MICHAEL AVERY: The Malta Job part II — the wild horses of Malta

After last week’s column on MAS Real Estate’s aborted €291m transaction with Prime Kapital, I expected some blowback (“The Malta job: how to hollow out a company’s independence and value”, April 29). What I got instead was a deluge of calls, messages and discreet winged visitors flapping onto my balcony with more disclosures than a circular under section 10 of the JSE listings requirements. 

While I’d love to report that the company is finally turning a corner, the evidence suggests otherwise. The rot runs deeper than a single failed transaction. This is a systemic problem, part misaligned incentive, part opaque governance, part boardroom theatre of the absurd. 

Let’s start with why MAS management keeps telling investors the glass is half empty. They consistently lead with liquidity constraints, refinancing risks and murky dividend prospects, all of which help keep the share price depressed. Why? Because it conveniently benefits Prime Kapital and associated parties as they continue accumulating MAS stock at a discount. 

It appears MAS has become Europe’s most reluctant optimist, even while other CEE property players are raising debt with relative ease, according to sources familiar with regional capital markets. The idea that MAS can’t refinance or attract capital is being spun as inevitable, when it may simply be tactical misdirection. 

Then there’s Flensburg, a noncore German property MAS has publicly flagged for disposal. Investors have been told it’s for sale. But the financials show it reclassified as not for sale. Either this is a basic clerical error or it’s misdirection. And when your credibility is already under fire the difference matters. 

If sold, Flensburg could materially reduce MAS’s debt burden. So why not prioritise it? Why not highlight it? Perhaps because the narrative of crisis serves another agenda. 

Under Maltese law — unlike SA regulation — a mandatory offer to minority shareholders only kicks in at 50% ownership. So Prime Kapital and its affiliates can amass just under that and still avoid triggering a public offer.

Of course, the MAS board has full discretion under its memorandum of incorporation to waive even the local 30% threshold. And they did. Because why make life difficult for the people who used to sit on your side of the table? 

Prime Kapital’s leadership have reportedly claimed they’re done accumulating MAS shares. Yet recent activity shows otherwise. A reminder to investors: watch what they do, not what they say. 

This isn’t a passive shareholding. It’s a creeping takeover executed under the regulatory radar and, it seems, with boardroom complicity. 

In the detritus of the failed transaction lies a particularly disturbing clause: MAS may be liable for “making good” for new partners joining Prime Kapital. What that means is murky. But the implication is that MAS shareholders could end up footing the bill for Prime Kapital’s internal reorganisation, including payouts to incoming partners.

The MAS board must be reshuffled, with credible, independent directors brought in immediately.

In other words, a publicly listed real estate investment trust would help fund the succession plan of a private developer through mechanisms not clearly disclosed, not debated, and not fully understood.

So why did Prime Kapital abruptly pull out of the €291m buyout? The official line is vague. But those close to the matter suggest the real reason may lie in legal exposure. The new transaction disclosures, had they been tabled, could have opened the floodgates to regulatory scrutiny and shareholder litigation.

Another disgruntled shareholder confirmed to me last week that the joint venture did include a 3.75% development fee (MAS calls it a margin) on all projects. The fee accrued in the financials but was apparently never paid. MAS enjoys the right to a 5% return on its preference shares, after which the development margin and the remaining 2.5% points of the pref rate rank pari passu. 

A fee large enough, across a €500m pipeline, to run into hundreds of millions of rand. This isn’t a rounding error. This is potential structural theft of shareholder value. 

Worse, the analyst community has been bullied into silence. In a now-corroborated incident, former MAS CEO and current Prime Kapital figurehead Martin Slabbert swore at an analyst during a valuation query, snapping, “I don’t give an F what you think,” in a room full of professionals. The response from others? Silence. Intimidation works when the culture around it is complicit. 

And what a culture it is. Let’s not forget, MAS started as a relatively clean vehicle. But the rot set in about 2016 with the joint venture. In 2019 MAS bought Prime Kapital’s CEE property platform, and as part of that deal Prime Kapital founders Slabbert and Victor Semionov became executive directors of MAS in what appears to be have been a Trojan Horse move. Embedded for three years, they institutionalised a structure that would keep the levers of control with Prime Kapital even after their official exit. 

Sources tell me that MAS chair Werner Alberts has described Prime Kapital as “wild horses that can’t be tamed”. A revealing metaphor, because when the people meant to steward capital start admiring the unruly energy of their counterparties you know the line between governance and gallop has been trampled. 

But there is a flicker of hope. Shareholders are stirring. Some have begun reaching out to MAS’s sponsor, Java Capital, but as they advised on all of this I have my doubts that will yield results. Others are calling for board changes. And, to his credit, Alberts appears open to adding new directors. 

We are long past the point of “lessons learnt”. What’s needed now is action. The MAS board must be reshuffled, with credible, independent directors brought in immediately. This would require large shareholders such as Coronation and others being willing to vote off Prime Kapital-linked board members.

The JSE and Financial Sector Conduct Authority must investigate the entirety of MAS’s disclosure record since 2016. A forensic audit must be launched into all related-party transactions with Prime Kapital, especially those involving development margins, share accumulations and the extension of the development joint venture where the full terms of the commercial arrangements were not disclosed, causing shareholders to act on incomplete information. 

If wild horses can’t be tamed, it’s time to change the stable. 

• Avery, a financial journalist and broadcaster, produces BDTV's ‘Business Watch’. Contact him at Badger@businesslive.co.za.