London, January 22
23 January 2019
PICTON PROPERTY INCOME LIMITED
(“Picton”, the “Company” or the “Group”)
Net Asset Value as at 31 December 2018
Picton (LSE: PCTN), the property investment company, announces its Net Asset Value for the quarter ended 31 December 2018.
Highlights during the quarter included:
Positive results with improved balance sheet
Dividend declared and continued strong cover
Continued portfolio activity
Nick Thompson, Chairman of Picton, commented:
“Given the current macro environment, we are encouraged by positive NAV growth during the period. The benefits of lower taxation, through our entry into the REIT regime, alongside lower financing costs this quarter have positively contributed to this result.”
Michael Morris, Chief Executive of Picton, commented:
“As the debate and uncertainty around Brexit continues, it is becoming much clearer which parts of the market are still active and which are not. While we believe that our portfolio is well positioned with a strong weighting to the industrial sector, we’ve also proved that it is possible to limit the impact of some of the structural challenges being faced in other sectors through creative and innovative asset management. The expansion and transfer of Lidl from one unit in Swansea to replace a retailer subject to a CVA is an excellent example of this. We are also encouraged by our pipeline of asset management initiatives.”
This announcement contains inside information.
For further information:
Jeremy Carey/James Verstringhe, 020 7920 3150, email@example.com
Michael Morris, 020 7011 9980, firstname.lastname@example.org
Note to Editors
Picton is a UK REIT established in 2005. It owns and actively manages a £684 million diversified UK commercial property portfolio, invested across 49 assets and with around 350 occupiers (as at 31 December 2018). 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
NET ASSET VALUE
The unaudited Net Asset Value (‘NAV’) of Picton, as of 31 December 2018, was £498.1 million, reflecting 92.5 pence per share, an increase of 0.3% over the quarter.
|31 Dec 2018
|30 Sept 2018
|30 June 2018
|31 March 2018
|Net Asset Value per share||92.5p||92.2p||91.8p||90.4p|
*The investment property valuation is stated net of lease incentives.
The NAV attributable to the ordinary shares is calculated under IFRS and incorporates the independent market valuation as at 31 December 2018, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in February 2019.
The movement in Net Asset Value can be summarised as follows:
|NAV at 30 September 2018||497.1||92.2|
|Movement in property values||0.1||-||-|
|Net income after tax for the period||5.8||1.2||1.1|
|NAV at 31 December 2018||498.1||0.3||92.5|
A separate announcement has been released today (23 January 2019) declaring a dividend of 0.875 pence per share in respect of the period 1 October 2018 to 31 December 2018 (1 July 2018 to 30 September 2018: 0.875 pence).
Post-tax dividend cover over the quarter was 123% (30 September 2018: 129%).
Total borrowings at 31 December 2018 were £193.9 million, 87% of the debt is fixed under long term facilities, with the remainder at variable rates. The net gearing ratio, calculated as total debt less cash, as a proportion of gross property value, is 25.0% (30 September 2018: 25.5%).
The weighted average debt maturity profile of the Group is approximately 10.1 years and the weighted average interest rate is 4.0%.
The Company has a further £26 million available from its undrawn RCFs.
The portfolio valuation increased by 0.1% or £1.0 million, with the industrial sector delivering the strongest growth. The office sector saw a slight decline, which was in part due to the short-term impact of surrender activity. The retail and leisure sector valuation declined over the quarter, principally impacted by weaker sentiment in the regional retail and retail warehouse sectors.
The sector weightings at 31 December 2018 and valuation movements over the quarter are shown below:
|Like for like
|Rest of UK||13.2%|
|London City and West End||4.2%|
|Inner and Outer London||8.3%|
|Rest of UK||10.8%|
|Retail and Leisure||21.0%||-3.2%|
|High Street – Rest of UK||5.1%|
|High Street – South East||5.7%|
As of 31 December 2018, the portfolio had a net initial yield of 5.2% (allowing for void holding costs) or 5.4% (based on contracted net income) and a net reversionary yield of 6.5%. The weighted average unexpired lease term, based on headline rent, was 4.9 years.
Occupancy reduced slightly to 93%, principally reflecting the surrender activity referred to below.
The top ten assets, which represent 50% of the portfolio by capital value, are detailed below.
|Parkbury Industrial Estate, Radlett||Industrial||South East|
|River Way Industrial Estate, Harlow||Industrial||South East|
|Stanford House, Long Acre, WC2||Retail||London|
|Angel Gate, City Road, EC1||Office||London|
|50 Farringdon Road, EC1||Office||London|
|Tower Wharf, Cheese Lane, Bristol||Office||South West|
|Belkin Unit, Shipton Way, Rushden, Northants||Industrial||East Midlands|
|30 & 50 Pembroke Court, Chatham||Office||South East|
|Colchester Business Park, Colchester||Office||South East|
|Lyon Business Park, Barking||Industrial||Outer London|
Key highlights in the quarter included:
Recognising the high occupancy in this element of the portfolio leasing activity was limited. We let a unit at Parkbury Radlett, achieving 100% occupancy, and securing £0.1 million per annum, in line with ERV. At the same estate we renewed two leases, increasing the passing rent by a combined 39% to £0.3 million per annum, 2% ahead of ERV and settled one rent review increasing the passing rent by 42% to £0.1 million per annum, 1% ahead of ERV.
At Nonsuch Industrial Estate in Epsom, where we have smaller units, we settled four rent reviews increasing the passing rent by 11% to a combined £0.1 million per annum setting a new rental tone for the estate. At the same estate we have surrendered two leases, so we can relocate an occupier and create a double unit to satisfy demand.
We extended £0.4 million of income at a 100,000 sq ft distribution facility at Haynes Way, Rugby on a short-term basis 33% ahead of ERV.
We let the first of two suites at 180 West George Street, Glasgow, generating income of £0.22 million per annum. During the period we received a floor back on lease expiry, which will be refurbished ahead of releasing alongside the remaining suite.
We surrendered a suite at Tower Wharf in Bristol, which expired in September 2019, receiving a payment of £0.34 million. Whilst this has a short-term impact on income and value we have completed a simple refurbishment and expect to secure a 40% uplift on the previous passing rent.
In a back to back transaction, we surrendered a lease at Trident House in St. Albans that had a break in September 2019, securing a new occupier on a new five-year lease at a rent of £0.11 million per annum in line with ERV.
Retail and Leisure
At Parc Tawe North in Swansea, we completed an Agreement to Lease with Lidl on the former Homebase unit, moving Lidl from its existing premises on the retail park and making it the anchor occupier.
Lidl currently occupies a 10,000 sq ft unit on a lease expiring in 2023 and will increase its footprint by 255%, as it takes the entire 35,500 sq ft previously occupied by Homebase. Following enabling works by Picton, Lidl will take a 20-year lease, with a break after 15 years, at an annual rent of £0.39 million. The lease is subject to five-yearly Retail Price Index (RPI) based rent reviews capped at 2% per annum. Homebase was paying a rent of £0.44 million per annum on a lease expiring in 2022.
Lidl will continue to trade from its existing unit, paying £0.14 million per annum, until the enabling works and fit out have been completed at the former Homebase unit, which is expected to happen in the second quarter of 2019. The current lease will then be surrendered.
We simultaneously renegotiated a restrictive covenant to allow additional food retailing on the park and served notice to terminate Homebase’s lease as they had proposed a 90% reduction in rent post their CVA.
At Regency Wharf in Birmingham, we renegotiated a lease by inserting a rolling Landlord’s break option, which will enable us to secure vacant possession in the future. This will allow us to pursue a strategy of change of use from restaurant to office, which we anticipate will significantly enhance the ERV.
Two new occupiers were secured at Kings Heath in Birmingham, achieving 100% occupancy at the property. The combined rent is £0.07 million per annum, which is line with ERV.
According to the MSCI Monthly Index, the All Property total return was 1.1% for the quarter to December 2018, compared to 1.7% for the previous quarter.
Capital growth was -0.2% (September 2018: 0.4%) and rental growth was -0.1% for the quarter (September 2018: 0.1%). A more detailed breakdown is shown below:
MSCI rental growth
|Number of MSCI segments|
|Quarterly growth||Positive growth||Negative growth|
MSCI capital value growth
|Number of MSCI segments|
|Quarterly growth||Positive growth||Negative growth|
*Source: MSCI Monthly Digest, December 2018