Picton Property Income Ltd - Net Asset Value and Interim Dividend

PR Newswire

25 October 2016


(“Picton” or the “Company” or the “Group”)

Net Asset Value as at 30 September 2016 and Interim Dividend

Picton (LSE: PCTN), the income focused property investment company, announces its Net Asset Value for the quarter ended 30 September 2016 and Interim Dividend. 

Highlights during the quarter included:


  • Increase in Net Assets to £423.9 million (30 June 2016: £418.0 million).
  • NAV/EPRA NAV per share rose 1.4% to 78.5 pence (30 June 2016: 77.4 pence).
  • Total return for the quarter of 2.5% (30 June 2016: 1.3%).
  • Repaid £15.8 million under the revolving credit facility leaving £53.0 million of undrawn facilities now available.
  • Net gearing of 31.6% (30 June 2016: 34.4%), which has further reduced post quarter end (see below).


  • Dividend of 0.825 pence per share declared and to be paid on 30 November 2016 (30 June 2016: 0.825 pence per share).
  • Post-tax dividend cover for the quarter of 248% (30 June 2016: 111%), or 130% prior to the one-off receipt in respect of the Strathmore Hotel, Luton (see below).
  • Dividend yield of 4.6%, based on a share price of 71.25 pence on 21 October 2016.

Portfolio Activity

  • Like-for-like increase in property portfolio valuation of 0.1% (30 June 2016: 0.5%).
  • Completed the sale of Boundary House, Jewry Street, London EC3 for £27.8 million in line with 30 June 2016 valuation.
  • Received £0.67 million in respect of a Rights of Light claim at Boundary House from a nearby owner.
  • Occupancy at 93% (30 June 2016: 96%). The decrease, as anticipated, is principally due to the vacancy at 50 Farringdon Road, London EC1.
  • 10 lettings completed, on average 3% ahead of 30 June 2016 ERV, adding £0.9 million per annum to the rent roll.
  • Five lease renewals/regears, in line with the 30 June 2016 ERV, securing £0.5 million per annum.
  • Settled outstanding dispute in respect of the Strathmore Hotel, Luton for £5.25 million.

Post Quarter End Activity

  • Fully repaid £29.1 million zero dividend preference shares reducing the Group’s weighted average interest rate to 4.2% and net gearing to 29.6%.
  • Completed sale of 1 Chancery Lane, London WC2 for £17.25 million, 7.8% above June valuation and 2.1% above September valuation. 
  • Let the portfolio’s largest industrial void in Harlow, at an initial rent of £0.35 million per annum, in line with 30 September 2016 ERV.
  • Pipeline of 10 lettings for a combined rent of £0.8 million and three lease renewal/regears for a combined rent of £0.2 million currently under offer.

Commenting, Nick Thompson, Chairman of Picton, said:

“Whilst we cannot avoid Brexit headwinds, our resiliently positioned portfolio has meant we have had another good quarter, with encouraging activity post quarter end. We have reduced our central London exposure, strengthened our balance sheet through the repayment of the ZDPs and improved underlying dividend cover. We are well positioned with over £50 million available for accretive opportunities as they arise.”

Michael Morris, Chief Executive of Picton Capital, added:

“We are working hard to maintain momentum within the portfolio and the activity, over the usual quieter summer period, speaks for itself. Our priority and indeed the opportunity, is to further grow income from this position with leasing and active management initiatives we have identified.”

This announcement contains inside information.

For further information:

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

Picton Capital Limited
Michael Morris, 020 7011 9980, michael.morris@picton.co.uk

The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court
Les Banques
St Peter Port

Katie Le Page, 01481 745 001, team_picton@ntrs.com

Note to Editors

Picton Property Income Limited 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 £423.9 million at 30 September 2016, 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. 



The EU referendum result at the end of June has clearly impacted the UK property market in July, August and September. According to the MSCI IPD Monthly Index, total returns were -2.3% in the quarter to September 2016, compared to 1.3% in the quarter to June 2016. Capital growth was -3.6% over the quarter, compared with -0.1% in the quarter to June 2016. On a monthly basis, capital growth declines reduced in September (-0.2%) compared to August (-0.7%) and July (-2.8%).

Across the principal IPD sectors, office values fell by -4.7% (June 2016: 0%), industrial by -2.1% (June 2016: 0.4%) and retail by -3.9% (June 2016: -0.4%). Out of a total of 37 segments (based on rolling 3 months), only one segment recorded positive capital growth (Standard Retail Central London), compared to 13 last quarter.

Over the quarter to September, rental values rose by 0.2%, compared with 0.6% in the quarter to June 2016. Across the principal IPD sectors, office rental values grew by 0.2% (June 2016: 0.6%), industrial by 0.4% (June 2016: 1.2%) and retail remained flat at 0.0% (June 2016: 0.3%). Over the quarter, the majority of the IPD segments recorded positive rental growth, with a majority of rises recorded in the industrial sector. Out of a total of 37 segments, 23 segments recorded positive rental growth compared to 29 segments last quarter.


The unaudited Net Asset Value (‘NAV’) of Picton, as at 30 September 2016, was £423.9 million, reflecting 78.5 pence per share, an increase of 1.4% over the quarter.

The NAV uplift reflected a positive portfolio movement and covered dividend, which was further enhanced by the one-off settlement of a dispute relating to the Strathmore Hotel, Luton for £5.25 million. This settlement had the effect of adding just less than 1.0 pence per share to the 30 September 2016 NAV.

The NAV attributable to the ordinary shares is calculated under International Financial Reporting Standards and incorporates the external market valuation as at 30 September 2016, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in November 2016.

Following the Referendum result, in line with the approach adopted by other valuers, CBRE Limited, the Group’s external valuer, has included the following comment in their valuation report:-

“Following the Referendum held on 23 June 2016 concerning the UK’s membership of the EU, a decision was taken to exit. Since that date, we have monitored market transactions and market sentiment in arriving at our opinion of Market Value.  After an initial period of uncertainty and an absence of activity, transactional volumes and available evidence has risen in most sectors of the market and liquidity is returning to more normal levels. This has led to a generally more stable outlook for the market. However, there remains a paucity of comparable transactions in central London offices, development land and buildings, retail parks and large shopping centres and therefore valuations in these sectors reflect a greater degree of judgement.”

The next independent valuation of the property portfolio is scheduled for December 2016 and the unaudited NAV per share, as at 31 December 2016, will be announced in January 2017.

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


An interim dividend of 0.825 pence per share is declared in respect of the period 1 July 2016 to 30 September 2016 (1 April 2016 to 30 June 2016: 0.825 pence). The dividend will be paid on 30 November 2016 to shareholders on the register on 11 November 2016. The ex-dividend date is 10 November 2016.

Post-tax dividend cover over the quarter was 248% (30 June 2016: 111%). This reduces to 130% when excluding the settlement agreed of £5.25 million at the Strathmore Hotel, Luton.   


In the quarter, £15.8 million of the revolving credit facility was repaid, using proceeds from the disposal of Boundary House. The Group now has £53.0 million of undrawn facilities currently available.

The Group had total borrowings of £234.2 million at 30 September, with a weighted average interest rate of 4.6% (100% fixed rate) and a weighted average debt maturity profile of approximately 10.7 years. Net gearing, calculated as total debt including the zero dividend preference shares (“ZDPs”), less cash, as a proportion of gross property value, was 31.6% (30 June 2016: 34.4%).

Following the quarter end the ZDP’s were repaid in full for £29.1 million using proceeds from recent asset disposals. Following this repayment the Group’s overall debt structure, on a proforma basis, can be summarised as follows:-

  • Total drawn debt has reduced to £205.2 million (30 September 2016: £234.2 million).
  • Average debt maturity increased to 12.1 years (30 September 2016: 10.7 years).
  • Net gearing reduced to 29.6% (30 September 2016: 31.6%).
  • Weighted average interest rate reduced to 4.2% (30 September 2016: 4.6%)


The portfolio valuation increased 0.1% or £0.5 million, primarily as a result of our sector weightings combined with active management and leasing activity completed during the period. The Group also incurred £0.3 million of capital expenditure, which has enhanced the portfolio value.

The best performing elements within the portfolio were the central London office and industrial segments, reflecting trading and active management activity as detailed below. In broad terms, in a post EU referendum environment, the negative valuation movements within the portfolio primarily reflected either more conservative leasing assumptions, weaker yields or a changed leasing position. Conversely active management, improved leasing and disposal activity had an offsetting positive impact.

Occupancy across the portfolio decreased to 93% primarily due to the space at 50 Farringdon Road, London EC1 becoming vacant in August. This single void accounts for 40% of the total vacancy across the portfolio.

As at 30 September 2016, 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 6.9%. 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:


Our strategy to reduce central London office exposure and use the proceeds to reduce gearing was concluded with the disposal of Boundary House, London EC3 and Chancery Lane, London WC2, post quarter end.

The sale of Boundary House, London EC3 completed during the quarter realising £27.8 million, which was in line with the 30 June 2016 valuation. The sale crystallised value created since purchase, having acquired the building in 2006 for £16.1 million. In a separate transaction at Boundary House, the Company secured a payment of £0.67 million from a nearby owner, in respect of a Rights of Light claim.

As reported last quarter, at the end of August we have had two floors returned to us at 50 Farringdon Road, London EC1 and the current advice is that we expect to let the space some 60% ahead of the rent paid by the outgoing tenant.

We renewed a lease at Angel Gate, London EC1 for a further five years, increasing the passing rent by 35% to £80,000 per annum which is slightly ahead of ERV. There are currently four vacant suites on the estate with an ERV of £0.18 million.


In Oldham, we secured a change of use from industrial to leisure, allowing us to complete a lease to The Gym Group on a 15 year term at a rent of £0.15 million per annum, which was 50% ahead of its ERV as a industrial unit. A small piece of land was acquired in Oldham as part of this transaction. The net valuation uplift was 50%.

We have seen notable occupational demand at Lyon Business Park in Barking, where we let the final two smaller units securing £70,000 per annum, in line with ERV. Following the quarter end we have also completed an Agreement for Lease on unit O, our second largest industrial void, at a rent of £0.25 million per annum, 17% ahead of ERV with a nominal rent free period.  Once various Landlord works are completed, the lease will take effect and the estate will be fully let which will be reflected in the December valuation.

Retail and Leisure

With occupancy above 99% within this element of the portfolio, the principal transaction was the £5.25 million settlement in relation to a dispute at the Strathmore Hotel, Luton. The existing valuation and leasing arrangement at this asset remained unchanged.

The settlement will be received in November but is required to be accounted for in this period, which has consequently had a major impact on dividend cover.  When received, it will further improve the cash position and reduce net gearing.



The unaudited Net Asset Value is as follows:

                                                30 Sept 2016
30 June 2016
31 Mar 2016
Investment properties * 621.1 648.5 646.0
Other assets 24.1 18.5 17.3
Cash 35.3 23.4 22.8
Other liabilities      (22.4) (22.7) (19.5)
Borrowings: Loan facilities




Net Assets 423.9 418.0 417.1
Net Asset Value per share 78.5p 77.4p 77.2p

* 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 30 June 2016 418.0 77.4
Movement in property values (0.7) (0.2) (0.1)
Net income after tax for the period 11.0 2.7 2.0
Dividends paid (4.4) (1.1) (0.8)
NAV at 30 September 2016 423.9 1.4 78.5


In addition to the 30 September weightings we have also included the proforma numbers following the disposal of Chancery Lane, London WC2, which completed on 14 October. On this basis our London office exposure now comprises 10.9% in Central London (Angel Gate, EC1 and 50 Farringdon Road, EC1) and 2.5% in Greater London (Croydon).

The Group’s portfolio is structured as follows:

Sector Weighting
30 Sept 16
Proforma Weighting
14 Oct 2016
Like for Like
Valuation Change
Office – Rest of UK 20.2% 20.8% -1.4%
Office – Central/Greater London 15.8% 13.4% 2.0%
Industrial 37.8% 38.9% 1.4%
Retail/Leisure 26.2% 26.9% -1.8%
Total 100.0% 100.0% 0.1%


Geography Weighting
30 Sept 16
Proforma Weighting
14 Oct 2016
South East 33.8% 34.7%
Central & Greater London 24.8% 22.7%
North 16.1% 16.6%
Midlands 13.9% 14.2%
Wales 3.8% 4.0%
South West 3.8% 3.9%
Scotland 3.4% 3.5%
Northern Ireland 0.4% 0.4%
Total 100.0% 100.0%


The top ten assets, which represent 47% 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 North
Phase II Parc Tawe, Swansea Retail Warehouse Wales

Metro, Manchester                                                             Office                                      North West