M7 float targets regional property market
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.