Picton ZDP Limited Corporate Update

 
TIDMPCTZ 
 
26 January 2016 
 
 
                              PICTON ZDP LIMITED 
 
                               Corporate update 
 
 
The announcement below has been released today to Picton Property Income 
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 December 2015 and Interim 
Dividend.   Highlights during the quarter included: 
 
 
Financial 
 
  * Net Assets increased to GBP408.8 million (30 September 2015: GBP393.1 million). 
  * NAV/EPRA NAV per share rose 4.0% to 75.7 pence (30 September 2015: 72.8 
    pence). 
  * Total return for the quarter of 5.1% (30 September 2015: 3.9%), and 19.9% 
    for the calendar year. 
  * Net gearing of 33.3% (30 September 2015: 34.6%). 
  * Average debt maturity of 11.6 years, with a weighted average interest rate 
    fixed at 4.6% per annum. 
 
 
Dividend 
 
  * Dividend of 0.825 pence per share declared and to be paid on 29 February 
    2016 (30 September 2015: 0.825 pence per share). 
  * Post-tax dividend cover for the quarter of 117% (30 September 2015: 122%). 
  * Dividend yield of 4.8%, based on a share price of 69.25 pence on 25 January 
    2016. 
 
 
Portfolio Activity 
 
  * Like-for-like increase in property portfolio valuation of 2.6% (30 
    September 2015: 2.2%), with the strongest valuation gains in the office 
    portfolio. 
 
  * Occupancy maintained at 95% (30 September 2015: 95%) for the 5th 
    consecutive quarter. 
  * Disposed of a low yielding, non-core retail asset in Guildford for GBP3.25 
    million, at a 9% premium to September 2015 valuation. 
  * Completed nine lettings, adding GBP0.5 million per annum to the rent roll 
    (after incentives), three lease renewals securing GBP0.17 million per annum 
    (after incentives) and four rent reviews securing an income uplift of over 
    GBP0.03 million, in line with September 2015 ERV s. 
 
 
 
 
 
Post Quarter End Activity 
 
  * Subsequent to the quarter end and following the valuation date, a number of 
    significant asset management transactions have completed, which are 
    expected to further enhance the income and capital position. 
  * In 2016 we have completed three regears totalling GBP1.4 million pa, 
    extending this income on average by over eight years (2% ahead of the 
    December 2015 ERV), one rent review securing a GBP0.05 million pa uplift  (5% 
    ahead of December 2015 ERV) and one letting securing GBP0.15 million pa (50% 
    ahead of the December 2015 ERV)). 
  * In addition, terms have been agreed in respect of 14 new lettings, subject 
    to contract, at a combined rental in excess of GBP0.9 million pa (11% ahead 
    of the December 2015 ERV). 
 
 
 
Commenting, Nick Thompson, Chairman of Picton, said: 
 
"OurThe strong performance thisover the quarter is attributable toa reflection 
of our high relative exposure to the outperformingoffice and industrial sectors 
which have outperformed, as well as our covered dividend, the positive impact 
of our capital structureuse of debt and the full benefit of the higher income 
as a result of recent acquisitions." 
 
Michael Morris, Chief Executive of Picton Capital, added: 
 
"We are encouraged, not only by the activity within the portfolio during the 
quarter, and also but the strong start to 2016., in terms of underlying 
portfolio activity.  In particular, a number of lettings and repositioning 
initiatives continue to drive rents, enhancing our capital base and 
contributing to performance ahead of the wider market." 
 
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] 
 
 
 
 
 
NET ASSET VALUE 
 
The unaudited Net Asset Value ('NAV') of Picton, as at 31 December 2015, was GBP 
408.8 million, reflecting 75.7 pence per share, an increase of 4.0% 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 December 2015, including income for the quarter, but does not include 
a provision for the dividend this quarter, which will be paid in February 2016. 
 
The next independent valuation of the property portfolio is scheduled for March 
2016 and the unaudited NAV per share, as at 31 March 2016, will be announced in 
April 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 October 2015 to 31 December 2015 (1 July 2015 to 30 September 2015: 
0.825 pence). 
 
The dividend will be paid on 29 February 2016 to shareholders on the register 
on 12 February 2016. The ex-dividend date is 11 February 2016. 
 
Post-tax dividend cover for the quarter was 117% (30 September 2015: 122%). 
 
DEBT 
 
The Group has total borrowings of GBP233.5 million with a fixed weighted average 
interest rate of 4.6% and a weighted average debt maturity profile of 
approximately 11.6 years. 
 
As at 31 December 2015, net gearing, calculated as total debt including ZDPs, 
less cash, as a proportion of gross property value, was 33.3% (30 September 
2015: 34.6%). 
 
The Company, through subsidiary Picton ZDP Limited (PCTZ), has 22 milliona Zero 
Dividend Preference shares which are scheduled to mature maturity in October 
2016. It intends to repay these ZDP shares in full at the maturity date and is 
currently exploring the most appropriate method of repayment. Thethe Company 
currently has a GBP26 million undrawn Rolling Credit Facility, over GBP70 million 
of uncharged assets, and existing cash resources to facilitate this.. 
 
The Company has received enquiriesfeedback  from a number of from PCTZ of ZDP 
shareholders concerning a possible rollover of ZDPs to Picton ordinary shares, 
recognising the higher dividend yield compared tovs the ZDP GRY and the 
potential benefit of deferringment of any Capital Gains TaxCGT liabilitiesy. 
 
The Company therefore nowIt intends to consult more widely with ZDP holders to 
establish whether a rollover would be viablein the coming quarter to establish 
if there is sufficient demand to facilitate a roll over from PCTZ to PCTN on a 
non dilutive basis for Ordinary shareholders.  It will provide clarity on the 
strategy at the time of the Annual Results, if not sooner. 
 
MARKET BACKGROUND 
 
According to the MSCI IPD Monthly Index, total returns were 3.1% in the quarter 
to December 2015, compared to 3.4% in the quarter to September 2015. 
 
Capital growth remained positive and was 1.7% over the quarter, compared with 
2.1% in September 2015. Across the principal IPD sectors, office values rose by 
2.5% (September 2015: 3.1%), industrial by 2.3% (September 2015: 3.1%) and 
retail by 0.8% (September 2015: 0.8%). Over the quarter, the majority of the 
IPD segments recorded positive capital growth, with falls only recorded within 
the rRetail sector. Out of a total of 37 segments, 34 recorded positive capital 
growth, compared to 36 last quarter. 
 
Over the quarter to December, rents grew by 1.1%, compared with 1.2% in 
September 2015. Across the principal IPD sectors, office rental values rose by 
1.9% (September 2015: 2.1%), industrial by 1.6% (September 2015: 1.4%) and 
retail by 0.3% (September 2015: 0.3%).  Over the quarter, the majority of the 
IPD segments recorded positive rental growth, with falls only recorded in 
thesome retail sectorgments. Out of a total of 37 segments, 31 recorded 
positive rental growth compared to 29 last quarter. 
 
The occupancy rate in the December IPD Monthly Index was higher than the 
previous quarter at 91.2% (September 2015: 90.6%). 
 
PORTFOLIO UPDATE 
 
The portfolio valuation increased by 2.6% during the period and occupancy was 
maintained at 95%. 
 
The office assets in the portfolio recorded the strongest valuation gains and 
this was in part a reflection of asset management activity and rising rental 
levels across the portfolio. 
 
The strongest gains were seen in the London portfolio where rising rental 
values (of currently at an average of GBP43 per sq ft across the London 
portfolio) GBP43 per sq ft overall) and the low overall current rental levels 
(which currently reflect under GBP31 per sq ft) will, in our view, offer further 
scope for income growth. 
 
As at 31st December, the portfolio had a net initial yield of 5.7% (allowing 
for void holding costs) or 5.8% (based on contracted net income) and a net 
reversionary yield of 6.8%. The weighted average unexpired lease term based on 
headline rent was 5.7 years. 
 
Key highlights in the quarter included: 
 
 
 
 
 
Industrial 
 
At Parkbury, Radlett we secured a 3% uplift in rent at the second largest unit 
(40,000 sq ft)  at a February 2014 rent review increasing the rent to GBP0.38 
million per annum. The uplift is 8% ahead of ERV.   We have agreed aon early 
surrender of a 22,000 sq ft unit which is coming back in February 2016, on the 
back of the strong demand we are presently seeing and currently we have one 
vacant unit, which is under offer. 
 
In Harlow, we secured a 5% uplift in rent at a July 2013 rent review increasing 
the rent to GBP0.22 million per annum. The uplift is 1% ahead of ERV and a 
positive result especially with regard to other outstanding reviews. As 
anticipated, a 55,000 sq ft unit came back at the end of December and will be 
refurbished, prior to relettingwe expect strong interest in the unit post the 
refurbishment. 
 
In Epsom, at Nonsuch Industrial Estate, we have let one of the larger units for 
a ten-year term, without break, at a rent of GBP0.04 million per annum with no 
incentive. The new rent equates to GBP16 per sq ft, which is 6% ahead of ERV and 

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