News

MAS announces acquisition of investment property in Edinburgh, UK

Morné Wilken, CEO of Attacq.f
Morné Wilken, CEO of MAS Real Estate Inc.

Shareholders are advised that MAS, through a wholly-owned subsidiary, MAS Holdings Limited, has concluded a sale and purchase agreement to acquire from New Uberior House Holding Limited the entire issued share capital of New Uberior House Limited, which owns two adjoining commercial buildings known as Princes Exchange and New Uberior House in Edinburgh, Scotland with effect from 3 May 2018.

The purchase price for the acquisition is GBP 71 million, or approximately EUR 80.5 million, which has been settled in cash. Bank debt of GBP 39 million, or approximately EUR 44.3 million, is being drawn against the property, which will result in a net equity investment of GBP 32 million, or approximately EUR 36.2 million, before acquisition costs.

The debt is for a term of five years at a margin of 1.5% over LIBOR. It is the intention of the directors to fix the interest rate of a substantial portion of the debt.

The property comprises grade A office buildings with an aggregate gross lettable area of 14,718 square metres prominently positioned in the heart of the Exchange financial district of Edinburgh. The property also benefits from 175 basement car parking spaces. The property is let to a single tenant, Bank of Scotland, over several leases, all of which expire in December 2025. Bank of Scotland is a subsidiary of the Lloyds Banking Group PLC, a FTSE 100 listed bank.

The current passing rent is GBP 4.15 million per annum, (at a weighted average rental of GBP 260.95 per square metre excluding the car park), which will be topped up by the vendor to GBP 4.20 million per annum (at a weighted average rental of GBP 264.65 per square metre excluding the car park) to reflect the anticipated settlement of outstanding rent reviews. This reflects a net initial yield of 5.82%. The annual net operating income of the property is GBP 4.1 million.

The acquisition represents a unique opportunity to grow the rental income of the property from current levels through active asset management. The market in Edinburgh has a structural undersupply of grade A office space, compounded by growing demand and declining supply dynamics. This, together with the age of lease, presents the opportunity to re-gear what is considered to be an under-rented property at a higher rent-roll. The acquisition also provides the opportunity for MAS to further leverage its significant experience in the Edinburgh property market, having delivered on the award winning New Waverley mixed-use development comprising hotels, retail, residential and a c.19,000 square metre office building.

The purchase price reflects the fair value attributed to the property as determined by the directors of MAS. The directors of MAS are not independent or registered as professional valuers or professional associate valuers in terms of the South African Property Valuers Profession Act 2000 or otherwise. The net operating income detailed above approximates the net profits attributable to the acquisition.

As the SPA was signed and the acquisition exchanged and completed simultaneously, conditions precedent are not relevant to this transaction.

The acquisition is categorised as a Category 2 transaction in terms of the JSE Listings Requirements and as such is not subject to shareholder approval.

“The acquisition of the grade A office buildings in the heart of the Exchange financial district of Edinburgh proves the unique deal-making capabilities of the team.  This further leverages our significant experience in the Edinburgh property market, having delivered on the award winning New Waverley mixed-use development.

The assets are well positioned with Bank of Scotland as the tenant until December 2025. The acquisition yield is attractive and there is a structural undersupply of grade A office space in Edinburgh, which is compounded by growing demand and declining supply dynamics.  We believe we will be able grow rental income through active asset management and the acquisition complements our strategy of delivering high quality and growing distributions on a sustainable basis” concluded Morne Wilken, Chief Executive Officer of MAS.