Grit Real Estate, the pan-African real estate company, raised $ 156.7 million through an open offer and placement.
A portion of the proceeds, $ 80.6 million, was realized through the issuance of 155 027 444 new ordinary actions to the shareholders the development company Gateway Real Estate Africa Limited (GREA) and its asset manager Africa Property Development Management Limited (APDM) in consideration for the sale of their stakes in GREA and APDM to Grit.
The balance, $ 76.1 million, will be used to repay debt and reduce gearing, which is a measure of a company's debts to its net assets.
For example, if my company has assets of £100 and them borrows another £100 it now has total assets of £200.
Its Loan to value ratio is 0.5 or 50% = 100/200.
Its gearing is expressed as 100% = 100/(200-100) though remember this can also be expressed as 200 - see the gearing definition.
" class="glossary_term">ready to value (LTV) which had reached 53.1% as of June 30, 2021.
A total of 97 185 369 shares were issued as part of the Open Offer, 49 156 943 shares in the placement, and 155,027,444 shares issued to the selling shareholders of GREA and APDM.
Peter Todd, non-executive chairman of Grit, said: “We are delighted with the success of the show and, on behalf of the Read our guide to Boards and Directors" class="glossary_term">advice, I would like to thank the current and new shareholders for their support. The success of the issue reflects our confidence in reducing Grit’s overall level of indebtedness and in continuing to expand our core and extended business, which we hope will bring increased value to our shareholders. Grit board plans to take over dividend payments for the current year, allocated to the net operating income generated by our existing real estate assets.“
Following the admission of the new ordinary shares, Grit will have a total of 477,577,858 outstanding shares.
Details on GREA and APDM and benefits of the proposed acquisition
The proceeds from the issue will also allow Grit to acquire a majority stake in GREA and a majority stake in APDM, GREA’s external management company. Following the completion of the proposed acquisition, Grit will hold a combined direct and indirect majority stake in GREA (51.66%) and a direct majority stake in APDM (78.95%).
The group said the acquisition should “dramatically accelerate” its ability to access development feedback from mitigated risk development projects from GREA’s attractive portfolio of development opportunities and give Grit the resources to manage and control. necessary to lead further development of GREA, through APDM. . Acquiring a controlling stake in APDM offers Grit the potential for new sources of income and fees, asset management and facilities as it relates to the Bureau of Overseas Buildings Operations (OBO) – the program global overseas construction department of the Department of State and the United States government..
From increasing the capital allocation to development projects, the group said it expects its target total return to shareholders over time to increase from 12% to 13-15% per year. .
GREA is the only development company covering all regions of Africa and with a multi-asset class focus, providing real estate solutions for global global tenants within Grit’s existing and target client lists. Taking control of a single transaction dramatically speeds up Grit’s ability to access development feedback from mitigated risk development projects. GREA’s existing pipeline is fully funded by existing equity contributions and is expected to provide strong NAV growth as projects are completed over the next 24-36 months.
GREA has access to a broad portfolio of OBO (diplomatic housing in the United States) and data center development opportunities, which are expected to increase net asset value, are extremely resilient asset classes and provide exposure to well-rated tenants to support future income levels.
Acquiring a majority stake in APDM offers Grit the potential for new sources of income and fees, asset and facility management with regard to OBOs and other asset classes and accelerates Grit’s strategy of increasing its exposure to providing professional services to its customers and other third parties. parties.
The proposed acquisition would diversify the group’s geographic exposure (and, in particular, reduce the company’s current overexposure in Mozambique).
After taking control of GREA, Grit would have the ability to perform additional value creation activities, including:
- Squeak balance sheet optimization. When combined with Grit’s balance sheet, GREA’s current low leverage is expected to result in a significant reduction in Grit Group LTV’s consolidated metrics from completion. The larger scale and reduced reliance on hospitality and retail, along with reduced overall exposure to Mozambique, would facilitate the eventual issuance of a corporate bond by Grit in a near future, defining the maturity profile and reducing costs. Grit said he is exploring the possibility of a bond issue after the proposals are completed.
- Disposal of non-core assets. Grit is pursuing strategies to reduce exposure to the retail sector and would use GREA to push through such asset disposals. Such asset recycling should free up capital which can be recycled into new project opportunities within GREA.
- Cost savings. Eliminating double cost structures and redeploying staff could lead to savings.
GR1T: Grit Real Estate raises $ 156.7 million