Development Securities has posted a £10.2 million pre-tax loss for the 14 months to February 2012.
The results for the property developer and investor compare with £2.6million of pre-tax profit for the year ended 31 December 2010, and came despite a hike in turnover from £44.4m in 2010 to £80million. Operating profit fell from £9.5million to £1million, reported AJ’s sister newspaper Construction News.
The firm made a similar size pre-tax loss in 2009, when it said the worst had passed.
The company - whose major projects include Paddington Central, the Peninsula in Manchester and 3DReid’s Heart of Slough scheme in Berkshire - said the main factors for the 2011 loss included a £4.7million downturn in the valuation of its £237.9 million investment portfolio, and further losses - this time of £2.8 million - in its small serviced office division.
Referring to the serviced office loss, it said ‘aggressive price discounting by competitors over an extended period has forced the group to accept lower occupancy levels and reduced licence fees’.
However DevSec said it had bagged £50 million of forward-funding on its speculative Hammersmith Grove office development, designed by BFLS, from Scottish Widows Investment Partnership Property Trust.
Yet the developer said that the UK commercial property market ‘still lacks clear direction and is showing signs of slipping back into a further period of negative value growth’. In retail, it said a ‘dramatic slowdown in the UK economy and the decline in consumer spending has served to exacerbate the decline in our high streets’.
The office market is ‘retrenching’ outside of Central London, where the market is better but ‘demand is weak’.
The company says as a result, it is continuing its strategy of prioritising the upgrade of secondary property assets ahead of new build.
Chairman David Jenkins said the UK needs ‘a vigorous regeneration of its redundant and derelict real estate assets into prime or near-prime investments servicing those areas of the economy which still retain an element of demand strength; effectively, changing functional obsolescence into functional strength’.
The developer raised £100million of equity from shareholders through a placing and rights issue in 2010, which it has invested into the property market in more than 40 separate transactions.
The firm said ‘significant value will be added for our shareholders’ through these investments, focused in Greater London, the South, South East, South West and Manchester, and on foodstores, retail around foodstores, selected residential schemes, student accommodation, hotels and leisure.
Chief executive Michael Marx said the company’s strategy of driving capital growth through real estate regeneration is starting to deliver anticipated returns and ‘will allow us to navigate these difficult times’.