TIDMMCKS
RNS Number : 7838Y
McKay Securities PLC
08 March 2017
McKAY SECURITIES PLC ("McKay" or "the Group")
TRADING UPDATE
1(st) October 2016 to 3(rd) March 2017
McKay Securities PLC, the only UK REIT specialising entirely in
the South East and London office and industrial markets, today
announces a trading update for the period 1(st) October 2016 to
3(rd) March 2017.
Commenting on trading, Simon Perkins, Chief Executive of McKay
said:
"At the half year we reported good progress towards our
objective of realising the substantial income potential from our
portfolio, and I am pleased to say this has gathered further
momentum.
The development of Prospero, our new office building in Redhill,
was completed in November and we have recently announced our first
letting on excellent terms, reflecting the quality and appeal of
the scheme. Recent refurbishment initiatives and our proactive
in-house management have secured new lettings and lease renewals,
also at rents ahead of valuation assumptions. Our recycling of
assets has continued with the exchange of unconditional contracts
for the sale of Pinehurst Park, Farnborough for GBP5.88 million,
generating a return on cost of 71.9%.
Across our markets, economic and political uncertainty since the
BREXIT vote has increased occupier and investor sensitivity to
risk. Despite this, occupier take up in the South East office
market in 2016 held up well, totalling 1.96 million sq ft; 8.7%
lower than 2015 but 28.1% ahead of 2014. The M25 and M4 regions
have vacancy rates well below the long term average, and occupier
demand for office space remains steady and focused on new and Grade
A availability - positive market conditions for our recently
completed schemes in Redhill and Reading, which continue to
generate interest."
Leasing Activity
Ten open market lettings were completed over the period at a
combined contracted rent of GBP0.73 million pa; 2.8% ahead of
September 2016 valuation assumptions (ERV). In addition to the
previously announced letting at Redhill referred to below, new
letting activity took place at the following properties.
-- One Crown Square, Woking continued to attract tenants
following completion of the refurbishment of the 5(th) and 6(th)
floors and the upgrading of the reception and other common areas.
Seven new leases were signed, the most significant being the entire
6(th) floor (7,850 sq ft) on a 10-year lease with no break, and
only 1,621 sq ft remains to let on the 5(th) floor. Rents achieved
were in the region of GBP24.00 psf (at ERV), maintaining rental
growth in the building.
-- At The Mille, Brentford, the rental tone has also increased
with the latest lettings. Following completion of the refurbishment
of half the 4(th) floor and the whole of the 6(th) and 7(th)
floors, the refurbished 4(th) floor (3,940 sq ft) has been let at
GBP26.00 psf. This is a 30.0% increase in ERV from the date of
acquisition in 2014 and 4.2% ahead of current ERV.
-- At 329 Bracknell, the provision of smaller suites continues
to meet occupier demand. The most recent letting to Carillion Plc
(1,744 sq ft) achieved a rental high for the building of GBP24.50
psf; 9.2% ahead of ERV.
At lease break and expiry, a high tenant retention rate of 78.9%
was maintained, securing a combined contracted rent of GBP1.12
million pa. This included the renewal of three leases that expired
over the period, where the combined contracted rent achieved of
GBP0.73 million pa was 4.9% ahead of ERV and 15.7% ahead of the
previous passing rent.
-- The most significant renewal was at Gainsborough House,
Windsor (18,660 sq ft), where a 10-year lease extension has
increased the passing rent by 12.8% to GBP0.58 million pa; 4.8%
ahead of ERV.
Development Programme
The development of Prospero, Redhill completed in November 2016,
providing the only new build office floor space available to let in
this well-established market. The building, totalling 50,370 sq ft
on ground and three upper floors, has achieved BREEAM 'Excellent'
and EPC A ratings. The early letting of the third floor (10,643 sq
ft) has been achieved to Morrisons Solicitors LLP on a 10-year
lease term (without break). The rent of GBP0.33 million pa,
equivalent to GBP31.00 psf, is in excess of ERV and represents a
new rental high for Redhill.
Marketing of the remaining floors at Prospero, and at 9
Greyfriars Road, Reading (39,620 sq ft) continues to generate
encouraging interest.
The redevelopment of 30 Lombard Street, EC3 remains on programme
for delivery by mid 2018. Letting agents have been appointed, and
will be implementing a formal marketing campaign for this high
quality City core scheme (totalling 58,000 sq ft).
Disposals
Unconditional contracts for the sale of the Group's remaining
freehold interest at Pinehurst Park, Farnborough were exchanged in
February 2017 for GBP5.88 million, representing an 11.5% premium to
book value. The purchaser has paid a non-returnable GBP1.00 million
deposit, and the Group will retain income through to completion on
28(th) November 2017. Net disposal proceeds from Pinehurst Park
will total GBP6.36 million, representing a 71.9% return on cost. In
addition, the Group will have received rental income totalling
GBP3.34 million since acquisition.
Finance
In December 2016, the notional value of the Group's interest
rate swap was reduced by GBP12.00 million to GBP33.00 million at a
cost of GBP5.08 million, with an additional contribution by the
counterparty bank. Further action is kept under regular review.
Drawn debt increased by GBP6.00 million over the period to
GBP136.00 million, mainly due to capital expenditure on development
and refurbishment projects and the swap reduction cost. Headroom
available under the loan facilities is currently GBP39.00
million.
Loan to value, based on the last valuation at 30(th) September
2016, increased marginally to 32.9%. The next portfolio valuation
at 31(st) March 2017 will be reported with the year end results in
May 2017.
-ends-
Date: 8(th) March 2017
For further information, please contact:
McKay Securities PLC Capital Access Group
Simon Perkins, CEO Scott Fulton / Jessica Bradford
Giles Salmon, CFO 020 3763 3400
0118 950 2333
This information is provided by RNS
The company news service from the London Stock Exchange
END
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