Picton Property Income Ltd - Picton acquires regional office investment

9 August 2017

PICTON PROPERTY INCOME LIMITED

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

Picton acquires highly reversionary multi-let office building in Bristol

Picton (LSE:PCTN), the property investment company, has completed the acquisition of a grade A office building located in Bristol city centre for £23.15 million.

Known as Tower Wharf, the building is situated in a prominent position on the waterfront, adjacent to Temple Way, and equidistant to both Temple Meads Railway Station and Cabot Circus shopping district. Constructed in 2005 to a BREEAM “Excellent” rating, the building provides 70,664 square feet of office accommodation arranged over ground and five upper floors, with car parking in the basement.

The property has an average unexpired lease term of 5.2 years (2.8 years to break) and provides diversified rental income of £0.89 million, reflecting a low average passing rent of £19.65 per square foot from four occupiers: Oracle, Newlaw Legal, Ashfords and Lambert Smith Hampton. The remaining 25,392 square feet of vacant accommodation is already fully refurbished to a high standard and Picton intends to lease the space in an improving occupational market.

The purchase price reflects a net initial yield of 3.6%, which is expected to grow to 7.5% on leasing the remaining vacant space and capturing the full reversionary potential. The purchase price represents a capital value of approximately £328 per square foot, in line with its estimated replacement cost.

The acquisition was funded using £12.5 million drawn down from one of Picton’s revolving credit facilities (“RCF”), with the balance from existing cash resources.

The impact of this acquisition, compared to the Company’s position as at 30 June 2017 is as follows:

• Initial increase in the Company’s net income after finance costs of £0.3 million per annum and increase in dividend cover by approximately 2%.
• Once fully let, it is expected to contribute additional net income after finance costs of £1.4 million and will increase dividend cover by approximately 8%.
• Initial small reduction in the portfolio’s current occupancy levels from 96% to 94%
• With recently announced disposals, increase the portfolio’s average lot size from £12.0 million to £12.5 million
• Reduce the Company’s weighted average interest rate from 4.2% to 4.1%
• Increase the Company’s loan to value ratio to just under 30%

Fraser D’Arcy, Investment Director at Picton, commented:

“Constrained by a lack of Grade A office space and a limited development pipeline, the occupier market in Bristol is currently seeing good demand for high quality space in buildings like Tower Wharf. Against this backdrop and recognising the reversionary potential, this purchase is aligned with our strategic objective to grow both income and our asset base.”

Michael Morris, Chief Executive of Picton, commented:

“This off-market acquisition, secured using the drawdown of our recently extended RCF facility, is in line with our strategy to grow income while creating value through active asset management. Tower Wharf is a high quality and well-located office asset underpinned by strong property fundamentals, which will enable Picton to deliver further income growth and therefore enhance future returns for our shareholders.”

For further information:

Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150, [e-mail]

Picton Capital Limited
Sheryl Bates, 020 7011 9979, [e-mail]

Note to Editors

Picton is a property investment company established in 2005.   It owns and actively manages a £636 million diversified UK commercial portfolio, invested across 53 assets and with around 350 occupiers (as at 30 June 2017). Through an occupier-focused, opportunity-led approach to real estate asset management, Picton aims to be one of the consistently best performing diversified UK property companies listed on the main market of the London Stock Exchange.

For more information please visit: www.picton.co.uk

ENDS

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