Picton Property Inc. - Trading Update and Net Asset Value

Picton Property Income

31/07/2024 07:00

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RNS Number : 4692Y  Picton Property Income Limited  31 July 2024

31 July 2024

 

PICTON PROPERTY INCOME LIMITED

('Picton', the 'Company' or the 'Group')

LEI: 213800RYE59K9CKR4497

 

Trading Update and Net Asset Value as at 30 June 2024

 

 

Picton today announces its Net Asset Value ('NAV') for the quarter ended 30
June 2024.

 

Lena Wilson CBE, Chair of Picton, commented:

"For the second consecutive quarter we have seen a stabilisation in our net
asset value. With a fully covered dividend, increased by nearly 6% in May, and
with 100% long-term fixed financing, we are in a strong position to capitalise
on improving market conditions".

 

Michael Morris, Chief Executive of Picton, commented:

"It is encouraging that, at a portfolio level, we have delivered a positive
valuation movement for the quarter, the first since June 2022. We have also
been able to improve occupancy, with our industrial, warehouse and logistics
assets continuing to support income growth.

 

During the period we have reduced our office exposure through our alternative
use repositioning strategy and used the proceeds to repay floating rate debt
to reduce financing costs. We continue to invest in our portfolio, future
proofing and upgrading assets to unlock value".

 

Financial highlights

 •    Net assets of £524.1 million (31 March 2024: £524.5 million)
 •    NAV/EPRA net tangible assets per share decreased by -0.1% to 96.0 pence (31
      March 2024: 96.1 pence)
 •    Total return for the quarter of 0.9% (31 March 2024: 0.9%)
 •    Reduced total outstanding debt from £227.5 million to £210.8 million
 •    Reduced the weighted average interest rate on our debt to 3.7%
 •    Reduced loan-to value ratio (LTV) to 24.9% (31 March 2024: 27.9%)

 

Operational highlights

 •    Like-for-like portfolio valuation increase of 0.4% over the quarter, with the
      industrial, warehouse and logistics assets continuing to show the most
      resilience
 •    Reduction of office exposure, through completion of part vacant asset
      disposal, 2% ahead of March 2024 valuation
 •    Completed four active management transactions 7% ahead of the March 2024
      estimated rental value (ERV) - three enabling existing occupiers to expand,
      securing an additional annual rent of £0.4 million, and one early lease
      regear, securing annual rent of £1.6 million until 2039
 •    Completed three new lettings in the industrial and office sectors with a
      combined annual rent of £0.5 million, 7% ahead of the March 2024 ERV
 •    Renewed five leases in the industrial, office and retail sectors, with a
      combined annual rent of £1.0 million, an increase of 45% on the previous
      passing rent and 1% below the March 2024 ERV
 •    Settled three rent reviews in the industrial sector with a combined annual
      rent of £0.6 million, 45% ahead of the previous passing rent and 1% ahead of
      the ERV at the review date
 •    Invested £1.9 million into upgrading projects across the portfolio to enhance
      asset quality and improve environmental credentials, facilitating occupier
      retention and new lettings
 •    Improved occupancy to 93% (31 March 2024: 91%) or 95% excluding two assets
      where an alternative use is being progressed

 

 

Dividend

 •    Interim dividend of 0.925 pence per share declared for the period 1 April 2024
      to 30 June 2024 and to be paid on 30 August 2024 (1 January 2024 to 31 March
      2024: 0.925 pence per share)
 •    Annualised dividend equivalent to 3.7 pence per share, delivering a dividend
      yield of 5.5%, based on the share price at close of business on 30 June 2024
 •    Dividend cover for the quarter of 102% reflecting the dividend increase
      effective May 2024

 

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

 

For further information:

 

Tavistock

James Verstringhe

020 7920 3150, james.verstringhe@tavistock.co.uk
(mailto:james.verstringhe@tavistock.co.uk)

 

Picton

Kathy Thompson, Company Secretary

020 7011 9988, kathy.thompson@picton.co.uk
(mailto:kathy.thompson@picton.co.uk)

 

About Picton

Established in 2005, Picton is listed on the main market of the London Stock
Exchange and is a constituent of a number of EPRA indices including the FTSE
EPRA Nareit Global Index.

 

Picton owns and actively manages a £718 million UK commercial property
portfolio, invested across 48 assets and with around 350 occupiers (as at 30
June 2024).

 

Through an occupier focused, opportunity led approach, Picton aims to be one
of the consistently best performing diversified UK REITs and has delivered
upper quartile outperformance and a consistently higher income return than the
MSCI Quarterly Property Index since launch.

 

With a portfolio strategically positioned to capture income and capital
growth, currently weighted towards the industrial sector, Picton's agile
business model provides flexibility to adapt to evolving market trends over
the long-term.

 

Picton has a responsible approach to business and is committed to being net
zero carbon by 2040.

 

For more information please visit: www.picton.co.uk (http://www.picton.co.uk)

 
NET ASSET VALUE

The NAV of Picton as at 30 June 2024 was £524.1 million, or 96.0 pence per
share, reflecting a -0.1% decline over the quarter or 0.9% 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 2024, including
income for the quarter, but does not include a provision for the dividend this
quarter, which will be paid in August 2024.

                            30 Jun 2024   31 Mar 2024   31 Dec 2023   30 Sept 2023

                            £million      £million      £million      £million
 Investment properties*     700.2         727.4         728.3         740.0
 Other assets               26.7          26.9          23.6          26.6
 Cash                       32.1          19.8          21.6          17.2
 Other liabilities          (24.1)        (22.1)        (21.3)        (19.9)
 Borrowings                 (210.8)       (227.5)       (227.9)       (226.8)
 Net Assets                 524.1         524.5         524.3         537.1
 Net Asset Value per share  96.0p         96.1p         96.0p         98.5p

 

*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       Movement  Per share

                                      £million    %         Pence
 NAV at 31 March 2024                 524.5                 96.1
 Movement in property values          (0.1)       -         -
 Net income after tax for the period  5.1         1.0       0.9
 Dividends paid                       (5.1)       (1.0)     (0.9)
 Other                                (0.3)       (0.1)     (0.1)
 NAV at 30 June 2024                  524.1       (0.1)     96.0

 

As at close of business on 30 June 2024, the Company's share price of 67.7
pence reflected a 29.5% discount to the NAV of 96.0 pence per share.

 

DIVIDEND DECLARATION

A separate announcement has been released today declaring a dividend of 0.925
pence per share in respect of the period 1 April 2024 to 30 June 2024 (1
January 2024 to 31 March 2024: 0.925 pence).

 

Dividend cover for the quarter of 102% reflecting the dividend increase
effective May 2024.

 

DEBT

Total borrowings as at 30 June 2024 reduced to £210.8 million. The
outstanding balance of £16.4 million drawn under the revolving credit
facility was repaid in full in the period, with all debt now drawn under
long-term fixed rate facilities.

 

The weighted average debt maturity profile of the Group is approximately 7.5
years and the weighted average interest rate is 3.7%. The net loan-to-value
ratio, calculated as total debt less cash, as a proportion of gross property
value, is 24.9% (31 March 2024: 27.9%).

 

Picton has £50 million available through its undrawn revolving credit
facility.

 

 

MARKET BACKGROUND

The MSCI UK Monthly Property Index showed a positive total return for All
Property for the three months to June 2024 of 1.7%, with an income return of
1.4% and capital growth of 0.3%. (March 2024: -0.9%). This is the first
consecutive three months of positive capital growth since June 2022.

 

All Property rental growth was 0.8% for the three months to June 2024 (March
2024: 0.8%). On a rolling three month basis, rental growth has remained
positive since February 2021.

 

The All Property Net Initial Yield was 5.4% in June 2024, compared to 5.3% in
March 2024.

 

The market performance for the three months to June 2024 for All Property and
the three main sectors is shown below. Capital growth was positive for all
industrial sub-sectors, negative for all office sub-sectors, and positive for
over half of all retail sub-sectors, principally retail warehousing. Rental
growth was positive for all industrial and office sub-sectors and more than
half of the retail sub-sectors.

 

 Three months to June 2024                All Property  Industrial  Office  Retail

 Total Return                             1.7%          2.1%        -0.3%   2.8%

 Income Return                            1.4%          1.2%        1.3%    1.8%

 Capital Growth                           0.3%          0.9%        -1.6%   1.0%
 Number of segments with positive growth  16            7           0       9
 Number of segments with negative growth  18            0           10      8

 ERV Growth                               0.8%          1.3%        0.5%    0.2%
 Number of segments with positive growth  25            7           9       9
 Number of segments with negative growth  7             0           0       7

 

(Source: MSCI UK Monthly Property Index)

 

 

PORTFOLIO UPDATE

On a like-for-like basis, the overall portfolio valuation movement was up
0.4%, the first positive quarterly movement since June 2022.

 

The breakdown of valuation movements over the quarter are shown below:

 

 Sector                    Portfolio    Like-for-like

                           allocation   valuation change

 Industrial                61.7%        0.8%
 South East                43.8%
 Rest of UK                17.9%

 Office                    27.1%        -0.6%
 London City and West End  7.5%
 South East                7.8%
 Rest of UK                9.0%
 Alternative use assets    2.8%

 Retail and Leisure        11.2%        0.6%
 Retail Warehouse          7.1%
 High Street - Rest of UK  2.3%
 Leisure                   1.8%

 Total                     100%         0.4%

 

 

Industrial - improving and extending income and capturing reversion

In Grantham, having settled the rent review, we have now restructured the
lease with our third largest occupier, securing an additional 13-year term at
a passing rent of £1.6 million. As part of the transaction Picton will
contribute towards upgrading the asset, including energy efficiency
improvements.

 

At Parkbury, Radlett we renewed the lease of our second largest occupier on
the estate, securing £0.8 million per annum, an increase of 56% on the
previous passing rent and 1% ahead of the March 2024 ERV. We also settled two
rent reviews securing a combined £0.4 million per annum, 53% ahead of the
previous passing rent and 1% ahead of ERV at the time of the reviews.

 

In Bracknell we completed the letting of the vacant unit for £0.3 million on
a 15-year lease, 8% ahead of ERV and in Warrington we let a unit for £0.1
million, 3% ahead of ERV.

 

At Datapoint, London E16, we surrendered a lease and simultaneously re-leased
the unit to the adjacent occupier who also extended their existing lease
securing a minimum of ten-years term certain on both units. The combined rent,
which included the settlement of a forthcoming rent review, is £0.5 million
per annum, 5% ahead of ERV and 27% ahead of the previous passing rent.

 

Offices - capturing ERV growth and upgrading the portfolio

At Tower Wharf, Bristol we have upsized an occupier into recently vacated
space on a ten-year lease at £0.5 million, 5% ahead of ERV. The occupier has
increased their space in the building by 143% and their rent will increase by
£0.3 million per annum, on completion of refurbishment works.

 

At Atlas House, Marlow we have renewed a lease for £0.1 million, in line with
ERV and 42% ahead of the previous passing rent. At Stanford Building, London
WC2 we have leased a residential unit for £0.1 million per annum, 9% ahead of
ERV.

 

Our office portfolio decarbonisation programme is progressing and at five
assets we are upgrading mechanical and electrical infrastructure to meet
occupier requirements, improve income and meet our net zero commitments.

 

Offices - delivering our alternative use strategy

As previously announced, the sale of Angel Gate, London EC1 was completed for
£29.6 million, 2% ahead of the March 2024 valuation.

 

In Cardiff, in accordance with the sale contract, the purchaser has submitted
a planning application to convert the substantially void office building into
student accommodation. Completion will occur following receipt of satisfactory
planning permission, due later this year, and it is expected that an
additional overage payment will be made to the Company, based on the number of
units achieved.

 

At Charlotte Terrace, London W14, we have secured planning consent for six
residential units on space that is currently vacant.

 

Retail - high occupancy

In Swansea we settled an indexed rent review at £0.4 million, an increase of
10% ahead of the previous passing rent. Our retail portfolio is currently 98%
occupied and we are in negotiations with a number of occupiers to extend
leases.

 

Top 10 Holdings

 Asset                                                   Sector      Location
 Parkbury Industrial Estate, Radlett, Hertfordshire      Industrial  South East
 River Way Industrial Estate, Harlow, Essex              Industrial  South East
 Stanford Building, Long Acre, London, WC2               Office      London
 Datapoint, Cody Road, London, E16                       Industrial  London
 Shipton Way, Rushden, Northamptonshire                  Industrial  East Midlands
 Lyon Business Park, Barking, London                     Industrial  Outer London
 Sundon Business Park, Luton, Bedfordshire               Industrial  South East
 Tower Wharf, Cheese Lane, Bristol                       Office      South West
 50 Farringdon Road, London, EC1                         Office      London
 Trent Road, Grantham                                    Industrial  East Midlands

 

ENDS

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