IFC loan agreed to acquire Kenyan logistics asset

IFC LOAN AGREEMENT FOR THE ACQUISITION, EXPANSION AND REDEVELOPMENT OF THE ORBIT AFRICA WAREHOUSING AND MANUFACTURING FACILITY, NAIROBI, KENYA

The board of Directors (the "Board") of Grit Real Estate Income Group Limited, a leading pan-African income real estate company, focused on investing in and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multi-national tenants, today announces that it has entered into a loan agreement with the International Finance Corporation (the "IFC"), the investment arm of the World Bank, for the acquisition and redevelopment of the Orbit Africa warehousing and manufacturing facility in Nairobi, Kenya.

The Orbit Africa transaction initially comprises the acquisition, on a sale and leaseback basis, of an existing warehouse and manufacturing facility with a gross lettable area ("GLA") of 29,243 sqm and total land parcel of 80,570 sqm at an accretive net acquisition yield of 9.60% (net of acquisition costs). The facility will be leased back to Orbit Products Africa Limited ("OPAL" or the "Tenant") on a new 25-year US dollar denominated triple net lease, with an option to extend the lease term for a further 10 years and includes a contracted average annual escalation of 2% per annum. The transaction is targeted to complete in August 2021.

A further redevelopment and expansion of the existing facility will be undertaken from the second quarter of 2022, with expected completion in the fourth quarter of 2023, when it will be let on a new 20-year triple net lease at an attractive contractual development yield of 16.0% (net of acquisition costs), enhancing the rental income on the expanded asset and its capital value. 14,741 sqm GLA of modern warehouse space will be added as part of the redevelopment and extension programme, which will reposition the property to today's modern FMCG industry standards and IFC EDGE green building certification upon completion (the "Redevelopment Project"). On 29 April 2021, the IFC published its sustainability findings, a summary of which can be accessed at the following link (https://disclosures.ifc.org/project-detail/ESRS/45002/grit-reig). 

OPAL, controlled by the Chandaria family, has operated in Kenya for more than 40 years and is the leading manufacturer of popular personal care and home care products for the East Africa region, employing over 600 permanent staff. OPAL's primary clients include multi-nationals including inter alia Reckitt Benckiser, Ecolab, Colgate and Henkel. The transaction is underpinned by strong corporate guarantees from the parent companies of the Chandaria family, with which Grit has further credit risk insurance policies that provide for up to three years of rental obligation guarantees and cover.

The total expected investment (incl. VAT) in the combined initial acquisition and the expansion and redevelopment is expected to be US$53.6 million and will be funded through the US$ 25 million senior debt financing from the IFC, with the balance provided through a Grit issued perpetual preference note. Further announcements on the preference note issuance will be made in due course.

The Orbit facility is situated on Mombasa Road, the principal route south of Nairobi center serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometres from the Inland Container Depot. The site is well known to Grit, being less than one kilometre from the Grit Urban Logistics industrial warehouse site currently tenanted to Imperial Health Sciences.

The Company expects to realise attractive capital value enhancement and rental income growth and for the transaction to be accretive to both the Company's net asset value (NAV) and earnings from inception, delivering further value to shareholders.

Bronwyn Knight, CEO of Grit Real Estate Income Group Limited, commented:

"We are excited to start this long-term partnership with the IFC on the strength of a robust and well-established East African tenant covenant and an accretive investment and redevelopment project in a prime location. The transaction, which will further increase Grit's exposure to Kenya and the broader light industrial sector, is expected to be accretive to both NAV and earnings, delivering further sustainable value to our shareholders immediately.

The Orbit Africa Facility upgrades are expected to create long lasting positive social, economic and environmental benefits for local communities and help to further strengthen the broader precinct as a prime logistics and supply chain hub, whilst the property will additionally benefit from being significantly improved to today's modern FMCG industry standards and achieving an IFC EDGE green building certification."

DEBT FINANCING TERMS

·      The IFC provides a US$ 25 million senior debt facility (the "Loan").

·      US$ 16.1 million of the Loan will be utilised to fund the purchase consideration and associated transaction costs related to the initial sale and leaseback.

·      US$ 8.9 million of the Loan will be utilised to fund the Redevelopment Project.

·      The Loan provided by the IFC carries a tenure of eight years of which the first three years are provided under   a capital repayment moratorium.

·      The applicable facility interest rate is 5.75% per annum above 6-month LIBOR.

2 July 2021

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU no. 596/2014) (as amended) as it forms part of UK domestic law by virtue of the European union (withdrawal) act 2018 and other implementing measures. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

FOR FURTHER INFORMATION, PLEASE CONTACT:

NOTES:

Grit Real Estate Income Group Limited is the leading pan-African real estate company focused on investing in 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 is targeting net total shareholder return inclusive of NAV growth of 12.0%+ p.a.*

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 http://grit.group/

*               These are targets only and not a profit forecast and there can be no assurance that they will be met. Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of Directors and have not been reviewed or reported on by the Company's external auditors.

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 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

UK Transfer secretary: Link Asset Services Limited 

SEM authorised representative and sponsor: Perigeum Capital Ltd