Picton Property Income will become a self managed UK REIT (if shareholders are happy with the idea). Picton Property Income reported a total return on net assets of 14.9% for the year to the end of March 2018. Within this, the EPRA NAV rose by 10.5% to 90p per share and its EPRA earnings per share were 4.2p (up from 3.8p for the previous year). Total dividends of 3.4p were therefore covered by revenue. Following an increase in February, the run rate of dividends is 3.5p. The return to shareholders was 4.8%
The return on the property portfolio was 13%, well ahead of the equivalent MSCI IPD return of 10.1%. In total, net property income moved from GBP42.4 million in 2017 to GBP38.4 million in 2018. However, in 2017 they received GBP5.3 million of exceptional income in respect of their Luton hotel asset. Excluding this, net property income grew by 3% in 2018.
Picton is progressing plans to become a UK REIT. Non-resident landlord companies such as Picton (which is domiciled in Guernsey) will be brought into the scope of UK corporation tax, from 1 April 2020. They expect the fund’s liability to UK tax to increase significantly from that date. Additionally, from 1 April 2019, capital gains made by a non-resident on the disposal of commercial property will be subject to UK tax. Any disposals the company makes from its portfolio after that date will be taxed, reducing shareholder returns.
They’ll be issuing a circular to shareholders with detailed proposals, including a number of resolutions to be voted on by shareholders at a general meeting in July.
They want to enter the REIT regime on 1 October this year, after becoming tax resident in the UK, which is a condition of entry. There will be some changes proposed to the articles of the company to facilitate the REIT conversion. At the same time, they are planning to internalise the management function, becoming a self-managed REIT akin to a British Land or Land Securities. Once based in the UK, they’ll have a business strategy rather than an investment objective. They will no longer have an investment management subsidiary but will be managed through a traditional board structure with an executive function. However, the investment approach and portfolio strategy will remain very similar. Michael Morris, who is currently a non-executive director, will become chief executive, with effect from 1 October 2018. At the same time, Andrew Dewhirst will join the board as finance director.
PCTN : Picton Property Income will become a self managed UK REIT