MAS REAL ESTATE INC - Acquisition of investment property in Edinburgh, UK

Release Date: 04/05/2018 12:45
Code(s): MSP
 
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Acquisition of investment property in Edinburgh, UK

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")

ACQUISITION OF INVESTMENT PROPERTY IN EDINBURGH, UK

INTRODUCTION

Shareholders are advised that MAS, through a wholly-owned subsidiary, MAS (IOM) Holdings Limited, has concluded
a sale and purchase agreement ("SPA") to acquire from New Uberior House Holding Limited the entire issued share
capital of New Uberior House Limited, which owns two adjoining commercial buildings known as Princes Exchange
and New Uberior House (together "the property") in Edinburgh, Scotland ("the acquisition") with effect from 3 May
2018.

SALIENT TERMS OF THE ACQUISITION

The purchase price for the acquisition is GBP 71 million, or approximately EUR 80.5 million ("purchase price"), which
has been settled in cash. Bank debt of GBP 39 million, or approximately EUR 44.3 million, is being drawn against the
property, which will result in a net equity investment of GBP 32 million, or approximately EUR 36.2 million, before
acquisition costs. The debt is for a term of 5 years at a margin of 1.5% over LIBOR. It is the intention of the directors
to fix the interest rate of a substantial portion of the debt.

The property comprises grade A office buildings with an aggregate gross lettable area of 14,718 square metres
prominently positioned in the heart of the Exchange financial district of Edinburgh. The property also benefits from
175 basement car parking spaces. The property is let to a single tenant, Bank of Scotland, over several leases, all of
which expire in December 2025. Bank of Scotland is a subsidiary of the Lloyds Banking Group PLC, a FTSE 100
listed bank.

The current passing rent is GBP 4.15 million per annum, (at a weighted average rental of GBP 260.95 per square
metre excluding the car park), which will be topped up by the vendor to GBP 4.20 million per annum (at a weighted
average rental of GBP 264.65 per square metre excluding the car park) to reflect the anticipated settlement of
outstanding rent reviews. This reflects a net initial yield of 5.82%. The annual net operating income of the property is
GBP 4.1 million.

INVESTMENT RATIONALE

The acquisition represents a unique opportunity to grow the rental income of the property from current levels through
active asset management. The market in Edinburgh has a structural undersupply of grade A office space,
compounded by growing demand and declining supply dynamics. This, together with the age of lease, presents the
opportunity to re-gear what is considered to be an under-rented property at a higher rent-roll. The acquisition also
provides the opportunity for MAS to further leverage its significant experience in the Edinburgh property market,
having delivered on the award winning New Waverley mixed-use development comprising hotels, retail, residential
and a c.19,000 square metre office building.

The purchase price reflects the fair value attributed to the property as determined by the directors of MAS. The
directors of MAS are not independent or registered as professional valuers or professional associate valuers in terms
of the South African Property Valuers Profession Act 2000 or otherwise. The net operating income detailed above
approximates the net profits attributable to the acquisition.

CONDITIONS PRECEDENT

As the SPA was signed and the acquisition exchanged and completed simultaneously, conditions precedent are not
relevant to this transaction.

CATEGORISATION OF THE ACQUISITION

The acquisition is categorised as a Category 2 transaction in terms of the JSE Listings Requirements and as such is
not subject to shareholder approval.
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 May 2018

For further information please contact:
Helen Cullen, Company Secretary, MAS Real Estate Inc.                      +44 1624 625000
Java Capital, JSE Sponsor                                                  +27 11 722 3050
Charl Brand, M Partners, Luxembourg Stock Exchange Listing Agent           +352 263 868 602
Investor Relations, Lizelle du Toit, Instinctif Partners                   +27 82 465 1244

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