On April 19, 2017, MAS Real Estate Inc., listed on the Johannesburg Stock Exchange (JSE) and Bourse de Luxembourg, announced the acquisition of two shopping malls in Bulgaria for €62 million. The malls were acquired from Globe Trade Centre S.A. and the European Bank for Reconstruction and Development. Galleria Burgas and the Galleria Stara Zagora lie in the cities of Burgas and Stara Zagora, respectively.
“We are very pleased with the acquisition of the Galleria Burgas and Galleria Stara Zagora. This transaction is in line with our plans to expand into markets with growing economies across Central and Eastern Europe by acquiring accretive income-generating assets with real upside potential through our joint venture with Prime Kapital. The transaction increases our income-generating property portfolio by 15.3%, from €406.4 million to €468.4 million,” said Lukas Nakos, CEO of MAS.
Tourists as an additional target group
Galleria Burgas is the dominant shopping center in Burgas, Bulgaria’s fourth-largest city, with a population of 200,000. The mall benefits from a total catchment area of approximately 480,000 people within 60 minutes’ drive. It also enjoys a significant number of tourists during the summer holiday season because the city is near the most popular Black Sea resorts on the Bulgarian coast. The scheme is centrally located in the northern area of the city with excellent visibility from, and access to, a major boulevard in front of the mall and it is well served by public transport.
“Galleria Burgas has a broad mix consisting of 115 tenants, including primarily international fashion and entertainment brands like Bershka, CCC, Cinema City, Deichmann, H&M, Humanic, Ikea, Intersport, LC Waikiki, Lee Cooper, Lidl, Massimo Dutti, Oysho, Terranova, and Zara. Due to strong performance and tenant demand, we are considering a significant extension to enhance earnings from this asset,” commented Nakos.
Galleria Stara Zagora is the dominant shopping center in Stara Zagora, the sixth-largest city in Bulgaria. The mall benefits from a total catchment of approximately 400,000 people within 45 minutes’ drive. It is centrally located, has good visibility at the crossroads of two main city boulevards, and is served by public transport. The tenant mix is focused primarily on fashion and entertainment and consists of 71 tenants, including brands like Bershka, Cinema City, CCC, Deichmann, DM, H&M, Intersport, Kenvelo, LC Waikiki, New Yorker, Nike, Pull&Bear, and Stradivarius.
Need for refurbishment
Nakos: “Galleria Stara Zagora needs refurbishment and offers value-enhancing opportunities through operational streamlining and commercial layout improvement. With our asset management expertise, we have formulated an approach to improve the mall’s operational capacity to enhance the net income earned from the asset.”
MAS’s effective economic interest in the acquisition is the equivalent of an 80% direct participation in the performance of the malls and a 20% participation at the weighted average cost of funding achieved by the acquisition in line with the previously announced co-investment agreement with Prime Kapital. “This acquisition forms part of our investment joint venture with Prime Kapital and demonstrates the team’s ability to access outstanding accretive deal flow. The continuous increase in purchasing power within these regions underpins the investment case in the region in general, and for these two acquisitions in particular. We remain focused on delivering high quality and growing income distribution per share to shareholders. Our expansion strategy is on track and we are excited about the company’s future pipeline,” concluded Nakos.
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