It was a pivotal moment and a true “matter of association” for Atterbury Europe to sign up Pareto property investment and management group as a new investor earlier this year. Pareto Group CEO Malose Kekana was one of the VIP guests who attended the recent opening of Atterbury Europe’s landmark Iulius Town development in Timisoara, Romania, and he shares his impressions of the opening, as well as his vision for the partnership.
How did the decision come about for Pareto to invest in Atterbury Europe? Had there previously been involvement with Atterbury?
We have been 100% South African until this deal, and we were looking for additional investment opportunities in territories with a strong growth environment. Eastern and Central Europe were identified. Therefore, for a while we had decided that we would look for investment opportunities there. We had met Louis van der Watt previously when we had approached Atterbury to assist us with a transaction, and although that particular transaction did not materialise we remained on good terms. When we learnt in the market that they were raising capital for Atterbury Europe we contacted them with an eye to getting involved.
What does the investment entail, in practical terms? And what is it that attracted you to this partnership in particular?
Pareto’s investment is roughly 250 million euros, or R4 billion in the form of shareholder loans and a 25% shareholding in Atterbury Europe. Our investment decision was based on a number of reasons, first being the confidence we have in the strong management team of Atterbury Europe and the particular experience they have. Henk Deist and David Downes come from the same school as me, having also come via RMB. I also have a prior strong relationship with Rand Merchant Bank Holdings (RMH) and liked that there was another strong shareholder.
Additionally, the fact that 80% of the portfolio is income-generating was attractive, with 20% that represents opportunity for growth. We liked that this was not speculative, but there is already some income. Also, the quality of the assets in Serbia, Cyprus and Romania was a strong drawcard – the assets are dominant in the cities where we have the investment. We are also very comfortable with the quality of our partners in all three territories.
Has Pareto ever undertaken an investment of this scale? What was the biggest deal you were involved in before this one?
The biggest transaction before this one was Menlyn Park, so we are accustomed to big development ideas, although this one sets a new benchmark for us.
What is your vision for this investment?
We would like to continue to increase our exposure to Eastern Europe, and hopefully via this platform, since we have a team that we know and trust. We plan to co-invest in other opportunities that might arise, and hopefully we’ll see the company being listed in Europe at some point.
How has the investment/partnership rolled out so far – is Pareto involved across all of Atterbury Europe’s developments, or is there a narrower focus?
Pareto is involved in all aspects, from asset management to development, and we have representatives on all the committees; I sit on the board. There isn’t daily operational involvement as we have that very strong management team; but we participate in all the key decisions on company level.
We believe you attended the opening celebrations for Iulius Town in Timisoara, Romania, along with the Atterbury team; what was the highlight of this event for you, as an investor?
The sheer size of the development is impressive and as an investor seeing it come to life was very gratifying. Witnessing the speed with which this project had been realised was also amazing. Romanians have very high skill levels and they work hard as a nation; and that, combined with having a great development team from both Atterbury Europe and Iulius, inspires a lot of confidence for an investor.
The festivities around the opening were very entertaining and innovative and my family and I enjoyed being there to see it all unfold. For instance, they broke a Guinness World Record with the most LED wristbands being lit simultaneously. Timisoara was the first city in Europe to have street lights and they wanted another milestone achievement. The city was also hosting a summer music festival which meant there were beautiful music performances in the parks and public spaces all around. The locals really supported it and came out in great numbers, which made for a very festive atmosphere throughout Timisoara. We also invited South Africa’s ambassador, Mr Jabu Mbalula, who is based in Bucharest and he attended the opening, delivered a speech, and attended some of the celebrations, which was a definite highlight for us.
What are your impressions of the opportunities for development in Romania, compared to South Africa?
Look, Romania has a long way to go before it would be as developed as South Africa, and those growth opportunities add to its investment appeal. South Africa remains home and very important to us; we want growth for our country and will continue to invest. But we aim to have 30% of our portfolio overseas eventually.
What about other territories? Would you also consider further expansion outside of Eastern and Central Europe?
We will look at the UK and any opportunities that might arise from Brexit, but we are satisfied with where we are for now. Further investment will be opportunity driven.
What makes Atterbury Europe Pareto’s partner of choice?
The people. We don’t do business with companies – we do business with people. That is the most important element.