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Fairvalley Heights Limited plans to develop a 229-unit residential development on 5 acres of land in Gimu area of Mavoko. 

The development comprises of 3 blocks of apartments which are 8 floors each with 102 three-bedroom units and 85 two-bedroom units.

One block contains 24 one-bedroom units, 18 four four-bedroom villas and a commercial zone with adequate shops to support the development. 

The total number of units is 229, all fitted with associated amenities. The development also contains ample parking, a playground and other social amenities. 

The site neighbourhood has&nbsp;sewerage&nbsp;and the development will be connected to the sewer line for liquid waste disposal. 

The project is set on a parcel of land which under lease to the proponent for a period of ninety-nine years from 1997 according to the EIA report. 

The proposed project is located in Gimu area, off Mombasa Road near CITAM Athiriver, approximately 2 Kilometres off Mombasa Road in a neighbourhood dominated by existing residential estates, agricultural parcels, and light industry. 

The total project cost for this first phase is estimated at Ksh 500 million.&nbsp;

While many South African companies have had mixed successes when venturing into Africa, the multi-listed Pan-African REIT (real estate investment trust) Grit Real Estate Income Group, is proving that the right recipe will reap rewards.

Robust risk mitigation has been key to Grit’s success, which included multiple listings, multiple geographies and multiple asset classes.

Key partnerships and multinational tenants further insulate the company from the risks that often face investments in the region.

“The success of our African business has been partnerships,” says CEO Bronwyn Corbett.

Corbett was instrumental in forming Delta International, Delta Property Fund’s Africa offshoot that listed separately on the JSE as Mara Delta Property Holdings in 2014.

In 2017, the company was rebranded to Grit Real Estate Income Group.

Grit remains the only Africa-focused REIT on the JSE, paying dividends in hard currency.

That ability to pay dividends in dollars came with its listing on the Mauritius Stock Exchange (SEM) in 2015. Last year Grit also listed on the London Stock Exchange (LSE). Grit’s property portfolio of 25 assets is valued at $796.4m.

The company is headquartered in Mauritius, with further investments in Botswana, Ghana, Kenya, Morocco, Mozambique and Zambia.

Grit has been careful to only forge into stable markets as opposed to high-risk jurisdictions. Margins of safety include security of tenure, ability to get debt in the country and most importantly, ability to move money out of the country.

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“We wanted to be multi-geography. We had seen too many real estate businesses being commodity focused in only one or two countries. Then the commodities cycle turned on them,” explains Corbett.

Grit views the continent in two parts.

Half of its investments goes into investment-grade countries, and the other half into what Corbett terms “growth Africa”. Investment-grade countries like Morocco, Mauritius and Botswana attract a lot of pension fund money, says Corbett.

“You won’t get super returns but you are going to get that stability, which anchors the portfolio,” she explains.

Growth countries, on the other hand, offer higher returns but somewhat more risk. Corbett sites countries like Kenya, Uganda, Mozambique, Ghana and to some extent Zambia.

“We see the ability to work with global tenants in markets like these because they have long-term strategies for these countries,” she says.

The REIT also invests in multiple asset classes determined by the economic drivers of the particular markets, like tourism in Mauritius that drew Grit’s investment in hospitality.

Hard currency income, which comes with global tenants able to pay in euro or dollar leases, ties together Grit’s multi-pronged mantra. Hard currency comprises 93.2% of income, with 92.3% of that coming from multinational tenants.

Global tenants include Barclays, Beachcomber, ExxonMobil, Lux Resorts &amp; Hotels, Shoprite and Vodacom. Many leases are signed out of country with parent companies signing as guarantors, further mitigating Grit’s risk.

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“Whenever you have an international tenant you have recourse to the parent company in the event of default, not the local company,” explains chief financial officer Leon van de Moortele.

The company also has political risk insurance through Lloyds that covers dollar liquidity and expropriation of funds.

Mauritian hospitality

Close on 25% of Grit’s investment sits in investment-grade country Mauritius, where it has four hospitality assets and one office asset.

The island accounts for around 21% of net property income. With favourable tax treaties and exchange controls, Mauritius is increasingly considered as a financial services hub, but tourism remains a mainstay. The island, with a population of 1.3m, welcomes 1.4m tourists annually.

Tourism resilience and steady growth drew Grit to acquire three four-star Beachcomber hotels (a co-owned investment with anchor tenant Beachcomber) and one four-star LUX hotel.

The hospitality assets come with fully servicing triple net leases with the parent companies of Beachcomber and LUX signing as guarantors. Hotel exposure comprises 21% of Grit’s total assets.

The beach area around Mauritius where Grit’s hotel assets are, is owned by the Mauritian government. Sixty-year land leases are the norm, says Van de Moortele. “Our minimum requirement to purchase an asset is 30 years.”

There are few beach sites left for new builds.

Plenty of focus is therefore on expansion, by creating additional rooms, or on upgrading of rooms. Grit operates in the four-star/four-star-plus market where year-round occupancy is north of 80%. At its Tamassa Resort occupancy last year was around 92%.

Van de Moortele says the hospitality assets are good cash flow generators for Grit.

“Our hospitality approach is different to that typically seen in South Africa. We are not looking to take any hotel operational risks from a cash flow perspective. We just want rolling consistent, solid returns. The fact that these are euro-based means we are getting quite a lot of upside.”

Rael Colley, real estate analyst at Anchor Stockbrokers, tells finweek that Grit’s exposure to the hospitality market in Mauritius is appealing. He cites reasons like long lease terms and healthy occupancy rates in Grit’s hotels (average of 85% vs. the average in SA of 65%).

“The RevPAR (revenue per available room) rate has been strong over the last few years as well. “Five-star hotels have been struggling of late, however Grit does not have any exposure to this segment of the market,” adds Colley.

Grit also owns Barclays House, a modern office building tenanted by Barclays, and located in Ebène Cybercity, a vibrant business hub.

There’s plenty of office construction taking place in Ebène but Grit is not planning further office investment.

“We don’t see our pipeline including offices. We don’t think there are enough tenants for that,” says Corbett.

Game-changing London listing

Grit’s listing on the LSE gives it the ability to attract international investors who are now able to access African markets through a listed structure.

The London listing was a “game-changer”, says Van de Moortele.

UK institutional investors now comprise around 20% of Grit’s stock.

“We invested in Grit because the price was right, the yield was high and the stock was pregnant with opportunity,” says London-based Nicholas Hooper, director at London Investment Management.

“Our clients have dipped their toes in with an initial $5,000,000. We like Grit and the approach they have to become the best in class property partner for global companies who have properties in some of the more stable African economies.”

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The $132.2m of capital raised for the LSE listing was deployed into acquisitions in Ghana and Mozambique. That had a positive impact on net asset value (NAV). Creating NAV is high on Corbett’s agenda and redevelopment opportunities is a means of achieving that.

The redevelopment completion of Anfa Shopping Centre in Morocco will push Grit’s occupancy to 99% and will allow Grit to keep its distribution yield while at the same time hold back some cash that can be used for redevelopment opportunities.

Opportunities that are being explored include co-investment with pension funds in Africa, and asset managing the real estate portfolios that many of these pension funds have.

“Redevelopment opportunities and being able to add value to these pension fund portfolios allows us to play the NAV angle,” says Corbett.

Grit does much of its own property and asset management in the countries it is invested in. That, together with the need to control its own development pipeline, brought about the creation of Grit’s development partner, Gateway Delta.

It’s an unlisted business, with four shareholders. Grit’s stake in Gateway is just under 20%. Corbett says Grit won’t necessarily be the outtake for all Gateway Delta’s assets.

The company will be co-investing with Gateway Delta on the $100m ExxonMobil residential compound project in Maputo, Mozambique.

“We want some of that NAV upside,” explains Corbett.

“The development yield on the Exxon project is 12%.”

Investor attraction

The London listing brings with it additional investors and another level of corporate scrutiny. This, says Garreth Elston, portfolio manager at Reitway Global, is always a plus.

“Grit has become a comforting investment,” he says, “It has done what it set out to do and that includes mitigating a lot of risk.”

Colley says the counter offers an attractive US dollar yield (of around 8.5%).

“However, liquidity in the stock remains constrained. I think South African investors still struggle to grapple with various country risks that Grit has exposure to. Although to mitigate this, Grit has strong partnerships and relatively sticky tenants which should bode well in the long-term.”

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Grit’s loan-to-value (LTV) sits at 43.4%, but it has committed to an even lower LTV of around 35% to 40%.

“We’ll be able to get our gearing to 30% should we do another capital raise without impacting our dividend yield,” says Corbett, explaining that refinancing measures will drop funding costs.

A refinancing deal in Mozambique will drop Grit’s dollar cost of funding by 1% and add $2.5m annually to the kitty.

Grit maintains a target of 3% and 5% dividend growth, and a total annual net shareholder return of 12% in dollars for its full 2019 financial year. “…[P]rovided, of course, the share price tracks our net asset value,” says Corbett.

<a href="https://www.fin24.com/Finweek/Business-and-economy/grits-risk-removal-recipe-20190509">Article</a> by Glenda Williams

Real estate is a capital intensive industry and the game belongs to the man with the dry powder. The recently released Wealth Report by Knight Frank tells it all. To begin with, the wealth numbers for 2017 show that New York City had the highest number of Ultra-High Net Worth individuals globally. Los Angeles, Hong Kong and London were not a far off. However, talking about cities, the City Wealth Index sheds some light.

The index, outlines the cities that matter to the wealthy now and in the future.

The City Wealth Index focuses on the four main issues; population of wealthy residents in a city, cities attracting investments of $10 million or more, lifestyle themes like the number of luxury hotels and quality of leading restaurants, average visitor spend and education which is also a significant driver of second home purchases globally. The expected future level performance based on city level innovation and predicted GDP is was also a consideration.

According to the index, New York City emerged the best overall performer, coming on top on each of the four rankings. This was followed by London and San Francisco respectively on a ranking that was dominated by North American cities as well as Asian metropolises.

On wealth in particular, North American cities reigned on the others taking nine of the top ten slots with London filling the tenth. New York appeared as the dominant centre for high net worth individuals based on households earning more than $250,000 annually, double the population of Los Angeles in second place.

For investments, London emerged top owing to its diversity of demand as a result of the diverse number of nationals making investments there. New York which came second however, boasts the largest annual average private property investment over the two-year period to the end of 2017. The ranking on investments was close between North American and European cities but in Asia Hong Kong emerged the best.

New York also scored the highest on future expectations of a high GDP growth with its GDP anticipated to grow to $1800 billion between 2017 and 2022. It was followed by Tokyo with a forecast of $1537 billion and Los Angeles at $1105 billion. In general, North American Cities seem poised for more growth, taking four of the top ten ranks.

On lifestyle, London is the best city with 75 five-star hotels, compared to Dubai’s 61. However, Dubai’s overnight visitors were the biggest spenders, totalling US$28.5 billion in expenditures while New York in second place, recorded a visitors’ spend of $17 billion. But it is in Melbourne, Australia where visitors spend the most per night at an average of $1925 followed by Dubai’s $1917.

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New York City ranked the top destination for wealthy individuals globally

Mombasa County in conjunction with the ministry of tourism, are in the process of sourcing for contractors for an urban regeneration programme that will include works on the proposed Mama Ngina Waterfront and Cultural District. The plan includes transforming the waterfront into a modern waterfront with a boardwalk and other recreation facilities.

The regeneration programme will also include Jomo Kenyatta Public beach. The national government has already set aside Sh. 600 million for the exercise according to a recent pronouncement by Tourism permanent secretary Najib Balala.

Development of Mama Ngina and Jomo Kenyatta Public beach will involve the redesign and planning of the areas to international standards culminating into iconic recreational seafront features.

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The features will include leisure walks, souvenir shopping, entertainment, sporting and other leisure activities, foods and beverages, and relaxation areas.

The beach destination flagship projects also include Little Theatre, a cultural heritage centre to provide a platform for exhibition of the coast’s diverse cultural practices and foster heritage. These are part of the Tourism Ministry’s Agenda 218-2022.

Mombasa county government has recently undertaken a series of projects to beautify the city’s streets and eradicate garbage, which have changes the coastal hub’s outlook. The additions will boost the county's economic prospects in most sectors including real estate.

Financing of the projects will be done through the Tourism Transformation Fund which was established by the finance Act of 2016 to provide resources for development and transformation of the tourism sector. The Ministry of Tourism has already called for submission of the tenders with a deadline of December 5th, 2018

Tourism contributes about 11% of the country’s GDP and the industry creates 12% of the countries employment according to the Ministry of Tourism and Wildlife.

&nbsp;

Mombasa Country to redevelop Mama Ngina and Jomo Kenyatta beaches

Pan-African REIT CEO unpacks company's strategy for success

Hotels in Africa registered a growth in occupancy, average daily rate and revenue per available room according to hotel data provider, STR.

Occupancy rose by 1% to 64% when compared to the same period last year, while average daily rate (ADR) rose by 3.5% to US$105.43 according to analysts.

Meanwhile, revenue per available room (RevPAR) rose by 4.5% to US$67.53 when compared to Q3 in 2018.

Africa hotels’ performance indicators have been on a rise over the past few months. In September alone, RevPAR was on the rise for the 87th consecutive month, while ADR was up 3.3% and occupancy was up 2.9% when compared to September 2018.

Addis Ababa in Ethiopia recorded the highest ADR (Average Daily Rate) in the continent over a 12-month period.

Data from STR revealed that from July 2018 through June 2019, Addis Ababa registered an absolute ADR of US$163.79 when measured in constant currency, which smooths out inflation effects. That was an 1.1% increase year-over-year. Accra, Ghana with an ADR of $160.34 and Lagos ($132.51), were also top contenders.

Addis Ababa’s <a style="color: #ff6600;" href="https://www.hoteliermiddleeast.com/search/key/str?sort=date">occupancy</a> of 58.4% over the period was up 6.5% year over year. The city’s performance was driven by a growing economy, a successful airline and its diplomatic states in the shadow of AU.

Cairo &amp; Giza (Egypt) was the continent’s occupancy leaders at 74.5%, followed by Cape Town Centre (65.0%), and Accra (59.7%).

<a style="color: #ff6600;" href="https://estatecloud.co.ke/hotels-in-mixed-use-developments-attract-more-funding/">Read; Hotels in mixed-use developments attract more funding</a>

Africa’s growing middle class, and the continuous expansion of its consumer segments in recent years has led to an increase in demand for logistics property. Over the past few years most retailers and manufacturers have made efforts to expand their operations to fit the growing demand although a supply gap still remains. More than the available facilities, occupiers are now looking for high technical specifications that support modern retailing, distribution and manufacturing practices.

The Logistics Africa Report by Knight Frank explains that, recent activity by developers and investors have largely focused on retail and office space leaving behind logistics property. However, there has been some progress since some players like Actis and RMB Westport have taken initiative to boost logistics projects in Sub-Saharan Africa. As with most other commercial property, South Africa hosts some of the largest and most sophisticated logistics property in Sub-Saharan Africa. With that wealth of experience, South African developers are currently seeking to diffuse their expertise into the rest of the continent.

Traffic congestion within most African large cities have impacted logistical operations leading to many logistical property developers to consider locating their facilities outside the busy city centres. Additionally, inland dry ports have become a very viable option as a result of sea port congestion and competition for limited warehouse space around those areas.

Major logistics market drivers between 2015 and 2016 include the growing middle class and consumer spending, mineral and resource demand, new oil and gas discoveries, rapid infrastructure development, stronger agricultural demand and increased FDI. Furthermore, the growth of online retail markets has the potential to exert major changes in the demand and supply of logistics property in Africa. The e-commerce market in Africa is already projected to reach US$50 billion by 2018 with pioneers such as Jumia and Konga in Nigeria, Zonda and Rupu in South Africa and Kenya respectively already putting up such facilities.

With the rising e-commerce trends, it is foreseeable that e-commerce companies will grow to demand the kind of sophisticated logistics properties in use by more advance companies like Amazon in the U.S. Presently one of the most promising logistical hotspots in Sub-Saharan Africa is Lusaka, Zambia which has been framed for its strategic geographic location at the heart of Southern, Eastern and Central Africa.

Five of the cities with the highest prime logistical rents in Sub-Saharan Africa include Luanda, Abuja, Accra, Maputo and Lagos. As reported by the Logistics Performance Index 2016 (LPI), which rates the logistic friendliness of countries, the top 5 in Africa include South Africa with a score of 3.78, Kenya (3.33), Botswana (3.05), Uganda (3.04) and Tanzania (2.99). The same index ranks South Africa at position 20 out of 160 globally, Kenya at 42nd and Botswana at 57th. For developers, the opportunities are ripe and present as the challenges are.

Estate Cloud

Estate Cloud

Developer to Build 229 Housing Units in Mavoko

By Estate Cloud - over 2 years ago - Kenya

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