Reading: McKay Securities delivers 21% uplift in rental income

McKay Securities plc, the only Real Estate Investment Trust (REIT) specialising exclusively in the London and South East office, industrial and logistics markets, has announced its half-year results for the six months ended September 30, 2019.

Financial Highlights

• Gross rental income up 20.8% to £12.61 million (September 2018: £10.43 million), benefitting from lettings secured on recent development projects
• Net rental income of £11.27m, up 22.8% (September 2018: £9.17m)
• Adjusted profit before tax up 17.6% to £5.08m (September 2018: £4.32m)
• IFRS profit before tax of £11.17m (September 2018: £11.40m)
• NAV (EPRA) up 2.1% to 333p per share (March 2019: 326p)
• NAV (IFRS) up 0.6% to 333p per share (March 2019: 331p)
• Interim dividend of 2.8p per share, in line with the same period last year

Portfolio Highlights

• Portfolio valuation of £492.14m, generating a 1.0% (£5.06m) valuation surplus and outperforming the MSCI index which fell by -1.1%
• 1.9% increase in rental value, taking portfolio ERV (net) to £33.30m pa (MSCI: 0.1%)
• 10 open market lettings (2.3% ahead of ERV) completed at a combined contracted rent of £490,000 pa, in addition to six lease renewals at 5.3% uplift to prior contracted rents
• Opportunistic disposal of Station Plaza, Theale for £8.23 million, representing a 32.7% premium to March 2019 book value
• Development of a new 134,430 sq ft logistics warehouse at Junction 12 of the M4 at Theale underway with completion due in early 2020
• Substantial 24.3% portfolio reversion of £6.51 million pa, well placed to deliver further value and income growth, building on track record of delivery
• New debt facility secured providing an additional £55.00 million of firepower for acquisitions and portfolio expenditure
• Fully in-house managed portfolio, with £3.79 million of expenditure over the period on refurbishment and upgrading of properties at lease expiry to deliver high quality product into supply constrained markets
• Recognition of ESG efforts with a GRESB (Global Real Estate Sustainability Benchmark) Green Star award for the fourth year running

Simon Perkins, chief executive of Reading-headquartered McKay, said: “Our consistent focus on our core office, industrial and logistics sectors across London and the South East, combined with successful development projects and the intensive in-house management of our portfolio, can be credited for the delivery of another positive set of results, with gains achieved across our key metrics.

“We do not take our ability to out-perform the market in the current environment for granted, and with the benefit of increased headroom have no intention of slowing down the active programme of portfolio initiatives that has helped McKay’s assets stand out in a competitive landscape. The letting of our development and refurbishment schemes, the recycling of capital and the ability to utilise our increased loan facilities provide us with the opportunity to continue building on the substantial growth we have delivered over recent years, and unlock an attractive reversion.

“We remain wary of the political uncertainty affecting our operating environment and hope that some clarity will provide the basis for a more positive economic outlook. In the meantime, our focus on the strongest regions and sectors of the UK and their prospects to enhance our portfolio growth once confidence improves, provides us with an encouraging platform for the future.”