PICTON PROPERTY INCOME LD

Net Asset Value • Apr 29, 2013

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RNS Number : 4041D

Picton Property Income Limited

29 April 2013

29 April 2013

PICTON PROPERTY INCOME LIMITED

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

Net Asset Value as at 31 March 2013 and Interim Dividend

Picton Property Income Limited (LSE: PCTN) announces its Net Asset Value for the quarter ended 31 March 2013 and Interim Dividend.

The highlights over the quarter include:-

Financial

·     Net Assets of £169.4 million (31 December 2012: £174.5 million)

·     NAV/EPRA NAV per share of 49.0 pence (31 December  2012: 50.5 pence)

·     Average debt maturity of 14.5 years, with a weighted average interest rate of 4.5% pa

Dividend

·     Dividend of 0.75 pence declared (31 December 2012: 0.75 pence)

·     Post-tax dividend cover over the quarter of 141% (31 December 2012: 160%)

·     Dividend yield of 7.0%, based on 25 April 2013 share price

Valuation

·     CBRE were appointed as sole independent valuer to the Company as at 31 March, following a comprehensive review

·     1.5% decrease in underlying property portfolio valuation (31 December 2012: -1.4%)

Leasing

·     Progress on specific leasing initiatives with 10 lettings completed during the period contributing £0.57m pa

·     Terms agreed during the period on a further 17 lettings, of which five have completed following the year end contributing a further £0.18m pa

Asset Management

·     Four surrenders were completed to facilitate specific active management initiatives contributing £0.5m of income

·     Occupancy 88% (December 2012: 89%)

·     Weighted average lease length 7.0 years (31 December 2012: 6.8 years)

Commenting, Nick Thompson, Chairman of Picton, said:

"Good progress has been made in terms of both leasing and specific asset management initiatives and our covered dividend policy provides headroom to invest further into the portfolio.  We have a good pipeline of leasing transactions which is also encouraging in terms of improving the occupancy rate in the context of current market conditions".

For further information:

Tavistock Communications

Jeremy Carey/James Verstringhe, 020 7920 3150,

Picton Capital Limited

Michael Morris, 020 7011 9978, michael.morris@pictoncapital.co.uk 

David Sauvarin

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

Guernsey

GY1 3QL

Tel:       01481 745001

Fax:      01481 745085

Note to Editors

Picton Property Income Limited ('Picton') is an income focused, property investment company listed on the London and Channel Islands Stock Exchanges.  It was established in 2005 to invest both directly and indirectly in commercial property across the United Kingdom.

With Net Assets of £169.4 million at 31 March 2013 and approximately 870 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 2013, was £169.4 million, reflecting approximately 49.0 pence per share, a decrease of 2.9% over the quarter. 

The movement in NAV was primarily attributable to the underlying independent property valuation which reduced by 1.5% 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 2013, including income for the quarter, but does not include a provision for the quarterly dividend announced herein, which will be paid in May 2013.

The Company is in the process of preparing its annual results which will be released in June 2013.

The property portfolio will next be subject to an independent valuation during June 2013 and the NAV per share, as at 30 June 2013, will be issued in July 2013.

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 2013 to 31 March 2013 (1 October 2012 to 31 December 2012: 0.75 pence).

The dividend will be paid on 31 May 2013 to shareholders on the register on 17 May 2013. The ex-dividend date will be 15 May 2013.

DEBT

The Company has a weighted average interest rate of 4.5%, of which 99% is fixed with a weighted average debt maturity profile of approximately 14.5 years.

The Company continued to reduce debt through amortisation, whilst accruing for capital additions under the ZDP shares.

During the period the Company announced that it would seek to reduce gearing further through the repurchase of ZDPs from surplus cashflow.  Due to limited liquidity no purchases have yet been undertaken and the Company will continue to monitor the position.

As at 31 March 2013, net gearing, calculated as total debt including ZDPs less cash, as a proportion of gross property value, was 54.5%. 

MARKET BACKGROUND

According to the IPD Monthly Index, total returns in the three months to March 2013 were 1.1%. Income return remained stable at 1.7% while capital growth was recorded at -0.6%.  This capital movement compares with movement of -1.1% and -1.07% in the preceding two quarters.

Across the principal sectors, capital movements were all negative, with retail at -0.9%, offices -0.3% and industrial -0.4%.  In particular in terms of sub sectors positive capital growth was only recorded in the London region with the best performing sub sector being Central London Retail at 1.8% and the worst performing market being South West Offices at -2.8%.

Occupancy rate on the index was 88.7% in March down from 90.1% as at December 2012.

PORTFOLIO UPDATE

During the quarter, the Company undertook a strategic review of its independent valuation advisors in consultation with its lenders.  As a result of this process, CBRE has been appointed across the entire portfolio to provide greater consistency in valuations. CBRE are the single largest contributor to the three main IPD indices.  This change will further enhance the robustness of the underlying valuation process.

As a result of this, the portfolio valuation experienced the additional impact of a change in valuer and approach in addition to general market movements.  This can be seen across the movements in the various sub sectors, most noticeably regional offices (15.8% of the portfolio) and leisure (4.7% of the portfolio) reflecting a more conservative/optimistic opinion of valuation metrics including capitalisation rates, void assumptions and rental values respectively.

During the quarter, the Company completed 10 lettings, three lease regears/renewals, three rent reviews, removed two lease break options and concluded four active management surrenders.

The lettings were on average in line with ERV and the lettings contributed an additional £0.57m per annum.  In addition, terms were agreed over the quarter on a further 17 transactions, which we would expect to conclude in the current quarter.

Rental income reflecting 0.6% pa of the portfolio went into administration during the period and the Company is pursuing guarantors and working to get this space income producing again. 

A selection of activity over the quarter included :-

Offices

·      In London, a letting was completed at Austin Friars EC2 (now fully leased).  At Angel Gate, EC1 one letting has completed and a further unit is under offer.  In addition the Company has surrendered a unit for a premium payment to take advantage of current demand in this location.  Terms have also been agreed to lease two floors in Chancery Lane.

·      In the regional markets lettings were achieved in Milton Keynes, Glasgow and St.Albans. 

·      In one of the largest lettings in the Northampton office market in recent years, Ricoh UK Limited has effectively doubled its occupancy to take the whole of 800 Pavilion Drive, a 50,000 sq ft headquarters office building located on Northampton Business Park. Following this agreement, Ricoh is now one of the Company's top 10 occupiers.  This transaction increases income longevity and was achieved by relocating Texas Instruments, an existing occupier in Northampton, to another asset in Milton Keynes.

Industrial

·      Primark Stores Limited is now the company's largest single occupier having taken over the TNT lease at Magna Park, Lutterworth.

·      Lettings have been achieved in Belfast, Harlow and Middleton.  In particular at our Estates in Middleton and Epsom we are making progress repositioning these assets with the introduction of trade counter uses.  Terms have also been agreed at Cody Road, E16 on one of the three vacant units.

·      A unit in Harlow became vacant and was returned on lease expiry reflecting a loss of income of £0.33m pa.  A refurbishment scheme is currently being finalised, following which it will be marketed.

The occupancy rate reduced slightly (principally as a result of the activity above) and stands at 88% (December 2012: 89%). 

As at 31 March 2013, the portfolio had a net initial yield of 7.0% and a net reversionary yield of 8.2%  The weighted average unexpired term (to first termination was 7.0 years.

Appendix

NET ASSETS SUMMARY

The unaudited NAV is as follows:

	31 March 2013 £million	31 Dec 2012 £million	30 Sep 2012 £million
Investment properties *	382.7	388.9	394.9
Other assets	12.3	12.3	12.3
Cash	22.9	22.3	32.0
Other liabilities	(15.1)	(15.8)	(16.9)
Borrowings: Loan facilities                     Loan stock                     ZDP's	(208.6) (2.1) (22.7)	(208.8) (2.1) (22.3)	(209.0) (2.1) (31.0)
Net Assets	169.4	174.5	180.2
Net Asset Value per share	49.0p	50.5p	52.2p

* 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 2012	174.5		50.5
Movement in property values	(6.2)	(3.5)	(1.8)
Net income after tax for the period	3.7	2.1	1.1
Dividends paid	(2.6)	(1.5)	(0.8)
NAV at 31 March 2013	169.4	(2.9)	49.0

PORTFOLIO COMPOSITION

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

Sector	Weighting 31 March 2013	Like for Like Valuation Change
Retail	19.1%	-3.8%
Offices - Central/Greater London	18.1%	3.3%
Offices - Rest of UK	15.8%	-11.6%
Industrial	35.3%	-0.1%
Leisure	4.7%	10.4%
Retail Warehouse	7.0%	4.2%
Total	100%	-1.5%

GEOGRAPHICAL WEIGHTINGS

Geography	Weighting 31 March 2013
Central & Greater London	26.6%
South East	29.2%
South West	3.4%
Midlands	16.9%
North	15.7%
Scotland	2.1%
Wales	5.6%
Northern Ireland	0.5%
Total	100%

TOP TEN ASSETS

Asset	Weighting 31 March 2013
Unit 5320 Magna Park, Lutterworth	7.7%
River Way Industrial Estate, Harlow	7.5%
Stanford House, Long Acre, WC2	5.9%
Phase II Parc Tawe, Swansea	4.4%
50 Farringdon Road, EC1	4.3%
Boundary House, Jewry Street, EC3	4.0%
Angel Gate Office Village, City Road, EC1	4.0%
Colchester Business Park, Colchester	3.2%
1 Chancery Lane, WC2	2.9%
Angouleme Way Retail Park, Bury	2.7%
Total	46.5%

This information is provided by RNS

The company news service from the London Stock Exchange

END

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