A recently concluded US$306 million refinance agreement between Grit Real Estate Income Group and Standard Bank marks the largest sustainability linked real estate debt refinancing and syndication in Sub Saharan Africa – excluding SA – setting a new benchmark for African real estate investment.

A recent Financial Mail, Grit Real Estate Income Group and Standard Bank discussion unpacked the African debt market landscape, the challenges they faced putting the transaction together, the barriers to cross-collaterization, the importance of ESG in the negotiation of refinancing transactions, target setting and the key drivers that support funding objectives.

Grit is a pan-African real estate company which invest in and actively manages a diversified portfolio of assets in carefully selected African countries. The company has its primary listing on the premium segment of the London Stock Exchange and a secondary listing on the Stock Exchange of Mauritius. It has grown its portfolio from two assets valued at US$140m to 53 income producing assets and investments valued at more than US$856m throughout Africa, across multiple asset classes.

Grit CEO Bronwyn Knight explained that when the process to put this transaction started 11 months ago there was much to consider and understand given the fact that the transaction was across multi geographies, legal jurisdictions, asset classes, currencies and even languages. Key to the successful achievement of the transaction was finding the right partners which included Standard Bank as the lead arranger.

The deal includes global benchmarks for impact with a number of key performance impact indicators in place. Pointing out that the transaction is ground-breaking and transformational for the real estate sector, the African continent and emerging markets, Knight said that to be able to create a sustainability- linked funded structure that is scalable for the future is a tremendous accomplishment.

Volatility is a challenge when doing business in Africa, conceded Niyi Adeleye, head of Real Estate Finance Africa Regions at Standard Bank. However, when you are dealing with property you have to consider the investment through cycles. Although macro shocks will have an impact, these need to layered against the underlying property fundamentals and potential market recoveries.

Standard Bank, he added, has historically funded deals on a country by country basis. This transaction, however, created an overarching platform that allows the investment to ride out any volatility and build scale. If you can create scale you can attract more capital, he said.

Simon Gouweloos, head of Real Estate Finance at Standard Bank agreed that the transaction is pioneering given the cross-collaterization and said he expects to see more transactions of this nature in the future.

Each jurisdiction had to be considered in its own silo and the conditions met and risks mitigated in each, revealed Ntombentsha Odolo, Investment Banking legal adviser at Standard Bank. Other banks that come into the syndication rely on the fact that Standard Bank has mitigated the risks as far as possible.

Leon van der Moortele, CFO at Grit said that having only one party to deal with rather than multiple parties, particularly when it comes to issues such as refinancing, has made things so much easier.

Making the security pool more attractive has helped with pricing and is a blueprint for going forward, agreed Jaco van Zyl, head of Treasury at Grit. The additional funds will be used to develop a project in Senegal and roll out more impact projects going forward.