Interim Results - McKay Securities PLC · BREEAM Excellent target ... March 2019 326pps 34.6 % LTV...
Transcript of Interim Results - McKay Securities PLC · BREEAM Excellent target ... March 2019 326pps 34.6 % LTV...
Interim Results to 30th September 2019
MCKAY / NOV 2019
Heading
02
Simon Perkins
CEO
Giles Salmon
CFO
Tom Elliott
Property Director
Management teamReview of the period 3
Financial review 5
Portfolio review 10
Market review 22
Outlook 25
Appendix 26
Interim Results to 30th September 2019
The only REIT specialising in the office, industrial and logistics markets of London and the South East.
MCKAY / NOV 2019 02
MCKAY / NOV 2019 03
492.1portfolio
value(1.0%/£5.1m
surplus)
Positive period, with gains across all key metrics
£m
• Profit up 17.6%, with recent lettings driving strong growth in rental income
• NAV/share (EPRA) up 2.1% to 333 pence, benefiting from valuation and disposal surpluses
• Active in-house management delivering gains ahead of the MSCI benchmark index:
*1.0% (£5.1m) valuation surplus (MSCI: -1.1%)
*1.9% ERV growth to £33.3m (MSCI: 0.1%)
• Substantial 24.3% (£6.5mpa) reversionary potential
• Market conditions stable, but subdued
MCKAY / NOV 2019 04
84%reduction in
carbon footprint from 2017/18
Delivery
• Early adopter
• At the heart of everything we do
• Revised framework and updated strategy concluded in April 2019
• GRESB Green Star 2016/17/18/19
• EPCs: 99.5% E or above
• All developments meeting and exceeding BREEAM Excellent target
• Regular stakeholder engagement
• Positive corporate governance endorsements
Our sustainability framework
MCKAY / NOV 2019 04
05
+17.6% +2.1%
Financial highlights
Adjusted profit NAV (EPRA)
Sept 2018 £4.3m
March 2019 326pps
34.6%LTV
March 2019 33.3%
MCKAY / NOV 2019 05
September 2019 September 2019 September 2019
£5.1m 333pps
MCKAY / NOV 2019 06
NAV (EPRA) pps
March 2019
0
50
100
150
200
250
300
September2019
326p
333p
Valuationgain
4
Adjustedprofit
Profit on disposal
Dividend Other: IFRS 2 adjDeferred tax adj
2
5
(7)
3
333up 2.1%
pps
Dividend (per annum)
2019: 10.2pps
2018: 10.0pps
2017: 9.0pps
2016: 8.8pps
2015: 8.7pps
%Adjusted profit before tax 17.6
%
MCKAY / NOV 2019 07
Up
Sept 2018
Grossrents
InterestSurrender premiums
Netproperty costs
Admin Sept2019
£ m
illion 5.08(0.14)(1.32) (0.01)
4.32
2.17 0.06
Improved loan facilities and increased headroom from refinancing
1. LTV: Net debt as a % of portfolio value
MCKAY / NOV 2019 08
50
100
150
200
250
£ m
illio
n
March 2019 September 20190
165
65 65
Drawn
Fixed Total
facilities
Drawn
Fixed Total
facilities
190
173
245
LTV 33.3%
WACD: weighted average cost of debt, at current rates
WACD 3.3%
LTV 34.6%
WACD 3.1%
3.0%
fully drawn cost of debt
• Portfolio growth enabling increase in loan facilities
• April 2019: A new £180m RCF (club) signed, and three bilateral loans of £125m repaid
• Total facilities up £55m to £245m
• WALD 6.1 years
• WACD fully drawn 3.0% (at current rates)
• Provides an additional £40m for acquisitions / portfolio cap ex
• LTV1 : 34.6% (March 2019: 33.3%)
Heading
Poyle
Croydon
Redhill
Crawley
Leatherhead
Folkestone
Newbury BracknellTheale
FleetFarnborough
Woking
Maidenhead
Banbury
Reading
Weybridge
Windsor Staines
WimbledonBrentford
LondonO
ffice
s
25%
Other
5%Industrial
18%
South E
ast O
ffice
s
52%
MCKAY / NOV 2019 09
• 32 Properties
• Established towns
• Transport hubs
• Internally managed from Reading HQ
Regional strength & sector focus
Office Industrial Other
492.1m
£
portfolio value
Well-placed portfolio with growth prospects
Sept 2019 March 20191
Substantial reversionPortfolio ERV £33.3m pa £32.7m pa
Less: Contracted rents £26.8m pa £26.3m pa
Reversion £6.5m pa £6.4m pa
6.5m pa
£
24% portfolio reversion
MCKAY / NOV 2019 10
Sept 2019 March 2019
Assets 32 33Average lot size £15.4m £14.6m
Occupancy
inc dev 87.1% 87.9%
exc dev 91.1% 91.0%
WAULTTo expiry 5.9 6.1
To break 4.8 5.1
Valuation yieldsInitial (topped-up) 5.1% 5.3%
Reversionary 6.3% 6.6%
Net equivalent 5.7% 5.7%
1. Like for like
Heading
MCKAY / NOV 2019 11
Delivering portfolio potential
High occupier retention• In-house management / strong relationships
• 75.0% tenant retention at lease break / expiry
Portfolio gains• 1.0% (£5.1m) valuation surplus
• 1.9% growth in ERV to £33.3m pa1
• 3.4% total property return
• Outperformance of MSCI index (All property)2
• Income generation ahead of ERV
Disposal: Station Plaza, Theale 32.7% ahead of book value
Development: Approaching PC Theale Logistics Park
1. Like for like2. See appendix
MCKAY / NOV 2019 12
10 open market lettings• £0.49m pa combined rent• 2.3% ahead of ERV
Significant rent reviews• £1.65m pa agreed at ERV• 12.6% uplift over passing• £0.24m backdated income
75% tenant retention• 6 lease renewals• £0.43m pa• 5.3% uplift over passing
Delivering portfolio potentialIncome generation from proactive asset management
One Crown SquareWoking50,190 sq ft
Sopwith DriveWeybridge63,140 sq ft
McKay Trading EstatePoyle73,955 sq ft
Including:
MCKAY / NOV 2019 13
Mallard Court, Staines
24%pre-let
Reception, 1st and 3rd floors (11,340 sq ft)
• PC August 2019
• Latest technology – building app for occupiers
• Part 1st floor exchanged agreement to lease ahead of ERV
Pegasus 2, Crawley Whole building (12,720 sq ft)
• PC July 2019
• Ground floor pre-let at new record rent
Delivering portfolio potentialRefurbishments completed
Combined ERV: 20.5% of portfolio void (excl dev)
MCKAY / NOV 2019 14
Occupiers want…
• Ease of occupation
• Minimal capital expenditure
• Flexibility
• Customer service
• Communal breakout areas
• Connectivity
McKay offers…
• Short form leases
• Fitted out – accelerated occupation
• Flexible lease terms
• Directly managed by McKay
• Kitchen / bookable meeting rooms /
breakout space
• Fibre enabled
Delivering portfolio potentialMeeting occupier trends
Substantial income potential remaining
Contracted rent
ERV £33.3m pa
September 2019
Developmentvoid
Portfolio void
Renewal/
review
£1.5m pa
£2.8m pa
£2.2m pa
… 24.3% (£6.5 million pa) reversion
ACQUISITION TIMELINE£73 million of acquisitions since 2014 Capital raising
January 2014
Acquisition:Crown Square,Woking
Headline:£6.0m
Yield:9.3% initial
March 2014
Acquisition:Ashcombe House,Leatherhead
Headline:£4.4m
Yield:7.4% initial
April 2014
Acquisition:The Mille,Brentford
Headline:£19.3m
Yield:7.7% initial
May 2014
Acquisition:9 Greyfriars Road,Reading
Headline:£5.8m
Yield:Vacant
September 2014
Acquisition:Station Plaza,Theale
Headline:£8.4m
Yield:10.1% initial
October 2014
Acquisition:The Planets,Woking
Headline:£8.8m
Yield:6.9% initial
April 2015
Acquisition:Brunel Road,Theale
Headline:£
Yield:%
2014JAN
2015JAN
FEB
MAR
APR
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
July 2014
Acquisition:Gainsborough House,Windsor
Headline:£6.9m
Yield:7.1% initial
MCKAY / NOV 2019
£26.8m pa
15
MCKAY / NOV 2019 16
Speculative redevelopment of 1980s warehouse, delivering a 39% increase in floor area and 100% increase in ERV
• 134,420 sq ft high quality distribution/logistics unit
• Practical completion Q1/2020
• Adjacent to Junction 12, M4
• Potential for long lease term
• ERV: £1.5m pa
Delivering the reversion135 Theale Logistics Park, J12 M4: approaching completion
17 MCKAY / NOV 2019 17
Rivergate, Newbury• £15.5m purchase price
• 61,385 sq ft, multi let
• 7.5% initial yield
• Recently refurbished
• WAULT 8.8 yrs to expiry
• £1.29m pa contracted rent
• Low rents of £21.40 psf overall
• Freehold
Acquisition
18 MCKAY / NOV 2019 18
Station Plaza, Theale• Campus of three office buildings
totalling 41,420 sq ft
• Purchased 2014 at 10.1% yield
• Lease expiry July 2019
• Passing rent £0.9m pa
• Sold at lease expiry to owner occupier
South West
Theale Town Centre
Theale Train Station
Theale Commercial Estate
Commerce Park
London
1
34
56
1
4
2
5
3
Station Plaza
Arlington Business Park
A4 to Basingstoke
A4 to Reading
Junction 12 2
6
M4
M4Disposal
Sale price £8.2m, 32.7% ahead of book value
19 MCKAY / NOV 2019 19
The Planets, Woking• Sale contracts exchanged
• Planning application to be submitted Q4/2019
• Conditional on receipt of planning consent
• Proposed high density residential tower scheme
• Purchaser pays all costs
• Potential for uplift over book value
Disposal
Prime City of London development (58,590 sq ft)• PC in January 2019
• Triggered 15yr pre-let lease commencement to St James’s Place plc
• £3.4m pa (net), equivalent to £65 psf
• Commenced marketing in September 2019
MCKAY / NOV 2019 20
30 Lombard Street, EC3
Disposal
%Below 80,000 sq ft
85
79Source: BNP Paribas
91 %Post completion
%New / Grade A
MCKAY / NOV 2019 21
Office lettings over the last ten years:
Steady take up and demand with focus on qualitySouth East office market
Lettings completed
0
1
2
3
4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(Q3)
sq
ft (m
illio
n)
5 year average
Lettings > 80,000 sq ft
Named demand (Q3)
27
36
%
%
New
All
1.8%Vacancy
now
7.8%Vacancy
now
4
2
6
8
10
12
9/20
15
9/20
16
9/20
17
9/20
18
9/20
19
sq
ft (m
illio
n)
9/20
14
All Grade A + New New
Increasingly constrained supplySouth East office market
MCKAY / NOV 2019 22
Market supply
Source: BNP Paribas
Reduction in South East office supply over 5 years:
0
1
20
15
10
5
0
2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
sq
ft (m
illio
n)
Number of new schemes (RHS)sq ft (LHS)
Source: BNP Paribas
MCKAY / NOV 2019 23
… with a limited development pipelineSouth East office market… with a limited development pipeline
South East industrial and logistics market
4.0 0.8
… supporting our speculative redevelopment at Theale
years
sq ft
million
5.7%
2019 YTD take up 23% increase on 2018
vacancy rate lowest on record
supply on the market
MCKAY / NOV 2019 24Source: Savills
HeadingOutlookSubstantial portfolio potential in resilient markets
Market growth• Market momentum to pick up with Brexit/political clarity
• Stable occupier demand and decreasing supply of modern business space
• Positive drivers to underpin rental growth
Income growth• 2019 letting activity to benefit future periods
• 24.3% (£6.5m pa) potential income from portfolio reversion
• Development approaching completion at Theale Logistics Park in strong industrial market
NAV growth• Gains from development and capturing the portfolio reversion
• Comfortable LTV with substantial firepower
MCKAY / NOV 2019 25
26
Appendix
Cashflow and debt 27Financial summary 28Rental value movement 29Capital value movement 30Contact information 3 1
MCKAY / NOV 2019 26
MCKAY / NOV 2019 27
Cashflow and debt£’
milli
on
165.0
Drawn debtMarch 2019
7.0
Dividendpaid
Disposalproceeds
10.5
Capex
(8.1) (1.4)
Movement in cash
173.0
Drawn debtSept 2019
MCKAY / NOV 2019 28
Financial summary
Balance sheet Sept 2019
Portfolio value 1 £492.14m
Drawn debt £173.00m
NAV/share 333pps
NAV/share – EPRA 2 333 pps
NNNAV/share – EPRA 2 332 pps
LTV 3 34.6%
Gearing – NAV 4 55%
Sept 2019
Dividend/share (Interim) 2.8pps
Income statement Sept 2019
Profit before tax – IFRS £11.17m
Adjusted profit before tax £5.08m
EPS (EPRA) 5.86pps
1. Valuation movements (%) before allowing for cap-ex incurred during the period
2. Calculated in accordance with EPRA guidelines3. LTV: net debt as a % of portfolio value4. Debt as a percentage of EPRA adjusted net assets
Sept 2018 Change
£11.40m
£4.32m 17.6%
4.10pps 42.9%
March 2019 Change
£482.70m 2.0%
£165.00m 4.8%
331 pps 0.6%
326 pps 2.1%
326 pps 1.8%
33.3%
53%
Sept 2018 Change
2.8pps 0%
Sept 2018 Change
331 pps 0.6%
326 pps 2.1%
326 pps 1.8%
MCKAY / NOV 2019 29
Rental value movement
1. Segments analysed by MSCI geographical area2. MSCI Monthly Index – movement by segment where applicable:
London = City segment3. 30 Lombard St, EC3 reclassified to London offices4. MSCI Monthly index (All property)5. Brunel Road, Theale
6 months to 30th Sept 20191
London offices3
South East offices4
Total offices
South East industrial/logistics
Other
Total (excluding developments)
Developments5
Total (like for like)
Disposals
Total (overall)
6 month movement
MSCI2
movement
0.0%
0.7%
0.8%
1.8%
–
0.1%4
0.1%
0.7%
2.5%
2.0%
2.3%
0.0%
1.9%
0.0%
1.9%
March 2019 portfolio ERV
£m pa
Sept 2019 portfolio ERV
£m pa
7.08
19.13
26.21
3.85
1.15
31.21
1.48
32.69
1.14
33.83
7.13
19.60
26.73
3.94
1.15
31.82
1.48
33.30
–
33.30
MCKAY / NOV 2019 30
1. Valuation movements (%) after allowing for cap-ex incurred during the period, exc disposals
2. MSCI Monthly index allocations MSCI London = City segment
3. 30 Lombard St, EC3 reclassified to London offices4. MSCI Monthly index (All property)
6 months to 30th Sept 20191
London offices3
South East offices
Total offices
South East industrial/logistics
Other
Total (excl. dev)
Developments
Total portfolio (like for like)
Disposals
Total (overall)
0.8%
-0.2%
0.1%
1.6%
–
-1.1%4
-1.1%
2.0%
-0.5%
0.3%
2.7%
-0.9%
0.6%
14.2%
1.0%
6 month movement
MSCI2
movement
Sept 2019 portfolio
valuation £m
March 2019 portfolio
valuation £m
123.25
257.55
380.80
67.55
24.59
472.94
19.20
492.14
–
492.14
120.80
255.70
376.50
65.65
24.55
466.70
9.80
476.50
6.20
482.70
Capital value movement
Contact information
31 MCKAY / NOV 2019
Simon PerkinsChief Executive
Joined in 2000 after 10 years with Arlington Securities plc. Appointed CEO in 2003.
email: [email protected]
Address: McKay Securities Plc 20 Greyfriars Road Reading Berkshire RG1 1NL
tel: 0118 950 2333
fax: 0118 939 1393
Website: mckaysecurities.plc.uk
November 2019
Giles SalmonChief Financial Officer
Joined in 2011, from BAA Lynton. Appointed Finance Director in August 2011.
email: [email protected]
Tom ElliottProperty Director
Joined in 2016 after 11 years with Land Securities plc. Appointed Property Director in April 2017.
email: [email protected]