M7 buys German offices, completes €130m in fresh deals

In four transactions totaling €130mn, pan-European investor and asset manager M7 Real Estate has bought 21 office and retail properties in Germany and the Netherlands for its new European Real Estate Investment Partners III fund (EREIP III). The portfolio, with a 21% vacancy rate, currently generates a rental income of €13.2mn.

The company bought three portfolios and a single asset, housing 143 different tenants. The properties have a vacancy rate of 21% that will allow M7 to increase income through lettings at a very modest level of capex. The German assets comprise the Riva Portfolio from Eurocastle, which is currently exiting from nearly all its European engagements apart from Italy.

The assets include six multi-let offices – with 21,300 sq.m. of rentable space – in secondary German cities and 11 offices and four Dutch retail properties. The German assets have 21,300 sqm in Bonn, Dortmund, Duisburg, Hanover, Kassel and Koblenz, and are 70% let to German insurer HUK-Coburg.

David Ebbrell, head of transactions at M7, said: “These properties present plenty of opportunities to add value through straight-forward asset management initiatives and selected capital expenditure against a background of improving occupier sentiment, a pick-up in demand from occupiers and a shortage of good quality space in prime locations.”

M7 said it has already raised €80m in capital commitments for the EREIP III fund, its largest fund close to date, and plans to have the fund fully invested by the end of this year’s first half. “We are intending to have a second close during the first half of this year and are targeting a gross investment capability of some €330m for the fund,” M7's CEO Richard Croft said. “We have already identified and/or are under offer on a number of other transactions and we intend to be fully invested by end 2Q16.”

The M7 EREIP III fund has a Value-Add strategy and targets assets that offer both sustainable income streams and asset management opportunities in the retail, office and the multi-let industrial sectors in both Germany and the Netherlands. The London-based group, founded in 2009 and wholly-owned by its senior managers, operates in the UK, Denmark, the Netherlands, France, Germany, Poland and the Czech Republic.