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First Ghanaian Blue Chip Office Acquisition
GRIT REAL ESTATE INCOME GROUP LIMITED
(previously known as Mara Delta Property Holdings Limited)
(Registered by continuation in the Republic of Mauritius)
(Registration number: C128881 C1/GBL)
SEM share code: DEL.N0000
JSE share code: GTR
ISIN: MU0473N00036
(“Grit” or “the Company”)
FIRST GHANAIAN BLUE CHIP OFFICE ACQUISITION
1. INTRODUCTION
1.1. Shareholders are hereby notified that on 15 March 2018, Grit signed a binding Heads of Agreement (“HoA”)
with Grit Accra Limited (its wholly-owned subsidiary incorporated in Ghana) (“Grit Accra”), Greenline
Development Limited (“Seller”), Costa Beira Investment Holding Limited (a company to be incorporated in
accordance with the laws of the Republic of Mauritius) (“Costa Beira”), Fouad Tabaa Chalabi, Nextregra Ghana
Limited and Delta International Mauritius Limited (“DIML” and together with Grit Accra, the “Purchaser”), for
the acquisition of an office complex known as 5th Avenue Corporate Offices, a commercial building located on
the 1.22 acres parcel of land referenced as Parcel No. 15 Block 11 Section 015 and also known as Plot 32, Osu
Avenue or Fifth Avenue Extension, Switchback Road Residential Area, West Cantonments, Accra Greater Accra,
Ghana (“Property”) and the corresponding rental enterprise on the Property as a going concern (“Rental
Enterprise”) (together, the “Acquisition”).
1.2. The Seller is a property development and asset management company based in Accra, Ghana.
2. RATIONALE FOR THE ACQUISITION
2.1. The following salient points of the Acquisition should be highlighted:
2.1.1. this is Grit’s first acquisition in Ghana and it meets the rigid investment criteria of international blue-chip
tenants underpinned by dollar-based leases;
2.1.2. it is a strategic acquisition and results in geographical diversification of Grit’s existing portfolio;
2.1.3. Grit intends on acquiring further blue chip tenanted real estate in Accra;
2.1.4. the acquisition will be held by Grit Accra, based in Ghana, which is 100% owned by DIML in Mauritius,
which in turn is 100% owned by Grit; and
2.1.5. the blue chip anchor tenant occupying 53% of the gross lettable area and contributing 58% of the rental
stream is an information and communication technology public-private partnership with a mandate to
provide e-solutions to government statutory agencies. The parent company of the second biggest tenant,
occupying 34% of the gross leasable area and contributing 30% of the rental income, is a leading owner,
operator and developer of wireless and broadcast communication towers and is listed on the New York
Stock Exchange.
3. GHANA: A NEW INVESTMENT JURISDICTION FOR GRIT
3.1. Ghana has been a longstanding target country for investment and has been approved as a prospective
investment jurisdiction by Grit, based on the following rigid investment criteria and principles established by
Grit: (i) ability to repatriate funds; (ii) ability to mitigate and insure against political and currency risk; (iii) land
tenure; (iv) ability to raise debt and (v) ability to conclude leases in hard currency.
3.2. Recent macro-economic and political developments in the country, and continued infrastructure
improvements, continue to fortify Ghana, and Accra in particular, as one of West Africa’s primary economic
and transport hubs. These strong fundamentals, along with the relevant investment opportunities being
presented, reinforced Grit’s resolve to actively pursue acquisitions in Ghana.
3.3. Grit’s strategy in Ghana is to position itself as a partner to multinational companies committing to the country’s
expanding economy, in order to meet their corporate real estate needs. This would allow the Grit group
(“Group”) to transact in hard-currency, secure long-term leases with steady escalation and in some instances,
defer in-country operational risk to listed parent companies. Such long-term tenancies would complement or
even increase the Group’s weighted average lease expiry, which stood at a healthy 7.4 years and an escalation
of 3% in the last published results for the period ending 31 December 2017, which was achieved through new
acquisitions and active asset management. This provides greater comfort around the income streams, and to
the extent that Grit concludes accretive deals, would create value for shareholders.
3.4. Grit’s board of directors believes that the promulgation of the real estate investment trust legislation in Ghana
(“REITs”) can be a catalyst for transforming the real estate sector in Ghana. Different stakeholders in Ghana
are actively working to implement REIT legislation with compelling incentives. If implemented, this would
provide Grit with further access to capital and the opportunity for tax efficient structuring.
4. PURCHASE CONSIDERATION
4.1. The Purchaser will acquire the Property and the Rental Enterprise from the Seller for USD 14,350,000, payable
in cash to the Seller (“Acquisition Price”).
4.2. The Acquisition Price would be fully funded through a debt facility which would be drawn down by the
Purchaser and be paid to the Seller on the date of transfer of the Property.
Grit will also issue its shares valued at the last published net asset value per share of USD 152.67 cents with
no entitlement to dividend prior to the issue of such shares, for a total value of USD 6,150,000, to Costa Beira
for providing the Rental Guarantee in relation to the anchor tenant lease (as set out in paragraph 6 below)
(“Rental Guarantee”) and to cover legal fees and commissions. Costa Beira will pledge the Grit shares to and
in favour of DIML until all the obligations of the Seller, Costa Beira and the shareholders of the Seller and Costa
Beira have been met to the satisfaction of DIML.
4.3. The aggregate purchase consideration for the acquisition of the Property and the Rental Enterprise, together
with the cost of the Rental Guarantee and other acquisition costs totals USD 20,500,000 (“Purchase
Consideration”).
5. CONDITIONS PRECEDENT
5.1. The Acquisition will be subject to the following conditions precedent (“Conditions Precedent”):
5.1.1. the board of directors and the investment committee of the Purchaser approving and ratifying the
conclusion of the HoA and all other agreements and transactions contemplated therein;
5.1.2. written confirmation that the Purchaser has completed the technical, legal and financial due diligence
on the Rental Enterprise, to the satisfaction of the Purchaser and remedial work to be attended to by
the Seller at the Seller’s cost and to the satisfaction of the Purchaser;
5.1.3. the Purchaser securing the necessary guarantees to finance the transaction;
5.1.4. the respective boards of directors of the Seller and the shareholders of the Seller approving the sale
of the Rental Enterprise on the terms and conditions set out in the HoA;
5.1.5. the Seller having granted the second biggest tenant of the Property the right of first refusal by giving
them 45 calendar days’ notice, and such tenant having waived its right of first refusal or having
indicated in writing that it does not choose to exercise its right to purchase the Property;
5.1.6. the Seller having obtained written consent to assign its rights to the Purchaser;
5.1.7. execution of 5-year leases from certain tenants of the Property at agreed market related lease terms
and conditions and for the basic rental charges and fixed charges no less than those stipulated in the
HoA;
5.1.8. the Seller providing the Purchaser with confirmation, to the satisfaction of the Purchaser, that the
Seller is unconditionally entitled to sell the Rental Enterprise to Grit Accra in accordance with the
terms of the HoA;
5.1.9. the parties to the HoA executing the transaction documents;
5.1.10. the Seller shall ensure that the building is zoned for the purpose that it is constructed and used; and
5.1.11. the parties to the HoA securing to the extent required all the necessary authorisations and consents.
6. RENTAL GUARANTEE
6.1. In terms of the HoA, Costa Beira guarantees to pay DIML or its nominee a total amount of up to USD4,072,310
("Guaranteed Amount”) if a new lease with the anchor tenant, is not concluded on the terms specified in the
HoA. The anchor tenant currently occupies 2700m2 of office space at the Property under an existing lease
expiring on 30 March 2019. If a new lease is executed with the anchor tenant which meets the minimum
duration and rental rates specified in the Rental Guarantee Agreement and otherwise reflects market-related
terms and conditions, DIML would release Costa Beira from the Rental Guarantee.
6.1.1. Should any rental from a new lease be less than the Guaranteed Amount, DIML or its nominee shall claim
the shortfall from Costa Beira on a monthly basis, or if no lease is signed, the Purchaser shall claim the
Guaranteed Amount from Costa Beira. Costa Beira shall forego any rights that it may have to dividends to
which it may be entitled until such time as the claims against the Rental Guarantee is settled in full. At the
option of the Seller, DIML or its nominee shall have the right to either sell the pledged Grit shares to make
good any outstanding claims at the end of the Rental Guarantee period, or the Rental Guarantee period shall
be extended and any outstanding claims may be settled through dividends that would have accrued to Costa
Beira.
6.2. The Rental Guarantee shall terminate 2 years after the expiry of the current lease agreement between the
Seller and the anchor tenant, being 30 March 2019.
7. EFFECTIVE DATE
The effective date of the transaction is the date on which the conditions precedent in paragraphs 5.1.1 to 5.1.9
are fulfilled ending with the execution of a deed of assignment and the deposit in an amount equal to the
Acquisition Price is paid into an account held by the Seller with Barclays Bank Ghana Limited (“Effective Date”).
8. WARRANTIES AND OTHER MATERIAL TERMS
8.1. The Seller, Costa Beira and the shareholders of Costa Beira provided the Purchaser with warranties and
indemnities standard for a transaction of this nature.
9. THE PROPERTY
9.1. The details of the Property are as follows:
Property Name and Geographic Sector Gross Leasable Area Weighted Average Gross
Address al Location (GLA) Rental/m2 /pm (USD)
(m2)
5th Avenue Corporate Ghana Office 5,070 33.11
Offices, Cantonments,
Accra
9.2. Details regarding the Property, as at the expected Effective Date, are set out below:
Purchase Yield Weighted Average Weighted Average Lease Vacancy % by Gross
Attributable to Escalation Expiry in Years Lettable Area
Shareholders
(Annualised)
10.13% 3.95% 3 (see note below) 0%
Notes:
a) The total costs associated with the Acquisition are estimated at USD 207,500 which would be settled
in cash, a total rental guarantee fee and commission of USD 6,150,000 would be paid through a Grit
share issue, which would be issued to Newco and would be issued at the last published net asset value
per share of USD 152.67 cents.
b) The Property has been valued, as at 31st December 2017 by Mr. Roger Hunting, Member of the Royal
Institute of Chartered Surveyors (No. 115) and Mr. Justin Weiner, Professional Associated Valuer (No.
6307) at USD21,100,000.
10. FORECAST FINANCIAL INFORMATION OF THE ACQUISITION
10.1. The forecast financial information relating to the Acquisition for the financial periods ending 30 June 2018 and
30 June 2019 are set out below. The forecast financial information has not been reviewed or reported on by a
reporting accountant in terms of section 8 of the JSE Listings Requirements and Chapter 12 of the SEM Listing
Rules and is the responsibility of Grit’s directors.
Forecast for the Forecast for the
5-month period 12-month period
ending 30 June 2018 ending 30 June 2019
(USD) (USD)
Revenue – contracted income 954,241 2,358,982
Revenue – uncontracted income - -
Near contracted revenue - -
Non-rental revenue - -
Operating expenses (74,087) (180,780)
Operational net income 880,154 2,178,202
Net profit after finance costs and tax 2,915,265 1,673,669
Earnings available for distribution 348,416 882,887
Forecast distribution 229,712 603,757
Notes:
a) Contracted income is based on current signed leases, and assumes any lease that may expire during
the period is renewed on the same terms and conditions.
b) There is no uncontracted revenue or near contracted revenue in this Acquisition.
c) The above net profit after finance costs and tax includes fair value adjustments based on an annual
discount cash flow revaluation at a discount rate of 12.25% and exit yield of 9.50%.
d) The net profit after tax excluding fair value adjustment is equal to the above earnings available for
distribution. The earnings available for distribution, adding back the debt amortisation fee being a
non-cash item and less the tax prepayment, is equal to the forecast distribution.
e) The Acquisition is anticipated to enhance the Company’s previously forecasted distributions as from
the financial year 2018.
11. CATEGORISATION
11.1. The Acquisition qualifies as a category 2 acquisition for Grit in terms of the JSE Listings Requirements.
11.2. The Acquisition constitutes an undertaking in the ordinary course of business of Grit and therefore does not
fall under the scope of Chapter 13 of the SEM Listing Rules.
15 March 2018
JSE sponsor and corporate advisor to Grit: PSG Capital Proprietary Limited
SEM Authorised Representative and Sponsor to Grit: Perigeum Capital Limited
Directors: Sandile Nomvete (chairman), Bronwyn Corbett*, Peter Todd (lead independent), Chandra Gujadhur, Ian
Macleod, Leon van de Moortele*, Matshepo More, Nomfundo Nomkosi Nomzamo Radebe and Catherine McIlraith
(*executive director)
Company secretary: Intercontinental Fund Services Limited
Registered address: c/o Intercontinental Fund Services Limited, Level 5, Alexander House, 35 Cybercity, Ebène 72201,
Mauritius
Transfer secretary (South Africa): Computershare Investor Services Proprietary Limited
Registrar and transfer agent (Mauritius): Intercontinental Secretarial Services Limited
JSE sponsor: PSG Capital Proprietary Limited
Sponsoring Broker: Axys Stockbrokering Limited
SEM authorised representative and sponsor: Perigeum Capital Ltd
This notice is issued pursuant to the JSE Listings Requirements, SEM Listing Rule 11.3 and the Mauritian Securities Act
2005. The Board of the Company accepts full responsibility for the accuracy of the information contained in this
communiqué.
Date: 15/03/2018 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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