Net Asset Value and Interim Dividend

25 April 2017

PICTON PROPERTY INCOME LIMITED
(“Picton” or the “Company” or the “Group”)

Net Asset Value as at 31 March 2017 and Interim Dividend

Picton (LSE: PCTN) announces its Net Asset Value for the quarter ended 31 March 2017 and Interim Dividend. 

Highlights during the quarter included:

Financial

• Increase in Net Assets to £441.9 million (31 December 2016: £434.4 million).
• NAV/EPRA NAV per share rose 1.7% to 81.8 pence (31 December 2016: 80.4 pence).
• Total return for the quarter of 2.8% (31 December 2016: 3.5%).
• Reduction in net gearing to 27.4% (31 December 2016: 28.3%).

Dividend

• Dividend of 0.85 pence per share declared and to be paid on 31 May 2017 (31 December 2016: 0.85 pence per share).
• Annual dividend equivalent to 3.4 pence per share, delivering a yield, based on 21 April 2017 share price, of 4.0%.
• Dividend cover for the quarter of 106%, reflecting the increased dividend paid February 2017 (31 December 2016: 112%).

Portfolio Activity

• Like-for-like increase in property portfolio valuation of 0.9% (31 December 2016: 1.9%).
• Completed six lettings, on average 6% ahead of December 2016 ERV, adding £0.4 million per annum to the rent roll.
• Completed the sales of three non-core assets for £6.5 million, overall 10% ahead of the December 2016 valuation.
• Resultant portfolio of 53 assets with average lot size of £11.8 million (31 December 2016: £11.4 million).
• Occupancy maintained at 94% (31 December 2016: 94%).
• Post quarter end, completed letting of largest industrial void for £0.2 million per annum improving the proforma occupancy to 95%.

Commenting, Nick Thompson, Chairman of Picton, said:

“We have had a good start to 2017, which is shown by a further increase in NAV. During the quarter, we maintained a covered dividend and reduced net gearing to 27%. We also continued to reshape the portfolio selling three non-core assets and increasing our average lot size.”

Michael Morris, Chief Executive of Picton Capital, added:

“We continue to create positive momentum, making NAV accretive disposals and letting space above independent valuation assessments. We now have more than 40% of the portfolio allocated to the industrial, warehouse and logistics sector, where we are experiencing strong performance and which has proven to be resilient to the broader economic and political volatility. We are carefully reviewing opportunities in the market but will only look to progress these where the property and financial fundamentals are compelling.”

The Company intends to release its year end results during the week commencing 5 June and a further announcement will be made in due course.

This announcement contains inside information.

For further information:

Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150, [e-mail]

Picton Capital Limited
Michael Morris, 020 7011 9980, [e-mail]

The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL

Sam Walden, 01481 745 001, [e-mail]

Note to Editors

Picton is an income focused, property investment company listed on the London Stock Exchange.

With Net Assets of £441.9 million at 31 March 2017, the Company's objective is to provide shareholders with an attractive level of income, together with the potential for capital growth by investing in the principal commercial property sectors. Picton can invest both directly and indirectly in commercial property across the United Kingdom.

www.picton.co.uk

NET ASSET VALUE

The unaudited Net Asset Value (‘NAV’) of Picton, as at 31 March 2017, was £441.9 million, reflecting 81.8 pence per share, an increase of 1.7% over the quarter.

The NAV attributable to the ordinary shares is calculated under International Financial Reporting Standards and incorporates the external market valuation as at 31 March 2017, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in May 2017.

The next independent valuation of the property portfolio is scheduled for June 2017 and the unaudited NAV per share, as at 30 June 2017, will be announced in July 2017.

A detailed breakdown of the NAV is included in the Appendix.

DIVIDEND

A dividend of 0.85 pence per share is declared in respect of the period 1 January 2017 to 31 March 2017 (1 October 2016 to 31 December 2016: 0.85 pence). The dividend will be paid on 31 May 2017 to shareholders on the register on 12 May 2017. The ex-dividend date is 11 May 2017.

Post-tax dividend cover over the quarter, based off the recently increased dividend, was 106% (31 December 2016: 112%).

DEBT

Total borrowings at 31 March were £204.6 million, with a weighted average interest rate of 4.2% (100% fixed) and a weighted average debt maturity profile of approximately 11.7 years. Net gearing, calculated as total debt less cash, as a proportion of gross property value, was 27.4% (31 December 2016: 28.3%).

The Group currently has access to £53.0 million of undrawn facilities. If drawn, interest will be charged at 175 basis points over 3 month LIBOR, which is currently equivalent to 2.1% per annum.

PORTFOLIO UPDATE

The like-for-like portfolio valuation increased 0.9% or £5.4 million, primarily as a result of our portfolio being positioned in better performing sub-sectors of the market combined with the active management and leasing activity completed during the period.

The best performing sector in the portfolio was again industrial, reflecting our on-going active management of these assets as well as robust occupational demand, as detailed below.

Occupancy was maintained at 94%, which is expected to improve over the short term as we have completed a letting post quarter end of our largest industrial void and as we make progress at 50 Farringdon Road, EC1.

As at 31 March 2017, the portfolio had a net initial yield of 5.9% (based on contracted net income and allowing for void holding costs) and a net reversionary yield of 6.9%. The weighted average unexpired lease term based on headline rent was unchanged from the previous quarter at 5.7 years.

Key highlights in the quarter included:

Office

The final suite at Trident House, St. Albans was leased, securing a rent of £0.1 million per annum which was 27% ahead of ERV, 91% ahead of the previous passing rent and at £38 per sq ft sets a record rent in this location.

At 50 Farringdon Road, a proposed transaction for leasing the remaining space became abortive during the quarter. Despite this we have good interest having relaunched the building in March.

The sale of a building at Waterside House, Bracknell, which was vacant and required refurbishment, completed during the quarter realising £1.54 million which was 9% ahead of the 31 December 2016 valuation. The sale of this non-core vacant building improves our occupancy, reduces our void holding costs and is in line with our business plan to grow the average lot size. We have one further vacant building to dispose of at this location.

Industrial

Space was let in Epsom, Luton and Radlett securing a combined rent after incentives of £0.33 million per annum, 1% ahead of the December 2016 ERV.

We re-geared two leases in return for short rent free periods, securing a combined £0.2 million per annum. At the same time, we settled five rent reviews, securing £0.42 million per annum which was a 12% increase on the passing rent and 3% ahead of the December 2016 ERV.

Retail and Leisure

In line with our strategy to dispose of our smaller properties once business plans are completed, we sold 2 Bath Street in Bath for £2.75 million and, following considerable management, disposed of Drury Lane in Oldham for £2.2 million. The combined sale price of these assets was 10% ahead of the December 2016 valuation.

MARKET BACKGROUND

According to the MSCI IPD Monthly Index, the All Property total return was 2.3% in the quarter to March 2017, compared to 2.6% in the quarter to December 2016. Capital growth was 0.9% over the quarter, compared with 1.1% in the quarter to December 2016.

Across the principal IPD sectors, industrial capital values grew by 2.4% (December 2016: 2.7%), office by 0.6% (December 2016: 1.0%) and retail by 0.3% (December 2016: 0.4%). Out of a total of 37 segments (based on a rolling three months), 31 segments recorded positive capital growth compared to 29 last quarter. Only the industrial sector saw a positive valuation movement across all of its segments over the quarter.

Over the quarter to March 2017, rental values rose by 0.3%, compared with 0.5% in the quarter to December 2016. Across the principal IPD sectors, industrial rental values grew by 1.0% (December 2016: 1.3%), office by 0.1% (December 2016: 0.3%) and retail recorded nil growth (December 2016: 0.3%). Over the quarter, 23 of the IPD segments recorded positive rental growth compared to 29 segments last quarter. The industrial sector primarily saw positive rental growth but this was more muted in the office and retail sectors.

APPENDIX

NET ASSETS SUMMARY
 

The unaudited Net Asset Value is as follows:

	31 Mar 2017 £million	31 Dec 2016 £million	30 Sept 2016 £million
Investment properties *	615.2	615.6	621.1
Other assets	18.6	17.6	24.1
Cash	33.9	28.2	35.3
Other liabilities	(21.2)	(22.1)	(22.4)
Borrowings: Loan facilities                  ZDP’s	(204.6)	(204.9)	(205.2) (29.0)
Net Assets	441.9	434.4	423.9
Net Asset Value per share	81.8p	80.4p	78.5p

* The investment property valuation is stated net of lease incentives.

The movement in Net Asset Value can be summarised as follows:

	Total	Movement	Per share
	£million	%	Pence
NAV at 31 December 2016	434.4		80.4
Movement in property values	7.2	1.7	1.4
Net income after tax for the period	4.9	1.1	0.9
Dividends paid	(4.6)	(1.1)	(0.9)
NAV at 31 March 2017	441.9	1.7	81.8

PORTFOLIO COMPOSITION

The portfolio consisted of 53 assets and an average lot size of £11.8 million at the end of March 2017.

The Group’s portfolio is structured as follows:

Sector	Portfolio weightings 31 Mar 2017	Like for like valuation change
Industrial sub-total	40.1%	2.1%
South East	26.9%
Rest of UK	13.2%
Offices sub-total	34.3%	0.3%
South East	21.4%
Rest of UK	8.7%
City & West End	4.2%
Retail and Leisure sub-total	25.6%	-0.2%
Retail warehouse	10.4%
High Street - Rest of UK	7.4%
High Street - South East	5.6%
Leisure	2.2%
Total	100%	0.9%

TOP TEN ASSETS

The top ten assets, which represent 48% of the portfolio by capital value, are detailed below.

Asset	Sector	Location
Parkbury Industrial Estate, Radlett	Industrial	South East
River Way Industrial Estate, Harlow	Industrial	South East
Angel Gate Office Village, City Road, EC1	Office	London
Stanford House, Long Acre, WC2	Retail	London
50 Farringdon Road, EC1	Office	London
Shipton Way, Rushden, Northamptonshire	Industrial	East Midlands
Pembroke Court, Chatham	Office	South East
Queens Road, Sheffield	Retail Warehouse	Yorkshire & Humberside
Phase II Parc Tawe, Swansea	Retail Warehouse	Wales
Metro, Manchester	Office	North West

ENDS