REG - Picton Property Inc. - Trading Update and Net Asset Value

Picton Property IncomeAnnouncement

30/01/2024 07:15

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RNS Number : 2812B  Picton Property Income Limited  30 January 2024

30 January 2024

 

PICTON PROPERTY INCOME LIMITED

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

LEI: 213800RYE59K9CKR4497

 

Trading Update and Net Asset Value as at 31 December 2023

 

 

Picton announces its Net Asset Value for the quarter ended 31 December 2023.

 

Lena Wilson CBE, Chair of Picton, commented:

"The real estate market showed continued resilience from an occupational
perspective, with all three core sectors showing positive rental growth for
the year. With capital values having seen on average a 25% write down since
their 2022 peak, the outlook, assuming interest rates have peaked, will become
supportive and as such we expect a stabilisation of values in 2024."

 

Michael Morris, Chief Executive of Picton, commented:

"This quarter we have agreed some significant rental increases, which have
mitigated the impact of outward yield movements, against a backdrop of rising
interest rates in 2023. We have maintained a well covered dividend over the
period and made good progress on specific asset management initiatives. These
will enable us to improve earnings as we reposition our portfolio, to ensure
it continues to meet evolving occupier needs. As we start 2024, we are already
encouraged by portfolio activity."

 

Financial Highlights

 •    Net assets of £524.3 million (30 September 2023: £537.1 million).
 •    NAV/EPRA NTA per share decreased by -2.5% to 96.0 pence (30 September 2023:
      98.5 pence).
 •    Total return for the quarter of -1.6% (30 September 2023: 0.0%).
 •    LTV of 27.7% (30 September 2023: 27.7%).

 

Operational Highlights

 •    Like-for-like portfolio valuation movement of -1.5% over the quarter, with the
      industrial sector showing most resilience.
 •    Secured a 33% increase against the previous passing rent from four rent
      reviews in the industrial and retail sectors, with an annual rent of £2.3
      million, which was 5% ahead of the September 2023 ERV or the ERV at the time
      of the review if prior.
 •    Renewed / regeared two leases in the industrial sector, with a combined annual
      rent of £0.1 million, an increase of 101% against the previous passing rent
      and in line with the September 2023 ERV.
 •    Completed five lettings in the industrial and office sectors, securing a
      combined annual rent of £0.5 million, in line with the September 2023 ERV.
 •    Secured valuable residential permitted development rights at Angel Gate EC1,
      in order to maximise future disposal proceeds.
 •    Stable occupancy at 90% (30 September 2023: 90%).

 

Dividend

 •    Interim dividend of 0.875 pence per share declared in respect of the period 1
      October 2023 to 31 December 2023 and to be paid on 29 February 2024 (1 July
      2023 to 30 September 2023: 0.875 pence per share).
 •    Annualised dividend equivalent to 3.5 pence per share, delivering a dividend
      yield of 5.3%, based on the share price at close of business on 26 January
      2024.
 •    Dividend cover for the quarter of 108% (30 September 2023: 115%).

 

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

 

Picton

Kathy Thompson, Company Secretary

020 7011 9988, kathy.thompson@picton.co.uk

 

 

About Picton

 

Picton, established in 2005, is a UK REIT. It owns and actively manages a
£745 million diversified UK commercial property portfolio, invested across 49
assets and with around 400 occupiers (as at 31 December 2023).

 

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 (http://www.picton.co.uk)

 

NET ASSET VALUE

The unaudited Net Asset Value ('NAV') of Picton as at 31 December 2023 was
£524.3 million, or 96.0 pence per share, reflecting a -2.5% decline over the
quarter or -1.6% on a total return basis.

 

The NAV attributable to the ordinary shares is calculated under IFRS and
incorporates the independent market valuation as at 31 December 2023,
including income for the quarter, but does not include a provision for the
dividend this quarter, which will be paid in February 2024.

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

                            £million      £million       £million      £million
 Investment properties*     728.3         740.0          744.1         749.6
 Other assets               23.6          26.6           25.1          23.4
 Cash                       21.6          17.2           20.7          20.0
 Other liabilities          (21.3)        (19.9)         (20.9)        (20.9)
 Borrowings                 (227.9)       (226.8)        (227.1)       (224.5)
 Net Assets                 524.3         537.1          541.9         547.6
 Net Asset Value per share  96.0p         98.5p          99.4p         100.4p

 

*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 30 September 2023             537.1                 98.5
 Movement in property values          (13.3)      (2.5)     (2.5)
 Net income after tax for the period  5.1         0.9       0.9
 Dividends paid                       (4.8)       (0.9)     (0.9)
 Other                                0.2         -         -
 NAV at 31 December 2023              524.3       (2.5)     96.0

 

 

DIVIDEND DECLARATION

A separate announcement has been released today declaring a dividend of 0.875
pence per share in respect of the period 1 October 2023 to 31 December 2023 (1
July 2023 to 30 September 2023: 0.875 pence).

 

Dividend cover over the quarter was 108% (30 September 2023: 115%).

 

DEBT

Total borrowings at 31 December 2023 were £227.9 million. The majority is
drawn under long-term fixed rate facilities with only £16.4 million drawn
under the revolving credit facility.

 

The net loan-to-value ratio, calculated as total debt less cash, as a
proportion of gross property value, is 27.7% (30 September 2023: 27.7%).  The
weighted average debt maturity profile of the Group is approximately 7.5 years
and the weighted average interest rate is 3.9%.

 

Picton has £33.6 million available through its undrawn revolving credit
facility (30 September 2023: £35.1 million).

 

MARKET BACKGROUND

The MSCI UK Monthly Property Index showed a total return for All Property for
the three months to December 2023 of -1.4%, with an income return of 1.4% and
capital growth of -2.7%. Rental growth was 1.2% for the three months to
December 2023, compared to 0.8% for the three months to September 2023. The
All Property Net Initial Yield was 5.3% in December 2023, compared to 5.1% in
September 2023.

 

The market performance for the three months to December 2023 for All Property
and the three main sectors is shown below.

 

 Three months to December 2023            All Property  Industrial  Office  Retail

 Total Return                             -1.4%         0.3%        -4.2%   -1.9%

 Income Return                            1.4%          1.2%        1.3%    1.7%

 Capital Growth                           -2.7%         -0.8%       -5.5%   -3.6%
 Number of segments with positive growth  1             1           0       0
 Number of segments with negative growth  34            6           10      18

 ERV Growth                               1.2%          2.2%        0.7%    0.2%
 Number of segments with positive growth  27            7           8       12
 Number of segments with negative growth  8             0           2       6

 

 

PORTFOLIO UPDATE

On a like-for-like basis, the portfolio valuation movement was -1.5%, with the
industrial sector showing most resilience, whilst regional office and retail
warehouse sub-sectors showed more weakness over the quarter, with investment
activity significantly lower than previous years.

 

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

 

 Sector                    Portfolio    Like-for-like      Average equivalent

                           allocation   valuation change    yield movement

 Industrial                58.9%        -1.0%              +11 bps
 South East                42.0%
 Rest of UK                16.9%

 Office                    30.4%        -2.4%              +18 bps
 London City and West End  7.1%
 Inner and Outer London    1.7%
 South East                8.0%
 Rest of UK                8.9%
 Alternative use assets    4.7%

 Retail and Leisure        10.7%        -1.9%              +13 bps
 Retail Warehouse          6.7%
 High Street - Rest of UK  2.4%
 Leisure                   1.6%

 Total                     100%         -1.5%

 

Capturing rental growth in the industrial sector and extending income

 

At our distribution unit in Grantham, we settled a rent review at £1.6
million per annum, increasing the passing rent by 38%, 6% ahead of the
September 2023 ERV.

 

In Harlow, we settled a rent review at £0.5 million per annum, increasing the
passing rent by 29%, in line with the ERV at the time of the 2021 review.

 

At our largest multi-let estate in Radlett, we settled a rent review at £0.1
million per annum, increasing the passing rent by 56%, 5% ahead of the
September 2023 ERV.

 

Two leases were renewed in Belfast and Wokingham, increasing the passing rent
by 101% to £0.1 million per annum, in line with the September 2023 ERV.

 

In Gloucester, we let a refurbished unit with an A-rated EPC to an existing
occupier for their expansion. The rent agreed was £0.1 million per annum, 9%
ahead of the September 2023 ERV and we will benefit from additional income
from solar installation.

 

At Colchester Business Park, we have let a refurbished unit with a B-rated
EPC. The rent agreed was £0.3 million per annum, 1% below the September ERV,
and the occupier took a 15-year lease, subject to break.

 

Leasing space in the office sector and retaining income

 

We have let three suites at Queens House, Glasgow and at Angel Gate, London on
flexible SwiftSpace agreements for a combined rental income of £0.1 million
per annum.

 

At Angel Gate we have removed two break options securing £0.2 million per
annum of short-term income. In addition, we secured value accretive
residential permitted development rights across the entire estate following
engagement with both the local and national planning authorities during 2023,
to remove the restrictive Article 4 Direction. This unlocks residential
conversion potential in order to maximise future disposal proceeds.

 

As at 31 December 2023, the portfolio had a net initial yield of 5.3%
(allowing for void holding costs) or 5.5% (based on contracted net income), an
equivalent yield of 6.8% and a net reversionary yield of 7.0%. The weighted
average unexpired lease term, based on headline rent, was 4.3 years.

 

Occupancy remained stable at 90%, or 92% excluding offices at Cardiff and
Angel Gate, where alternative use strategies are being pursued.

 

The top ten assets, which represent 54% of the portfolio by capital value, are
detailed below.

 

 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
 Shipton Way, Rushden, Northamptonshire                  Industrial  East Midlands
 Datapoint, Cody Road, London, E16                       Industrial  London
 Lyon Business Park, Barking, London                     Industrial  Outer London
 Angel Gate, City Road, London, EC1                      Office      London
 Sundon Business Park, Luton, Bedfordshire               Industrial  South East
 Tower Wharf, Cheese Lane, Bristol                       Office      South West
 50 Farringdon Road,  London, EC1                        Office      London

 

ENDS

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