Africa-focused property fund Grit Real Estate Income Group, which is listed on both the JSE and the London Stock Exchange, says it is looking at partnering with further Club Med resorts in Africa.
This follows an announcement by the group last week regarding the acquisition of the Club Med Cap Skirring property in Senegal for around R183 million.
The South African-founded fund, which targets property investments in the rest of Africa and is headquartered in Mauritius, is effectively investing more than R570 million in Senegal through the deal.
Besides acquiring the property via one of its subsidiaries, it will be investing between 25 million and 28 million euros in revamping and expanding the resort from 150 to 250 rooms.
That’s the word from Grit CEO Bronwyn Corbett, who says the company likes the Club Med model and is therefore looking to partner with it on existing resorts in Africa.
Club Med Senegal ‘makes sense’
“The Club Med Cap Skirring resort in Senegal is an established hospitality property in the country, operating for some 45 years,” Corbett says, adding that the deal makes sense as it is based on a leaseback agreement with Club Med.
“Grit has a euro-based lease on the property, with Senegal’s economy having a strong currency pegged with the euro. Senegal has a stable economy and is highly rated for ease of doing business, which means we have a low-risk investment with upside benefits [expansion and revamp of the resort].”
Grit’s entry into Senegal takes its Africa presence to eight countries; the others being Botswana, Ghana, Kenya, Mauritius, Morocco, Mozambique and Zambia. Corbett says the company is looking at opportunities in the light industrial property market in Senegal, where the oil and gas can be leveraged off.
She says the company wants to secure oil and gas majors in office properties “that we may acquire in Senegal”.
Further Club Med partnerships
In a JSE Sens statement, Grit announced it would “enter into a strategic relationship” with Club Med and “target to provide further real estate solutions to Club Med across the other African jurisdictions” that it operates in.
While the Club Med chain plans to open what will be its first resort in South Africa, which is earmarked for development at Tinley Manor on the KwaZulu-Natal north coast, Corbett says Grit’s focus is definitely still ex-South Africa.
She says it will continue to target property assets with dollar and euro-based leases in the rest of Africa (outside SA). Currently, some 90% of its income is based on dollar-linked leases with largely blue-chip international companies.
Club Med’s existing properties in Africa and the Indian Ocean region that could potentially be targets for the property company include three resorts in Morocco and Mauritius respectively, in addition to two in the Maldives and one each in Senegal and Tunisia. Plans are also in the pipeline to open resorts in the Seychelles.
Grit already owns other property assets in Mauritius and Morocco but Corbett was reluctant to comment on the company’s next Club Med deal.
Untapped markets come with risk
Corbett adds that Grit is looking at further acquisitions in Ghana, Morocco and Kenya as well as new Indian Ocean destinations like the Seychelles and Maldives. “Uganda is also on our radar,” she says. “We are currently largely focusing on the office, hotel and industrial property sectors in terms of acquisitions going forward.”
Stanlib analyst Ahmed Motara says that while the security of blue-chip tenants – accompanied by dollar and euro-based leases – is key to mitigating risk, Grit’s announced expansion into new African jurisdictions could concern investors who are largely unfamiliar with the jurisdictions being considered.
“As such, Grit will have to focus on better familiarising investors with the assets, markets and rationale that underpin its expansion strategy.”
Grit’s share price was up 18.18% on the JSE on Tuesday.