MAS Real Estate Inc. (“MAS”), a commercial property investor, developer and operator listed on the JSE and Bourse de Luxembourg, today reported exceptional results for the year ended 30 June 2016, marked by a 63% increase in rental income and a 34% increase in final distribution to 4,50 euro cents per share.
“We have made substantial progress during the financial year and the portfolio is coming of age, with substantial developments delivered on time and on budget. We have now begun to roll out our updated strategy for the group which focuses on delivering a high quality and growing income distribution per share, including through expansion into the Central and Eastern European (“CEE”) regions,” commented Lukas Nakos, CEO of MAS.
The updated strategy will see the company expand its target markets to include the growing economies of CEE through a joint venture with the experienced developers and investors, Prime Kapital. MAS intends to invest a further €200 million in the joint venture over the next four years, as it rebalances its portfolio across the wider European market.
“We are very excited about the joint venture with Prime Kapital. The team brings exceptional development, investment and financing experience in CEE to the table. There are attractive opportunities in the region backed by a combination of relatively high initial acquisition yields, substantial growth prospects and attractive debt terms that will deliver strong returns on equity.
“The development market is very attractive; supported by rapidly expanding purchasing power and, in some cases, sub-optimally designed or undersized existing assets ripe for re-development or displacement. We have already made good progress with land acquired and a pipeline secured on an exclusive basis with Prime Kapital,” said Nakos.
MAS currently has a very low portfolio LTV of 12.4%. This provides substantial opportunity for growth as the company implements its gearing programme and moves the LTV towards it’s longer term target of 40% – 50%. Developments are currently funded through equity and refinanced at completion.
Malcolm Levy, CFO of MAS commented, “Our current LTV remained very low as we invested the cash we had. Our focus has now moved to optimising the balance sheet and driving the gearing towards the LTV targets we have set. This will position the group to enter a long period of high earnings per share growth, benefiting from accretive acquisitions and developments.”
The company’s income-generating property has grown by EUR78,2 million to EUR242,6 million, supported by the acquisition of the Lehrte property in Germany in late 2015 and Edeka portfolio 1 at the end of the current financial year as well as the completion of the Edinburgh based Whitbread hotels and associated retail at New Waverley in February 2016.
Says Nakos, “After year-end, we completed the acquisition of the Munich property and the second Edeka portfolio, in North East Germany, both providing strong income returns. The Munich property is let to Volkswagen, providing an excellent covenant, and has the potential to be an exciting redevelopment play in the years to come.”
It is expected that the development portfolio will increase substantially in the coming months as the CEE developments come on stream.
“The board is confident that the group is well positioned for strong distribution per share growth in the reporting periods to follow. Whilst remaining vigilant towards movements in our investment markets, we are excited at the prospect of our expansion strategy, and the performance that this will generate in the years to come,” concluded Nakos.