Mailbox REIT rewrites agreement with IWG, extends IPO timetable

Under the terms of the arrangement IWG will sign a 10 year management contract under its Spaces coworking brand over the entire 50,000 sq ft of new office space on Level 1 of the Mailbox. IWG will earn management fees based on a percentage of rent received.  

IWG has also expressed an intention to subscribe to the company’s IPO, which has been extended by a further six weeks to allow the definitive agreement with IWG to be put in place.

‘The Directors and the AIFM believe that this arrangement will significantly improve the potential future income profile of the Mailbox and the Company, and therefore should be attractive to investors,’ the firm said.

Richard Croft, Executive Chairman of M7 Real Estate, said: ‘This innovative new agreement will mark a significant acceleration of our asset management plan for the Mailbox and underlines both the building’s appeal to occupiers and the continued strength of the Birmingham office market.  We believe the Spaces facility is the perfect complement to the traditional office space we have in the Mailbox, particularly against a backdrop of COVID, providing an additional suite of amenities for existing and new occupiers alike, as well as on the doorstep ‘home’ offices for the residents of the 144 apartments within the Mailbox footprint and those in the surrounding area.’

With the IPO, Mailbox will become the first single-asset company to list its shares on the new IPSX stock exchange. The firm, which owns the Mailbox,  a large prime office-led mixed use property in Birmingham valued at £179 mln, plans to raise up to £62.5 mln (before expenses) through the issue of new shares at a price of 100 pence apiece.
 
The company will apply for the stocks be admitted to trading on the IPSX Prime segment of International Property Securities Exchange (IPSX).  IPSX is a new Regulated Investment Exchange regulated by the FCA and is the world’s first such exchange dedicated to the initial public offering and secondary market trading of companies owning single institutional grade real estate assets and multiple assets with commonality.

M7 Real Estate, the asset manager, will retain indirect ownership of approximately 46% of the Company’s share capital after Admission.

The Mailbox comprises 698,000 sq ft of space located on a 4.8 acre canal side site in the UK’s second largest city and was the Royal Mail’s former sorting office. The property’s income is diversified across a number of uses including office (47.6% by passing rent), car parking (18.9%), leisure (21.2%), retail (11.4%) and other (1%). It produces a passing rent of £9.3 mln per annum with an Estimated Rental Value of £12.8 mln (assuming full occupancy).

The asset has performed well under the Covid-19 pandemic based on the rent collection with receipts of 82.3% and 68.7% for the March and June 2020 Quarter Days, respectively (as at 6 August 2020), compared to 96.2% for the December 2019 Quarter Day.  

Originally completed in 1970, between 1998 and 2000 the building was converted to a major mixed-use scheme incorporating 144 residential units (not part of the Property) and over the past eight years has benefitted from a major £50 mln programme of refurbishment and improvements before being acquired by the M7 Real Estate.
 
The company is targeting an initial annual dividend payment of 5 pence per Ordinary Share equating to a yield of 5% per annum by reference to the Offer Price. It will be chaired by Stephen Barter who has over 40 years’ experience in real estate including a number of senior leadership roles such as chairman of Real Estate Advisory at KPMG, UK Chief Executive Officer of Qatari Diar (the property arm of the Qatar Investment Authority), Group Projects Director and a member of the Executive Committee at Grosvenor (the Duke of Westminster’s private international property company), Head of European Real Estate at Babcock & Brown and an equity partner at Richard Ellis (now CBRE).