M7 Real Estate (“M7”), the pan-European investor and asset manager, has assembled just over a £300 million portfolio of 19 retail warehouses following the full deployment of capital raised across its M7 Box+ I and M7 Box+ II funds. Both funds, which were launched in H2 2020, focus on carefully selected UK retail warehouses with potential for future rental and capital growth, through asset management and an anticipated re-pricing of the asset class as the logistics function of these properties in the last mile delivery chain grows.
A total of £130 million equity was raised across the two funds, derived from a mix of global high net worth, family office and institutional investors, while M7 also established new borrowing relationships on behalf of the funds with Aberdeen Standard Investments and Apollo. A loan facility of £26.15 million was agreed with Aberdeen Standard Investments for M7 Box+ I and £137.8 million was agreed with Apollo for M7 Box+ II.
M7 Box+ I comprises 10 assets with a total area of 413,500 sq ft, while M7 Box+ II, the larger of the two funds, has nine assets with a total area of circa 1 million sq ft. The portfolios are spread across the UK, providing income and value diversification by both tenant and geography, although Box+ II has a bias towards the South East where the supply / demand pressures are more acute due to land availability.
David Ebbrell, CEO at M7 said: “We believe that retail warehouses are one of the most interesting UK real estate asset classes at the moment, especially given the current pricing dislocation in this segment as the rental arbitrage between last mile logistics and retail warehousing narrows.
“Despite perceptions, occupier demand for well-located space with deep residential catchments remains robust seeing over 700 new store openings in 2020. Retail warehouses will play an important role as part of the omnichannel retail landscape, especially for click and collect, last mile logistics and retailer returns, given their convenient locations in urban areas where space is extremely constrained. We are of the view that demand is only set to grow. The portfolio we have managed to assemble over a relatively short timeframe holds significant opportunity and by deploying our asset management skills we believe that we will deliver attractive income and capital appreciation for our investors.”
Hugh Fraser, CEO M7 Capital commented: “We are very pleased to have secured banking facilities with Aberdeen Standard and Apollo, both of which are new relationships for M7, especially in the current environment. It is a strong endorsement of our track record and we look forward to growing long term partnerships with both parties.