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RNS Number : 4618G
McKay Securities PLC
02 March 2018
McKAY SECURITIES PLC ("the Group" or "McKay")
TRADING UPDATE
LETTINGS PROGRESS CONTINUES TO UNLOCK PORTFOLIO REVERSION
McKay Securities PLC, the only UK REIT specialising exclusively
in the London and South East office and industrial markets,
announces its trading update for the period 1(st) October 2017 to
1(st) March 2018.
Simon Perkins, CEO of McKay, commented:
"Following a positive half year, letting progress has continued
to be strong and released further income, contributing to our
strategic objective of delivering earnings and capital growth. Our
pure focus on the resilient office and industrial markets of London
and the South East continues to underpin this objective.
"All of our lettings highlight the importance of providing high
quality floorspace and at Prospero, Redhill the decision we made to
develop this new office building on a speculative basis has paid
off.
"Today we are also pleased to announce the commencement of our
redevelopment scheme at Brunel Road, Theale for a single 134,430 sq
ft high bay warehouse to be completed in Spring 2019, which we
expect to generate strong interest from e-commerce and logistics
occupiers."
Crystallisation of portfolio reversion generating earnings
growth
-- Thirteen open market lettings completed at ERV over the
period, at a combined contracted rent of GBP0.88 million pa.
-- Two further lettings agreed conditional on completion of
ongoing landlord's works, adding an additional
GBP0.59 million pa.
-- Continued letting progress at Prospero, Redhill, with leases
signed for the ground floor (at ERV), and the majority of the first
floor (1.7% ahead of ERV) conditional on sub-division works. Both
leases are for 15 year terms with tenant breaks at year 10, let at
rents of GBP0.35 million pa (GBP30.00 psf) for the ground floor and
GBP0.26 million pa (GBP30.50 psf) for the part first floor. This
just leaves the balance of the first floor and the second floor to
let, with encouraging interest.
-- At the Mille, Brentford, lettings completed on the first and
second floors (16,624 sq ft), conditional on upgrading works. This
converts legacy profit-sharing management agreements with an
existing serviced office tenant into new institutional 10 year
leases at a combined contracted rent of GBP0.33 million pa
(GBP20.00 psf) with fixed uplifts at first review to GBP25.00 psf
(ERV GBP21.50 psf).
-- At Corinthian House, Croydon, a 47.4% rental increase was
secured on the fourth floor (4,497 sq ft), which was re-let on
lease expiry with no void at GBP0.13 million pa (GBP28.00 psf). In
addition, surrender by the tenant of the 7(th) floor (4,623 sq ft),
paying GBP17.30 psf, and simultaneous grant of a new 10 year lease
of part of the recently refurbished 8(th) floor at GBP30.00 psf.
This was achieved at ERV, and has enabled refurbishment of the
dated 7(th) floor.
-- Across the portfolio 77.8% tenant retention at lease
break/expiry, including five lease renewals with a combined
contracted rent of GBP0.22 million pa; 33.9% ahead of prior rent
and 12.6% ahead of ERV.
-- Portfolio occupancy (excluding developments) increased to 94% (31(st) March 2017: 93.7%).
Significant reversion maintained following disposals and
commencement of Theale redevelopment
-- Freehold disposal of Pinehurst Park, Farnborough completed at
GBP5.88 million following the exchange of contracts in February
2017, crystallising a 71.9% return on cost since acquisition in May
2012.
-- Completion of the freehold disposal of Albion House, Newbury
for GBP1.24 million following the exchange of contracts in
September 2017; 43.0% ahead of book value as at 31(st) March 2017.
Further disposals are under consideration.
-- Total portfolio contracted rent of GBP24.02 million pa
(30(th) September 2017: GBP24.66 million), lower on account of the
loss of income of GBP0.60million pa from disposals and GBP0.75
million pa on lease expiry ahead of redevelopment at Theale.
-- Across the portfolio, significant 38.3% reversion of GBP9.21
million retained (30(th) September 2017: 38.2%/ GBP9.43
million).
Development progress
-- Positive progress made within the selective development
programme of prime assets in established locations, set to deliver
further income and capital gains.
-- With the continued lettings progress over the period, at
Prospero, Redhill, (50,370 sq ft) the Group's most recently
completed office building is now 64% let.
-- Construction work at 30 Lombard Street, EC3 (58,000 sq ft)
remains on programme to deliver a new, high quality scheme in this
highly regarded core City of London location in mid-2018. Direct
competition is limited, and the marketing campaign continues to
generate occupier interest in both the building as a whole and on a
floor by floor basis.
-- At Brunel Road, Theale, planning consent was secured in
October 2017 to increase the floor space on site by up to 38.8%
through the redevelopment of the existing warehouse building with
either a single high bay warehouse of 134,430 sq ft or four
detached buildings totalling 117,700 sq ft. As anticipated, the
existing tenant vacated the property in February 2018, having paid
a years' rent of GBP0.75 million as a surrender premium. Following
an early marketing campaign, McKay has taken the decision to
progress with the single warehouse scheme on a speculative basis to
maximise the site's potential, adjacent to Junction 12 of the M4
motorway on the western outskirts of Reading. The demolition
contract has been placed, and works will commence this month with
scheme completion anticipated in spring 2019.
Sound and stable financial position
-- Drawn debt of GBP153.00 million (30(th) September 2017:
GBP149.00 million) with undrawn facilities of a further GBP27.00
million.
-- Loan to value of 34.2% (based on 30(th) September 2017 values).
-- Weighted average length of debt: 5.7 years.
-- Weighted average cost of debt: 3.9% (6 months to 30(th) September 2017).
Date: 2nd March 2018
For further information, please contact:
McKay Securities PLC FTI Consulting
Simon Perkins,CEO Dido Laurimore, Tom Gough, Ellie Sweeney
Giles Salmon, CFO 0203 727 1000
0118 950 2333
About McKay Securities
McKay Securities PLC is a commercial property investment company
with Real Estate Investment Trust (REIT) status, listed on the main
market of the London Stock Exchange. It specialises in the
development and refurbishment of good quality office and industrial
building within established and proven markets of London and South
East England. The portfolio, which was last valued at GBP453
million (30(th) September 2017), now comprises 34 properties in
strong and established areas which deliver diversity in terms of
both sector and location.
This information is provided by RNS
The company news service from the London Stock Exchange
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