File picture: Dado Ruvic

Johannesburg - Listed MAS Real Estate anticipates having a portfolio of property assets in central and eastern Europe conservatively worth between €800 million (R13 billion) and €1bn from only its development activity in the region within the next five years.

Lukas Nakos, the chief executive of MAS, said on Friday that the company did developments in both western and central Europe, but the majority of its investment at this stage would be in central and eastern Europe.

MAS, which is listed on the Euro MTF market of the Luxembourg Bourse and main board of the JSE, earlier this year announced the establishment of a joint venture with Prime Kapital, in terms of which they would develop properties to retain as investments in eastern and central Europe.

Nakos said the joint venture had already acquired one development site and had a further six under exclusivity.

“If we get all seven, it (the developments) will cost more than €500m,” he said.

Nakos said these developments would come on stream “very quickly”, adding that the planning permission process in these markets was much quicker than in Europe and it would take between three to six months before they could start building.

He said the construction phase was also quicker in central and eastern Europe and such a phase would take between 12 to 18 months, possibly 24 months for a large development, before they came on stream.

Nakos stressed that once these property developments were equity producing, they would be refinanced and the capital recycled into new development opportunities.

He said MAS’s focus was on growing distributions a share in the medium to long term, and that the best way to achieve that was by developing property and holding it, particularly as a much higher yield could be obtained on developments.

Nakos said the growth and demand for property in central and eastern Europe was strong, because of the low cost of labour in those countries and companies locating their IT and manufacturing operations in the region, which had resulted in property funds looking to come into these markets as investors.

More liquid

“For developers, this creates a huge uplift in that market and if we had to sell a property in that market, it’s a lot more liquid, which gives us a lot more comfort,” Nakos said.

He said the joint venture would be doing retail and industrial developments in the region and in certain nodes where there was a particular demand for some office projects.

MAS on Friday reported a 34 percent increase in distributions a share to 4.5 euro cents (R0.73) for the year to June from 3.35 euro cents in the previous year.

Rental income increased 63 percent to €14.2 million from €8.7m.

Shares in MAS dropped 2.62 percent on the JSE on Friday to close at R18.60.