10 Oct 2017

Property firm M7 to float new company to target booming regional market

As reported by Rhiannon Bury, Business Reporter at The Daily Telegraph, on 10 October:

Property company M7 Real Estate is looking to raise a £300m fund for regional buildings through a new listed company that will float on the London Stock Exchange.

Richard Croft, chief executive of M7 Real Estate, said the demand for regional offices and warehouse space was extremely high as firms looked to relocate out of more expensive premises in and around cities.

M7 Multi-Let REIT, as the company will be known, has been initially seeded with a portfolio worth around £119m from other funds previously managed by M7.

Stephen Smith, a former chief investment officer at British Land Company, has been appointed as chair of the new firm’s board.

The company will become a real estate investment trust, a tax structure which means it will pay no corporation tax on the profits from its rental income. It is targeting a quarterly dividend yield of around 6.5pc, which Mr Croft said means it fills an investment need that is currently not being met.

“We think the market right now is in need of a high yielding, liquid product,” he said, adding that initial interest in the firm had been very positive.

Both the warehouse and offices market in the UK’s regions are currently short of supply. Many industrial properties have been snapped up by retailers looking to increase their online delivery sales, and few have been built to replace them because of the cost of development relative to their value.

A number of offices in regional towns and cities have been converted into homes in recent years under the new permitted development rights, which have made it easier to change the use of buildings without having to apply for complex planning permission.

The remaining buildings are often overlooked by investors, M7 claims, because they are relatively small and require a lot of management.

M7 said it has identified more than 100 buildings with a total value of more than £400m that it could buy, giving it a sizable pipeline for the new company. It said it plans to spend the money raised in this first phase within nine months, and if successful, would raise more money in the future.

The wider firm manages more than 995 properties across Europe valued around €4.6bn.

Mr Croft said: “The regional market is a better investment prospect than London, in my opinion. We’re seeing growth there that we’re not seeing in the capital.”