As we reported back in December, European property fund manager M7 Real Estate was in negotiation with - it was suggested – Canada’s Oxford Properties, with a view to the very serious matter of being taken over. A deal which has now been consummated, we are happy to report, with the Canadian group buying 100%.
Oxford Properties is the real estate arm of Canadian pension funds OMERS (Ontario Municipal Employees Retirement System), the pension fund for local government workers in Canada’s largest province. It has been increasing its activities in Asia-Pacific recently, where it aims to scale the region up to 25% of its balance sheet. However, it has been quiet in continental Europe since making waves in 2017 when it bought the Sony Centre on Berlin’s Potsdamer Platz. With this deal, it’s now back with a vengeance.
M7 Real Estate was set up in 2009 by current executive chairman Richard Croft and David Ebrell, previously of Halverton. It is – or was, until this takeover - now majority owned by senior management, with minority stakes held by the Kwok family of Hong Kong (25%) and advisory firm TTB Partners (6%).
The company manages more than 830 mainly multi-tenanted assets across Europe valued at €5.3bn on behalf of investors such as Blackstone, Starwood, Centerbridge, HIG Capital and M&G. The new ownership deal will give M7 access to a much greater pool of capital for both real estate and corporate investments.
The €51bn Canadian group said it was making the acquisition as part of its plans to invest about €3.3bn into Europe’s multi-let industrial and urban logistics markets. It has experience in buying fund management businesses, having beaten out Blackstone for a 50% stake in Australia’s Investa Office Fund and buying a stake in November last year in Investment Office Management Holdings.
In the US it bought into the IDI Logistics platform, and invested $360m in cold storage specialist Lineage Logistics, and in the UK took a stake in the build-to-rent operator Get Living. In Asia, it bought a stake in Hong Kong-based logistics company ESR. The M7 deal is the first time the Canadians have bought a 100% stake in a manager.
James Boadle, senior vice-president Europe at Oxford properties said in a media interview that logistics is “one of our highest conviction strategies globally, and a major focus on where we’re trying to grow the business.” Currently Oxford’s European business only has 5% allocated to logistics, well below target. He said Oxford’s goal was to have a third of its global real estate balance sheet in logistics. Over the next five years this would involve doubling M7’s AUM to €10bn, using M7 as “our primary vehicle for deploying capital into the European logistics space, alongside selective other ventures.”
M7 will continue to pursue its expansion plans under the mantle of Oxford, using a three-pronged approach. Firstly, M7 will support Oxford’s logistics strategies, including building an urban logistics platform after October (it is tied into an advisory mandate with Blackstone until then). Secondly it will pursue club deals, characterized by a core-plus risk and return profile, where Oxford will be a significant investor. And thirdly, Oxford will provide general partner capital to M7 for its own real estate funds, which are typically more value-add and opportunistic.
