Brum Mailbox first Reit to list on new UK property exchange

Property fund manager Richard Croft explains the significance of a 5%-yielding, single asset Birmingham real estate investment trust (Reit) listing on the IPSX commercial property exchange.

A new single-asset real estate investment trust (Reit), which only owns the Mailbox in Birmingham, is aiming to raise £62.5m as it lists on a newly-formed property stock exchange. 

Mailbox Reit’s sole investment is Mailbox Birmingham, the former Royal Mail sorting office turned upmarket shopping and office development that is home to the BBC and Harvey Nichols, and is currently valued at £179m.

M7 Real Estate, the Reit’s fund manager which owns 46% of the shares, hopes to raise the money when it lists on the prime segment of the International Property Securities Exchange (IPSX), which claims to be the first exchange in the world that lets investors buy shares in individual buildings through a tax-efficient Reit structure. 

Investors in the Reit will receive a 5% dividend from ‘long-dated income streams, underpinned by very low-risk high-profile tenants’ in a mixed-use development, as well as benefit from planned ‘asset management initiatives’, said M7 chief executive Richard Croft.

The building already produces a passing rent of £9.3m a year, which will rise to £12.8m with full occupancy. It currently has 46 tenants with unexpired leases of 14.9 years on average, including the BBC, Q-Park, Advanced Business Software & Solutions, and Harvey Nichols. 

The majority of the income comes from the office in the building at 47%, followed by leisure at 21%, car parking at 19%, and retail at 11% and Croft has plans to boost income further by ‘converting retail into offices’ and introducing more amenities in the building. 

‘We will keep some of it, but a lot of the retail space will change into amenities,’ he said. 

‘When you leave the office, what would you like? A walk-in doctor, or a dry cleaner, a newsagent, grab and go businesses...we want to let the space to companies that are useful to people in the offices.’ 

Croft believed the building was also ‘25% cheaper’ than other office space in the area, adding that ‘one of the reasons we bought it is because we thought it was undervalued and had a lot of uplift potential’.

He claimed the ‘symbiotic relationship’ would attract tenants after Covid-19 and that the seven-storey building lent itself to social distancing as it did not rely on lifts to move people around. 

‘Covid-19 will change some things but not everything...We believe in the office and think people like going into the office. Your social life is intertwined with your business relationships and teamwork does not work as well over Zoom,’ he said. 

The property investor argued that ‘investors are better off investing in real estate than shares’ as companies slash and cancel dividends in a bid to shore up their balance sheets.

‘Companies can only pay a dividend if they’re making profits, but they have to pay their rent along with the wages,’ he said. ‘In the waterfall of payment, rent is better than dividends.’ 

The launch of IPSX would make it even easier to take a stake in commercial real estate, by reducing the costs and illiquidity associated with the asest class. 

‘If you want to invest in commercial real estate you have a choice of Reits on the London Stock Exchange, but still with lots of different assets...and you have not got control,’ he said. 

‘You have open-ended real estate funds that have liquidity problems and are somewhat discredited. Or you are very very rich and you can take part in private equity or buy a building.’

He said IPSX, which will be home to single-asset Reits, will ‘democratise ownership of major commercial real estate’ and investors can buy shares in the buildings they like. 

‘You can build your own property portfolio from your ISA or Sipp,’ he said. 

Croft said investors shouldn’t just invest in one single-asset Reit but diversify with a portfolio of Reits when they hit the IPSX market, adding that the vast number of tenants and mixed-use nature of the development means Mailbox is a well diversified asset.

‘We expect lots of Reits to be listed in the course of the next few months. There will be a follow up to Mailbox but it is not in Birmingham,’ he said. 

‘This is a UK innovation, there is no exchange like it. It is crazy that real estate doesn’t have its own capital market but we are going to fix that,’ said Croft. 


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