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MAS REAL ESTATE INC - Acquisition of property portfolio in Romania

Release Date: 04/03/2019 08:00
Code(s): MSP     PDF:  
 
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Acquisition of property portfolio in Romania

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 PROPERTY PORTFOLIO IN ROMANIA

INTRODUCTION

Shareholders are advised that MAS has entered into a sale and purchase agreement (the "SPA") to acquire the entire
share capital and shareholder loans of three subsidiaries of PKM Developments Limited, being PK Black SRL, PK Indigo
SRL and PK Red SRL (together, "the acquisition companies") through two subsidiaries namely PKM Investments
S.á.r.l. and PKM Neptune SRL. These entities own the nine recently completed retail centres in PKM Developments
Limited ("the portfolio"), described below ("the acquisition").

PKM Developments Limited is the development joint venture established together with Prime Kapital in March 2016.

INVESTMENT RATIONALE

The acquisition of these retail centres complements and expands MAS' income-generating portfolio in Romania,
enhancing its footprint in CEE. Strong growth in rents and tenant turnover are expected as these newly developed
centres mature in the coming years, supported by a continuation of strong macroeconomic fundamentals within the
region.

The exposure to turnover based leases in the growing Romanian market is particularly attractive, given the strong
locations and dominance of the centres. The portfolio comprises the following:

     -   Roman Value Centre, an 18,808 square metre GLA, Carrefour anchored retail centre that opened in November
         2018 with approximately 159,000 residents within a 30-minute drive and no direct competition within the
         catchment area;
     -   Baia Mare Value Centre that opened in December 2018, a 21,318 square metre GLA centre, also anchored
         by Carrefour, registering initial sales above expected levels; and
     -   A portfolio comprising seven further value centres each adjacent to a Kaufland supermarket, totalling 27,833
         square metres of GLA completed throughout 2017 and 2018.

As the acquired entities will be owned by PKM CEE Investments Limited, the co-investment joint venture between MAS
and Prime Kapital, the underlying assets will continue to benefit from being managed by Prime Kapital.

This acquisition recycles and releases the existing capital of PKM Developments Limited to fund its growing
development pipeline.

SALIENT TERMS OF THE ACQUISITION

The purchase price for the acquisition, before adjustments for working capital and additional development land for
extensions, is EUR 108.65 million. The purchase price, after these adjustments, amounts to EUR 112.97 million
("purchase price"). In total the nine assets comprise 67,959 square metres of GLA and are expected to deliver EUR
8.148 million of annual net operating income, as per the unaudited cashflow forecasts for the full calendar year 2019,
which represents a yield of 7.5%. This statement has not been reviewed nor audited by the Company's auditor. Based
on the management accounts for the 6 months ended 31 December 2018, the profits attributable to the net assets of
PK Black SRL, PK Indigo SRL and PK Red SRL respectively are EUR 220,055, EUR 355,662 and EUR 656,855, based
on the unaudited management accounts, which have been prepared in accordance with International Financial
Reporting Standards and management is satisfied with the quality thereof. The largest centres opened in November
and December 2018.

The payment of the purchase price, which shall be off-set by the distribution of accrued 'A' preference dividends and
capital profits in PKM Developments Limited, will be deferred on a short-term basis until required by PKM Developments
Limited, with interest accruing at MAS' marginal cost of borrowing across a basket of its existing undrawn facilities. The
deferred consideration is expected to be called before the end of the 2019 calendar year.

Three of the centres have the potential to be extended. MAS has undertaken to acquire these development extensions
from PKM Developments at the same yield as the acquisition yield if developed over the next five years, and thereafter
at an acquisition yield equating to the latest valuation yield of the property that is extended. The extensions have zoning
approval.

The purchase price of the acquisition represents the fair value attributed to the acquisition companies 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 acquisition was signed on 28 February 2019 and is subject to administrative processes typical for a transaction of
this nature.

PROPERTY SPECIFIC INFORMATION

Details of the portfolio, including property name, geographical location, sector, GLA and weighted average base rental
per square metre and valuation are set out in the table below:

 Name                        Geographical location              Sector       GLA           Weighted           Value
                                                                          (square       average base       (EUR mn)
                                                                           metre)              rental
                                                                                            (EUR per
                                                                                       square metre)
 Romanian Value Centre       Roman, Romania                      Retail     18,808               9.73           33.62
 Portfolio                   Baia Mare, Romania                  Retail     21,318               9.15           35.22
                             Slobozia, Romania                   Retail      6,742               7.95            8.83
                             Focsani, Romania                    Retail      6,098               9.49           10.51
                             Ramnicu Sarat, Romania              Retail      3,998               8.07            5.38
                             Targu Secuiesc, Romania             Retail      3,248               7.80            4.43
                             Fagaras, Romania                    Retail      3,176               7.50            3.85
                             Gheorgheni, Romania                 Retail      1,395               8.70            2.32
                             Sebes, Romania                      Retail      3,176               7.87            4.49

CO-INVESTMENT AGREEMENT WITH PRIME KAPITAL

The acquisition has been undertaken in terms of a long-term co-investment agreement between MAS and Prime Kapital.
MAS's effective economic interest in the acquisition is the equivalent of an 80% direct participation in the performance
of the portfolio and a 20% participation at the weighted average cost of external funding achieved by the joint venture
with Prime Kapital, in line with the previously announced co-investment agreement.

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 March 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
Charl Brand, M Partners, Luxembourg Stock Exchange Listing Agent                     +352 263 868 602
Investor Relations, Lizelle du Toit                                                  +27 82 465 1244

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