Key Facts About Opening Day For The First Single Building To Float On New Stock Exchange
It was never likely to pop like Darktrace or tank like Deliveroo — shares in the first building to be listed on a new stock exchange for single commercial property assets ended the opening day of trading flat.
Shares in the Mailbox, a mixed-use property in Birmingham, started the day at £1 and ended the day at £1, though they had risen 2.5% in the afternoon.
The Mailbox is the long-awaited debut listing on IPSX, a new stock exchange that allows investors to buy shares in a special-purpose vehicle that owns a single building. IPSX has been seven years in the making, and the exchange hopes to make commercial property more liquid and accessible to a broader range of investors.
Here are the key facts to know about the first listing, and what is coming next on the exchange.
What’s the Mailbox?
A 698K SF mixed-use building in Birmingham, owned by clients of M7 Real Estate.
Give me its vital stats.
The passing rent is £8.8M and it was valued earlier this year at £181M. About half the rent comes from office space, with the rest fairly evenly split between retail, leisure and car parking space. The BBC is an office tenant, and Harvey Nichols has a department store there. The weighted average lease term is 14.7 years. The building has a £110M loan secured against it.
So how has the building been listed on a stock exchange?
On Friday, M7 sold £25M of new shares in the building to investors through the IPSX exchange, and those shares can now be traded just like shares in any other company. That £25M sale increases the equity in the building from £71M to £84M, once costs have been taken into account, and means that the building is now 70% owned by M7 and its clients, and 30% owned by the institutional investors that bought the shares.
Why would someone buy shares in a minority stake in a building?
The shares have a dividend yield of 7% on day one — higher than the average for listed companies on major stock exchanges or corporate bonds. And M7 hopes to increase that dividend to 11p and beyond over the medium term through asset management initiatives.
How can the rent and dividend be increased?
M7 said it is planning to convert some of the scheme’s defunct retail space into 50K SF more office space — it has already signed flexible office brand Spaces to take some of it. And it will condense the existing retailers on to one floor and add more restaurants aimed at serving the office workers. It said it thought the rent could rise from £9M to £13M in the medium term, and that doing this and improving the income and value would create a potential internal rate of return of 20%.
What’s the downside?
Everything M7 is planning is exactly that, a plan. There is no guarantee that vacant space will be filled or that existing tenants will continue in situ. Rents and values can go down as well as up. As minority owners, the new shareholders don’t have much influence over the strategy if things don’t go well.
What’s next for IPSX?
M7, which owns a stake in IPSX, is planning to float a stake in a second building on IPSX in the coming months: Bridgewater Place, which is the tallest building in Leeds and comprises 234K SF of office space that is 90% leased as well as 200 apartments.
