Net Asset Value and Interim Dividend

RNS Number : 2623F

Picton Property Income Limited

23 April 2014

 



    23 April 2014

PICTON PROPERTY INCOME LIMITED

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

Net Asset Value as at 31 March 2014 and Interim Dividend

Picton (LSE: PCTN) announces its Net Asset Value for the quarter ended 31 March 2014 and Interim Dividend.

The highlights over the quarter include:-

Financial

·     Net Assets increased to £214.1 million (31 December 2013: £204.3 million).

·     NAV/EPRA NAV per share rose 4.8% to 56.4 pence (31 December 2013: 53.8 pence).

·     Like-for-like increase in property portfolio valuation of 1.8% (31 December 2013: 3.3%).

·     Gains of £2.7 million arising from trading activity over the quarter.

·     Average debt maturity of 13.4 years, with a weighted average interest rate maintained at 4.5% per annum.

Dividend

·     Dividend of 0.75 pence declared (31 December 2013: 0.75 pence).

·     Post-tax dividend cover over the quarter of 129% (31 December 2013: 122%).

·     Dividend yield of 5.3%, based on share price of 56.75 pence as at 31 March 2014.

Portfolio Activity

·     Trading activity has increased geographical exposure to the South East markets, whilst also improving the income profile and increasing the average lot size within the portfolio.  This includes:

-    two industrial acquisitions (Radlett and Grantham) during the quarter totalling £52 million, with one completing during the quarter and one following the quarter end.

-    three disposals (London EC2 - offices, Richmond - retail and Lutterworth - industrial) during the quarter and one (Dartford - offices) following the quarter end, for a combined consideration of £40.4 million, 8.2% ahead of the December valuation.

-    exchanged contracts on a further disposal of a vacant asset for £1.65 million, with completion subject to receipt of planning consent for conversion to a mixed use retail and residential scheme.

·     De-risked the largest single lease expiry due in 2014, by agreeing a new reversionary lease, further improving the weighted average lease length of the whole portfolio to 6.7 years.

·     Occupancy across the whole portfolio remains stable at 91% (December 2013: 91%).

Commenting, Nick Thompson, Chairman of Picton said:

"The backdrop of improving occupier markets and positive portfolio valuation movements has driven NAV growth.  This has been enhanced through our active management, trading activity, our long-dated debt profile and covered dividend.  Having recently completed two acquisitions, we are exploring options to provide Picton with additional equity funding to take further advantage of the improving commercial property market."

Michael Morris, Chief Executive of Picton Capital added:

"We have undertaken some innovative transactions this quarter, helping us to reshape and improve the quality of the portfolio.  These have provided greater stability to our cashflow and improved the income profile.  We have completed some key lease re-gears, continued to make progress with lettings and have a healthy pipeline of asset management activity within the portfolio."

For further information:

Tavistock Communications

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 745001, [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 £214.1 million at 31 March 2014 and approximately 850 investors, 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.pictonproperty.co.uk

NET ASSET VALUE

The unaudited Net Asset Value ('NAV') of Picton, as at 31 March 2014, was £214.1 million, reflecting 56.4 pence per share, an increase of 4.8% 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 March 2014, including income for the quarter, but does not include a provision for the quarterly dividend announced herein, which will be paid in May 2014.

The Company is shortly to start preparing its annual results, which will be released in June 2014.

The property portfolio will next be subject to an independent valuation during June 2014 and the NAV per share, as at 30 June 2014, will be issued in July 2014.

A detailed breakdown of the NAV is included within the Appendix.

DIVIDEND

An interim dividend of 0.75 pence per share is declared in respect of the period 1 January 2014 to 31 March 2014 (1 October 2013 to 31 December 2013: 0.75 pence).

The dividend will be paid on 30 May 2014 to shareholders on the register on 16 May 2014. The ex-dividend date will be 14 May 2014.

DEBT

The Group's debt has a weighted average interest rate of 4.5%, of which 99% is fixed with a weighted average debt maturity profile of approximately 13.4 years.

As at 31 March 2014, net gearing, calculated as total debt, including ZDPs, less cash, as a proportion of gross property value, was 47.7% (31 December 2013: 48.6%). 

MARKET BACKGROUND

According to the IPD Monthly Index, total returns in the quarter to March 2014 were positive at 3.9%, but at a reduced level compared with the strong performance in December 2013 (4.7%). The income return in the quarter to March 2014 was 1.6% and capital growth was 2.3%.

Across the principal IPD sectors, office values rose by 3.7% (December 2013: 4.9%), industrial by 3.2% (December 2013: 4.1%) and retail by 1.0% (December 2013: 1.6%). Over the quarter, 35 of the 37 IPD segments recorded positive capital growth movements compared to 36 in December, and only 4 in March 2013.  In terms of rental growth 19 segments recorded positive rental growth compared to 21 in December and 10 in March.

The occupancy rate in the March IPD Monthly Index was 90% (December 2013: 91%).

PORTFOLIO UPDATE

Reshaping of the portfolio has continued and at the quarter end comprised 57 assets, with over 370 occupiers. Activity over the quarter was primarily focused in the office and industrial sectors, which consequently were subject to the largest positive valuation movements.  In addition, trading activity added £2.7 million to the NAV through three asset disposals and one acquisition.

The most notable transaction was the asset swap in which we acquired a multi-let South East industrial estate, inside the M25, which is now the largest asset in the portfolio, in exchange for one of our two holdings at Magna Park, Lutterworth.  This is further detailed below.

Terms were agreed on an acquisition in Grantham, Lincolnshire for £11.5 million, which was completed, using existing cash resources, following the quarter end and announced on 4 April 2014.

Key highlights over the quarter are detailed below:-

Offices

·     Sold the long leasehold of 28 Austin Friars, EC3 for £4.2 million, 6.3% ahead of the December valuation. The sale follows the completion of asset management initiatives since acquisition in 2010.  Picton Capital has retained two floors for its own occupation.

·     In an active management transaction at Boundary House, EC3, income was extended in respect of two leases and a further lease was surrendered.  Subsequently, terms have been agreed for a new lease on this space (which completed following the quarter end) at a rent over 50% higher than previously passing and showing significant rental growth over the quarter.

·     Completed an agreement to sell part (1.6 acres) of the Westlea Campus, Swindon to Aldi for £1.65 million for a new food store, subject to planning and 20% ahead of its apportioned December valuation. A joint planning application was submitted following the quarter end which followed extensive consultation with Aldi.  It is currently intended that the remainder of this six acre site will be brought forward for sale once outline residential planning has been secured.

·     Terms were agreed to sell a small office building in Dartford for £0.42 million, 6.3% ahead of the December valuation, and followed receipt of planning permission in 2013 to change the use from office to residential.  Completion occurred following the quarter end, in line with the March valuation.

·     Terms agreed on six vacant units which are under offer to let, with a combined annual rent of £348,000 per annum, which are expected to complete following the period end.

Industrial

·     Sold 5320 Magna Park for £34 million, 8.5% ahead of the December valuation. This was the single largest income risk in the portfolio with the occupier accounting for 9% of the Group's rent roll, with a break option in 2016.  This could have resulted in a significant loss of income, given that the passing rent was over 25% ahead of prevailing market rental levels and as such this position was de-risked through exit.

·     Acquired Parkbury, Radlett for £40.5 million. This modern 24 unit scheme is well located within the M25 and provides a diversified income stream and lease expiry profile.  The property has two vacant units, which are subject to rental guarantee and further income which is subject to fixed uplifts.  Terms have already been agreed in respect of one vacant unit, which is under offer at a rent in line with ERV on purchase.

·     Removed the largest income risk due in 2014, securing DHL for a further five years from December 2014 at 3220 Magna Park at a rent of £885,000 per annum, in line with the December ERV.

·     Let the final unit at Datapoint, E16 for £60,000 per annum, 2.7% above the December ERV, with no incentives, for a five year term.

·     Terms agreed on four vacant units which are under offer to let, with a combined annual rent of £245,000 per annum, which are expected to complete following the period end.

Retail

·     Sold 2/2a George Street in Richmond, which is let to Links of London for 10 years, for £1.8 million, 5.9% ahead of the December valuation.

·     Terms agreed on three vacant units which are under offer to let, with a combined annual rent of £100,000 per annum which are expected to compete following the period end.

Leisure

·     Whilst this is the smallest component of the portfolio, this was the only sector to experience a negative valuation movement.  In respect of one of the assets, based on legal advice received, the Group will be taking action against the Guarantor to a lease, following a tenant default in the previous quarter. Until certainty over the position has been reached, a prudent approach to the valuation of this asset has impacted performance over the quarter.

As at 31 March 2014, the portfolio had a net initial yield of 6.6% (allowing for void costs) or 6.9% (based on contractual net income) and a net reversionary yield of 7.6%. The weighted average unexpired term (to first termination) was improved at 6.7 years.

Appendix

NET ASSETS SUMMARY

The unaudited Net Asset Value is as follows:

	31 Mar 2014 £million	31 Dec 2013 £million	30 Sept 2013 £million
Investment properties *	417.6	406.0	396.7
Other assets	14.2	13.6	13.8
Cash	32.4	34.4	19.2
Other liabilities	(16.0)	(15.7)	(15.7)
Borrowings: Loan facilities                     Loan stock                     ZDP's	(207.7) (2.0) (24.4)	(207.9) (2.1) (24.0)	(208.1) (2.1) (23.5)
Net Assets	214.1	204.3	180.3
Net Asset Value per share	56.4p	53.8p	50.4p

* 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 December 2013	204.3		53.8
Movement in property values	9.0	4.4	2.4
Net income after tax for the period	3.6	1.8	1.0
Dividends paid	(2.8)	(1.4)	(0.8)
NAV at 31 March 2014	214.1	4.8	56.4

PORTFOLIO COMPOSITION

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

Sector	Weighting 31 March 2014	Like for Like Valuation Change
Industrial	38.9%	2.5%
Retail	18.3%	2.0%
Office - Central/Greater London	18.8%	5.3%
Office - Rest of UK	14.2%	1.3%
Retail Warehouse	6.5%	0.0%
Leisure	3.3%	-15.7%
Total	100%	1.8%

GEOGRAPHICAL WEIGHTINGS

Geography	Weighting 31 March 2014
Central & Greater London	30.2%
South East	36.1%
North	14.0%
Midlands	9.1%
Wales	5.3%
South West	3.1%
Scotland	1.7%
Northern Ireland	0.5%
Total	100%

TOP TEN ASSETS

The top ten assets, which represent 50.9% of the portfolio by capital value, are detailed below.

Asset	Sector	Location
Parkbury, 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
Phase II Parc Tawe, Swansea	Retail Warehouse	Wales
1 Chancery Lane, WC2	Office	London
Colchester Business Park, Colchester	Office	South East
3220 Magna Park, Lutterworth	Industrial	Midlands

 

END

 

 

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