The Midlands industrial and commercial property company A&J Mucklow has just bought its first investment property for more than two years, during which it let others chase prices to heights it considered uneconomic.
The property in question is a modern 48,000 square feet industrial "shed" next to an industrial estate Mucklow already owns in Leamington Spa. It has recently been let for £252,500, giving a yield of 6.8 per cent on the £3.7 million Mucklow paid for it.
Until recently Mucklow has been a net seller of properties, while quietly accumulating land for future developments.
"During the year we bought 29 acres of land," said Rupert Mucklow, chairman, yesterday. "We now have 50 acres, after having none at all two years ago."
He was presenting results for Mucklow's year to June in which the headline profit slipped by £3 million to £33.4 million - a setback due largely to smaller revaluation gains on the property portfolio.
Leaving these aside, along with profits from the sale of investment properties and the premium paid to buy back high-yielding debentures, the adjusted profit came out at £19.7 million up from £12 million the year before.
Net assets rose to £259.3 million, or 445p a share, from £215.7 million. A final dividend of 8.04p gives shareholders a 7.4 per cent increase for the full year.
None of that prevented the shares from sinking another 8p yesterday to 342p only 2p above their 12-month low.
Shares in most property companies that decided, as Mucklow did, to adopt the newly permitted status of Real Estate Investment Trusts, or REITS, have been battered in recent
months. The move is costing Mucklow £5.7 million in a special tax - to be taken off the balance sheet, not the profit - plus some £200,000 in professional fees.
"We will save £2.3 million to £2.4 million a year in tax," Mr Mucklow pointed out. "It pays for itself after two years and we will stop paying capital gains tax."
The tax savings should also enable Mucklow to raise its dividend by a one-off 20 per cent next year. That points to a yield of 5.1 per cent on last night's share price. REITS companies are required to distribute 90 per cent of their income profits as dividends.
At a time when there is talk of the heavyweight Land Securities considering breaking itself up to lift its share price, Mr Mucklow is not despondent about prospects for property generally, or specifically in the Midlands.
"A bit of a correction and nervousness in the market is probably overdue and it could work in our favour as a smaller company," he said.