Interim Report for half year ended 30 June 2023

Mailbox REIT PLC

29 September 2023

 

29 September 2023

Mailbox REIT plc

(the "Company" or "Mailbox REIT", together with its subsidiaries, the "Group")

Interim Report and Condensed Consolidated Financial Statements for the half year ended 30 June 2023

The Board of Directors of Mailbox REIT, which owns Mailbox, a prime mixed-use asset in Birmingham, is pleased to present the unaudited interim report (the "Report") and Condensed Consolidated Financial Statements of the Group for the half year ended 30 June 2023.

The interim results have not been audited nor reviewed by the Group's auditors.

Financial and Operational Highlights

	30 June 2023 (unaudited)	31 December 2022 (audited)
Net Asset Value	£53.19 million	£47.98 million
Net Asset Value per share	62.69 p	56.55 p
Fair value of investment property	£162.50 million	£157.00 million
Loan Facility	£101.92 million	£108.50 million
Loan to Value ("LTV") on external valuation	62.72%	69.11%

	Half year ended 30 June 2023 (unaudited)	Half year ended 30 June 2022 (unaudited)
Earnings per share ("EPS")	6.14 p	1.47 p
Adjusted EPS	0.01 p	2.64 p
Total dividends	0.00 p	3.49 p
Dividend cover (on Adjusted EPS)	0.00%	75.64%
Operating profit before fair value changes	£4.53 million	£4.58 million
Profit before tax	£5.21 million	£1.25 million

 

Financial highlights

•              EPS of 6.14 p for the half year (30 June 2022: 1.47 p) with the uplift largely attributable to an unrealised gain on the revaluation of investment property.

•              Adjusted EPS of 0.01 p (30 June 2022: 2.64 p) due to rising finance costs. 

•              Operating profit before fair value changes decreased marginally by 1.14% to £4.53 million in the half year (30 June 2022: £4.58 million) which highlights the consistency of the letting profile in conjunction with asset management initiatives.  

•              Recurring rental income (before service charges) improved by 13.74% during the half year to £6.18 million (30 June 2022: £5.44 million). The impact of this is largely attributable to a full six months of revenue from IWG Spaces, which opened in May 2022. 

•              Mailbox valuation improved by 3.50% to £162.50 million in the half year to 30 June 2023 (31 December 2022: £157.00 million). The increase reflects a slight improvement in market sentiment . The valuation has a net equivalent yield of 7.92% (31 December 2022: 7.26%).

•              Loan facility with the senior lenders reduced by £6.58 million to £101.92 million in the half year (31 December 2022: £108.50 million) as the Group continues to work towards curing the loan-to-value ("LTV") covenant default. More details are given in the debt extension update below.

Operational highlights

•              The flexible workspace operating under IWG's 'Spaces' brand opened in May 2022. As of June 2023, 57% (3 December 2022: 55%) of the available space was occupied with open desk coworking and enterprise serviced office space (larger private offices with multiple work stations) at 27% and 77% let respectively. Demand for the private offices remains strong and IWG are confident occupancy will continue to improve. With regards to the open desk co-working element, IWG are reviewing the pricing of these desks to ensure occupancy continues to improve and revenues increase in the coming months.

•              The Canalside dining and bar area is now fully let with two new restaurants, EN Steak and The Mayan, having opened. These new leases total 7,399 sq ft and both are let above estimated rental value ("ERV").

•              The BBC served notice of its intention to vacate its office space on lease expiry in 2026. There is the potential that the BBC will require a two year extension to their expiry date due to the space into which the BBC are moving not being available at the agreed time. Discussions have commenced with the BBC and it is hoped that a conclusion will be reached by the end of 2023. Work has begun on a re-leasing and repositioning strategy for the space, taking advantage of the opportunity to accelerate progress on the Company's ambition for Mailbox to be carbon neutral by 2030.

•              Occupancy was 94% by sq ft at the end of June 2023 (December 2022: 94%) with 38 tenants (December 2022: 38). Office and car park tenants represent 67% (December 2022: 69%) of the gross rent receivable and the balance comprises retail and leisure operators.

•              The weighted average unexpired lease term ("WAULT") is 11 years and 11 months to break and 12 years and seven months to expiry (December 2022: 12 years and three months to break and 12 years and 10 months to expiry).

Debt extension update

Following a lender-called valuation in November 2022, the Group was informed by the lender syndicate that the debt was in breach of the LTV covenant and a cure of £27.5 million would be required, prior to the agreement of the expected debt extension. On 20 April 2023, the lender syndicate reserved its rights and announced that the debt had fallen into default which was subsequently announced publicly on 24 April 2023. The implication of this is that the Group is now being charged default interest on the borrowings balance up to the date that the default has been fully cured (see Note 2).

The Group is in the process of raising a loan note of £27.5 million which will be used to cure the default, reducing the LTV to 60.0% based on the November 2022 lender valuation. As at 29 September 2023, £7.1 million had been raised and paid down, and £1.5 million had been paid out of reserves, leaving £18.9 million still payable. Encouraging discussions are being progressed with potential investors to secure the remaining sums required.

Following final settlement of the cure, which will reduce the senior debt facility to £81.0 million, an extension with the lender is expected to be agreed and the duration of the extension will be known in parallel with settlement.

Stephen Barter, Non-Executive Chairman of Mailbox REIT plc, commented:

"We continue to be encouraged by the operational resilience of Mailbox and the long-term strength of its rental income and occupier portfolio. 

"Some £11 million of annualised rental income is being received from a diverse mix of high-quality tenants occupying 94% of the building's floor area. The Company continues to benefit from strong quarterly rental collections, with 99% of both the 2023 half-year, and 2022 full-year rents now received.

"The Board notes that the International Property Securities Exchange ("IPSX") has commenced the process of winding down operations. Mailbox REIT is investigating alternative platforms for listing and trading its shares to sustain liquidity for investors, and the Board expects to take a final decision shortly.

"Despite the impact which the recent turbulence in financial markets and interest rate increases have had on the property's capital value, and hence its current NAV and LTV, its continued, long-term operational resilience reflects the purposeful asset management and sustainability plan which M7 Real Estate Ltd has been implementing since before the IPO".

ENQUIRIES

Mailbox REIT PLC

Stephen Barter - Chairman                               via Tavistock, below

M7 Real Estate Ltd

Richard Croft                                                      [phone]

WH Ireland (Lead Advisor &

Corporate Broker)                                             [phone]

Chris Hardie

Tavistock (Communications

Adviser)                                                               [phone]

Simon Hudson                                     

James Whitmore

Alter Domus (UK) Limited

(Company Secretary)                                            [phone]

The Company's ISIN is GB00BM9BWM32.

Further information on Mailbox REIT plc is available at www.themailboxreit.com¹.

NOTES

Mailbox REIT PLC Mailbox REIT is a single asset REIT offering shareholders exposure to the performance of Mailbox which is a prime regional office-led, mixed-use asset offering long-term secure income and the potential for value enhancement.

The Company's asset manager is M7 Real Estate Limited ("M7"). M7 is a leading specialist in the pan-European, regional, multi-tenanted real estate market. It has over 220 employees in 15 countries and territories. The team manages almost 610 assets with a value of circa €6.9 billion.

¹ Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

Chairman's Statement

Overview

I am pleased to present the unaudited interim report and Condensed Consolidated Financial Statements for the Company for the half year period ended 30 June 2023.

Despite challenges faced by the market following recent political and economic instabilities, we are proud that we have continued to maintain income at Mailbox through the period under review. Mailbox continues to have strong income streams which are generated from its blue-chip tenant base, and the rigorous asset management initiatives which the Group continues to progress with. These measures will both safeguard and enhance rental income, together with Mailbox's ESG credentials and the fact that the Property is a popular work, live, play destination in the UK's second city.

While high occupancy levels at Mailbox leave little room for new lettings, three new leases were completed during the early part of 2023 which will further improve operational performance by increasing rental income and decreasing vacancy costs. Furthermore, there are additional asset management initiatives which are currently being explored to utilise advertising space within the asset.  

At the same time, momentum continues to build at the IWG-operated Spaces co-working facility, which opened in May 2022 and was 57% let as at 30 June 2023.

The BBC's announcement that it intends to vacate the building in 2026 gives Mailbox an excellent opportunity to reposition the space and enhance rental income by capturing its reversionary potential in a supply constrained Birmingham prime office market. The Group has been in dialogue with the BBC to potentially exercise a short term extension its lease beyond 2026, as it is unlikely that the new space in Digbeth will be available in 2026. It is hoped that this discussion will be concluded by the end of 2023. Any new letting together with the associated refurbishment will enhance the Mailbox's pathway to net zero by 2030.

Borrowing rates are not expected to fall until inflation has reduced markedly and shows a more settled longer-term trend. This significantly affects the Group as the interest rate cap on borrowings expired on 20 January 2023 (with the senior debt) which means that the SONIA rate is now 100% floating.  

Rising finance costs significantly constrain the Group's ability to make future dividend payments therefore a decision was made to suspend dividend payments in the final quarter of 2022. A dividend has not yet been declared or paid in 2023 however the Group will continue to review the capacity to pay future dividends through 2023 and into 2024. 

The Board is realistic about the many challenges in the current climate. There are many factors which the Group cannot control. The progressive asset management plan will help to ensure that the building retains its appeal for both employers and visitors, as well as further improving its ESG performance. These measures will continue to strengthen the diversified income streams which the asset delivers. The Directors are confident that the Group will remain responsive to and benefit from the vibrant local market dynamics of the West Midlands, always progressing as a stronger and more competitive investment.

Financial results

	Half year ended 30 June 2023 (unaudited)	Half year ended 30 June 2022 (unaudited)
NAV (£ million)	53.19	84.24
NAV per share (pence)	62.69 p	99.28 p
Operating profit before fair value changes (£'000)	4,528	4,580
Change in fair value of investment property* (£'000)	5,240	(689)
Operating profit (£'000)	9,768	3,891
Profit before tax (£'000)	5,209	1,250
Dividend per share (pence)	0.00 p	3.49 p
Earnings per share - basic and diluted (pence)	6.14 p	1.47 p
Adjusted EPS** - basic and diluted (pence)	0.01 p	2.64 p
LTV on external valuation (%)	62.72	56.42

* See note 9 of the Condensed Consolidated Financial Statements for breakdown of the fair value loss of investment property.

**Please see note 7 of the Condensed Consolidated Financial Statements and the appendices to show how this was calculated. Please also see the 'Key Performance Indicators' section.

Valuation

Avison Young performed an independent external valuation of Mailbox as at 30 June 2023, which saw an increase in the fair value of the property to £162.50 million (31 December 2022: £157.00 million). A breakdown of the valuation by sector is shown below.

Sector	Value (£)	% of Total Value
Office	86,100,000	52.98%
Car Park	30,900,000	19.02%
Food & Beverage	21,100,000	12.98%
Retail	19,700,000	12.12%
Other	4,700,000	2.89%
Total	162,500,000	100.00%

Corporate Governance

The Board members have substantial experience in real estate. The Board is committed to maintaining high standards of corporate governance and is responsible for promoting high quality governance and reporting.

The Board has considered the principles and recommendations of the 2019 AIC Code of Corporate Governance (the "AIC Code"), which addresses the principles and provisions set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company as an investment company.

The Board meets at least on a quarterly basis and has established the Audit Committee which also meets at least three times per year. Given the size of the Board, the Board has not established Nomination and Remuneration committees. A full report against the AIC code was provided in the 2022 annual report.

The AIFM and the Asset Manager

The board appointed M7 Real Estate Financial Services Ltd (the "AIFM") to provide day-to-day discretionary portfolio and risk management of the Company's investments subject to the AIFM Agreement, the Company's Articles of Association, the Admission Document and the overall supervision of the Directors.

The board has appointed M7 Real Estate Limited (the "Asset Manager") to provide day-to-day asset management and advisory services to the Group. More information about the Asset Manager and its strategy can be read at the Group's website https://themailboxreit.com/.

Shareholder Engagement

The Board has actively engaged with key stakeholders through public dissemination of business updates and dividend announcements, ESG, and other key Company initiatives that will drive long-term value to shareholders. As part of its ongoing investor engagement strategy, the Board will continue to actively engage with current and prospective investors by offering a virtual platform to meet and communicate with the Board.

Stephen Barter

Chairman

29 September 2023

Asset Manager's Report

The Asset Manager presents its report on the operations of the Group for the half year ended 30 June 2023.

Introduction

Mailbox's strong performance over the half year to June 2023, and the asset management initiatives which are being undertaken, have helped drive a 3.50% increase in the fair value of the property.

Following two new food & beverage lettings to independent restaurants, Canalside is now fully let. EN Steak, a high-end steak restaurant and bar is occupying 3,052 sq ft, and The Mayan, a modern Mexican restaurant and mezcal bar is occupying 4,347 sq ft. Both restaurants are now open and have been enjoying great success.

The asset management of the flexible office space operated by IWG (Spaces) has now been in effect for over twelve months. During this time, it has become evident that the demand for enterprise office space has outweighed that of open desk units. Occupancy for the enterprise space (private offices) currently sits at 77%, while the open desk element has an occupancy of 27%.  Mailbox REIT continue to work with IWG to review the pricing associated with the open desk co-working element, to ensure revenue and occupancy improves over the coming months.

While the BBC has expressed its intentions to relocate to Digbeth at lease expiry in 2026, it now expects this will be delayed. As a result, discussions are underway with the BBC who are interested in extending in Mailbox for a 12-24 month period. Plans to reposition and re-lease of the space are also being drafted and M7 Real Estate believe these will enable the building's reversionary potential to be captured.  With the current and predicted lack of supply of grade A space within the City, together with the limited levels of new development anticipated, there will be strong demand for 120,000 sq ft of prime new, sustainable office space in this flagship amenity rich building, which offers some of the largest floorplates in the Birmingham market.

Mailbox made its first GRESB submission in June 2023. WSP advised on this, and after an initial review of responses, has indicated Mailbox is on track for a good first year score. Measures to reduce greenhouse gas ("GHG") emissions and energy use are continuing, with the asset on track to reach Net Zero, in Landlord controlled areas, by 2030. Modelling undertaken by JLL, has shown Mailbox's energy use intensity is significantly lower than the Carbon Risk Real Estate Monitor 2030 target. This target is a science-based decarbonisation pathway aligned with the Paris Climate Goals of limiting global temperature rise.

The vacant office suite on Level 7 (8,765 sq ft) is being marketed by joint agents Avison Young and Lambert Smith Hampton. M7 Real Estate has spoken to the Property's agents about increasing the marketing activity for Level 7 and as a result M7 has commissioned three digital flyers with key messages, to undertake direct mailing. These will be issued to the market in mid-September.

Terms have been agreed with a woodland themed cafe, restaurant and cocktail bar, The Woods, for the last food and beverage uni7 on level 3. and within the canalside precinct. This will provide another much-needed lunch option for office occupiers, as well as adding an interesting evening offer to the asset.

As a result of the factors outlined above, M7 Real Estate, as Mailbox's asset manager, remains optimistic about the Company's prospects.

Market Outlook

UK Economic Outlook

The commercial property sector in the UK continues to navigate through a challenging period marked by higher interest rates and persistent, although declining inflation. The latest figures show that inflation in August 2023 dropped to 6.7%, down from a recent peak of 11.1% in October 2022. This has resulted in falling expectations for UK interest rate rises, with the forward SONIA curve continuing to slowly flatten. Political and regulatory uncertainty are adding to the challenges facing the commercial property sector, although the strength of the labour market coupled with strong economic performance continue to drive rental growth.

UK Real Estate Outlook

Average prime yields edged slightly higher in May 2023 to an average of 5.75% vs 4.75% a year ago, according to Savills, but still way below the 7.25% average reached at the peak of the Global Financial Crisis in 2009. The investment market is hampered by lower volumes and deal count resulting in total volume of circa £15bn for the first half of the year, 58% below H1 2022, and placing H1 2023 in the bottom five of the past 24 years. Offices accounted for 29% of all activity by value, industrial accounted for 16%, and retail for 11%, according to Colliers. Colliers also expects yields to have stabilised for now and for investment activity to likely remain subdued in Q3 2023, with a pick-up in Q4. Similarly, CBRE does not anticipate any notable recovery in capital values in 2023, but specific market sectors with strong rental growth should perform better. Also, CBRE expects a gradual recovery in transaction activity in the second half of the year as some investors will come under pressure to deploy capital as the year progresses.

Lower valuations, higher interest rates and risk aversion from the lending market will continue to limit investment volumes as levered buyers remain on the sidelines and current owners facing debt maturities need additional equity to meet leverage and coverage ratios.

The office sector has seen a slowdown in leasing activity with a 20% decline in take-up for H1 2023 vs a year ago, according to CBRE. Transaction activity indicates a preference for best-in-class office space with limited leasing volumes for secondary, poorly located assets. Office investment volumes have fallen by circa 70% in H1 2023 from a year ago, and transaction activity for large ticket sizes has been severely constrained by the significant rise in debt costs. CBRE believes that take-up and investment volumes will increase in H2 2023 but will remain subdued relative to 2022.

Birmingham Office Market Outlook

The ongoing dynamics of the Birmingham office market are clearly an important consideration given the significant impact they have on the Mailbox's performance both as an investment and on the prospects for reletting the vacant office suite on Level 7.

Take up in Q2 2023 amounted to 177,665 sq ft, bringing the total for H1 2023 to 331,215 sq ft. The top five deals made up 60% of take up this quarter. The largest transaction comprised the 36,343 sq ft letting to Re-Defined at Louisa Ryland House. Other notable lettings included 22,924 sq ft to Arden University at Crossway House, 21,500 sq ft to UK Curriculum and Accreditation Body at 54 Hagley Road, 13,815 to JLL at One Centenary Way, and 12,459 sq ft to Cubo at Two Chamberlain Square.

With an 8,765 sq ft vacant office suite on Level 7, the Company is particularly focused on requirements in the 7,000-10,000 sq ft size range. In 2022, the market was dominated by transactions of below 10,000 sq ft band, which accounted for 44% of take-up.

Two major office refurbishment projects were announced; 19 Cornwall Street, to offer 139,000 sq ft of smart enabled space in a net zero carbon building, and Arca (formerly St Philips Point), to offer 65,000 sq ft with amenities including a large roof terrace, cycle storage, shower facilities and secure lockers.

After a pronounced silence from offices in the city's fringe areas, Q2 2023 saw seven lettings in Edgbaston. Leading the way on these transactions was 54 Hagley Road, which secured three transactions totalling 29,600 sq ft.

One Centenary Way reached practical completion on 6 March 2023, and represents the only new build office to be completed in 2023 and is a key element of the Paradise development within the traditional CBD. The building provides 280,000 sq ft of Grade A commercial office space over 13 floors along with two retail units and the benefit of a BREEAM excellent rating. The floor plates are 22,913 sq ft and Part ground and levels 4-8 are currently available, totalling 123,359 sq ft.

It is unlikely that other office developments will commit in the short term due to the limited number of viable and deliverable new build speculative schemes. Therefore, 'back to frame' and substantially refurbished product is likely to underpin the shortfall in new Grade A speculative supply in the short term.

Peak headline rents are now £41.00 per sq ft, which were achieved at 103 Colmore Row to Facepunch Games and Weightmans. Avison Young expects rental growth to continue for best-in-class accommodation, where peak headline rents are forecast to reach £41.50 per sq ft during 2023, exceeding £45.25 per sq ft by 2027. However, due to the local market supply and development pipeline (specifically 3 Chamberlain Square, Paradise) dynamics, Avison Young anticipates this rental tone could be achieved, and potentially exceeded, much earlier than projected across the 5-year forecast, as occupiers become increasingly aware of the shortage of best-in-class space and the potential for inward investment increases.

Financial results

Total rental income earned from the portfolio for the half year ended 30 June 2023 was £6.24 million, excluding service charge and direct recharges (30 June 2022: £6.04 million). This figure includes an uplift in gross rental income of £0.82 million however this is offset by £0.60 million of non-recurring surrender premium and dilapidation revenues which were recognised in the prior half year.

Administrative and property operations expenses (excluding service and direct recharges), and other costs attributable to the running of the Group, were £1.80 million for the half year (30 June 2022: £1.50 million).

The Group incurred finance costs of £4.67 million during the half year (30 June 2022: £2.93 million) which highlight the impact of rising interest rates on the senior debt, coupled with the maturity of the interest rate cap.

The profit before tax was £5.21 million (30 June 2022: £1.25 million) which equates to a basic earnings per share of 6.14 p (30 June 2022: 1.47 p). The profit before tax is largely attributable to an unrealised gain on the revaluation of investment property. 

Adjusted EPS for the year equates to cash generated from operations (and therefore excludes movements in accrued rent smoothing debtors, impairment of rent receivables, non-cash portion of interest expense and the amortisation of loan arrangement fees) was 0.01 p (30 June 2022: 2.64 p). The observable decrease in adjusted EPS is a reflection of the detrimental impact of rising interest rates on the net cash earnings of the Group.   

The Group's NAV as at 30 June 2023 was £53.19 million or 62.69 p (31 December 2022: £47.98 million or 56.55 p).

Valuation

As at 30 June 2023, the Group's property had a fair value of £162.50 million (31 December 2022: £157.00 million), an increase of 3.50%.

Summary by Sector as at 30 June 2023

	Valuation (£)	Market Value (%)	WAULT to break (years)	Gross Contracted Rental Income (£)
Sector
Office	86,100,000	52.98%	6.07	5,600,340
Car Park	30,900,000	19.02%	30.00	1,937,988
Food and Beverage	21,100,000	12.98%	8.50	2,134,451
Retail	19,700,000	12.12%	17.66	1,115,145
Other	4,700,000	2.89%	7.52	383,987
	162,500,000	100.00%	11.89	11,171,911

Top Five Tenants

Tenant	Sector	% of Total Current Gross Rent
The British Broadcasting Corporation	Office	19.65%
Q-Park Limited	Car Park	17.23%
Advanced Business Software and Solutions Ltd	Office	11.86%
WSP Management Services Ltd	Office	10.33%
Harvey Nichols (Own brand) Stores Ltd	Retail	5.29%

Lease Expiry Portfolio

Year	Expiring contracted rent (£)	% of total
2023	52,400	0.47%
2024	2,000	0.02%
2025	207,741	1.86%
2026	2,493,049	22.32%
2027	-	-
2028	-	-
2029	331,425	2.97%
2030	509,252	4.56%
2031	1,410,199	12.62%
2032	1,164,315	10.42%
2033	1,466,404	13.13%
2034	111,500	1.00%
2035+	3,423,626	30.64%

M7 Real Estate Limited

29 September 2023

Principal Risks and Uncertainties

The principal risks of the business are set out in the Annual Report and Financial Statements for the year ended 31 December 2022 (the "Annual Report") and include commentary on their potential impact, links to the Group's strategic priorities and the relevant mitigation factors.

As detailed in the Annual Report, risks faced by the Company include, but are not limited to: breach of borrowing covenants, interest rates, property defects, property market, property valuations, illiquid investments, environment, development, tenant default, property location, use of service providers, dependence on AIFM and Asset Manager, ability to meet objectives, Group REIT status, political/economic risks, health and safety risks and disclosure risks.

Since the publication of the Annual Report, the Board believes the following principal risks have been affected:

•       Breach of borrowing covenants: The Group continue to be in default of the LTV covenant associated with the senior debt. Negotiations are ongoing with the lender syndicate regarding the pay down of the default cure which was detailed in the consolidated financial statements for the year ended 31 December 2022. While the Group continue to be in default, the lender syndicate have reserved their rights, continue to charge default interest and could call in the loan.   

•       Interest rate risks: Interest rates continue to fluctuate and as the senior debt is floating (following maturity of the interest rate cap in January 2023), the Group are acutely impacted by increases in the SONIA rate. Further increases in rates could lead to a negative interest coverage ratio where the Group is unable to generate sufficient operating revenues to service the debt.     

•       Property valuation risks: Fluctuations in property valuation are impacted by influences outside of the Group's control. Reductions in property value could lead to a decreased NAV which could impact the share price of the Group. Furthermore, a decrease in property value would increase the LTV ratio which could lead to additional defaults on the lending covenants.    

•       Failure of investment exchange: The Company is listed on IPSX which is a relatively new investment exchange. Failure to attract more listings could lead to a reduction in capital which could consequently lead to an inability for IPSX to function as a recognised exchange. This would mean that the Company would need to find an alternative exchange to move its share capital to which could result in additional due diligence expenditure (see note 16).

Interim Management Report and Directors' Responsibility Statement

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining half of the financial year are set out in the Chairman's Statement, Asset Manager's Report and the Principal Risks and Uncertainties sections above.

Related Party Transactions

Detail of the AIFM and Asset Managers arrangements were provided in the Annual Report. There have been no changes to the related party transactions described in that report that could have a material effect on the financial position or performance of the Group. Amounts payable to the AIFM and Asset Manager in the period being reported are shown in the unaudited Condensed Consolidated Statement of Comprehensive Income.

Going Concern

This report has been prepared on a going concern basis. Note 2 sets out the Board's considerations in coming to this conclusion.

Directors' Responsibility Statement

This half-year financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-year financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The Directors confirm that to the best of their knowledge these Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and 4.2.8, namely:

•              an indication of important events that have occurred during the half year and their impact on the Condensed Consolidated Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

•              material related-party transactions in the half year and any material changes in the related-party transactions described in the last annual report.

A list of the Directors is maintained on the Company's website at https://www.themailboxreit.co.uk/ and provided in
the Company Information in the end of this Report.

This report was approved by the board of directors on 29 September 2023 and signed on its behalf by:

Stephen Barter

Chairman

29 September 2023

Condensed Consolidated Statement of Comprehensive Income

For the Half year ended 30 June 2023

					Unaudited		Unaudited
					Half year ended 30 June 2023		Half year ended 30 June 2022
			Notes		£'000		£'000
Income
Rental and other income			3		8,528		8,345
Property operating expense			4		(3,483)		(3,175)
Other income					85		47
Net rental and other income					5,130		5,217
Other operating expenses			4		(602)		(637)
Operating profit before fair value changes					4,528		4,580
Change in fair value of investment property			9		5,240		(689)
Operating profit					9,768		3,891
Finance income			5		108		287
Finance expenses			5		(4,667)		(2,928)
Profit before tax					5,209		1,250
Taxation			6		-		-
Profit after tax					5,209		1,250
Total comprehensive income for the period					5,209		1,250
Earnings per share (pence) (basic and diluted)			7		6.14 p		1.47 p
Adjusted EPS (pence) (basic and diluted)			7		0.01 p		2.64 p

The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.

All profit and total comprehensive income is attributable to the equity holders of the Company.

Condensed Consolidated Statement of Financial Position

As at 30 June 2023

					Unaudited		Audited
					30 June		31 December
					2023		2022
			Notes		£'000		£'000
Assets
Non-current Assets
Investment property			9		162,500		157,000
Current Assets
Trade and other receivables			10		6,935		7,112
Cash and cash equivalents					3,371		1,904
Derivative financial instruments			11		-		389
					10,306		9,405
Total Assets					172,806		166,405
Non-current Liabilities
Interest bearing loans and borrowings			12		6,580		-
Current Liabilities
Interest bearing loans and borrowings			12		103,981		109,494
Trade and other payables					9,055		8,930
					113,036		118,424
Total Liabilities					119,616		118,424
Net Assets					53,190		47,981
Issued share capital and reserves
Share capital			14		8,386		8,386
Retained earnings					44,804		39,595
Total reserves attributable to equity holders of the Group					53,190		47,981
Net Asset Value per share (pence)			7		62.69 p		56.55 p

The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.

These Condensed Consolidated Financial Statements of Mailbox REIT plc were approved and authorised for issue by the Board of Directors on 29 September 2023 and signed on its behalf by:

Stephen Barter

Director

29 September 2023

Condensed Consolidated Statement of Changes in Equity

For the half year ended 30 June 2023, 30 June 2022 and 31 December 2022

											Total reserves
											attributable
											to equity
		Share						Retained				holders of
		capital						earnings				the Group
		£'000						£'000				£'000
For the half year ended 30 June 2023
Balance as at 1 January 2023		8,386						39,595				47,981
Dividends paid (note 8)		-						-				-
Total comprehensive income		-						5,209				5,209
Balance as at 30 June 2023 (unaudited)		8,386						44,804				53,190
For the half year ended 30 June 2022
Balance as at 1 January 2022		8,386						77,564				85,950
Dividends paid (note 8)		-						(2,965)				(2,965)
Total comprehensive income		-						1,250				1,250
Balance as at 30 June 2022 (unaudited)		8,386						75,849				84,235
For the half year ended 31 December 2022
Balance as at 1 July 2022		8,386						75,849				84,235
Dividends paid		-						(1,914)				(1,914)
Total comprehensive income		-						(34,340)				(34,340)
Balance as at 31 December 2022 (audited)		8,386						39,595				47,981

The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statement of Cash Flows

For the half year ended 30 June 2023

						Unaudited		Unaudited
						Half year ended 30 June 2023		Half year ended 30 June 2022
				Notes		£'000		£'000
Cash flows from operating activities
Profit before tax						5,209		1,250
Adjustments for non-operating items:
Finance income				5		(108)		-
Finance expenses				5		4,277		2,641
Change in fair value of investment property				9		(5,240)		689
Change in fair value of financial instruments				11		389		-
Amortisation of tenant incentives				3		(252)		(324)
Reversal of provision on tenant receivables						(85)		(47)
Increase in trade and other receivables						2,723		(692)
Decrease in trade and other payables						(2,395)		(1,204)
Net cash generated from operating activities						4,518		2,313
Cash flows used in investing activities
Capital expenditure on investment property						(7)		(5,870)
Lease incentives - capital contributions				9		-		(514)
Dividends paid				8		-		(2,965)
Net cash used in investing activities						(7)		(9,349)
Cash flows used in financing activities
Repayment of external borrowings				12		(6,580)		-
Drawdown of external borrowings				12		6,580		-
Interest received from financial instruments				5		390		-
Bank interest received				5		22		-
Bank interest paid				5		(3,438)		(1,744)
Other finance costs				5		(18)		(39)
Net cash used in financing activities						(3,044)		(1,783)
Net increase/(decrease) in cash and cash equivalents						1,467		(8,819)
Cash and cash equivalents at start of period						1,904		10,046
Cash and cash equivalents at end of period						3,371		1,227

Notes to the Condensed Consolidated Financial Statements

1.            Corporate information

Mailbox REIT plc is a public limited company which was incorporated on 18 March 2020 and is domiciled in the UK and registered in England and Wales. The registered office of the Company is c/o Alter Domus (UK) Limited, 10^th Floor, 30 St. Mary Axe, London, United Kingdom, EC3A 8BF. The principal activity of the Group is to provide shareholders with an attractive level of income together with the potential for capital growth by investing in the Property.

2.            Significant accounting policies

2.1          Basis of preparation

These Condensed Consolidated Financial Statements for the half year ended 30 June 2023 (the 'financial statements') have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2022 ('last annual financial statements'). They do not include all of the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

The 2022 Annual Report and Financial Statements of the Group can be found at www.themailboxreit.com.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated.

The financial statements have been prepared on the historical cost basis, except for investment properties and certain financial instruments which are measured at fair value, as appropriate.

The information relating to the period is unaudited and does not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006. A copy of the statutory financial statements for the year ended 31 December 2022 has been delivered to the Registrar of Companies. The auditor's report on those financial statements was not qualified however it did identify a material uncertainty pertaining to the going concern position as a result of the debt maturity in January 2023.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in this report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and the accompanying notes.

The Directors have projected the Group's cash flows for the period up to 30 September 2024 and beyond, challenging and sensitising inputs and assumptions, giving due consideration to the Group's cash resources, loan facility, rental income, property and other operating costs, capital expenditure and distributions.

The Directors note that the Group's loan facility of £108.5m matured on 20 January 2023 and that two one-year extension options were conditionally able to be utilised. Prior to approving the initial extension, the Group received notification from the lender syndicate that a cure be made in the sum of £27.5m, following a breach in loan to value ("LTV") covenant as a result of a lender-instructed valuation in November 2022. A subsequent reservation of rights letter to formally advise that the loan was in default was later announced on 24 April 2023.

Following receipt of the reservation of rights letter, M7, as Asset Manager to the Group, began raising a loan note of up to £30.0m. This would be used to repay £27.5m of senior debt and give the Group additional working capital of £2.5m. As at 29 September 2023, £7.1m has been raised and subsequently paid down, and £1.5m has been paid out of reserves, reducing the balance of senior debt to £99.9m. Negotiations regarding a formal extension of the senior debt are ongoing and are expected to complete in parallel with the final cure payment. It is currently anticipated that there will be no change to the covenants or covenant levels as a result of the cure or extension.   

Looking forward, evaluating the position of debt covenants is of paramount importance:

(i)            Considering the debt yield ("DY") covenant, the Group has calculated and stress tested whether there is sufficient headroom above current revenue levels to maintain compliance within this covenant. Acknowledging this, the Group concluded that net revenues would need to drop by 52.2% on current levels to breach the DY covenant. As such, the Directors consider the likelihood of a DY covenant breach unlikely in the twelve months from the date of signing these condensed consolidated financial statements, given the strength and consistency of the income profile.

(ii)           Considering the LTV covenant, the cure is expected to reduce the loan facility to £81.0m which would represent an LTV of 60.0% on the lender-instructed valuation. This means that any reduction in valuation would lead to a further breach of the LTV covenant as there is no headroom. At the date of signing these consolidated financial statements, £8.6m of the cure has been paid which leaves an LTV of 74.0% on the lender-instructed valuation. While there is an expectation that the remaining £18.9m will be raised and paid in due course, there is a scenario where the Group is unable to make these payments and the LTV covenant continues to be in default. A continued breach of the LTV covenant would result in further application of default interest and the potential for the lender syndicate to call in the loan.

Moving to the valuation, the Directors consider a further reduction to be unlikely, given the conservative lender valuation from November 2022. It is noted that an independent external valuation, undertaken by Avison Young as at 30 June 2023 considered the value of the investment property to be materially higher, at £162.5m. The Directors acknowledge that the ongoing debt negotiations and future valuations may be influenced by market forces outside of the Group's control that could lead to a reduction in value and subsequent breaches of the LTV covenant.

Having paid due consideration to the Group's forecasts and projections, and the events and conditions discussed above, the Directors acknowledge that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business. However, reflecting on the continued rent collection rates, the operational strength and financial performance of the asset (as can be seen in the DY covenant) and the ability to continue to servicing debt obligations during a turbulent borrowing market, the Directors continue to adopt the going concern basis of accounting in preparing the condensed consolidated financial statements of the Group. Therefore, these financial statements do not include adjustments that would be required, should the going concern basis of preparation no longer be appropriate.

New standards, amendments and interpretations

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2022. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

2.2          Critical accounting estimates and judgements

The preparation of the financial statements requires the use of critical judgments, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. Estimates and assumptions concerning the future, and the accounting results of those estimates will, by definition, rarely equal the related actual results. In particular, the estimation of the value of investment property requires considerable judgement.

The judgements, estimates and assumptions applied in the financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the year ended 31 December 2022.

2.3          Summary of significant accounting policies

The accounting policies and methods of computation and presentation adopted in the preparation of the financial statements are consistent with those applied in the last annual financial statements.

3. Rental and other income

					Unaudited		Unaudited
					Half year ended 30 June 2023		Half year ended 30 June 2022
					£'000		£'000
Gross rental income					5,930		5,111
Spreading of tenant incentives - tenant contributions					(156)		(66)
Spreading of tenant incentives - rent free periods					408		390
Other property income* (see below)					56		601
Total rental and other income before service charge					6,238		6,036
Service charges and direct recharges (see note 4)**					2,290		2,309
Total rental and other income					8,528		8,345

All rental, service charge and direct recharge and other income is derived from the United Kingdom and from external parties.

Summary of other property income*
Lease surrender premium					-		527
Dilapidation income					48		70
License and other income					8		4
Total other property income					56		601

4. Expenses

					Unaudited		Unaudited
					Half year ended 30 June 2023		Half year ended 30 June 2022
					£'000		£'000
Property operating expenses					1,183		866
Service charges and direct recharges (see note 3)					2,290		2,309
Write off of rent receivables					10		-
Total property operating expense					3,483		3,175
Other operating expenses
Asset and Investment management fees (incl. AIFM fees)					129		211
Auditor remuneration					47		31
Operating costs					367		340
Directors' remuneration					59		55
Total other operating expenses					602		637
Total expenses					4,085		3,812
Total expenses (excluding service charges and direct recharges)					1,795		1,503
Audit remuneration
Statutory audit of Annual Report and Accounts					47		31
Total fees paid to BDO LLP					47		31

5. Finance income and expenses

					Unaudited		Unaudited
					Half year ended 30 June 2023		Half year ended 30 June 2022
					£'000		£'000
Finance income
Bank interest received					22		-
Interest received from financial instrument					86		-
Fair value gain on financial instrument					-		287
Total finance income					108		287
Finance expenses
Interest payable on external borrowings					(4,166)		(2,889)
Fair value loss on financial instruments					(389)		-
Amortisation of loan arrangement fees					(94)		-
Other finance costs					(18)		(39)
Total finance expenses					(4,667)		(2,928)

6. Taxation

					Unaudited		Unaudited
					Half year ended 30 June 2023		Half year ended 30 June 2022
					£'000		£'000
Tax charge comprises:
Analysis of tax charge in the period
Profit before tax					5,209		1,250
Theoretical tax at UK corporation tax standard rate of 25.00% (2022: 19.00%)					1,302		238
Non-taxable items					(238)		76
Expenses not deductible							14
Income not taxable							13
Corporate interest restriction							-
Utilisation of brought forward losses							38
Exempt REIT net profit					(1,064)		(379)
Total					-		-

The Group obtained REIT status on 14 May 2021, at which point any gains or losses arising from property business are exempt from UK corporation tax.

Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains and losses arising on the revaluation of the investment property.

7. Earnings per share and NAV per share

						Unaudited		Unaudited
						Half year ended 30 June 2023		Half year ended 30 June 2022
Earnings per share:
Total comprehensive income (£'000)						5,209		1,250
Weighted average number of shares (Number)						84,850,001		84,850,001
Earnings per share (basic and diluted) (pence)*						6.14 p		1.47 p
Adjusted EPS:
Total comprehensive income (£'000)						5,209		1,250
Adjustment to total comprehensive income:
Change in fair value of investment properties  (£'000)						(5,240)		689
Change in fair value of financial instrument (£'000)						389		(287)
Rental income recognised in respect of tenant contributions (£'000)						156				66
Rental income recognised in respect of rent free periods (£'000)						(408)				(390)
Amortisation of loan arrangement fee (£'000)						94		-
Non-cash interest expense (£'000)						(107)		958
Reversal of impairment provision on tenant receivables (£'000)						(85)				(47)
Adjusted earnings (basic and diluted) (£'000)						8		2,239
Adjusted EPS (basic and diluted) (pence)**						0.01 p		2.64 p
						Unaudited		Audited
						30 June 2023		31 December 2022
NAV per share:
Net asset value (£'000)						53,190		47,981
Ordinary shares (Number)						84,850,001		84,850,001
NAV per share (pence)						62.69 p		56.55 p

* The Group does not have any diluting shares.

** The adjusted earnings exclude the effect of non-cash items including changes in the fair value of investment property and financial instruments, the straight lining of rental income in respect of rent free periods and tenant contributions deferred, non-cash portion of the interest expense and provisions for impairment on rent receivables. This is a measure used by the Board to assess the level of the Group's dividend payments and is supported by cash flows. This is an Alternative Performance Measure and is not directly comparable to other companies.

Earnings per share are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period. The basic and diluted earnings per share are the same as there are currently no instruments either granted or in issue to dilute the earnings per share figure.

8. Dividends

	Unaudited Half year ended 30 June 2023		Unaudited Half year ended 30 June 2022
	£'000		£'000
Dividends declared with respect of the year ended 31 December Dividend declared and paid in respect of the quarter ended 31 December 2022	-		1,483
0.00 p per Ordinary share (31 December 2021: 1.75 p per Ordinary share)
Dividends declared with respect of the half year ended 30 June
Dividend declared and paid in respect of the quarter ended 31 March 2023	-		1,482
0.00 p per Ordinary share (31 March 2022: 1.75 p per Ordinary share)
Total dividends paid in the half year	-		2,965
Dividend declared and paid in respect of the quarter ended 31 December 2022	-		(1,483)
0.00 p per Ordinary share (31 December 2021: 1.75 p per Ordinary share)
Dividend declared and paid in respect of the quarter ended 30 June 2023	-		1,483
0.00 p per Ordinary share (30 June 2022: 1.75 p per Ordinary share)
Total dividends declared in respect of the half year	-		2,965
Total dividends declared in respect of the half year	-		3.49 p

9. Investment property

					Unaudited 30 June 2023		Audited 31 December 2022
					£'000		£'000
Investment property
At the beginning of the period / year					157,000		185,825
Additions and capital improvements					7		6,391
Revaluation of investment property					5,240		(36,438)
Movement in lease incentives					253		1,222
Fair value of investment property					162,500		157,000
Change in fair value of Investment property
Change in fair value before adjustments for lease incentives					5,493		(35,216)
Adjustment to fair value for tenant contributions paid					155		(548)
Adjustment to fair value for rent smoothing of lease income					(408)		(674)
					5,240		(36,438)

9.1 Valuation of investment property

The property has five separate uses consisting of offices, retail units, leisure/restaurants, public car park, and other (storage, auto valeting etc.). The property is held on a freehold (four) and long leasehold (one) basis.

The fair value of investment properties is determined using the direct capitalisation approach (yield method).

Independent professionally qualified external valuers, Avison Young, has performed the valuation of the investment property as at 30 June 2023 (31 December 2022: Avison Young were the valuers). Avison Young are an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued.

Further information on valuation methodologies applicable to investment property are provided in group note 2.4 and note 9 of the 2022 Annual Report and Consolidated Financial Statements.

9.2 Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolios of investment properties are:

1) Estimated Rental Value ("ERV"); and

2) Equivalent yield.

Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the yield in isolation would result in a lower/(higher) fair value measurement.

Class	Fair value £'000		Valuation technique		Significant unobservable inputs		Range
30 June 2023
Investment Property	162,500		Direct capitalisation		ERV Equivalent yield		£14,439,173 5.3% - 15.0%
31 December 2022
Investment Property	157,000		Direct capitalisation		ERV Equivalent yield		£13,030,250 5.0% - 15.0%

Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable inputs to reasonable alternatives.

	30 June 2023
	Change in ERV				Change in equivalent yield
	£'000		£'000		£'000		£'000
Sensitivity Analysis	+10%		-10%		+0.5%		-0.5%
Resulting fair value of investment property	172,117		153,478		151,565		175,036
	31 December 2022
	Change in ERV				Change in equivalent yield
	£'000		£'000		£'000		£'000
Sensitivity Analysis	+10%		-10%		+0.5%		-0.5%
Resulting fair value of investment property	166,094		148,381		146,120		169,542

Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting period.

10. Trade and other receivables

				Unaudited		Audited
				30 June 2023		31 December 2022
				£'000		£'000
Tenant receivables				796		883
Less: Provision for impairment of trade receivables				-		(41)
Other receivables				5,425		5,668
Prepayments				714		602
Total				6,935		7,112

Included within other receivables is £3.8 million (31 December 2022: £4.5 million) of cash collected and held with the property's managing agent which does not meet the criteria of cash and cash equivalents.

11. Derivative financial instruments

				Unaudited		Audited
				30 June 2023		31 December 2022
				£'000		£'000
Fair value of financial instrument				-		389

Fair value of financial instruments

The Group does not apply hedge accounting in accordance with IFRS 9. Nevertheless, interest rate caps are part of economic hedge relationships. The interest rate cap expired on 20 January 2023 and there are currently no further financial instruments that have been entered into to replace it. The Group are closely monitoring debt markets and the economic environment to determine whether entering into a new hedging arrangement would be beneficial. 

12. Interest bearing loans and borrowings

				Unaudited  30 June 2023		Audited 31 December 2022
				£'000		£'000
At the beginning of the period/year				108,500		108,500
Bank borrowings repaid in the period/year				(6,580)		-
Mezzanine borrowings drawn in the period/year				6580
Total interest bearing loans and borrowings drawn				108,500		108,500
At the beginning of the period/year				109,494		107,514
Bank borrowings repaid in the period/year				(6,580)		-
Mezzanine borrowings drawn in the period/year				6,580		-
Loan issue costs incurred in the period/year				(60)		-
Effective interest rate adjustments				(107)		452
Amortisation of loan issue costs				94		1,230
Movement in accrued interest				1,140		298
At end of period/year				110,561		109,494
Interest bearing loans and borrowings < 1 year				101,920		108,500
Interest bearing loans and borrowings > 1 year				6,580		-
Total at end of period/year				108,500		108,500

The Group's £108.50 million loan facility matured on 20 January 2023. Following a lender valuation in November 2022, the Group breached its LTV covenant and fell into default, requiring a cure of £27.50 million. The Group is in the process of raising a loan note which will primarily be used to cure the default, reducing the LTV to 60.0%. As at 30 June 2023, £6.58 million had been raised and paid down, leaving £20.92 million still payable. Following final settlement of the cure, which will reduce the senior debt facility to £81.00 million, an extension with the lender is expected to be agreed.

13. Commitments

Capital commitment

No new capital commitments.

14. Share capital

	Unaudited				Audited
	For the period ended 30 June 2023				For the year ended 31 December 2022
		Number of Ordinary Shares					Number of Ordinary Shares
	£'000				£'000
Ordinary Shares issued and fully paid
At the beginning of the period/year	8,386		84,850,001		8,386		84,850,001
Additions	-		-		-		-
Disposals	-		-		-		-
At the end of the period/year	8,386		84,850,001		8,386		84,850,001

15. Transactions with related parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Asset Manager & Alternative Investment Fund Manager (AIFM)

M7 Real Estate Ltd was appointed as Asset Manager and M7 Real Estate Financial Services Ltd was appointed as AIFM on 22 September 2020. The Asset Manager and the AIFM are related to the Group by virtue of common ownership. Total fees of £0.13 million (30 June 2022: £0.21 million) were accrued for the Asset Manager and AIFM during the period all of which remains unpaid as at 30 June 2023.

Directors

Directors of the Group are considered to be the key management personnel. Directors' remuneration of £59,342 (30 June 2022: £54,577) was charged during the period. The Directors hold a total of 55,000 shares in the Company.

16. Events after reporting date

Debt extension

An additional £2.00 million has been paid toward the settlement of the cure, of which £0.50 million was from the raising of the loan note, and £1.50 million was from existing cash reserves. This leaves a balance payable of £18.92 million which the Directors are hopeful will come through shortly. Following final settlement of the cure, which will reduce the senior debt facility to £81.00 million, an extension with the lender is expected to be agreed.

IPSX

The International Property Securities Exchange ("IPSX"), the market on which the shares in the Company are quoted and traded, has started winding down operations. IPSX states that it has sufficient capital for an orderly wind-down, anticipating this to take several months and will continue trading through the wind-down period.

The Board, in consultation with its Asset and Investment Manager and its Corporate Broker, is in discussions with an alternative platform to move the shares of the Company to and expects to make a final decision shortly. A further announcement regarding the new trading and listing venue will be made in due course.

Appendix 1: Company Information

Board Composition

STEPHEN BARTER Chairman •              40 years' experience in real estate. •              Until March 2018, he was Chairman of Real Estate Advisory at KPMG. •              Previously, he was UK Chief Executive Officer of Qatari Diar, the property arm of the Qatar Investment Authority, Group Projects Director at Grosvenor, the Duke of Westminster's private international property company (and a member of its Executive Committee), Head of European Real Estate at Babcock & Brown and an equity partner at Richard Ellis (now CBRE). •              Other current appointments: Stephen is a director of Gabrieli, a non-profitable organisation, H3 Tradeco Limited and Chairman of his own firm, Wilton Capital Advisers. Stephen is also Chair of the West Midlands Combined Authority's Public Land Task Force and a Special Adviser to Transport for London, Network Rail and (via KPMG) the Foreign Commonwealth and Development Office.

MICKOLA WILSON Non-Executive Director •              A highly accomplished senior executive with over 20 years' experience operating at board level in both executive and non-executive positions. •              Prior to joining Seven Dials she was CEO of Teesland Plc, a listed property fund and asset management company, with over £5bn of funds under management across UK and Europe. •              Other appointments: Mickola is co-owner and Director of Seven Dials Fund Management Limited and its group companies, and a Non-Executive Director of KMPT (KENT AND MEDWAY NHS AND SOCIAL CARE PARTNERSHIP TRUST).

IAN WOMACK Non-Independent Non-Executive Director •              Over 40 years' experience in the real estate sector and retired as Chief Executive of Real Estate at Aviva Investors in June 2015. •              Spent majority of his career at Aviva Investors in various roles within the Real Estate division before being appointed to lead the business in 1998. •              He is an active and engaged participant in the broader Real Estate community and was Chairman of the highly respected Investment Property Forum from 2006 to 2007. •              Other appointments: Ian is a director for Bennbridge group, Grosvenor Liverpool Limited, Bennelong Funds Management Group Pty Ltd and for his own consulting company Womack Partners Limited. He is also trustee of the charity, The Story of Christmas. Ian is also a non-independent non-executive director to M7 Regional E-Warehouse REIT plc and an independent member of the advisory board of M7 Box+ II LP, a company managed by the Asset Manager.

Company secretary	Alter Domus (UK) Limited 10th Floor, 30 Mary Axe, London, United Kingdom, EC3A 8BF
Company number	12524041
Registered office	c/o Alter Domus (UK) Limited 10th Floor, 30 Mary Axe, London, United Kingdom, EC3A 8BF
Alternative Investment Fund Manager	M7 Real Estate Financial Services Ltd 10 Queen Street Place, London, United Kingdom, EC4R 1AG
Asset Manager	M7 Real Estate Ltd 10 Queen Street Place, London, United Kingdom, EC4R 1AG
Financial PR Advisor	Tavistock 18 St Swithin's Lane, London EC4N 8AD
Lead Advisor and Market Maker	WH Ireland 24 Martin Lane, London, EC4R 0DR [phone]
Registrar	Equiniti Limited Aspect House, Spencer Road, Lancing, West Sussex, United Kingdom, BN99 6DA Helpline: [phone] Lines are open Monday - Friday from 8.30 a.m. - 5.30 p.m. (excluding bank and public holidays in England and Wales) Website www.shareview.co.uk
Approved Valuer	Avison Young 3 Brindley place, Birmingham, B1 2JB [phone]
Property	Mailbox Birmingham, an office-led mixed-use asset located at Royal Mail St, Birmingham, United Kingdom, B1 1RS
Company website	https://themailboxreit.com

 

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