Mutually beneficial: inside Oxford Properties’ acquisition of M7 Real Estate

Moxford 7 may not be the name of M7 Real Estate under its new ownership by Oxford Properties. But it is a name that the two companies have shared via a merger, of sorts, for some time. While M7’s sale to the Canadian pension fund giant seemingly came out of the blue, the pair have actually been in talks for a while. About tag rugby anyway. With not enough players in each of their teams, but both clearly competitive, Oxford and M7 decided to merge in an attempt to beat the competition and Moxford 7 was born. Whether they were triumphant or not is a story for another day. Today the focus is on their tie-up off the pitch. Jo McNamara, executive vice president, Europe, at Oxford, and Richard Croft, executive chairman of M7 Real Estate, say the deal is mutually beneficial. And while not agreed on a rugby pitch, it did become blatantly obvious to both parties over a breakfast in October – during one of those rare chances for a real-life meeting – that the addition of M7 to the Oxford portfolio would solve both businesses’ current quandaries. [caption id="attachment_1055730" align="alignright" width="150"] Jo McNamara[/caption] [caption id="attachment_1075446" align="alignleft" width="150"] Richard Croft[/caption] At Oxford, says McNamara, the challenge was accessing the logistics market in a significant way. Oxford had seen the large-scale logistics tie up that M7 had created with Blackstone in 2017 and it wanted to do something similar. Initial talks were around working at arms-length with M7. But soon, says McNamara, they realised that their teams just got on – so why stay separate? Why not bring that team into the Oxford family? The deal, which will see M7 continue to operate as a separate entity led by Croft and David Ebbrell, gives Oxford the scale it was looking for, particularly in logistics. M7 has some 620 assets weighted towards light industrial and urban logistics in 15 European countries with a capital value in excess of €4bn (£3.5bn) and, crucially, has the expertise on the ground to search out deals. McNamara says Oxford has a target of deploying £3bn into European logistics over the next few years. The company has looked at a number of deals and successfully bought its first direct logistics investment in Europe late last year, a 15-acre site in Heathrow alongside Logistics Capital Partners. But the best deals, she adds, are off market and that requires on-the-ground sector specialists. “M7 has a team of people who know exactly what they are doing in an area where we have struggled [to build scale],” says McNamara. Oxford will use M7 to deploy its capital into mostly logistics assets and other sectors focused on the supply chain across Europe. And while Oxford will have more control over its own capital, it is keen for M7 to retain its entrepreneurial spirit and will not get overly involved in smaller, more niche deals utilising third-party capital. For Croft, the deal enables M7 to grow up, to embrace long-term strategies, to access Oxford’s vast capital – Oxford is part of OMERS, the Canadian pension fund with more than $110bn of net assets – and be a little less of a “semi-institutional version of Trotters Independent Traders”. Still just as entrepreneurial but safe in the knowledge that you don’t always have to go out and raise the money. “We wanted to find a partner that had a big balance sheet,” says Croft. That big balance sheet will not only enable M7 to swoop on some of the big logistics opportunities that Croft says are out there but will also enable the business to be more long-term in its thinking and hold assets for longer than it has traditionally be able to. “It will enable us to achieve much more than we have in the past,” he says. Included in the deal are M7’s investments in asset management software firm Coyote and IPSX, the regulated stock exchange dedicated to trading shares in real estate. Two of those niche investments that Oxford says it will support M7 on but will not necessarily get involved in. Croft, however, will continue to be involved in pushing M7’s niche investments and says he expects to bring the listing of Mailbox REIT and another asset back to the IPSX soon. The listing was delayed indefinitely just before Christmas as news about the Oxford sale broke. Niche will not be what we can expect to see from Oxford, however – it is hungry to grow. Particularly around its strategic platform investments. “When we back a strategy, it doesn’t matter how we do it,” says McNamara. “We will be creative: we’ll buy, we’ll build, or we’ll back a team. Strategy is where we can get to scale and generate returns. And you’ll see us doing more of this kind of investment.” To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette