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GRIT Real Estate Income Group - Succeeding by design

GRIT Real Estate Income Group - Succeeding by design

GRIT Real Estate Income Group (LON:GR1T) is a pan-African (excluding South Africa) real estate company, generating high levels of US dollar and euro-denominated rental yield underpinned by a blue-chip tenant base.

The company has achieved good progress since its London Stock Exchange (LSE) listing in July 2018. Results for the half-year ended 31 December (released 14 February) showed gross rental income +25.9% year-on-year and group loan-to-value down to 43.4% (full-year to June 2018: 51.4%). Furthermore, the ratio of administration costs to asset value was reduced to 1.3% from 1.4%. We believe this can go below 1% as the portfolio continues to grow.

Performance has been achieved in spite of pockets of significant weakness in the African retail sector, highlighting the value of GRIT's diversification strategy. We provide some outlines of the strategy on page 2 (p2).

Grit targets a minimum total return in US dollars of 12%, which consists of an 8.25% dividend yield and at least 3.75% growth in net asset value (NAV). We argue that this model is solidly on track and offers an attractive proposition to investors. In addition, Grit has ongoing initiatives to deliver over and above the targeted minimum total return of 12%. We outline some of these initiatives on p2.

Full report is available via Capital Network website
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Grit Real Estate Income Group Timeline

Related Researches

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May 30 2018

Custodian Reit (LON:CREI) ) has performed strongly in recent years, delivering a total shareholder return of 10% a year over the last three years, and with lower volatility than the REIT sector or the stock market. In this report, we look at the fundamentals that drive this performance.

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April 30 2019

Custodian REIT (LON:CREI) released its quarterly net asset value (NAV) update on April 30. The release shows a NAV of £426.6mln, unchanged versus December 2018, and NAV total return per share (definition in the release) of 5.9%. Occupancy remains high at 95.9%.

The property portfolio valuation is down by £5mln during the quarter at £527.7mln. This is due to a reduction in the valuation of the high street retail portfolio, which we believe is not a surprise to the market. We note that high street retail now comprises 12% of the overall portfolio weighted by income.

The release describes a subdued environment for investment activity in the UK non-residential property market, due to political uncertainties, but continued resilient economic activity supporting leasings, particularly in the Industrial market (38% of portfolio) and regional offices (11%).

Custodian has announced a target dividend of 6.65p for FY March 2020e, continuing a run of dividend increases since listing in 2014. Custodian now offers a 5.8% dividend yield for FY Mar 2019, versus 3.4% for the sector, as benchmarked by the iShares UK Commercial Property ETF (LON:IUKP).

We consider Custodian's dividend to be well supported by a number of factors:

  • Dividend fully covered by net rental earnings
  • Low balance sheet gearing
  • Low portfolio concentration, with no tenant comprising more than 3.5% of rental income

We consider some of these metrics in more detail on p2.

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January 29 2019

Custodian REIT (LON:CREI) released its quarterly net asset value (NAV) updated on 29 January. This was in line with our expectations.

NAV Total Return +1.0% in the quarter. Portfolio net initial yield (a measure of property income yield) of 6.6%. Balance sheet gearing remains low at LTV (loan-to-value) ratio of 24.7%.

We believe that all of the key dynamics remain intact to sustain continuing strong shareholder returns.

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