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REAL ESTATE | Grit Real Estate Income Group

GRIT

R E A L E S T AT E INCOME GROUP Guts, resilience, innovation and tenacity in Africa’s real estate markets


African Business Network


REAL ESTATE | Grit Real Estate Income Group

Running any developing business on the African continent demands a long list of qualities which extend much beyond the usual prerequisites of a successful company. The continent is a mish-mash of frontier, emerging and maturing markets with countless jurisdictional regimes often punctuated by various macro challenges. Pan-African real estate group Mara Delta has experienced the full spectrum of these conditions since its formation in 2014, so when the company decided to undertake a corporate rebrand it was inspired by the skills it had drawn on over the last three and a half years operating across Africa’s sprawling real estate sector. “After much deliberation, months of work and spending lots of time with branding agencies the name Grit came to me while I was listening to a TED talk,” says CEO Bronwyn Corbett. “I listened to the concept of grit, which stood for guts, resilience, innovation and tenacity and it really resonated with what we are building on the continent. “It takes a sheer amount of grit to have done what we’ve done and the whole concept of grit is reflected in our work so far. Therefore, the name Grit absolutely made sense.”


African Business Network Grit’s strategy remains unchanged through the name change, which is built on the premise of establishing a diverse portfolio comprised of highly regarded blue-chip tenants. “We are continuing with our investment strategy from day one which is based on country diversification and not being overly exposed to a commodity driven country or a jurisdiction that is driven by the same factors as another country. “We want to have that diversification of country, to have that diversification of asset class, which means we are looking more for the strength of the tenant and the underlying lease, rather than a particular asset class.” Corbett believes it is this carefully defined strategy that has shaped the company’s success thus far in building a varied portfolio of industrial, office, residential and retail properties in Morocco, Mozambique, Kenya, Zambia, Mauritius and most recently Ghana.

Mozambique The group’s sustained progress in Mozambique is a perfect example of the grit concept in action, as the company has maintained its portfolio of $150 million in the face of increasing macro challenges in the Southern African nation. After two decades of large-scale socioeconomic development, Mozambique’s economic growth has slowed in the last few years as a result of the global


REAL ESTATE | Grit Real Estate Income Group


African Business Network economic downturn and low-level political conflict. However, Grit has kept its faith in Mozambique and is reaping the rewards from it. “Mozambique has remained through these times our best performing portfolio and that is because of our investment strategy which centres on having very strong, international blue-chip tenants that have been quite sticky in the respect of macro challenges,” reveals Corbett. “For us we call Mozambique our country of

“I listened to the concept of grit, which stood for guts, resilience, innovation and tenacity and it really resonated with what we are building on the continent” Bronwyn Corbett, CEO

true grit because it’s a really great case study. We bought this portfolio before their recent troubles and if you look now we’ve actually

Mauritius

renewed several significant leases.”

Focusing on its transitions in Mauritius, Grit has been highly acute to the realities of the

Grit has renewed its leases with Vodacom

real estate market, and quickly identified that

and KPMG for another 10 years each,

the retail market is challenged by obvious

increasing the firm’s overall lease expiry

demographic factors, as the tiny Indian

profile across the whole portfolio to eight

Ocean island is home to only 1.2 million

years, which is longer than any other lease in

people.

Southern Africa. However, the Mauritian tourism industry In a further show of commitment to the

is currently booming with visitor numbers

country, Grit has established a large

rising 11% in 2016, taking a chunk out of

corporate office in Mozambique containing a

the European tourism market as the region

number of senior staff, and is fully expectant

continues to struggle in the face of macro

of a full economic recovery and more.

concerns.

Looking at the wider portfolio, Grit recently

Consequently, Grit has built its portfolio

completed a $121 million capital raise to

around this burgeoning tourism sector on the

settle some pipeline acquisitions including

island. “Mauritius has become an absolute

a number of hospitality assets in Mauritius,

hub for tourist activities in recent times,”

its current Kenyan assets and an investment

confirms Corbett.

into a separate development company.


REAL ESTATE | Grit Real Estate Income Group “There are more flights coming into the island with Turkish Airlines flying in six days a week and Emirates Airlines flying two A380s a day, so we really looked at that sector quite closely.” What the company found was a collection of highly prominent owner-operator brands on the island that were keen to expand and renovate their existing facilities. Therefore, Grit was able to approach these brands with the offer of buying the assets on a lease-back basis, allowing them to continue with the operational running of the facilities. “Those have proven to be very good deals for us on the basis that we collect a triplenet lease rental cheque every month and we don’t have to get involved in any structural matters or other challenges on the assets.” One of these assets, the Tamassa Resort hotel closed out at 90% occupancy this year in a further sign of the industry’s growth. Yet it is the strength and size of the hotel operator LUX* that is crucial to Grit, as the brand is big enough to sustain the 15-year Euro-backed lease it agreed with LUX*. “Mauritius itself is very flush and it has a lot of liquidity on the Euro. We funded that deal at 3.75%, and we still predict annual growth on the leases of around 2%, so those really stand out as being very accretive, very good real estate transactions for ourselves.”

Bronwyn Corbett, CEO


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REAL ESTATE | Grit Real Estate Income Group

London Stock Exchange

now but probably need to be around the

One of Grit’s long-standing targets as a

$450 million mark to consider listing.”

company has always been to list on the LSE and having already listed on the JSE and the

The major attractions to the LSE centre on

SEM, it has patiently waited for the perfect

it providing access to a new shareholder

moment to list in London.

base thus bringing greater liquidity, but Corbett remains cautious of a London listing

“London has been something we have been

based on how previous African stocks have

looking at for some time,” reveals Corbett.

fared. Consequently, the firm is undertaking

“For us its key that we come in at the right

detailed market research to determine

market cap size. We are just over $200 million

whether the flotation would bring compelling


African Business Network to drive development, particularly in Kenya and Morocco. “For me what makes Africa so exciting is the extent of opportunity out there, and with the projected population growth over the next 10 years, I think that Africa is the only frontier and I really do believe that. “We have a portfolio in five countries and just in these alone there are enough opportunities to keep us busy for a lifetime. It really is just the tip of the iceberg in relation to real estate, as we know these markets are 20-30 years behind other mature global markets.” For the time being Grit enjoys first mover advantage in the African real estate market, and has built itself from the ground up into a company with an equity shareholder following that will support considerable further portfolio expansion. Now the aim for Grit is to continue adapting to the challenges associated with the listed market space (not just those of the real enough returns to the business.

estate sector) ahead of a potential listing on the LSE, which promises to propel the

On a broader note, Corbett sees an ever-

company to the next level in Africa’s real

increasing catalogue of opportunities for

estate market.

real estate development in Grit’s portfolio countries, with the implementation of real estate investment trust (REIT) structures set

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To tell the resource market your story, contact: jacob@africanbusinessnetwork.co.za WWW.AFRICANBUSINESSNETWORK.CO.ZA Published by Anderson Murray Media Ltd

ABN | Grit Real Estate  
ABN | Grit Real Estate