MBU Real Estate

Tangible Assets. Exceptional People.

Real Estate Overview

The Real Estate strategy has been structured on the basis of the current market conditions, the latest market research, and data available from reputable 3rd party advisors. The Real Estate team has a wealth of experience in predominantly PBSA, BTR, PRS and Permitted Developments (PD).

Real estate is not a complex asset class; however, it can become such if there is not proper due diligence, evidence, market research, oversight, and continual monitoring. The team know that we are not looking to either develop or invest in properties that we personally want or indeed like, it is what the market / end consumer wants.

It should be noted that today’s market is ever evolving and the strategy of the business unit will be continually revised and updated, as the impact of COVID-19 is felt and realised and that of Brexit takes affect over the next 12-24 months.

MBU Real Estate at a glance

£225m

InvestmentS MADE
£400m+
GDV
20
closed transactionS
£135m+
12 month pipeline
25
yearS of TEAM experience

A Strategy for Real Estate

Finding the right opportunities to deliver for our clients

To maximise IRR’s, profitability, and cash events for MBU Capital through investing in and developing real estate transactions in the UK. We maximise MBU’s ROE, market presence and to build a successful real estate business over the medium to long term.

Real Estate Model

In 2020, MBU made key strategic hires for the real estate team, in order to be able to manage the existing developments and assets and to successfully grow the business over the coming year and beyond to produce market leading opportunities and see them through to completion.

The Real Estate Team
KEY RESPONSIBILITIES:

1
Manage existing development transactions and procure an exit.
2
Appraise, underwrite, execute, fund, develop and exit new opportunities.
3
Manage existing investment properties.
4
ROIF Fund- set up, analysis, underwriting, execution, asset / development management, exit.
5
MBU / SUNWAY PBSA Fund - Set up, analysis, underwriting, execution, asset / development management, exit.
6
Bridging loan sourcing and underwriting for ‘MBU bank’
7
Opportunistic deals which sit outside 1-6 above

2020 Strategy

Historically, the strategy for the real estate team has been to focus primarily on commuter towns on the outskirts of London. With prime central London house prices out of reach for many first-time buyers, the commuter town strategy has been at the forefront for many developers over the last 5 years. However, with new improved transport links including the recent announcement of the new HS2 initiative along with many corporate head-offices relocating their operations to Northern cities in an attempt to cut costs, the team at MBU strongly believe that a broader geographical spectrum will allow us to explore new territorial opportunities UK wide.

The philosophy of the team is to develop the right product in the right location rather than force our opinion on the market. In today’s COVID-19 world, the real estate market remains uncertain and therefore we have concentrated on areas where the risk element has been reduced or there is a clearly defined exit. This ensures we can maximise returns, based upon solid, detailed and well researched analysis.

The strategy for the real estate team is to focus on developing ‘anything with a bed’. This includes the following sectors:

  • PBSA (student)
  • PRS
  • BTR
  • PD
  • Open market residential sales and Hotels

We exclude Co-living from this strategy. The real estate team is actively looking to purchase schemes ideally on an unconditional basis and obtain the planning permission, however, will consider schemes with permission in place.

The core of the real estate team has significant experience in these sectors, having developed over 5,500 student rooms, 2,000 PD units and in excess of 3,000 PRS units.

 Key development criteria
‘ANYTHING WITH A BED’

GDV - £30m + for PRS, GDV - £20m + for PBSA. Max deal size £120m GDV.
Location - British Isles wide (including N. Ireland & ROI).
Will consider sites with and without planning.
Minimum of 1.2 X EM
Minimum of 20% IRR on MBU equity
Minimum of 25% ROC for deals that purchased unconditionally
 Minimum of 20% ROC for PRS / PBSA deals.
Will consider joint ventures / vendor leaving the land in the deal and paying a coupon / profit element.

ROIF Fund

The Regional Office & Industrial Fund (ROIF) is an actively managed, multistrategy, leveraged, ‘Bricks and Mortar’ commercial real estate fund. The fund is focused on driving returns through the improvement or repurpose of regional office and industrial property to produce both stable income returns and capital growth.

Fund strategies to drive returns:

The improvement and stabilisation of income producing assets.

Purchasing high-yield assets, implementing improvements and selling them as high quality lower yield assets.

The repurposing of property by identifying assets were the demand for the current use is declining, gaining planning consent for conversion, then disposing of the asset as a development opportunity with a planning premium and in a market with rising demand.

Investment Criteria - Stabilised 9%+ NOI yield, Minimum investment size £5m — £25m, Exit time frame 3-5 years, must have value-adding proposition, inflation hedge potential, investment security and potential for capital growth with a define dexit strategy.

Property Strategy - Buying poorly managed, part income producing property, improving externals and refur­bishing vacant space, securing new lettings & re-gearing existing leases and interventions to reposition assets for onward sale at a profit.

ROIF will look to execute both principal strategies while collecting and distributing income with a target coupon of 7%.

Adapting to a changing commercial real estate landscape we are shifting the ‘Bricks and Mortar Fund’ paradigm.

The strategy For ROIF is to buy high yielding assets and to add value to them by lowering the yield of the asset, so that it can be disposed of within a five year timescale.

  • Seek and capitalise on stock with high yielding returns
  • Assets with a high-quality build, in growth regions and located in specialised business / Industrial parks with the opportunity to asset manage and grow value.
  • Seek to acquire assets which generate income from the acquisition date, over the life of the investment, that we can add value to.
  • ROIF will seek out, and capitalise on, market inefficiencies with reference to the investment risk profile set within the Fund Prospectus. The investment process is very stock focused, and draws upon our strong active asset management capabilities, in conjunction with BNP Paribas and CBRE, the Fund's Property Managers. The Fund will focus on crystallising rental reversion, refurbishment, letting voids, re-gearing leases and positioning towards rental growth. This will be driven and guided by the MBU real estate team.
  • The real estate team will be responsible for sourcing properties which match or exceed the criteria set out for the Board of the Fund to consider and will further be responsible for full due diligence of each asset and a full under writing process for each project. The team will be responsible for legally completing on the asset, completing any asset management / refurbishment / redevelopment as required and regular reporting to the fund.

REGIONALLY DIVERSE

Post Stabilisation Property Mix

65% Office

10% Industrial

25% Logistics (Storage / Last-Mile)

NAV WEIGHTING

No one region to have more than 25% of the portfolio

TENANT MIX

>50% of total space let to 3A1 or better rated tenant.

< 40% of void / vacancy at any time

COUPON COVER RATIO

Cash Reserve and Rent Accounts to hold no less than 150% of annual coupon liability

INCOME MIX

>50% of total NOI from 3A1 rated or better coupon liability

LTNAV

Loan to Net Asset Value not to exceed 60% at any time

Our Businesses

The team has recently formed a joint venture with the Sunway Residence Trust, a Singapore based fund, targeting student assets for the £120m fund to purchase, add value / asset manage and to dispose of via a public securitisation listing on the Singapore Stock Exchange.

The Real Estate Team are responsible for all of the property aspects of each transaction including: sourcing, underwriting, executing, and managing suitable properties in the UK which meet the criteria profile of the fund. The strategy is to purchase existing trading PBSA stock with a minimum Net Initial Yield of 6% upon purchase and to enhance the value of the assets / portfolio through a variety of methods.

The Real Estate Team is responsible for sourcing, underwriting, executing, and monitoring real estate loans for MBU bank. All credit decisions are made by the MBU Bank Credit Team and not within the Real Estate Team.

MBU Bank will be offering: Real Estate Bridging loans, Commercial Asset Loans and Regulated Buy-To-Let Mortgages.

    Before investing in offices, it is important to think about occupier demand. Anywhere with availability below 5% means the prospect for future rental growth is good. On this basis, Central London, Oxford, Cambridge, Bath, Manchester, and potentially Birmingham at grade A level, all look like strong office investment locations.

    As part of the ongoing real estate strategy, MBU will continue to purchase stable income generating UK wide office and industrial assets to build up its commercial portfolio. One such example includes the £7.6m purchase of a Grade A office building in Newcastle - Quorum Business Park, currently let out to a AAA covenant tenant for an unexpired 5-year term. Other successful asset management and sales has included the recent exit of Centenary Court HMRC Bradford for £25.5m.

    Many potentially interesting real estate opportunities may not typically fit our current investment mandate or criteria in line with MBU’s risk policies. However, having the flexibility, we are happy to explore opportunistic deals on a deal by deal basis given the current market conditions.

    At MBU, we know that each project has a unique story and an expected return that is commensurate with its level of risk.

    Say hello to the team

    A wealth of experience and professionalism throughout the team

    We are specialists with a passion for what we do. We seek to make a difference to the world with the projects we deliver.