Picton Property Income — Organic growth accelerating

Picton Property Income (LSE: PCTN)

Last close As at 19/07/2024

GBP0.72

−0.10 (−0.14%)

Market capitalisation

GBP394m

More on this equity

Research: Real Estate

Picton Property Income — Organic growth accelerating

Picton Property Income’s 6% increase in the rate of quarterly DPS from Q423 demonstrates an increasing confidence in the outlook for organic income and earnings growth. The occupier market has remained robust and rents have increased across much of Picton’s diversified portfolio. Active asset management, including the repositioning of selected office assets, is unlocking the significant potential embedded in the portfolio.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Picton Property Income

Organic growth accelerating

FY24 results and outlook

Real estate

18 June 2024

Price

65p

Market cap

£354m

Net debt (£m) at 31 March 2024

207.8

Net LTV at 31 March 2024

27.9%

Shares in issue

545.2m

Free float

100%

Code

PCTN

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.8)

3.0

(15.8)

Rel (local)

(2.7)

(2.0)

(21.0)

52-week high/low

75.8p

60.3p

Business description

Picton Property Income is an internally managed UK REIT that invests in a diversified portfolio of commercial property across the UK. It is total return driven with an income focus and aims to generate attractive returns through proactive management of the portfolio.

Next events

AGM

30 July 2024

Analyst

Martyn King

+44 (0)20 3077 5700

Picton Property IncomePicton Property Income is a research client of Edison Investment Research Limited

Picton Property Income’s 6% increase in the rate of quarterly DPS from Q423 demonstrates an increasing confidence in the outlook for organic income and earnings growth. The occupier market has remained robust and rents have increased across much of Picton’s diversified portfolio. Active asset management, including the repositioning of selected office assets, is unlocking the significant potential embedded in the portfolio.

Year end

Net property income (£m)

EPRA earnings* (£m)

EPRA
EPS* (p)

DPS
(p)

NAV** per share (p)

P/NAV
(x)

Yield
(%)

03/23

36.3

21.3

3.9

3.50

100

0.65

5.4

03/24

37.9

21.7

4.0

3.55

96

0.68

5.5

03/25e

38.3

23.0

4.2

3.70

100

0.65

5.7

03/26e

39.9

24.3

4.4

3.84

104

0.63

5.9

Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.

Building on a strong track record

Picton’s actively managed, diversified portfolio has weathered many challenges, including the pandemic and rising interest rates, and has outperformed the MSCI UK Quarterly Property Index in each of the past 11 years. Over three, five and 10 years and since launch in 2005, performance is upper quartile. In FY24, the portfolio total return was 1.6%, compared with -1.0% for the index, benefiting from a strong (59%) weighting to the industrial sector and asset management initiatives. At the company level, the NAV total return (without reinvestment of dividends) is 8.7% pa over the past 10 years. Total returns are supported by reinvestment in the portfolio, enhancing quality, including energy efficiency, maintaining its appeal to current and future occupiers, and in turn supporting rental growth and capital values. By reinvesting for total returns, Picton’s immediate dividend yield is lower than peers, but dividend cover is strong (114% in FY24).

Asset management driving earnings upgrade

The portfolio contains strong reversion upside, with a significant opportunity to close the wide (£12.9m) end-FY24 gap between current passing rents and estimated rental value (ERV). Active asset management plans, aimed at unlocking this, and including repurposing of selected office properties, are a key driver of our increased forecasts. Since end-FY24, new lettings have added £0.8m pa to rent roll, at a 4% premium to ERV, and repurposing projects at Longcross and Charlotte Terrace have advanced further. Capital values (c 25% below the 2022 peak across the sector) should benefit from the anticipated decline in interest rates. It is on this organic growth that the company is focused, despite recognising the benefits of sector consolidation and its own potential to leverage its strong performance track record and internal management structure. Our FY25e and FY26e EPRA EPS are increased by 4% in each year and DPS by 3% and 4%, respectively.

Valuation: Attractive dividend yield and NAV discount

The current annualised run rate of DPS (3.7p), which we expect to be fully covered, represents a prospective yield of 5.7%. We forecast DPS growth, fully covered, in FY25 and FY26. Meanwhile the shares trade at a c 30% discount to NAV.

Organic opportunities with flexibility

Across most of the commercial property market, occupier demand has remained resilient and rents have continued to increase, despite economic challenges. The short technical UK recession of end-2023 reversed in the opening months of 2024. With inflation significantly reduced and interest rates expected to soon decline, property valuations appear to be stabilising at levels that are well below the peak of 2022. Meanwhile, increased building costs are a headwind to new construction. Against this background, Picton has significant opportunities to grow income and create value, and we highlight the key elements of the investment case as:

Picton continues to provide diversified exposure to UK commercial real estate. The portfolio is diversified but not passive. It is actively managed and continues to be strongly weighted towards industrial assets (59% by value).

With its active, total return-driven strategy, Picton has a well-established track record of index outperformance and attractive NAV total return.

Diversification adds to income stability while providing the flexibility to adapt the portfolio to changing market conditions across the cycle.

Successful asset management is underpinned by the group’s occupier focus whereby it seeks to work closely with tenants to understand their needs, enhance occupancy, improve tenant retention and maximise income.

There is significant ‘reversionary’ growth potential embedded within the portfolio to support future income and capital values.

Ongoing asset repositioning should continue to accelerate the realisation of value embedded within the office assets, with any impact on net rental income offset by capital redeployment.

The balance sheet is conservatively positioned with moderate gearing, long-term fixed rate borrowing and significant liquidity headroom. The proceeds from asset repositioning provide an opportunity for accretive redeployment, little reflected in our forecasts.

A strong balance sheet, consistently positive track record of property outperformance, an experienced management team and internal management structure all support Picton’s ability to create value through corporate activity should opportunities present themselves.

Uplift to earnings and DPS forecasts

FY24 EPRA earnings of £21.7m was well ahead of our forecast £20.5m, with the beat driven by net property income while higher-than-forecast expenses offset lower net financing costs. Expenses included £0.6m of non-recurring items. The stronger-than-forecast net property income was split between higher dilapidation fees (‘other income’) and lower property expenses. The increase in DPS, with effect from Q424, was both earlier and greater than we had expected. The FY24 financial performance is shown in detail later in this report.

Our FY25 and FY26 EPRA earnings forecast are each increased by £1.0m, with portfolio repositioning having a noticeable impact. As a result, higher DPS growth than we had expected remains well-covered by EPRA earnings. The completed sale of Angel Gate, around 50% vacant, reduces net property income by £0.7m pa, but with the proceeds partly utilised to repay more expensive, floating rate debt in full, the foregone income is more than made up by reduced borrowing costs of c £1.1m, even before redeployment of the balance of proceeds of more than £13m. With vacant possession obtained on Longcross in Cardiff, the sale completion, expected later this year, will have a positive impact on net property income, driven by the property costs eliminated.

The NAV growth that we forecast is mostly driven by increased rental income. For FY25 we assume no change in the end-FY24 net initial yield of 5.4% but allow for a 10bp yield tightening in FY26, reflecting the anticipation of declining interest rates.

We estimate that each 5bp increase or decrease in the net initial yield is equivalent to c 1% of portfolio value and c 1.3p per share of NAV.

Exhibit 1: FY24 performance and forecast update

£m unless stated otherwise

Actual

Forecast

Previous forecast

Actual vs forecast

Change

FY24

FY25e

FY26e

FY24e

FY25e

FY26e

FY24

FY25e

FY26e

Gross rental income

43.9

44.3

45.6

43.7

44.3

45.6

0.2

0%

0%

Other income

1.2

0.5

0.5

0.6

0.5

0.5

0.5

0%

0%

Non-recoverable property costs

(7.2)

(6.5)

(6.2)

(7.7)

(7.0)

(7.1)

0.5

-8%

-15%

Net property income

37.9

38.3

39.9

36.6

37.8

39.0

1.3

1%

2%

Administrative expenses

(7.2)

(6.8)

(7.1)

(6.6)

(6.9)

(7.2)

(0.6)

-1%

-1%

Net interest

(8.9)

(8.5)

(8.5)

(9.5)

(8.9)

(8.5)

0.5

-5%

0%

EPRA earnings

21.7

23.0

24.3

20.5

22.0

23.3

1.2

0.0

4%

Realised & unrealised property gains/(losses)

(26.5)

18.0

16.7

(11.6)

0.0

0.0

(14.9)

IFRS earnings

(4.8)

41.0

41.0

8.9

22.0

23.3

(13.7)

EPRA EPS (p)

4.0

4.2

4.4

3.8

4.0

4.3

0.2

4%

4%

IFRS EPS (p)

(0.9)

7.5

7.5

1.6

4.0

4.3

(2.5)

DPS declared (p)

3.55

3.70

3.84

3.50

3.60

3.70

0.05

3%

4%

Dividend cover (x)

1.12

1.14

1.16

1.08

1.12

1.15

0.0

EPRA NTA per share (p)

96

100

104

96

99

100

0.1

1%

4%

EPRA NTA total return

-0.9%

8.0%

7.6%

1.8%

4.2%

4.4%

LTV

27.9%

23.8%

23.5%

27.8%

25.7%

25.7%

Source: FY24 actual as reported by Picton Property Income, Edison Investment Research forecasts

A strong record of value creation

10-year NAV total return of 8.7% pa

Picton aims to provide an attractive total return with an income focus, proactively managing its portfolio with a focus on assets where it has identified opportunities to enhance income and/or value. Its dividend policy is to distribute most of the recurring income earnings to shareholders via quarterly dividends, maintaining full cover and generating surplus cash for reinvestment back into the portfolio. Despite challenging market conditions in FY23 and FY24, the cumulative 10-year NAV total return,2 calculated without assuming any reinvestment of dividends, has been 129.1%, or an average 8.7% pa. Reflecting the total return investment strategy, dividends paid have provided 46% of the 10-year total return and capital growth 56%. We expect dividends to represent an increased share of total return in the next two years. In common with the sector, the across-the-cycle income return has been much more stable than the capital return.

  1 The change in NAV adjusted for dividends paid but not reinvested.

Exhibit 2: 10-year NAV total return history

Year ending 31 March

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

10-year

Opening NAV per share (p)

56

69

77

82

90

93

93

97

120

100

56

Closing NAV per share (p)

69

77

82

90

93

93

97

120

100

96

96

DPS paid (p)

3.3

3.3

3.3

3.4

3.5

3.5

2.8

3.4

3.5

3.5

33.5

Income return/dividends paid

5.9%

4.9%

4.3%

4.2%

3.9%

3.8%

2.9%

3.5%

2.9%

3.5%

59.4%

Capital return/change in NAV

21.6%

12.7%

5.9%

10.5%

2.6%

0.7%

3.7%

24.4%

-16.6%

-4.4%

70.4%

NAV total return

27.4%

17.6%

10.2%

14.7%

6.4%

4.4%

6.6%

27.9%

-13.7%

-0.9%

129.9%

Average annual total return

8.7%

Source: Picton Property Income data, Edison Investment Research

NAV total return has been driven by portfolio outperformance

The key driver of Picton’s NAV total return performance has been the consistently strong property portfolio return, measured before the impact of gearing or the company running costs. The company has outperformed the MSCI Quarterly Property Index in each of the past 11 years, with upper-quartile performances over three, five and 10 years and since launch in 2005. In FY24, Picton’s portfolio total return was 1.6% compared with -1.0% for the index. This comprised a capital return of -3.5% (-5.7% for the index) and an income return of 5.1% (4.7% for the index). Since launch, Picton’s property income return is c 20% ahead of the index.

Exhibit 3: Annual total property returns (%) versus MSCI*

Source: Picton Property Income, MSCI. Note: *MSCI UK Quarterly Property Index. Data to 31 March 2024.

Among the factors supporting this strong performance, we note Picton’s successful record of proactive asset management and its diversified, unconstrained investment strategy.

Actively managing assets

Active asset management is core to Picton’s strong performance. Underpinned by the group’s occupier focus, Picton seeks to work closely with tenants to understand their needs, enhance tenant retention and occupancy, maximise income and support capital values. The strong portfolio performance in FY24 included progress in the following areas:

Successful leasing activity. During FY24, 76% of the £6.4m total ERV at risk from lease expiry or break options was retained. This excludes office buildings where space was intentionally kept vacant for change of use. New lettings secured £2.4m pa of rent at an average 3% premium to ERV, lease renewals and regears retained £0.4m pa of income at an average 2% premium to ERV, and rent reviews added a further £0.8m to passing rents, at an average 2% premium to ERV. Agreed lease variations also retained £1.0m of existing income by removing occupier break options. Since the period-end, lettings with a combined rental of £0.8m pa have completed, 4% above the end-FY24 ERV.

Refurbishment and upgrades. Reinvestment back into the portfolio, including sustainability upgrades, to maintain its attractiveness to occupiers and enhance income and/or value, is an important element of the strategy. In FY24, £4.5m was invested into the portfolio across more than 20 separate projects. The investment represented c 0.8% of the opening portfolio value, similar to the 10-year average. All works are carried out in alignment with the company’s own sustainable goals, including becoming net zero carbon by 2040, future-proofing the assets and meeting the evolving demands of tenants. Where appropriate, natural gas is being removed, solar panels installed and insulation upgraded. In turn, this is reflected in a continued improvement in EPC ratings, with 80% of the portfolio (by rental value) now rated EPC C or better, the expected minimum requirement by 2028, up 4% on FY23.

Asset repositioning to unlock value. Notwithstanding the positive leasing and regear activity that Picton achieved during the year, it has identified opportunities to respond proactively to significant changes in the office market by adapting some of its assets to alternative use. It made progress during FY24, as we discuss below, and we expect this to be a key contributor to near-term earnings growth.

Asset repurposing to unlock value

The pattern of office use, post-pandemic, remains unclear, particularly with respect to the long-term adoption of remote and hybrid working arrangements. Combined with economic uncertainties this has created some general occupier hesitancy, but with interest focused increasingly on well-located, good quality and sustainable space. Similarly, in the investment market, secondary space, in need of capital expenditure to meet occupier demands and regulatory requirements for energy efficiency, rents and capital values face a significant headwind.

Picton has responded proactively to these changes in the office market by adapting some of its assets to alternative use, with key projects at Angel Gate in London EC1, Longcross in Cardiff and Charlotte Terrace in London W14.

The sale of Angel Gate completed shortly after the period end, for a consideration of £29.6m, a 5% premium to the 31 December 2023 (Q324) independent valuation. It followed significant work undertaken by the company during 2023, when it identified an opportunity to secure planning consent for conversion of part-vacant office property to residential use. As Picton worked through the process, it was able to maintain occupancy at around 50%, but the property still represented the largest single void in the portfolio, accounting for 19% of the end-FY24 total.

At Longcross, contracts have been exchanged for its sale to an experienced purpose-built student accommodation developer. Picton has been securing vacant possession ahead of the sale and at end-FY24, Longcross represented 12% of the total portfolio void. The transaction is conditional on planning permission, for which the purchaser has now submitted an application. Picton hopes that permission will be secured in the fourth quarter of 2024. The final sale price is dependent on the exact planning consent obtained and, in particular, upon the number of rooms secured, subject to a collar and cap. The planning application is for 706 units, which Picton says will trigger an overage payment if successfully completed, with an expected sales price of c 20% of the end-FY24 valuation The potential gain on sale is c £1m or c 0.2p per share.

Charlotte Terrace (13% of the portfolio void) comprises four adjoining buildings, with total 28,500 sq ft of office space and 4,400 sq ft of retail space, arranged over five floors. It is located close to Olympia, which is currently undergoing a £1bn redevelopment, delivering a new creative district with a new theatre, entertainment venue, hotel, office, retail and leisure space that is expected to enhance the surrounding area. Having achieved vacant possession in one of the four buildings, planning permission has now been secured for alternative use, allowing Picton to convert the void space into six residential units.

Diversified, unconstrained investment strategy

Picton has an unconstrained, opportunistic and primarily asset-driven approach to portfolio construction, while nonetheless maintaining a diversified portfolio. This provides the flexibility to adjust the portfolio to changing market conditions while also investing with conviction. It is an approach that is especially suited to investors that are unable or disinclined to choose between the broad range of single-sector, in many cases higher-risk, funds. Picton’s portfolio of 49 properties is significantly weighted towards industrial and logistics assets (59% by value at end-FY24), reflecting the depth of opportunities in the sector, which benefits from positive demand-supply fundamentals and continuing rental growth. Industrial and logistics assets have significantly contributed to Picton’s performance in recent periods and continued to do so through FY24. Conversely, traditional retail has for some time offered only selective opportunities in the face of over-supply and falling rents, and two-thirds of sector exposure is to retail warehouses, which are better supported by trend changes in consumer spending habits and are underpinned by value-led retailers. Repositioning of selected office assets will see exposure to that sector decline further.

Exhibit 4: Active weightings in a diversified portfolio

Source: Picton Property Income data

Passing rent for the industrial assets continued to increase strongly in FY24, by 12% (FY23: 13%), while the ERV also increased, albeit at a more moderate pace than previously (by 3% on a like-for-like basis in FY24 versus 18% in FY23). Capital values showed a modestly positive movement.

Despite the pressures on the office market, ERV increased by 4% for Picton’s assets in FY24, particularly within the central London assets (in Farringdon and Covent Garden). Passing rent decreased by 7%, some of which was related to obtaining vacant possession for alternative uses, while capital values decreased by 8%.

Encouragingly, for Picton’s retail & leisure assets, passing rent increased by 2% and ERV by 1% while capital values were 2% lower.

Picton believes strongly in the benefits of diversification

The choice of sector-diversified commercial property REITS, and the list of peers that we show in the valuation section of this note, has reduced drastically in the past three years, as a result of merger and acquisition activity and corporate wind-downs. The catalyst for this has been a challenging market environment since interest rates began to increase, leading to most companies trading at persistent discounts to NAV.

Alongside the benefits of increased scale, the opportunity to increase exposure to industrial and logistic assets has in many cases been highlighted by acquirers.

Picton recognises the merits of consolidation and the opportunity to leverage its strong performance record and the significantly fixed costs of its internal management structure. The disclosed extensive discussions with UK Commercial Property REIT (UKCM) about a possible combination were one of multiple consolidation opportunities that the company has considered over the past year. However, its belief in the merits of a diversified approach remains a point of focus. Subsequent to discussions with Picton ending, UKCM was acquired by Tritax. CT Property Trust (UKCPT) had earlier been acquired by LondonMetric. In both cases the buyers were particularly attracted by the opportunity to increase their industrial logistics exposure. With similar motivations, Urban Logistics (SHED) made an indicative proposal to abrdn Property Income Trust (API) after it had agreed a merger with Custodian REIT (CREI). SHED withdrew but the merger with CREI, recommended by both boards, failed to gain sufficient shareholder approval, by a very narrow margin. API is now pursuing a strategy of managed wind-down. Balanced Commercial Property Trust is undertaking a strategic review and could well go the same way. Other companies that have been removed from the peer group in the past two to three years through completed or ongoing wind-down include Circle Property, Palace Capital and Ediston Property.

Strong organic income opportunity

The end-FY24 ERV of £57.6m was £12.9m, or 29%, ahead of passing rent of £44.7m, providing a strong opportunity to organically increase income. Excluding the two office assets held for sale, the income upside potential included £3.7m from void reduction and a further £3.7m from increasing rents to market levels at lease expiry/regear. The balance included lease incentive run-off and stepped up rents (c £3.9m).

Exhibit 5: Reversionary potential (as at end-FY24)

Source: Picton Property Income data

Within Picton’s portfolio, there is significant further potential to increase industrial rents and reduce office voids. For its industrial assets, the upside from passing rents to ERV is £6.1m, of which £4.2m represents upside to market rents. The end-FY24 industrial voids was low, at just £0.7m of ERV, most of which was either under offer or under refurbishment. Lettings have been completed in Bracknell and Warrington which estimate has roughly halved the void.

Excluding Angel Gate and Longcross, there was £5.9m of remaining reversionary potential in the office sector, of which £2.9m relates to voids (79% of the total portfolio void), with £0.8m upside to estimated market rents. Key voids included Tower Wharf were in Bristol (£0.7m) and Colchester Business Park (£0.6m), both undergoing refurbishment, in addition to Charlotte Terrace (£0.7m). At Tower Wharf, has since let 13,000 sq ft, with an existing occupier relocating within the building, and taking 140% more floorspace. We estimate this has broadly halved the void at this property.

For the retail & leisure assets, occupancy is high while rents are above estimated market levels (by £0.8m of ERV). Positively, passing rent increased in FY24 (by 2%), as did ERV (by 1%).

Lease maturities provide an opportunity to rebase rents and capture reversionary upside. Across the portfolio, the average length of leases to first termination is 4.2 years and the company expects to capture around 20% of the reversion to market level rents annually, providing a positive tailwind for income growth over coming years.

Exhibit 6: Longevity of income

Source: Picton Property Income data

At end-FY24, EPRA occupancy was 91% but has since increased to c 93%, including the post-FY24 lettings and completion of the sale of Angel Gate. This is in line with the 10-year average but below pre-pandemic levels. We would expect a combination of further portfolio repositioning away from the office sector and the leasing of better quality, refurbished space to be the key drivers of further occupancy improvement.

Exhibit 7: 10-year portfolio occupancy trend

Source: Picton Property Income data

Strong and flexible balance sheet

Total drawn debt at end-FY24 was £227.5m, comprising long-term, fixed-rate borrowing of £211.1m and £16.4m drawn on a short-term floating rate revolving credit facility (RCF), since repaid in full. The fixed-rate debt has a blended cost of 3.69% with no maturity until 2031.

Adjusting for the Angel Gate disposal and repayment of the RCF, the end-FY24 net loan to value ratio (gross debt net of cash of £19.8m) of 27.9% was c 25% on a pro-forma basis. Picton is weighing options for the balance of proceeds of the Angel Gate disposal. This will certainly include investment in the existing portfolio to support rental growth and capital values and may also include opportunistic acquisitions, where these are accretive. Share repurchases are also an option, although any immediate accretion would at least in part be offset by the diseconomies of reduced scale. We would favour a patient approach to deployment of the proceeds as market conditions move in favour of acquisitions.

Exhibit 8: Summary of debt portfolio post RCF repayment

Lender

Canada Life

Aviva

NatWest RCF

Amount drawn

£129m

£82.1m

nil

Undrawn

Fully drawn

Fully drawn

£50.0m

Maturity

Jul-31

Jul-32

May-25

Interest rate

Fixed 3.25%

Fixed 4.38%

SONIA +1.5%

Commitment fee

N/A

N/A

0.60%

LTV covenant

65%

65%

55%

Interest cover covenant

1.75x

2.5x

Debt service cover ratio covenant

N/A

1.4x

Source: Picton Property Income, as at 31 March 2024

The Canada Life facility can only be repaid at maturity. The Aviva facility is amortising, but only at a rate of c £1.4m pa. The undrawn RCF expires in May 2025 and the company is already considering options for refinancing that will cost-efficiently maintain its balance sheet flexibility.

Although we expect the attractively priced long-term borrowing to be held to maturity, its value can be seen in the c £25m difference between the nominal value of borrowings and their fair value at end-FY24 of £202.8m. This is reflected in the EPRA net disposal value per share of 101p, above EPRA net tangible assets per share of 96p.

Valuation and performance

The increased level of quarterly DPS (0.925p) represents an annualised rate of 3.7p or a 5.7% yield. We forecast further increases in quarterly DPS in FY25 and FY26.

The shares trade at c 0.70x the 96p end-FY24 NAV3 per share, well below the 10-year average of 0.9x and a high of c 1.1x. In common with the UK REIT sector, Picton shares have de-rated as interest rates have risen and the current valuation is broadly in line with its level at the height of pandemic uncertainty in early 2020.

  2 Defined as EPRA net tangible assets (NTA) per share.

Exhibit 9: 10-year dividend yield history (%)

Exhibit 10: 10-year price to NAV history (x)

Source: LSEG, Picton trailing DPS data, Edison Investment Researc

Source: LSEG prices, Picton trailing NAV data, Edison Investment Research

Exhibit 9: 10-year dividend yield history (%)

Source: LSEG, Picton trailing DPS data, Edison Investment Researc

Exhibit 10: 10-year price to NAV history (x)

Source: LSEG prices, Picton trailing NAV data, Edison Investment Research

The table below compares Picton with a selected group of peers, all targeting income from diversified portfolios. The list has narrowed considerably in the past two years as a result of the corporate activity referred to above and looks likely to narrow further. Corporate activity has had an impact on relative share price performances and valuations, and continues to do so. Picton shares trade on a lower yield than the group average, primarily reflecting its strategy of balancing sustainable fully covered4 dividends with the capital requirements of active management. Its P/NAV ratio is slightly below the average. The company’s strong track record of property level performance, the future income and valuation growth potential embedded in its portfolio, and its strong balance sheet are all positive indicators for a share price re-rating.

  API has reported cover for the three months to 31 March 2024 (Q124) of 75.4% (December 2023: 83.4%), excluding exceptional items associated with corporate activity.

Exhibit 11: Peer comparison table

Price
(p)

Market cap (£m)

P/NAV
(x)*

Trailing yield (%)**

Prospective yield***

Share price performance

1 month

3 months

12 months

3 years

AEW REIT

85

135

0.83

9.4

9.4

-3%

-3%

-18%

-10%

Balanced Commercial Property Trust

76

535

0.71

6.6

6.9

-1%

-1%

2%

-13%

Custodian Property Income

71

313

0.76

7.7

8.5

-6%

-2%

-21%

-28%

Schroder REIT

44

215

0.75

7.6

7.8

-2%

6%

-4%

-8%

abrdn Property Income Trust

51

193

0.67

7.9

7.9

-2%

-6%

1%

-29%

Average

0.74

7.9

8.1

-3%

-1%

-8%

-18%

Picton Property Income

65

355

0.68

5.5

5.7

-6%

3%

-16%

-27%

UK property sector index

1,320

-4%

4%

5%

-25%

UK equity market index

4,438

-3%

5%

6%

11%

Source: Company data, LSEG. Note: Prices at 17 June 2024. *Based on last reported EPRA NAV/NTA. **Based on trailing 12-month DPS declared. ***Based on current FY target or last quarterly DPS annualised.

Summary of FY24 financial performance

Against a challenging market backdrop, the FY24 performance was robust. EPRA earnings was maintained and, as discussed above, the property portfolio performed ahead of the index.

Exhibit 12: Summary of FY24 financial performance

£m unless stated otherwise

FY24

FY23

FY24/FY23

H124

Rental income

43.9

43.0

2.2%

21.6

Other income

1.2

0.4

0.4

Net property operating costs

(3.1)

(3.5)

-11.9%

(1.5)

Void costs

(4.1)

(3.6)

13.0%

(2.3)

Net property income

37.9

36.3

4.5%

18.2

Total operating expenses

(7.2)

(6.0)

21.2%

(3.4)

Net finance expense

(8.9)

(9.0)

-0.9%

(4.7)

EPRA earnings

21.7

21.3

2.2%

10.0

Property valuation movements

(26.5)

(110.8)

(11.4)

IFRS net profit/(loss)

(4.8)

(89.5)

(1.4)

EPRA EPS (p)

4.0

3.9

2.2%

1.8

IFRS EPS (p)

(0.9)

(16.4)

(0.3)

DPS declared (p)

3.55

3.50

1.4%

1.75

DPS paid (p)

3.50

3.50

0.0%

1.75

Dividend cover

1.14

1.12

1.05

Net assets, IFRS & EPRA (£m)

524.5

547.6

537.1

NAV per share, IFRS & EPRA (p)

96

100

-4.4%

99

NAV total return

-0.9%

-13.7%

-0.2%

Carried value of investment properties

724.0

746.3

736.6

Net LTV

27.9%

26.7%

27.7%

Source: Picton Property Income data, Edison Investment Research

Key features included:

Net property income increased £1.6m, or 4.5%, to £37.9m. This included growth in rental income of £0.9m, or 2.2%, including £1.0m from industrial assets. Other income increased £0.8m as a result of higher dilapidation receipts. Property costs were little changed despite higher void costs relating to Angel Gate and Longcross.

The £1.3m increase in operating expenses included c £0.6m of non-recurring items, relating to the aborted merger discussions (£0.2m), internalising the company secretarial function (£0.3m) and CFO transition costs (£0.1m). The underlying increase was primarily driven by additional staff headcount and salary reviews. The EPRA cost ratio was 23.0% (FY23: 21.3%) but was 21.7% excluding the non-recurring items. Underlying operating expenses as a percentage of average net assets increased to 1.2% (FY23: 1.0%), with around half the increase attributable to lower net assets.

Finance costs reduced slightly, as a result of lower average borrowings.

EPRA earnings increased £0.4m, or 2.2%, to £21.7m and EPRA EPS was 4.0p.

Four quarterly dividends of 0.875p were paid during the year. The Q424 DPS declared of 0.925p was paid at the end of May.

Including property revaluation losses, the IFRS loss was £4.8m (FY23: £89.5m) and NAV per share was 96p.

Portfolio summary and positioning

At 31 March 2024 (end-FY24), the externally assessed fair value of the investment portfolio was £745m (the balance sheet value includes an adjustment for lease incentives and finance leases), reflecting an EPRA net initial yield of 5.4% and a reversionary yield of 7.0%.

Exhibit 13: Key portfolio data

31-Mar-24

31-Mar-23

31-Mar-22

FY24

FY23

FY22

Portfolio valuation (£m)

745

766

849

Number of properties

49

49

47

Average lot size (£m)

15.2

15.6

18.1

EPRA net initial yield (%)

5.4

5.0

4.1

Net reversionary yield (%)

7.0

6.7

5.4

Annualised passing rent (£m)

44.1

43.3

38.7

Annualised reversionary rent (£m)

57.6

55.8

49.8

Occupancy as % estimated rental value (ERV)

91%

91%

93%

Weighted average unexpired lease term

4.2 years

4.6 years

4.8 years

Source: Picton Property Income

The portfolio comprises 49 assets, let to more than 400 individual occupiers, of which the top 10 account for 23.6% and the largest (3.6%) is various public sector entities.

Exhibit 14: Top 10 occupiers

Contracted rent (£000s)

% total

Public sector

1.7

3.6%

Whistl UK

1.6

3.4%

The Random House Group

1.6

3.4%

B&Q

1.2

2.6%

Snorkel Europe

1.2

2.4%

XMA

1.0

2.0%

Portal Chatham

0.9

1.8%

DHL Supply Chain

0.8

1.6%

4 Aces

0.7

1.4%

Hi-Speed Services

0.7

1.4%

Total top 10

11.4

23.6%

Source: Picton Property Income

Exhibit 15 shows the split of the portfolio in greater detail.

Exhibit 15: Detailed portfolio split by valuation at end-FY24

Portfolio value by sector

Industrials

58.6%

o/w South East

42.0%

o/w Rest of UK

16.9%

Office

30.7%

o/w London City & West End

7.1%

o/w Inner & Outer London

1.7%

o/w South-East

8.0%

o/w Rest of UK

8.9%

o/w Alternative use assets

4.7%

Retail & leisure

10.7%

o/w Retail Warehouse

6.7%

o/w High Street Rest of UK

2.4%

o/w Leisure

1.6%

Portfolio total

100.0%

Industrials

o/w South East

o/w Rest of UK

Office

o/w London City & West End

o/w Inner & Outer London

o/w South-East

o/w Rest of UK

o/w Alternative use assets

Retail & leisure

o/w Retail Warehouse

o/w High Street Rest of UK

o/w Leisure

Portfolio total

Portfolio value by sector

58.6%

42.0%

16.9%

30.7%

7.1%

1.7%

8.0%

8.9%

4.7%

10.7%

6.7%

2.4%

1.6%

100.0%

Source: Picton Property Income

Additional details on the company and management

An internally managed REIT

The company was launched in October 2005 as the ING UK Real Estate Income Trust in an offshore structure, listed on the Channel Islands Stock Exchange and the London Stock Exchange. In 2011, the company name was changed to Picton Property Income and in January 2012, management was internalised, giving the company greater flexibility to manage costs and benefit fully from the growth in assets. In 2018 it became a UK-domiciled REIT and changed its technical listing status from an investment company to a commercial company, bringing it more in line with other internally managed property company peers. Throughout this period, there has been no change in the company’s diversified, actively managed total return investment strategy.

Leadership and governance

The board comprises six members: four non-executive and two executive directors, chaired by Lena Wilson CBE. Collectively, the non-executive directors bring considerable experience from across the real estate, real estate financing and financial services sectors. Ms Wilson serves on a number of boards in a non-executive capacity, including NatWest Group, and is also chair of Chiene + Tait LLP and AGS Group. Previously she was chief executive of Scottish Enterprise from 2009 until 2017 and, prior to that, was a senior investment adviser at The World Bank. The other non-executives are Mark Batten (chair of the audit and risk committee and the senior independent director), formerly a partner at PricewaterhouseCoopers for over 25 years, Maria Bentley (chair of the remuneration and nominations committees), with over 35 years of experience in the financial services sector, and Richard Jones (chair of the property and valuation committee), a highly experienced real estate professional with over 30 years’ experience.

The executive board members are CEO Michael Morris and CFO Saira Johnston. Mr Morris has more than 25 years’ experience in the UK commercial property sector and has worked with the group since it was launched in 2005. Ms Johnston joined Picton in March 2024, replacing Andrew Dewhirst upon his retirement, and has over 20 years’ experience in the real estate and financial services sector.

Brief biographies of the key members of the leadership team are listed below and detailed board biographies may be found on the company website.

Including the CEO and CFO, the broader Picton management team comprises 11 individuals, of whom five are property professionals.

Sensitivities

The commercial property market is cyclical, historically exhibiting substantial swings in valuation through cycles. Income returns are significantly more stable, but still fluctuate according to tenant demand and rent terms. From a sector viewpoint we also highlight the increased risks and uncertainties that attach to development activity, including planning consents, timing, construction risks and the long lead times to completion and eventual occupation. Picton is not a developer, but is exposed to similar but lesser uncertainties, as it actively invests in improvements to existing assets with the aim of enhancing long-term income growth and returns. More generally we note the sensitivity to:

Economic risk: the war in Ukraine, sharply rising inflation and a continuing rise in interest rates are creating a high level of uncertainty regarding the global and UK economic outlook. Thus far, occupier demand across most sectors has remained resilient.

Sector risk: some of the inherent cyclical risk to vacancy in commercial property can be mitigated by portfolio diversification. Picton invests across the main UK commercial property sectors, with a portfolio that is well-diversified by property and by individual occupiers.

Energy performance considerations: a failure to successfully meet regulatory and/or tenant expectations for energy performance enhancement would likely affect Picton’s ability to let properties on satisfactory terms and may make properties unlettable.

Funding risks: gearing is moderate and all existing borrowings are fixed rate and long term, protecting the company from rising interest rates. Additional shorter-term, floating rate borrowing facilities provide funding flexibility.

Management risk: as Picton is internally managed, there is some management risk. With a relatively small team, the loss of any senior member has the potential to be disruptive and if any of the directors were to leave, they would need to be replaced.

Exhibit 16: Financial summary

Year end 31 March (£m)

FY22

FY23

FY24

FY25e

2026e

PROFIT & LOSS

Rental income

40.1

43.0

43.9

44.3

45.6

Other income

0.2

0.4

1.2

0.5

0.5

Service charge income

6.2

8.4

9.6

9.7

10.0

Revenue from properties

46.5

51.8

54.7

54.4

56.1

Property operating costs

(2.5)

(3.5)

(3.1)

(3.1)

(3.1)

Property void costs

(2.4)

(3.6)

(4.1)

(3.4)

(3.1)

Recoverable service charge costs

(6.2)

(8.4)

(9.6)

(9.7)

(10.0)

Property expenses

(11.1)

(15.6)

(16.8)

(16.1)

(16.2)

Net property income

35.4

36.3

37.9

38.3

39.9

Administrative expenses

(5.8)

(6.0)

(7.2)

(6.8)

(7.1)

Operating Profit before revaluations

29.7

30.3

30.7

31.5

32.8

Revaluation of investment properties

129.8

(110.8)

(26.5)

18.0

16.7

Profit on disposals

0.0

0.0

0.0

0.0

0.0

Operating Profit

159.5

(80.5)

4.1

49.5

49.5

Net finance expense

(8.5)

(9.0)

(8.9)

(8.5)

(8.5)

Debt repayment fee

(4.0)

Profit Before Tax

147.0

(89.5)

(4.8)

41.0

41.0

Taxation

0.0

0.0

0.0

0.0

0.0

Profit After Tax (IFRS)

147.0

(89.5)

(4.8)

41.0

41.0

Adjust for:

Investment property valuation movement

(129.8)

110.8

26.5

(18.0)

(16.7)

Profit on disposal of investment properties

(0.0)

0.0

0.0

0.0

0.0

Exceptional income /expenses

4.0

0.0

0.0

0.0

0.0

EPRA earnings

21.2

21.3

21.7

23.0

24.3

Fully diluted average Number of Shares Outstanding (m)

547.3

546.9

547.1

547.6

547.6

EPS (p)

26.93

(16.42)

(0.88)

7.51

7.51

EPRA EPS (p)

3.9

3.9

4.0

4.2

4.4

Dividend declared per share (p)

3.45

3.50

3.55

3.70

3.84

Dividends paid per share (p)

3.375

3.500

3.500

3.700

3.805

Dividend cover (x) EPRA EPS/DPS declared

1.13

1.12

1.12

1.14

1.16

Dividend cover (x) - paid dividends

1.15

1.12

1.14

1.17

1.20

Total return

27.9%

-13.7%

-0.9%

8.0%

7.6%

EPRA cost ratio (excluding direct vacancy costs)

19.9%

21.3%

23.0%

21.9%

22.0%

BALANCE SHEET

Non-current assets

834.4

749.8

691.8

717.0

740.9

Investment properties

830.0

746.3

688.3

713.5

737.4

Other non-current assets

4.4

3.4

3.5

3.5

3.5

Current assets

61.4

42.8

82.1

62.4

59.7

Debtors

22.9

22.7

62.3

26.2

26.4

Cash

38.5

20.1

19.8

36.1

33.3

Current Liabilities

(20.3)

(20.7)

(21.9)

(21.9)

(21.9)

Creditors/Deferred income

(19.3)

(19.6)

(20.7)

(20.7)

(20.7)

Current borrowings

(1.1)

(1.1)

(1.2)

(1.2)

(1.2)

Non-Current Liabilities

(218.4)

(224.2)

(227.5)

(211.5)

(211.8)

Non-current borrowings

(215.8)

(221.6)

(224.9)

(208.9)

(209.2)

Other non-current liabilities

(2.6)

(2.6)

(2.6)

(2.6)

(2.6)

Net assets

657.1

547.6

524.5

546.0

567.0

NAV per share (p)

120

100

96

100

104

EPRA NTA per share (p)

120

100

96

100

104

CASH FLOW

Operating cash flow

28.1

30.9

29.2

32.6

33.3

Net Interest

(8.1)

(7.9)

(9.0)

(8.2)

(8.2)

Tax

0.0

0.0

0.0

0.0

0.0

Net cash from investing activities

(33.8)

(26.8)

(4.5)

28.6

(7.2)

Ordinary dividends paid

(18.4)

(19.1)

(19.1)

(20.2)

(20.8)

Debt drawn/(repaid)

52.2

5.4

3.1

(16.4)

0.0

Net proceeds from shares issued/repurchased

(0.7)

(1.1)

0.0

0.0

0.0

Other cash flow from financing activities

(4.0)

Net cash from financing activities

29.0

(14.8)

(16.0)

(36.6)

(20.8)

Change in cash

15.2

(18.5)

(0.3)

16.4

(2.8)

Opening cash

23.4

38.5

20.1

19.8

36.1

Closing cash

38.5

20.1

19.8

36.1

33.3

Debt as per balance sheet

(216.8)

(222.8)

(226.1)

(210.0)

(210.3)

Un-amortised loan arrangement fees

(2.0)

(1.7)

(1.4)

(1.1)

(0.8)

Closing net (debt)/cash

(180.3)

(204.4)

(207.8)

(175.0)

(177.8)

Net LTV

21.2%

26.7%

27.9%

23.8%

23.5%

Source: Picton Property Income historical data, Edison Investment Research

Contact details

Valuation by sector

Picton Property Income Limited
27a Floral Street
London
WC2E 9EZ
020 7628 4800
www.picton.co.uk

Management team

Non-executive chair: Lena Wilson CBE

Chief executive: Michael Morris

Lena Wilson joined the board on 1 January 2021 as chair-designate, assuming that role in February 2021, and is also chair of the nomination committee. She brings a wealth of business experience to the role and currently serves as non-executive director on a number of boards, including NatWest Group, and is also chair of Chiene + Tait LLP and AGS Group. Previously, she was chief executive of Scottish Enterprise from 2009 to 2017 and prior to that, was a senior investment adviser at The World Bank.

Michael Morris was appointed to the board in October 2015. He has over 25 years’ experience in the UK commercial property sector and has worked with the group since launch in 2005. As chief executive he is responsible for the implementation of the company’s strategy. Prior to this, he worked in private practice, then became a senior director and fund manager at ING Real Estate Investment Management (UK). He is a member of the Investment Property Forum and has obtained the Investment Management Certificate and the IPF Diploma in Property Investment.

Chief financial officer: Saira Johnston

Head of asset management: Jay Cable

Saira Johnston joined Picton in March 2024 and joined the board as CFO on 1 April 2024. She is a chartered accountant with over 20 years of experience, working in the real estate sector in a range of financial and operational related roles. She was previously CFO at Gravis Capital Management and other previous roles include group financial controller at Moorfield Group, director of finance at CBRE Global Investors/ING Real Estate and investment controller for Morgan Stanley Real Estate Fund.

As head of asset management and a member of the executive committee, Jay Cable is responsible for overseeing all asset management activities in respect of the group’s property portfolio. He has worked for the group since launch in 2005, having formerly been a director at ING Real Estate Investment Management (UK). He has over 18 years of real estate experience and is a member of the Royal Institute of Chartered Surveyors and of the Investment Property Forum.

Management team

Non-executive chair: Lena Wilson CBE

Lena Wilson joined the board on 1 January 2021 as chair-designate, assuming that role in February 2021, and is also chair of the nomination committee. She brings a wealth of business experience to the role and currently serves as non-executive director on a number of boards, including NatWest Group, and is also chair of Chiene + Tait LLP and AGS Group. Previously, she was chief executive of Scottish Enterprise from 2009 to 2017 and prior to that, was a senior investment adviser at The World Bank.

Chief executive: Michael Morris

Michael Morris was appointed to the board in October 2015. He has over 25 years’ experience in the UK commercial property sector and has worked with the group since launch in 2005. As chief executive he is responsible for the implementation of the company’s strategy. Prior to this, he worked in private practice, then became a senior director and fund manager at ING Real Estate Investment Management (UK). He is a member of the Investment Property Forum and has obtained the Investment Management Certificate and the IPF Diploma in Property Investment.

Chief financial officer: Saira Johnston

Saira Johnston joined Picton in March 2024 and joined the board as CFO on 1 April 2024. She is a chartered accountant with over 20 years of experience, working in the real estate sector in a range of financial and operational related roles. She was previously CFO at Gravis Capital Management and other previous roles include group financial controller at Moorfield Group, director of finance at CBRE Global Investors/ING Real Estate and investment controller for Morgan Stanley Real Estate Fund.

Head of asset management: Jay Cable

As head of asset management and a member of the executive committee, Jay Cable is responsible for overseeing all asset management activities in respect of the group’s property portfolio. He has worked for the group since launch in 2005, having formerly been a director at ING Real Estate Investment Management (UK). He has over 18 years of real estate experience and is a member of the Royal Institute of Chartered Surveyors and of the Investment Property Forum.

Principal shareholders (source: Picton Property Income FY24 Annual Report)

(%)

Rathbones

17.7

Columbia Threadneedle

9.0

BlackRock

5.8

Vanguard

4.6

Premier Miton

3.6

RBC Brewin Dolphin

3.4

Goldman Sachs

3.3


General disclaimer and copyright

This report has been commissioned by Picton Property Income and prepared and issued by Edison, in consideration of a fee payable by Picton Property Income. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Picton Property Income and prepared and issued by Edison, in consideration of a fee payable by Picton Property Income. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Picton Property Income

View All

Latest from the Real Estate sector

View All Real Estate content

Research: Healthcare

IRLAB Therapeutics — Mesdopetam disease-modifying potential

Researchers in China studying IRLAB’s lead asset, mesdopetam (IRL790) in a preclinical model for levodopa-induced dyskinesia in Parkinson’s disease (PD-LIDs) have noted that the treatment not only improved dyskinesia in the tested rodents but also potentially demonstrated neuroprotective (disease-modifying) properties by restoring or improving alterations in dendritic spine density in the implicated regions. We view the latter as a key observation, given that PD continues to be a progressive disease currently addressed with only symptomatic treatments. However, this data would need to be reproduced in larger clinical trials to be conclusive. Management may seek to test this in the upcoming Phase III trial, which we expect to start before the year-end, provided a development partner is finalised.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free