TIDMPCTN
25 October 2016
PICTON PROPERTY INCOME LIMITED
("Picton" or the "Company" or the "Group")
Net Asset Value as at 30 September 2016 and Interim Dividend
Picton (LSE: PCTN), the income focused property investment company, announces
its Net Asset Value for the quarter ended 30 September 2016 and Interim
Dividend.
Highlights during the quarter included:
Financial
* Increase in Net Assets to GBP423.9 million (30 June 2016: GBP418.0 million).
* NAV/EPRA NAV per share rose 1.4% to 78.5 pence (30 June 2016: 77.4 pence).
* Total return for the quarter of 2.5% (30 June 2016: 1.3%).
* Repaid GBP15.8 million under the revolving credit facility leaving GBP53.0
million of undrawn facilities now available.
* Net gearing of 31.6% (30 June 2016: 34.4%), which has further reduced post
quarter end (see below).
Dividend
* Dividend of 0.825 pence per share declared and to be paid on 30 November
2016 (30 June 2016: 0.825 pence per share).
* Post-tax dividend cover for the quarter of 248% (30 June 2016: 111%), or
130% prior to the one-off receipt in respect of the Strathmore Hotel, Luton
(see below).
* Dividend yield of 4.6%, based on a share price of 71.25 pence on 21 October
2016.
Portfolio Activity
* Like-for-like increase in property portfolio valuation of 0.1% (30 June
2016: 0.5%).
* Completed the sale of Boundary House, Jewry Street, London EC3 for GBP27.8
million in line with 30 June 2016 valuation.
* Received GBP0.67 million in respect of a Rights of Light claim at Boundary
House from a nearby owner.
* Occupancy at 93% (30 June 2016: 96%). The decrease, as anticipated, is
principally due to the vacancy at 50 Farringdon Road, London EC1.
* 10 lettings completed, on average 3% ahead of 30 June 2016 ERV, adding GBP0.9
million per annum to the rent roll.
* Five lease renewals/regears, in line with the 30 June 2016 ERV, securing GBP
0.5 million per annum.
* Settled outstanding dispute in respect of the Strathmore Hotel, Luton for GBP
5.25 million.
Post Quarter End Activity
* Fully repaid GBP29.1 million zero dividend preference shares reducing the
Group's weighted average interest rate to 4.2% and net gearing to 29.6%.
* Completed sale of 1 Chancery Lane, London WC2 for GBP17.25 million, 7.8%
above June valuation and 2.1% above September valuation.
* Let the portfolio's largest industrial void in Harlow, at an initial rent
of GBP0.35 million per annum, in line with 30 September 2016 ERV.
* Pipeline of 10 lettings for a combined rent of GBP0.8 million and three lease
renewal/regears for a combined rent of GBP0.2 million currently under offer.
Commenting, Nick Thompson, Chairman of Picton, said:
"Whilst we cannot avoid Brexit headwinds, our resiliently positioned portfolio
has meant we have had another good quarter, with encouraging activity post
quarter end. We have reduced our central London exposure, strengthened our
balance sheet through the repayment of the ZDPs and improved underlying
dividend cover. We are well positioned with over GBP50 million available for
accretive opportunities as they arise."
Michael Morris, Chief Executive of Picton Capital, added:
"We are working hard to maintain momentum within the portfolio and the
activity, over the usual quieter summer period, speaks for itself. Our priority
and indeed the opportunity, is to further grow income from this position with
leasing and active management initiatives we have identified."
This announcement contains inside information.
For further information:
Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150,
james.verstringhe@tavistock.co.uk
Picton Capital Limited
Michael Morris, 020 7011 9980, michael.morris@picton.co.uk
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Katie Le Page, 01481 745 001, team_picton@ntrs.com
Note to Editors
Picton Property Income Limited is an income focused, property investment
company listed on the London Stock Exchange. Picton can invest both directly
and indirectly in commercial property across the United Kingdom.
With Net Assets of GBP423.9 million at 30 September 2016, the Company's objective
is to provide shareholders with an attractive level of income, together with
the potential for capital growth by investing in the principal commercial
property sectors.
www.picton.co.uk
MARKET BACKGROUND
The EU referendum result at the end of June has clearly impacted the UK
property market in July, August and September. According to the MSCI IPD
Monthly Index, total returns were -2.3% in the quarter to September 2016,
compared to 1.3% in the quarter to June 2016. Capital growth was -3.6% over the
quarter, compared with -0.1% in the quarter to June 2016. On a monthly basis,
capital growth declines reduced in September (-0.2%) compared to August (-0.7%)
and July (-2.8%).
Across the principal IPD sectors, office values fell by -4.7% (June 2016: 0%),
industrial by -2.1% (June 2016: 0.4%) and retail by -3.9% (June 2016: -0.4%).
Out of a total of 37 segments (based on rolling 3 months), only one segment
recorded positive capital growth (Standard Retail Central London), compared to
13 last quarter.
Over the quarter to September, rental values rose by 0.2%, compared with 0.6%
in the quarter to June 2016. Across the principal IPD sectors, office rental
values grew by 0.2% (June 2016: 0.6%), industrial by 0.4% (June 2016: 1.2%) and
retail remained flat at 0.0% (June 2016: 0.3%). Over the quarter, the majority
of the IPD segments recorded positive rental growth, with a majority of rises
recorded in the industrial sector. Out of a total of 37 segments, 23 segments
recorded positive rental growth compared to 29 segments last quarter.
NET ASSET VALUE
The unaudited Net Asset Value ('NAV') of Picton, as at 30 September 2016, was GBP
423.9 million, reflecting 78.5 pence per share, an increase of 1.4% over the
quarter.
The NAV uplift reflected a positive portfolio movement and covered dividend,
which was further enhanced by the one-off settlement of a dispute relating to
the Strathmore Hotel, Luton for GBP5.25 million. This settlement had the effect
of adding just less than 1.0 pence per share to the 30 September 2016 NAV.
The NAV attributable to the ordinary shares is calculated under International
Financial Reporting Standards and incorporates the external market valuation as
at 30 September 2016, including income for the quarter, but does not include a
provision for the dividend this quarter, which will be paid in November 2016.
Following the Referendum result, in line with the approach adopted by other
valuers, CBRE Limited, the Group's external valuer, has included the following
comment in their valuation report:-
"Following the Referendum held on 23 June 2016 concerning the UK's membership
of the EU, a decision was taken to exit. Since that date, we have monitored
market transactions and market sentiment in arriving at our opinion of Market
Value. After an initial period of uncertainty and an absence of activity,
transactional volumes and available evidence has risen in most sectors of the
market and liquidity is returning to more normal levels. This has led to a
generally more stable outlook for the market. However, there remains a paucity
of comparable transactions in central London offices, development land and
buildings, retail parks and large shopping centres and therefore valuations in
these sectors reflect a greater degree of judgement."
The next independent valuation of the property portfolio is scheduled for
December 2016 and the unaudited NAV per share, as at 31 December 2016, will be
announced in January 2017.
A detailed breakdown of the NAV is included in the Appendix.
DIVID
An interim dividend of 0.825 pence per share is declared in respect of the
period 1 July 2016 to 30 September 2016 (1 April 2016 to 30 June 2016: 0.825
pence). The dividend will be paid on 30 November 2016 to shareholders on the
register on 11 November 2016. The ex-dividend date is 10 November 2016.
Post-tax dividend cover over the quarter was 248% (30 June 2016: 111%). This
reduces to 130% when excluding the settlement agreed of GBP5.25 million at the
Strathmore Hotel, Luton.
DEBT
In the quarter, GBP15.8 million of the revolving credit facility was repaid,
using proceeds from the disposal of Boundary House. The Group now has GBP53.0
million of undrawn facilities currently available.
The Group had total borrowings of GBP234.2 million at 30 September, with a
weighted average interest rate of 4.6% (100% fixed rate) and a weighted average
debt maturity profile of approximately 10.7 years. Net gearing, calculated as
total debt including the zero dividend preference shares ("ZDPs"), less cash,
as a proportion of gross property value, was 31.6% (30 June 2016: 34.4%).
Following the quarter end the ZDP's were repaid in full for GBP29.1 million using
proceeds from recent asset disposals. Following this repayment the Group's
overall debt structure, on a proforma basis, can be summarised as follows:-
* Total drawn debt has reduced to GBP205.2 million (30 September 2016: GBP234.2
million).
* Average debt maturity increased to 12.1 years (30 September 2016: 10.7
years).
* Net gearing reduced to 29.6% (30 September 2016: 31.6%).
* Weighted average interest rate reduced to 4.2% (30 September 2016: 4.6%)
PORTFOLIO UPDATE
The portfolio valuation increased 0.1% or GBP0.5 million, primarily as a result
of our sector weightings combined with active management and leasing activity
completed during the period. The Group also incurred GBP0.3 million of capital
expenditure, which has enhanced the portfolio value.
The best performing elements within the portfolio were the central London
office and industrial segments, reflecting trading and active management
activity as detailed below. In broad terms, in a post EU referendum
environment, the negative valuation movements within the portfolio primarily
reflected either more conservative leasing assumptions, weaker yields or a
changed leasing position. Conversely active management, improved leasing and
disposal activity had an offsetting positive impact.
Occupancy across the portfolio decreased to 93% primarily due to the space at
50 Farringdon Road, London EC1 becoming vacant in August. This single void
accounts for 40% of the total vacancy across the portfolio.
As at 30 September 2016, 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 6.9%. The weighted average unexpired lease term
based on headline rent was unchanged from the previous quarter at 5.7 years.
Key highlights in the quarter included:
Office
Our strategy to reduce central London office exposure and use the proceeds to
reduce gearing was concluded with the disposal of Boundary House, London EC3
and Chancery Lane, London WC2, post quarter end.
The sale of Boundary House, London EC3 completed during the quarter realising GBP
27.8 million, which was in line with the 30 June 2016 valuation. The sale
crystallised value created since purchase, having acquired the building in 2006
for GBP16.1 million. In a separate transaction at Boundary House, the Company
secured a payment of GBP0.67 million from a nearby owner, in respect of a Rights
of Light claim.
As reported last quarter, at the end of August we have had two floors returned
to us at 50 Farringdon Road, London EC1 and the current advice is that we
expect to let the space some 60% ahead of the rent paid by the outgoing tenant.
We renewed a lease at Angel Gate, London EC1 for a further five years,
increasing the passing rent by 35% to GBP80,000 per annum which is slightly ahead
of ERV. There are currently four vacant suites on the estate with an ERV of GBP
0.18 million.
Industrial
In Oldham, we secured a change of use from industrial to leisure, allowing us
to complete a lease to The Gym Group on a 15 year term at a rent of GBP0.15
million per annum, which was 50% ahead of its ERV as a industrial unit. A small
piece of land was acquired in Oldham as part of this transaction. The net
valuation uplift was 50%.
We have seen notable occupational demand at Lyon Business Park in Barking,
where we let the final two smaller units securing GBP70,000 per annum, in line
with ERV. Following the quarter end we have also completed an Agreement for
Lease on unit O, our second largest industrial void, at a rent of GBP0.25 million
per annum, 17% ahead of ERV with a nominal rent free period. Once various
Landlord works are completed, the lease will take effect and the estate will be
fully let which will be reflected in the December valuation.
Retail and Leisure
With occupancy above 99% within this element of the portfolio, the principal
transaction was the GBP5.25 million settlement in relation to a dispute at the
Strathmore Hotel, Luton. The existing valuation and leasing arrangement at this
asset remained unchanged.
The settlement will be received in November but is required to be accounted for
in this period, which has consequently had a major impact on dividend cover.
When received, it will further improve the cash position and reduce net
gearing.
APPENDIX
NET ASSETS SUMMARY
The unaudited Net Asset Value is as follows:
30 Sept 2016 30 June 2016 31 Mar 2016
GBPmillion GBPmillion GBPmillion
Investment properties * 621.1 648.5 646.0
Other assets 24.1 18.5 17.3
Cash 35.3 23.4 22.8
Other liabilities (22.4) (22.7) (19.5)
Borrowings: Loan facilities (205.2) (221.2) (221.5)
ZDP's (29.0) (28.5) (28.0)
Net Assets 423.9 418.0 417.1
Net Asset Value per share 78.5p 77.4p 77.2p
* The investment property valuation is stated net of lease incentives.
The movement in Net Asset Value can be summarised as follows:
Total Movement Per share
GBPmillion % Pence
NAV at 30 June 2016 418.0 77.4
Movement in property values (0.7) (0.2) (0.1)
Net income after tax for the 11.0 2.7 2.0
period
Dividends paid (4.4) (1.1) (0.8)
NAV at 30 September 2016 423.9 1.4 78.5
PORTFOLIO COMPOSITION
In addition to the 30 September weightings we have also included the proforma
numbers following the disposal of Chancery Lane, London WC2, which completed on
14 October. On this basis our London office exposure now comprises 10.9% in
Central London (Angel Gate, EC1 and 50 Farringdon Road, EC1) and 2.5% in
Greater London (Croydon).
The Group's portfolio is structured as follows:
Sector Weighting Proforma Like for Like
30 Sept 16 Weighting Valuation Change
14 Oct 2016
Office - Rest of UK 20.2% 20.8% -1.4%
Office - Central/Greater 15.8% 13.4% 2.0%
London
Industrial 37.8% 38.9% 1.4%
Retail/Leisure 26.2% 26.9% -1.8%
Total 100.0% 100.0% 0.1%
Geography Weighting Proforma
30 Sept 16 Weighting
14 Oct 2016
South East 33.8% 34.7%
Central & Greater London 24.8% 22.7%
North 16.1% 16.6%
Midlands 13.9% 14.2%
Wales 3.8% 4.0%
South West 3.8% 3.9%
Scotland 3.4% 3.5%
Northern Ireland 0.4% 0.4%
Total 100.0% 100.0%
TOP TEN ASSETS
The top ten assets, which represent 47% of the portfolio by capital value, are
detailed below.
Asset Sector Location
Parkbury Industrial Estate, Industrial South East
Radlett
River Way Industrial Estate, Industrial South East
Harlow
Angel Gate Office Village, City Office London
Road, EC1
Stanford House, Long Acre, WC2 Retail London
50 Farringdon Road, EC1 Office London
Shipton Way, Rushden, Industrial East Midlands
Northamptonshire
Pembroke Court, Chatham Office South East
Queens Road, Sheffield Retail Warehouse North
Phase II Parc Tawe, Swansea Retail Warehouse Wales
Metro, Manchester
Office North West
ENDS
END
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October 25, 2016 02:00 ET (06:00 GMT)