TIDMPCTZ
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 GBP417.1 million (31 December 2015: GBP408.8 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%).
* GBP15.8 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 GBP0.8 million per
annum to the rent roll.
* Three lease renewals, 32% ahead of December ERV, securing GBP0.5 million per
annum.
* Two lease extensions, 15% ahead of December ERV, securing GBP1.3 million per
annum.
* Acquisition of a high quality, fully let office building in Salford Quays,
Greater Manchester in February for GBP17.6 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 GBP417.1 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 GBP
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 GBP249.5 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, GBP15.8 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 GBP10.2 million of undrawn
facilities, more than GBP95 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 GBP17.6 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 GBP250 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 GBP0.9 million per annum, rising to GBP1.2
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 GBP0.71 million, with 2.5% per annum compound
increases. No incentive was given and the initial rent was 6% ahead of ERV. We
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 02:00 ET (06:00 GMT)
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 GBP0.20 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 GBP0.10 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 GBP0.14 million per annum (6% ahead of ERV).
* Boundary House, EC3 - Let 1,950 sq ft on a five year lease at GBP0.09 million
per annum (8% ahead of ERV)
* Queens House, Glasgow - Let three suites for a combined GBP0.06 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 GBP0.84 million
per annum, and would have had a capped rent review at GBP1.14 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 GBP0.66 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 GBP
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 GBP0.62 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 GBP0.07 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 GBP0.23 million per annum
rising to GBP0.26 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 GBP0.09 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 GBP0.14 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 31 Dec 2015 30 Sept 2015
GBPmillion GBPmillion GBPmillion
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 (221.5) (206.0) (206.2)
ZDP's (28.0) (27.5) (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
GBPmillion % 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 4.7 1.1 0.8
period
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 Like for Like
31 March 2016 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, 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
Boundary House, Jewry Street, EC3 Office London
50 Farringdon Road, EC1 Office London
Shipton Way, Rushden, Industrial East Midlands
Northamptonshire
Pembroke Court, Chatham Offices South East
Phase II Parc Tawe, Swansea Retail Warehouse Wales
Queens Road, Sheffield Retail Warehouse North
ENDS
END
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