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Strategic update, memorandum of understanding with Prime Kapital and extension to PKM Developments
MAS Real Estate Inc.
Registered in the British Virgin Islands
Registration number 1750199
SEDOL (EMTF): B96VLJ5
SEDOL (JSE): B96TSD2
JSE share code: MSP
ISIN: VGG5884M1041
LEI code: 213800T1TZPGQ7HS4Q13
("MAS" or "the Company")
STRATEGIC UPDATE, MEMORANDUM OF UNDERSTANDING WITH PRIME KAPITAL AND EXTENSION TO PKM DEVELOPMENTS
INTRODUCTION
In 2016, MAS embarked on a three-year programme to restructure and grow its balance sheet. The programme
had two principal components. The first component was the targeted disposal of those assets in Western Europe
whose valuations were approaching historic highs relative to their recurring cash flows and which had muted
further organic growth potential. The second component was to invest in a mixture of income generating assets
with high organic growth potential and/or significant potential to add value. This component was funded through
raising both debt and additional equity. The emphasis was on developing and owning retail assets in Central and
Eastern Europe ("CEE"), given strong historical CEE consumption growth trends that are expected to continue.
As this programme draws to a successful close, the board of directors ("the Board") has undertaken an in-depth
review of the Company's strategy. The impressive performance and growth of the CEE portfolio has led the Board
to consider that the continued expansion into the CEE, combined with full divestment from Western Europe, is
the most appropriate strategy for the group. The increased geographical focus in the higher growth CEE markets,
with a predominant focus on retail, provides the group the best opportunity to continue to meet its long-term
objectives of sustainable growth in distributable earnings per share.
Werner Behrens, recently appointed CEO, stated "My aim is for MAS to become the pre-eminent real estate
investment and development company in CEE, focused on delivering sustainable and superior distribution growth
to our shareholders. We believe this will be achieved through a focus on the CEE markets, with an emphasis on
retail, but also with exposure through PKM Developments Limited to the exciting residential opportunities in the
principal growth centres across the region."
"In pursuit of this strategy we will re-deploy capital currently invested in Western Europe to the CEE in a focused
and disciplined manner, as well as strengthening our institutional capability to manage and grow our CEE
investments with the focus on income growth."
DISTRIBUTION GROWTH TARGET TO 2022
With the Company on track to pay a distribution per share of 8.75 euro cents per share for the current year, MAS
has set itself a three year target of growing this distribution per share by 30% for the year ending 30 June 2022,
from the current targeted level. It should be noted this targeted growth will not be linear, given that the strategic
changes referred to above will include implementing a phased re-deployment of capital from Western Europe into
CEE over time. This target is based on the assumption that a stable macro-economic environment will prevail,
no major corporate failures will occur and budgeted rental income, based on contractual escalations and market-
related renewals, will be collected. In addition, it is assumed that investments in Western Europe will be able to
be disposed of timeously at least for book value and redeployed in the CEE markets at a rate of return which is
at least similar to what is currently being achieved in Western Europe. This target has not been reviewed or
audited by the group's auditors.
MEMORANDUM OF UNDERSTANDING WITH PRIME KAPITAL
As part of the updated strategic direction of the business, the Board recognises the importance of being able to
manage the income-generating investment properties directly without reliance on third parties. MAS is therefore
pleased to announce that it has entered into a Non-Binding Memorandum of Understanding ("MOU") with Prime
Kapital Holdings Limited (“PK”) to acquire an option to purchase PK's effective 20% interest in the investment
joint venture, together with the PK management platform, for an option premium of EUR2 million. The
management platform includes the necessary human resources, systems, processes and intellectual property to
manage the CEE assets in the investment joint venture. The option premium will be offset against the final
transaction value if the option is exercised. The option is subject to certain conditions precedent and can be
exercised between 30 June 2022 and 30 June 2024. This option provides the group the ability, but not the
obligation, to acquire PK's effective interest in the investment joint venture and the management platform at fair
value upon exercise.
Further announcements will be made upon the conclusion of a legal binding option agreement.
UPDATE ON DEVELOPMENT JOINT VENTURE
The PKM Developments Limited pipeline in CEE continues to grow and the Board is satisfied with the strong
performance of the venture. With high-quality opportunities abundant, MAS has agreed to increase its commitment
by a further EUR120 million to fund this pipeline, with a further two-year extension to the exclusivity and life of the
venture. The exclusivity period will run until March 2025, and the venture until March 2030.
CONCLUSION
MAS looks forward to continuing and building the relationship with PK over the coming years and is confident that
the focus on the CEE region, predominantly within the retail sector, together with integrating the capability to
manage and grow its own assets, will provide the enhanced and sustainable value that is attractive to
shareholders.
CATEGORISATION OF THE TRANSACTION
This announcement is voluntary in terms of the JSE Listings Requirements and is made for information purposes
only.
MAS is listed on the Main Board of the JSE and is listed and admitted to trading on the Euro MTF market of the
Luxembourg Stock Exchange.
4 June 2019
For further information please contact:
Helen Cullen, Company Secretary, MAS Real Estate Inc. +44 1624 625000
Java Capital, JSE Sponsor +27 11 722 3050
Harneys Luxembourg, Luxembourg Stock Exchange Listing Agent +352 278 671 02
Investor Relations, Lizelle du Toit +27 82 465 1244
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