26 March 2016 – by David Hatcher
M7 Real Estate has struck an innovative profit-share deal with serviced offices firm Regus that will see it rapidly build up its footprint across the fund and asset manager’s 3m sq ft office portfolio.
The deal’s structure means Regus will share profits with M7 rather than pay rent through traditional leases.
For Regus, the relationship provides a large portfolio into which to expand and minimises fixed costs and reduces risk. For M7, which often buys high-yielding, opportunistic portfolios with relatively high vacancy, the deal provides greater potential returns on its investment compared with those achievable at existing rental levels. It also absorbs vacant space and saves on empty rates charges.
The pair have already agreed deals on six sites in the UK and similar deals are expected to be rapidly expanded across continental Europe. Regus sites are generally between 7,500 sq ft and 15,000 sq ft.
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Richard Croft, chief executive of M7, said: “This transaction is a further demonstration of M7’s ability to take an entrepreneurial and innovative approach to improving clients’ returns and to create mutually beneficial partnerships with leading global businesses such as Regus.
“We have an extensive pan-European portfolio across our various funds and mandates, which will benefit from this relationship while at the same time providing Regus with scale and product across the Continent that not many landlords can provide.”
M7’s office portfolio is valued at close to €300m (£237m) and it has joint ventures with Oaktree Capital Management, Starwood Capital and M&G Investments.