M7 Real Estate Ltd is one of the leading specialists in the pan-European, regional, multi-let real estate market.
With over 250 employees across Europe, the team manages over 1,400 assets in the retail, office and industrial sectors with a value of circa €8.5 bn. The business manages relationships with circa 9,000 tenants across 118m sqft of space producing an income of circa €646m per annum.
M7 identifies value-add investment opportunities for investors in the smaller, multi-let sector. This sector is often neglected and considered inefficient due to the small individual lot sizes and the management-intensive nature of the underlying assets. However, M7’s established platform, market leading information and data management systems and experienced team ensure that M7 can capitalise on this perceived inefficiency. The business typically aggregates numerous individual assets to form large portfolios with income levels and yields well above the real estate market averages.
M7 acquires and manages all commercial property types focusing mainly on regional business parks, retail parks, convenience retail parades and multi-let light industrial estates. The business also has a planning and development team that has acquired and is managing a mixed use development project in the UK.
Investment principles & strategy
M7 has identified a deep pipeline of attractive real estate deals across the UK and continental Europe offering gross yields averaging circa 8% pa at the asset level (particularly appealing in the current low interest rate environment). With strong equity investor appetite for value-add real estate and with M7’s proven track record, the company is seeking to exploit a number of opportunities by making further investments over the coming 12 months.
M7 identifies investment opportunities for investors by linking a value-oriented investment philosophy with an active, hands-on asset management platform. The on-the-ground real estate experience available to the business through its pan-European platform results in a top-down and bottom-up approach to initial investment decisions and ongoing asset management strategies.
M7’s fund management business is forecast to continue on its growth path by offering high-net-worth and institutional investors the opportunity to invest in higher yielding commercial real estate across Europe (including Central Europe). In parallel, M7 will continue to provide advisory services and asset management services on a separate account basis and will consider co-investment joint ventures.
Within the UK commercial property market, the first quarter of 2018 was remarkably busy and strong price increases over the past 12 months have done little to deter investors from industrial and logistics assets. Following record annual investment volumes in 2017, this has continued with regional offices also sustaining their strong run.
Within the industrial sector, the constraints on supply and robust occupier demand means the strong levels of rental growth are expected to continue and are forecasted around 4.5% per annum for 2018 and 2019. The current buoyancy of the sector to investors, along with the weight of money and relative scarcity of supply will, in our view, continue to support a further downward yield movement, particularly for quality defensive stock. M7 believes that multi-let industrial property will also continue to provide an attractive income return in a low growth, low interest rate environment.
Recent reports suggest that an easing on capital controls for Chinese overseas investment could spur fresh investment into UK commercial property in general in the coming months and pricing is therefore likely to remain under pressure. Limited supply of investible assets will maintain upward pressure on pricing and hold all property yields steady across most asset classes. The market continues to wait for the outcome of Brexit and its potential effects.
In continental Europe, secondary markets continue to strengthen with both occupier demand increasing and international investors bringing large volumes of capital into the market. The lack of stock in both the office and industrial/logistics sectors in prime locations is increasing demand in out-of-town locations.
Yield compression is likely to continue in continental European markets over the next 12 months across most countries. When combined with increased occupational demand, M7 continues to see opportunities for investment, however these are challenging to find in a more crowded market.
There remains a significant weight of money seeking investment on the continent as international investors continue to diversify outside the UK whilst the impact of Brexit and the terms of the separation are understood. The positive economic environment across the majority of Europe is attracting all kinds of investors both domestically and internationally. With strong market and economic fundamentals, M7 expects further growth in the European real estate markets.
Strategic corporate development
M7 was established in 2009 and focused initially on the UK multi-let industrial sector. The need for efficient and accurate data management was a key part of the firm’s founding philosophy. A number of JVs were created with private equity partners to capitalise on the opportunities created in the aftermath of the global financial crisis. A workout business was also launched to help lenders manage higher yielding secondary assets.
Prior to 2009, M7’s original senior management team had built pan-European multi-let real estate platforms and used this experience in creating its bespoke, best-in-class information management systems. On these strong foundations, the directors developed the firm’s value-add asset/investment management focus and have consistently delivered strong returns.
The development of the continental European platform started in 2013 with the goal of providing real estate owners and investors with a first class, integrated asset management platform across Europe, specialising in multi-let regional real estate. Today, M7 has operations in the UK, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Portugal and Slovakia.
Products/ Business lines
M7 focuses on the higher yielding, multi-let, secondary real estate markets across Europe to identify attractive opportunities for investors.
With local teams on the ground, the business is well placed to access local market intelligence and source attractive deals. All assets are actively managed throughout the holding period, integrating local market intelligence into the decision making process.
M7 has four business lines:
1. M7 funds: Where it co-invests alongside multiple investors and acts as investment manager and asset manager to the fund. M7 has a series of UK and Continental European funds that have invested in retail, office and industrial property. In addition to M7’s co-invest, external equity has been raised from circa 150 high-net-worth and family office investors as well as institutional investors.
2. Co-investing private equity joint ventures: Where M7 co-invests alongside its partner and acts as a promoted asset manager. M7 has existing joint ventures with various private equity firms.
3. Separate account asset management mandates: Where M7 acts as a third party asset manager for institutional, family office and high net worth investors’ portfolios. M7 has partnered with many industry leaders, including M&G in the UK managing a portfolio of multi-let industrial estates and MIRA in the Czech Republic and Slovakia, managing a portfolio of logistics and light industrial assets.
4. Advisory: Where M7 advises third parties on a strategy for either existing assets or a targeted acquisition.
This information is intended for Professional Clients and Institutional Investors only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services and should not be used as the basis for any investment decision or relied upon in any way by the public. No determination has been made regarding the suitability of any securities, financial instruments or strategies for particular clients or prospects and the information within is of a general nature. The source of all information is M7 unless stated otherwise. M7 has a wholly owned subsidiary, M7 Real Estate Financial Services Limited, that is authorised and regulated by the Financial Conduct Authority (Reference number: 618047).
News from M7 Real Estate Ltd (Homepage)
The International Property Securities Exchange, which will be the first regulated exchange dedicated to the admission and trading of securities in commercial real estate assets, today announces that M7 Real Estate have invested in the current IPSX funding round; the terms of their involvement remain undisclosed.
News from IPE Real Assets
Manager invests in Irish capital for fourth fund
Sale-and-leaseback deal agreed by JV with Danske Bank
Manager buys portfolios for latest vehicle targeting value-add assets
Manager buys portfolio of light industrial assets in Czech Republic, Slovakia
London-based investment manager shops in Germany
Analysis from IPE Real Assets
Refurbishing SME office space to incorporate environmental features can be good for the planet, good for tenants – and good for investor returns, writes Simon Ringer