Re-letting the refurbished 30 Lombard Street site helped boost McKay Securities' (MCKS) net rental income by more than a fifth in the six months to September. However, management is considering selling the building, which has been let on a 15-year lease, in a bid to take advantage of demand from overseas investors in central London office properties. “That long[-term] income makes it a very attractive asset,” says chief executive Simon Perkins.
In addition to new lettings, five rent reviews were re-settled at an average 12.6 per cent uplift over the previous passing rent but at rents equivalent to estimated rental values. A portfolio valuation increase of one per cent was driven by industrial assets, as office valuations rose just 0.3 per cent.
However, supply constraints mean the market backdrop remains attractive. Take-up of offices within the south-east so far this year has been almost seven per cent behind the 10-year average across the market and the company estimates the full-year deficit will be around 10 per cent. For now, McKay hopes a lack of capacity will mean that vacancy rates across all properties - which fell to 7.8 per cent across the market - remain low.
Brokerage Peel Hunt forecasts adjusted net asset value of 331p at the March 2020 year-end, rising to 335p a year later.
| MCKAY SECURITIES (MCKS) | ||||
| ORD PRICE: | 240p | MARKET VALUE: | £ 226m | |
| TOUCH: | 240-245p | 12-MONTH HIGH: | 265p | LOW: 215p |
| DIVIDEND YIELD: | 4.3% | TRADING PROP: | £79m | |
| DISCOUNT TO NAV: | 28% | |||
| INVESTMENT PROP: | £492m | NET DEBT: | 54% | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 331 | 11.4 | 12.1 | 2.8 |
| 2019 | 333 | 11.2 | 10.8 | 2.8 |
| % change | +1 | -2 | -11 | - |
| Ex-div: | 28 Nov | |||
| Payment: | 2 Jan |
