26 April
2016
PICTON ZDP
LIMITED
Corporate
update
The announcement below has been released today to Picton
Property Income Limited (“Picton”) 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 March 2016 and Interim
Dividend. Highlights during the quarter included:
Financial
- Net Assets increased to £417.1 million (31 December 2015: £408.8 million).
- NAV/EPRA NAV per share rose 2.0% to 77.2
pence (31 December 2015:
75.7 pence).
- Total return for the quarter of 3.1% (31
December 2015: 5.1%).
- £15.8 million drawn from revolving credit facility at cost of
2.3% to part fund Manchester
acquisition.
- Average debt maturity of 10.7 years, with a weighted average
interest rate of 4.4% per annum.
- Net gearing of 34.6% (31 December
2015: 33.3%).
Dividend
- Dividend of 0.825 pence per share
declared and to be paid on 31 May
2016 (31 December 2015:
0.825 pence per share).
- Post-tax dividend cover for the quarter of 106% (31 December 2015: 117%).
- Dividend yield of 4.7%, based on a share price of 70.25 pence on 22 April
2016.
Portfolio Activity
- Like-for-like increase in property portfolio valuation of 1.5%
(31 December 2015: 2.6%), with the
strongest valuation gains in the regional office portfolio,
primarily due to specific asset management activity.
- Improvement in income profile through lettings, lease
restructuring and lease renewals, with weighted average lease
length to first termination increasing to 5.9 years (31 December 2015: 5.7 years).
- Increase in occupancy to 96% (31
December 2015: 95%), driven by activity including:-
- 12 lettings on average 12% ahead of December ERV, adding £0.8
million per annum to the rent roll.
- Three lease renewals, 32% ahead of December ERV, securing £0.5
million per annum.
- Two lease extensions, 15% ahead of December ERV, securing £1.3
million per annum.
- Acquisition of a high quality, fully let office building in
Salford Quays, Greater Manchester
in February for £17.6 million, reflecting a net initial yield of
6.2%, rising to 8.3% in April
2017.
Commenting, Nick Thompson, Chairman of Picton, said:
“We have continued to deliver results which have outperformed
and it is particularly pleasing to deliver positive NAV growth,
despite European Referendum headwinds and the one-off effect of the
Chancellor’s hike in stamp duty in March. This demonstrates the
quality of our portfolio, the success of our strategy and its
implementation over the
period.”
Michael
Morris, Chief Executive of Picton Capital, added:
“As you can see from the results, we have successfully completed
the pipeline of asset management activity we highlighted in
January, which has had a positive impact over the period.
Looking ahead we remain confident in our ability to continue
to deliver income and value accretive occupier focused
transactions.”
For further information:
Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150,
jverstringhe@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
David Sauvarin, 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 £417.1 million at 31 March 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
NET ASSET VALUE
The unaudited Net Asset Value (‘NAV’) of Picton, as at
31 March 2016, was £417.1 million,
reflecting 77.2 pence per share, an
increase of 2.0% 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 March
2016, including income for the quarter, but does not include
a provision for the dividend this quarter, which will be paid in
May 2016.
The next independent valuation of the property portfolio is
scheduled for June 2016 and the
unaudited NAV per share, as at 30 June
2016, will be announced in July
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 January 2016 to 31 March
2016 (1 October 2015 to
31 December 2015: 0.825 pence).
The dividend will be paid on 31 May
2016 to shareholders on the register on 13 May 2016. The ex-dividend date is 12 May 2016.
Post-tax dividend cover, which does fluctuate quarter on
quarter, was 106% (31 December 2015:
117%).
DEBT
The Group has total borrowings of £249.5 million with a weighted
average interest rate of 4.4% (94% fixed rate) and a weighted
average debt maturity profile of approximately 10.7 years.
To part fund the acquisition of Metro, Salford Quays, £15.8
million was drawn down under the revolving credit facility in the
period, at a floating rate of 2.3%. As at 31
March 2016, net gearing, calculated as total debt including
ZDPs, less cash, as a proportion of gross property value, was 34.6%
(31 December 2015: 33.3%).
The Group has 22 million zero dividend preference shares which
it intends to repay at maturity in October
2016. Picton has considered the potential of a conversion of
ZDPs into ordinary shares, but has concluded this is not a viable
option in the current market. It currently has £10.2 million of
undrawn facilities, more than £95 million of uncharged property
assets, and existing cash resources to facilitate the repayment. As
such the Group has agreed terms in principle for a new five year
debt facility, to meet the ZDP liability, which will be subject to
usual due diligence before being finalised.
MARKET BACKGROUND
According to the MSCI IPD Monthly Index, total returns were 1.1%
in the quarter to March 2016,
compared to 3.1% in the quarter to December
2015.
Whilst capital growth generally was slower in January and
February, the impact of stamp duty changes announced in March had a
negative impact. Capital growth was -0.2% over the quarter,
compared with 1.7% in the quarter to December 2015.
Across the principal IPD sectors, office values rose by 0.2%
(December 2015: 2.5%), industrial by
0.1% (December 2015: 2.3%) and retail
fell by -0.8% (December 2015: 0.8%).
Out of a total of 37 segments, nine recorded positive capital
growth, compared to 34 last quarter. The rise in stamp duty costs
in March, caused the majority of the IPD segments to record
negative capital growth over the quarter. By way of illustration,
in January and February, on average 25 of the 37 IPD segments
recorded positive capital growth, whereas in March all 37 segments
were negative as valuations included the effect of higher
acquisition costs.
Over the quarter to March, rental values rose by 0.7%, compared
with 1.1% in December 2015. Across
the principal IPD sectors, office rental values rose by 1.3%
(December 2015: 1.9%), industrial by
0.8% (December 2015: 1.5%) and retail
by 0.2% (December 2015: 0.3%).
Over the quarter, the majority of the IPD segments recorded
positive rental growth, with a majority of falls again recorded in
the retail sector. Out of a total of 37 segments, 28 recorded
positive rental growth compared to 32 last quarter.
The occupancy rate in the March IPD Monthly Index was higher
than the previous quarter at 91.4% (December
2015: 91.2%).
PORTFOLIO UPDATE
The valuation of the property portfolio incorporates the
government’s changes to Stamp Duty Land Tax (SDLT), introduced in
the recent Budget, and effective from 17
March 2016, increasing the charge by 1% to 5%.
These changes, which have a one off impact to valuation and
pricing, have negatively impacted upon the values of larger
commercial properties across England and Wales. Notwithstanding this, on a
like-for-like basis the portfolio valuation increased by 1.5%
during the period and occupancy increased to 96%, well ahead of the
market.
As at 31 March, the portfolio had a net initial yield of 5.6%
(allowing for void holding costs) or 5.7% (based on contracted net
income) and a reversionary yield of 7.1%. The weighted average
unexpired lease term based on headline rent increased to 5.9 years.
As detailed within the Appendix, the regional office assets in the
portfolio recorded the strongest valuation gains, which was a
reflection of asset management activity as detailed below.
Key highlights in the quarter included:-
Office
During the quarter we acquired a high quality, fully let office
building of 71,000 sq ft, for £17.6 million. The property is
located within Salford Quays, 2.5 miles west of Manchester city centre and close to the BBC’s
home at Media City.
The acquisition price reflected a net initial yield of 6.2%,
rising to 8.3% in April 2017 and a
capital value of under £250 per sq ft, which is close to the cost
of construction. After finance costs this transaction will
increase the Company’s net income by approximately £0.9 million per
annum, rising to £1.2 million per annum in April 2017.
At Pembroke Court, Chatham,
which was acquired in June 2015, we
restructured a lease securing a 10 year term (1.8 years on
acquisition) for the second largest occupier at an initial rent of
£0.71 million, with 2.5% per annum compound increases. No incentive
was given and the initial rent was 6% ahead of ERV. We have now
extended 80% of the income since this asset was purchased and the
weighted average unexpired lease term to first termination has
risen from 2.9 years on acquisition to 9.5 years as at 31 March 2016.
We re-geared Natwest’s lease at Building 100, Colchester
Business Park for a further 10 years, (subject to a break in year
five) at a rent of £0.20 million per annum with three months rent
free. The rent was 19% ahead of ERV.
In addition, further letting activity took place at the
following properties which are now all fully let:
- Citylink, Croydon - Let 4,700 sq ft to Bodyshop on a seven year
lease, subject to break, at £0.10 million per annum (10% ahead of
ERV).
- 401 Grafton Gate, Milton
Keynes - Let 6,500 sq ft on a 10 year lease, subject to
break, at £0.14 million per annum (6% ahead of ERV).
- Boundary House, EC3 - Let 1,950 sq ft on a five year lease at
£0.09 million per annum (8% ahead of ERV)
- Queens House, Glasgow - Let
three suites for a combined £0.06 million (23% ahead of ERV).
At 50 Farringdon Road, EC1 (adjacent to the new Crossrail
station), one of the larger occupiers vacates this summer. They are
currently paying £0.84 million per annum, and would have had a
capped rent review at £1.14 million per annum. The building was
comprehensively refurbished five years ago and we are seeing strong
demand, such that we expect to see over a 60% rental uplift on any
new letting ahead of the current rent passing and approximately 20%
above the capped level.
Industrial
At Parkbury, Radlett we settled the November 2015 rent review on the largest unit on
the estate, increasing the rent to £0.66 million per annum, 8%
ahead of the previous passing rent and 5% ahead of ERV.
Furthermore we completed a lease surrender in February and
re-let the unit in March (without refurbishment) to an existing
occupier on a 10 year lease at £0.22 million per annum with six
months rent free. The letting was 20% ahead of both the previous
passing rent and ERV. The transaction allows our occupier to
‘rightsize’ their business by staying on the estate. We are taking
back their smaller unit at the end of the year, three months ahead
of lease expiry, allowing them time to relocate and also giving us
a nine month marketing period. There is currently one vacant unit
which is being refurbished ahead of reletting.
In Harlow, we secured a new 10 year lease (subject to a break in
year five) to an existing occupier securing £0.62 million per annum
which is 26% ahead of ERV with a three month rent free period. We
renewed the lease on a smaller unit, securing a five year term at
£0.07 million per annum which is 21% ahead of the previous passing
rent and 4% ahead of ERV. Three units are coming back in the summer
totalling 84,000 sq ft; two are already under offer.
A lease at The Business Centre in Wokingham was renewed,
securing a 10 year lease (subject to breaks in years four and
eight) at £0.23 million per annum rising to £0.26 million in year
three with three months rent free. The initial rent is 60% ahead of
ERV and sets great evidence on the estate. We currently have two
small units to let, one of which is under offer.
Dencora Way, Luton and
Easter Court, Warrington are now fully let with two lettings
completing over the quarter adding a combined £0.09 million to the
rent roll, 4% ahead of ERV.
Retail / Leisure
There has been limited activity over the quarter, with occupancy
within this sub-sector remaining in excess of 99%.
At Gloucester Retail Park (acquired in March 2015), we have secured planning on a unit
for a change of use from retail to leisure. Simultaneously we have
signed an Agreement to Lease/Surrender with Pure Gym/Carpetright
respectively. Pure Gym are taking a 10 year lease at a rent
of £0.14 million per annum, 32% ahead of ERV. The letting improves
the occupier mix on the park and the surrender premium received
will cover the cost of the works to the unit.
APPENDIX
NET ASSETS SUMMARY
The unaudited Net Asset Value is as follows:
|
31 Mar
2016
£million |
31 Dec
2015
£million |
30 Sept
2015
£million |
|
|
|
|
Investment properties
* |
646.0 |
619.7 |
606.3 |
Other assets |
17.3 |
18.4 |
18.8 |
Cash |
22.8 |
24.6 |
20.3 |
Other
liabilities |
(19.5) |
(20.4) |
(19.0) |
Borrowings: Loan facilities
ZDP’s |
(221.5)
(28.0) |
(206.0)
(27.5) |
(206.2)
(27.1) |
Net Assets |
417.1 |
408.8 |
393.1 |
Net Asset Value per
share |
77.2p |
75.7p |
72.8p |
* 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 |
|
£million |
% |
Pence |
|
|
|
|
NAV at 31 December
2015 |
408.8 |
|
75.7 |
Movement in property
values |
8.1 |
2.0 |
1.5 |
Net income after tax
for the period |
4.7 |
1.1 |
0.8 |
Dividends paid |
(4.5) |
(1.1) |
(0.8) |
NAV at 31 March
2016 |
417.1 |
2.0 |
77.2 |
PORTFOLIO COMPOSITION
The Group’s current portfolio is structured as follows:-
Sector |
Weighting
31 March 2016 |
Like
for Like
Valuation Change |
|
|
|
Office – Rest of
UK |
19.7% |
3.6% |
Office –
Central/Greater London |
18.9% |
1.5% |
Industrial |
36.1% |
2.2% |
Retail/Leisure |
25.3% |
-1.0% |
Total |
100.0% |
1.5% |
Geography |
Weighting
31 March 2016 |
|
|
South East |
32.1% |
Central & Greater
London |
27.5% |
North |
15.6% |
Midlands |
13.5% |
Wales |
3.8% |
South West |
3.6% |
Scotland |
3.6% |
Northern Ireland |
0.3% |
Total |
100.0% |
TOP TEN ASSETS
The top ten assets, which represent 46% 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 |
Angel Gate Office
Village, City Road, EC1 |
Office |
London |
Stanford House, Long
Acre, WC2 |
Retail |
London |
Boundary House, Jewry
Street, EC3 |
Office |
London |
50 Farringdon Road,
EC1 |
Office |
London |
Shipton Way, Rushden,
Northamptonshire |
Industrial |
East
Midlands |
Pembroke Court,
Chatham |
Offices |
South
East |
Phase II Parc Tawe,
Swansea |
Retail
Warehouse |
Wales |
Queens Road,
Sheffield |
Retail
Warehouse |
North |
ENDS