- Grit to acquire 5th Avenue Corporate Offices in Accra as its first asset for US$20 500 000.00.
- Transaction to be settled in cash and shares issued at net asset value of USD 152.67. Shares will be pledged to Grit subject to fulfilment of certain conditions by the vendor.
- Purchase yield of 10.13% accretive to current portfolio.
- Investment meets Grit’s rigid criteria such as strong counter parties and US$ based leases.
- West African experiencing economic groundswell.
- Ghana inflation down from 13.3% in Jan 2017 to 11.8% in December.
- IMF projects real GDP growth of 8.9% in real terms for 2018.
- Moody’s confirmed stable economic outlook.
- Further strategic acquisitions in Accra anticipated.
Grit has announced its first venture into Ghana, West Africa.
Comments Bronwyn Corbett, Chief Executive and founder of Grit:
“Ghana has been earmarked as an expansion country based on its strong fundamentals some time ago. We have been monitoring the country’s economic reform with interest since 2014 and the real estate market has sufficiently repriced to meet our various investment hurdles”.
“There is a strong political will to implement REIT legislation in Ghana, which will allow further tax efficient structuring and access to local capital looking for a unique investment offering.”
Grit signed heads of agreement to purchase 5th Avenue Corporate Offices, a three storey, fully let 5 070 m2 GLA A-grade office complex in the upmarket Cantonments quarter of the capital, Accra from Greenline Development Limited, a regional real estate developer in operation since 2010. The purchase yield attributable to shareholders is 10.13%.
The aggregate purchase consideration of US$20 500 000.00 will be settled in cash to the amount of US$14 350 000 and the balance of US$6 150 000 by way of an issue of fresh shares at Grit’s net asset value of USD 152.67. These shares will be pledged in favour of Grit, pending the fulfilment of certain conditions including the provision of a rental guarantee in relation to the anchor tenant’s lease.
The asset is anchored by a Public Private Partnership in which the Government of Ghana holds a 38% shareholding. The second biggest tenant is a leading independent owner, operator and developer of wireless and broadcast communication towers and sites, listed on the New York Stock Exchange.
The weighted average lease escalation is 3.95% and the effective anchor lease term is five years, with three years remaining on the current lease, and an additional two-year rental guarantee by the vendor, subject to a successful lease renewal. Should any rental from a new lease be less than the guaranteed amount, Grit shall claim the guaranteed amount from the pledged shares or extend the rental period, with any outstanding claims settled through dividends that would have accrued to the pledged shares.
“In addition to taking a view on the country’s investment merits, our due diligence process places strong emphasis on the quality of tenant, their ability to service the lease in hard currency, the tenure of the lease and rental escalations,” says Corbett.
From a macro-economic viewpoint, the ability to repatriate funds, mitigate against political and currency risk, certainty around land tenure and access to debt are major considerations.
“Our growth to date has been counter-cyclical, and with a US$600 million portfolio, we have some leverage to structure new acquisitions optimally. Although solid opportunities such as this transaction exist, our focus is not growth at all costs and we remain circumspect when it comes to new territories and transactions. We’re not afraid to walk away from a deal if it doesn’t work,” concluded Corbett.
Ghana will be the seventh country that Grit’s portfolio has exposure to. The Company has a self-imposed soft target of not exceeding 25% exposure to a single country or single asset class.