation, GREA's current low
leverage would be expected to result in a material reduction in
consolidated Grit Group LTV metrics.
-- Whilst GREA is expected to remain relatively lowly geared,
its construction debt facilities will be amortising and are
relatively expensive compared to Grit's debt facilities and a
potential consistent and consolidated Grit Group approach would be
expected to provide GREA with cheaper debt funding and, crucially,
the ability to recycle operational cashflow into new projects
rather than debt repayments, thereby securing enhanced levels of
growth.
4. Details of key individuals
-- GREA has a strong board and, through APDM, an equally strong
executive management team and investment committee comprising
individuals with exceptional track records in creating, building
and managing property development and investment companies. This
will be supplemented by Grit senior management through the
appointment of Grit nominees to the relevant Boards and investment
committees, which is expected to occur shortly after obtaining the
controlling interest in APDM.
-- APDM's management team and staff will become employees of the
Enlarged Group on, essentially, the same employment terms as they
currently enjoy at APDM, immediately upon the acquisition of the
controlling interest in APDM. The consideration payable by Grit to
the GREA Executive Share Trust pursuant to the GREA Executive Share
Trust Share Purchase Agreement shall be settled by Grit shares.
Such shares are to be retained by the GREA Executive Share Trust,
for the benefit of designated participants under a long-term
incentive plan, vesting on a future date or earlier if sufficient
value is achieved in GREA. Certain participants will also be
enrolled to the Grit long-term incentive plan and awarded shares
upon the fulfilment of specific key performance indicators.
-- The APDM team is led by chief executive officer, Greg
Pearson. Greg is a co-founder of Grit and was instrumental in
sustaining its rapid growth from its inception in 2014 through to
2018, when he left Grit to focus his attention on GREA. Greg has
successfully completed a series of developments across the office,
retail, leisure, education and healthcare sectors and also sits on
the Board of GREA as its de facto CEO.
-- Greg is supported by the following executive team members:
o Krishnen Kistnen, Chief Financial Officer
o Andre Janari, Chief Investment Officer
o Craig Glutz, Head of Developments
o Shevira Bissessor, Chief Operating Officer
Except as disclosed, there has been no significant change
affecting any matter contained in the earlier notification and no
other significant new matter has arisen which would have been
required to be mentioned in that earlier notification if it had
arisen at the time of the preparation of that notification.
By order of the Board
11 April 2022
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited
Bronwyn Knight, Chief Executive Officer +230 269 7090
Darren Veenhuis, Chief Strategy Officer
and Investor Relations +44 779 512 3402
Maitland/AMO - Communications Adviser
+44 7747 113 930 / +44
James Benjamin 20 7379 5151
Alistair de Kare-silver Grit-maitland@maitland.co.uk
finnCap Ltd - UK Financial Adviser
William Marle/Teddy Whiley (Corporate Finance) +44 20 7220 5000
Mark Whitfeld/Pauline Tribe (Sales) +44 20 3772 4697
Monica Tepes (Research) +44 20 3772 4698
Perigeum Capital Ltd - SEM Authorised Representative
and Sponsor
Shamin A. Sookia +230 402 0894
Kesaven Moothoosamy +230 402 0898
Capital Markets Brokers Ltd - Mauritian
Sponsoring Broker
Elodie Lan Hun Kuen +230 402 0280
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African
real estate company focused on investing in, developing 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 holds its primary listing on the Main Market of the
London Stock Exchange (LSE: GR1T and a secondary listing on the
Stock Exchange of Mauritius (SEM: DEL.N0000).
Further information on the Company is available at
www.grit.group
Directors:
Peter Todd+ (Chairman), Bronwyn Knight (Chief Executive
Officer)*, Leon van de Moortele (Chief Financial Officer)*, David
Love+, Sir Samuel Esson Jonah+, Nomzamo Radebe, Catherine
McIlraith+, Jonathan Crichton+, Cross Kgosidiile and Bright Laaka
(Permanent Alternate Director to Nomzamo Radebe).
(* Executive Director) ((+) independent Non-Executive
Director)
Company secretary : Intercontinental Fund Services Limited
Registered office address : PO Box 186, Royal Chambers, St
Julian's Avenue, St Peter Port, Guernsey GY1 4HP
Registrar and transfer agent (Mauritius) : Intercontinental
Secretarial Services Limited
SEM authorised representative and sponsor : Perigeum Capital
Ltd
UK Transfer secretary : Link Assets Services Limited
Mauritian Sponsoring Broker : Capital Markets Brokers Ltd
This notice is issued pursuant to the FCA Listing Rules and SEM
Listing Rule 15.24 and 15.36A and the Mauritian Securities Act
2005. The Board of the Company accepts full responsibility for the
accuracy of the information contained in this communiqué.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
UPDEANLEFSNAEFA
(END) Dow Jones Newswires
April 11, 2022 02:01 ET (06:01 GMT)
Grit Real Estate Income (LSE:GR1T)
Historical Stock Chart
From Apr 2024 to May 2024
Grit Real Estate Income (LSE:GR1T)
Historical Stock Chart
From May 2023 to May 2024