Reading: McKay Securities well placed post-COVID

McKay Securities plc, the only Real Estate Investment Trust (REIT) specialising exclusively in the South East and London office, industrial and logistics markets has announced its half-year results for the six months ended September 30, 2020.

Financial highlights

• Adjusted profit before tax up 3.7% to £5.27 million (30 September 2019: £5.08m)
• Adjusted earnings per share increased by 3.9% to 5.59 pence (30 September 2019: 5.38 pence)
• IFRS loss before tax of £15.02m (30 September 2019: profit £11.17m), due to the valuation deficit compared with a surplus in the comparable period
• IFRS loss per share of 15.93 pence (30 September 2019: profit 10.83 pence)
• Gross rental income up 1.1% to £12.75m (30 September 2019: £12.61m), benefiting from active, inhouse portfolio management
• Strong rent collection throughout the period with 96% of rents for the year to date (three quarters) received or agreed
• Portfolio valuation of £438.95m (31 March 2020: £510m), resulting in a 3.4% valuation deficit of £15.64m (post sale of 30 Lombard Street, EC3)
• Like for like portfolio ERV down 2.1% to £31.42m pa
• NTA (EPRA) down 4.9% to 313 pence per share (31 March 2020: 329 pence)
• NAV (IFRS) down 4.9% to 312 pence per share (31 March 2020: 328 pence)
• Interim dividend of 2.8 pence per share, in line with the same period last year

Operational and strategic highlights

Largest asset sold

• Sale of 30 Lombard Street, EC3 completed during the period (13.2% of portfolio value as at 31 March 2020)
• 4.16% yield / £70.1m cash proceeds (net of sale costs)
• LTV reduced to 30.3% (31 March 2020: 37.6%)

Largest development let

• 135 Theale Logistics Park (134,430 sq ft) completed: April 2020
• Fully let to Amazon: September 2020

Enhanced resilience and scope for growth

• Balance sheet transformed
• £10m recycled into Willoughby Logistics Park, Bracknell, September 2020 at a 5.6% yield
• £108m of undrawn facilities for new acquisitions and other opportunities
• £4.2m pa (15.2%) portfolio reversion remaining 

Simon Perkins, chief executive of Reading-based McKay, said: “We have achieved two significant milestones for the business during the period. Completion of the sale of our largest asset, 30 Lombard Street, EC3 for a headline price of £76.5 million has transformed our balance sheet and provided us with enhanced resilience and headroom for new acquisitions and other opportunities. Additionally, the letting of 135 Theale Logistics Park, our largest development, to Amazon on excellent terms, and our acquisition of Willoughby Logistics Park, Bracknell will both contribute to our net rental income and increase our portfolio weighting in the industrial and logistics sector to 25.1%.

“The relationships that we have built up with our occupiers through our direct in-house portfolio management approach have continued to be of great benefit. All our multi-let properties have remained open for business, and 96.0% of rent due for the year to date has so far either been received or agreed. Many businesses were planning a return to the office in September, prior to the government reverting to a home working policy. Once this policy is lifted, we see a return to the office gathering momentum. There will be changes in working practices, and our portfolio is ideally placed to benefit from a shift towards both decentralisation from central London and local working.

“In the meantime, the outlook remains dominated by the speed at which the Covid-19 pandemic passes and the impact it has on the economy. With the achievements of the last six months, and our consistent focus on the UK’s strongest regions and sectors, we are in a strong position to navigate this period of uncertainty, and in due course capitalise on future opportunities.”