Member Article

McKay Securities sees growth following year of strategic M&A activity

McKay Securities, the Real Estate Investment Trust (REIT) specialising in South East and London office and industrial property, has seen steady growth for the year ending 31 March 2015.

Stats

In February 2014, McKay set out strategy for growth of £86.71 million Capital Raising. Its implementation over the last year has delivered ‘a significant increase’ in the value of the group’s property portfolio, as it continues to make strategic acquisitions and disposals

McKay saw pre-tax profit dip to £33.2m from £38.2m for the previous year, with a total comprehensive income for the year of £32.7m from £38.6m.

The group received £14.9m net income from investment properties, compared to £12.7m for 2014 as gross rents and service charges also increased to £21.4m to £16.8m.

Analysis

Earlier this month, the group completed a debt financing, from £155m to £175m, with Aviva Commercial Finance Ltd introduced as a new lender and relationships maintained with three of the group’s four lending banks.

The Capital Raising has also provided sufficient resources to allow us to commit to two larger office projects already in the portfolio in the City of London and Redhill. In addition the acquisition of 9 Greyfriars Road, Reading referred to above has added a third project. Works have commenced on all three schemes, which have a combined ERV of £5.56 million pa.

66 Wilson Street, EC2 was let as a whole on a 10 year lease at £0.55 million pa, which was double the rent prior to refurbishment, 32.0% ahead of estimates on acquisition in 2012 and 17.3% ahead of ERV at the 30th September 2015 valuation.

At Maidenhead, rental values continue to recover and there is interest in part of the remaining space to let which consists of Building 6 and the first floor of Building 4.

At 329 Bracknell, demand has been encouraging and 70% of the building is either let or in solicitors’ hands at rents ahead of assumptions.

Comment

David Thomas, Chairman of McKay Securities PLC said:

“Our objective for the year was to allocate the proceeds of the Capital Raising to allow the Group to benefit from the anticipated positive trends in the office and industrial markets of the South East and London. To achieve this, we identified the potential to acquire properties at an opportune time in the market cycle, to make an early start on four refurbishment schemes and to accelerate a number of larger portfolio development projects.

We are pleased that substantial progress has been made on all fronts. Our returns have been enhanced by our increased exposure to these markets, which have improved as we anticipated. Total shareholder return over the year was 24.8%.

The prospects for future economic growth look encouraging, particularly with the stability of political continuity. This, in turn, is likely to maintain the recent positive trends we have seen in our markets over the year ahead.“

Summary

McKay has continued to take advantage of the strengthening market in London and the South East, making significant acquisitions and disposals to adapt to the ever-changing property climate.

This was posted in Bdaily's Members' News section by Ellen Forster .