Mailbox REIT PLC, the owner of one of central Birmingham’s largest commercial properties, has increased its dividend target as it looks to conclude a management agreement with the serviced offices group IWG PLC (LON:IWG).
IWG, the owner of the Regus chain has conditionally agreed to take on the running of 50,000 square feet that has been converted largely from retail use and which will be operated under IWG’s ‘Spaces’ fascia.
The aim is to lift the operating income for Level-One of the Mailbox office and retail development from £1 per square foot to around £27.50.
“Based on comparable IWG locations in central Birmingham and other similar sites this could be achieved in two years,” Mailbox REIT’s manager M7 Real Estate said in an earlier announcement. Occupancy of 85% would equate to £34 per square foot.
This predicted increase in rental income has a direct impact on the sum distributed to investors.
The REIT’s prospectus contained an initial 5% dividend target. Management believes this can be “incrementally increased to 7% and beyond within the medium-term”.
Mailbox REIT is a single asset real estate investment trust, which will be the first company to list on the International Property Securities Exchange (IPSX).
It is the owner of the Mailbox in central Birmingham, a 4.8-acre office-led site which is home to tenants such as the BBC, WSP, Harvey Nichols and Advanced Business System. They are also long-term tenants - the weighted unexpired lease term is 14 years.
The Mailbox is what’s called Grade-A space, which is highly sought by companies of the ilk of AXA Arup, Goldman Sachs and the UK government as they lead the retreat from London.
Birmingham's popularity owes much to its location in the centre of the country, good road and rail access and the build-out of HS2, which will cut travelling time between central London and Birmingham to 49 minutes.
Mailbox REIT is looking to raise £66mln at £1 a share when it lists next month, which would give it a market capitalisation of £119.5mln.
Post-IPO, the debt will be £70mln, giving gearing of 38%.
M7 will be keeping a 45% stake in the business, meaning its and investors’ goals are completely aligned. The offer closes at 11am on December 8 with dealings commencing on December 14, 2020.