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MAS Real Estate

ramps up for growth

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Richard Colburn

Equity Analyst

Property investment company MAS Real Estate is currently in a ramp-up phase as it continues to deploy capital into income-producing properties and accretive developments. The question many investors are asking is: can this growth be sustained? The company has secured a significant development pipeline to fuel future distribution growth, and we therefore believe it can continue its current trajectory.

MAS Real Estate is an internally managed offshore-focused real estate holding and development company with assets in the UK, Western Europe and, more recently, Central Eastern Europe (CEE). The management team’s stated strategy during the current property cycle has been to focus on CEE, as the fundamentals continue to be more attractive relative to other opportunities available in Western Europe.

The company’s exposure in CEE is through its joint venture with Prime Kapital (PK) – an owner-managed, vertically integrated real estate developer, investor and operator led by Martin Slabbert and Victor Semionov, former CEO and CFO respectively of listed entity NEPI. MAS Real Estate’s management team has stated that development and acquisition opportunities will be pursued with PK in the CEE region, while only opportunistic developments will be explored in Western Europe. Also, given the prevailing property cycle and fundamentals in Western Europe, acquisition of income-producing assets will occur only in exceptional circumstances in this region.


MAS Real Estate has both income-generating and development assets. The company’s income-generating portfolio has grown significantly, with passing rent now contributing €32.2 million (R514 million) – in the 2016 financial year this figure was €17.3 million (R276 million). There is a retail sector bias as retail contributes the majority (74%) to passing rent, with industrial and logistics (15%), and hotels (11%) making up the balance.

Geographically, most of the company’s income is still derived from Germany (46%) and the UK (20%), with the balance coming from Bulgaria (17%), Poland (13%) and Switzerland (4%). Nearly a third of passing rent is from CEE. Over the past financial year, MAS Real Estate acquired three assets with PK:

  • Galleria portfolio: two Bulgarian retail malls that added €5.4 million (R86.2 million) in passing rent
  • Nova Park in Poland, which added €4.3 million (R68.6 million) in passing rent
  • Edeka Miha portfolio, a high-yielding retail portfolio in and around Berlin, Germany, that contributed €3.8 million (R60.7 million) in passing rent.

Over the financial period, MAS Real Estate also disposed of four properties in the company’s Aldi portfolio, at a 14% premium to carrying value. The proceeds will be allocated to the CEE pipeline. The MAS Real Estate management team has indicated it intends to recycle mature assets once their value has been unlocked, so the capital can be reallocated to accretive developments and/or acquisitions.


MAS Real Estate’s development assets include the company’s iconic New Waverly development in Edinburgh, Scotland. Phase 1 saw significant value increase as three hotels and 22 retail units were developed with a solid tenant profile. Phase 2 is currently underway and has seen strong demand from residential developers.

In its development venture with PK, MAS Real Estate initially invested €100 million (R1.6 billion) in preference shares yielding 7.5%. The company has subsequently increased its commitment to €350 million (R5.6 billion) to support the opportunities secured by this venture. Current developments include:

  • Emonika in Ljubljana, Slovenia: a 80 000m2 mixed-use retail, office and hotel development
  • A number of value-centre and retail developments that should yield 9% to 12% on cost
  • Residential developments: land has been acquired for two large-scale developments in Bucharest, Romania – this is a new venture for MAS and PK, but management feels confident that this is an opportunity given the current supply of old stock and rising purchasing power in the region.


The question on many investors’ minds is: can this growth be sustained? We believe it can, for the following three reasons:

  1. The MAS Real Estate management team is allocating more capital to development and income-producing opportunities in the joint venture with PK than was initially budgeted for.
  2. MAS is deploying capital at a faster rate than anticipated due to PK bringing accretive projects to the joint venture.
    The result is a significant secured pipeline. Currently, MAS Real Estate has a pipeline of approximately €1.2 billion (R19.2 billion), of which around €766 million (R12.2 billion) has been secured. It is important to understand that almost €1 billion (R16 billion) of the €1.2 billion (R19.2 billion) is targeting development assets (the remaining €200 million [R3.2 billion] will be used to acquire income-producing assets), which will secure growth in future periods. These developments will put the business on a growth path well beyond the next two years, as many of the assets being developed now will produce income in the future.
  3. By the financial year-end, MAS Real Estate had increased gearing in the fund from 12% to 26%, with drawn debt at around €147 million (R2.3 billion). This increase in gearing is explained by continued deployment of capital into the company’s pipeline. MAS Real Estate has also communicated to the market that the company is targeting a long-term aggregate portfolio loan-to-value of 40%, which provides flexibility to invest from these levels.
    Additionally, at year-end, MAS Real Estate had €33 million (R527 million) cash on its books, with a further €74.5 million (R1.2 billion) of debt drawn down after year-end against newly acquired assets in Poland and Bulgaria.
    Earlier this month, the company completed an accelerated book-build, which saw it raise R1.98 billion at a price of R25.50 – this will reduce gearing to low single digits. The book-build was significantly oversubscribed and, given the demand, MAS Real Estate was able to raise the maximum legal limit. This raise and the additional debt drawn gives the management team significant firepower to pursue its secured pipeline to fuel future distribution growth.


We invested in MAS Real Estate as the company’s ramp-up phase started and it began to deploy raised capital and gearing. Low levels of gearing, access to cheap funding and management ability to source accretive deals made for a compelling valuation. As is the case with any asset, the intrinsic value is computed by discounting future earnings growth at the required discount rate. We remain confident that MAS Real Estate will be able to continue its growth trajectory.

As stated above, MAS Real Estate has secured a significant pipeline of more than €1.2 billion (R19.2 billion). By acquiring carefully selected income-producing assets and delivering on development plans funded by an optimal mix of increased gearing, recycling of assets and selective capital raises, there is still scope for continued growth in distribution for the company.

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