MAS REAL ESTATE INC Results presentation Year ended 30 June 2016 New Waverley, Edinburgh, UK 1
TABLE OF CONTENTS i. Company profile ii. iii. iv. Strategic update Recurring and potential EPS Highlights of the year v. Review of the portfolio vi. Pipeline Bruchsal property, Germany vii. Capital management viii. Outlook ix. Appendices i. Recent additions to the portfolio ii. Developments iii. Management accounts 2 Munich property, Germany
COMPANY PROFILE PROPERTY INVESTOR, DEVELOPER AND OPERATOR MAS Real Estate Inc ( MAS or the group ) is a commercial property investor, developer and operator that is listed on the main board of the Johannesburg Stock Exchange ( JSE ) and the Euro-MTF market of the Bourse de Luxembourg. BUSINESS STRATEGY MAS strategy is to generate sustainable and growing distributable earnings per share by acquiring, developing and operating retail, office, industrial and hotel assets in Western Europe and more recently in Central and Eastern Europe. Where exceptional opportunities arise, the group will embark on mixed-use or residential developments with the view to either generate recurring income, such as campuses leased to universities, or capital gains. The company aims to distribute all of its distributable earnings on a semi-annual basis, with distribution of capital and other profits at the discretion of the directors. SEGMENT PROFILE BY VALUE * 378.13 million Income generating Developments Land bank GEOGRAPHIC PROFILE BY RENT * m 309.1 24.5 45.5 MANAGEMENT MAS is internally managed, combining investment, development and asset management skills. Developments are undertaken by teaming up with strong developers that have intimate knowledge of the local markets and by agreeing terms that lead to a strong alignment of interests. 22.07 million Germany UK Switzerland m 15.77 5.10 1.20 FUNDING MAS is targeting an aggregate portfolio LTV of 40% - 50%. Long-term debt funding is referred and interest rates are managed through the group s hedging strategy. Developments are currently funded through equity and refinanced at completion. SEGMENT PROFILE BY PASSING RENT * LONG-TERM INCOME FROM STRONG COVENANTS MAS has assembled a high quality portfolio of commercial property and developments across Western Europe and is currently expanding into Central and Eastern Europe in joint venture with Prime Kapital. At 30 June 2016 the portfolio had an outstanding weighted average lease term of 12.3 years, occupied by tenants with strong corporate covenants. 22.07 million Retail Industrial/logistics Hotel m 15.77 4.12 2.18 3 * Includes acquisition of Edeka portfolio 2 and the Munich property, acquired post year end
STRATEGIC UPDATE Updated strategy being implemented: High quality and growing distribution per share Optimising balance sheet allocation Focus on income growth through acquisition, asset management and development Expansion into CEE developing and investing Gearing optimally to 40-50% portfolio LTV Prime Kapital partnership Development joint venture 200m in 7.5% preference shares and 20m in 40% equity stake 8-10% income and +15% IRR Co-investment in income generating property Euro million 500 450 400 350 300 250 200 150 100 50 0 Income-generating property Previous listed investments, treasury, cash and proceeds from refinancing invested in new developments and accretive income generating property Income-generating property refinanced & proceeds invested in further developments Development property Completed developments held for income 2015 2016 Optimised Previous investment focus Current investment focus Income-generating Development Listed Investments Treasury Income-generating Development Existing WE ü Existing WE ü WE ü WE ü Existing WE ü Existing WE ü New CEE ü New CEE ü New WE? New WE ü 4
RECURRING AND POTENTIAL EPS Euro cents 10.0 9.0 Theoretical EPS assuming no further equity issues, gearing at 40% LTV and full investment of assets in income-generating properties 2.0 8.0 7.0 5.8 6.0 0.8 1.8 0.2 5.0 1.1 4.0 8.1 3.0 2.0 4.6 6.4 5.4 4.3 1.0 - Passing rent 30.06.16 Acquisitions - committed Passing rent - committed Property outgoings - 30.06.16 Property outgoings - committed NRI Admin plus tax Recurring EPS NRI - optimised Incremental Recurring EPS finance cost to potential 40% LTV 5 MAS is well positioned to go through an sustained period of earnings growth supported by the completion of its existing developments, committed and further pipeline acquisitions, recycling of capital into income-generating assets and increasing the gearing to its target LTV of 40-50%.
HIGHLIGHTS DISTRIBUTION PER SHARE MEDIAN DAILY SHARE VOLUME INVESTMENT PROPERTY * Euro cents 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 4.50 34.3% 3.35 82.1% 1.84 2014 2015 2016 Thousands of shares 90 80 70 60 50 40 30 20 10 0 76.2 40.8 1.1 2014 2015 2016 Euro millions 350 300 250 200 150 100 50 0 311.6 248.5 64.8 2014 2015 2016 ADJUSTED NAV PER SHARE TOTAL ASSETS LOAN TO VALUE * Euro cents 125 120 115 121.2 Impact of Brexit/ currency 115.1 Euro millions 500 450 400 410.5 467.6 Percentage 18 16 14 12 16.0 12.3 110 105 103.8 350 300 310 10 8 6 4.8 100 250 4 2 95 2014 2015 2016 200 2014 2015 2016 0 2014 2015 2016 * Data extracted from management accounts 6
REVIEW OF THE PORTFOLIO Euro millions CONTRACTED RENT BY YEAR 20 18 16 Germany United Kingdom Switzerland 12 UK 14 12 Isle of Man Headquarters Edinburgh Office 16 GERMANY 10 8 6 London Office 1 Frankfurt Office 1 4-2 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Total contracted rent is 248.4m 2037-46 pa SWITZERLAND Prime Kapital Office ROMANIA 7
INCOME-GENERATING PROPERTY EVOLUTION OF PASSING RENT Euro millions 25 20 15 +63% 10 5 - Rent received FY2015 Rent received FY2016 Passing rent 30.06.16 Munich Edeka portfolio 2 Adagio Adjusted passing rent 8 INCOME-GENERATING WALT 12.3 Whitbred and arches Edeka portfolio 1 Aldi portfolio Toom portfolio Donaueschingen Lehrte Gotha Braehead Heppenheim park Existing Zurich Acquired post year end Chippenham Bruchsal Munich Edeka portfolio 2 0 5 10 15 20 25 30 Years
PIPELINE 30 June 2016 30.0 Development 129.0 113.5 150.0 Income-generating 91.0 67.8-20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 Further pipeline Exclusivity Committed Euro millions 9
CAPITAL MANAGEMENT Optimising the group s sources of funding is one of the group s key strategic objectives DEBT GEARING PROGRAMME FOR CURRENT ASSETS Target portfolio LTV 40% - 50% DRAWN/COMMITTED Debt - 31.08.16 98.9 million Weighted cost of debt 2.5% Weighted average term 9.2 years NEGOTIATED Debt - 31.08.16 86.7 million Weighted cost of debt less than 2.50% EQUITY 100% improvement in liquidity of traded share R1.2bn further equity raised to secure pipeline acquisitions and developments Millions 380 360 SHARES IN ISSUE DRAWN/COMMITTED AND NEGOTIATED DEBT BY CURRENCY 340 5% 320 28% 300 185.6m 67% 280 10 EUR GBP CHF
OUTLOOK MAS is well positioned to deliver a sustained period of significant growth in earnings and distributions on the back of: A strong internally managed platform that can take on the management of significant further assets Significant capital committed alongside our experienced partners Prime Kapital A focus on two core investment categories which should deliver the optimal returns from our capital base in markets with strong growth potential Balance sheet optimisation and efficient capital management 11
MAS REAL ESTATE INC Appendices 12 New Waverley, Edinburgh, UK
RECENT ADDITIONS TO PORTFOLIO LEHRTE PROPERTY Acquired December 2015 Tenant OBI Contracted rent 0.76m WALT 10.6 years Lehrte property, Germany A stand-alone retail warehouse let on a long-term lease to OBI, the largest DIY operator in Europe, part of the Tenglemann Group. This property was acquired because of the strong income, dominant location in surrounding area, and ability to refinance at low rates. WHITBREAD AND THE Arches Completed March 2016 Tenant Whitbread, various Contracted rent 2.18m WALT 27.6 years Premier Inn, new Waverley The first delivery from phase I at New Waverley is the Premier Inn hotel, Hub by Premier Inn hotel, and associated retail. This development continues to progress well, with the current trading at the recently opened hotels being above expectation, which bodes well for the remainder of the phase I scheme that is being delivered later this calendar year, and phase II that is commencing. 13
RECENT ADDITIONS TO PORTFOLIO EDEKA PORTFOLIOS 1 AND 2 Acquired June/August 2016 Tenant Edeka (regional operators) Rent 5.85m WALT 14.9 years Edeka store, Germany Two portfolios consisting of 23 retail units let on long-term leases to the regional operator of Edeka. The Edeka Group is the largest German supermarket corporation, holding a market share of approximately 26% in Germany and operating 4,100 stores under the Edeka brand. These portfolios were acquired because of the strong income generated and ability to refinance at exceptionally low rates, as well as the key locations of the stores in the surrounding area. MUNICH PROPERTY Acquired August 2016 Tenant Volkswagen Rent 0.89m WALT 2.5 years An industrial property located in Munich, Germany, let to Volkswagen AG, the leading German auto manufacturer. This property was acquired for it s strategic location, asset management opportunities, and in time, it s potential redevelopment. Munich property, Germany 14
DEVELOPMENTS ADAGIO Completion December 2016 Secured tenant Adagio, with Accor and Pierre & Vacancies guarantee, plus various ERV 2.03m The Adagio and associated retail represents the completion of phase I of the New Waverley development. This hotel is set to complete at the end of this calendar year. It has frontage directly onto the Royal Mile, and will anchor the southern end of the public square at the development. Adagio, New Waverley PROGRESS REPORT Construction nearing completion for December occupancy PHASE II NEW WAVERLEY Completion FY2019E Phase II comprises the office, residential and associated retail aspects that will complete the New Waverley development. Pre-letting is well underway, after which construction will begin. Phase II, New Waverley PROGRESS REPORT Planning approved process of agreeing pre-let 15
DEVELOPMENTS LANGLEY PARK Completion FY 2018 Secured tenant Travelodge ERV 0.44m PROGRESS REPORT Planning submitted Progress continues at Langley Park, where a pre-let has been secured with Travelodge, a leading budget hotel operator, subject to planning. Planning has been submitted in the summer, and we expect an outcome before the end of this calendar year. This hotel is intended to be held for income. 16 PROGRESS REPORT Land acquired CEE DEVELOPMENTS MAS has recently expanded its target markets, in joint venture with experienced developers and investors Prime Kapital, to include central and eastern Europe ( CEE ), which with more than 100 million people and 1 trillion in GDP is a sizable growth market. CEE s growth rates have substantially outpaced those achieved in Western Europe WE over the last 15 years, whilst the transparency and liquidity of the investment market in a large part of CEE has improved greatly, a trend which is expected to continue. MAS has invested 20 million in return for a 40% equity interest in this business, and intends to invest a further 200 million by way of 7.5% preference shares over the next 4 years. A substantial pipeline has been built up in a short time-frame, and the first acquisitions of development sites has already completed. Return expectations are for income of between 8% - 10%, and an IRR in excess of 15%.
MANAGEMENT ACCOUNTS // FINANCIAL POSITION AS AT 30 JUNE 2016 As at As at Euro 30-Jun-16 30-Jun-15 Investment property 311,613,772 248,538,806 Income-generating property 242,625,172 164,390,518 Development property 24,907,797 44,335,117 Land bank 44,080,803 39,813,171 Financial investments 51,614,068 82,173,737 Goodwill 25,262,818 29,351,139 Deferred taxation asset 721,292 737,015 Trade and other receivables 11,313,808 4,527,803 Other assets 241,083 15,136 Cash and cash equivalents 66,946,902 45,111,775 Total assets 467,713,743 410,455,411 Shareholders equity 400,844,952 353,140,598 Interest bearing borrowings 44,578,595 15,747,889 Financial instruments 12,543,033 35,627,918 Deferred taxation liability 1,242,741 1,143,646 Trade and other payables 8,405,586 4,795,360 Other liabilities 98,836 - Total liabilities 66,868,791 57,314,813 Total shareholders equity and liabilities 467,713,743 410,455,411 Actual number of ordinary shares in issue 348,625,219 291,787,889 NAV per share (euro cents) 115,0 121,0 Adjusted NAV per share (euro cents)* 115,1 121,2 *Net asset value per share as adjusted for deferred tax 17
MANAGEMENT ACCOUNTS // INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2016 Year ended Year ended Euro 30-Jun-16 30-Jun-15 Direct investment result Rental income 14,203,699 8,733,519 Net service charges and property operating expenses (1,989,426) (2,815,813) Service charge income and other recoveries 2,047,322 589,637 Service charges and other property operating expenses (4,036,748) (3,405,450) Net rental income 12,214,273 5,917,706 Other income 1,717,829 - Corporate expenses (3,203,472) (1,767,154) Net operating income 10,728,630 4,150,552 Net finance costs (355,990) (576,698) Finance income 433,132 4,676 Finance costs (817,928) (581,374) Interest capitalised on development property 28,806 - Current taxation (684,749) (371,447) Direct investment result 9,687,891 3,202,407 Indirect investment result Fair value adjustments 6,431,719 27,877,364 Investment expenses (2,202,144) (537,417) Other income 637,552 - Currency differences (12,913,210) 17,660,295 Deferred taxation (143,776) 272,259 Indirect investment result (8,189,859) 45,272,501 IFRS net profit (direct plus indirect result) 1,498,032 48,474,908 18
DISTRIBUTABLE EARNINGS FOR THE YEAR ENDED 30 JUNE 2016 Year ended Year ended Euro 30-Jun-16 30-Jun-15 Direct investment result 9,687,891 3,202,407 Other specific adjustments 1,698,750 *(81,932) Adjustment relating to shares issued during period 1,568,915 49,096 Distributable earnings 12,955,557 3,169,571 Distribution from reserves 2,750,000 6,618,272 Total distribution 15,705,557 9,787,843 Closing number of shares 348,625,219 291,787,889 Final distribution (euro cents per share) 2,23 2,20 Interim distribution (euro cents per share) 2,27 1,15 Total distribution (euro cents per share) 4,50 3,35 19
DISCLAIMER This document does not constitute an offer for securities or other interests in MAS Real Estate Inc., nor does it purport to solicit offers to subscribe for securities or interests in MAS Real Estate Inc. This document does not constitute an offer for the sale of or subscription for, or the solicitation of an offer to buy and subscribe for, securities to the public as defined in the South African Companies Act, No. 71 of 2008 (as amended or otherwise) and must not be distributed to any person in South Africa in any manner which could be construed as an offer to the public in terms of Chapter 4 of the said Act. This document does not constitute an offer of securities to the public in the United Kingdom. This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments who are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ), (iii) high net worth entities falling within Article 49(2) of the Order and (iv) other persons to whom it may lawfully be communicated (all such persons together being referred to as relevant persons ). Any investment activity to which this communication relates will only be available to, and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the Prospectus Directive ) is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive. This document does not constitute an offer of securities for sale or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in the United States, Canada, Australia, Japan or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction. In particular the shares in MAS have not been, and will not be, registered under the United States Securities Act of 1933 as amended (the Securities Act ) or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia or Japan and, subject to certain exceptions, may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident or citizen of Canada, Australia or Japan. Neither this document nor any copy of it may be distributed directly or indirectly to any persons with addresses in the United States of America (or any of its territories or possessions), Canada, Australia or Japan, or to any corporation, partnership or other entity created or organised under the laws thereof, or in any other country where such distribution may lead to a breach of any legal or regulatory requirement. MAS Real Estate Inc. disclaims any obligation or undertaking to release publicly any update, review or revise any forward looking statement contained in this document whether as a result of new information, future developments or otherwise or any change in events, conditions or circumstances on which any such statement is based. 20 info@masrei.com www.masrei.com