K&C REIT struggles with high overheads and weak property market – K&C REIT, the high-end residential property fund, has announced results for the year ended 30 June 2017. Its NAV fell to 8.57p from 9.42p (-9.0%). The shares are trading at 7.5p. They point out that the residential sales market has slowed over the last year, particularly in higher price-band properties in Central London. The impact of the Brexit vote, a more difficult economy, an inconclusive general election result and significant tax changes, particularly for ‘buy-to-let’ landlords, all taking place within a relatively short period of time, have been difficult for the market to digest.
The group reports a consolidated operating loss before separately disclosed administrative items of GBP636,896, which includes abortive and ongoing acquisition costs of approximately GBP200,000. The operating loss of GBP1,029,215 includes a non-cash share-based payment charge of GBP392,319.
The report says that Osprey, their retirement property business, has exceeded their expectations, having significantly increased revenue from ground rents, sales commissions, lease extensions and other management income. At the Coleherne Road apartments, occupancy has been maintained at close to 100 per cent and rents have increased by eight per cent since acquisition in July 2015. After the year-end, they completed the acquisition of three residential units at their freehold Heathside property in Hampstead for GBP935,000 (accepting the surrender of 67-year leasehold interests) using funds raised from the issue of convertible loan notes.
Board shake up
Dominic White joined the Board as chief executive in January 2017. Christopher James, Tim Oakley and Patricia Farley stepped down from the board at the end of March. They say that Christopher and Tim continue to play important roles as members of the senior management team while Patricia’s property expertise and experience remains available to the business. Oliver Vaughan became a non-executive director of the Company in May 2017.
Admin costs high in relation to equity
The accounts show that, at the end of June 2017, the company had property worth £7.2m and net equity (after deducting loans etc.) of £4.5m. On this they earned gross revenue of £514,000 and net revenue of £404,000. Administrative expenses were £1.157m, however, or 26% of year end assets.
KCR : K&C REIT struggles with high overheads and weak property market