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(Alliance News) - Picton Property Income Ltd said on Thursday that its portfolio value fell, but noted valuations are showing signs of stability, a marked contrast to the post UK mini-budget turmoil.
Picton, a London-headquartered real estate investment trust which invests in UK commercial properties, said that the independent valuation of its portfolio was GBP766.2 million on March 31. This reflected a 1.2% decline from December 31.
According to the MSCI UK Monthly Property Index, all property capital growth in the first quarter was also negative 1.2%.
"This represents a significant improvement relative to the prior period and reflects stabilisation following the marked repricing after the September 2022 mini budget. Specifically, the MSCI Index has shown positive capital growth movements in March in both the industrial and retail sectors, for the first time since June 2022," Picton said.
Markets were rocked by a poorly-received UK fiscal policy statement back in September, delivered by then chancellor Kwasi Kwarteng. Kwarteng eventually lost his job as a result. The turmoil then led to former prime minister Liz Truss also stepping down.
Picton stated that over the last quarter, rent collection remained strong at close to 100%, while occupancy increased to 91% from 90% on December 31. Highlights included the upsizing of an existing occupier in Radlett, with a rent increase of 46% to GBP600,000 from GBP400,000 per year, and a rent increase to GBP700,000 from GBP300,000 per year for Picton's largest occupier in Gloucester.
Picton is exploring "higher value alternative uses" at several of its office assets, in response to market conditions. Consent has been secured to create residential units across seven buildings, and applications for residential use on six other buildings are currently progressing. These could potentially create up to 35 units. Picton says that it also intends to maintain high retail occupancy.
Chief Executive Michael Morris said: "Our own independent valuation and the recent MSCI figures appear to indicate that the marked repricing seen at the end of last year has substantially run its course.
"In our portfolio increasing rents and rising rental values are having a positive valuation impact and offsetting some of the outward yield movement we have seen in recent months. Being able to improve occupancy and adapt our portfolio to changing market conditions is also encouraging."
Shares in Picton were up 0.9% at 74.28 pence in London on Thursday afternoon.
By Emma Curzon, Alliance News reporter
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