Grit Real Estate Income Group: FULL YEAR AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2024

The board of Directors (the “Board”) of Grit Real Estate Income Group Limited, a leading pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multinational tenants, today announces its audited consolidated results for the financial year ended 30 June 2024.

Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented:

“Despite a year shaped by significant macroeconomic headwinds, particularly persistently high-interest rates impacting both earnings and asset valuations, the Group has demonstrated resilience and adaptability. Our property portfolio, in the face of these challenges, has continued to deliver consistent returns, bolstered by a deliberate shift towards higher-yielding, more defensive real estate assets that build on our longstanding, value-driven fundamentals.

“A key milestone was our acquisition of a majority stake in GREA, our development associate. While this acquisition had one-off impacts on this year’s financial results, it optimises our cost base, simplifies our reporting, and strengthens our capability to drive targeted, tenant-led developments. Additionally, it bolsters our Group’s robust platform, positioning us to capture growth opportunities in targeted sectors through the establishment of specialised sub-structures. These will be supported by long-term funding partners who share our commitment to unlock and generate high quality impact investment in Africa.

“The continued confidence and backing from our financial partners, particularly key financiers and leading development funding institutions, underscore the strength of our strategic direction. We are gratified by this support, which validates the Group’s commitment to disciplined and focused growth.

“On the operational front, our commitment to cost efficiency yielded a 14.0% reduction in administrative expenses, an achievement underscoring our focus on running a lean and efficient business while advancing our broader objectives.

“Looking ahead, our strategic priorities remain well defined: we are firmly committed to sustainable growth in distributable income and capital appreciation. By focusing on core portfolio metrics, such as lower loan-to-value (LTV) ratios, reduced vacancy rates, and optimised cost structures, we are establishing a resilient foundation for long-term growth.

“Asset recycling remains integral to our strategy, allowing us to reinforce the balance sheet, enhance liquidity, and dynamically adjust to market conditions.

“As we progress, we continue to prioritise disciplined capital allocation and a vigilant approach to cost management, ensuring we remain well-positioned to create sustainable value for our shareholders in an evolving market.”

Financial & Portfolio highlights as at 30 June 20241

Notes

Summarised results commentary:

• Despite global macroeconomic headwinds, the reported property portfolio revenue (based on the Group’s proportionate interest) grew by 9.8% in the year under review. This growth reflects the Group's increased interest in GREA, rising from 35.01% in the prior year to 54.22%, and the subsequent consolidation effective from 30 November 2023.

• Reported NOI (based on the Group’s proportionate interest) saw a year-on-year increase of 7.9%, driven by the annualised contribution of assets brought into operation in late FY2023, including ENEO CCI, which commenced commercial use this year. The growth was partially offset by the impact of BHI and LLR disposals completed in FY2023.

• Total income-producing assets rose by US$109.2 million, reaching US$971.2 million. This increase is primarily due to the GREA acquisition and consolidation, partly offset by US$30.0 million in property revaluations and the elimination of pre-existing investment relationships previously recognised under associates and joint ventures.

• Reported property values, based on the Group’s proportionate share (including joint ventures and GREA associates), grew by 11.1%. This increase was driven by the GREA consolidation and a step-up acquisition in DH1, along with ENEO CCI project completion and associated capital expenditure of US$20.7 million and US$22.1 million, respectively. Offsetting factors include the reclassification of Tamassa as a non-current asset held for sale and valuation adjustments of US$30.0 million.

• EPRA NRV per share declined by 20.5% to US$57.9cps (from US$72.8cps in the prior year), largely due to property revaluations and other non-cash items, including non-controlling interest.

• Rising global interest rates in 2023 and sustained higher rates through FY2024 raised Grit’s weighted average cost of debt to 10.0% (up from 8.4% as of June 2023). Base rate increases were the primary contributors to these higher financing costs.

• The Group maintained US$200 million in hedging instruments to mitigate interest rate impacts; however, the expiry and re-establishment of US$100 million in SOFR hedges at higher levels, coupled with the GREA consolidation, led to an increase in net finance costs year-on-year. US CPI-linked lease escalations across the portfolio offered some protection against funding cost increases, though the additional US$13.2 million charge weighed significantly on the annual financial results. The net finance charge includes amortised loan issuance costs and hedging impacts.

• Administrative expenses were reduced by 14.0% year-on-year, reflecting disciplined cost management and cost efficiencies obtained through the consolidation of group functions. As a percentage of total income-producing assets, the administrative expense ratio decreased from 2.42% at 30 June 2023 to 1.85% at 30 June 2024. The Group remains committed to a target administrative expense ratio of 1% relative to total income-producing assets.

• Persistent high interest rates and economic pressures in our operating regions have affected the Group’s financial flexibility, leading the Board to suspend dividends in the second half of the financial year. Total dividends declared for the year amount to US$1.50 cps.

Corporate highlights – execution on strategy

1. Acquisition of GREA and APDM Successfully Completed:

• Established Bora Africa as a specialised industrial sector sub-structure, attracting investment from the IFC, with further investment opportunities in the pipeline.

• Advanced negotiations to create DH Africa as a dedicated diplomatic real estate sub-structure, reflecting strategic focus on sector-specific asset growth.

2. Strong Leasing Momentum:

• Achieved an 86% tenant retention rate on renewals and a 5.2-year WALE.

• Notable leasing activity recorded at The Precinct in Mauritius and ENEO at Tatu Central, Kenya, with additional lease renewals and negotiations progressing.

3. Strategic Project Delivery:

• Completed ENEO at Tatu Central, Kenya’s largest Business Process Outsourcing development tenanted by CCI Global, ahead of schedule, delivering a robust yield exceeding 10%.

4. Asset Recycling Milestone:

• Reached the December 2023 asset recycling target of US$160 million. The Board extended the target by an additional US$200 million in non-core asset disposals, with US$76.4 million identified for near-term disposal.

5. Recognition for Excellence:

• Received multiple high-profile industry awards for sustainability and construction excellence for ENEO at Tatu Central, showcasing the Group’s leadership in sustainable development practices.

Notable Post balance sheet events

1. Enhanced Tenant Profile and Vacancy Reduction Initiatives:

• Since the balance sheet date, our Asset Management team has continued to secure high-quality tenants under long-term leases, positioning us to reduce the Group’s EPRA vacancy rate to below 7.5% by 31 December 2024. We have received strong interest from multinational corporations seeking to acquire office space in northern Mauritius, prompting us to initiate the sectionalisation of the Precinct Unity Building to cater to this demand.

2. Strengthened Hedging Strategy:

• Following the balance sheet date, the Group settled a US$6.25 million cross-currency swap that matured in August 2024. Concurrently, we expanded our hedging instruments, raising total coverage for SOFR debt from US$200 million to US$256.6 million, fortifying our risk management posture amidst global rate fluctuations.

3. Asset Recycling Through Strategic Disposals:

• The disposal process for Artemis Curepipe Hospital commenced post balance sheet and is on track to conclude within FY2025. This divestiture aligns with our ongoing strategy to streamline the portfolio and to reduce debt levels and support the development pipeline resulting in higher yielding assets.

4. Shareholder Call Notice and Capital Commitment to GREA - PIC Capital Investment

• On 28 June 2024, GREA issued a call notice to its shareholders, including Grit and the Public Investment Corporation SOC Limited of South Africa (“PIC”), as part of a US$100 million rights issue.

• While all conditions precedent for the PIC Capital Investment have been satisfied, the release of the US$48.5 million was delayed as a result of South Africa’s recent regulatory directive, restricting state-owned entities from investing in low-tax jurisdictions or using these as conduits for offshore investments.

• Notwithstanding this directive, the South African Reserve Bank (“the SARB”) on 30 October 2024 advised that the South African Minister of Finance has approved the request by the PIC, on behalf of the Government Employees Pension Fund of South Africa (“GEPF”) to participate in the rights issue as part of the capital raise exercise, subject to the condition that GREA redomicile from Mauritius to Kenya, within the next 12 months. Shareholders are further advised that the redomiciliation process is currently underway and expected to be completed imminently.

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