Africa-focused property fund Grit Real Estate Income Group will be stretching its map of Africa after finally managing to secure funding to buy an Orbit Products Africa Limited (Opal) light industrial warehouse in Nairobi, Kenya for $53.6 million (about R796 million).
On Wednesday, Grit – which has listings in London and Mauritius – said an issuance of perpetual note from Ethos Mezzanine Partners GP and BluePeak Private Capital, and a loan from the International Finance Corporation (IFC), a member of the World Bank Group, will be financing the deal.
The perpetual note issuance could translate into as much as $31.5 million – of which $28.6 million will go towards the deal – while the IFC loan will add another $25 million towards the purchase.
“The funding arrangements mark an important step-change in Grit’s business by not only confirming Grit’s long-term partnership with the IFC, but also introducing two respected and well-established project finance partners to Grit,” Grit CEO Bronwyn Knight said in a statement.
“The perpetual note issuance is conditional upon certain remaining conditions precedent which are expected to be fulfilled in the near future,” the company stated.
Despite delisting from the JSE last year and having a presence in eight African countries, except South Africa, the company still has strong links to the country. Its largest South African shareholder is the Public Investment Corporation (PIC), which owns about 25%, followed by the Eskom Pension Fund, which owns about 5%.
The purchase – which is on a leaseback basis – will tie the Mauritius-based property fund into long-term partnerships that will see it joined at the hip with not only Opal, but the IFC and its financing partners.
“This Orbit sale and leaseback transaction and facilities upgrade is indicative of the reliable, secure and attractive opportunities with robust prospects for long-term profitable growth that we are exploring on the continent,” Knight said.
The deal will see the company acquire a manufacturing facility with gross lettable area of 29 243m2 and a total land lot of 80 570m2.
The warehouse will be leased back to Opal – a contract manufacturer for Colgate-Palmolive and Unilever – on a 25-year US-dollar-denominated triple net lease. Opal will have the option to extend the lease term for a further 10 years.
In addition Grit has agreed to redevelop the facility and expand it by a further 14 742m2 by the end of 2023, which it will lease on a new 20-year triple net lease to Opal.
Opal executive director Sachen Chandaria, whose family controls the company, said the deal will help the company raise capital and allow it to focus on increasing value for its customers.
“Proceeds from the transaction will substantially further strengthen our balance sheet, positioning Orbit for expansion and for product and category extensions, to better service and support the ambitious growth plans of our pan-regional and multinational customers,” he said.
Knight added: “We want the ability to partner with very strong operators to be able to release cash onto their balance sheets so that they can successfully grow their operations.”
The company said that through this purchase it will create approximately 250 jobs, 150 of which will be created during the construction of the new warehouse space.
Listen to Suren Naidoo’s interview with Grit CEO Bronwyn Knight in this Property Pod (or read highlights of the interview here):