M7 Real Estate Ltd (M7) the pan-European investor and asset manager has increased the occupancy to 99% and income by 220% on Bürgermeister-Schlag-Straße 10, Eichenzell, Germany.
Bürgermeister-Schlag-Straße 10 is a well-located industrial estate close to Fulda in Eichenzell, central Germany, comprising 18,045 sq m, which was acquired by M7 on behalf of a major fund in June 2017. Prior to the purchase, the main tenant filed for insolvency which resulted in a vacancy rate of 50 % (c.9,000 sq m). In addition to this, other asset management challenges included short term leases with outstanding service charges which had led to a considerable shortfall in net income.
Prior to marketing the space, M7 thoroughly analysed the technical deficiencies of the units following which several capital expenditure projects were undertaken. These included new electrical installations, new lighting systems, installation of a glass fibre optic internet connection as well as several fire protection measures culminating in the creation of a new fire protection concept, which included the installation of new fire doors and smoke detection systems.
After completing the upgrades, the vacant space was marketed via all the available media channels together with a cold calling initiative. In addition, the vacant units were included in M7’s monthly broker update.
As a result of these initiatives, KBS Gastrotechnik GmbH (KBS) showed interest in the asset and ultimately agreed to a new 8-year firm lease across 7,979 sq m at an annual contracted rent of €277,270 pa (€34.75 per sqm), which was €5 per sqm (17%) ahead of M7’s ERV. Furthermore, an existing tenant, John Spedition GmbH, had an expansion requirement and agreed to an additional 2,791 sq m of warehouse space at an annual rent of €96,987 pa (€34.75 per sqm) until the end of 2020. In addition to the expansion, John Spedition GmbH agreed to renew their existing space, 7,060 sqm, securing a further €188,076 pa.
As a result, occupancy at the asset has increased to 99% with a WALT of 4.17 years, which is a 3.76 year increase since August 2018. Net income has increased by over 220% since acquisition, and all tenancy agreements require prepayment of service charge.