McKay stagnates

But this picture of stagnation masks a divergence in the underlying portfolio, which is split between London and the south-east. McKay's London properties rose 2.6 per cent in value, but these gains were offset by losses elsewhere as lease contracts crept inexorably towards expiry or break.

The risk that tenants exploit these so-called 'lease events' to move out or renegotiate rents is a serious one, with implications both for cash flow and property values. McKay secured eight new lettings and two lease renewals in the six-month period, but at a discount to the previous estimates of rental value. Nor were these lettings sufficient to stop the portfolio void rate rising from 10.9 per cent to 13.5 per cent. Lloyds Banking Group exercised a break option on a sizeable office on Blackfriars Road, which should be easier than most to fill, but McKay will still have to shell out for a refurbishment job to make the office attractive to new occupiers.

As usual, McKay's statutory results were heavily skewed by accounting losses on its interest-rate hedges, as the prospect of rate increases grew more distant over the period.

House broker Oriel Securities downgraded its March 2012 adjusted NAV estimate from 234p to 225p.