MAS adds weight in mall-buying exercise

JSE-listed MAS Real Estate, which has owned assets in Germany, the UK and Switzerland, is quickly creating a presence across Eastern Europe, having acquired an asset in Poland and announcing a deal this week to buy two malls in Bulgaria.

The rand-hedge property stock is starting to appeal to an increasing number of investors, precisely because it is investing in the region with the help of Prime Kapital.

Prime Kapital is run by the former executive management team and co-founders of New Europe Property Investments (Nepi), Martin Slabbert and Victor Semionov. They made Nepi Romania’s largest retail developer and shopping-centre owner. They then formed their own company early last year, called Prime Kapital.

Now MAS and Prime Kapital are investing in Eastern Europe using joint-venture structures; Kapital’s focus has been on finding deals for MAS there.

MAS was originally listed on the JSE in 2009 by a South African investors’ group backed by Sanlam and Atterbury.

Management, under CEO Lukas Nakos, has grown the portfolio aggressively over the past two years, taking its income-generating assets from €64m to about €469m in about two-and-a-half years. MAS has shifted from being a capital-growth fund to a company that also pays out income. With Prime Kapital’s help, MAS could soon own income-generating assets worth more than €1bn over the next two years.

Investment company Trematon Capital is trading at a discount of more than 25% to its intrinsic value of about 360c a share. This is a fairly large discount by listed investment company standards, the benchmark being 10% to 20%. What’s more, Trematon’s portfolio is underpinned by real-estate assets including residential, commercial and retail properties.

Consequently, it was not surprising that there were questions at Thursday’s investor presentation about whether the directors were contemplating a share buy-back exercise.

Trematon CEO Arnold Shapiro was wary that share buy-backs could suck up the already limited liquidity in the company’s shares. The plan, for now, is that Trematon will engage more actively with the investment community in a bid to narrow the discount. If Trematon’s pitches fall on deaf ears then there will be little hesitation in buying back shares.

The underlying message, though, is that Trematon is more comfortable recycling its capital than embarking on one-off uplifts via a share buy-back.

But what could be a catalyst for value unlocking in the medium term is the potential for Trematon to separately list parts of its business. The most likely would be one of its specialist property holdings, although it would probably not be advisable to bet against a listing of the fledgling Generation privateschool business.

Generation – which comprises just 7% of group intrinsic value — has already expanded into four properties (Sunnydale, Hermanus, Melkbos and Noordhoek), and Trematon said it would be disappointed if the number of schools were not doubled by the end of 2019.

It would also be surprising if Trematon – which indicated Generation was already chipping in a small profit – was not inundated with offers to buy the private-school business.