21 dec 2021
M7 Regional E-Warehouse REIT PLC admitted to trading on IPSX
The Board of M7 Regional E-Warehouse REIT PLC (“E-Warehouse REIT” or the “Company”), announces that it has published an Admission Document ahead of the proposed introduction of Ordinary Shares in the Company for trading on the wholesale market of the International Property Securities Exchange (“IPSX”) (“Admission”). E-Warehouse REIT is a newly established company which aims to provide shareholders with a sustainable level of income together with the potential for income and capital growth by investing in a diversified portfolio of enhanced warehouse (e-warehouse) properties across the UK.
An e-warehouse is defined, by M7, as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future due to the existing planning consent and/or the configuration and location of the assets. They are typically large regular shaped industrial units with retail frontages that could easily be converted to pure industrial use and they are typically located with good accessibility and sufficient car parking that could be used for yard space in the event of conversion.
By investing in e-warehouses the Company aims to take advantage of the anticipated continued occupier demand for last mile logistics and warehouse space driven by structural changes to consumer behaviour, e-commerce and omni channel retail, as well as an increased focus from businesses on their supply chain, as well as the resultant strong investor demand for assets in the sector.
Upon Admission, the Company will acquire (the “Acquisition”) a £110.7 million portfolio of 17 e-warehouse assets (the “Portfolio”) located across the UK, all of which currently trade as retail warehouses, that was assembled behalf of M7 REIP VIII (the “Fund”), a closed ended, Jersey domiciled private investment vehicle established in July 2018. E-warehouse REIT will issue, in aggregate, 38,161,962 Ordinary Shares in the Company to the Fund and certain investors from the Fund (including M7 Aggregator Fund LP) as consideration for the Portfolio. W H Ireland Capital Markets is the appointed cornerstone investor representative in respect of M7 REIP VIII and M7 Aggregator Fund LP who are the Company’s cornerstone investors.
The Company is targeting an attractive annual dividend yield of around 8.00 per cent. by reference to the Issue Price, which will be paid quarterly starting from the financial period ending 31 December 2022, with the potential to grow the dividend in absolute terms through rental growth.
A total of 38,161,963 Ordinary Shares (comprising the Ordinary Shares to be issued pursuant to the Acquisition and the Company’s subscriber share which was issued on incorporation) in the capital of the Company will be admitted to trading on the wholesale market of IPSX. Dealings in the Company’s Ordinary Shares are expected to commence on IPSX at 9.00 a.m. on 21 December 2021 under the ticker REW. The market capitalisation of the Company on Admission will be £38,161,963.
IPSX is a new Regulated Investment Exchange regulated by the FCA and is the world’s first such exchange dedicated exclusively to the initial public offering and secondary market trading of institutional grade commercial real estate assets. IPSX Wholesale is a market exclusively for institutional and professional investors and for issuers with an asset or assets that have a minimum market value in excess of £50 million.
Dickson Minto is acting as Lead Adviser to the Admission. M7 Real Estate Financial Services Ltd will act as the Company’s alternative investment fund manager (“AFIM”) and M7 Real Estate Ltd has been appointed as the asset manager. The AIFM is a wholly owned subsidiary of the Asset Manager and both are part of the M7 Group.
Admission to IPSX provides significant benefits for existing investors in M7 REIP VIII:
• The proposed Admission aims to allow the M7 REIP VIII investors to benefit from transferring their holding, either directly or indirectly, from a closed ended, Jersey domiciled private investment vehicle to an investment in an onshore UK vehicle which offers the potential for daily liquidity via trading on a regulated stock exchange.
• As part of the UK’s REIT regime M7 Regional E-Warehouse REIT is also expected to benefit from a more efficient corporate structure with the potential for the Company’s net profitability to be greater than that of M7 REIP VIII under its existing structure.
• The Directors, together with the Investment Manager, believe that the Company’s tax efficient structure in conjunction with any reduced financing costs they believe may negotiated as a result of improved profitability and the Company’s investment policy, will benefit the Company in meeting its investment objective and dividend policy.
• The majority of the existing investors in the Fund will remain invested in M7 REIP VIII which will hold the Company’s Ordinary Shares, with the remainder holding Ordinary Shares in the Company directly.
Strong Portfolio income profile and high reversionary potential supportive of the Company’s attractive 8.00 per cent per annum dividend:
• The 911,641 sq. ft. Portfolio is let to a diversified base of 54 occupiers with a weighted average unexpired lease term (“WAULT”) in excess of 6.3 years as at 5 November 2021.
• The Portfolio has delivered robust rent collections prior to and since the outbreak of the COVID-19 pandemic with rent collections for Q3 2021 currently standing at 91.1 per cent. and are expected to revert to 100 per cent. in the coming quarters.
• The Portfolio’s top ten tenants account for 62.5 per cent. of the rent roll and comprise Matalan Retail Ltd, Go Outdoors Retail Limited, Odeon Cinemas Ltd, B&M Retail Ltd, B&Q Ltd, Poundstretcher Ltd, Co-operative Group Motors Ltd, Tenpin Ltd, Wilko Retail Ltd and Homebase Ltd.
• The Investment Manager believes that the Portfolio will continue to provide a strong, defensive and diversified income return whilst also offering multiple value-add opportunities.
• Retail parks have proved particularly resilient throughout the COVID-19 pandemic and are generally, by their nature, conveniently accessible and typically benefit from free car parking, which has facilitated omni-channel retail with many tenants introducing a ‘click and collect’ offer. Furthermore, the products typically sold at retail parks are often more defensive to online retailing than high street goods.
ESG credentials and performance to be improved through active asset management:
• Current, ongoing asset management initiatives generally relate to the leasing of voids, future lease expiries and breaks, rent reviews, capital expenditure and disposals.
• The Company also aims to further improve the Portfolio’s ESG credentials through a range of initiatives including those relating to biodiversity, such as the introduction of beehives and the planting of vegetation at the estates.
• Green energy providers will be utilised for common areas and all new leases will include green lease clauses, setting out specific responsibilities in relation to sustainable operation.
• Other initiatives that are currently being put in include installing LED lighting to the car parking areas, ensuring that the sites have recycling provisions and utilising waste contractors that have a ‘zero to landfill’ policy.
• Electric vehicle charging stations have also been introduced at a number of sites across the Portfolio, all of which use 100 per cent. renewable electricity.
• In the longer term, capital expenditure projects such as the creation of pod units, drive-thru lanes or the construction or reconfiguration of whole units may be considered on an asset-by-asset basis if they add significant value. Comprehensive redevelopment may also be considered if there is considerable alternative use potential, or the asset might be marketed for sale with development potential.
Highly experienced management team with strong historical performance track record:
• M7 Group was established in 2009, is headquartered in London and has over 220 employees across 17 offices and 14 countries in the United Kingdom and Europe together with an office in Hong Kong. It is one of the leading investment and asset managers which specialises in the UK and pan-European multi-tenanted real estate market.
• As of 17 December 2021, M7 Group managed approximately 570 assets comprising 42.9 million sq. ft and valued at approximately €4.3 billion on behalf of real estate investors such as Blackstone, M&G and HIG Capital.
• The M7 Group currently operates 38 mandates in the form of joint ventures, managed funds and separate accounts.
• M7 Real Estate has a value-oriented investment philosophy combined with an active asset management platform which utilises what it believes to be a market leading focus on technology to drive insight into end markets and assets.
• The M7 Group (through a wholly-owned subsidiary) together with certain of its shareholders hold approximately 15 per cent. of the share capital in IPSX Group Limited.
Strong independent non-executive Board with significant real estate and financial experience:
• The Company will be chaired by James Max, former investment banker and private equity real estate principal who currently holds a range of positions including being a broadcaster, columnist and business adviser to a range of real estate and financial companies. He has had a varied and dynamic career in real estate, broadcast and advisory spanning 30 years. He now has a plural career with a range of active roles. James has provided strategic advice to the board of Stanhope PLC board since 2013 on an ad-hoc basis across a range of corporate and deal related matters. Originally, James trained as a chartered surveyor starting his career at DTZ (now Cushman & Wakefield), becoming a Director of their investment team in 1996. Subsequently he joined Morgan Stanley’s investment banking team before becoming head of UK and a Principal at Doughty Hanson’s Real Estate Fund.
• The Board also comprises Candace Valiunas (formerly Head of European Real Estate at Cambridge Place Investment Management and now a non-executive director of Silva Homes, a charitable housing association) and Ian Womack (the former Chief Executive of Real Estate at Aviva Investors who is currently an Independent Director of Grosvenor Liverpool Limited, a non-executive director of Mailbox REIT plc and was until recently a senior adviser to IPSX).
James Max, Chairman of M7 Regional E-Warehouse REIT PLC, commented: “M7 Regional E-Warehouse REIT will own a high-quality portfolio of retail warehouses, which will be immediately income producing. We believe e-warehousing is a sub-sector that will remain highly defensive to online retailing, offering products that consumers want to see and touch. Furthermore e-warehouses are typically found in convenient, at edge of town, locations that are not only ideal for omni channel retailing but also are well placed and easy to convert for last mile fulfilment and other warehouse uses.
“The Company’s portfolio has proven its resilience during the COVID-19 pandemic, recording strong rent collection, with a number of occupiers able to stay open during the lockdowns. The strategy for the Company will be a continuation of that of the previous Fund, with ongoing asset management activities to enhance the ESG credentials, income stream and capital value of the portfolio.”
Richard Croft, Executive Chairman of M7 Real Estate, added: “Momentum on IPSX continues to build with the Admission of M7 Regional E-Warehouse REIT. M7 REIP VIII Investors recognised the multiple benefits of a listing on IPSX, including being a part of the UK REIT regime, which we expect to improve efficiencies and net profitability. The closure of a number of open-ended real estate funds over the last year has led to a reassessment of the nature of commercial real estate investment, with IPSX offering investors quick and equal access to investment in real estate through securitisation and daily liquidity.”
The Company website is www.rewreit.co.uk