NAV and Dividend

RNS Number : 7009T

Picton Property Income Limited

22 July 2015

 



22 July 2015

PICTON PROPERTY INCOME LIMITED

("Picton" or the "Company" or the "Group")

Net Asset Value as at 30 June 2015 and Interim Dividend

Picton (LSE: PCTN), the income focused property investment company, announces its Net Asset Value for the quarter ended 30 June 2015 and Interim Dividend.

Highlights during the quarter included:

Financial

·     Net assets increased to £382.6 million (31 March 2015: £370.0 million).

·     NAV/EPRA NAV per share rose 3.4% to 70.8 pence (31 March 2015: 68.5 pence).

·     Total return for the quarter of 4.6% (31 March 2015: 4.9%).

·     Net gearing of 31.4% (31 March 2015: 30.1%), reflecting the reduction in cash following property acquisitions.

·     Average debt maturity of 12.1 years, with a weighted average interest rate of 4.6% per annum.

Dividend

·     Dividend of 0.825 pence per share declared and to be paid on 28 August 2015 (31 March 2015: 0.825 pence per share).

·     Post-tax dividend cover during the quarter of 101% (31 March 2015: 120%).

·     Dividend yield of 4.6%, based on a share price of 72.5 pence on 21 July 2015.

Portfolio Activity

·     Like-for-like increase in property portfolio valuation of 2.9% (31 March 2015: 2.5%), with strongest valuation gains in the office portfolio.

·     Occupancy maintained at 95% (31 March 2015: 95%).

·     Acquired two modern office buildings in Chatham, Kent for £19.05 million, yielding 8.62%.

·     Further acquisition of a long leasehold interest in Unit 12 Angel Gate, City Road, London EC1 for £1.1 million, continuing our consolidation strategy at this holding.

·     Completed the disposal of the non-income producing Westlea Campus in Swindon for £4.8 million and a non-core property in Southampton for £1.5 million, reflecting an average 11% premium to the March 2015 valuation.

·     Completed nine lettings, adding £0.5 million per annum to the rent roll (after incentives); four lease renewals securing £0.2 million per annum (after incentives) and seven rent reviews securing an uplift of £0.1 million per annum.

Commenting, Nick Thompson, Chairman of Picton said:

"The portfolio has performed well for another consecutive quarter, delivering returns ahead of an improving UK property market. We have also made our first two acquisitions using proceeds from the final tranche of our recently completed placing programme."

Michael Morris, Chief Executive of Picton Capital, added:

"We have taken advantage of market conditions to continue reshaping our portfolio in favour of larger, high quality assets. This has included the disposal of two non-core assets and the acquisition of two assets - a pair of south east offices and a further unit at our existing holding at Angel Gate. We also have further acquisitions under consideration which will utilise the remaining cash proceeds and provide a further boost to the Company's net income profile."

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]

Note to Editors

Picton Property Income Limited ('Picton') 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 £382.6 million at 30 June 2015, 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

NET ASSET VALUE

The unaudited Net Asset Value ('NAV') of Picton, as at 30 June 2015, was £382.6 million, reflecting 70.8 pence per share, an increase of 3.4% 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 30 June 2015, including income for the quarter, but does not include a provision for the dividend this quarter which will be paid in August 2015.

The next independent valuation of the property portfolio is scheduled for September 2015 and the NAV per share, as at 30 September 2015, will be announced in October 2015.

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 April 2015 to 30 June 2015 (1 January 2015 to 31 March 2015: 0.825 pence).

The dividend will be paid on 28 August 2015 to shareholders on the register on 14 August 2015. The ex-dividend date is 13 August 2015.

Post-tax dividend cover during the quarter was 101% (31 March 2015: 120%).  The cover, which fluctuates on a quarterly basis as with preceding years, reflects inter alia the timing of reinvestment of the Placing proceeds towards the end of the quarter and the higher dividend following the equity issuance in March 2015. As the cash from the Placing is invested, it is therefore expected that the dividend cover will rise from this quarter's level.

DEBT

The Group has total borrowings of £233.0 million with a fixed weighted average interest rate of 4.6% and a weighted average debt maturity profile of approximately 12.1 years.

As at 30 June 2015, net gearing, calculated as total debt including ZDPs, less cash, as a proportion of gross property value, was 31.4% (31 March 2015: 30.1%). The difference is principally attributed to a lower cash balance at June 2015 compared with March 2015.

The Company has a revolving credit facility of £26 million, which is currently undrawn and available for future use.  It is therefore not included within the above figures.

MARKET BACKGROUND 

According to the IPD Monthly Index, capital growth improved to 2.2% over the quarter, compared with 1.6% in March 2015. Quarterly rental growth was also higher at 1.2%, compared with 0.7% in March 2015. Overall total returns were 3.6% in the quarter to June 2015, compared to 3.0% in the quarter to March 2015.

Across the principal IPD sectors, office values rose by 3.9% (March 2015: 2.7%), industrial by 2.8% (March 2015: 2.0%) and retail by 0.7% (March 2015: 0.5%).

Over the quarter, 36 of the 37 IPD segments recorded positive capital growth, which is significantly higher than the 30 recorded last quarter. Positive rental growth was recorded in 29 of the 37 segments compared to 28 in the previous quarter.  The segments with negative movements were all within the retail sector.

The occupancy rate in the June IPD Monthly Index was 91.2% (March 2015: 91.5%).

PORTFOLIO UPDATE

Positive valuation gains were seen across the portfolio, overall slightly ahead of the preceding quarter. The portfolio valuation increased by 2.9% during the period, with the office sector again performing particularly well, driven by the activity described below. Occupancy was maintained at 95%.

As at 30 June 2015, the portfolio had a net initial yield of 6.1% (allowing for void holding costs) or 6.2% (based on contracted net income) and a net reversionary yield of 7.0%. The weighted average unexpired lease term (to first termination) was 6.0 years.

Key highlights in the quarter included:

Industrial

At our multi-let industrial estate, Datapoint in Bromley by Bow, we completed two rent reviews securing a combined uplift of £67,600 per annum. The overall uplift was 25% ahead of the previous passing rent and 21% ahead of the March 2015 ERV.

In Epsom, at Nonsuch Industrial Estate, we renewed one lease for a further 10 years without break, increasing the previous passing rent by 29% to £39,950 per annum, which was 14% ahead of ERV.

Following completion of the refurbishment of three units at Dencora Way in Luton, we have let one to Chubb for a term of 10 years, subject to break, at £37,100 per annum, 6% ahead of ERV. In another transaction on the estate, we removed a tenant break clause securing £53,500 per annum for another five years, at a level 11% ahead of the current ERV.

In Harlow, which remains fully let, we removed a tenant break clause for a nominal incentive securing £57,700 per annum until September 2021, which is subject to review next year.

Office

Two modern office buildings in Chatham, Kent were acquired during the quarter for £19.05 million, reflecting a net initial yield of 8.62%. 30 and 50 Pembroke Court comprise two attractive and well specified modern buildings of 35,000 sq ft and 51,000 sq ft respectively. They are prominently positioned on an established business park located in the Chatham Maritime office district, close to the A289, providing easy access to the A2 and M2 motorway, 35 miles south east of central London. They produce a diversified annual income of £1.74 million reflecting an average rent of £20 per sq ft and are currently occupied by Canterbury Christ Church University, NHS Property Services and Vanquis Bank with an average weighted lease length to expiry of 9.1 years and to earliest termination of 2.9 years. The purchase price reflected a low capital value of £220 per sq ft, which is below the estimated cost of construction.

As part of our ongoing strategy, the long leasehold interest at Unit 12 Angel Gate, City Road, London EC1 was acquired for £1.1 million, reflecting approximately £350 per sq ft. The unit comprises a 3,200 sq ft self-contained office which was approximately 70% occupied. The passing rent was £46,000 per annum on purchase and we have already leased the vacant space, which increased income by £27,000 per year, effectively increasing the running yield to 6.3 % on the purchase price, with a reversionary yield of 7.5%.

Also at Angel Gate, we have regeared a lease securing a minimum five-year term on an unrefurbished property at £132,000 per annum (£30.00 per sq ft) which is 7% ahead of ERV and 62% ahead of the previous passing rent. Three office buildings are currently being refurbished, for future re-letting at enhanced rental levels.

The sale of non-income producing land at Westlea in Swindon was completed during the period, as the final conditions following planning consent were satisfied, enabling a 15,000 sq ft foodstore and up to 70 residential units on the site.  The 1.6 acre retail element of the site was sold to Aldi for £1.65 million as previously agreed.  In addition, the remaining 4.4 acres was sold to a national housebuilder for £3.12 million. The disposals complete our exit strategy for this former office campus and the combined disposal price reflected an 11% premium to the March 2015 valuation.  The proceeds will be reinvested into identified income producing opportunities.

The sale of College Place, Southampton was completed for £1.5 million. The sale of this mixed use property follows the leasing of the ground floor unit in January at a rent of £50,000 per annum, 39% ahead of the preceding ERV. The sale price was 11% ahead of the March 2015 valuation.

At Stanford House in Covent Garden, where an office occupier had vacated in March, we re-let the suite for a term of three years at £139,000 per annum or £61 per sq ft, an increase on the previous passing rent of 69%, and 28% ahead of March 2015 ERV. The shorter term lease ties in with the other office leases at the property and provides future flexibility in respect of alternative use options.  In addition, during the quarter we also applied for planning permission for an enhanced, larger residential scheme in respect of the upper parts.

Elsewhere, within the regional office portfolio, at Merchants House in Chester, we surrendered an occupier's lease to facilitate a larger letting for a term of five years at £57,000 per annum, 9% ahead of ERV.  In St. Albans at Trident House, we also surrendered an occupier's lease with a year to break and re-let the suite for a term of five years at £44,000 per annum, 11% ahead of both ERV and the previous passing rent.

Retail / Leisure

At Broadmead in Bristol, we re-let the shop that become vacant in September 2014, to Sally Salon Services, for a term of 10 years, subject to break, at a rent of £77,500 per annum, 5% ahead of ERV. The property is now fully let.

Following a wider repositioning exercise at Regency Wharf, Birmingham, two lettings have completed, achieving 100% occupancy.  We leased the ground floor unit to Karaoke Box at a rent of £80,000 per annum and the third floor unit to Rub Smokehouse, at a rent of £70,000 per annum, both of which were in line with the March 2015 ERV.

Appendix

NET ASSETS SUMMARY

The unaudited Net Asset Value is as follows:

	30 Jun 2015 £million	31 Mar 2015 £million	31 Dec 2014 £million
Investment properties *	562.4	532.9	504.7
Other assets	18.4	17.6	15.8
Cash	53.9	70.1	46.6
Other liabilities	(19.1)	(17.8)	(17.0)
Borrowings: Loan facilities                     Loan stock                     ZDP's	(206.5) - (26.5)	(206.7) - (26.1)	(206.9) (1.8) (25.7)
Net Assets	382.6	370.0	315.7
Net Asset Value per share	70.8p	68.5p	66.0p

* The underlying property valuation is stated net of lease incentives.

The movements in Net Asset Value can be summarised as follows;

	Total	Movement	Per share
	£million	%	Pence
NAV at 31 March 2015	370.0		68.5
Movement in property values	12.5	3.4	2.3
Share premium (issue costs)	0.1	-	-
Net income after tax for the period	4.5	1.2	0.8
Dividends paid	(4.5)	(1.2)	(0.8)
NAV at 30 June 2015	382.6	3.4	70.8

PORTFOLIO COMPOSITION

The Group's current portfolio is structured as follows:-

Sector	Weighting 30 June 2015	Like for Like Valuation Change
Industrial	39.2%	2.8%
Office - Central/Greater London	18.9%	4.0%
Office - Rest of UK	15.2%	4.2%
Retail	15.8%	1.0%
Retail Warehouse	8.6%	2.5%
Leisure	2.3%	2.7%
Total	100.0%	2.9%

GEOGRAPHICAL WEIGHTINGS

Geography	Weighting 30 June 2015
South East	34.1%
Central & Greater London	28.5%
North	11.6%
Midlands	15.5%
Wales	4.2%
South West	4.2%
Scotland	1.5%
Northern Ireland	0.4%
Total	100.0%

TOP TEN ASSETS

The top ten assets, which represent 49% of the portfolio by capital value, are detailed below.

Asset	Sector	Location
Parkbury Industrial Estate, Radlett	Industrial	South East
River Way Industrial Estate, Harlow	Industrial	South East
Stanford House, Long Acre, WC2	Retail	London
Angel Gate Office Village, City Road, EC1	Office	London
50 Farringdon Road, EC1	Office	London
Boundary House, Jewry Street, EC3	Office	London
Shipton Way, Rushden, Northamptonshire	Industrial	East Midlands
Pembroke Court, Chatham	Office	South East
Phase II Parc Tawe, Swansea	Retail Warehouse	Wales
Angouleme Way, Bury	Retail Warehouse	North West

 

END

 

 

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