Trading Update and Net Asset Value as at 30 Jun...

27 July 2022 

PICTON PROPERTY INCOME LIMITED
(“Picton”, the “Company” or the “Group”)
LEI: 213800RYE59K9CKR4497

Trading Update and Net Asset Value as at 30 June 2022

Picton announces a 2.0% increase in Net Asset Value for the quarter ended 30 June 2022.

Financial Highlights

• Net assets of £670.0 million (31 March 2022: £657.1 million).
• NAV/EPRA NTA per share increased by 2.0% to 122.9 pence (31 March 2022: 120.4 pence).
• Total return for the quarter of 2.8% (31 March 2022: 7.6%).
• LTV of 22.3% (31 March 2022: 21.2%).

Operational Highlights

• Like-for-like portfolio valuation uplift of 1.9% over the quarter.
• Completed three small lettings, in the office and retail sectors, and renewed / regeared three leases, all in the industrial sector, with a combined annual rent of £0.3 million, 6% ahead of the March 2022 ERV.
• Secured an average increase of 12% against the previous passing rent from four rent reviews in the industrial and retail sectors, with a combined annual rent of £0.3 million, which was 14% ahead of the March 2022 ERV.
• Purchased a multi-let mixed use London asset for £13.7 million.
• Occupancy of 91%, principally reflecting the existing vacancy in the above acquisition (31 March 2022: 93%).

Dividend

• Interim dividend of 0.875 pence per share declared in respect of the period 1 April 2022 to 30 June 2022 and to be paid on 31 August 2022 (1 January 2022 to 31 March 2022: 0.875 pence per share).
• Annualised dividend equivalent to 3.5 pence per share, delivering a dividend yield of 3.8%, based on 25 July 2022 share price.
• Dividend cover for the quarter of 103% (31 March 2022: 103%).

Lena Wilson CBE, Chair of Picton, commented:

“It is encouraging to have delivered yet another quarter of positive NAV growth. Looking ahead, our conservative balance sheet and predominately fixed long-term debt facilities put us in a favourable position to take advantage of opportunities arising from current market conditions.”

Michael Morris, Chief Executive of Picton, commented:

“We have seen valuation gains across each sector of the portfolio. Whilst we recognise that macro events are leading to a slowing of capital growth in many markets, both asset management initiatives and rental growth in a number of subsectors have contributed to the overall positive result. We continue to watch the market carefully for opportunities to grow the portfolio.”

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE UK MARKET ABUSE REGULATION

For further information:

Tavistock 

James Verstringhe, 020 7920 3150, [e-mail]

Picton

Michael Morris, 020 7011 9980, [e-mail] 

Note to Editors

Picton, established in 2005, is a UK REIT. It owns and actively manages a £879 million diversified UK commercial property portfolio, invested across 48 assets and with around 400 occupiers (as at 30 June 2022).

Through an occupier focused, opportunity led approach to asset management, Picton aims to be one of the consistently best performing diversified UK focused 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 2022 was £670.0 million, reflecting 122.9 pence per share, an increase of 2.0% over the quarter or 2.8% on a total return basis.

The NAV attributable to the ordinary shares is calculated under IFRS and incorporates the independent market valuation as at 30 June 2022, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in August 2022.

	30 Jun 2022 £million	31 Mar 2022 £million	31 Dec 2021 £million	30 Sept 2021 £million
Investment properties*	863.2	834.2	774.2	730.2
Other assets	25.5	24.2	25.3	26.2
Cash	22.4	38.5	17.7	16.7
Other liabilities	(22.6)	(21.0)	(19.3)	(20.0)
Borrowings	(218.5)	(218.8)	(182.2)	(179.5)
Net Assets	670.0	657.1	615.7	573.6
Net Asset Value per share	122.9p	120.4p	112.8p	105.0p

*The investment property valuation is stated net of lease incentives and includes the value of owner-occupied property.

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

	Total £million	Movement %	Per share Pence
NAV at 31 March 2022	657.1		120.4
Movement in property values	13.3	2.0	2.5
Net income after tax for the period	4.9	0.7	0.9
Dividends paid	(4.8)	(0.7)	(0.9)
Other	(0.5)	-	-
NAV at 30 June 2022	670.0	2.0	122.9

DIVIDEND DECLARATION

A separate announcement has been released today declaring a dividend of 0.875 pence per share in respect of the period 1 April 2022 to 30 June 2022 (1 January 2022 to 31 March 2022: 0.875 pence).

Dividend cover over the quarter was 103% (31 March 2022: 103%).

DEBT 

Total borrowings at 30 June 2022 were £218.5 million, with £4.9 million drawn under the revolving credit facility and the balance drawn under long-term fixed rate facilities. The net loan to value ratio, calculated as total debt less cash, as a proportion of gross property value, is 22.3% (31 March 2022: 21.2%). 

The weighted average debt maturity profile of the Group is approximately 9.3 years and the weighted average interest rate is 3.7%.

Picton has £45.1 million available through its undrawn revolving credit facility.

PORTFOLIO UPDATE

Like-for-like, the portfolio valuation increased over the quarter by 1.9% or £16.2 million, with £1.1 million of capital expenditure incurred across the portfolio during the period. The valuation movements over the quarter are shown below:

Sector	Portfolio Allocation	Like-for-like Valuation Change
Industrial	59.3%	2.3%
South East	43.1%
Rest of UK	16.2%
Offices	30.3%	0.7%
London City and West End	7.0%
Inner and Outer London	5.2%
South East	8.7%
Rest of UK	9.4%
Retail and Leisure	10.4%	2.8%
Retail Warehouse	6.8%
High Street – Rest of UK	2.1%
Leisure	1.5%
Total	100%	1.9%

Against a backdrop of rising inflation and financing costs, there was some upward pressure on yields in certain subsectors, albeit this was offset through rental growth and portfolio activity. 

The retail and leisure element of the portfolio saw the strongest growth, principally reflecting lower yields for retail warehouse assets. On a like-for-like basis the valuation of our office portfolio increased by 0.7% over the quarter, principally reflecting investment into the assets. Occupational demand in the industrial sector remains strong with associated rental growth and this led to positive performance and a capital value uplift, despite some small outward yield adjustments for lower yielding assets.

Charlotte Terrace, Hammersmith Road, London, W14 was acquired for £13.7 million. This mixed use London block comprises four adjoining buildings, which total 28,500 sq ft of office space and 4,400 sq ft of retail space, arranged over five floors. The property was redeveloped behind the façade in 1990 and is Grade II listed, meaning there are no business rates payable on void units. The purchase price reflects a net initial yield of 3.3%, rising to over 8% once fully let and reflecting a low capital value of £417 per sq ft, which is below its estimated replacement cost. In order to assist the leasing process, works are underway to improve the occupier amenities.

As at 30 June 2022, the portfolio had a net initial yield of 4.1% (allowing for void holding costs) or 4.3% (based on contracted net income) and a net reversionary yield of 5.4%. The weighted average unexpired lease term, based on headline rent, was 4.9 years. 

Occupancy reduced to 91%, principally reflecting the existing vacancy in the above recent acquisition.

The top ten assets, which represent 55% 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
Datapoint, Cody Road, E16	Industrial	London
Lyon Business Park, Barking	Industrial	Outer London
Stanford Building, Long Acre, WC2	Office	London
Shipton Way, Rushden, Northants	Industrial	East Midlands
Angel Gate, City Road, EC1	Office	London
Tower Wharf, Cheese Lane, Bristol	Office	South West
Sundon Business Park, Luton	Industrial	South East
50 Farringdon Road, EC1	Office	London

MARKET BACKGROUND

According to the MSCI Monthly UK Property Index, the All Property total return was 3.6% for the quarter to June 2022, compared to 5.5% for the previous quarter. 

Capital growth was 2.5% (March 2022: 4.3%) and rental growth was 1.1% for the quarter (March 2022: 1.3%). A more detailed breakdown of the MSCI Monthly Digest is shown below:

MSCI capital growth

		Number of MSCI segments
	Quarterly growth	Positive growth	Negative growth
Industrial	4.1%	7	0
Office	0.6%	5	5
Retail	2.2%	11	8
All Property	2.5%	23	13

MSCI rental growth

		Number of MSCI segments
	Quarterly growth	Positive growth	Negative growth
Industrial	2.7%	7	0
Office	0.1%	5	5
Retail	0.2%	10	9
All Property	1.1%	22	14

ENDS