Picton Property Income H2 2025 Earnings Report

Picton Property Income EPS Results

• Actual EPS: GBX 4.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Picton Property Income Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Picton Property Income Announcement Details

• Quarter: H2 2025
• Date: 5/22/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 22, 2025
• Conference Call Time: 10:00AM ET

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 £718 million UK commercial property portfolio, invested across 48 assets and with around 350 occupiers (as at 30 June 2024). 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. With a portfolio strategically positioned to capture income and capital growth, currently weighted towards the industrial sector, Picton's agile business model provides flexibility to adapt to evolving market trends over the long-term. Picton has a responsible approach to business and is committed to being net zero carbon by 2040. For more information please visit: www.picton.co.uk

Picton Property Income H2 2025 Earnings Call Transcript

Key Takeaways

• Delivered a 8% total return for the year to March 2025, with EPRA earnings up to £4.1 pence per share, NAV at 100 pence per share and a dividend cover of 113%.
• Completed £50 million of office disposals at a 5% premium to book value, using proceeds to repay floating-rate debt, invest £12 million in asset upgrades and buy back £7.5 million of shares at a 33% discount.
• Industrial assets now account for 60% of net rental income, drove a 3.8% valuation uplift and achieved rent reviews on average 38% above prior levels.
• Office portfolio occupancy of 86% remains below historic highs, prompting targeted capital expenditure on six key buildings to modernize space and support future rent growth.
• Debt is 76% fixed at an average rate of 3.7% with maturities in 2031–32 and an LTV of 24%, adding c.5 pence per share of unrecognized value and ensuring financing cost visibility.

Presentation

[Operator]

Good afternoon, and welcome to the Picton Property Income preliminary results investor presentation. Throughout the quarter presentation, investors will in listen only mode. Questions are encouraged and they can be submitted at any time by the Q and A tab situated in the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received from the meeting itself, however the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you to CEO, Michael Morris. Good afternoon to you, sir.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Good afternoon, and, thank you to everyone for, joining us this afternoon. My name is Michael Morris. I'm the chief executive of Picton, and I'm joined by Sarah Johnson, our CFO. We've got about half an hour, and we're going to just give a very quick introduction to Picton for those that don't know us. We're gonna talk to our financial results, give a view on the property market and what we've been doing with our portfolio, some concluding slides, and then an opportunity for q and a as mentioned using the using the I n c q and a buttons.

[Michael Morris, Chief Executive & Director at Picton Property Income]

So without further ado, Pigton is a diversified REIT. We've been going nearly twenty years now. We've adapted and adjusted our portfolio through that twenty years as different market conditions dictate. Today, we sit here with a portfolio that's nearly twothree in the industrial sector, a quarter in the office sector and the balance in retail and leisure. We're very proud of our long term track record of proxy level outperformance against MSCI.

[Michael Morris, Chief Executive & Director at Picton Property Income]

We run the business with not only a total return focus, because that's really important to us, but also generating those returns through income as well. Looking at the year just gone, we've delivered, I think, financial results, certainly recognizing the sort of macroeconomic backdrop. We've outperformed at the property level, now for the twelfth consecutive year. We reduced our office exposure through disposals of void assets by a fifth. We have used those monies to invest back into our portfolio and upgrade the assets.

[Michael Morris, Chief Executive & Director at Picton Property Income]

We've used the money to repay debt, and we've also used the money to take advantage of our current share price and buy back shares. So if I hand over to Sarah to talk you through the financial results.

[Saira Johnston, CFO at Picton Property Income]

Thank you, Michael. So as Michael mentioned, we have a strong financial performance for the year ending 03/31/2025, delivering positively across both income and capital values. For the year end, we're reporting a profit of GBP 37,000,000 and a total return of just over 8%. From an income perspective, we've seen EPRA earnings grow to GBP 23,000,000 during the year, which equates to GBP 4.1 per share. And from a balance sheet or net assets perspective, we closed at GBP $533,000,000 at the March, and that equates to GBP 100 per share.

[Saira Johnston, CFO at Picton Property Income]

Over the year, we've paid just over £20,000,000 of dividends to our shareholders, and that equates to 3.7p per share. And overall, we've operated a well covered dividend for the year of 113%. And by way of further background, you'll recall that we increased our dividend by just under 6% in May and have recently announced a further 3% increase in our dividend. And really, the strong financial performance is underpinned by the value in our long term debt structure. During the year, we repaid our floating rate debt and reduced our loan to value further to 24%.

[Saira Johnston, CFO at Picton Property Income]

And now our interest rate at an average of 3.7% is fixed and well below the current financing rates. The maturities on our long term loans are in 2031 and '32, so that gives us really good visibility about our financing costs and cost base going forward. And the value of that long term debt isn't seen in the NAV per share, but adds in about another $0.05 per share to 105p per share. The next couple of slides, I'll just talk through the key drivers for both NAV movements and earnings movements. So firstly, in terms of the net asset value movement, we saw an increase of 4% to 100p per share at the end of the year, and this is primarily due to the valuation gains on our industrial assets.

[Saira Johnston, CFO at Picton Property Income]

We saw valuation gains of 3.8% over the course of the year, And we've invested in our portfolio, as Michael mentioned, and we'll come on to explain in a bit more detail later. But even less of that capital expenditure, we saw valuation gains of just over 2%, which compares positively to the MSCI index of 1.5. We did say see differences across the sectors, and we'll talk through those further in more detail later. Another point of note on disposals, we completed a three opportunistic disposals in the year, totaling about GBP 50,000,000 of proceeds, and they were all sold at a premium to the valuation at the March of just over 5%, realizing a gain of £1,500,000 during the year. Final point of note in this slide, share buybacks.

[Saira Johnston, CFO at Picton Property Income]

So those share buybacks totaled £7,500,000 During the year, we bought back shares at an average price of 67p and a discount of 33%. And those have also been accretive in the period, not only from a net asset value, but also an earnings perspective. Moving on to the earnings for the year. So we've also seen growth in EPRA earnings for the year of 5% or 4.2p per share. And again, this is primarily due to our industrial exposure where we're starting to see the rental income increase and the repositioning and office disposals.

[Saira Johnston, CFO at Picton Property Income]

So firstly, in terms of net rents. Overall, disposals have resulted in a net reduction in net rents of GBP 400,000.0, but the underlying portfolio, excluding those disposals, have seen rental income growth of just under GBP 1,000,000 or about 2%. We're seeing reducing void costs on the underlying portfolio and an increase weighting to our industrial assets. So industrial assets for the year ending March 2025 comprised about 60% of our net rental income compared to 55% in the prior year. And again, this is showing the reversion on the underlying industrial assets coming through in our earnings numbers this year.

[Saira Johnston, CFO at Picton Property Income]

Final point on here, reduced financing costs. We repaid our floating rate debt early on in the year, and that's resulted in a reduced interest expense for the period. Our next slide talks to capital allocation and our capital priorities. We've sought to reduce our void and focus on disposing of lower yielding assets. And we've done that through three disposals of the year, and these were the three largest voids at the end of last year.

[Saira Johnston, CFO at Picton Property Income]

So Angel Gate, Charlotte Terrace and Longcross were disposals, and they were all completed during the period at an average of 5% ahead of book value. And that £51,000,000 of proceeds have been used for the four sectors of capital priorities we've outlined on this slide. So firstly, we started the year repaying our floating rate debt, so we now sit in a really strong position with the GBP $210,000,000 of our loans at fixed rates with long term maturities. Secondly, with investors back into our portfolio, just under GBP 12,000,000, we really believe that this is a good use of our capital. We see that reversion of about 16% in our portfolio and investing to unlock that reversion and maintain capital values has been an area of focus through the year.

[Saira Johnston, CFO at Picton Property Income]

There's been one tactical acquisition during the year, something adjacent to an existing asset that we use, but otherwise, we've deprioritized asset acquisitions during the year. And finally, as Michael mentioned, we see good value in buying back our own shares, recognizing the discount and the disconnect between our share price and our net asset value. And in January, we announced our share buyback program. Those have been accretive to earnings at the discounts that we've purchased. And also, we've extended that buyback program post year end.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Thank you, Sarah. The next few slides just to give a broad introduction to the property market and how it's been performing in light of all that's been happening this year. So on the next slide, you know, clearly, budget at the end of last year sort of came a bit left field. And some of the tax changes in there just took a little bit of time for business to absorb. And clearly, we've now had things like tariffs that we gave need a bit of understanding from business.

[Michael Morris, Chief Executive & Director at Picton Property Income]

But actually, we you know, it's it's a word of use for you know, we we we've seen the market really, I think, in quite a resilient place as a result of that. And, you know, the headline is that that that yields have come down a bit. Base rates have come down as well. And I think I generally say that there's a bit more liquidity in the market now than certainly there was, you know, in the latter half of last year. The headline is, and the chart show this, capital values broadly were rising in the last twelve months.

[Michael Morris, Chief Executive & Director at Picton Property Income]

The industrial sector saw the best growth offices for reasons to come on to work with were more challenging. And rents actually across all three core sectors have have risen. And, you know, that's a generalization. Clearly, better quality space is attracting higher rates of rental growth. Part of that is because demand has remained robust.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Secondly, supply is quite tight. Now that's not a fair reflection across the market. But when you start to think about sort of quality of space rather than space per se, there is a reasonably limited supply. A part of that is because the cost of construction have gone gone up, the cost of development finance has gone up, and there is definitely less speculative development today than there was, you know, a year or two ago when finance was more readily available. And all of these factors, the repricing that happened against the backdrop of rising interest rates mean that in lots of property sectors, you know, current market pricing is below the cost of construction.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And I'm not saying just because it's below the cost of construction, that means it's good value. But it is a real indicator, and it is a reflection of of what future supply will look like. If we turn the page and look at the occupational markets, I mean, the headline is, and you can see from the chart, the industrial sectors seen generally higher growth rates in terms of rents across the whole year. We've seen a bit of a sort of step back into 2025 with with all the sort of tariffs and and that sort of view. And I think that's a view across all businesses, just people absorbing what all that means.

[Michael Morris, Chief Executive & Director at Picton Property Income]

But but the reality is that rents are rising against this backdrop of sort of 90% plus occupancy. In the office sector, this this really is, you know, the difference between best quality and not. We have seen rental growth, but part of that, in my view, has been driven by an upgrading of assets. But I think the challenge in the office sector today is just a much lower occupancy level that creates more supply and really is more challenging in terms of capturing the demand that is out there. And this really reinforces the fact why we've, a, reduced office exposure through disposals for higher value alternative uses, but b, where we do have good quality assets, we're investing in them to make sure that we can attract occupiers and be at the top of people's lists for new space.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Retail and leisure, I I mean, that's gone through a big repricing. You know, rents today are still below where they were five years ago, but we do think that market's turned the corner. And we are starting to see a little bit of ERV growth even if that's not yet coming through into income growth. The the stats show quite high occupancy for the retail sector. Personally, I don't believe the stats because I think the stats are quite skewed to a sample size that includes retail warehousing and supermarkets.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And I'm sure most of you, if you go down most sort of regional or market town, big towns, you know, there's plenty of still floor space supply from a retail perspective. Although without question, that's reducing as as buildings are, again, in this sector being repositioned for other other uses. Investment markets, well, again, the chart really tells the story. The repricing in the office sector has definitely moderated. And, you know, in the other two sectors, we're seeing, you know, not not significant, but nevertheless, a positive capital growth.

[Michael Morris, Chief Executive & Director at Picton Property Income]

But with all of these things, you know, the devil is in the detail. It's the the the type of assets that you own, the location of those assets, the quality of the space, you know, if buildings are energy efficient, they meet today's occupational needs. The pricing is very different from buildings that require a lot of lot of capital expenditure and without it, might have far more limited, occupational demand. So to just talk to our own portfolio in the context of what I've said about the market, the chart on the left just shows the majority of our portfolio is biased towards the Southeast Of The UK, although we do own assets across The UK. It's definitely more concentrated today in the industrial warehouse and logistics sector and our office exposure, which was up 30% a year ago, we've brought down to 24% with the disposals that Sarah mentioned earlier.

[Michael Morris, Chief Executive & Director at Picton Property Income]

A good number of assets within the portfolio and a good number And that's really important as we think about diversifying the cash flow and the income security to provide some stability to that. The initial yield on the portfolio is just over 5%. We have contractual rent increases where there'd be neither rent freeze or step rent, takes it up to, I think, it's 6.2%, and the reversion yield is just under seven In the last twelve months, our portfolio delivered a property level return of just over 7%, excuse me, ahead of the wider market that was better both in income and capital terms. And that improvement in occupancy principally down to the disposal of key boys also helped.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Twelve year consecutive year that we've outperformed the wider market. And as we look back and benchmark against other real estate portfolios since launch in 02/2005, Our portfolio at the property level ranks eight out of 72 vehicles. So again, that's something we're quite proud of. This is just a breakdown of the valuation across the portfolio. And clearly, the impact of CapEx in the office sector has had a bearing on performance, but very much we see that as a sort of a future proofing measure.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And clearly, some of the upside of that will come through as the lease space in future. But the headline is that the industrial portfolio, which is the bulk of the portfolio and the retail and leisure trade returns and the office sector offset it, quite similar to the wider market. The headline being though that the offices that we sold, we sold at 5% premiums on average to book. So you can see the benefit of the disposal program that we undertook. Secondly, on this slide, it just talks about the change in valuer.

[Michael Morris, Chief Executive & Director at Picton Property Income]

One of the requirements to the public company is a rotation of valuers. That's something that we're having to do between March and June of this year. And it's unusual to have two companies look at a portfolio of assets at one moment in time. We did that with Knight Frank, who are our incoming valuer and also CBRE, who are the outgoing value. And I think the headline, which is relevant for investors, is the the minimum difference between those two firms.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And I think that that should be comforting to investors to sort of understand that our valuation is is is not well understood. Valuation is an estimate of a price, really. And secondly, we refinanced our RCF. This is following the year end, but a second set of eyes went on a number of those assets that were part of that security package. And again, the valuation range across three values is 2%.

[Michael Morris, Chief Executive & Director at Picton Property Income]

I mean, that this really is de minimis in in proxy context. So in terms of our own portfolio activity, I mentioned previously, occupancy is up, the disposals, the investments, and that's really led to a near 4% increase in ERVs and a 3% increase in contracted rent. So again, against this sort of quite difficult market backdrop, we've still been able to grow some some of these key metrics. And if you look in the in the blue box in the bottom right hand corner, you know, where we have taken or had rent reviews over the year, you know, so we're generally on a five year rent review cycle. You know, the fact that we've been getting on average rent 26% ahead of the previous rent just shows that reversion being captured and coming through.

[Michael Morris, Chief Executive & Director at Picton Property Income]

If we just look at the sectors in a little bit more detail, so the industrial portfolio, which, as I mentioned earlier, is just under twothree of the portfolio. 81% of our industrial exposure is through smaller, slightly more urban multilet industrial units. And then the balance is in distribution units primarily located in and around the Midlands, which is a sort of well recognized distribution hub. 70% in the Southeast and the balance across The UK. So again, biased to those areas with sort of stronger demographics, tighter land supply, complete competing land uses, etcetera.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Not much vacancy in the portfolio. We made one small acquisition, and this, again, reinforces that the ERV, is ahead of the contracted rent, and we've seen, like for like ERV growth of 3%. And the rent reviews here in the industrial sector just reinforcing that growth. The rent reviews here are 38% on average above the previous rent. We undertook a couple of transactions that we thought were worth highlighting in some of our sort of within the M25 assets.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And, you know, I just refer you to the the the settlements that we've achieved on some of these rent reviews, you know, up closer to 50 rental increases as the rents have been reset at either lease events being rent reviews or actually on expiry of leases. So we've geared leases on lease renewals. The office portfolio is split really three ways between the offices we own in Central London, the offices we own in the Southeast and then the rest of The UK. As I mentioned previously, more void in this part of the portfolio, which is not unexpected, but our occupancy of 86% is is well ahead of the market. And as we've mentioned previously, we've been investing specifically around asset transactions, I.

[Michael Morris, Chief Executive & Director at Picton Property Income]

To facilitate releasing at higher rents or indeed to ensure that we get good occupier retention going forward. And that's the output of it this year. It's 4% ERV growth across our office portfolio, which is, I think, quite a good number, all things considered. Just some examples of this. So in Bristol, we refurbished space.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Part of that refurbishment was tied in with an existing occupier expanding. So that was sort of derisked in terms of the CapEx spend. But some of the space we've refurbished speculatively, It's not yet signed up. We've we've definitely got interest, and we're sort of progressing through legal on that. In Milton Keynes, we structured it slightly differently there.

[Michael Morris, Chief Executive & Director at Picton Property Income]

We had conversations with occupiers in advance of CapEx works, and so we're on-site at the minute upgrading M and E. But we've done that on the basis of occupiers pre committing to to stay if we do work. So now again here, you know, the the new rent that we've got here is a third higher than the RV, and it just proves that point, I think, that occupiers will pay for the right quality space. If it's the right space, people will pay. If it's not the right space in this market with the degree of oversupply, you'll struggle.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And then Farring is just another interesting example. So the three assets we sold last year, we've secured planning on for alternative uses. Planning in Farringdon is not converting the offices to residential, but actually, we've got planning to put residential on the roof of the building. So if you just sort of think it through, previously, there's no value ascribed to roof space. Literally, in the last few weeks, we've got planning permission to put 13 flats.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And so as we sort of look at that asset today, there's a residual value now ascribed to the development value of those other parts. And that's something that we're working through at the minute as to how we take that scheme forward. In terms of retail and leisure, it's a relatively small component part of the portfolio. It's an area that we've been heavily underweight as we've seen the disruption from online and seen the disruption from COVID. But we are more positive about this sector going forward.

[Michael Morris, Chief Executive & Director at Picton Property Income]

The devil is in the detail in terms of the towns and the locations you're in. And this is borne out really by the ERV growth we've seen in our own portfolio, of which, again, slightly skewed because twothree of it is in retail warehousing, which has seen better rental growth, better levels of occupancy. The comment I would make about the sector is though even though in the short term, we're seeing rental growth, we are in a place where the contracted rent is still slightly higher than ERV. And that goes back to my point earlier that rents are below, levels in February. Gossip and Sheffield, lease regears again where we've got higher rents relative to ERV.

[Michael Morris, Chief Executive & Director at Picton Property Income]

But like I say, that's not meaning income growth. It's just simply getting rents ahead of the market, and and, you know, that's had a valuation impact.

[Saira Johnston, CFO at Picton Property Income]

So moving on to just talk about a couple more points on the CapEx projects. I think it's fair to say we've invested significantly to upgrade the overall portfolio. But during the year, we've really focused on six projects where we've been looking to improve the occupier appeal and also alongside that, improve energy efficiencies across the portfolio. And you'll see from the a doughnut on the slide that we've been focusing our spend on the office assets. We've explained why it's really to improve ERVs, improve the rents that we're achieving on those and also trying as best we can to link that spend to lease events.

[Saira Johnston, CFO at Picton Property Income]

And for four of the six projects that we've outlined there, we've achieved that. So we're linking our spend. We're trying to make sure that we achieve the best return on cost for our spend across our portfolio. So thinking about the timing of the lease events, thinking about retention and reletting is really key when we think about capital investment. And alongside that, we've been looking at how we best achieve our net zero pathway and thinking about practical solutions for that across the portfolio.

[Saira Johnston, CFO at Picton Property Income]

And that involves the key themes such as improving the fabric of our buildings. That's mainly on our industrial assets through roof upgrades, insulation. And for our office assets, it's removing gas, upgrading heating and cooling systems. But the key point of note here is looking at the improvement of the EPCs over a longer period of time, and we're pleased that at the end of the year, we've increased the proportion of ATC ratings to 83%.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Thank you, Tara. In terms of the portfolio vacancy, I've touched on this a little bit as we went through the sector slides. But we've got GBP 3,400,000.0 of void currently across the portfolio. Just to be clear, last year, that number was GBP 5,300,000.0. So you can see the reduction that we've made over the year through both releasing and disposal strategy.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Probably not unsurprisingly, we've got more vacancy in the office sector. I think what's important to note though is quite a bit of the void in that office sector is not where we've got whole buildings vacant. It just might be where we have a a floor vacant within a wider building. So we know there's good occupational demand. We know tenants are staying and renewing.

[Michael Morris, Chief Executive & Director at Picton Property Income]

We just now have to lease the remaining space. We've got about 300,000.0 of that, under offer at the minute. And in Milton Keynes, we're on-site to refurbish and upgrade, and that will bring that through also.

[Saira Johnston, CFO at Picton Property Income]

Just thinking about our reversion, so really bridging the gap between the 5.2 initial yield on the portfolio and the 6.8% reversion rate yield, We see that in a number of parts, and that's the first chart on the slide. So rent free from set rents effectively already contracted and in our earnings numbers. And then we look at vacancy, which Michael has talked about, where we're investing in our building to maximize their appeal to our occupiers. And the final part of that is the reversion in the underlying lease leases that we have with our occupiers. And when we think about reversion, we think about two things.

[Saira Johnston, CFO at Picton Property Income]

We think about the timing. So when do these events occur in order for us to unlock or crystallize that reversion, and that's typically at rent reviews or lease expiries or breaks. And we think about what sectors that reversion is in. So where do we see those ERVs growing to and at that point in time. So as of today, we see we've got 38% of that reversion linked to lease events in the next year and then 2315% for the year after.

[Saira Johnston, CFO at Picton Property Income]

So the chart, the second chart is showing the income at risk effectively breaks and expiry in the next twelve months, twenty four months or thirty six months and looking at what sector that is and the reversionary potential within that. And the key point of note there is the the timings and the sectors that those are coming through in the next twelve months, we see as a real opportunity. Obviously, we're here trying to balance the time between the contracted rent and the income at risk and then the new letting rent reviews or regearing coming in.

[Michael Morris, Chief Executive & Director at Picton Property Income]

So really sort of in in summary, we are you know, just because we passed the year end doesn't lead to a change in strategy, but it clearly we've we've had time to reflect. We have a new chair join us this year and looked at a number of factors. We are going to continue to capture the reversion. There's definite income growth within the portfolio, and we're absolutely clear that we want to continue to deliver sort of higher quality income going forward. And certainly, in the listed market, there's probably a higher rating attached to higher distributions rather than just a pure total return play.

[Michael Morris, Chief Executive & Director at Picton Property Income]

So we want to continue to do that, investing into the portfolio to capture and drive rental growth and valuation growth is key. And there is, however, a balance between optimizing income and value. So some transactions that we'll undertake are going to be income focused and some are value creation. And I spoke earlier about Farrington and the upside there. Opportunistic disposals.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Well, yes, we made disposals last year. Those have clearly improved earnings through debt repayments and share buybacks, but we're going to continue with that. And there's a focus for us, particularly on some of the lower yielding assets. And if we can reinvest and recycle those to grow income further, I think that's attractive. We've got this very strong debt book, Sarah mentioned, that it puts us in a good place just following the quarter or year end rather.

[Michael Morris, Chief Executive & Director at Picton Property Income]

We refinanced our RCF. That's currently undrawn. The cost of debt there is more expensive than balance that is there and available both operationally and clearly dependent upon opportunities that might arise in the market moving forward. In terms of capital allocation, we're clearly, mentioned the buybacks. Over the year, we bought back 7,500,000.0, between the March year end and yesterday, I think it was, we bought back 4.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And we are gonna continue with that program, you know, this disconnect in the share price. Although it's narrowed and and to be fair, there's a disconnect across the wider real estate sector. We're really keen to try and take advantage of that and start to narrow that discount so shareholders see the benefits of that. So I think that's the end of the presentation. It's now time for Q and A.

[Michael Morris, Chief Executive & Director at Picton Property Income]

I'm going to quickly plug in my iPad. It doesn't die.

[Operator]

Great. Great. Thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just both in the Q and A tab that's situated on the top right corner of your screen. But just while the company takes a few moments for you, the questions that have been submitted today, I'd like to remind you the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. We have received questions throughout today's presentation. And what I'll do, Mark, is I'll hand back to you to run through the Q and A, and I'll pick up from you at the end.

[Michael Morris, Chief Executive & Director at Picton Property Income]

You. So we've had a couple of questions, and let me try and summarize them and respond. So the first question is, well, with shares repurchased at a 33% discount to NAV, how does management view this persistent disconnect between the share price and the NAV and what's the long term strategy to close the gap? Well, that's a valid point. The shares that we bought back during the year were bought back at a 33% discount.

[Michael Morris, Chief Executive & Director at Picton Property Income]

The shares that we bought back post year end have been bought back at a 25% discount. So we see clear share price appreciation since the buyback was initiated. I don't think you can solely use the share buyback program to reduce discounts to zero, but it does have, in my view, a positive impact. And as I mentioned just a minute ago, we're going to continue with that. We have surplus proceeds from disposals.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And our view is that the discounts in the sector will generally narrow, picked as well. And if we can keep delivering at a property level, the debt book is strong. And if we can use that buyback program, we will start to and indeed, we already have started to narrow that discount to what is an acceptable level. The next question is around sort of how do we feel about a diversified strategy. There have been a number of weeks that have left the sector that have had diversified approach.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And, equally, there's a number of, you know, a number of REITs that run clear sector strategies. I mean, I think I've mentioned a couple of things to that. Although we're a diversified REIT, I think we're quite opportunistic in our approach. So we don't run a diversified REIT purely to be diversified. We run a diversified REIT that allows us to adapt and change to market conditions.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And the slide right at the beginning talks to how that portfolio composition has changed over time. And there are clearly times in the market where certain sectors deliver very strong performance. Equally, there are times in the market where returns are less about sectors, but more about what as a owner of real estate you're doing to those assets. So, you know, be be it planning permission, be it lease restructuring, be it asset refurbishments and upgrades. So we're comfortable with the idea of being opportunistic and being able to adapt the business for the long term.

[Michael Morris, Chief Executive & Director at Picton Property Income]

What one sometimes doesn't see looking at the listed market today is all the businesses that over the last ninety years that we've been running are no longer here. And there are plenty of sector specialist businesses that are no longer in the listed market for for a multitude of reasons. There's another question here on sustainability of occupancy, which is a good question. Occupancy today is 94. A year ago, it was 91.

[Michael Morris, Chief Executive & Director at Picton Property Income]

I think in the twenty years nearly that Picton has been running, we've never had occupancy above 97%. So we will always have a structural void within the portfolio. But I think what the way we look at it is is occupancy is likely to move up and down, up and down, up and down. And we get space back, we release, and we have that total churn within the business. But I firmly believe that occupancy between maybe 93 to 97% is a good acceptable range.

[Michael Morris, Chief Executive & Director at Picton Property Income]

It very much depends on these events. But our own experience is if you're in the right sectors, which we've actually been for quite a period of time, you know, space will release pretty quickly. And that's the key is having space that you can find occupiers for quickly. And you can see that with our current portfolio vacancy, there's very little void in the industrial sector, and that's where twothree of our assets are located. And then I think this might be the final question, but there's a question about, capital expenditure and, how do we think about required returns for CapEx.

[Michael Morris, Chief Executive & Director at Picton Property Income]

Sorry, the screen disappeared outside. So hopefully, you can still hear us about required returns for CapEx and share buybacks. So I think there's two discrete questions there. But to my mind, they're slightly interlinked because, actually, required returns for CapEx, to my mind, is a property decision, and we need to think about, the upside of doing those works or equally the downside of not doing those works. And as we've demonstrated, I think, through the the slideshow, quite a number of the CapEx projects that we've been doing have been linked with occupier transactions.

[Michael Morris, Chief Executive & Director at Picton Property Income]

So that clearly derisks the CapEx spend because it's generating a return through those lease regears and restructuring. And Sarah said broadly, we'd be looking at a 10% plus return on cost. But what we've been doing in the year is not only investing that money, but also doing share buybacks. So it's not an it's not an either or. It's it's a both.

[Michael Morris, Chief Executive & Director at Picton Property Income]

And, you know, clearly, the returns that are generated from buying shares back at a discount to NAV look very attractive on the face of it. You you've got all that credit card discount. But what we want to continue to do is invest in and maintain or indeed as this year, we've done again, grow the NAV so that you're buying through the buybacks you know, in a a proper discount as opposed to something that might be illusory or or under pressure. So I think those are the questions. Thank you, And I'll hand back to Investor company.

[Operator]

That's great. Thank you very much for answering those questions from investors. Of course, the company can review all the questions submitted today, we will publish those responses on the Investor Meet company platform. Just before redirecting investors to provide you the feedback, it's particularly important to the company. Michael, could I just ask you for a few closing comments?

[Michael Morris, Chief Executive & Director at Picton Property Income]

Yes. Just just to say, I think, you know, we've we've demonstrated, I think, this year with these results, you know, success across multiple layers within the business. So in terms of, you know, the buyback program, I think, is really important as we think across shareholder value. I think what we've done on our debt book and reducing financing costs, you know, shows corporately, you know, that we're thinking about leverage and ensuring that we're we're in a good place at a property level. I think there's been lots of good things and indeed investment for the future going forward.

[Michael Morris, Chief Executive & Director at Picton Property Income]

So, I'd urge anyone that hasn't to to take a look on our website. You know, our annual report will be on there, and there's a lot more detail in there. And equally, sort of happy to take any questions if you've missed anything on this presentation. So thank you all for your time.

[Operator]

That's great. Thank you once again for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback, and the management team can better understand your views and expectations? On behalf of management team of Pick n Property Income, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Participants

Executives

• Michael Morris, Chief Executive & Director
• Saira Johnston, CFO