LONDON-listed Grit Real Estate Income Group is taking steps to manage down its loan-to-value (LTV), which rose in the year ended June, said on Friday the potential sale of AnfaPlace Mall in Casablanca, Morocco would contribute to this end.
Grit is a pan-African real estate company that invests in and manages a portfolio of assets in carefully selected African countries.
The company, which delisted from the JSE this year, but remains listed in Mauritius and in London, said its distributable earnings per share plummeted 37.7 percent to $5.97 (R91.42) cents per share from $9.58 cents per share the prior year.
Group LTV increased to 53.1 percent from 50.2 percent in 2020 predominantly as a result of the decrease in the value of the group's property portfolio, it said, adding that it had successfully extended its lowest applied LTV debt covenants to 55 percent to April 2023 and secured additional liquidity facilities.
The board said it remained committed to reducing LTV levels to its near-term target of 45 percent and then to its medium term target of between 35 percent to 40 percent.
Bronwyn Knight, the chief executive of Grit, said,“ We have a high-quality portfolio of attractive property assets leased to very strong tenant covenants that is continuing to deliver a resilient performance with 92.5 percent of contracted revenue collected this period, versus 88.6 percent in the prior year, despite the headwinds of the pandemic.
“We are increasingly confident that the group's property occupancy rate of 94.7 percent at the period end will continue to improve during the balance of 2021 and beyond, supported by our hospitality sector assets benefiting from the easing of travel restrictions and further leasing activity in both our Ghanaian office portfolio and retail sector assets. Trading is also showing encouraging signs of normalising, especially in the hospitality and retail sectors.
Knight said although Grit delivered a robust operational performance, with its property portfolio net operating income rising 3.5 percent in the reporting period, the firm’s LTV ratio rose to 53.1 percent over the same period impacted by valuation pressures, predominantly in the retail sector.
“We expect Grit's LTV to benefit from improvements in our property valuations over the medium term, the acceleration of our asset recycling strategy and target of recycling 20 percent by property portfolio value by the end of 2023, which we continue to pursue, and our perpetual note issuance, which has now been concluded.
“Our LTV will additionally benefit from the potential sale of AnfaPlace at no lower than the June, 30, 2021 book value, which would also be expected to impact positively on the group's distributable earnings per share,” she said.
Knight said in an interview that even pre-Covid, Grit had wanted to decrease its retail footprint. Being in eight African countries was very diverse and adding complexities of retail was not ideal. This was exacerbated under Covid and countries shutting down.“
Part of the asset recycling was to reduce retail and put the cash back into the system and putting it into assets that had shown resilience, she said.
Knight said although the firm’s short-term focus remained on continuing strong rental collections, balance sheet optimisation and the reduction of its LTV, the company was pursuing select accretive growth, co-investment and pre-funded development opportunities across resilient sectors.
The portfolio was independently valued at June 30, with total income producing assets valued at $801.9m, lower than $823.5m the prior year with like-for-like property valuations decreasing 7.8 percent in the reporting period.
The loss for the year before taxation was $60.9m down 13 percent from the prior year, while property portfolio net operating income was $55.3m, up 3.5 percent.
philippa.larkin@inl.co.za
BUSINESS REPORT ONLINE