Picton Property Income Posts 5.3% Total Return, NAV Up as Buybacks Boost Results

Picton Property Income (LON:PCTN) reported positive earnings and a positive total return for the quarter to December, as management highlighted continued modest valuation gains and the contribution from the company’s share buyback program during an investor update call led by Chief Executive Michael Morris and Chief Financial Officer Sara Johnson.

Quarterly financial highlights

For the nine months, the company reported profit after tax of £22.5 million and a total return of 5.3%. Earnings per share for the nine-month period were 3.1 pence, which management said was in line with the comparable period a year earlier, and dividend cover was 108% for the nine months.

Net asset value (NAV) per share increased to £1.024, up 0.9% over the period, which the company attributed to underlying valuation movements and accretion from share repurchases.

The portfolio valuation ended the period at £699 million, a 0.6% increase versus the end of September on a gross basis and 0.3% on a like-for-like basis, inclusive of capital expenditure during the quarter. Johnson said the movement was modest but better than the overall MSCI/benchmark capital performance. She also noted that the office sector recorded a 0.3% increase, describing the direction as important given investment into that segment.

Capital structure and liquidity

Management described the balance sheet as “exceptionally strong,” pointing to surplus cash following the disposal of the company’s largest office asset earlier in the financial year. The company highlighted what it characterized as embedded value in its long-term fixed-rate debt with Canada Life and Aviva, which management said is around £20 million and not reflected in NAV, but instead in the net net disposal value. Johnson said that equated to 4 pence per share or 106 pence on an NDV basis.

Loan-to-value (LTV) increased marginally during the quarter, which the company said reflected lower cash as a result of buybacks and capital expenditure rather than additional borrowings. The weighted average interest rate was stated as 3.7%, with a six-year debt maturity profile. The company also has a £50 million undrawn revolving credit facility with NatWest.

Buybacks, investment spending, and market backdrop

During the quarter, Picton deployed £6 million into its share buyback program at an average price of £0.76, representing a 25% discount, which management said added £0.004 per share of accretion over the three months. The company also repurchased an additional £0.9 million post quarter-end, but said the program was paused in January following the announcement of a strategic review.

On capital priorities, the company invested about £2.5 million during the quarter, primarily in office assets in Milton Keynes and Chatham, focusing on upgrades and decarbonization to improve letting appeal.

In commentary on the broader U.K. property market, Morris said total returns last year were modest but positive across sectors, with industrial and retail as “standouts” and offices continuing to struggle due to capital declines. He also pointed to ongoing rental growth supported by tight supply and demand for higher-quality space, while noting that office write-downs appeared to be moderating toward the end of the year.

Portfolio activity, occupancy, and leasing pipeline

The company’s portfolio remains weighted toward industrial, with nearly two-thirds in industrial/warehouse/logistics, just over 20% in offices, and the balance in retail and leisure (with a skew toward out-of-town retail warehouse parks). The company said it has roughly 300 occupiers across 46 assets.

Management pointed to leasing and asset management activity that it said supported valuations, including lettings ahead of estimated rental values (ERVs), renewals ahead of previous passing rent, and rent reviews. Examples cited included:

• Colchester: Following refurbishment of about half the space, the company said it leased one unit after quarter-end and had other space under offer, with rents nearly 50% higher than the outgoing occupier.
• Harlow: An industrial occupier in financial difficulty surrendered its lease and the space was simultaneously re-let to a new occupier at a higher rent than passing and ahead of the March ERV, on a 10-year term.
• Glasgow: The company cited transactions with existing and new occupiers at rents ahead of ERV, alongside a program to upgrade common parts to support further rental growth.

Occupancy was reported at 83%, down from September, which the company linked to previously announced transactions that reduced occupancy but generated “meaningful payments.” Morris said that over the longer term Picton has generally operated between 92% and 96% occupancy, and he described the current level as below expectations.

Picton also reiterated what it sees as significant reversionary potential, citing a net initial yield just under 5% and a reversionary yield near 7.5%. Management said almost half of the reversion from vacancy relates to two larger industrial units, with the remainder in offices, where the company says its capital investment program is beginning to translate into leasing traction. Johnson noted the final ERV figure provided was 55.9, higher than reported in September.

Strategic review and Q&A disclosures

During Q&A, Morris said the strategic review announced in mid-January is governed by the Takeover Code, limiting what management can disclose. He referenced an announcement that named LondonMetric as a counterparty due to Takeover Panel rules following a press leak, while emphasizing the board is engaging with all interested parties.

Morris also said refurbishments underway on the two industrial units that became vacant are being undertaken speculatively without signed tenants, but he characterized the works as broadly suitable for any occupier. He added that a “lot” of the work is covered by dilapidations settlements, and noted outgoing payments of over £3.5 million related to those assets.

On why buybacks were halted, Johnson said continuing repurchases was not appropriate once the strategic review began, given the focus on maximizing shareholder value through a formal process.

Morris was also asked about the company’s Farringdon office building, where he said permitted development rights were obtained in 2025 for residential accommodation on the top storey, but the company is reviewing options including changing planning to allow for offices rather than residential. He said costs could not be disclosed at this stage.

Looking ahead, Morris said 2026 had “got off to a really positive start” in terms of occupier activity and noted a stated pipeline of £1.6 million of transactions under offer, largely in the office sector, while emphasizing that operationally it remains “business as usual” as the strategic review continues.

About Picton Property Income (LON:PCTN)

Established in 2005, Picton is listed on the main market of the London Stock Exchange and is a constituent of a number of EPRA indices including the FTSE EPRA Nareit Global Index.

Picton owns and actively manages a £726 million UK commercial property portfolio, invested across 47 assets and with around 350 occupiers (as at 30 June 2025).

Through an occupier focused, opportunity led approach, Picton aims to be one of the consistently best performing diversified UK REITs and has delivered upper quartile outperformance and a consistently higher income return than the MSCI Quarterly Property Index since launch.