Last checked at 31 Jul 2012 07:00
Picton Property Income Limited
31 July 2012
PICTON PROPERTY INCOME LIMITED (LSE: PCTN) - Net Asset Value as at
30 June 2012, Interim Dividend and Interim Management Statement
Picton Property Income Limited ("Picton" or the "Company"), the internally managed Investment Company with an income focused approach to the UK commercial property market, announces its Net Asset Value as at 30 June 2012 and Interim Dividend.
·; NAV per share 54 pence (March 2012: 57 pence).
·; Net Assets of £185.0 million (March 2012: £196.1 million).
·; 2.7% decrease in underlying property portfolio valuation.
·; Significant group refinancing completed post period end, saving approximately £1 million per annum in financing costs.
·; Dividend of 1 pence per share declared.
Commenting, Nick Thompson, Chairman of Picton, said:
"The primary focus over the period was to ensure the refinancing of our secured borrowings. This was successfully completed following the quarter end and now provides the Company with a significant saving on its future interest costs. We continue to operate in markets that remain challenging, but with approximately 40%, by rental value, of our total void within the wider London markets, we are positive that our portfolio initiatives can enhance this position."
NET ASSET VALUE
The unaudited Net Asset Value ('NAV') of Picton as at 30 June 2012 was £185.0 million, reflecting approximately 54 pence per share and a decrease of 5.7% over the quarter.
The movement in Net Asset Value was primarily attributable to the underlying external property valuation movement which reduced by 2.7% over the quarter.
The NAV attributable to the ordinary shares is calculated under International Financial Reporting Standards, which includes the marked to market value of the interest rate swap contracts.
This NAV figure incorporates the external portfolio valuation as at 30 June 2012, including income for the quarter, but does not include a provision for the quarterly dividend announced herein, which will be paid in August 2012.
The property portfolio will next be subject to an external valuation during September 2012 and the NAV per share, as at 30 September 2012, will be issued in October 2012.
A more detailed breakdown of the NAV is included within the Appendix.
DIVIDEND
The Company also announces an interim dividend of 1 pence per share in respect of the period 1 April 2012 to 30 June 2012 (1 January to 31 March 2012: 1 pence). The dividend will be paid on 24 August 2012 to shareholders on the register on 10 August 2012. The ex-dividend date will be 8 August 2012.
It remains the Board's intention to review the dividend policy following the refinancing of its zero dividend preference shares ("ZDPs").
REFINANCING & DEBT
During the period, the Company was focused on its refinancing and has, in two simultaneous transactions, completed the refinancing of its secured borrowings, which concluded following the period end. The Company has secured two new facilities totalling £209 million in aggregate from Aviva and Canada Life. The new facilities have replaced Picton's existing CMBS facility and bank loan totalling £188.5 million, which were due to mature in 2013.
The new facilities are long term, with staggered maturity profile of 10, 15 and 20 years, and provide fixed rate financing at a blended rate of 4.2% per annum. This is lower than the cost of the debt it replaces, which will have a positive impact on future dividend cover.
These savings will enable the Company to reduce borrowings on an annual basis as the Aviva facility includes annual amortisation of £0.9 million in the first year following drawdown, rising annually to £2.1 million in year 20, resulting in a total of £28.3 million being amortised over the period. In addition, the new facilities provide increased operational flexibility with an enhanced loan to value covenant at 65%. The Canada Life facility has an interest cover ratio ('ICR') covenant of 175% and the Aviva facility a debt service cover ratio ('DSCR') covenant (including amortisation) of 140%.
As a result of this early refinancing, the Company has cancelled its interest rate derivatives at a cost of £3.4 million.
The Company is currently investigating potential options for refinancing its ZDPs including considering a mechanism which would allow investors to elect to extend the maturity of their ZDPs. With the completion of the secured refinancing completed, Picton will provide a further update in respect of the refinancing of its ZDPs shortly.
As at 30 June 2012 net gearing, calculated as total debt including ZDPs, less cash as a proportion of gross property value was 50%.
MARKET BACKGROUND
The UK property market followed events in the wider economy, and with the UK back in recession and Eurozone issues at the forefront, we have generally seen a weakening of the property market over the period.
According to Investment Property Databank, ('IPD'), the total returns for the last quarter were 0.3%, down from the previous quarter returns of 0.9%. Total returns were driven by income return of 1.6% but dragged down by negative capital valuation movements of 1.3%. This pace of decline was almost double the preceding quarter and most marked in the retail sector. Negative movements in capital values were experienced across all sectors, albeit both London retail and office subsectors recorded positive growth.
In a market where occupiers are increasingly seeking operational flexibility there remains a marked divergence in pricing between longer term and short term income. In addition in many markets outside of central London the valuation of assets with short term income remains below their cost of construction.
The IPD Monthly vacancy rate grew over the period from 10.1% in March to 10.7% in June.
PORTFOLIO UPDATE
The underlying portfolio decreased in value over the quarter by 2.7%, a lower rate of decline than the preceding quarter. Like the wider market this was not consistent across all sectors with London offices showing positive growth, but the other parts of the portfolio recording negative capital valuation movements as detailed below.
There appears to be an increasing divergence in the valuation between long term and short term income, and this affected the Company's portfolio valuation. The underlying valuation movements were primarily a reflection of both reduced rental values across the portfolio alongside outward yield movement, reflecting weakening sentiment and harder operating environments, and in particular in the retail warehouse and regional office markets where a number of tenants vacated, which specifically impacted a number of assets.
As a result of the downward movement in rental values, in particular in assets outside London, this impacted the Company's occupancy rate with a greater percentage of voids relative to rental value, with central and greater London now accounting for approximately 40% of the portfolio void.
Underlying portfolio activity was reduced compared with the preceding quarter, and against a sluggish backdrop, transactions are generally taking longer to complete. Following the quarter end the Company has completed letting transactions representing £170,000 per annum and has new lettings representing nearly £250,000 per annum under offer and in legals.
As at 30 June 2012, the portfolio had a net initial yield of 7.2% and a net reversionary yield of 7.8%. Occupancy rate reflected 89%, which is in line with IPD. The weighted average unexpired term (to first termination) was 6.8 years.
Appendix
NET ASSETS SUMMARY
The unaudited NAV is as follows:
| 30 Jun 2012 £m
| 31 Mar 2012 £m
| 31 Dec 2011 £m |
Investment properties * | 400.2 | 411.7 | 422.1 |
Other assets | 7.7 | 6.8 | 9.9 |
Cash | 30.1 | 31.1 | 31.5 |
Other liabilities | (17.4) | (17.0) | (18.2) |
Borrowings: Securitised loan
Liquidity facility
Bank loan
Loan stock
ZDP's
| (171.6)
(10.7)
(16.9)
(2.2)
(30.5) | (171.6)
(10.7)
(16.9)
(2.2)
(30.0) | (171.6)
(10.7)
(17.0)
(2.2)
(29.5) |
Market value of interest rate swaps | (3.7) | (5.1) | (6.4) |
Net Assets | 185.0 | 196.1 | 207.9 |
Net Asset Value per share | 54p | 57p | 60p |
EPRA Net Assets | 188.7 | 201.2 | 214.3 |
EPRA Net Asset Value per share | 55p | 58p | 62p |
* The underlying property valuation is stated net of lease incentives.
The movements in the Net Assets can be summarised as follows;
Total | Movement | Per share | |
£m
| % | Pence | |
Net Assets at 31 March 2012 | 196.1 | 57 | |
Movement in property values (realised and unrealised) | (12.0) | (6.1) | (4) |
Movement in swap value
|
1.4 |
0.7 |
1 |
Net income for the period (after distributions) | (0.5) | (0.3) | 0 |
Net Assets at 30 June 2012 | 185.0 | (5.7) | 54 |
PORTFOLIO COMPOSITION
The Company's current portfolio is structured as follows:-
Sector | Weighting 30 June 2012 | Like for Like Valuation Change |
Retail | 19.2% | -0.6% |
Offices - Central/Greater London | 16.6% | 0.1% |
Offices - Rest of UK | 18.5% | -5.6% |
Industrial | 34.8% | -2.5% |
Leisure | 4.1% | -5.0% |
Retail Warehouse | 6.8% | -7.0% |
Total | 100% | -2.7% |
GEOGRAPHICAL WEIGHTINGS
Geography | Weighting 30 June 2012 |
Central & Greater London | 24.4% |
South East | 29.7% |
South West | 3.9% |
Midlands | 16.8% |
North | 16.9% |
Scotland | 2.3% |
Wales | 5.5% |
Northern Ireland | 0.5% |
Total | 100% |
TOP TEN ASSETS
Asset
| Weighting 30 June 2012 |
River Way Industrial Estate, Harlow | 7.4% |
Unit 5320 Magna Park, Lutterworth | 7.4% |
Stanford House, Long Acre, WC2 | 5.3% |
Phase II Parc Tawe, Swansea | 4.1% |
50 Farringdon Road, EC1 | 3.9% |
Boundary House, Jewry Street, EC3 | 3.5% |
Colchester Business Park, Colchester | 3.1% |
Angel Gate Office Village, City Road, EC1 | 2.9% |
Angouleme Way Retail Park, Bury | 2.7% |
1 Chancery Lane, WC2 | 2.6% |
Total | 43% |
For further information:
Tavistock Communications
Jeremy Carey/James Verstringhe, 020 7920 3150, jverstringhe@tavistock.co.uk
Picton Capital Limited
Michael Morris, 020 7628 4800, michael.morris@pictoncapital.co.uk
Renee McIver
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481 745324
Fax: 01481 745085
Note to Editors
Picton Property Income Limited ('Picton') is an income focused, internally managed 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 £185.0 million at 30 June 2012 and approximately 850 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.