Top African Fund Manager Backs Grit’s $100 Million Property Push

(Bloomberg) -- Africa’s biggest pension fund is backing Grit Real Estate Income Group Ltd.’s $100 million capital-raising push for the property company’s real estate unit on the continent.

The Public Investment Corp., which manages about 3 trillion rand ($165 billion) in savings for the Government Employees Pension Fund of South Africa, is providing London-listed Grit with a $48.5 million cash injection for its Gateway Real Estate Africa unit that will be responsible for all property development on the continent outside of South Africa.

“The cash-equity injection will be used to reduce the unit’s more expensive debt,” GREA Chief Executive Officer Greg Pearson said in an interview. “Over the medium term, funds will be deployed into risk-mitigated and accretive development projects, with yields in excess of 10%.”

African companies like Grit are increasingly seeking better pricing and developmental investors for their projects in the region. The GEPF is a consistent backer of some of the largest property developments on the continent, including the V&A Waterfront in Cape Town and Waterfall City in Johannesburg, two of Africa’s most valuable property assets.

The continent is home to the fastest-growing population in the world that has a dire need for more infrastructure. Property companies are operating in challenging environments where it’s expensive to build and find reliable renters.

GREA is currently targeting more defensive, higher-yielding developments in sectors such as health care, light industrial, diplomatic housing, business-process-outsourcing centers and data centers, Pearson said.

While GREA continues to scour the continent for opportunities, it’s currently focused on developments in East Africa, and some pipeline opportunities in West Africa related to diplomatic housing and data centers, he said. Most of its building leases are in currencies such as the dollar and euro, with multinational tenants, he said.

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As part of the group’s strategy to simplify its portfolio, it’s considering exiting some assets such as large-format shopping malls, properties in which it holds a minority interest and developments that have reached maturity, said Pearson.

Grit has operated in Africa since 2018, and owns large developments such as Elevation Residence in Ethiopia — which provides US diplomats with housing valued at $77 million — and the largest business-process-outsourcing center in Kenya valued at $48 million, Pearson said.

Future projects include another housing project for US diplomats and a second BPO center in Kenya, he said.