Grit Real Estate Income Group (LSE:GR1T) — Grit’s recently concluded sustainability linked African debt refinance

0:01 Good morning, ladies and gentlemen. Welcome to the GRIT REAL ESTATE INCOME INVESTOR PRESENTATION. Africa with live attendees in presence. Your questions are encouraged and can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and your participation would be greatly appreciated. In the meantime, I'll just put you on hold awaiting for the venue to go live. Thank you. Fifty seconds.

2:26 Ladies and gentlemen, please do bear with us

2:27 as we wait for the presentation to start in South Africa. We will get started shortly. Thank you. Markets and historic property sectors. In that sense, it is a real coup that the two teams, GRIT and Standard Bank, have succeeded in crafting together.

3:17 So joining us today to tell us why this loan matters, how it was pulled together, exactly what it is are the two teams I mentioned. It's GRIT, we have the CEO, Bronwyn Knight on the line from Dubai. We have got Leon van den Mortel who is GRIT's CFO, Jakob van Zyl, the Head of Treasury. And then on the other side of the double, we have the Standard Bank team that has arranged and syndicated the loan and joining me now on the platform are Simon Houlewis. He is the Head of Real Estate Finance for South And Central Africa and Tombencha or Tombi Odolo, the Legal Adviser for Standard Bank's Investments Banking Division. And then on the line is Nir Adelay. He is the Head of Africa Real Estate Finance Head of Real Estate Finance for the Africa regions.

4:13 The other reason why this loan, it appears to be, matters is because it should be of interest to anyone doing business on the continent and also intent on growing across the continent.

4:25 And GRIT is going to show us a fairly short video after which Brannen is going to kick off with her presentation. So let's get straight to that. Hi, everybody. Hi, bro. I'm just gonna wait for the video to show. Sorry. There was a bit of a delay. So all could you We are a leading Pan African real estate company that focuses on investing and actively managing a diversified portfolio of assets. Through a dearest African investment strategy, we identify, unlock, and deliver superior returns through property investment, property development, and asset management.

5:23 Our diversified portfolio consists of 59 assets in 12 countries across eight asset classes, all of which is underpinned by predominantly US dollar and euro long term businesses. The value of our portfolio currently exceeds 800,000,000 US dollars. Listed on the stock exchange of Mauritius and the London Stock Exchange, we build bridges that unlock opportunities across inaccessible African territories to generate sustainable returns for generations to come. At GRIT, we breathe Africa.

6:25 We think Africa. We love Africa.

6:34 We are Africa. Okay, Bronin. We're back to you. Thanks, Juliana. Thank you. And it was it is really fantastic to be here today. And so happy to start our bank team and the GRITED team in in the same room. I must say that somewhat I

7:29 you know, I think between both teams at that stage, it was so much to consider and so much to really understand if we could really put together a multi geographic cross syndicated multiple currencies, multiple asset classes, multiple jurisdictions, multiple languages, etcetera, etcetera. I think the barrier of that said, it was just could we do set up numbers? And understanding that the concept of what a family of heart should mean. And trust that the fact that we were the last eleven months able to get a a sort of transaction of this nature over the line, which is so transformational not just for our sector real estate, but also for African continent, for emerging markets. And as you alluded to, Giuliana, it's so transformational for even beyond emerging markets because in this current climate, transactions of this nature are just not being done currently with rising interest rates and a magnitude of other economic considerations.

8:49 So really at GRIT, it's around finding the most strategic partners to align yourselves with to really deliver on a transaction which eleven months ago seemed impossible, and that for us is the alignment of GRIT with the lead arranger on this transaction being Standard Bank. Standard Bank has been our largest financier since we started this business, and also now having sort of Standard Bank along our alongside ourselves in a transaction and being able to bring this to market is really just for us absolutely groundbreaking. So from that perspective, you know, to be able to be sitting today in the final stages of the closing of this transaction and and really just now getting to pay away, it really is a transaction that has created a foundational sort of base for deals to come.

9:43 And I think that's what's been so fantastically pioneering around this particular transaction. So maybe just to take a step back, Julian, and just to remind the audience around the GRIT investment case. So we have business that was set up eight years ago with the ambition of being multi geographic, multi asset class, global tenants, and servicing the real estate needs of global tenants, focusing on tenants that could deliver hard currency to ourselves. Sort of eight years ago, this was a business with an asset value of just over a $120,000,000. Today, we sit with a portfolio of $850,000,000 over, eight to nine various African countries geo geographically.

10:30 So we see the African continent, one, being able to access different countries, different geographies, to be able to follow key strategic tenants like the American embassies, like the telecommunications companies, like the financial services companies, these global tenants, and being able to be

10:51 their real estate partner. So effectively, sort of where are we today? We are business that has grown significantly. We are business that has invested in North, West, East, and South Africa. We have business that has invested across a number of asset classes. And as we know in emerging markets, these cycles go up and down. So effectively, what we have seen is we've seen some of the markets performing. We've seen other markets not performing. So to be able to to create a sustainability linked and I'm and I'm a say it's a bit of a tongue twister, Julian, so I feel the pain here. But to be able to create a sustainability linked funding structure that is not just for today, but is scalable for the future is a tremendous success story. So it's taking good assets, performing assets in complex regions, regions like Zambia, regions like Ghana, being able to cross syndicate those into other performing geographies and being able to really look at around just securing those geographies in relation to being able to create a product that is able to scale up from from a debt structuring perspective.

12:07 Just just if I could just pause a second. Just to the team that's on the line, there is supposed to be a presentation that's supposed to be following me. So I just wanted to double check if that presentation was showing on your side. Not yet. Not yet. But I don't know if you wanna carry on regardless. Yes. I'm I'm just gonna carry on regardless, and I just talked to it. So yeah. I I thought one of the team members was was actually dialing in to show the actual screen whilst I talking. Was So apologies about that. So I'm just gonna just carry on regardless. And just just ready just to talk to the background of of where we got to the deal, and then, Fidel, now hand up to you and and the rest of the panelists to talk about the deal construct.

12:57 But, again, just to sort of solidify the, obviously, the the investment case, the scalability and the size of the GRIT business today, which gives us the platform and the foundational base to be able to sort of put a pioneering type gate syndicated structure of this nature. So what it gives us as a business and what it gives us as our key stakeholders, both investors and financiers,

13:24 it gives us a sustainable platform. It gives us tenor, so longer dated date. We're able to hedge out a lot of our interest rates exposure in in relation to rising interest costs as we've seen from an economic perspective. But furthermore, it allows us, as I mentioned upfront, to create a scalable solution. Okay? And just on the creating of a a scalable solution, the fact that this has been linked to impact. So you'll see that, really, when you look at the the GRITED world and where we've come from and where we're going to from an investment case perspective, we talk about income to impact. What does that mean? It means historically, we were a multi asset class as I've mentioned and will continue to do going forward.

14:10 But where we're going into the future is we're going to be focused on impact type

14:14 assets. So what are impact type assets for us? Impact type assets are through our development partner, Gateway, GREAL. We're building two health care projects. The scalability of industrial manufacturing, cold storage, creating infrastructure in the regions and the countries that we actually operate in, the ability now to really look at the impact side. So this program, as you will see, is linked to impact, which means that we, through our financiers, have put in certain impact hurdles to be able to get the benefit from cost of funding, but this goes far reaching just in the financial benefit. It's taking a real estate portfolio of our nature and being able to sort of really focus on what we are doing already in these regions.

15:05 So what we are doing from a carbon emission perspective, what are we doing from a community upliftment perspective, what we are doing from a woman led business perspective. You would have seen that specifically our project through our development partner, American Embassy in Kenya, was led by a predominantly woman led development team and woman on the construction site itself. It is really under a program called Build Her. That particular program is almost one of its kind actually globally. So never mind for emerging markets, but globally, we are creating impact on a global scale. We are setting global benchmarks. So to align with our financiers, we are recognizing the effort and the contribution that we are making to the African continent and being able to have that linked into a program of this nature is absolutely fantastic for us. So really, Juliana, and and just obviously to the audience, for us, this really goes to the heart of our business and why we do business.

16:11 Remembering that this is a portfolio that we started eight years ago from zero. It's a portfolio that we have grown on scale servicing the global needs of tenants, global tenants, hard currency leases. Furthermore, this was a business that started with five people eight years ago. There are over a 150 people that we have in the GRIT and the GRIT development business, which we service the needs, the entire value chain of real estate for all of our global tenants. When you go into Mozambique, you see an office of 30 GRIT and GRIT people based in Mozambique. We do all our own property management, facilities management, leasing. Now with the acquisition, a majority acquisition of our development company, the development management, and with this, we are uplifting the communities.

17:01 We are putting skills into the communities. We are mobilizing local people in all these regions to take senior positions to for the business. So the ability on an upscale basis and that we are really through the whole real estate real estate value chain are creating such an impact in relation to real estate. So to be able to launch a facility on the scale, and as you correctly said, even for global markets, this is actually a global benchmark. So, you know, I we have as you are aware, we have got a London London listing. We are primarily listed on the premium segments in London. We had just released our results at the back end of October. We've been here on a road show across various investors.

17:47 And what's interesting is what even they are seeing, they are seeing that the sort of developed market REITs or developed market real estate companies are struggling with refinancing. They're struggling with putting in sustainable debt solutions. So they're looking at an Africa business and an emerging market business of our nature, and they are saying that this is even, you know, on the scale of a of of a global perspective in this current economic environment, it's fantastic to see that your finances are working along yourself to find a sustainable solution. So for us, really to close off the the closure of this year with this particular program, to have it that we are able to upscale it into the future, it creates capacity for us to do additional real estate and additional redevelopment of the back end of this facility.

18:40 The fact that it's in cap led, the fact that we have seen banks like Absa and Nedbank alongside Standard Bank is really, fantastic supporting this debt sort of restructure for the business going forward. So, Juneau, I think just really in summary, that's what I wanted to really get across to the audience is that to the GRIT investment case and the business case with our acquisition of our development company, the fact that we are impact through and through, the fact that we are have got the scale to be able to mobilize a structure of this nature, and also the fact that we've been pioneering in such a way that there are other persons and other real estate companies that will be able to follow-up with the back end of this. To have countries like Senegal, Mozambique, Ghana, Zambia cross syndicated, it means that both Standard Bank and ourselves absolutely found a way in relation to this transaction.

19:35 So on that note, I will hand over back to yourself. Great. Thanks, Bronwyn. Perhaps I can bring in because we've heard now from the GRIT perspective on this syndicated sustainability linked loan. Nir Adelaide is, as I mentioned, Standard Bank's Head of Real Estate Finance for Africa. If I can ask you, did you come into this loan with some trepidation because we saw what happened in Zambia during COVID, they defaulted on their sovereign debt, which is a really sort of disastrous, I think, thing for the country and it must have made you guys and GRITED quite nervous to see that happening. And imagine there is a lot of nervousness amongst banks in general when you see these countries where there were some pretty groundbreaking Eurobond loans that were set up in the last few years and then you have someone default. I mean that is kind of the nightmare for a bank. So from your perspective, did that sour you at all or is that one of the reasons why it took so long, eleven months, to get this loan across the line?

20:53 Thank you. Thank you for the question, and thank you for hosting the panel. The challenge with the continent and the countries within the continent is is the volatility that you tend to see from time to time. Brumman sort of alluded to it. You have to think of the continent or investments within the continent like a portfolio. And that's that's typically what we build our thesis on. Even throughout the transaction, there will be there were sort of changes that evolved throughout.

21:38 So take Ghana, for example. At the beginning of the transaction, there was some pressure, but not as aggressive as sort of transpired towards the end of the of the the of the transaction. But I think you've got to the way we we because of the characteristics of property, you have to think about your investment, your structure on on a through the cycle basis. So those macro shocks will certainly impact what we do, how we structure, but you then have to you then have to layer that against the property fundamentals, against the strength of the property the underlying property and the potential recovery of of the markets of the countries.

22:32 So definitely, there's some complexity there. To to to I mean, part of the part of part of the the sort of, structural sort of consideration we had to have was at the time we started talking about the transaction where interest rates were at a different point as to where they are now. So your base case assumptions, had to change, throughout that process. But one thing that is thematic for us from a Standard Bank point of view in trying to provide solutions to financing real estate, assets for our clients, but also for for the market is is the is the focus in trying to build scale. We've I mean, historically, deals are being funded on a country by country basis.

23:23 But depending on the reality of the country, like you've sort of alluded to with Zambia as an example, you are constrained. And the appetite for debt, then it sort of follows what the country macro realities are. But you you you you what we've tried to do with the structure for clients that operate on a Pan African basis is to try to create that overarching platform that allows them to to ride the the volatility in a more sustainable manner and in a more steady manner, rather than just the impact of economic shocks, but also build scale in to to attract greater sort of flows of international capital to the continent and to the sector. Yeah. And I think that's an important thematic, and that's also similar to what GRITED does by with this with this London listing and with this diverse sort of investor base.

24:23 For us, it's in the more sort of capital that you attract to the market, the more sustainable you find in the market, the more sort of interest and the depth of the market. Thanks. Thanks. Jakob, maybe I can go to you because cross collateralization, besides being a total tongue twister, is something that has come up again and again and I suppose it speaks to having this scalable loan. Can you but in layman's terms, just break it down for us exactly what it means and how complex it is to get a loan that is cross collateralized? Yeah, so we've heard the word multiple quite a few times now today and I think we'll still hear quite a few more. I think the benefit of GRITED's model is to be diversified in asset class and jurisdiction and the idea is to actually capitalize on this and actually bring it into one security pool so that when there are certain volatilities and challenges in certain markets or jurisdictions that you've got the support of other stronger markets that not experiencing the same volatility at the time. So it's essentially just grouping a asset pool that's stemmed from different jurisdictions and different asset classes.

25:38 And I guess that's the ultimate goal that we try to achieve because that gives lenders the comfort as well as for us to achieve the sort of required tenant that we wanted to get out of this and also to allow optimized pricing that actually make this deal work for us. Yes. I will get to pricing in a moment. Tombi, Bronwyn was saying in our briefing a couple of days ago that when you started talking there were something like 600 suspensive conditions which sounds appallingly complex and from the legal perspective perhaps you can tell us what some of those suspense conditions were, why there were so many and whether or not you managed to whittle it down? I mean whittling it down, I think we have done very well in terms of ticking them off as being complete and why there were so many.

26:31 So you have to look at each jurisdiction in silo and each jurisdiction has its own regulatory requirements in order for us to perfect the security, in order for us to have an unconditional framework of documents for that particular jurisdiction. Over and above that, some of the requirements and legal conditions are in a different language. So you then have to go through some complications around translating sworn translations and then also liaising with central banks in every well, in particularly two of the jurisdictions being Mozambique and Senegal. And those become conditions for the banks in order for us to have a sort of unconditional funding so that we can fund. And then obviously you have got your registerable security, your mortgages across different jurisdictions again and a number of properties within particular jurisdictions. And all of those properties in a singular asset have conditions that need to be met in order for us to perfect that security at least from a risk mitigation perspective. And that's why we had so many.

27:37 And we have scaled it down in the sense that we have managed to tick off about 80%, if maybe not 90% of those conditions. But it's a process. It's a process that's unique to each country and to each legal system. And it is quite complex because you sort of have to get to the granular detail in order for banks to take comfort in terms of having mitigated or mitigated their risk from legal perspective. In fact, I am surprised it only took eleven months given what you just said. Simon, is this a template for other banks and other companies? Yes, potentially. I think we have done something with GRITED Mozambique in 2019. We cross collateralized that portfolio. That I think has laid the platform for this structure where we are just able to almost plug and play that piece into this broader structure. And the same kind of thesis applies here where we can take this structure, scale it up for GRIT's future use.

28:37 And then, yes, for other potential clients across the presence and, I guess, investment focus across multiple jurisdictions, you can look to apply a similar kind of structure. It's pioneering, as Bronwyn said, given the cross collateralized nature of this across the multi different jurisdictions and the benefits that it does come with. I think the challenge we do face in Africa at least is the scale of Pan African large investors that are able to at least have the scale of GRIT's portfolio to put this type of structure in place. I think a lot of them are a lot, call it, younger in their growth cycles and the like. Assets are still maturing where you need a bit more stability and potentially a much broader solution such as this is not quite yet ready for their purpose.

29:26 Certainly going into the future I think you are going to see a lot more focus on these types of structures. Leon, if I can bring you in, how much how much easier does this if you have one loan, one overarching loan for four different countries, right, and the number of assets contained in those four countries, how much easier does that make your life in managing your business? I mean perhaps you can give us a sense of what you would have to do before you get got a syndicated loan such as this. So when we started out initially, I mean the portfolio was really small and a few assets. And eventually, you just start creating one loan per asset. And eventually, you get to a point now where you've got 59 assets. If you just think of the scale of having 59 loans to actually manage, 59 relationships with banks, The covenant, everything that you have to monitor in terms of all of these loans to ensure you are comfortable as well as the banks being comfortable through this process becomes this massive undertaking.

30:27 Also when you look at the refinance risk that you face, if you are trying to refinance 59 loans, you have an average tenure of three years in Africa to five years. It means you are going to be refinancing 12 loans every single year. So when you get to a situation like this, the amount of workload that it puts on both our internal team as well as the banks becomes a much better solution in terms of making it admin less intensive. And just to have one party to deal with, even though it's over four or five countries, it creates this environment where you have interaction with one party and the ability to cover so many more aspects of your business through one relationship, one set of covenants that you need to test and monitor.

31:13 You have to then go through your refinance process every four and a half years in terms of where you want to reduce your refinance risk. And it just makes it so much easier from an admin perspective and then also just for all the cost benefits from I it as mean does it really make it cheaper? Because I was looking at it seems it actually is slightly more expensive for GRITS, this overall loan. Am talking a couple of basis points. Jakob, perhaps you can step in there and Simon, you can talk about how you actually arrive at the pricing of these loans. Absolutely. I think if you had to sort of refinance these facilities on an individual basis, which is seven different finance facilities that was in place before this, covering 16 assets. Some of the jurisdictions, like me mentioned, there's some volatilities coming through certain jurisdictions, which certainly would have arrived at a different pricing. So collectively by pulling these assets and making security pool more attractive certainly helped us in pricing.

32:13 But also like someone said, is a sort of blueprint going forward so this is something that we can leverage off going forward and roll other assets in. And you'll start benefiting from the sort of cost of putting the structure in place for future refinancing as well. That's where you will start to see benefits of this as well. Another sort of element to this to overlay to the complexity of all of this is we've got multiple partners a lot of these assets, Zambia, some in Mozambique and in Ghana. And obviously, to get their buy in and participation within the structure, it's got to be appealing and the understanding across the board was it's certainly a lot more attractive than going for the individual asset refinancing. Simon, I mentioned pricing. So how do you arrive at pricing this kind of loan because you know you have so many factors to take into account. You have to take into account currency risk, you have to take into account geographic risk, asset risk.

33:14 How do you actually arrive at one unique figure that says, okay, this is what GRIT is going to pay back Standard Bank over the course of this loan? At the risk of oversimplifying it, but No, please simplify it. There are a number of factors obviously going to any kind of debt consideration, pricing and the like and assessment of risk. Country risk is a big one obviously. Nid touched on the property fundamentals earlier. I mean you wouldn't go into a country like Zambia and finance a bad asset, for example. You'd only pick the better assets, the cream of the crop. And then, I could touch on it now where Zambia is in default. Ghana is in, call it, a bit of distress at the moment. To look at those on a stand alone basis, your pricing, given that risk environment, would be a lot higher.

34:01 But then you get to, call it, cost collateralise or let's just say, subsidise, if you like, and other assets in much better performing jurisdictions. You diversify that risk. You can still get cash flows out of some of these difficult jurisdictions like Zambia and Ghana still, but you now have the added benefit of the rest of it. That all plays together. Goes into, I am not going to say black box, but a nice pot. You stir it up. And then you also you kind of translate against what is the experience in the country from other assets, other clients, other banks, other everything. You just do kind of a benchmarking market comparison as well. And I think despite some of these country risks, you look through the cycle and some of it, you can't take a point in time view all the time right now that says Amazon default, am pricing you here. Because in two years' time, it turns around. I mean, the IMF program is in there. The debt restructure, fingers crossed, comes across in the next, call it, six months or so, in a very different environment.

34:58 And clients, banks, we don't like lots of change all the time. I mean, I can imagine Leon sitting there saying we're changing your margin every month because of the country risk. He's going to he'll shoot me. So we take a long term view through the cycle. We pick the good assets. We believe in those fundamentals that we are managing the risk accordingly and you price as best you can, obviously against then from a bank regulatory perspective, the cost of capital and the required returns we need to make on our side as well. Just find a nice, call it, meeting of minds and a marrying of where that ends up. Niamh, if I can go back to you, what are the banks' willingness to lend like at the moment? Because also talking to Bronwyn before this presentation, she was saying that Standard Bank actually helped or financed initially GRITS operations in Mozambique.

35:50 And it seemed there was quite a lot of reluctance from other banks and yet so many of the South African banks are pan African players or at least want to be. But it seems as if there is not many banks actually who want to go out and do the loan. Okay, yes, you brought in others. You brought in Absa and you brought in Nedbank. Investec, I think was one of them. But generally, the willingness to lend money to companies, is it there or are you still quite tentative, especially post COVID? I think I'll focus that response on the real estate sector because each sector is different and the impact on appetite for each bank is also different. A couple of years back, the number of players or financiers operating in the continent for real estate was limited.

36:45 It still is, but the number is growing. And you're seeing quite a lot of interest from from other banks in providing financing and capital to the markets. There are a number of reasons that drive that. Bronwyn spoke to one of them. There's that concept or context of impact that the sector tends to generate because of its activity. Some and because of the at the nascent level of development in a number of the countries, you tend to even see the real estate asset class as, you know, people define that as business infrastructure, whether it's retail or offices or industrial, and the like. And then if you if you then sort of if you venture further into the likes of medical services, digital services, life sciences, all of those have much stronger impact measures.

37:48 So with that context, you're you're starting to see a growth in number of participants. Not a and and you gotta you gotta divide that up by the sort of Pan African regional sort of players like ourselves, Nedbank, Absa, RMB, who operate in the continent. And then also, some of the more regional operators that are expanding into other countries or expanding within specific regions, all also growing their sort of footprint and their capital sort of deployment into the sector. For us, the idea, as I mentioned, is if you if you can create scale, then you can attract more capital.

38:34 And and hopefully that that you know, there's that saying that a rising tide lifts lifts our boats. So hopefully, you can sort of leverage on that, you you can see you can see that translating to better growth for the sector and for players in the sector. Yeah. I mean, there's a the saying the rising tide lifts all boats is also saying that there's safety in numbers. I sort of wonder if it's the syndication aspects of a loan like this is that the banks think, okay, it's not just me lending to this company. We have gathered ourselves together. Is that, Tombi, from a you know, it seems that you are kind of focused on risk part and the legal part of the equation. Is that quite important? Is that the risk is shared? I think so.

39:19 And I think the banks place well, other banks that come into the syndication place a lot of reliance, especially from a legal perspective, around some of the risks that we would have mitigated for the transaction. So I think once we have taken a view around how we have mitigated the risk from a legal perspective, the banks sort of seem to get comfortable. So I would assume from a funding perspective it sort of follows the same narrative. I haven't actually introduced Annika who is there online and I apologize Annika for ignoring you as the start of the presentation. Annika is from Standard Bank and she is the Executive for Sustainability. And this is another key term in this loan. It is a syndicated sustainability linked debt facility.

40:08 Perhaps you can just talk us through why this is so important or why this has become such a consideration for raising capital and especially in light of the greenwashing that takes place. ESG is a term that is bandied about very widely. How do you make sure that a loan like this meets the spirit of ESG? Thank you, Jeleta. Hi, everyone. Thanks for the question. I think to address the first part of your question, there is pressure coming from all angles and I am sure Brannan and the team would acknowledge that. It's not only coming from with your financial decision making.

41:03 And so as a as a finance organization, we're trying to drive that behavior and incentivize our our client base to do the right thing and to contribute towards the greater goal of net zero and all the other social commitments that we have on the continent. In terms of addressing the greenwashing risk, I think if you look at all the deals that have been done globally, probably close to a 100% of transactions that are being structured in the market align with market principles such as the LMA principles and the ICMA principles. So GRIT sustainability linked loan aligns with the LMA sustainability linked loan principles. And so what what we do in our role as sustainability coordinator is we ensure that the structure is robust enough and that it's credible enough to take to the market for lenders to participate in the structure and that it does tick all the boxes of the principles. And and that would really include ensuring that the KPIs that have been selected are core and material to GRIT's business, that we're not selecting something which is actually immaterial, that the targets that GRIT have produced are ambitious enough that it goes beyond business as usual, and there's a big analysis that sits behind that in historical analysis, in peer benchmarking analysis that's provided to the lender group.

42:27 And all that information is collated in the form of a sustainability information memorandum. So in that information memorandum, and in GRIT's case, is quite a lengthy document because there was so much ESG reporting available. You actually set the the the kind of the lay of the land in terms of at the very top GRITS ESG strategy, going into what their focus areas are, going into what they're really reporting on from an ESG metrics point of view, and then moving into the structure of the loan. So all the information sits in one place. It's obviously available to the entire lender group. And I think that's really what's at the core of understanding that we are aligning with the principles. I think in some cases, you will find that some of these transactions also carry a second party opinion from an external provider.

43:18 That is usually the case where we sit with a hard to abate sector, a name that's quite tricky, or perhaps KPIs or targets that aren't as straightforward, and we feel there's some an additional layer of assurance required. So the market is developing. It is still changing every day. It's quite hard to keep up with all the changes that are that are happening. But I think the direction which we're all trying to move towards is standardization and credibility, really protecting the credibility of the market. So that when we do when we call something green, when we call something sustainability linked, we know it's been tagged and branded in the right way. And that what's happening here and what's happening in Europe is effectively, you know, the same, call it, classification REPRESENTATIVE:] of a facility when we look at sustainable Ronon, if I can bring you in here, I'm sorry to have ignored you for the last twenty minutes or so, but is it not certainly problematic, the makeup of your tenants?

44:20 You know, you have got ExxonMobil and you have got Total. These are sort of the original sinners in terms of, you know, fuel output. And they also tend towards being the classic sort of greenwash offenders. How do you square that off with the fact that you have got this sustainability linked finance arrangement? Julieta, you you you asked me an interesting question actually, which was posed at our results presentation a few weeks ago by one of our investors. And it's always an interesting one to answer as pragmatically as possible because it does become quite tricky when you when you're operation across Africa.

45:07 You know, whilst I appreciate that clients like Total and these type of tenants could be categorized in this cardinal similar relation to ESG and what they are and aren't doing. I think the reality is that, you know, there are very big portions of their business that are tending to things like this. And also the fact that they are needed in these type of jurisdictions. So and they are needed for certain components that they so, you know, whilst we would all wanna be totally green and all of these incredible concepts that we think that we are absolutely pioneering as GRITS and from a real estate perspective is also a harsh reality around the basic needs in relation to commodities, etcetera, etcetera. So what we can do as GRITS is what we look towards these tenants to understand what are these sustainability programs.

45:58 We obviously scrutinize these in relation to our reporting. The second aspect is that, you know, we are not going to see ourselves completely exposed to oil and gas go across the whole of Africa. We have really key clients and financial services businesses and industrial businesses. We have hospitality tenants like Crabnet and Beachcombe who are literally pioneering in relation to what they're doing from an ESG perspective. And just maybe to add on that, throughout development business career, we actually have almost completed the first five star green rating built rated building in in the Indian Ocean, which is now going to be in Mauritius, the first of its nature. So whilst I'm not saying we we we overcompensating for the lack thereof our tenants, I think there's also a realistic perspective of looking at these tenants in relation to what they are bringing to Africa. And it's about all of us looking in the mirror and having a sort of harsh discussion with ourselves.

47:00 And the the the the benefit of our business is that, you know, we're not making this stuff up as we go along. And and I think the Standard Bank team can attest to that is that there's so much stuff that we're doing already. There was no reason why we had to build the first green star rated building in in in Mauritius. It's because that's actually what we wanted to do. That was good business practice. And, ultimately, the more we can do that, the more pioneering we can be in those type of elements of real estate, people will follow. You know? The clientele like like TotalNet and those type of sort of tenants, you know, they they they will follow, and we will put the necessary pressure where we need to. Okay. Mean, Simon, from your perspective, are you more willing to lend to companies that have very strong ESG credentials, genuine ESG credentials? Most definitely.

47:50 I think Anika touched on it, Brian has touched on it. Sustainability linked ESG, as much as the words are thrown around, they're becoming the heart of any investment globally. Yes, Africa has probably got some way to go. I mean, it's hard to hold us to the same standards as maybe Europe where one hundred years ahead in certain infrastructure. But it's a massive focus from banks, clients, investors. I mean, at the end of the day, investors bring the initial capital to drive growth. And if it's a hard requirement in their investment thesis, you can't escape it. So it is becoming ingrained in everything we do across funding and assessing risk and the like. Is a massive part of how we look at clients and transactions across Africa. Okay. I am going to get to a couple of questions and if you would like to ask questions, please put up your hands and let me know.

48:42 But there is questions that have come through from the online feed and one of the things that we have not spoken about hedging, know, hedging as opposed to your currency exposure, exposure to economic growth, whatever it may be. And so the one question that has been asked is, in terms of this one facility, is this $306,000,000 loan, are there options for hedges as African economies are volatile, for example, on the interest rates? Are the conditions to fix or have caps or collars based on certain outcomes? That's quite a technical question, so I'm gonna have to leave it up to Simon or Nid to answer that one. Or I don't know, Yaku, if the So Leon is silently the smart one in the room. But the interest rates are a key thing we look at, obviously, is FX risk and the same risk that impacts GRIT and their returns from tenants in their portfolio impacts potential debt repayment from our side from the receipts they get.

49:38 Most of the portfolio I mean, it came quite clear in the pre video Bramen shared, the tenant base is very focused on dollar earning tenants. You have a lot of multinational top tenants so that they have access to dollars from a global perspective even if the jurisdiction that they're currently operating in has some challenges, for example. So your strong tenant profile helps mitigate some of that dollar risk specifically, at least from a receivables or cash flow perspective. And then marrying that across with the debt costs and interest rates going up and down. I mean, all the banks have dedicated teams focusing on these types of solutions and we engage with clients. I think we engage with GRIT almost every couple of weeks on even for the last seven years, even if there's no need.

50:26 We're discussing providing solutions, curves are doing this, this could come through, what's the best way, what's your view versus our view. You have a very robust discussion. Caps and collars, technical term, you kind of put a ceiling and a floor I guess is a max and a minimum that you pay in that type of structure. So you benefit in a band of rates. You kind of limit your so your downside to the rates going up. So you get those type of protection mechanisms that you get in. Then there is more, call it, straight or vanilla transactions, call it a swap where it's one rate fixed for the life of a period. If rates are down, you pay the higher rate. If they are higher, you pay the same rate so you kind of benefit. But there are a few different sexy structures the guys put together and that's outside of my scope of day to day expertise. But that's I guess the basic overview of it. Maybe just to add to Simon. So we also hedge to an extent on a natural basis because our dollar based tenants are obviously linked to inflationary increases.

51:32 So to an extent, we are naturally hedged, but we do take out these instruments to hedge ourselves. Think currently our U. S. Dollar debt is sitting at an 80% hedged level. So we constantly look at these instruments that's available and do assessments on an ongoing basis. I mean, Jan, was that the primary kind of one of the, I suppose, founding principles of GRIT was that you would have tenants who paid in hard currencies? And because one of the ways that companies can come horribly unstuck is when they have they're earning their revenues in the local currency, but then they've got their debts in a hard currency and you can I mean that's when things go spectacularly wrong? I think that's sort of investing 101 is you've to match your debt to your cash flows as well.

52:18 You don't want to have $1 debt versus a quasi income stream. That's where you open yourself up to undue risk. And all of our properties, that's why we have the currency of the debt in the same currency as the lease streams. And that's why we look at certain artificial products like cross currency swaps, where a portion of our portfolio is actually in euros. And naturally, we've tended to have higher gearing on our euro assets because we ultimately report in U. S. Dollars. Any mismatch there creates a transaction that you have to book on your balance sheet, which either creates a profit or loss. And you need to control this level of volatility. Cross currency swaps are one of the hedging mechanisms that we've put in place for this. But it's also just creating the more natural hedges, which are ultimately going to be cheaper, is matching your euro or your other currency debts to your other currency assets, which creates a natural hedge situation, which is ultimately one of the better ways of doing it.

53:13 Bramman, maybe going back to you, have is this something that you've had to work hard to explain to your investors, particularly the fact that you've got a listing in London? I mean, do they look at GRITED and maybe not stand the business or they amplify the risks and you talk about having these natural hedges in place so maybe the risk is actually not as great as people might initially think when they look at a company such as yours. Yeah, so I think it goes to the fact that this is Africa. And when we're sitting in The UK and actually predominantly our UK investor base is not actually emerging market investors. They are looking for income effectively, and they're looking for hard currency returns.

54:05 So the management team actually has to spend a considerable amount of time with our investor relations team really speaking about the GRIT investment case because automatically when people when people see Africa, one, it gets tainted with one brush. So you have sort of a fallout in certain countries and even what we've seen from a macro perspective in South Africa, and then the continent gets tainted with one brush. So it's to explain the differences between all the geographies. It's also to explain that we are not exposed to local currency risk. So that is a that is obviously a a very large factor in relation to people automatically seeing an African business and saying that there is local currency exposure. So it's the hard currency leases.

54:51 It's then the nature of why do we do dollar date, why do we do euro, and as Leon just explained to you now, it's to match to our revenue streams, which also has to be explained in quite a bit of detail. So, you know, it's you know, we say that, you know, GRIT is a a perfect bridge or a conduit for wasting money into emerging markets or to African continent because we've created a product which is Africa. It's the growth story of Africa, but it's feeling mitigated because of the fact that it's predominantly hard currency, it's multi geography, it's global tenants, it's multi asset class. Our leases are linked, as Yaku said, in relation to inflationary increases.

55:37 We've seen those annual escalations. But to be very frank, this takes a lot of explaining because as I said, you know, people have unfortunately look at look at Africa with a sort of a one one one sort of brush effectively. So, you know, we have to explain we don't invest in South Africa. We don't take rand risk for that particular reason. And, you know, all of this continues from an investor relations perspective. It's about simplifying the story. Okay? So it's about saying, what is GRIT? You know? We are here to service the real estate needs of global tenants who can service hard currency leases. We wanna control and give them the whole value chain of real estate from start to finish, from building their buildings to managing their assets. We wanna collect hard currency rentals, and, ultimately, we are long term holders of real estate.

56:33 So whilst we might be in an array of African countries, whilst there might be a whole lot of local currency, which is perceived risk, we actually don't face that risk. And furthermore, I think just to overlay, it's on on that sort of perception is that can we get money out of these countries? So, unfortunately, countries like Nigeria, like Ethiopia, have been really tricky with expropriation of funds. So we've had to demonstrate over the last eight years by paying a dividend every six months. We can get the money out of the countries. We've demonstrated the fact that we can expropriate funds out of these countries. So, you know, Juliet, it's a continuous education reeducation, especially to investors that are not emerging market investors.

57:18 But to be very honest, we will continue to tell the story because of the fact that people are looking for good alternative investments. What has been experienced in Africa has actually become a global issue. These are global macroeconomic challenges, and people are looking for mitigated good alternative investment stories with very, very heavily invested management teams, and and that is what GRIT is. And just maybe going back to Standard Bank's perspective, and me bringing you back in here. I mean real estate finance is this division's game, right? But banks have tended to especially banks operating in Africa tend to put money into government securities because no one really loses their shirt over a treasury bill.

58:10 It's when you venture out of that safe world of government debt, although maybe in Zambia's case not so safe, that you really don't want to do much lending. What are some of the fears that you have from a bank perspective of when you agree to lend money to companies that are a real estate company or when you are putting money into African economies that are not to the sovereign? I mean, what are some of the things that keep you awake at night with regards to lending out this money which is also shareholder capital? I think from the Standard Bank perspective, there's a slightly different view.

58:57 Our footprint in a number of the African countries mean that we are present on ground, and we are not briefcase bankers from that perspective. So that there's a lot of comfort derived from that process. So you have teams on ground. You have domestic expertise and understanding of the markets. The trepidation is still there, the concern is still there, but you have the infrastructure to sort of manage or mitigate some of that risk with domestic understanding of the market realities. And that becomes one of the reasons why that's what drives our activity. It's easy to do the to to do the to do treasury treasury lending to government securities, but you don't really impact the countries or you don't really make an impact by doing that.

59:55 And, you know, the the the the real impact is in in real sector lending to real counterparties. We would focus both on the domestic large local corporates, but also some of the global multinationals as well as the multinationals emerging from the African Continent in and of itself. That is where impact comes from. That's where we derive value from. That's where the partnerships that evolve come from. And a key ethos for us is really about relationships. We don't pursue sort of stand alone sort of lend to counterparties just for for pure for pure income purposes.

1:00:44 It's it's it's in the repeat relationship and repeat business, which kind of speaks to Brongwyn's GRIT's thesis about partnering and partnerships. And that's what actually drives us from a Standard Bank perspective. The the there's nowhere where lending is easy. I mean, you you would you've heard of defaulting with large corporates in China, similarly in in The US, similarly in in The UK. So the stories continue, but it is around understanding what the fundamentals are, leveraging on the knowledge that you have, but also on the relationships that you build with with with with with counterparts.

1:01:30 Yeah. Much harder to explain, to your shareholders when something blows up as it inevitably does, but that is part and parcel, I suppose, of the the risk of lending. Perhaps from a GRIT perspective you can tell us what you are going to do with this money. We haven't actually got to the most important part really is what are you going to do with financing that you have raised? So predominantly it's a refinance exercise. However, we've got a ratchet up scheme to do some further developments. So the most exciting one is the redevelopment or improvements of one of the big hot assets in Senegal, Club Med Capskering, which is going to upscale that entire development.

1:02:17 It's going to create extra capacity. And the impact this has on that local community is just massive. It's for the predominant employer in the region. I mean it's going to provide places for people to go on holiday, but it's also going to provide a massive amount of jobs for that area. This is very exciting. The ability to roll this out and expand this with new projects that come on stream in time and the scalability of the solution does allow us to enter into a lot more impactful projects going into the future, creating an additional sort of ratchet up for a new asset that we might buy in one of these economies is far easier now than having to go through the entire process of starting it from scratch. It's just adding to an existing security pool and then being able to draw on these funds to actually grow. The other aspect of it is this RCF facility that sits on top, which creates a timing mechanism for us for new developments or new investments where we can draw down on RCF to get going on projects. What is RCF?

1:03:15 Revolving credit facility, okay. To allow us to get started on some projects that are not necessarily fully funded up to date but there is a lot of sort of base work that you want to do to actually get into the ground and prepare for the deployment of capital and it gives us the ability to do these kind of projects. Are there any countries from a Standard Bank perspective that you really wouldn't venture into? That there is any countries or any companies that are particularly off limits? Can you tell us why? You can add in if you like. Mean, Nid touched on it earlier with our footprint. We are very focused on our footprint in Africa and the presence on ground is a core jurisdictional requirement for us. If anything goes wrong in a country, heaven forbid, no presence on the ground, no local team or expertise, you're shooting in the dark from SA wherever you might be. So it's a lot difficult or more difficult to lend into countries where you don't have any real on the ground presence and support. That's been a core focus for us over the past twenty plus years in Africa.

1:04:20 You might have seen Sims' press release a few months ago or a few weeks ago. There's a draft start looking a bit more North African country. I think Morocco is on the list. Senegal, I think, is not a presence country for us at the moment but something we are looking at, Rwanda and the like. So there is certainly a strategy to grow and expand that in some of these growth countries where we see long term opportunity, not just for ourselves in terms of growing the continent, but also to support and follow key clients. So I think that becomes quite key for us. So typically, in general, a country we are not present in is something we haven't really invested in or if it's a country with regulations and rules that prohibits foreign banks. I think Ethiopia, for example, we've a rep office but you cannot lend or at least you can't take securities of a foreign bank at this point. So if you're good to build a project in Ethiopia, it has to fund it, you're taking an unsecured view as much as real estate is asset backed lending. So it depends from country to country, client to client. Senegal, as much as it's a non presence country for us now, it's part of a portfolio structure. So you can take a bigger view on GRIT, the portfolio and the like to still go and explore some of these frontier markets, if you like, from our own perspective without going all in per se and really exposing the bank to undue risk.

1:05:35 Tomvi, are you wanting add I was going to say, so we don't have presence in Senegal, but I guess we were able to fund into Senegal by taking a view on the cross collateralization of the entire structure. And as much as we don't have presence in Senegal, it also proved to be one of the most difficult jurisdictions from a regulatory perspective because we didn't have people on the ground to sort of interpret the legislation that was in French. Yes, we had local council on the ground, but that's slightly different when you have actual lawyers from Standard Bank or Stannbeg in that particular jurisdiction. So it was an interesting one, Senegal, but I guess we took a view in terms of the cross collateralized structure we tried to put in place. I mean is that also why you you back a company like GRITED that has gone and done the pioneering work, kind of gone in there And I'm not saying that you can ride their coattails, you you need each other probably equally, is that the thinking? Is that they are the pioneers and then you see how they fare and then you back them? I think it's different. It depends on which client, which country.

1:06:41 I only gave an example from Mozambique when we first went in with them. The presence on the ground, the oil and gas story, it's been coming for a long time. But we believe in that story. We have the teams on the ground expertise to take that long term view and buy and agree with GRIT's thesis for Mozambique, for example. I mean, you are seeing a lot of interest from other banks and corporates in Mozambique with oil and gas kind of stories coming through and it's five, ten years late, but they're still coming through. So I mean, we're there at the beginning. It gives us the first move advantage with clients like GRIT to partner and then it sets us up for this kind of success with them across other opportunities. Annika, from your perspective, are there companies or countries or industries where you are the handbrake for Standard Bank? Where you say, uh-uh. This is these people are gross offenders, whether it be environmental, social, or or in governance.

1:07:35 I I would have to say there are examples of deals that are challenging and and where we where we need to do more work in order to label something as as sustainable finance. So we do see that, generally speaking. And I think if you then drill down from into a sector level, of course, there are certain sectors that are going to be much harder, more challenging, more due diligence, a lot more work that has to be done in order to execute on a sustainable finance transaction. So if I look at the African landscape, a lot of what we've seen in the in the African market, actually, the real estate sector has been very active.

1:08:21 Then, obviously, we've got across sectors, you know, retail, a bit of industrial. I might be missing a few now, but there's been a lot of activity in those sectors. What we haven't seen yet is an uptick in volume and activity in sectors such as mining, oil and gas. Agree. And I think what we're gonna be seeing now is the next wave of sustainable finance transactions that are done in those sectors and the transition element coming in through through through those. So that's where a lot of work is being done around at a government level even, looking at what transition means, looking at what transition frameworks are.

1:09:07 I think it's hard to define. I mean, nobody really knows exactly how to structure it and what to do what to do with it, but we know it has to be done. So in effect, we're not turning away from those clients. We're not turning away from those sectors. We have a big portfolio across those sectors and we want to help those clients transition into a more greener economy. But I think we are kind of at the start of that journey. Okay. We have got about ten minutes left, so I don't know if there are any questions from the floor that you would like to ask any of the panellists either here in the studio or online? No? Any closing remarks maybe? Jakku? Yes. I think what Simon and It touched on earlier, I think a key thing that came through the success of this transaction and certainly for GRITED's success to date is relationships and partnerships.

1:10:03 Like and I think there is a key understanding or shared understanding between GRIT and Standard Bank for the sort of growth appetite in Africa and the understanding of the African landscape when it comes to real estate. So I think that was absolutely key. Getting to these jurisdictions, which Ntommi just like mentioned, a difficult jurisdiction for them, more Senegal. Yes, the cross collateralization sort of solved for that. But I certainly think that it's the relationships, the partnerships and the shared understanding of the African landscape that definitely was key to the success of this transaction. Leon? I think as a testament just to the strength of relationships is the fact that both ourselves and Standard Bank, when we really got into the starting point of this, just saw this absolute minefield of potential things that could go wrong. And you don't embark on a journey like this without a very good belief in yourself as the people that can pull this across the line, but also belief in your partners where you know that they will stand behind you and you will stand behind them through thick and thin to make something happen. And this is the key of why we see ourselves as this family of partnerships.

1:11:18 Because this goes not only to our relationship with Standard Bank but it's also our relationship with our tenants. We have to fill their needs as much as they need to pay their rent. It's a symbious relationship where you have to always be open and communicate and deal with problems as they come because there's going to be cycles, there's going to be difficulties, there's also going to be good times. And property is a long term game. And these cycles are going to come and go. And that's where this diversity has really just played a de risking role into this entire structure. But having key relationships with your partners is absolutely key. I mean Standard Bank will know that during COVID there's many a call the Many a frantic call. The credit committee and you just have to ultimately share your experiences and be partners is really what it comes down genuine partners.

1:12:08 I think they're gonna delete my number after this transaction put into me. I'm Chuckle again. Bronwyn, perhaps last word from you. Yeah. I'm just I'm I'm I'm having a chuckle because I know we're saying this tongue in cheek, but we're actually not. I think, Annie and and Simon, even just from the team, but from myself, have had many calls in the middle of the night to say, we need to find a way, please. And I must say that the entire Standard Bank team never shied away from actually just getting things done. And it's actually it's amazing because, you know, it sounds sort of really this this concept of partnerships, but unless you have a very strategic partner alongside yourself when you are pioneering something with this amount of complexity, unless you are in it together, you won't get it over the line. And I think that's the reality is that, you know, there have been players that have tried this before.

1:13:13 There might be players that try this into the future, but you have to align yourself with the correct long term sustainable partner for your business, and that is what is to us. And they know that real estate is a long term game, so do we. We have a structural capital permanent capital structure that speaks to the long term game of real estate. And it was hearing hairy over COVID. You know? I always sort of dramatically say sort of the 25% exposure to hospitality and 25% to retail that a half of our portfolio was boarded up, and I say that quite dramatically. But there was never a day when we didn't touch base with each other alongside that. And we did what we needed to do to get through that very difficult period.

1:13:58 And I think the Standard Bank team and executive team has seen us in action with our backs against the wall, and they know that we face forward. We don't go backwards. And I think that is why they align themselves with a business like GRITED into the future around a structure of this nature because it is a large deal. You know? We talk about $306,000,000. If you start putting that to rands, you realize how large this transaction actually is. So from our side and even from my team's side and and and and Leon looked much younger than somewhat ten months ago, I can show you. So I think, you know, we all sort of burned midnight oil and to and sort of trying to get this over line. And and and, actually, I think you correctly said it, Juliet, to upfront is that you can't believe this actually only took eleven months, and it actually just made me think. It actually only took eleven months considering how much we actually did in eleven months.

1:14:54 So I wasn't gonna say that out loud because next time we do a deal with Standard Bank, we're once done in six months. But be that as a mayor, I think it was a it was a tremendous acknowledgment to both the Standard Bank and the GRIT team in a in a transaction of this nature. There was a question that's come through, but it's it's quite technical and I think I'm going to put it to the panelists maybe offline. And I think this is where we're going to wrap things up. So Bronwyn and me and Annika, thanks very much for joining us online this afternoon. Great to chat to the three of you. Ntombe, Simon, Yaku, Leon, thanks for joining us on the panel. And for those who are here with us, it is time to hit the snacks table and have a large glass of wine. And thank you very much for joining us this afternoon.

1:15:43 That's great. Ladies and gentlemen, thank you very much indeed for your time in attending today's presentation. Can I please ask you not to close this presentation as we will now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of GRIT REAL ESTATE INCOME GROUP, we'd like to thank you very much for attending today's presentation. I wish you all a very pleasant afternoon. Apologies once again for the slight echo that you may have experienced during today's call. Thank you.