Dev Secs cautions on City prices
David Jenkins, chairman of Development Securities, suspects that the City of London “will remain a market for those with deep pockets and a longer-term investment horizon”. Speaking at the release of the company’s full-year results, Mr Jenkins said the rapid rise in rental values in the Square Mile, together with a perception of reduced supply and the weight of inward investment, had raised the value of prime development sites to levels “which would appear to be hard to justify in such an early stage of the current economic cycle”.
Chief executive Michael Marx said that while the company had cash for investment in a marketplace currently “somewhat starved of capital”, it would not be seeking larger deals “at what may be inflated prices”. Development Securities is still looking for opportunities in the centre of the capital, as “there still appears to be value to be captured in the increasing agglomeration of skills in London,” but it is moving cautiously.
The company noted that UK banking groups have been slowly disposing of troubled loans and foreclosed properties in the prime sector, and will soon have to move onto their secondary assets. Development Securities sees continuing opportunity in regional and secondary markets as a result, and is continuing to target opportunities “where redevelopment of secondary stock will create new institutional investment product,” he added.
Development Securities today reported a pre-tax profit of £2.6m for 2010 after a loss of £11.4m the previous year, with total returns from its investment property portfolio at 15.2%, equalling the IPD UK Quarterly Property Index for 2010. Given that it has no representation in central London markets, this can be considered a strong performance, the company pointed out. The comparable return from the Index for property outside central London was 10.1%. NAV per share was 272p.
