M7 bolsters expansion with major Dutch, German acquisitions

The UK-based M7, a specialist investor and asset manager of multi-let real estate across Europe, has had a busy couple of months, closing on fundraising on no less than three of its funds in the month of October alone.

REFIRE caught up with Hugh Fraser, director and head of debt at M7, on the fringes of the recent Real Estate Finance Day, organised by the Frankfurt School Verlag and Targa Communications.

When we talked, M7 had just finished inking the deal on a purchase of a portfolio of eight German retail properties for €46m which, it said, corresponds to a gross initial yield of 8.7%. The seller was a private owner. The portfolio, to become part of the M7 European Real Estate Investment Partners I Fund (EREIP I), has 38,350 sqm of gross lettable area and includes four supermarkets, in Alfeld, Bad Gandersheim, Exertal and Hildesheim, three retail warehouse centres in Braunschweig, Gelsenkirchen and Lehrte and a shopping centre in Hannover.

M7 is taking over the asset management of the portfolio through its on-the-ground German team, managed by Alyssa Huse out of Frankfurt. The firm now manages 32 properties in Germany with total floor area of 383,000 sqm and a volume of around €200m. It plans to expand the portfolio to nearly €290m by the end of this year, and has a further pipeline of €250-400m for 2016.

On financing, M7 secured €31m senior financing from Berlin Hyp for the fund and Fraser said the group was discussing with the bank further financing for about 20 additional retail assets, expected to close in early 2016. "This transaction underlines both the quality of the fund's portfolio and our ability to leverage our local teams' relationships to access capital across Europe. The professionalism and expertise of the Berlin Hyp team allowed us to conclude this deal in a quick and efficient manner and we now look forward to building a very strong relationship with the bank over the coming years,“ said Fraser.

Earlier in November, M7 raised over €40m of equity and loan notes for its second mainland Europe fund, with investors include a US-based multi-strategy private equity firm along with a number of existing M7 investors.

The fund, M7 European Real Estate Investment Partners II (M7 EREIP II) bought a portfolio of 42 assets in three individual acquisitions, including the Spring Portfolio that originated from a non-performing loan. The purchases, from three different vendors, comprise a total of 136,000 sqm of space, and the combined purchase price was over €82m representing an initial yield of approximately 11%, with a vacancy rate of about 25%. The assets are located throughout the Netherlands and comprise a mixture of multi-let office, local retail and light industrial property.

A pan-European investor and asset manager specialised in multi-let real estate M7 Real Estate is a operates in UK, Denmark, the Netherlands, France, Germany, Portugal and Poland. Founded in 2009 and owned by senior managers, M7 manages around €1.5bn of assets and its joint venture partners include Oaktree Capital Management, Starwood Capital, H.I.G. Capital, Goldman Sachs and M&G Investments.