Picton Property Income Ld Share Discussion Threads

[cwa1] 31/7/2012 07:18

30 June 2012, Interim Dividend and Interim Management Statement
Picton Property Income Limited ("Picton" or the "Company"), the internally managed Investment Company with an income focused approach to the UK commercial property market, announces its Net Asset Value as at 30 June 2012 and Interim Dividend.
-- NAV per share 54 pence (March 2012: 57 pence).
-- Net Assets of GBP185.0 million (March 2012: GBP196.1 million).
-- 2.7% decrease in underlying property portfolio valuation. -- Significant group refinancing completed post period end, saving approximately GBP1 million per annum in financing costs.
-- Dividend of 1 pence per share declared. Commenting, Nick Thompson, Chairman of Picton, said:
"The primary focus over the period was to ensure the refinancing of our secured borrowings. This was successfully completed following the quarter end and now provides the Company with a significant saving on its future interest costs. We continue to operate in markets that remain challenging, but with approximately 40%, by rental value, of our total void within the wider London markets, we are positive that our portfolio initiatives can enhance this position."

[skyship] 25/7/2012 06:54

So, 4.2% for varying maturity dates - 10, 15 & 20yr. Excellent deal.

No news yet on the future dividend rate - though may hear shortly once they've resolved the ZDP repayment/roll-over issue...

[madmix] 11/7/2012 19:26

Thanks Alan. Will take a look.

[alanji] 11/7/2012 18:03

madmix - IRP has a yield of 10.8% (not covered)

[warrensearle] 11/7/2012 15:55

Ahhh yes i did see that when reading it then immediately forgot!

[skyship] 11/7/2012 15:53

Yes you are. The stats were for a 15month period...

[warrensearle] 11/7/2012 15:51

Am I missing something in the RNS it states a divi of 5p per share for 2012

I'm sure I get 1p a quarter I.e 4p per year

All of you talking about divi cuts are using 4p as start figure why does it say 5p in the RNS

I look forward to you all pointing out the obvious mistake I'm missing :)

[madmix] 11/7/2012 15:27

Alan,

Can I ask which peer is currently yielding 11%?

I'm currently only holding SREI in the sector, but have quiet a large chunk of them.

[alanji] 11/7/2012 15:21

Strangely, mangal, I was just about to post on that.
What I regard as its 'peers' are paying dividends of between 6% and 11% and the nearest similar co, SREI, is yielding almost 10% with no hint of a reduction and plans for it to be covered in the next couple of years. At 39p PCTN is yielding just over 10% with a 4p dividend. A reduction to 3p would reduce the yield to 7.7% - similar to some of its peers standing on a much lower discount (or a premium) to nav. Surely some of the large shareholders are going to be pressing for the co to reduce the discount and a dividend cut is not the way to achieve it.
I will continue to hold both PCTN and SREI for the moment. They have similar portfolios and gearing and both are at a 33% nav discount. SREI's tenant strength is better, but current dividend cover not so good. There may be a good buying opportunity if the dividend is cut.

[mangal] 11/7/2012 15:05

Well, they state that they
"remain committed to distributing as high a dividend as is commercially sensible to do so and will continue to benchmark our performance against the other income orientated listed property vehicles."

Does anyone know what the range of dividend rate paid by "other income orientated listed property vehicles" is?

[stevie blunder] 11/7/2012 13:02

Don't think they would sink that low, since the yield would be rock solid and the amortization of the debt would increase the NAV over time.


Hope I am wrong and your more optimistic view of the new divi is right though!

cheers

[skyship] 11/7/2012 12:37

Stevie - a qtly 0.75p would be the absolute minimum; ie @ 39p would be on a running yield of 7.7%. If they did cut to that level then we would for sure return to the 36.75p/37p recent lows.

[stevie blunder] 11/7/2012 09:47

The new debt is amortizing, so they will need cash for that as well, unless they plan some regular disposals.

I have penciled in a 25% cut in divi after this morning, hope that is enough.

[alanji] 11/7/2012 09:01

Strange announcement re the dividend, which I also read as a cut. However, the 93% cover is higher than I hoped for and going forward the dividend at the current rate should be more than covered - interest cost reduced, management costs reduced and some rent free holidays ending. The 16% of tenants on high or maximum risk is a bit of a concern though.

[skyship] 11/7/2012 08:13

A reduction to perhaps a maximum of 4 x 0.875p would seem to be on the cards. That 3.5p annual dividend would give us 1.063% cover and yields & NAV discounts of:

8.75% & 29.8% @ 40p
8.97% & 31.6% @ 39p
9.21% & 33.3% @ 38p
9.46% & 35.1% @ 37p

[lord gnome] 11/7/2012 08:12

I'd say that reads like advance warning of a dividend cut. Certainty! Other than that it looks ok and a steady business. Could be a nice safe little dividend earner once the size of the cut is known. I'll keep this on the watch list until then. I reckon the price could drift back down again.

PS. the announcement did clear up one of the debating points on here. The new finance is at fixed rate.

[madmix] 11/7/2012 07:41

Looks like the dividend could be reduced slightly going forward :

Dividend

"During the period the Company paid dividends of £17.3 million. Prior to the one off costs associated with internalisation and corporate activity referred to above, this reflected dividend cover of 93%, with the shortfall being funded from reserves.

Despite Picton having one of the strongest levels of dividend cover within its immediate peer group, the Board intends to review the Company's dividend policy once the refinancing exercise has been completed. It has been our intention for a period of time to reach a position where the Company operated with dividend cover of at least 100%, rather than pay dividends on an uncovered basis.

In the current economic environment we believe the balance should be more weighted to strengthening the balance sheet rather than over distribution. Following completion of the refinancing, and once financing costs are finalised, we will be in a position to update shareholders on the future dividend policy. We remain committed to distributing as high a dividend as is commercially sensible to do so and will continue to benchmark our performance against the other income orientated listed property vehicles."

[nerja] 11/7/2012 07:33

Anybody more savvy than me give a heads up on the results please,

31 March 2012* 31 December 31 December
2010 2009
Property assets GBP411.7m GBP424.3m GBP352.6m
Net assets GBP196.1m GBP206.9m GBP181.1m
Rental income GBP40.6m GBP31.1m GBP31.9m
Profit before tax GBP6.2m GBP31.9m GBP(19.3)m
Income profit before GBP14.0m GBP14.6m GBP12.0m
tax
Net asset value per
share 57p 60p 55p
Earnings per share 1.9p 9.3p (5.9)p
EPRA earnings per share 4.1p 4.2p 3.6p
Total dividend per
share 5.0p 4.0p 3.0p

On the surface the longer period this time seems to account for the greater rental income but why the profit before tax drop?
Thanks in advance.

[sleepy] 06/7/2012 13:57

Spec - I think the interest rates on the new loan are/will be fixed

[specuvestor] 06/7/2012 13:36

I am trying to understand this new refinancing deal. From what I have read my understanding is that it is an interest only commercial mortgage with a variable rate of interest linked to the gilt rate. I thought that nornmally these loans are linked to libor. There doesnt seem to be any mention of hedgeing against interest rate raises. Isnt this more risky than before?
I am a holder of SREI & MCKS and have been in and out of a few of these property companies over the last few years. All have had some sort of interest rate hedge in place.
With gilt rates historically low isnt there a risk of the gilt bubble bursting and hence interest rates increasing drastically? Without hedging would not Picton be badly exposed? Or have I missed something?
I would like to buy in because of the high yield but this could be affected if their interest rate payments shot up and the divi had to be cut.

[rooky4] 02/7/2012 08:43

Swap break costs were given as £5.1 million as at 31 March 2012, so they will be presumably be less in July, and lower still if completion drags out as often happens. So maybe a bit of good news still to come.

[envirovision] 29/6/2012 11:34

We don't know the swap details, but why would it not be with the lender, or if not likely conditional upon and having been chosen by the loan provider.

One would think the fact it cannot run to expiry would be be down to the fact it would have been conditional upon the finance having been provided by the lender.

--------------------
nice 250K buy gone through as I type

[yieldsearch] 29/6/2012 11:30

AlanJI fully agree with you, they could have left the existing financing in place, with the swap costs declining to zero at maturity in early 2013, with a forward commitment from the new lender.

May be they were really concern with the lack of banks lending on real estate?

Or they could have use the existing swap for the new financing, forcing them to pay on the old swap term instead of paying an upfront 5m

[alanji] 29/6/2012 11:18

Who said it had to be fair? The swap will not be with the lender but they no doubt received a generous kickback when it was taken out.
The question is why refinance now rather than let it run down to expiry. I would have thought they could get some sort of advance commitment for less than £5m

[envirovision] 29/6/2012 11:12

Anyway, so let me get this strait? Pictons debt agreement was coming to an end and needed to be refinanced. No one was party to the discussions with existing lenders, but it is assumed that they would not have wanted to refinance on generous terms and infact may well have been demand terms which would have been highly unfavourable to existing shareholders, possibly who knows, even wipe out existing shareholders to an extent.

For the our privilege of not agreeing to what ever these "not so favourable terms" we have had to pay them an interest rate swap liability cost penalty of £5.1 million pounds.

.....................hmmmmmm does that sound fair ??