Net Asset Value and Interim Dividend

RNS Number : 3682P

Picton Property Income Limited

24 October 2012

 



PICTON PROPERTY INCOME LIMITED

("Picton" or the "Company" or the "Group")

24 October 2012                              

Net Asset Value as at

30 September 2012 and Interim Dividend

Picton Property Income Limited (LSE: PCTN), the internally managed Investment Company with an income focused approach to the UK commercial property market, announces its Net Asset Value as at 30 September 2012 and Interim Dividend.

Quarterly Highlights

·      Net Assets of £180.2 million (30 June 2012: £185.0 million)

·      NAV/EPRA NAV per share of 52 pence (30 June 2012: 54 pence)*

-    1.3% decrease in underlying property portfolio valuation (30 June 2012: -2.7%)

·      Conclusion of £230 million group refinancing

-    New secured debt facilities entered into in July for 10, 15 and 20 years

-    Successful rollover and placing of 4 year zero dividend preference shares

-    Reduction in annual financing costs from 4.98% to 4.48%

·      Stabilised portfolio occupancy and improved income longevity

·      Move to fully covered dividend following dividend review

-    Dividend of 0.75 pence declared (30 June 2012: 1 pence)

Commenting, Nick Thompson, Chairman of Picton, said:

"During the quarter we have successfully finalised a comprehensive refinancing at a lower overall cost of debt for the Group.  Looking ahead, we will now reduce indebtedness through quarterly amortisation and in addition, recognising current market conditions, we believe it is appropriate to rebase the dividend to ensure that dividends are paid on a covered basis from cashflow generated by the business.

This prudent approach to distribution will strengthen the balance sheet and provide operational flexibility to invest in asset management initiatives that will further improve the underlying cashflow and capital position."

NET ASSET VALUE

The unaudited Net Asset Value ('NAV') of Picton, as at 30 September 2012, was £180.2 million, reflecting approximately 52 pence per share, a decrease of 2.6% over the quarter. 

The movement in NAV was primarily attributable to the underlying external property valuation which reduced by 1.3% over the quarter.

This NAV figure incorporates the external portfolio valuation as at 30 September 2012, including income for the quarter, but does not include a provision for the quarterly dividend announced herein, which will be paid in November 2012.

The property portfolio will next be subject to an external valuation during December 2012 and the NAV per share, as at 31 December 2012, will be issued in January 2013.

A more detailed breakdown of the NAV is included within the Appendix.

*      The NAV attributable to the ordinary shares is calculated under International Financial Reporting Standards, which as a result of the refinancing no longer includes the marked to market value of interest rate swap contracts and as such is equivalent to EPRA NAV.

DIVIDEND

As previously advised, Picton has undertaken a detailed review of its dividend policy in light of the new financing arrangements, which provide for debt repayment through amortisation. 

In a market where, according to the IPD Monthly Index, commercial property valuation movements have been negative for 11 consecutive months and rental growth negative for 10 out of the past 12 months, it is important to have a distribution policy that enhances rather than undermines the balance sheet. 

The Board has concluded that it would be inappropriate to continue to pay dividends on an uncovered basis out of capital reserves, but rather that it should rebase the dividend to a sustainable level financed by cashflow generated by the business.   

This more prudent approach will ensure that the Group is able to reduce its indebtedness whilst at the same time providing adequate working capital to maintain and enhance the quality of the underlying portfolio, which should provide further potential for income and capital enhancement.

The Board has concluded that the appropriate quarterly dividend will be set at 0.75 pence per share.

As such, an interim dividend of 0.75 pence per share is declared in respect of the period 1 July 2012 to 30 September 2012 (1 April to 30 June 2012: 1 pence). The dividend will be paid on 30 November 2012 to shareholders on the register on 16 November 2012. The ex-dividend date will be 14 November 2012.

REFINANCING & DEBT

During the quarter Picton entered into two new debt facilities with Aviva and Canada Life, simultaneously repaying its secured debt that was due to mature in January 2013.

In addition, Picton launched an issue of 22,000,000 new zero dividend preference shares ("2016 ZDP Shares") with a Gross Redemption Yield of 7.25% pa, which was concluded following the quarter end.

This completes Picton's refinancing exercise and provides more diversified sources of capital with a staggered maturity profile of 4, 10, 15 and 20 years. The Group's blended average interest rate on its debt is now 4.48%, lower than the blended average interest rate of 4.98% as at 30 June 2012, prior to the refinancing.  The weighted average debt maturity profile is 15.1 years.

As at 30 September 2012, net gearing, calculated as total debt including ZDPs less cash, as a proportion of gross property value, was 53.2%.

MARKET BACKGROUND

According to the IPD Monthly Index, total returns for the 3 months to September were 0.6%, comprising an income return of 1.7%, set against negative capital growth of -1.07%. 

Whilst total returns from the real estate sector have been positive since July 2009, more recently this has been driven by income return, with negative capital valuation movements having now been recorded month on month since November 2011.  The office sector continued to deliver the strongest total returns at 1.01%, compared to the industrial sector at 0.62% and retail sector at 0.28%.

Occupancy rate on the Index was 90.3% as at September 2012.

PORTFOLIO UPDATE

During the quarter, a number of initiatives were completed that led to stabilised occupancy over the period, including seven lettings which were secured at a combined rental in excess of £350,000 pa and three lease renewals which were completed at a rental totalling in excess of £650,000 pa. 

Specifically in three separate transactions over £500,000 pa was secured through new leases, with minimum 10 year lease commitments, which improved the overall longevity of income from the portfolio.

In line with the wider market, Central London assets within the portfolio remained the principal driver of positive capital valuation movements.  Elsewhere, the negative valuation movements were significantly reduced compared with the previous two quarters and are detailed within the Appendix.

As at 30 September 2012, the portfolio had a net initial yield of 7.3% (30 June 2012: 7.2%) and a net reversionary yield of 7.9% (30 June 2012: 7.8%). The occupancy rate remained stable at 89%. 

The weighted average unexpired term (to first termination) increased from the previous quarter to 6.9 years (30 June 2012: 6.8 years), reflecting letting and restructuring activity within the portfolio.

Appendix

NET ASSETS SUMMARY

The unaudited NAV is as follows:

	30 Sep 2012 £m	30 Jun 2012 £m	31 Mar 2012 £m
Investment properties *	394.9	400.2	411.7
Other assets	12.3	7.7	6.8
Cash	32.0	30.1	31.1
Other liabilities	(16.9)	(17.4)	(17.0)
Borrowings: Loan facilities                     Loan stock                     2012 ZDP's                     Securitised loan                     Liquidity facility                     Bank loan	(209.0) (2.1) (31.0) - - -	- (2.2) (30.5) (171.6) (10.7) (16.9)	- (2.2) (30.0) (171.6) (10.7) (16.9)
Market value of interest rate swaps	-	(3.7)	(5.1)
Net Assets	180.2	185.0	196.1
Net Asset Value per share	52p	54p	57p

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

The movements in the Net Assets can be summarised as follows;

	Total	Movement	Per share
	£m	%	Pence
Net Assets at 30 June 2012	185.0		54
Movement in property values (realised and unrealised)	(5.5)	(3.0)	(2)
Movement in swap value	0.2	0.1	-
Net income for the period  (after distributions)	0.5	0.3	-
Net Assets at 30 September 2012	180.2	(2.6)	52

PORTFOLIO COMPOSITION

The Company's current portfolio is structured as follows:-

Sector	Weighting 30 September 2012	Like for Like Valuation Change
Retail	19.3%	-0.8%
Offices - Central/Greater London	17.0%	1.2%
Offices - Rest of UK	18.1%	-2.7%
Industrial	34.7%	-1.9%
Leisure	4.1%	-1.2%
Retail Warehouse	6.8%	-2.2%
Total	100%	-1.3%

GEOGRAPHICAL WEIGHTINGS

Geography	Weighting 30 September 2012
Central & Greater London	25.0%
South East	29.4%
South West	3.9%
Midlands	16.7%
North	16.7%
Scotland	2.3%
Wales	5.5%
Northern Ireland	0.5%
Total	100%

TOP TEN ASSETS

Asset	Weighting 30 September 2012
River Way Industrial Estate, Harlow	7.3%
Unit 5320 Magna Park, Lutterworth	7.3%
Stanford House, Long Acre, WC2	5.5%
Phase II Parc Tawe, Swansea	4.1%
50 Farringdon Road, EC1	4.0%
Boundary House, Jewry Street, EC3	3.6%
Angel Gate Office Village, City Road, EC1	3.0%
Colchester Business Park, Colchester	3.0%
1 Chancery Lane, WC2	2.7%
Angouleme Way Retail Park, Bury	2.7%
Total	43.2%

For further information:

Tavistock Communications

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

Picton Capital Limited

Michael Morris, 020 7011 9978, [e-mail] 

Renee McIver

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

Guernsey

GY1 3QL

Tel:       [phone]

Fax:      [phone]

Note to Editors

Picton Property Income Limited ('Picton') is an income focused, internally managed Investment Company listed on the London and Channel Islands Stock Exchanges.  It was established in 2005 to invest both directly and indirectly in commercial property across the United Kingdom.

With Net Assets of £180.2 million at 30 September 2012 and approximately 850 investors, 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.  www.pictonproperty.co.uk

 

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