Picton Prop Inc Ltd Trading Update and NAV

 
TIDMPCTN 
 
31 January 2023 
 
                        PICTON PROPERTY INCOME LIMITED 
                   ("Picton", the "Company" or the "Group") 
                           LEI: 213800RYE59K9CKR4497 
 
           Trading Update and Net Asset Value as at 31 December 2022 
 
Picton announces its Net Asset Value for the quarter ended 31 December 2022. 
 
Financial Highlights 
 
·    Net assets of £557.3 million (30 September 2022: £636.4 million). 
 
·    NAV/EPRA NTA per share decreased by -12.4% to 102.2 pence (30 September 
2022: 116.7 pence). 
 
·    Total return for the quarter of -11.7% (30 September 2022: -4.3%). 
 
·    LTV of 26.4% (30 September 2022: 24.1%). 
 
Operational Highlights 
 
·      Like-for-like portfolio valuation movement of -9.0% over the quarter 
caused by upward yield movement across all sectors (MSCI Monthly UK Property 
Index, Capital Growth -15.6%). 
 
·      Completed nine lettings across all sectors, securing a combined annual 
rent of £0.4 million, 7% ahead of the September 2022 ERV. 
 
·      Renewed / regeared 12 leases across all sectors, with a combined annual 
rent of £0.5 million, an increase of 28% against the previous passing rent and 
3% ahead of the September 2022 ERV. 
 
·      Secured an average increase of 39% against the previous passing rent 
from four rent reviews in the industrial sector, with a combined annual rent of 
£1.0 million, which was 3% ahead of the September 2022 ERV. 
 
·      Purchased one small industrial unit for £0.4 million in Gloucester 
adjacent to an existing ownership. 
 
·      Strong rent collection for December quarter with 99% received including 
monthly payments. 
 
·      Stable occupancy of 90% (30 September 2022: 90%). 
 
Dividend 
 
·       Interim dividend of 0.875 pence per share declared in respect of the 
period 1 October 2022 to 31 December 2022 and to be paid on 28 February 2023 (1 
July 2022 to 30 September 2022: 0.875 pence per share). 
 
·       Annualised dividend equivalent to 3.5 pence per share, delivering a 
dividend yield of 4.4%, based on 27 January 2023 share price. 
 
·       Dividend cover for the quarter of 112% (30 September 2022: 121%). 
 
Lena Wilson CBE, Chair of Picton, commented: 
 
"During the quarter we have seen the impact of market volatility on our 
property portfolio valuation. Our modest gearing level, predominately fixed 
rate loan facilities and strong dividend cover have helped to mitigate the 
impact on net assets. Encouragingly, looking at the MSCI Monthly Index at an 
All Property level, rental growth remains positive and the rate of capital 
decline reduced in December relative to October and November." 
 
Michael Morris, Chief Executive of Picton, commented: 
 
"Although we have seen further upward yield movement in the valuation of our 
assets, at a property level we have been able to offset some of this impact 
through asset management and leasing activity which has also grown rental 
income. Our outperformance over the quarter relative to the MSCI Monthly Index 
demonstrates the team is focused on unlocking potential in our portfolio." 
 
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE UK MARKET 
ABUSE REGULATION 
 
For further information: 
 
Tavistock 
 
James Verstringhe, 020 7920 3150, [e-mail] 
 
Picton 
 
Michael Morris, 020 7011 9980, [e-mail] 
 
Note to Editors 
 
Picton, established in 2005, is a UK REIT. It owns and actively manages a £775 
million diversified UK commercial property portfolio, invested across 49 assets 
and with around 400 occupiers (as at 31 December 2022). 
 
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 at 31 December 2022 was £ 
557.3 million, or 102.2 pence per share, reflecting -12.4% over the quarter or 
-11.7% 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 2022, including 
income for the quarter, but does not include a provision for the dividend this 
quarter, which will be paid in February 2023. 
 
 
                            31 Dec 2022    30 Sept 2022   30 Jun 2022    31 Mar 2022 
                              £million       £million       £million      £million 
 
Investment properties*         758.6          835.4          863.2          834.2 
 
Other assets                    23.8           27.5           25.5          24.2 
 
Cash                            20.3           19.7           22.4          38.5 
 
Other liabilities              (20.6)         (21.0)         (22.6)        (21.0) 
 
Borrowings                    (224.8)        (225.2)        (218.5)        (218.8) 
 
Net Assets                     557.3          636.4          670.0          657.1 
 
Net Asset Value per share      102.2p         116.7p         122.9p        120.4p 
 
*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 2022        636.4                         116.7 
 
Movement in property values     (79.8)         (12.5)         (14.6) 
 
Net income after tax for         5.3            0.9            1.0 
the period 
 
Dividends paid                  (4.8)          (0.8)          (0.9) 
 
Other                            0.2             -              - 
 
NAV at 31 December 2022         557.3          (12.4)         102.2 
 
DIVID DECLARATION 
 
A separate announcement has been released today declaring a dividend of 0.875 
pence per share in respect of the period 1 October 2022 to 31 December 2022 (1 
July 2022 to 30 September 2022: 0.875 pence). 
 
Dividend cover over the quarter was 112% (30 September 2022: 121%). 
 
DEBT 
 
Total borrowings at 31 December 2022 were £224.8 million. The majority is drawn 
under long-term fixed rate facilities with only £11.9 million drawn under the 
revolving credit facility. Borrowings were reduced through quarterly 
amortisation within one of the long-term debt facilities. 
 
The net loan-to-value ratio, calculated as total debt less cash, as a 
proportion of gross property value, is 26.4% (30 September 2022: 24.1%). 
 
The weighted average debt maturity profile of the Group is approximately 8.6 
years and the weighted average interest rate is 3.8%. 
 
Picton has £38.1 million available through its undrawn revolving credit 
facility (30 September 2022: £38.1 million). 
 
MARKET BACKGROUND 
 
According to the MSCI Monthly UK Property Index, the All Property total return 
was -14.5% for the quarter to December 2022, compared to -4.1% for the previous 
quarter. 
 
MSCI Capital Growth for the quarter showed the largest decline since the 
Monthly Index began in 1987, surpassing the movement during the final quarter 
of 2008 at the height of the Global Financial Crisis. MSCI Capital Growth over 
the three months was -15.6% (September 2022: -5.1%). Whilst the monthly All 
Property Capital Growth in October and November was -6.9% and -5.9% 
respectively, in December this slowed markedly to -3.7%. 
 
The occupier market is a more positive story, with rents at an All Property 
level growing 0.7% in the quarter according to MSCI (September 2022: 1.0%). ERV 
growth was driven by the industrial sector at 1.6%, with offices at 0.3% but 
-0.2% in the retail sector. Occupancy was 90.1% (September 2022: 90.5%). 
 
A more detailed breakdown of the MSCI Monthly Digest for the quarter to 
December 2022 is shown below: 
 
MSCI Capital Growth 
 
                                               Number of MSCI segments 
 
                              Quarterly        Positive growth  Negative growth 
                              movement 
 
Industrial                    -20.3%           0                7 
 
Office                        -12.7%           0                10 
 
Retail                        -12.3%           0                19 
 
All Property                  -15.6%           0                36 
 
MSCI Estimated Rental Value (ERV) Growth 
 
                                               Number of MSCI segments 
 
                              Quarterly        Positive growth  Negative growth 
                              movement 
 
Industrial                    1.6%             7                0 
 
Office                        0.3%             7                3 
 
Retail                        -0.2%            5                14 
 
All Property                  0.7%             19               17 
 
According to MSCI, at an All Property level Capital Growth was -19.9% for the 
six months to December 2022. By sector this comprises -26.9% in industrial, 
-15.0% in office and -15.3% in retail. 
 
PORTFOLIO UPDATE 
 
On a like-for-like basis the portfolio valuation movement was -9.0% as yields 
have moved upwards in all sectors. The valuation movements over the quarter are 
shown below: 
 
Sector                              Portfolio    Like-for-like      Average equivalent 
                                   allocation valuation change          yield movement 
 
 
Industrial                              57.4%            -9.9%                 +75 bps 
 
South East                              41.7% 
 
Rest of UK                              15.7% 
 
Office                                  32.1%            -7.4%                 +55 bps 
 
London City and West End                 7.2% 
 
Inner and Outer London                   5.7% 
 
South East                               9.1% 
 

Rest of UK                              10.1% 
 
Retail and Leisure                      10.5%            -8.3%                 +65 bps 
 
Retail Warehouse                         6.6% 
 
High Street - Rest of UK                 2.3% 
 
Leisure                                  1.6% 
 
 
Total                                    100%            -9.0% 
 
During the quarter, 41 assets saw a valuation decline, compared with 36 assets 
during the September quarter. Eight assets saw no movement or a slight uplift 
in value, primarily reflecting a higher yield profile initially or leasing and 
active management activity over the period. Since June 2022, the valuation 
movement has been -12%, which reflects an average equivalent yield movement of 
approximately +100 bps. 
 
The industrial sector saw the largest movements, primarily due to the lower 
yield profile within the sector. Conversely, we continue to see rising rental 
values and been able to capture further ERV growth. This included three rent 
reviews at a combined rent of £0.9 million, 39% ahead of the previous passing 
rent and 5% ahead of the September ERV at our largest two industrial estates in 
Harlow and Radlett. 
 
One small industrial unit was purchased for £0.4 million at Madleaze Trading 
Estate, Gloucester, consolidating our ownership. The purchase has allowed us to 
relocate an occupier, unlocking an asset management transaction where we have 
secured a seven-year lease increasing the passing rent by over 150%. 
 
In the office sector we leased several small suites in Colchester, Glasgow and 
London, securing £0.2 million per annum, 7% ahead of the September ERV. In 
addition, we regeared a lease at 180 West George Street, Glasgow, securing an 
additional five years to 2030 and increasing the passing rent by 17% to £0.2 
million, 7% ahead of the September ERV. 
 
In the retail and leisure sector, retail warehouse assets saw larger downward 
valuation movements than higher yielding high street assets. In terms of 
activity, we relocated an occupier at Scots Corner, Birmingham, which allowed 
another occupier to expand their business taking two units with the rent 9% 
ahead of the September ERV. 
 
As at 31 December 2022, the portfolio had a net initial yield of 4.8% (allowing 
for void holding costs) or 5.1% (based on contracted net income), equivalent 
yield of 6.4% and a net reversionary yield of 6.6%. The weighted average 
unexpired lease term, based on headline rent, was 4.5 years. 
 
Occupancy remained stable at 90%. 
 
The top ten assets, which represent 54% of the portfolio by capital value, are 
detailed below. 
 
Asset                                   Sector             Location 
 
Parkbury Industrial Estate, Radlett     Industrial         South East 
 
River Way Industrial Estate, Harlow     Industrial         South East 
 
Stanford Building, Long Acre, WC2       Office             London 
 
Datapoint, Cody Road, E16               Industrial         London 
 
Angel Gate, City Road, EC1              Office             London 
 
Lyon Business Park, Barking             Industrial         Outer 
                                                           London 
 
Shipton Way, Rushden, Northants         Industrial         East 
                                                           Midlands 
 
Tower Wharf, Cheese Lane, Bristol       Office             South West 
 
50 Farringdon Road, EC1                 Office             London 
 
Sundon Business Park, Luton             Industrial         South East 
 
                                     ENDS 
 
 
 
END 
 
 

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January 31, 2023 02:00 ET (07:00 GMT)