Grit has announced its first foray into Ghana by acquiring 5th Avenue Corporate Offices in Accra for $20.5m from Greenline Development, a regional real estate developer.

The aggregate purchase consideration of $20.5m will be settled in cash to the amount of $14.35m and the balance of $6.15m by way of an issue of fresh shares at Grit’s net asset value of $152.67. 

These shares will be pledged in favour of Grit, pending the fulfilment of certain conditions including the provision of a rental guarantee in relation to the anchor tenant’s lease.
 
Bronwyn Corbett, CEO and founder, said: “Ghana has been earmarked as an expansion country based on its strong fundamentals some time ago. We have been monitoring the country’s economic reform with interest since 2014 and the real estate market has sufficiently repriced to meet our various investment hurdles.
 
“There is a strong political will to implement REIT legislation in Ghana, which will allow further tax efficient structuring and access to local capital looking for a unique investment offering,” she added.
 
Grit signed heads of agreement to purchase 5th Avenue Corporate Offices, a three storey, fully let 5 070 m2 GLA A-grade office complex in the upmarket Cantonments quarter of the capital, Accra.

The purchase yield attributable to shareholders is 10.13%. 
 
The asset is anchored by a Public Private Partnership in which the Government of Ghana holds a 38% shareholding. 

The second biggest tenant is an independent owner, operator and developer of wireless and broadcast communication towers and sites, listed on the New York Stock Exchange.
 
The weighted average lease escalation is 3.95% and the effective anchor lease term is five years, with three years remaining on the current lease, and an additional two-year rental guarantee by the vendor, subject to a successful lease renewal. 

Should any rental from a new lease be less than the guaranteed amount, Grit shall claim the guaranteed amount from the pledged shares or extend the rental period, with any outstanding claims settled through dividends that would have accrued to the pledged shares.
 
“In addition to taking a view on the country’s investment merits, our due diligence process places strong emphasis on the quality of tenant, their ability to service the lease in hard currency, the tenure of the lease and rental escalations,” said Corbett.
 
From a macro-economic viewpoint, the ability to repatriate funds, mitigate against political and currency risk, certainty around land tenure and access to debt are major considerations.
 
“Our growth to date has been counter-cyclical, and with a $600m portfolio, we have some leverage to structure new acquisitions optimally. Although solid opportunities such as this transaction exist, our focus is not growth at all costs and we remain circumspect when it comes to new territories and transactions. We’re not afraid to walk away from a deal if it doesn’t work,” said Corbett.
 
Ghana will be the seventh country that Grit’s portfolio has exposure to. 

The Company has a self-imposed soft target of not exceeding 25% exposure to a single country or single asset class.