Picton Prop Inc Ltd Trading Update & Covid-19 Impact

 
TIDMPCTN 
 
15 April 2020 
 
PICTON PROPERTY INCOME LIMITED 
("Picton", the "Company" or the "Group") 
 
                         LEI: 213800RYE59K9CKR4497 
 
                       Trading Update & Covid-19 Impact 
 
Picton makes a trading update in light of the current Covid-19 situation and 
ahead of the release of its Annual Results which are expected in June 2020, 
subject to any further guidance from the FCA and FRC. 
 
Picton owns and actively manages a GBP665 million diversified UK commercial 
property portfolio, of which 82% is invested in the Industrial and Office 
sectors. The portfolio is diversified across 47 assets with rent receivable 
from around 350 occupiers, with the largest occupier contributing 4% of the 
rental income. 
 
The following trading update reflects activity over the first quarter of 2020, 
details of the March 2020 valuation and the Company's response to the Covid-19 
pandemic and its impact on the business. 
 
Michael Morris, Chief Executive of Picton, commented: 
 
"Whilst we are all operating in difficult circumstances, Picton is making good 
progress against our strategic priorities as further detailed below. We have a 
strong balance sheet, significant headroom against our debt covenants and are 
fortunate to have made recent disposals, as well as having access to fully 
undrawn revolving credit facilities if required. 
 
"We have had good leasing activity over the period, particularly in the 
regional office markets which has mitigated valuation declines as a result of 
Covid-19. Our diversified portfolio and wide occupier base underpin our 
resilience at this time.  Our focus is on continuing to proactively manage the 
portfolio through this difficult period, ensuring we are well positioned for 
the long-term. 
 
"We continue to make every effort to support our employees, occupiers, 
communities and suppliers in these difficult times." 
 
Portfolio activity 
 
The principal portfolio activity that has taken place in the first quarter of 
2020 is set out below. 
 
The Company completed nine lettings (3.5% ahead of the December 2019 ERV), 
three lease renewals and lease extensions (7.1% ahead of the December 2019 ERV) 
and four rent reviews (12.6% ahead of the December 2019 ERV). 
 
In addition to the announcement dated 20 March 2020 in respect of three key 
regional office lettings, the Company has achieved practical competition of the 
former Lidl unit in Swansea which has been let to Farmfoods. Other principal 
transactions over the quarter include the extension of the Pets at Home lease 
in Swansea by a further five years and a letting of a unit at a Greater London 
industrial estate, which completed following refurbishment works, 9.5% ahead of 
the December 2019 ERV. 
 
The Company completed seven refurbishment projects over the quarter, investing 
a further GBP3.7 million into the portfolio. The principal completion was at the 
Company's distribution unit at Rugby. www.swiftbox-rugby.co.uk/ 
 
In January 2020 Picton completed the disposal of a distribution warehouse in 
Lutterworth, Leicestershire, for GBP15.9 million and used the proceeds to reduce 
debt. The sale price reflects a net initial yield of 5.8% and a 1% uplift to 
the independent 31 December 2019 valuation. 
 
Valuation 
 
CBRE, the Company's external valuers, have valued the portfolio at GBP665 million 
as at 31 March 2020. Overall, the valuation decreased by 0.8% over the quarter, 
or by 1.3% reflecting capital expenditure. 
 
The breakdown by sector is as follows: - 
 
                                                                   Valuation 
movement               Sector weighting 
 
Industrial, Warehouse &         -0.3%                  47.9% 
Logistics 
 
Office                          -0.2%                  33.8% 
 
Retail & Leisure                -2.9%                  18.3% 
 
 
The valuers have confirmed that the valuation as at 31 March 2020, in 
accordance with industry practice, is subject to a material uncertainty clause 
as follows: 
 
The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health 
Organisation as a "Global Pandemic" on the 11 March 2020, has impacted global 
financial markets. Travel restrictions have been implemented by many countries. 
Market activity is being impacted in many sectors. As at the valuation date, we 
consider that we can attach less weight to previous market evidence for 
comparison purposes, to inform opinions of value.  Indeed, the current response 
to COVID-19 means that we are faced with an unprecedented set of circumstances 
on which to base a judgement. Our valuation(s) is / are therefore reported on 
the basis of 
 
'material valuation uncertainty' as set out in VPS 3 and VPGA 10 of the RICS 
Valuation - Global Standards. Consequently, less certainty - and a higher 
degree of caution - should be attached to our valuation than would normally be 
the case. Given the unknown future impact that COVID-19 might have on the real 
estate market, we recommend that you keep the valuation under frequent review. 
 
Rent collection 
 
The most recent rent quarter day in England and Wales was 25 March 2020. By 7 
April 2020, 71% of the rent due on the March quarter day had been paid in full. 
 
Picton has been able to draw down on rent deposits, which increase the 
collection rate to 72% and having agreed with a number of occupiers a 
short-term monthly payment plan, this figure rises to 80%. The March 2019 rent 
collection after two weeks was 95%. 
 
Rent in Scotland and Northern Ireland is due in May 2020. 
 
It is clear that companies operating directly or indirectly in the retail, 
leisure or hospitality sectors have been particularly impacted by this pandemic 
and we are working closely with these occupiers to seek both long and 
short-term solutions. 
 
Whilst lower than normal, under the circumstances, these are good rent 
collection numbers, which reflect our ongoing occupier focused approach. We are 
working to address individual occupier requests and hope to agree appropriate 
solutions with them in due course. As a responsible landlord, we have been in 
direct dialogue with any occupier currently experiencing difficult trading or 
cashflow issues. The aim is to seek solutions that assist occupiers through 
these uncertain times while minimising impact to both Picton's capital values 
and cashflow. 
 
Operational activity 
 
The Picton team is fully operational and working remotely. 
 
The Company is especially mindful of the health and safety of our employees, 
occupiers, our wider external team of suppliers and the on-site property 
management team. Operationally the Company is in a strong position but is 
cognisant of the reasons behind the Government imposed lockdown and the need to 
provide support where needed. 
 
The majority of our capital projects have been suspended until site access can 
be obtained, with cost reduction measures being implemented to reduce occupier 
service charges and minimise capital expenditure. 
 
Following Government advice, viewings of currently vacant space will be limited 
until restrictions are lifted, but the Company has a pipeline of four leasing 
transactions with a combined rent roll of GBP0.2 million. 
 
All our multi-let office buildings remain operational, but the majority of 
occupiers only have a limited on-site presence currently. With this in mind, we 
are also implementing the following measures: 
 
  * We are monitoring building occupancy levels - offices are being kept open 
    to support essential business activity in line with Government guidelines, 
    but service levels are being adjusted to reflect reduced occupancy. 
  * We are ensuring essential health and safety works are continuing and 
    building systems being kept on but turned down to minimise cost. We are 
    reviewing service charges and will defer non-essential works to further 
    reduce costs. 
  * On certain assets we have increased security monitoring through existing 
    CCTV and are looking to enhance coverage where needed. 
 
The refurbishment project at the Stanford Building in Covent Garden has been 
halted in line with Government guidelines. Once it has re-commenced, it is 
expected to be a further eight weeks to reach practical completion. 
www.stanfordbuildingwc2.co.uk/ 
 
We continue to engage with all our stakeholders and for a long time Picton has 
operated an occupier focused approach. Our key commitments to Action, 
Community, Technology, Sustainability and Support are particularly relevant at 
this time.  The Company is also continuing and has increased its support for 
its key charity partners. In addition, within the last week, we have leased, on 
a rent free and temporary basis, a vacant unit in the Docklands to the London 
Ambulance Service NHS Trust, to assist them with their Covid-19 response. 
 
The Company has no plans to furlough employees, nor to seek access to any 
emergency grants or Government assistance. 
 
Balance sheet 
 
In January 2020, following an asset sale, the Group fully repaid its revolving 
credit facilities, which are currently undrawn.  The Company has no short-term 
refinancing events and the average debt maturity profile, on drawn debt is ten 
years. 
 
Overall the Group's LTV is 22% as at 31 March 2020 and on average across the 
drawn facilities (i.e. ignoring the undrawn RCFs) rental income or asset values 
would have to fall by over 40% for there to be any impact on covenants.  The 
Company has been in dialogue with its lenders who are fully supportive of 
Picton's approach. 
 
In addition, the Group has GBP36.3 million of uncharged assets that could be used 
as additional security if required. 
 
The Group remains fully compliant with each of its loan facilities. In addition 
to the remaining proceeds from the recent Lutterworth disposal, the Group also 
has access to GBP49 million of undrawn facilities. 
 
As at 31 March 2020, the Group had over GBP23 million of cash or cash 
equivalents. 
 
Dividend 
 
In line with its usual practice, the Board will review the level of the 
forthcoming dividend, due to be paid in May 2020, at its next meeting, which 

will take place towards the end of April.  It will assess prevailing 
circumstances at the time and will make a further announcement later in April 
2020. 
 
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET 
ABUSE REGULATION (EU) NO. 596/2014 
 
For further information: 
 
Tavistock 
Jeremy Carey 07836 734 625 /James Verstringhe, 07769 698 105, 
[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 GBP665 
million diversified UK commercial property portfolio, invested across 47 assets 
and with around 350 occupiers (as at 31 March 2020). 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 
 
                                     ENDS 
 
 
 
END 
 

(END) Dow Jones Newswires

April 15, 2020 02:00 ET (06:00 GMT)