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Picton Property gains rent hikes in post-election bounce

14 January 2020

Picton Property Income has secured extensions to three rental contracts after the Conservative election victory prompted confidence in the property market

Picton Property Income (PCTN ) is benefiting from a post-election pick-up by extending leases with three of its largest tenants. 

The £531 million real estate investment trust (Reit) had come under pressure, alongside its rivals, as the commercial property market weakened in the face of Brexit and election uncertainty. 

However, the landslide Conservative election victory ensured the UK will leave the European Union, although uncertainty remains over the trade negotiations this year, providing support for the under-pressure real estate sector. 

In a portfolio update, Picton announced it has extended leases with three of its largest occupiers, securing £3.8 million of income a year. The renegotiated rents have a combined headline rental 8% above the estimated rental value and 7% above the previous rent. 

The rental agreements are in the popular property areas of industrial, warehouse, and logistics; a sector which has continued to grow in the online shopping boom and the challenge that poses struggling high street retailers. 

Picton has agreed to pre-lease a building in Rushden, Northamptonshire, to delivery group Whistl UK, on a 10-year contract at an annual rent of £1.6 million, creating the largest single occupier for Picton from October 2020 when the existing tenant vacates. 

The Reit has extended a lease with its current largest occupier in a building in Radlett, Hertfordshire, which was due to expire in November 2020, signing another 10-year lease with a ‘stepped rental increase’ to £1 million a year. 

Another lease has also been extended in Grantham, Lincolnshire, that was due to expire in 2023. It will now expire in 2029 and the occupiers will pay a rent of £1.2 million a year. 

Picton chairman Michael Morris said the group has ‘enhanced’ its leasing profile and that will have a ‘positive impact on the underlying cashflow and valuation of these assets’.

‘Across the wider portfolio, we have also been encouraged by our post-election pipeline of leasing and asset management initiatives,’ he said. 

The Reit, which won its third consecutive Citywire performance award last year, said before the election it was aiming to unlock more than £9 million of upside from its current rental contracts and assets. 

Despite the woes suffered by commercial property investors, the generalist UK property trust Picton has delivered stellar outperformance compared to the MSCI UK Property index over all timeframes.

Over the past year it has returned 16.9% versus 1.8% for the index, helped by a 10% advance in the past three months. Over three years the Guernsey-based company delivered 43.8% against 21.1%; over five years the fund gained 80.2% versus the index gains of 41.3%; and over 10 years it has risen 226.9% against 136% for the property benchmark.

Investment company news brought to you by Citywire Financial Publishers Limited.

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