15 April 2020
PICTON PROPERTY INCOME LIMITED
(“Picton”, the “Company” or the “Group”)
LEI: 213800RYE59K9CKR4497
Trading Update
& Covid-19 Impact
Picton makes a trading update in light of the current Covid-19
situation and ahead of the release of its Annual Results which are
expected in June 2020, subject to any
further guidance from the FCA and FRC.
Picton owns and actively manages a £665 million diversified UK
commercial property portfolio, of which 82% is invested in the
Industrial and Office sectors. The portfolio is diversified across
47 assets with rent receivable from around 350 occupiers, with the
largest occupier contributing 4% of the rental income.
The following trading update reflects activity over the first
quarter of 2020, details of the March
2020 valuation and the Company’s response to the Covid-19
pandemic and its impact on the business.
Michael
Morris, Chief Executive of Picton, commented:
“Whilst we are all operating in difficult circumstances, Picton
is making good progress against our strategic priorities as further
detailed below. We have a strong balance sheet, significant
headroom against our debt covenants and are fortunate to have made
recent disposals, as well as having access to fully undrawn
revolving credit facilities if required.
“We have had good leasing activity over the period, particularly
in the regional office markets which has mitigated valuation
declines as a result of Covid-19. Our diversified portfolio and
wide occupier base underpin our resilience at this time. Our
focus is on continuing to proactively manage the portfolio through
this difficult period, ensuring we are well positioned for the
long-term.
“We continue to make every effort to support our employees,
occupiers, communities and suppliers in these difficult times.”
Portfolio activity
The principal portfolio activity that has taken place in the
first quarter of 2020 is set out below.
The Company completed nine lettings (3.5% ahead of the
December 2019 ERV), three lease
renewals and lease extensions (7.1% ahead of the December 2019 ERV) and four rent reviews (12.6%
ahead of the December 2019 ERV).
In addition to the announcement dated 20
March 2020 in respect of three key regional office lettings,
the Company has achieved practical competition of the former Lidl
unit in Swansea which has been let
to Farmfoods. Other principal transactions over the quarter include
the extension of the Pets at Home lease in Swansea by a further five years and a letting
of a unit at a Greater London
industrial estate, which completed following refurbishment works,
9.5% ahead of the December 2019
ERV.
The Company completed seven refurbishment projects over the
quarter, investing a further £3.7 million into the portfolio. The
principal completion was at the Company’s distribution unit at
Rugby.
www.swiftbox-rugby.co.uk/
In January 2020 Picton completed
the disposal of a distribution warehouse in Lutterworth,
Leicestershire, for £15.9 million
and used the proceeds to reduce debt. The sale price reflects a net
initial yield of 5.8% and a 1% uplift to the independent
31 December 2019 valuation.
Valuation
CBRE, the Company’s external valuers, have valued the portfolio
at £665 million as at 31 March 2020.
Overall, the valuation decreased by 0.8% over the quarter, or by
1.3% reflecting capital expenditure.
The breakdown by sector is as follows: -
Valuation movement
Sector weighting
Industrial, Warehouse & Logistics |
-0.3% |
47.9% |
Office |
-0.2% |
33.8% |
Retail
& Leisure |
-2.9% |
18.3% |
|
|
|
The valuers have confirmed that the valuation as at 31 March 2020, in accordance with industry
practice, is subject to a material uncertainty clause as
follows:
The outbreak of the Novel Coronavirus
(COVID-19), declared by the World Health Organisation as a “Global
Pandemic” on the 11 March 2020, has
impacted global financial markets. Travel restrictions have been
implemented by many countries. Market activity is being impacted in
many sectors. As at the valuation date, we consider that we can
attach less weight to previous market evidence for comparison
purposes, to inform opinions of value. Indeed, the current
response to COVID-19 means that we are faced with an unprecedented
set of circumstances on which to base a judgement. Our valuation(s)
is / are therefore reported on the basis of
‘material valuation uncertainty’ as
set out in VPS 3 and VPGA 10 of the RICS Valuation – Global
Standards. Consequently, less certainty – and a higher degree of
caution – should be attached to our valuation than would normally
be the case. Given the unknown future impact that COVID-19 might
have on the real estate market, we recommend that you keep the
valuation under frequent review.
Rent collection
The most recent rent quarter day in England and Wales was 25 March
2020. By 7 April 2020, 71% of
the rent due on the March quarter day had been paid in full.
Picton has been able to draw down on rent deposits, which
increase the collection rate to 72% and having agreed with a number
of occupiers a short-term monthly payment plan, this figure rises
to 80%. The March 2019 rent
collection after two weeks was 95%.
Rent in Scotland and
Northern Ireland is due in
May 2020.
It is clear that companies operating directly or indirectly in
the retail, leisure or hospitality sectors have been particularly
impacted by this pandemic and we are working closely with these
occupiers to seek both long and short-term solutions.
Whilst lower than normal, under the circumstances, these are
good rent collection numbers, which reflect our ongoing occupier
focused approach. We are working to address individual occupier
requests and hope to agree appropriate solutions with them in due
course. As a responsible landlord, we have been in direct dialogue
with any occupier currently experiencing difficult trading or
cashflow issues. The aim is to seek solutions that assist occupiers
through these uncertain times while minimising impact to both
Picton’s capital values and cashflow.
Operational activity
The Picton team is fully operational and working remotely.
The Company is especially mindful of the health and safety of
our employees, occupiers, our wider external team of suppliers and
the on-site property management team. Operationally the Company is
in a strong position but is cognisant of the reasons behind the
Government imposed lockdown and the need to provide support where
needed.
The majority of our capital projects have been suspended until
site access can be obtained, with cost reduction measures being
implemented to reduce occupier service charges and minimise capital
expenditure.
Following Government advice, viewings of currently vacant space
will be limited until restrictions are lifted, but the Company has
a pipeline of four leasing transactions with a combined rent roll
of £0.2 million.
All our multi-let office buildings remain operational, but the
majority of occupiers only have a limited on-site presence
currently. With this in mind, we are also implementing the
following measures:
- We are monitoring building occupancy levels - offices are being
kept open to support essential business activity in line with
Government guidelines, but service levels are being adjusted to
reflect reduced occupancy.
- We are ensuring essential health and safety works are
continuing and building systems being kept on but turned down to
minimise cost. We are reviewing service charges and will defer
non-essential works to further reduce costs.
- On certain assets we have increased security monitoring through
existing CCTV and are looking to enhance coverage where
needed.
The refurbishment project at the Stanford Building in Covent
Garden has been halted in line with Government guidelines. Once it
has re-commenced, it is expected to be a further eight weeks to
reach practical completion. www.stanfordbuildingwc2.co.uk/
We continue to engage with all our stakeholders and for a long
time Picton has operated an occupier focused approach. Our key
commitments to Action, Community, Technology, Sustainability and
Support are particularly relevant at this time. The Company
is also continuing and has increased its support for its key
charity partners. In addition, within the last week, we have
leased, on a rent free and temporary basis, a vacant unit in the
Docklands to the London Ambulance Service NHS Trust, to assist them
with their Covid-19 response.
The Company has no plans to furlough employees, nor to seek
access to any emergency grants or Government assistance.
Balance sheet
In January 2020, following an
asset sale, the Group fully repaid its revolving credit facilities,
which are currently undrawn. The Company has no short-term
refinancing events and the average debt maturity profile, on drawn
debt is ten years.
Overall the Group’s LTV is 22% as at 31
March 2020 and on average across the drawn facilities (i.e.
ignoring the undrawn RCFs) rental income or asset values would have
to fall by over 40% for there to be any impact on covenants.
The Company has been in dialogue with its lenders who are fully
supportive of Picton’s approach.
In addition, the Group has £36.3 million of uncharged assets
that could be used as additional security if required.
The Group remains fully compliant with each of its loan
facilities. In addition to the remaining proceeds from the recent
Lutterworth disposal, the Group also has access to £49 million of
undrawn facilities.
As at 31 March 2020, the Group had
over £23 million of cash or cash equivalents.
Dividend
In line with its usual practice, the Board will review the level
of the forthcoming dividend, due to be paid in May 2020, at its next meeting, which will take
place towards the end of April. It will assess prevailing
circumstances at the time and will make a further announcement
later in April 2020.
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014
For further information:
Tavistock
Jeremy Carey 07836 734 625
/James Verstringhe, 07769 698 105,
james.verstringhe@tavistock.co.uk
Picton
Michael Morris, 020 7011 9980,
michael.morris@picton.co.uk
Note to Editors
Picton, established in 2005, is a UK REIT. It owns and actively
manages a £665 million diversified UK commercial property
portfolio, invested across 47 assets and with around 350 occupiers
(as at 31 March 2020). Through an
occupier focused, opportunity led approach to asset management,
Picton aims to be one of the consistently best performing
diversified UK focused property companies listed on the main market
of the London Stock Exchange. For more information please
visit: www.picton.co.uk
ENDS