Picton Property Income Ld Share Discussion Threads

[speedsgh] 26/7/2023 09:17

Trading Update and Net Asset Value as at 30 June 2023 -

Dividend Declaration -

~ NAV decline in offices (-3.2%) outweighed the small increases in industrial, retail & leisure. Offices now account for 31.2% of total portfolio.

"Whilst we saw modest valuation increases in the industrial and retail and leisure assets, office assets and particularly those in London were subject to further decline, reflecting the more limited investor demand in that sector currently."

"In the office sector we renewed the leases on a single leased building in Colchester, two small suites in Glasgow and an ancillary residential unit in Covent Garden, securing a combined £0.5 million per annum, which is 6% ahead of the March 2023 ERV. Using permitted development rights, we have secured further changes of use from office to residential on vacant office space at our scheme in Islington. In total permission has now been secured for 28 units (45 bedrooms) and have applications pending on a further 7 units (21 bedrooms). We are also progressing further repositioning initiatives in Cardiff and Hammersmith and updates will be provided as appropriate."

~ Occupancy down slightly at 90%

"Occupancy was 90%, reflecting slightly lower leasing activity over the quarter, combined with a specific asset management led surrender."

~ Quarterly dividend maintained at 0.875pps. Dividend was uncovered for the quarter at 96% (31 March 2023: 111%).

[dendria] 07/7/2023 18:22

Edison note from 4 July 2023:

[spectoacc] 26/5/2023 07:03

@speedsgh - agreed. The resi ones were supposedly nailed on, turns out they're now likely to slip to 2027 from 2025.

AFAIK the 2025, 2027 or 28 commercial rules are fairly committed - but not yet legislated - and the "2030 EPC B" looks most likely to slip. How can it not? It's extraordinarily harsh - I've got some old shops I let out & not a clue how I could get them to B.

Direction of travel clear tho - PCTN going to have to spend money on a quarter of the portfolio to get to C I reckon. Or sell some, along with everyone else.

[speedsgh] 25/5/2023 20:57

@specto - Which of the EPC deadlines are legislated and which (if any) are still just proposals? I have googled this several times and found so many conflicting articles that I have concluded that I can't trust what I read on t'internet!

[spectoacc] 25/5/2023 17:13

24% of portfolio isn't A-C, which is at least interesting.

Thanks re debt position, @nickrl.

On EPC's - barring exemptions, the current rule is for a minimum of B by 2030.

2025 C's for new lettings, 2028 C's for all lettings inc existing. So they may have a few years, but let's hope it isn't a few years that corresponds with the long-predicted downturn.

Getting to B on entire portfolios is going to be...interesting.

[nickrl] 25/5/2023 14:31

Even with a hefty increase in operating cost +20% mainly due to void costs they have covered it with increased rental income so divi cover one of the best here and could certainly be lifted by 10%. Majority debt is out to 31/32 and is fixed but the RCF is unprotected so if they are intending to load that up will drive up interest charges as its sitting around 5.68% all in currently on amounts drawn although the undrawn amount is costing more currently due to the commitment fee 0.6% (good to see they publish that others don't and it can add a fair whack to finance charges when they have large amounts undrawn).

As Sky says these are well loved and can't see them being taken out given discount level but that yield just isn't attractive as a few non renewals could quickly tip the balance on coverage.

[skyship] 25/5/2023 13:43

Debt structure now good, long maturity and fixed at 3.8%. LTV OK at 27%.

Divi cover good at 112%; but the 3.5p dividend provides a lowly yield of just 4.49% at 78p.

Discount after a further NAV fall is just 22%.

Once again PCTN seems over-valued versus peers:

# API - 51p - 38.1% & 7.84%

# EBOX - 60p - 34.3% & 7.37%

# SREI - 44.35p - 28.5% & 7.39%

PCTN has a loyal following, hence usually over-valued. But right now, far better value elsewhere, inc. the 3 above.

[speedsgh] 25/5/2023 12:29

~ NAV/EPRA NTA as at 31/3/23: 100p (31/3/22: 120p)
~ FY23 DPS 3.50p covered 1.12x (FY22: 3.40p covered 1.15x)
~ 76% of portfolio with EPC rating A-C (31/3/22: 71%)
~ LTV 27% (31/3/22: 21%)
~ Weighted average interest rate 3.8% (31/3/22: 3.7%)
~ Average duration 8.4 years (31/3/22: 9.6 years)

Preliminary Annual Results -

Picton announces its annual results for the year ending 31 March 2023.

Chair, Lena Wilson CBE, commented:
“Despite the challenges of inflation and higher interest rates, we have maintained both our EPRA earnings and our long-term track record of outperformance. We are continuing to upgrade and adapt our assets, ensuring they remain relevant and attractive to our occupiers, providing income sustainability.

As a business, we are in a resilient position. We have a strong capital structure with attractive long-term fixed rate debt. Our portfolio offers significant income upside, and we are already starting to see stability in asset values.”

Michael Morris, Chief Executive of Picton, commented:
“For the tenth consecutive year we have outperformed the MSCI UK Quarterly Property Index and our long-term track record shows upper quartile performance since launch in 2005. We remain focused on our portfolio performance, operational excellence and acting responsibly, and have strengthened our team accordingly.

One of the key advantages of having a diversified approach and a team with a proven track record of managing assets across sectors through several iterations of the investment cycle, is that we can draw on this experience during more challenging markets. This year, we have made significant progress, delivering rental growth and exploring and securing more valuable alternative uses at selected office assets. We have remained focused on sustainability, with further progress on our net zero pathway.

After a sharp and significant pricing correction in the property market in 2022, valuations appear to be stabilising, supported by resilience in the occupational markets. We will continue to explore opportunities to maximise earnings, whether at an asset level by capturing reversionary potential with our occupier focused approach or through growth and the economies of scale that our internally managed structure can deliver.”

Financial performance

– Stable EPRA earnings of £21 million
– Net assets of £548 million, or 100p per share
– Dividends paid of £19 million, 4% higher than preceding year
– Dividend cover of 112%

Defensive capital structure

– Loan to value of 27%
– Weighted average interest rate of 3.8%
– 95% of drawn borrowings fixed with 2031/32 maturities
– EPRA NDV £23 million higher than net assets, reflecting fair value of debt
– £38 million undrawn debt facilities

Resilient operational performance

– Outperforming property portfolio relative to MSCI UK Quarterly Property Index
– Like-for-like increase in passing rent of 10% and 3% in contracted rent
– Like-for-like estimated rental value increase of 9%
– Capturing rental growth through:
# 39 lettings, 25% ahead of March 2022 ERV
# 37 lease renewals or regears, 6% ahead of March 2022 ERV
# 20 rent reviews, 7% ahead of March 2022 ERV
– Rent collection over 99% for the year
– Occupancy of 91%
– Three separate acquisitions totalling £21 million

Increased investment with sustainability focus

– £6 million invested into upgrading over 15 assets
– Net zero carbon pathway progress, including installation of solar arrays
– 100% compliance with 2023 EPC minimum standards
– Improved EPC profile with 76% of portfolio rated A-C
– Scope 1 and 2 emissions reduced by 24% compared to 2019 baseline

[skyship] 21/5/2023 16:10

Finals this coming Thursday.

[speedsgh] 26/4/2023 07:10

Dividend Declaration -

Picton today announces an interim dividend payment in respect of the financial period from 1 January 2023 to 31 March 2023, maintained at 0.875 pence per share.

The dividend timetable is set out below:

Ex-Dividend Date - 4 May 2023
Record Date - 5 May 2023
Pay Date - 31 May 2023

The dividend of 0.875 pence per share will be designated as a property income distribution (‘PID’).

[speedsgh] 20/4/2023 12:52

Trading Update -

Asset Management progress and stabilising valuations

Picton provides a trading update ahead of its full year results, to be released on 25 May 2023.

Valuation

The independent valuation of the Group’s property portfolio as at 31 March 2023 was £766.2 million, reflecting a 1.2% decline relative to 31 December 2022.

This compares with the recently released MSCI UK Monthly Property Index which shows that All Property Capital Growth over the first three months of the year was -1.2%. This represents a significant improvement relative to the prior period and reflects stabilisation following the marked repricing after the September 2022 mini budget. Specifically, the MSCI Index has shown positive Capital Growth movements in March in both the industrial and retail sectors, for the first time since June 2022.

Rent collection

Rent collection remains consistently strong at 99.8%, for the last quarter.

Occupancy

Occupancy has improved to 91% (from 90% at 31 December 2022) following several leasing transactions offsetting space which has become available.

Portfolio activity

Activity over the three months included 19 lease renewals and extensions, 15 lettings, eight rent reviews and six surrenders. Key highlights over the quarter include:-

Capturing rental growth in the industrial sector

At Parkbury Industrial Estate, Radlett, an existing occupier was upsized, with two leases extended from 2025 to 2030 and the rent increased by 46% from £0.4 million to £0.6 million per annum, effective January 2025. In addition, Picton has pre-leased a unit which will become vacant in 2024, increasing the passing rent by 60% to £0.2 million per annum. Rents were in line with the December ERV.

At Riverway Industrial Estate, Harlow, an occupier has agreed to take an additional unit which became vacant at the end of 2022, after completion of upgrading works by Picton, including the installation of solar panels. Their rent increases from £0.3 million to £0.7 million per annum, which is in line with the December ERV.

At Madleaze Trading Estate, Gloucester, a rent review has been agreed with the largest occupier, increasing the rent by 29% to £0.3 million per annum, which is 23% ahead of the ERV at the time of acquisition in 2021. Elsewhere on the estate, two leases were renewed and separately occupier break options were removed in a further two leases, securing income until 2029. These transactions resulted in a combined uplift on the previous passing rent of 52% to £0.3 million per annum, 5% ahead of the December ERV.

Repositioning office assets

In response to market conditions, Picton is exploring higher value alternative uses at several office assets. Further details will be provided as these progress, but specifically at Angel Gate, London, EC1, Picton has used permitted development rights to secure residential use at this part vacant office scheme. Consent has been secured across seven buildings, totalling 17,760 sq ft, with the potential to create 19 residential units. In addition, applications are being progressed for residential use on another six buildings totalling 11,700 sq ft, creating a further 16 units.

Maintaining high retail occupancy

At Parc Tawe, Swansea, a lease has been renewed to a national retailer. The new rent is £110,000 per annum and is 10% above the December ERV but 17% below the previous passing rent.

At Gloucester Retail Park, a rent review was settled on one unit, increasing the rent by 30% to £78,000 per annum, 8% ahead of the December ERV.

In Cheltenham, a lease to a local retailer has been surrendered, securing a premium payment and a new letting to a national retailer has been agreed. This increases the passing rent by 6% to £45,000 per annum which is 1% ahead of December ERV.

A small retail unit has been leased to a local retailer at Charlotte Terrace, London, W10, for £25,000 per annum in line with December ERV.

Michael Morris, Chief Executive commented.

‘Our own independent valuation and the recent MSCI figures appear to indicate that the marked repricing seen at the end of last year has substantially run its course. In our portfolio increasing rents and rising rental values are having a positive valuation impact and offsetting some of the outward yield movement we have seen in recent months. Being able to improve occupancy and adapt our portfolio to changing market conditions is also encouraging.’

[petersinthemarket] 08/3/2023 15:03

NAV is plainly an important stat, but my mrs bt this, on my advice, in 2017, at AvgCost 88p and it has done nothing much since. Her pf is for LT total value and in that respect PCTN is just about positive but the DivYld is disappointing when we could get much the same in Gov stocks. This is a safe and solid, boring, company and we didn't expect fireworks, but we did hope for a gradual rise in capital appreciation and DivYld, ie total yld. If it does reach 88p again, we will quit.

[skyship] 07/3/2023 16:45

I agree with Peter. PCTN was good in the past - basically pre-2018; but recent performance hampered by their crazy decision not to refinance debt. They finally did so last year but still higher than most peers at 3.7%.

The high debt costs strangled their earnings, so even now PCTN yield a pretty miserly 4.59%; whilst discount unexceptional at 25.3%.

Personally I think it is a real no-no to view your yield at cost. To assess an investment surely you have to work on current stats. So forget that 8%; look at the 4.6%.

[speedsgh] 07/3/2023 12:54

I have to disagree, Peter. There are so many ways of comparing (NAV, NAV total return, share price total return etc) and it of course depends over what timescales you want to compare. From my experience as a LTBH investor who first invested in 2011, PCTN has performed admirably providing a growing income (currently 8% yield on my average cost) and steady capital appreciation. On a pure NAV view it also appears to have outperformed most of its generalist peers over all bar the most recent timescales e.g.

Ticker >> NAV 31/12/15 >> NAV 31/12/22 >> % change
PCTN >> 75.7p >> 102.2p >> +35.0%
API >> 82.2p >> 84.8p >> +3.2%
BCPT >> 135.3p >> 118.5p >> -12.4%
CTPT >> 99.9p >> 95.4p >> -4.5%
SREI >> 62.4p >> 62.0p >> 0%
UKCM >> 86.7p >> 79.7p >> -8.0%

I would be interested to see a comparison of NAV total return over the long term but unfortunately don't have the data available for this.

More than happy to continue to hold here.

[petersinthemarket] 06/3/2023 12:26

Chart looks interesting now - a convincing double bottom formation, coupled with solid support around 76p, plus an obvious pennant forming. So, share price decision time imminent - up or down? - chart suggests up - we'll soon see. On balance, poor capital return over several years and a miserly dividend. Time it did something interesting.

[nickrl] 01/3/2023 15:12

@sky another one that has loyal following though has good length on debt and covers the divi currently but can't see it moving up more than a 3-4% pa which if it >6% i would take.

[skyship] 27/2/2023 14:38

Problem with PCTN is that it is over-valued versus many of its peers. That 4.5% yield just doesn't cut the mustard when you look across at so many yielding in the range of 6%-8%, most on higher discounts as well.

[petersinthemarket] 27/2/2023 13:34

Remember, PCTN pays Edison £60k to produce this note. Up to you to decide on its independance.

[speedsgh] 03/2/2023 13:22

New Edison update...

Picton Property Income: Growing income and portfolio outperformance -

[spectoacc] 31/1/2023 07:33

Guessing this (to December) will be the worst of the NAV falls for all the REITs, but woe betide them if it isn't, or if it lasts a few years (the timescale when consumer spending is forecast to continually decline).

-12.7% in a quarter...

[speedsgh] 31/1/2023 07:28

NAV/EPRA NTA down 12.4% to 102.2p (30/9/22: 116.7p). Rents continue to rise. Occupancy stable at 90%. LTV 26.4%. Dividend cover 112%.

Trading Update and Net Asset Value as at 31 December 2022 -

-----------------------------

Dividend Declaration -

Picton today announces an interim dividend payment in respect of the financial period from 1 October 2022 to 31 December 2022, maintained at 0.875 pence per share.

The dividend timetable is set out below:

Ex-Dividend Date - 9 February 2023
Record Date - 10 February 2023
Pay Date - 28 February 2023

The dividend of 0.875 pence per share will be designated as a property income distribution (‘PID’).

[nickrl] 14/11/2022 19:20

@sky this statement suggest to me that 4% yield is as good as its going to get

"Our distribution is back to pre-pandemic levels and whilst we continue to keep the dividend level under review depending on further leasing progress and improved occupancy levels, we believe it is right to be prudent at this stage given the current economic backdrop"

Anyhow at least the miserly dividend is well covered at the cash level and could certainly be lifted up more especially as it looks like a decent income increase from locked in rent free periods expiring and stepups although above suggests they wont. You can also see how much voids can impact propcos with slight deterioration from 93 to 90% driving up void costs by 50% or another 0.5m.

Would like to see 5% to make me interested but doubt share price will drop back to that level anytime soon.

[skyship] 09/11/2022 08:59

Forgot that the NAV comparison is with Mar'22, not Jun'22. So the Q3 fall seems pretty much in line with others at c7%.

With the 10% fall in Industrials in October (CBRE stats); and with the weighting here at c53%, PCTN looking over-valued versus peers on their 25.6% discount and mere 4% yield.

[skyship] 08/11/2022 08:26

nick - I can edit the Header - but regrettably, not the Title!

[nickrl] 07/11/2022 23:18

@sky never got why this one is so supported with it low yield but with its high industrial weighting i can concur with your view that a reduced NAV should be expected although the correlation between REITs is never that good. No immediate debt issues to worry about and divi will be maintained so not sure it will be a valuable short.

Edit: would suggest the title "Undervalued, High-yielding Property Co..." isn't representative of today although i guess if you were in it 10 years ago its been worthy investment.