The disposal of Bolsa House for pounds 12.7m represented a yield of 5 per cent on the basis of its current rental income of pounds 630,000.
John Nettleton, finance director, agreed that it was a good price but warned that one-off deals in the City market could not be used to extrapolate trends. He added: 'A head of steam is building up. The market will pick up, if not later this year then next.'
He said that Wates would start development when there was firm evidence that rents were rising again. He expected to begin work on two sites in the City within the next 18 months, although he warned that it would be a cautious return and only on pre-let buildings.
His comments came as Wates announced a sharp fall in pre-tax profits in the six months to June from last year's pounds 3.74m to pounds 860,000. Earnings per share fell to 0.44p (1.95p) and the dividend was passed after 0.77p last year.
Wates is technically unable to pay a dividend because it has no distributable reserves. They were wiped out by a pounds 72m provision last year to cover the fall in the value of its property portfolio.
Mr Nettleton said that an uplift in values could be taken through distributable profits and when that happened a dividend would be paid again. Last year the value of Wates's portfolio fell 21 per cent after an 18 per cent fall in 1991.
Wates's rent-roll fell 23 per cent from pounds 7.94m to pounds 6.12m thanks to the disposal last year of two properties to cut borrowings. Although there is no interim balance sheet, borrowings are thought to have fallen about pounds 12m from the last year-end figure to pounds 83m.
Wates's shares yesterday closed 2p lower at 80p, at which level they have almost quadrupled since last September, when the property sector's resurgence began. At their peak in 1987 the shares were worth 295p.
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