Picton ZDP Limited Net Asset Value(s)

 
TIDMPCTZ 
 
26 April 2016 
 
                              PICTON ZDP LIMITED 
 
                               Corporate update 
 
The announcement below has been released today to Picton Property Income 
Limited ("Picton") ordinary shareholders and is included in full for 
information:- 
 
Picton (LSE: PCTN), the income focused property investment company, announces 
its Net Asset Value for the quarter ended 31 March 2016 and Interim Dividend. 
Highlights during the quarter included: 
 
Financial 
 
  * Net Assets increased to GBP417.1 million (31 December 2015: GBP408.8 million). 
  * NAV/EPRA NAV per share rose 2.0% to 77.2 pence (31 December 2015: 75.7 
    pence). 
  * Total return for the quarter of 3.1% (31 December 2015: 5.1%). 
  * GBP15.8 million drawn from revolving credit facility at cost of 2.3% to part 
    fund Manchester acquisition. 
  * Average debt maturity of 10.7 years, with a weighted average interest rate 
    of 4.4% per annum. 
  * Net gearing of 34.6% (31 December 2015: 33.3%). 
 
Dividend 
 
  * Dividend of 0.825 pence per share declared and to be paid on 31 May 2016 
    (31 December 2015: 0.825 pence per share). 
  * Post-tax dividend cover for the quarter of 106% (31 December 2015: 117%). 
  * Dividend yield of 4.7%, based on a share price of 70.25 pence on 22 April 
    2016. 
 
Portfolio Activity 
 
  * Like-for-like increase in property portfolio valuation of 1.5% (31 December 
    2015: 2.6%), with the strongest valuation gains in the regional office 
    portfolio, primarily due to specific asset management activity. 
  * Improvement in income profile through lettings, lease restructuring and 
    lease renewals, with weighted average lease length to first termination 
    increasing to 5.9 years (31 December 2015: 5.7 years). 
  * Increase in occupancy to 96% (31 December 2015: 95%), driven by activity 
    including:- 
 
  * 12 lettings on average 12% ahead of December ERV, adding GBP0.8 million per 
    annum to the rent roll. 
  * Three lease renewals, 32% ahead of December ERV, securing GBP0.5 million per 
    annum. 
  * Two lease extensions, 15% ahead of December ERV, securing GBP1.3 million per 
    annum. 
 
  * Acquisition of a high quality, fully let office building in Salford Quays, 
    Greater Manchester in February for GBP17.6 million, reflecting a net initial 
    yield of 6.2%, rising to 8.3% in April 2017. 
 
Commenting, Nick Thompson, Chairman of Picton, said: 
 
"We have continued to deliver results which have outperformed and it is 
particularly pleasing to deliver positive NAV growth, despite European 
Referendum headwinds and the one-off effect of the Chancellor's hike in stamp 
duty in March. This demonstrates the quality of our portfolio, the success of 
our strategy and its implementation over the period." 
 
Michael Morris, Chief Executive of Picton Capital, added: 
 
"As you can see from the results, we have successfully completed the pipeline 
of asset management activity we highlighted in January, which has had a 
positive impact over the period.  Looking ahead we remain confident in our 
ability to continue to deliver income and value accretive occupier focused 
transactions." 
 
For further information: 
 
Tavistock 
Jeremy Carey/James Verstringhe, 020 7920 3150, [e-mail] 
 
Picton Capital Limited 
Michael Morris, 020 7011 9980, [e-mail] 
 
The Company Secretary 
Northern Trust International Fund Administration Services (Guernsey) Limited 
Trafalgar Court 
Les Banques 
St Peter Port 
Guernsey 
GY1 3QL 
 
David Sauvarin, 01481 745 001, [e-mail] 
 
 
 
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 GBP417.1 million at 31 March  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.  www.picton.co.uk 
 
NET ASSET VALUE 
 
The unaudited Net Asset Value ('NAV') of Picton, as at 31 March 2016, was GBP 
417.1 million, reflecting 77.2 pence per share, an increase of 2.0% over the 
quarter. 
 
The NAV attributable to the ordinary shares is calculated under International 
Financial Reporting Standards and incorporates the external portfolio valuation 
as at 31 March 2016, including income for the quarter, but does not include a 
provision for the dividend this quarter, which will be paid in May 2016. 
 
The next independent valuation of the property portfolio is scheduled for June 
2016 and the unaudited NAV per share, as at 30 June 2016, will be announced in 
July 2016. 
 
A detailed breakdown of the NAV is included in the Appendix. 
 
DIVIDEND 
 
An interim dividend of 0.825 pence per share is declared in respect of the 
period 1 January 2016 to 31 March 2016 (1 October 2015 to 31 December 2015: 
0.825 pence). 
 
The dividend will be paid on 31 May 2016 to shareholders on the register on 13 
May 2016. The ex-dividend date is 12 May 2016. 
 
Post-tax dividend cover, which does fluctuate quarter on quarter, was 106% (31 
December 2015: 117%). 
 
DEBT 
 
The Group has total borrowings of GBP249.5 million with a weighted average 
interest rate of 4.4% (94% fixed rate) and a weighted average debt maturity 
profile of approximately 10.7 years. 
 
To part fund the acquisition of Metro, Salford Quays, GBP15.8 million was drawn 
down under the revolving credit facility in the period, at a floating rate of 
2.3%. As at 31 March 2016, net gearing, calculated as total debt including 
ZDPs, less cash, as a proportion of gross property value, was 34.6% (31 
December 2015: 33.3%). 
 
The Group has 22 million zero dividend preference shares which it intends to 
repay at maturity in October 2016. Picton has considered the potential of a 
conversion of ZDPs into ordinary shares, but has concluded this is not a viable 
option in the current market. It currently has GBP10.2 million of undrawn 
facilities, more than GBP95 million of uncharged property assets, and existing 
cash resources to facilitate the repayment. As such the Group has agreed terms 
in principle for a new five year debt facility, to meet the ZDP liability, 
which will be subject to usual due diligence before being finalised. 
 
MARKET BACKGROUND 
 
According to the MSCI IPD Monthly Index, total returns were 1.1% in the quarter 
to March 2016, compared to 3.1% in the quarter to December 2015. 
 
Whilst capital growth generally was slower in January and February, the impact 
of stamp duty changes announced in March had a negative impact. Capital growth 
was -0.2% over the quarter, compared with 1.7% in the quarter to December 2015. 
 
Across the principal IPD sectors, office values rose by 0.2% (December 2015: 
2.5%), industrial by 0.1% (December 2015: 2.3%) and retail fell by -0.8% 
(December 2015: 0.8%). Out of a total of 37 segments, nine recorded positive 
capital growth, compared to 34 last quarter. The rise in stamp duty costs in 
March, caused the majority of the IPD segments to record negative capital 
growth over the quarter. By way of illustration, in January and February, on 
average 25 of the 37 IPD segments recorded positive capital growth, whereas in 
March all 37 segments were negative as valuations included the effect of higher 
acquisition costs. 
 
Over the quarter to March, rental values rose by 0.7%, compared with 1.1% in 
December 2015. Across the principal IPD sectors, office rental values rose by 
1.3% (December 2015: 1.9%), industrial by 0.8% (December 2015: 1.5%) and retail 
by 0.2% (December 2015: 0.3%).  Over the quarter, the majority of the IPD 
segments recorded positive rental growth, with a majority of falls again 
recorded in the retail sector. Out of a total of 37 segments, 28 recorded 
positive rental growth compared to 32 last quarter. 
 
The occupancy rate in the March IPD Monthly Index was higher than the previous 
quarter at 91.4% (December 2015: 91.2%). 
 
PORTFOLIO UPDATE 
 
The valuation of the property portfolio incorporates the government's changes 
to Stamp Duty Land Tax (SDLT), introduced in the recent Budget, and effective 
from 17 March 2016, increasing the charge by 1% to 5%. 
 
These changes, which have a one off impact to valuation and pricing, have 
negatively impacted upon the values of larger commercial properties across 
England and Wales. Notwithstanding this, on a like-for-like basis the portfolio 
valuation increased by 1.5% during the period and occupancy increased to 96%, 
well ahead of the market. 
 
As at 31 March, the portfolio had a net initial yield of 5.6% (allowing for 
void holding costs) or 5.7% (based on contracted net income) and a reversionary 
yield of 7.1%. The weighted average unexpired lease term based on headline rent 
increased to 5.9 years. As detailed within the Appendix, the regional office 
assets in the portfolio recorded the strongest valuation gains, which was a 
reflection of asset management activity as detailed below. 
 
Key highlights in the quarter included:- 
 
Office 
 
During the quarter we acquired a high quality, fully let office building of 
71,000 sq ft, for GBP17.6 million.  The property is located within Salford Quays, 
2.5 miles west of Manchester city centre and close to the BBC's home at Media 
City. 
 
The acquisition price reflected a net initial yield of 6.2%, rising to 8.3% in 
April 2017 and a capital value of under GBP250 per sq ft, which is close to the 
cost of construction.  After finance costs this transaction will increase the 
Company's net income by approximately GBP0.9 million per annum, rising to GBP1.2 
million per annum in April 2017. 
 
At Pembroke Court, Chatham, which was acquired in June 2015, we restructured a 
lease securing a 10 year term (1.8 years on acquisition) for the second largest 
occupier at an initial rent of GBP0.71 million, with 2.5% per annum compound 
increases. No incentive was given and the initial rent was 6% ahead of ERV. We 

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have now extended 80% of the income since this asset was purchased and the 
weighted average unexpired lease term to first termination has risen from 2.9 
years on acquisition to 9.5 years as at 31 March 2016. 
 
We re-geared Natwest's lease at Building 100, Colchester Business Park for a 
further 10 years, (subject to a break in year five) at a rent of GBP0.20 million 
per annum with three months rent free. The rent was 19% ahead of ERV. 
 
In addition, further letting activity took place at the following properties 
which are now all fully let: 
 
  * Citylink, Croydon - Let 4,700 sq ft to Bodyshop on a seven year lease, 
    subject to break, at GBP0.10 million per annum (10% ahead of ERV). 
  * 401 Grafton Gate, Milton Keynes - Let 6,500 sq ft on a 10 year lease, 
    subject to break, at GBP0.14 million per annum (6% ahead of ERV). 
  * Boundary House, EC3 - Let 1,950 sq ft on a five year lease at GBP0.09 million 
    per annum (8% ahead of ERV) 
  * Queens House, Glasgow - Let three suites for a combined GBP0.06 million (23% 
    ahead of ERV). 
 
At 50 Farringdon Road, EC1 (adjacent to the new Crossrail station), one of the 
larger occupiers vacates this summer. They are currently paying GBP0.84 million 
per annum, and would have had a capped rent review at GBP1.14 million per annum. 
The building was comprehensively refurbished five years ago and we are seeing 
strong demand, such that we expect to see over a 60% rental uplift on any new 
letting ahead of the current rent passing and approximately 20% above the 
capped level. 
 
Industrial 
 
At Parkbury, Radlett we settled the November 2015 rent review on the largest 
unit on the estate, increasing the rent to GBP0.66 million per annum, 8% ahead of 
the previous passing rent and 5% ahead of ERV. 
 
Furthermore we completed a lease surrender in February and re-let the unit in 
March (without refurbishment) to an existing occupier on a 10 year lease at GBP 
0.22 million per annum with six months rent free. The letting was 20% ahead of 
both the previous passing rent and ERV. The transaction allows our occupier to 
'rightsize' their business by staying on the estate. We are taking back their 
smaller unit at the end of the year, three months ahead of lease expiry, 
allowing them time to relocate and also giving us a nine month marketing 
period. There is currently one vacant unit which is being refurbished ahead of 
reletting. 
 
In Harlow, we secured a new 10 year lease (subject to a break in year five) to 
an existing occupier securing GBP0.62 million per annum which is 26% ahead of ERV 
with a three month rent free period. We renewed the lease on a smaller unit, 
securing a five year term at GBP0.07 million per annum which is 21% ahead of the 
previous passing rent and 4% ahead of ERV. Three units are coming back in the 
summer totalling 84,000 sq ft; two are already under offer. 
 
A lease at The Business Centre in Wokingham was renewed, securing a 10 year 
lease (subject to breaks in years four and eight) at GBP0.23 million per annum 
rising to GBP0.26 million in year three with three months rent free. The initial 
rent is 60% ahead of ERV and sets great evidence on the estate. We currently 
have two small units to let, one of which is under offer. 
 
Dencora Way, Luton and Easter Court, Warrington are now fully let with two 
lettings completing over the quarter adding a combined GBP0.09 million to the 
rent roll, 4% ahead of ERV. 
 
Retail / Leisure 
 
There has been limited activity over the quarter, with occupancy within this 
sub-sector remaining in excess of 99%. 
 
At Gloucester Retail Park (acquired in March 2015), we have secured planning on 
a unit for a change of use from retail to leisure. Simultaneously we have 
signed an Agreement to Lease/Surrender with Pure Gym/Carpetright respectively. 
 Pure Gym are taking a 10 year lease at a rent of GBP0.14 million per annum, 32% 
ahead of ERV. The letting improves the occupier mix on the park and the 
surrender premium received will cover the cost of the works to the unit. 
 
APPENDIX 
 
NET ASSETS SUMMARY 
 
The unaudited Net Asset Value is as follows: 
 
                                31 Mar 2016     31 Dec 2015    30 Sept 2015 
                                 GBPmillion        GBPmillion        GBPmillion 
 
Investment properties *            646.0           619.7           606.3 
 
Other assets                       17.3            18.4            18.8 
 
Cash                               22.8            24.6            20.3 
 
Other liabilities                 (19.5)          (20.4)          (19.0) 
 
Borrowings: Loan facilities       (221.5)         (206.0)         (206.2) 
 
                    ZDP's         (28.0)          (27.5)          (27.1) 
 
Net Assets                         417.1           408.8           393.1 
 
Net Asset Value per share          77.2p           75.7p           72.8p 
 
* 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 
 
                                 GBPmillion            %              Pence 
 
NAV at 31 December 2015           408.8                              75.7 
 
Movement in property values        8.1              2.0              1.5 
 
Net income after tax for the       4.7              1.1              0.8 
period 
 
Dividends paid                    (4.5)            (1.1)            (0.8) 
 
NAV at 31 March 2016              417.1             2.0              77.2 
 
PORTFOLIO COMPOSITION 
 
The Group's current portfolio is structured as follows:- 
 
Sector                                    Weighting               Like for Like 
                                        31 March 2016            Valuation Change 
 
Office - Rest of UK                         19.7%                      3.6% 
 
Office - Central/Greater London             18.9%                      1.5% 
 
Industrial                                  36.1%                      2.2% 
 
Retail/Leisure                              25.3%                     -1.0% 
 
Total                                       100.0%                     1.5% 
 
 
 
Geography                                  Weighting 
                                         31 March 2016 
 
South East                                   32.1% 
 
Central & Greater London                     27.5% 
 
North                                        15.6% 
 
Midlands                                     13.5% 
 
Wales                                        3.8% 
 
South West                                   3.6% 
 
Scotland                                     3.6% 
 
Northern Ireland                             0.3% 
 
Total                                       100.0% 
 
TOP TEN ASSETS 
 
The top ten assets, which represent 46% of the portfolio by capital value, are 
detailed below. 
 
Asset                                       Sector                  Location 
 
Parkbury Industrial Estate,               Industrial               South East 
Radlett 
 
River Way Industrial Estate,              Industrial               South East 
Harlow 
 
Angel Gate Office Village, City             Office                   London 
Road, EC1 
 
Stanford House, Long Acre, WC2              Retail                   London 
 
Boundary House, Jewry Street, EC3           Office                   London 
 
50 Farringdon Road, EC1                     Office                   London 
 
Shipton Way, Rushden,                     Industrial             East Midlands 
Northamptonshire 
 
Pembroke Court, Chatham                    Offices                 South East 
 
Phase II Parc Tawe, Swansea            Retail Warehouse              Wales 
 
Queens Road, Sheffield                 Retail Warehouse              North 
 
                                     ENDS 
 
 
 
END 
 

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