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My best investment - Michael Morris, Picton Property Income Limited

17 May 2013

Why property is about buying well and focussing on income generation.

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As one of our best investments, I have chosen a building we acquired in 2010 in the City of London. Not only has this asset delivered very strong performance, but our ownership has helped shape the Picton occupier ethos and typifies our approach.

In late 2009 and following some dramatic pricing corrections, we identified that there were interesting opportunities in the UK commercial property market.  We acquired a company, with some 70% of the assets located in London and the South East of the UK and we were able to structure the transaction to ensure Picton did not issue equity on a dilutive basis.

The asset I have chosen was one of the top five assets within this transaction and was a part vacant, good quality but non prime city office building, well located in Austin Friars, EC2. Our plan was to increase the cashflow generated and enhance its value through upgrading the quality of accommodation and improving occupancy.

Financially this has provided to be a very successful acquisition.  Since purchase we have refurbished all but one of the floors, undertaken four lettings and more than doubled the income generated from the asset.  Equally the value has increased by over 70% (including the costs of refurbishment). Prime rental levels in the City have barely increased over this period but we have been able to grow the rental value by over 60%.  This reinforces my view that property is about buying well, ensuring that you provide accommodation that meets occupiers needs and focussing on income generation.  It’s not all about prime, long leased income.

As we became a self managed investment company and needed a home in 2011 we chose to occupy part of the building.  This has provided a fascinating insight to seeing property as an occupier rather than a landlord and we have implemented a number of occupier focussed initiatives directly as a result of this experience.   Finally there will come a time to sell this asset, but we will always have a connection with it.  Our Picton logo is based on the exterior terracotta tiling design.

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