M7 float tar­gets re­gional prop­erty mar­ket

The Daily Telegraph - Business - - Front Page - By Rhi­an­non Bury

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

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 about £120m from other funds pre­vi­ously man­aged by M7.

Stephen Smith, a for­mer chief in­vest­ment of­fi­cer at Bri­tish Land Com­pany, will be chair­man 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 tar­get- ing a quar­terly div­i­dend yield of around 6.5pc, which Mr Croft said means it fills an in­vest­ment cri­te­ria which 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 had been very pos­i­tive.

Both the ware­house and of­fices mar­kets in the UK’s re­gions are cur­rently short of sup­ply. Many 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 had iden­ti­fied more than 100 build­ings which it could buy, with a to­tal value of more than £400m.

The wider firm man­ages more than 995 prop­er­ties across Europe val­ued around €4.6bn (£4.1bn).

Mr Croft said: “The re­gional mar­ket is a bet­ter in­vest­ment prospect than Lon­don in my opin­ion.”

LON­DON’S list­ing mar­ket is gear­ing up for ac­tion as car parts maker TI Fluid Sys­tems has re­vived flota­tion plans and petrol sta­tion re­tailer MRH hired ad­vis­ers for a po­ten­tial £1.5bn de­but.

If TI Fluid suc­cess­fully steers its way on to the mar­ket it will draw a line un­der its false start last Oc­to­ber when pri­vate eq­uity owner Bain scrapped flota­tion plans in the wake of un­cer­tainty fol­low­ing the EU ref­er­en­dum re­sult.

The buy-out firm has had to scale back its am­bi­tions for its se­cond at­tempt. This time around TI Fluid Sys­tems has an­nounced it plans to raise around €425m (£380m) from sell­ing a 25pc stake, im­ply­ing a mar­ket val­u­a­tion of around €1.7bn.

Last year Bain had been hop­ing for a €2bn val­u­a­tion and to raise €600m.

The com­pany, which now makes fuel tanks and brakes and is hop­ing to cash in on the growth of elec­tric cars, can trace its roots to the start of mass car pro­duc­tion when it sup­plied fuel lines for the Ford Model T car. TI Fluid said it had grown sales by 9pc last year to €1.8bn.

Mean­while, US pri­vate eq­uity firm Lone Star has re­cently hired ad­vis­ers at Lazard to ex­plore a list­ing of petrol sta­tion re­tailer MRH, Bri­tain’s largest in­de­pen­dent petrol sta­tion op­er­a­tor. Lone Star and Lazard de­clined to com­ment.

The Texan firm, which is best known for seiz­ing con­trol of dis­tressed Ir­ish prop­erty loans dur­ing the fi­nan­cial cri­sis, bought MRH last Jan­uary in a deal thought to be worth £1bn. Lone Star’s swoop on MRH fol­lowed a wave of deal mak­ing in petrol fore­courts with TDR tak­ing a mi­nor­ity stake in Euro Garages in 2015 and Clay­ton Du­bilier & Rice buy­ing Mo­tor Fuel Group in the same year.

Lone Star will be hop­ing for fresh in­ter­est from in­vestors as petrol fore­courts have be­come in­creas­ingly at­trac­tive for gro­cery re­tail­ers look­ing to ex­pand their con­ve­nience stores away from more ex­pen­sive high street rents.

MRH has 170 of its own branded con­ve­nience stores, Hursts, and has ex­ist­ing part­ner­ships with Sub­way, Spar and Greggs.

Af­ter last year’s mar­ket jit­ters, Lon­don’s ini­tial pub­lic mar­ket has out­shone the rest of Europe so far this year, ac­count­ing for 36pc of all the re­gion’s list­ings. Euro­pean com­pa­nies have raised €8.2bn (£7.4bn) in the third quar­ter of this year, com­pared to €3.8bn last year.

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