Hyprop Investments’ acquires Attfund’s retail arm
Hyprop Investments’ R9bn acquisition of Attfund’s retail arm, effective next month, will not only have positive spinoffs for Hyprop shareholders but will also pave the way for a substantial capital injection into AltX-listed MAS.
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The Western European property play, which has its primary listing on the Luxembourg Stock Exchange, has been largely below the radar since its secondary listing on the JSE in August 2009. MAS hasn’t offered the size and liquidity to pique the interest of large fund managers. The stock’s JSE market cap is less than R200m.
But the company has an intriguing group of backers, including Sanlam and astute SA property entrepreneurs and Atterbury directors Louis van der Watt, Francois van Niekerk and Gideon Oosthuizen MAS was founded in 2008 by Pretoria-based Mertech, a key shareholder in Atterbury, following the global real estate crash. Atterbury is one of SA’s largest developers, with property assets exceeding R7bn.
MAS, which has over the past three years built up a small but solid property portfolio in Germany, Switzerland and the UK worth around à30m (R291m), is now gearing up for its next growth phase. The company is planning a R550m capital raising at the end of July.
The Hyprop/Attfund deal will allow Atterbury, which owns a 40% stake in Attfund, to further pursue its offshore growth strategy through MAS. Atterbury will initially take up R100m in the rights issue, and further investments are likely to follow. Sanlam has also committed R100m for next month’s capital raising.
“Atterbury’s aim is to hold 15% — around R1bn — of net property assets offshore. Currently our overseas exposure is around the R600m mark, which means we’re still underweight,” says Oosthuizen, a director of both Atterbury and MAS.
He concedes that the sale of Attfund’s shopping centres to Hyprop was partially prompted by the need to free up capital for offshore diversification. “SA’s retail property landscape is becoming saturated, hence the need to explore other regions. Also, our strategy is not to hold on to mature assets but rather to realise capital to invest in new growth opportunities.”
To date Atterbury’s offshore exposure, including a R100m stake in German shopping centre Nova Eventis and ventures through Attfund’s private equity fund Karoo, has been mostly held through physical properties. Capital growth has been the primary aim.
Says Oosthuizen: “We realised we also needed exposure to a listed property vehicle that would offer steady and predictable cash flows. And that’s where MAS comes into play.”
Atterbury will see a net return of around R2,6bn from the Attfund/Hyprop deal. Apart from the R100m investment in MAS, Atterbury will also be channelling more funds into shopping centre developments in Africa. The developer is already building the first regional shopping centre in Mauritius, in which it will retain a 50% stake.
Dewald Joubert, who was tasked by Mertech with getting MAS off the ground three years ago using a R200m cash pile, says next month’s capital raising will enable the company to more than double its existing portfolio.
That includes six retail stores in Germany leased on a 20-year contract to giant supermarket chain Aldi. In Switzerland, it owns the head office of global courier company DPD, while its UK interests include a 67-unit student housing development under construction at the University of Birmingham.
The latter has signed a three-year agreement with MAS guaranteeing 97% occupancy from September this year.
MAS’s free float will also increase significantly. Currently the directors and associates own more than 90% of the stock. Joubert, who, like executive directors and ex-Zimbabweans Lukas Nakos and Malcolm Levy, has been based on the Isle of Man for the past eight years, hopes that increased size and liquidity will lure more retail investors into the fund.
MAS is targeting a dividend yield (euro-based) of an attractive 7,5% once the capital raised has been fully invested.
MAS CEO Nakos says the window of opportunity is still open to acquire good quality retail, office and industrial properties in Western Europe at yields of 7%9% from cash-strapped sellers who have refinancing deadlines. MAS’s focus is on assets priced in the à10m-à50m (R97m-R485m) bracket.
“But you have to be discerning,” says Nakos. “The trick is to buy the right properties in the right locations with strong tenant and lease profiles that offer the best potential for capital growth over the next five to seven years.”
Evan Jankelowitz, a director of property asset manager Sesfikile Capital, likes the fact that MAS offers low-risk, bluechip properties with regular cash flows on the one hand but also potential for strong capital growth through a more opportunistic development and refurbishment pipeline on the other.
The stock also offers currency diversification among three major European economies. In addition, says Jankelowitz, the company is backed by some of SA’s most prudent property brains. “We are following the smart money.”