9th Jul 2014 14:17
LONDON (Alliance News) - Sutton Harbour Holdings PLC wants to attract better quality tenants into its property portfolio in Plymouth, as confidence returns to the coastal town following a miserable period during the recent recession.
The AIM-listed company has a property portfolio worth almost GBP50 million in and around the city in Devon, offering a mix of asset classes including offices, retail space, restaurants and an industrial estate located on the Fish Quay.
Like most real estate businesses, it had a tough time during the financial downturn and was affected by a fall in property values, low occupier demand and high debt. However, it seems to be finally benefiting from the improving property market outside of London.
?There have been businesses that have struggled during the recession. But we had four new lettings during the year, due to our push on professional services. There is definitely more demand out there and the economy is improving ? it takes longer to get to the provinces but we are seeing signs of encouraging growth,? Chief Executive Jason Schofield told Alliance News in an interview.
Sutton Harbour Holdings swung to a GBP265,000 pretax profit in its recent financial year, compared with a GBP3.7 million loss a year earlier. In the previous year the company made a GBP3.4 million loss on fair-value adjustment on investment property.
During the most recent fiscal year the company opened its new partially complete marina in Plymouth. King Point, which the company hopes will drive its revenue base, is a new 171-berth marina which includes shoreside facilities and related car parking.
Sutton Harbour Holdings also signed four new lettings equating to 9,015 square feet, while occupancy across its real estate portfolio rose to 86%, from 85% a year earlier.
?You do get this trickle down effect, it always seems that provincial cities are the first to get hurt. But the cluster of provincial services tenants we have is now of a very high quality for a regional city, and the pipeline of new tenants that we have is getting stronger all the time,? Schofield says.
Sutton Harbour Holdings said growth in car parking revenue is encouraging, with gross revenue up to GBP374,000, from GBP347,000 a year earlier. During the year it added new machines with card payment facilities which have proved popular with customers.
Schofield says the company's car parking business will play a key part in driving revenue in the future. ?People expect good car parking, and if its good car parking, people are willing to pay for it,? he says.
Now that the company has returned to profitability, it has put together a master plan framework for the former airport site it owns, as well as what it calls its ?Vision for Sutton Harbour? for the site on the edge of the harbour that it owns.
The harbour development plan has identified a number of significant opportunities which could deliver approximately 350,000 square feet of new waterfront space. The company wants to market Sutton Harbour as an area of regional importance, equal to that of Liverpool's Albert Docks, and wants to attract high-quality tenants.
Sutton Harbour Holdings receives revenue in the form of dues, fees and rents from fisheries, marinas and its real estate operations. This is a much simpler model to the one that existed before the rescission when the company had a healthcare division building doctor surgeries, and an aviation arm which would prove to be a thorn in its side.
In 2000, Sutton Harbour Holdings took over the day-to-day running of Plymouth Airport after British Airways decided it no longer wanted to operate it. Plymouth City Council, the freeholder, also thought better of running the site.
Sutton Harbour Holdings believed it had made a good investment, but was left in a precarious position when BA then pulled their airline operations from the airport in 2004.
To fill the void, Sutton Harbour Holdings created airline Air Southwest which flew passengers to Scotland, Ireland Manchester, Leeds and nearby Newquay. The airline initially benefited from favourable exchanges rates and reasonable fuel prices, but this proved short lived as the economic slowdown hit and the airline struggled in the face of increased fuel prices, competition and a lack of consumer confidence caused by security incidents at other airports and falling consumer demand.
Sutton Harbour Holdings tried to revitalise sales with the introduction of new services to Norwich and then London City Airport. However, by 2010, it was clear that the company could no longer sustain the airline and it was marketed for sale. Air Southwest was later sold to Eastern Airways.
Following a prolonged period of losses, and only after independent consultants confirmed to the council that the airport was no longer viable, Plymouth City Airport ceased operations in December 2011. Sutton Harbour Holdings has been working hard to ensure that the site, which has significant development potential, is included in the local area plan, but continues to face local opposition from a small but vocal group seeking to reopen the airport.
?The airport has never really worked at all, its hugely constrained by its geography, you have houses, businesses, educational facilities all around it," Schofield says. ?To do what people are talking about in terms of make it into a thriving airport its not just about lengthening the airport but widening the airport and taking into account all the environmental issues that it faces you are affecting 6,000 people and 2,000 homes. It would cost GBP40 million.?
Schofield says the company gave the airport their ?best possible shot? and stepped in at a time when no-one wanted to.
?In 2000 the airport could have been closed. People seem to forget that we gave it a good ten years of further existence but against something that I think was fundamentally flawed anyway and I can say that because it was before my time."
?I don't think we can be criticised for not giving it the best possible shot that we could. Others before us with much deeper pockets failed to do so or decided that they did not want to carry on with it,? the CEO said
Schofield says the locals should take some responsibility for the airport's closure because ?if you don't use it you lose.?
Nonetheless, the company is not dwelling on the past after exiting its healthcare and loss-making aviation activities.
However, Sutton Harbour Holdings is saddled with GBP20 million in net debt which has hindered its ability to pay a dividend again this year. The company is determined to dig itself out of this hole by driving up revenue across its business segments, but particularly by improving the quality of its tenants.
Despite not paying a dividend, Sutton Harbour Holdings says its shareholders have been patient.
?The shareholder make-up is that we have two very large shareholders who hold just shy of 30% each and they are not necessarily driving for a dividend,? Finance Director Natasha Gadsdon says. ?Some of the smaller holders will appreciate a dividend very much, but until we can offload some of this debt I don't think a dividend will be quite the right thing at the moment.?
With the sector slowly coming out of the doldrums and an exciting project on the horizon, Schofield urges investors to stick with the company.
?There are a number strands to the business in terms of its revenue streams. So having the fishing, the marinas, car parking, in other words not reliant on one in particular. We also have the upside of our development potential and what our vision for the harbour can bring, plus the realisation of the former airport site ? so I think that's a pretty attractive proposition," he says.
?I think from an investor's point of view there is still a strong asset backing to the company with good quality assets and a range of secure revenue. We are focused on what we do well and there is growth potential from what is a property-backed business,? he adds.
The company's ?Vision for Sutton Harbour? will take around 10 years to complete, but the returns look promising. The programme has a gross development value of GBP75 million and ultimately this could put Sutton Harbour Holdings back on track.
Sutton Harbour Holdings shares were up 1.5% at 33.75 pence Monday afternoon.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Sutton Harbour Holdings