Commercial property investor, developer and operator MAS Real Estate on Monday reported strong results for the six months ended December 31, 2018, which saw the group achieving distributable earnings per share (EPS) of €0.038 for the period.
These results represent a 40% increase in distributable EPS over the €0.027 in the comparative period, and were driven by acquisitions of investment property, as well as continued investment into PKM Developments and distributions received from the real estate investment trust (Reit) portfolio.
The solid results stem from the strategic decision three years ago to restructure and grow the company’s balance sheet, interim CEO Malcolm Levy said on Monday.
According to him, the foundation of this is twofold, meaning a targeted disposal of mature assets in Western Europe and investment in a mixture of income-generating assets with high organic growth and/or significant potential to add value.
During the reporting period, comparative net rental income grew by 55.7%, from €15.3-million to €23.8-million, while net operating income more than doubled, from €12.6-million to €25.6-million.
This growth, the company explained on Monday, was driven by acquisitions, income-enhancing asset management initiatives, as well as a strong tenant performance.
During the six-month period, MAS recycled capital out of mature assets into higher-yielding acquisitions and made good progress on asset management activities. The leases at Uberior House, in Scotland, were extended to 2030, increasing both certainty of income and the value of the asset, MAS said.
Commenting on the acquisitions of the Militari Shopping Centre, in Bucharest, and Atrium Mall, in Romania, Levy said the acquisitions in Romania offer the potential for strong growth in income over time through targeted asset management initiatives and redevelopment opportunities.
Earlier this year, on February 28, MAS and Prime Kapital reached an agreement that MAS, through the co-investment joint venture with Prime Kapital, would acquire the nine completed developments in Romania from PKM Developments for €108.6-million.
Development extensions planned for the centres in Slobozia, Roman and Baia Mare are expected to add 11 000 m2 of gross leasable area and will also be sold to the co-investment venture upon completion.
The parties also agreed that the exclusivity agreement, which is due to expire in March 2021, will extend for a further two years until March 2023.
This transaction boosts income generation for MAS, enhances its footprint and strengthens its positioning within Central and Eastern Europe.
The newly developed centres already have an occupancy level in excess of 90%, with full occupation expected by the end of this year.
“Our relationship with Prime Kapital has gone from strength to strength and the extension of the exclusivity period enhances and cements our successful relationship for the medium term,” Levy said.
As at December 31, 2018, the group had €330.5-million of third-party debt compared with €242.7-million at June 30, 2018.
The group loan to value ratio at the period end was 25% and this further increased to 38.2% as a result of the acquisitions concluded post the reporting period.
“The acquisition of the Romanian retail assets from PKM Developments increases the debt funding in the group to our target level, leaving us optimally geared,” said MAS CFO Paul Osbourn.
Looking ahead, MAS said it was on track to meet its distribution target of €0.088 a share for the financial year ended June 30, funded from distributable earnings.
This represents a 15% increase in the full year distribution and a 37.7% year-on-year increase in distributable earnings.
“We are well positioned for continued growth in distributable income per share beyond the end of the 2019 financial year, as a result of both our recent acquisitions and our exposure to assets with a high organic growth potential,” said Levy.
“We will maintain our investment discipline, pursuing only good-quality acquisitions and developments with value-adding potential and attractive long-term growth prospects. This will drive our strategic focus on delivering high-quality earnings and growing distributions to shareholders on a sustainable basis over time,” he concluded.