REG - Grit Real Estate Inc - Deemed Disposal & Announcement in BHI

Grit Real Estate IncomeAnnouncement

24/02/2023 07:00

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RNS Number : 9199Q  Grit Real Estate Income Group  24 February 2023

 GRIT REAL ESTATE INCOME GROUP LIMITED

 (Registered in Guernsey)

 (Registration number: 68739)

 LSE share code: GR1T

 SEM share code: DEL.N0000

 ISIN: GG00BMDHST63

 LEI: 21380084LCGHJRS8CN05

 ("Grit" or the "Company" and, together with its subsidiaries, the "Group")

 

 

DEEMED DISPOSAL IN BEACHCOMBER HOSPITALITY INVESTEMENTS LTD ("BHI") AND

CAUTIONARY ANNOUNCEMENT REGARDING A FURTHER EXIT BY GRIT OF ITS REMAINING
INTERESTS IN BHI

 

 

The board of Directors (the "Board") of Grit Real Estate Income Group Limited,
a leading and award-winning pan-African impact real estate company focused on
investing in, developing and actively managing a diversified portfolio of
assets underpinned by predominantly US Dollar and Euro denominated long-term
leases with high quality multi-national tenants, today announces a deemed
disposal of 17.32% and the potential further exit by Grit of its remaining
interests in BHI, an associate owning three hotels in Mauritius.

 

BHI was set up as a business venture between New Mauritius Hotels Limited
("NMH") and Grit. The hospitality property company currently owns three 4-star
hotels in the North of Mauritius, namely Victoria Beachcomber, Mauricia
Beachcomber and Cannonier Beachcomber, operated by NMH under the Beachcomber
brand.

 

Following a successful 2022 trading performance, including the collection of
all remaining Covid period back rentals, BHI recently declared a dividend
whereby Grit received EUR14.5 million (US Dollar 15.18 million) in cash and
NMH elected to receive a scrip dividend. This deemed disposal has resulted in
Grit's interests in BHI being diluted from 44.4% to 27.1% as at 31 December
2022.

 

To facilitate Grit's potential exit of its remaining interests in BHI, the
Board has today signed a Merger Agreement detailing a scheme of arrangement
(the "Scheme") to merge Grit's wholly owned subsidiary Leisure Property
Northern (Mauritius) Limited ("LPNL"), through which it owns its interest in
BHI, with and into BHI. BHI simultaneously proposes issuing preference shares,
offered by way of a public offer and listed on the Official List of the Stock
Exchange of Mauritius Ltd ('SEM'), with subscription proceeds being applied to
facilitating Grit's exit of its interest in BHI for an expected net cash
payment of EUR 25.8 million (c.US Dollar 27.5 million), after the transfer of
LPNL debt facilities of EUR 18.1 million (US Dollar 19.3 million) from LPNL to
BHI. The resultant EUR 1.6 million net deficit to the book values as at 31
December 2022, represent a 1.7% discount to the property value within the BHI
associate.

 

The Scheme is subject to the satisfaction of a number of conditions precedent
set out in the Scheme application documents and Merger Agreement which
include, inter alia, approvals of the regulatory authorities and the court in
Mauritius. Grit's exit is additionally subject to certain conditions precedent
set out in a preference shares prospectus (deemed to be the Listing
Particulars for SEM's purposes) and the regulatory authorities. As such,
Grit's exit at this point, still remains uncertain. Further details will be
communicated in due course and Grit shareholders and the investing public in
general are advised to exercise caution when dealing in the Company's shares.

 

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

"The deemed disposal and the further potential exit by Grit of its remaining
interests in Beachcomber Hospitality Investments Ltd are in line with and
materially contribute towards the Company's stated strategies of asset
recycling 20% of the value of its portfolio by 31 December 2023 and the
ongoing reduction in Grit's LTV and exposure to hospitality assets. Our strong
partnership with New Mauritius Hotels Group has delivered value to
shareholders and Grit's exit will allow BHI to better focus on exciting growth
opportunities across the hotel and tourism sector. The exit will also support
Grit's ongoing transition towards a more resilient, accretive and African
impact focussed asset base, which is expected to deliver near and longer term
value creation and growth opportunites in net asset value and income, to the
benefit of all our stakeholders, including the people of Africa."

 

Further detail on the proposed BHI restructure

Although the primary objective of BHI is to continue as a hospitality property
company, BHI's board has a vision to create a larger and more diversified
portfolio across market segment, geographic exposure and tenants. Grit's
updated strategy does not however envisage the material further increase in
hospitality sector exposure and Grit has therefore expressed an interest to
exit its remaining interests in BHI.

 

In the context of a BHI restructure and Grit potential exit, NMH has been
invited to contribute its shares in Kingfisher Ltd ('Kingfisher') to BHI.
Kingfisher holds shares of St Anne Resort Limited which owns a 5-star resort
property situated in Ste Anne, Seychelles. The resort is leased to Société
des Villages de Vacances (des Seychelles) Limited, trading as Club Med,
Seychelles. BHI also intends to invest in other yielding hospitality
properties, not necessarily owned or operated by NMH, to diversify its risk
profile.

 

Impact of Grit's exit of LPNL and its remaining interest in BHI

At 31 December 2022 LPNL had debt facilities of EUR 18.1 million (US Dollar
19.3 million), recorded its 27.1% interest as an investment in associate
valued at EUR 47.7 million (US Dollar 50.9 million) and reflected a financial
liability of USD 2.5 million, being the value of NMH's call option over LPNL's
shares in BHI. The expected cash payment of EUR 25.8 million will result in a
EUR 1.6 million net deficit to the above book values as at 31 December 2022
(representing a 1.7% discount the property value within the BHI associate).

 

The gross property assets that are the subject of the transaction are valued
at US Dollar 56.7 million, being Grit's current 27.1% ownership of the
properties valued at a total book value of USD 210.3 million on 31 December
2022. The profit attributable to the asset in the full financial year to 30
June 2022 amounted to US Dollar 2.4 million (which includes, Share of Profit
of the BHI associate of US Dollar 9.23 million of which US Dollar 5.1 million
represented the fair value movement on investment property in that year).
Funds received from the transaction are expected to be applied towards Grit
debt reduction, replenishment of liquidity reserves over the short term, and
redeployment into acquisitions and future Group projects over the medium term.

 

The Group continues to target 20% asset recycling, equating to a value of up
to US Dollar 160.0 million. This transaction is therefore expected to be a
meaningful contributor to the Group's asset recycling target being attained by
31 December 2023.

 

By Order of the Board

 

24 February 2023

 

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:

 Grit Real Estate Income Group Limited
 Bronwyn Knight, Chief Executive Officer                           +230 269 7090
 Darren Veenhuis, Investor Relations                               +44 779 512 3402

 H/Advisors Maitland - Communications Advisor
 James Benjamin                                                    +44 7747 113 930 / +44 20 7379 5151
 Alistair de Kare-Silver                                           Grit-maitland@h-advisors.global

 finnCap Ltd - UK Financial Adviser
 William Marle/Teddy Whiley (Corporate Finance)                    +44 20 7220 5000
 Mark Whitfeld/Pauline Tribe (Sales)                               +44 20 3772 4697
 Monica Tepes (Research)                                           +44 20 3772 4698

 Perigeum Capital Ltd - SEM Authorised Representative and Sponsor
 Shamin A. Sookia                                                  +230 402 0894
 Kesaven Moothoosamy                                               +230 402 0898

 Capital Markets Brokers Ltd - Mauritian Sponsoring Broker
 Elodie Lan Hun Kuen                                               +230 402 0280

NOTES:

Grit Real Estate Income Group Limited is the leading pan-African impact real
estate company focused on investing in, developing 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 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 www.grit.group

Directors: Peter Todd (Chairman), Bronwyn Knight (Chief Executive Officer)*,
Leon van de Moortele (Chief Financial Officer)*, David Love+, Sir Samuel Esson
Jonah+, Catherine McIlraith+, Jonathan Crichton+ and Cross Kgosidiile.

(* Executive Director) ((+) independent Non-Executive Director)

Company secretary: Intercontinental Fund Services Limited

Registered office 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

SEM authorised representative and sponsor: Perigeum Capital Ltd

UK Transfer secretary: Link Assets Services Limited

Mauritian Sponsoring Broker: Capital Markets Brokers Ltd

This notice is issued pursuant to the FCA Listing Rules, SEM Listing Rule
15.24 and the Mauritian Securities Act 2005. The Board of the Company accepts
full responsibility for the accuracy of the information contained in this
communiqué.

 

 

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