RNS Number : 9181K
Picton Property Income Limited
22 April 2015

22 April 2015



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


Net Asset Value as at 31 March 2015 and Interim Dividend


Picton (LSE: PCTN) announces its Net Asset Value for the quarter ended 31 March 2015 and Interim Dividend.


Highlights during the quarter included:-




·     Net Assets increased to £370.0 million (31 December 2014: £315.7 million).

·     NAV/EPRA NAV per share rose 3.8% to 68.5 pence (31 December 2014: 66.0 pence).

·     Raised £42.2 million of new equity at an average 3.7% premium to December NAV, principally for further property acquisitions.

·     Reduction in net gearing to 30.1% (31 December 2014: 36.7%), reflecting improved cash position and valuation gains at quarter end.

·     Average debt maturity of 12.4 years, with a weighted average interest rate of 4.6% per annum.

·     Entered into a new £26 million revolving credit facility providing increased operational and financial flexibility.

·     Repaid remaining £1.8 million of loan notes in the quarter.




·     Announced a 10% dividend increase, equivalent to an annual payment of 3.3 pence per share.

·     Dividend of 0.825 pence per share declared and to be paid on 29 May 2015 (31 December 2014: 0.75 pence per share).

·     Post-tax dividend cover during the quarter of 120% (31 December 2014: 118%).

·     Dividend yield of 4.6%, based on a share price of 72.5 pence on 21 April 2015.



Portfolio Activity


·    Like-for-like increase in property portfolio valuation of 2.5% (31 December 2014: 4.1%).

·     Strong valuation gain in the office portfolio driven by leasing and asset management activity

·     Occupancy maintained at 95% (31 December 2014: 95%)

·     Acquired a 112,000 sq ft retail warehouse park in Gloucester for £14.65 million yielding 6.9% and the long leasehold interest in two retail warehouse units adjacent to an existing holding in Bury for £3.9 million yielding 7.9%

·     Completed the disposal of two non core assets; Middleton Trade Park for £2.2 million and Sutton for £0.85 million

·     Completed 16 lettings, adding £1.2 million per annum to the rent roll (before incentives), five lease renewals securing £0.5 million per annum (before incentives) and five rent reviews securing an uplift of £0.2 million per annum



Commenting, Nick Thompson, Chairman of Picton said:


"The Company has completed another busy quarter and achieved several key objectives including completing the Placing Programme and establishing a new revolving credit facility that provides increased operational and financial flexibility. We also announced an increase in the Company's dividend which reflects our confidence in the future performance of the portfolio in relation to the current phase of the UK property cycle."


Michael Morris, Chief Executive of Picton Capital, added:


"The strong NAV growth this quarter was primarily a result of valuation gains within the portfolio, the covered dividend and the positive impact of gearing, currently at around 30%.  In particular, we completed several asset management initiatives on specific assets that enabled us to deliver growth ahead of the wider market."





For further information:



Jeremy Carey/James Verstringhe, 020 7920 3150, jverstringhe@tavistock.co.uk


Picton Capital Limited

Michael Morris, 020 7011 9980, michael.morris@pictoncapital.co.uk 


The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port




David Sauvarin, 01481 745 001, team_picton@ntrs.com




Note to Editors

Picton Property Income Limited ('Picton') is an income focused, property investment company listed on the London Stock Exchange. Picton can invest both directly and indirectly in commercial property across the United Kingdom.


With Net Assets of £370.0 million at 31 March 2015 and approximately 870 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









The unaudited Net Asset Value ('NAV') of Picton, as at 31 March 2015, was £370.0 million, reflecting 68.5 pence per share, an increase of 3.8% over the quarter.


The NAV attributable to the ordinary shares is calculated under International Financial Reporting Standards and incorporates the external portfolio valuation as at 31 March 2015, including income for the quarter, but does not include a provision for the dividend this quarter which will be paid in May 2015.


The next independent valuation of the property portfolio is scheduled for June 2015 and the NAV per share, as at 30 June 2015, will be announced in July 2015.


Following this announcement, and in accordance with Listing Rule 15.5.1(4), the Company confirms that it is satisfied that all inside information which the Directors and the Company may have in the period leading up to the announcement of its annual results has been and will continue to be notified via a RIS and, therefore, the dealings referred to in Listing Rule 15.5.1(3) are permitted.


The Company and persons discharging managerial responsibilities for the Company are therefore exempt during the close period from the provisions of the Model Code in respect of dealings in the Company's own securities. If, in the period leading up to the announcement of the annual results, the Directors, the Company or any person discharging managerial responsibilities come into possession of any inside information, this will be notified via a RIS before any such transactions are undertaken.


The Company is shortly to start preparing its annual results, which will be released in June 2015 and the close period to which this notification relates is in respect of the year ended 31 March 2015.


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





The Board of Picton recently announced a 10% dividend increase, equivalent to a yearly payment of 3.3 pence per share. The increase reflects an improvement in the underlying income profile of the portfolio as a result of increased occupancy and a reduction in void costs.


An interim dividend of 0.825 pence per share is declared in respect of the period 1 January 2015 to 31 March 2015 (1 October 2014 to 31 December 2014: 0.75 pence).


The dividend will be paid on 29 May 2015 to shareholders on the register on 15 May 2015. The ex-dividend date is 14 May 2015.


Post-tax dividend cover during the quarter was 120% (31 December 2014: 118%). 





The Group has total borrowings of £232.8 million with a fixed weighted average interest rate of 4.6% and a weighted average debt maturity profile of approximately 12.4 years.


A new three-year £26 million revolving credit facility ("RCF") was set up during the quarter. Once drawn, interest will be charged at 175 basis points over 3 month LIBOR, which is equivalent to 2.3% per annum currently. There is a nominal non-utilisation fee of 70 basis points, equivalent to £0.18 million per annum.


The facility provides increased optionality when Picton's 7.25% Zero Dividend Preference Shares ("ZDPs") mature in 2016. If the RCF is utilised, and assuming current 3 month LIBOR, it would significantly reduce the overall cost of debt upon the ZDP repayment.


In addition the RCF can provide flexibility in respect of future acquisitions, which is particularly relevant following completion of the recent Placing Programme. By providing the Company with immediate access to undrawn but committed facilities, in future Picton will be able to move quickly and opportunistically to purchase assets, rather than being reliant on raising new equity capital.


As at 31 March 2015, net gearing, calculated as total debt including ZDPs, less cash, as a proportion of gross property value, was 30.1% (31 December 2014: 36.7%).





During the quarter the Company raised a total of £42.2 million of primary equity under the Placing Programme in two tranches (£7.0 million on 21 January and £35.2 million on 18 March).


The Placing Programme is now complete having raised a total of £102 million of new equity since May 2014.


The Company now has a total of 540,053,660 million ordinary shares in issue.





According to the IPD Monthly Index, capital growth was 1.6% over the quarter, compared with 2.9% in December 2014. Over the quarter rental growth was 0.8%, compared with 1.0% in December 2014. Overall total returns were 3.0% in the quarter to March 2015, compared to 4.4% in the quarter to December 2014.


Across the principal IPD sectors, office values rose by 2.8% (December 2014: 4.3%), industrial by 2.0% (December 2014: 4.3%) and retail by 0.5% (December 2014: 1.3%).


Over the quarter, 30 of the 37 IPD segments recorded positive capital growth, this is lower than the 34 recorded last quarter. Rental growth was more widespread this quarter, with 28 of the 37 segments recording positive growth compared to 25 in the previous quarter. 


The occupancy rate in the March IPD Monthly Index rose to 91.5% (December 2014: 91.3%).





Positive valuation gains were seen across the portfolio, albeit at a slower rate than in the preceding quarter. Overall the portfolio valuation increased by 2.5% during the period, with the office sector performing particularly strongly, driven by activity further detailed below.


As at 31 March 2015, the portfolio had a net initial yield of 5.9% (allowing for void holding costs) or 6.0% (based on contracted net income) and a net reversionary yield of 7.2%. The weighted average unexpired lease term (to first termination) was 6.2 years. Occupancy was maintained at 95%.


Key highlights in the quarter included:-




In Rushden, which was only acquired in July 2014, we secured a £60,000 per annum uplift ahead of the April 2015 rent review, effectively increasing the running yield to 8% on the purchase price. The uplift was marginally ahead of ERV and 3.75% ahead of the previous passing rent.


In Radlett, we simultaneously surrendered a lease from a tenant not in occupation, and re-let it to another existing occupier on the Estate.  This increased income longevity by eight years.


Following an active management surrender in January at Unit O Lyon Business Park, Barking, the refurbishment of this 25,000 sq ft unit has just completed. We have good interest in the unit and expect to let the unit ahead of the previous passing rent. The outgoing tenant paid a premium of £300,000 plus dilapidations to surrender their lease, which expired in 2016.


We recently got back three units at Dencora Way in Luton, which are being refurbished. We have interest from a national occupier in one and expect to re-let the others quickly post refurbishment. At the same estate, in liaison with and predominantly funded by our occupiers, we have completed a programme of modernisation works which improves the appearance of the units and attractiveness of the overall estate.


Middleton Trade Park was sold for £2.2 million, 8% above the preceding valuation and 25% above the purchase price in April 2010. The sale of this 24,000 sq ft multi-let industrial estate follows considerable letting success which included the letting of six units to a range of occupiers including Screwfix.




At Angel Gate, EC1 and following the architect-led refurbishment that completed last quarter we have now leased unit 28. We have secured a five-year term at £156,000 per annum (£40.00 per sq ft) which is 7% ahead of ERV and shows the continued strong demand for refurbished offices at this location. A further four offices were leased at an annual rent of £293,000 per annum also 7% ahead of ERV. Two offices came back in the quarter, which are currently being refurbished, for future re-letting at enhanced rental levels.


At Atlas House in Marlow, we renewed an existing occupier's lease securing a further five years at a rent of £223,000 per annum, a 66% uplift on the passing rent and 3% ahead of ERV. This is another example where we work with our occupiers, as we are installing an office pod in the central atrium to cater for HPS's requirement for additional meeting rooms, allowing them to remain at Atlas House.


At Queens House in Glasgow, we have secured a further two new occupiers and completed a lease renewal. The overall rent of £46,000 per annum is 11% ahead of ERV. This property has seen strong occupier interest following the comprehensive refurbishment carried out last year. There are currently only two suites available, compared with 11 a year ago, and there remains good demand for the remaining units.


In Fleet, an agreement to lease has been completed securing two leases for 10 years, subject to break, at a stepped rent to £400,000 per annum (£11.60 per sq ft) in year five plus a top up rent. This is one of the largest lettings in the Fleet market and means the properties will now be refurbished for the occupier.  This transaction will further improve portfolio occupancy once these works are completed.


Four vacant office suites at Longcross Court in Cardiff, accounting for 21% of the floor space, are now being refurbished and this is the final stage of a rolling refurbishment programme.


Retail / Leisure


Gloucester Retail Park was acquired for £14.65 million reflecting an initial yield of 6.9%. The prominently located retail park is leased to leading discount retailers B&M Bargains, Carpetright, The Range and AHF with an average weighted lease length of 13.2 years at a low average rent of under £9.60 per sq ft.


We consolidated our ownership at Angouleme Way Retail Park in Bury where we acquired a 96-year leasehold interest for £3.9 million reflecting a net initial yield of 7.9%. The two units, let to Argos and Poundstretcher, are adjacent to the Group's existing holding and will allow us to unlock further value through asset management initiatives.


At 1 Chancery Lane, we paid to surrender a lease of a ground floor unit and simultaneously leased the unit to Itsu on a 15 year lease at a rent of £165,000 per annum with a nominal incentive. The transaction increased the lease term by eight years and the passing rent by 32%.


The September 2013 rent review on the retail unit at Stanford House, Covent Garden was settled at £785,000 per annum, a 17% uplift compared with the previous passing rent and in line with ERV.


We completed a reversionary lease at 78 Briggate in Leeds, extending the term from 2018 to 2023. The transaction secures the rent of £177,000 per annum.


In Southampton, we leased the ground floor of the property at a rent of £50,000 per annum, 39% ahead of the preceding ERV, albeit on a shorter and more flexible lease term. The property is now fully let.


The sale of 113/113a High Street, Sutton was completed for £0.85 million. The sale of this retail unit follows the regear of Stan James' lease in 2012 for 10 years with the other unit being let to the Fragrance Shop until 2017. The sale price was 4% ahead of the preceding valuation.











The unaudited Net Asset Value is as follows:



31 Mar 2015


31 Dec 2014


30 Sep 2014


Investment properties *




Other assets








Other liabilities     




Borrowings: Loan facilities


                    Loan stock


















Net Assets




Net Asset Value per share





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


The movements in Net Asset Value can be summarised as follows;





Per share




NAV at 31 December 2014



Movement in property values




Share issue




Share premium (net of issue costs)




Net income after tax for the period




Dividends paid




NAV at 31 March 2015








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




31 March 2015

Like for Like

Valuation Change




Office - Central/Greater London



Office - Rest of UK






Retail Warehouse















31 March 2015

South East


Central & Greater London








South West




Northern Ireland








The top ten assets, which represent 49% of the portfolio by capital value, are detailed below.





Parkbury Industrial Estate, Radlett


South East

River Way Industrial Estate, Harlow


South East

Stanford House, Long Acre, WC2



Angel Gate Office Village, City Road, EC1



50 Farringdon Road, EC1



Boundary House, Jewry Street, EC3



Shipton Way, Rushden, Northamptonshire


East Midlands

Phase II Parc Tawe, Swansea

Retail Warehouse


Angouleme Way, Bury

Retail Warehouse

North West

Colchester Business Park, Colchester


South East



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