AltX-listed MAS Real Estate, the Western European property play backed by SA developer Atterbury and life assurer Sanlam, is starting to look a lot more interesting now that its market cap has reached R1bn.

The company is preparing to move its listing to the JSE's main board towards the end of the year, which will bring it to the attention of a far wider investment audience.

Until now, the stock has been tightly held by directors and associates and hasn't offered the size and liquidity that usually get fund managers excited.

MAS has purposefully kept a low profile since its primary and secondary listings on the Luxembourg Stock Exchange and AltX respectively in August 2009.

The idea was clearly to focus on building a presence in the German, Swiss and UK real estate markets before going to the market to raise capital. Until now, growth has been supported through private placements only.

Management, under ex-Zimbabweans Lukas Nakos and Malcolm Levy, has over the past 3½ years assembled a solid portfolio of retail, industrial and student letting properties.

Assets have doubled in value over the past 18 months alone: from eight properties worth around à30m (R360m) to 20 properties valued at à64m (R768m).

The portfolio includes six retail stores in Germany leased to giant supermarket chain Aldi, the head office of global courier company DPD in Switzerland and a student rental housing development at the University of Birmingham in the UK.

MAS also owns two prime properties in Glasgow: retail premises leased to music store HMV, part of the EMI group; and a recently acquired industrial property opposite Intu Properties (formerly Capital Shopping Centres) Braehead Shopping Centre, one of the biggest malls in the UK.

Nakos says MAS proposed move from the AltX to the JSE's main board is an important step in the company's growth story as it will be accompanied by a broader capital-raising exercise that should increase free float and liquidity.

It will also enable MAS to cash in on further buying opportunities. Nakos says there's still plenty of distressed property stock available in Europe, especially in the UK, which now presents the best purchasing environment in a generation.

He says the trick is to be discerning and buy the right properties, at the right yields, in the right locations.

Nakos believes MAS offers an attractive rand hedge opportunity to SA investors who are looking for a stable and growing euro income. The portfolio offers good diversification between three of Europe's most stable economies and three currency baskets (euro, sterling and Swiss franc).

Though the share price is up a hefty 45% over the past three months, the stock offers strong potential for capital growth over the next few years through its opportunistic development and refurbishment pipeline.

MAS was founded by Pretoria-based Mertech, a key shareholder in Atterbury. The latter currently owns a 21% stake in MAS and has from the outset been actively involved in assembling the company's European real estate portfolio.

Atterbury is best known for building regional shopping centres such as Clearwater Mall in Roodepoort and Woodlands Boulevard in Pretoria, which was part of a R9bn retail portfolio that Attfund (Atterbury's unlisted property fund) sold to JSE-listed Hyprop Investments two years ago.

Atterbury is currently involved in the Waterfall Business Estate, a R25bn mixed-use development between the Woodmead and Allandale interchanges near Midrand. The developer is also rapidly expanding into African countries including Mauritius, Namibia and Ghana.

Given Atterbury's reputation as one of SA's most prudent property investment and development companies, it should help to unlock plenty of value for MAS shareholders over the next few years.

Source: Financial Mail