Picton Property Income (PCTN), a £400m real estate investment trust that has previously spoken of its ambition to be an acquirer in a consolidating sector, has put itself up for sale.
Launching a strategic review in response to the persistent undervaluation of its shares, which yesterday closed at a 24% discount, chair Francis Salway said the company’s board would consider a merger with other UK REITs, offloading some, or all, of its portfolio and returning capital to shareholders, as well as selling the entire company.
He said while Picton was in a strong financial and operational position, it was important to be proactive and take into account the views of shareholders and other key stakeholders.
“Whilst we have delivered upper quartile property returns since launch in 2005, and our twelve-month share price performance is over 29.8%, Picton shares continue to trade at a material discount to EPRA net tangible assets which doesn’t fully reflect the underlying quality and performance of the business,” Salway said.
Salway said the 20-year-old company enjoyed strong shareholder support, especially after using property disposals to fund nearly £25m of share buybacks this year. However, he recognised its investor base was evolving. “As institutional investors have consolidated, their capital has increasingly been allocated to larger investment vehicles which provide economies of scale and address their own liquidity requirements and exposure limits,” the chair said.
Shares in the company, which QuotedData analyst Richard Williams picked as his New Year tip, jumped 8% to 83.8p in early trading.
Our view
Richard Williams said: “Here we are again, another very well run, operationally strong REIT throwing in the towel due to a persistently wide discount. At this point, I’m really not sure what real estate companies need to do to bring their ratings in. When interest rates spiked in 2022 discounts understandably widened as uncertainty around valuations grew, however these hit a nadir point a long time ago and net asset values have been proven many times over with asset sales above book values.
“Picton has led the way here and the management team has also proven extremely proactive in portfolio management, successfully repositioning its struggling office portfolio (just 20% of assets) with refurbishments into alternative uses such as residential and student accommodation and in the process maximising value.
“I do question the timing of the strategic review. Having battled over three years of a persistent wide discount why give up now when interest rates are on a clear downward trajectory with more cuts forecast this year? Moreover, property is potentially rising up investors’ agendas as a way to hedge against volatility in wider equity markets.
“With most of the portfolio in logistics (68%), I’m sure this will be a target for the acquisitive REITs such as LondonMetric (LMP) and Tritax Big Box (BBOX) or the many private equity houses focused on scaling logistics portfolios such as Blackstone. It was the chief reason why I chose it as my pick for 2026, although I thought it would take longer than two weeks to play out.”
