David Ebbrell, one of the co-founders of pan-European investment firm M7, is preparing to shoulder full management of the company following the exit of erstwhile partner Richard Croft.
In February, Croft announced plans to step down as executive chairman of M7, after 14 years of building the business with what he has described as ‘a group of friends’. Ebbrell, M7’s CEO and one of the firm’s co-founders, is taking over full management of the company as of 1 June.
Supported by the remaining six members of the M7 leadership team, Ebbrell will be charged with leading M7 through the coming cycles, although Croft will remain associated with the company as a senior advisor. He remains on the General Partner boards of M7’s discretionary funds. His departure comes just over two years after Canadian multinational Oxford Properties acquired M7, in January 2021.
For Ebbrell, it’s business as usual at M7, focusing on ‘income from commercial property’, as he tells PropertyEU.
‘The focus hasn’t shifted at all,’ he notes. ‘M7 set out its stall as a specialist manager of multi-tenanted properties across Europe, to look at mispriced opportunities, and primarily looking at income first. We’re still aiming to be a nimble platform and still trying to find interesting real estate opportunities to fit with our long-term capital.’
This relatively asset class-agnostic approach has seen the company buy offices, retail warehouses and logistics properties over the years. But does Ebbrell still feel the same way about all three property types, in the light of recent seismic shifts in the economic and occupier landscape?
‘Our approach has been about the structural support from the occupiers for each of these strategies and the fundamentals of each individual asset,’ he says. ‘Retail warehousing is an interesting part of the supply chain, and although some people want to lump it together with retail real estate, we actually see a lot of parallels between retail warehouses and logistics.
Of course, it also remains a very valid asset class where physical sales continue to move forward, and that’s somewhere we see demand as being still very strong. There are very low levels of vacancy in the UK, retail warehouses are at around 96% occupancy, compared to 98% for logistics, for example, so we see strong, durable cashflows for investors, with potential for growth.
‘Our focus over the last 24 months has been on trying to buy best-in-class retail parks, which have cross-functionality in both being a place not only for physical retail, but also allowing for click-and-collect fulfilment.’
The future of work
Ebbrell acknowledges that the landscape has shifted somewhat for office real estate, but feels that the asset class still has a future. ‘Not all offices are the same,’ he notes. ‘We started investing in offices around 2015, and understanding the different occupier dynamics has always been the key to M7’s strategies.
Offices remain the backbone of corporate life, how businesses thrive, and in London for example we are starting to see a bigger percentage of people in the office rather than out of the office. Offices are being used in a different way to pre-Covid, but we see some similarities. Our first office investments were in the Netherlands, where flexible working, maybe three days a week, was already common. That has given us some interesting data points for the current cycle across other geographies.
‘However, there are structural issues around the asset class we are monitoring. The importance of ESG factors means looking closely at the state of a building and what it will need to remain occupied beyond the current lease term. Tenants today have complex requirements not only around flexible leases but also the quality of spaces, so that requires careful asset management. However, overall, our experience of the occupier market is not directly connected to the capital market perception. The office is not dead.’
Logistics and last mile are perhaps a clearer proposition. ‘The way that goods are distributed to customers has changed significantly, accelerated by Covid, and we continue to believe in that as a strategy. Some 60% of our assets are urban logistics and warehouses, across the territories of the UK, Netherlands, Spain, Ireland, Portugal, Denmark, France, Germany, Croatia, Hungary and Poland. So we get a very interesting view and data from an occupier perspective thanks to that range.’
Ebbrell notes that demand remains strong across each of those markets. ‘Tenants don’t have enough space, they keep paying their rent, and are looking to partner with us for the long term.
'We have had many more strategic conversations with logistics tenants than we used to in the past about lease events, future occupational plans – we see that they are much more strategic in general about their requirements, and conversations are happening much sooner than ever before, as they seek to foster deeper relations with landlords. That is a considerable market shift.’
Elsewhere, supply constraints also support the firm’s existing portfolio. ‘We are not seeing huge amounts of future developments, so that supports the fundamentals of the asset class. We believe strongly in logistics and it remains a big part of our business going forward.’
Looking at the shape of the European markets, Ebbrell says the firm would like to have greater exposure to Sweden, while the UK remains one of the more dynamic territories. ‘The UK market repriced the most quickly last year, and that low point has now been worked through, with an increasing number of transactions taking place after the fourth quarter.
It’s an interesting market, every five years you have an open market rent review, and given the huge amounts of rental growth that we’ve seen, that is one of the reasons it’s so strong from an income perspective.’
Finally, Ebbrell points out that the M7 office in Dubai, which it opened last year, adds an interesting capital dimension to the business. ‘We are fully licensed to operate in Dubai – it’s a capital raising office, and from a M7 perspective, it means that while we are out there, although we remain a part of Oxford Properties, we can continue to grow our investor base with access to Middle Eastern capital.’