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Picton Property bucks trend with NAV increase

Picton Property Income has bucked a trend of falling capital values post the EU referendum by posting an NAV increase for the six months ended 30 September 2016. The EPRA NAV rose by 1.7% to 78.5p over the period as the portfolio valuation increased by 0.6% against a market
backdrop of falling values. They say their outperformance was due to our low retail exposure, active management and leasing activity.

EPRA earnings per share increased by 8% to 2.0 pence, from 1.8 pence a year ago. This excludes the exceptional income of GBP5.3 million relating to a dispute in respect of the Strathmore Hotel, Luton, which is included in the total income profit of GBP16.0 million for the period. Dividend cover, again excluding this exceptional income, was 120% for the period, an increase from 112% reported in the 30 September 2015 results.

The annual dividend will be increased by 3%, equivalent to 3.4 pence per annum. The first increased quarterly dividend of 0.85 pence per share is expected to be paid in February 2017.

They set out to reduce Picton’s central London office exposure and this has been achieved with the sales of Boundary House, London EC3, which completed in August, and of 1 Chancery Lane, London WC2, which was concluded following the period end. Both of these properties were sold ahead of valuation and followed a significant period of capital appreciation since they were acquired. There has also been considerable leasing
and active management activity. They recently took back two floors at 50 Farringdon Road, London EC1 which has, as expected, had a short-term impact on the portfolio’s occupancy, currently running at 93%.

During the period, they concluded 22 lettings, adding GBP1.5 million per annum after incentives, which was on average 9% ahead of the March 2016 ERV. In addition 17 leases were renewed securing GBP0.9 million per annum, which is on average 6% ahead of the March 2016 ERV. GBP0.12 million per annum in additional income was secured from three rent reviews, the combined settlements being 12% ahead of the March 2016 ERV and 12% ahead of the preceding passing rent. In the six months to September the Picton portfolio returned 3.9%, outperforming the
industry benchmark which delivered 0.2%. Capital growth for the portfolio was 0.2%, compared to the benchmark which delivered -2.1%. The income return over the period was 3.7% compared with 2.3% for the benchmark. Industrial was the best performing sector, followed by offices (driven by central London) and retail.

Annual contractual income fell from GBP40.4 million in March 2016 to GBP39.4 million in September 2016, with this fall entirely due to the sale of Boundary House in August 2016. Rental values grew by 1.5% on a like-for-like basis and stood at GBP46.4 million as at 30 September 2016.

The average lot size at the end of September 2016 was 5% higher than twelve months ago at GBP11.1 million but was 2% lower than six months ago, which also reflects the sale of Boundary House.

At 30 September 2016, the portfolio comprised 57 assets valued at GBP630.5 million, reflecting a net initial yield, based on contracted net income, of 5.7%. The ERV of the portfolio was GBP46.4 million, with a net reversionary yield of 6.9%.

Following the repayment of the ZDPs they have reduced net gearing from 34.4% as at 31 March, to 29.6% currently, on a proforma basis. The repayment of the ZDPs formed part of a wider plan to simplify our corporate structure and it has the added advantage of removing them from the Association of Investment Companies’ ‘split capital trust’ classification. They currently have GBP53 million of undrawn debt facilities available.

PCTN : Picton Property bucks trend with NAV increase

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