Net Asset Value and Interim Dividend

25 July 2017

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

Net Asset Value as at 30 June 2017 and Interim Dividend Declaration

Picton (LSE: PCTN) announces its Net Asset Value for the quarter ended 30 June 2017 and Interim Dividend.

Highlights during the quarter included:

Improved financial position with continued NAV growth

• Increase in Net Assets to £452.5 million (31 March 2017: £441.9 million).
• NAV/EPRA NAV per share rose 2.4% to 83.8 pence (31 March 2017: 81.8 pence).
• Total return for the quarter of 3.4% (31 March 2017: 2.8%).
• Net gearing of 27.0% (31 March 2017: 27.4%).

Increase in dividend cover

• Dividend of 0.85 pence per share declared and to be paid on 31 August 2017 (31 March 2017: 0.85 pence per share).
• Annual dividend equivalent to 3.4 pence per share, delivering a dividend yield, based on 21 July 2017 share price, of 4.0%.
• Dividend cover for the quarter of 116% (31 March 2017: 106%).

Asset management activity and capital value growth

• Like-for-like increase in property portfolio valuation for the quarter of 1.8% (31 March 2017: 0.9%).
• Exchanged contracts to sell two non-income producing assets for £9.86 million, representing an overall gain of 37% above the March valuation, with completion post period end.
• Completed five lettings, on average 2% ahead of the March 2017 ERV, adding £0.9 million per annum to the rent roll.
• Completed four lease renewals / re-gears adding annual rent of £0.3 million, on average 5% ahead of the March 2017 ERV.
• Occupancy at 94% (31 March 2017: 94%), increasing to 96% after post quarter end disposals.

Nick Thompson, Chairman of Picton, commented:

“We have maintained good momentum during the quarter, demonstrated by the 2.4% growth in our NAV per share and an improvement in our dividend cover. With net gearing of 27% and £51 million of undrawn credit facilities, the Company is in a good financial position and has the resources to pursue tactical opportunities as they arise.”

Michael Morris, Chief Executive of Picton Capital, said:

“Positive performance over the quarter was driven by asset management and leasing activity. We also exchanged contracts to sell two non-income producing assets at a significant premium to the March independent valuation. The capital realised will be recycled into attractive opportunities that are supported by strong property fundamentals.”

This announcement contains inside information.

The next NAV update as at 30 September 2017 will be announced in October 2017.

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 a property investment company established in 2005.   It owns and actively manages a £636 million diversified UK commercial portfolio, invested across 53 assets and with around 350 occupiers (as at 30 June 2017). Through an occupier-focused, opportunity-led approach to real estate asset management, Picton aims to be one of the consistently best performing diversified UK property companies listed on the main market of the London Stock Exchange.

For more information please visit: www.picton.co.uk

NET ASSET VALUE

The unaudited Net Asset Value (‘NAV’) of Picton, as at 30 June 2017, was £452.5 million, reflecting 83.8 pence per share, an increase of 2.4% over the quarter:

	30 June 2017 £million	31 Mar 2017 £million	31 Dec 2016 £million
Investment properties *	626.5	615.2	615.6
Other assets	17.9	18.6	17.6
Cash	32.9	33.9	28.2
Other liabilities	(20.4)	(21.2)	(22.1)
Borrowings	(204.4)	(204.6)	(204.9)
Net Assets	452.5	441.9	434.4
Net Asset Value per share	83.8p	81.8p	80.4p

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

The NAV attributable to the ordinary shares is calculated under IFRS and incorporates the external market valuation as at 30 June 2017, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in August 2017.

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

	Total	Movement	Per share
	£million	%	pence
NAV at 31 March 2017	441.9		81.8
Movement in property values	9.6	2.2	1.8
Net income after tax for the period	5.3	1.2	1.0
Dividends paid	(4.6)	(1.0)	(0.8)
Other	0.3	-	-
NAV at 30 June 2017	452.5	2.4	83.8

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

DIVIDEND DECLARATION

A dividend of 0.85 pence per share is declared in respect of the period 1 April 2017 to 30 June 2017 (1 January 2017 to 31 March 2017: 0.85 pence). The dividend will be paid on 31 August 2017 to shareholders on the register on 11 August 2017. The ex-dividend date is 10 August 2017.

Post-tax dividend cover over the quarter was 116% (31 March 2017: 106%).

DEBT

Total borrowings at 30 June were £204.4 million, with a weighted average interest rate of 4.2% (100% fixed) and a weighted average debt maturity profile of approximately 11.5 years. Net gearing, calculated as total debt less cash, as a proportion of gross property value, was 27.0% (31 March 2017: 27.4%).

The revolving credit facility expiring in 2018 was extended by a further three years until June 2021. The facility is initially for £24 million and the annual non-utilisation cost will be £0.18 million. Once drawn, the facility will incur interest close to 2.2% per annum, which reflects 190 basis points over three month LIBOR.

Across its two revolving credit facilities the Company now has £51 million available and undrawn.

PORTFOLIO UPDATE

The portfolio valuation increased by 1.8% or £11.4 million. The best performing sector in the portfolio was offices, which primarily reflected asset disposals and leasing activity at Farringdon, as detailed below.

The portfolio consisted of 53 assets with an average lot size of £12.0 million. The sector weightings at 30 June 2017 and valuation movements over the quarter are shown below:

Sector	Portfolio weightings	Like for like valuation change
Industrial	40.2%	2.1%
South East	27.2%
Rest of UK	13.0%
Offices	34.6%	2.9%
London City and West End	4.3%
Inner and Outer London	9.1%
South East	12.3%
Rest of UK	8.9%
Retail and Leisure	25.2%	0.0%
Retail warehouse	10.3%
High Street - Rest of UK	7.2%
High Street - South East	5.5%
Leisure	2.2%
Total	100%	1.8%

Occupancy has increased to 96% post quarter end, as a result of the two vacant office disposals detailed below.

As at 30 June 2017, the portfolio had a net initial yield of 5.7% (allowing for void holding costs) or 5.8% (based on contracted net income) and a net reversionary yield of 6.8%. The weighted average unexpired lease term based on headline rent was 5.5 years.

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

Key highlights in the quarter included:

Office

The Company exchanged contracts to dispose of two vacant office assets in Bracknell for a combined consideration of £9.86 million, with completion occurring after the quarter end. The disposal of Phoenix House, Waterside Park follows the disposal of the adjacent Queensgate House announced earlier in the year.  L’Avenir, Bagshot Road became vacant in June 2017 and benefited from permitted development rights, which could enable an office to residential conversion.  The combined sale prices reflect a 37% premium to the independent March valuation and a 6% premium to the June 2017 valuation.

At the Company’s largest office vacancy, 50 Farringdon Road London EC1, two suites of 3,000 sq ft and 8,900 sq ft respectively have been let, generating a combined rent of £0.62 million per annum.  The lettings are 2% ahead of the March 2017 ERV, meaning that 75% of the building is now leased.

A lease was renewed at Angel Gate in Islington securing a 28% uplift from the passing rent to £58,000 per annum, in line with the March 2017 ERV. Two suites are under offer and two further suites are being refurbished ahead of leasing.

At 180 West George Street, Glasgow, where we are undertaking a comprehensive refurbishment, we renewed a lease with Standard Life at £0.19 million per annum, 4% ahead of the March ERV.

Industrial

The Company’s largest industrial vacancy at River Way, Harlow was let.  This follows receipt of planning consent for a change of use, thereby satisfying conditions contained within an Agreement to Lease, signed earlier in the year. The 30,500 sq ft letting secures a minimum 10 year term certain and will produce rent of £0.2 million per annum, with uplifts collared and capped at 2% and 4% respectively, compounded annually.

Elsewhere, we settled two rent reviews, securing £0.14 million per annum, which was a 16% increase on the passing rent and 5% ahead of the March 2017 ERV.

Retail and Leisure

The 152 bedroom hotel in Luton reopened during the quarter following a comprehensive refurbishment undertaken by the incoming occupier, Thistle Hotels.

MARKET BACKGROUND

According to the MSCI IPD monthly index, the All Property total return was 2.5% in the quarter to June 2017, compared to 2.3% in the previous quarter. Capital growth was 1.1% (March 2017: 0.9%) and rental growth was 0.4% (March 2017: 0.3%).

IPD quarterly growth*

IPD Sectors	Rental value	Capital value
Industrial	1.0%	3.2%
Office	0.3%	0.7%
Retail	0.1%	0.3%

Number of IPD segments with positive growth*

	Rental value	Capital value
Industrial	7	7
Office	9	9
Retail	7	15

Number of IPD segments with negative growth*

	Rental value	Capital value
Industrial	-	-
Office	1	1
Retail	13	5

*Source: MSCI IPD monthly index, June 2017
 

ENDS