Occupier focused,
Opportunity led.
Picton Property Income Limited
Annual Report 2022
Welcome
to our 2022
Annual Report
Strategic Report
Highlights
2
Sustainability and Net Zero Carbon
4
Chair’s Statement
6
8
Chief Executive’s Review
12 Business Model
14 Our Marketplace
20 Our Strategy
22 Our Strategy in Action
28 Key Performance Indicators
32 Portfolio Review
44 Financial Review
48 Principal Risks
53
TCFD Statement
58 Section 172 Statement
60 Being Responsible
Our purpose
To be a responsible owner of
commercial real estate, helping our
occupiers succeed and being valued
by all our stakeholders.
Visit our website picton.co.uk
Leadership and Purpose
Governance
68 Chair’s Introduction
70 Board of Directors
72 Our Team
74
80 Division of Responsibilities
82 Composition, Succession and Evaluation
85 Audit, Risks and Internal Controls
91
109 Directors’ Report
Remuneration Report
Independent Auditor’s Report
Financial Statements
113
117 Consolidated Statement of Comprehensive Income
118 Consolidated Statement of Changes in Equity
119 Consolidated Balance Sheet
120 Consolidated Statement of Cash Flows
121 Notes to the Consolidated Financial Statements
Additional Information
139 Supplementary Disclosures
143 Property Portfolio
144 Five Year Financial Summary
145 Glossary
146 Financial Calendar
147 Shareholder Information
Occupier focused,
Opportunity led.
Through our occupier focused, opportunity led
approach, we aim to be one of the consistently
best performing diversified UK REITs.
Sustainable thinking, responsible business
A responsible and ethical approach to business is essential
for the benefit of all our stakeholders and understanding
the long-term impact of our decisions will help us to
manage risk and continue to generate value.
Our occupier focused, opportunity led approach ensures
we actively manage our assets, which helps to maintain
high occupancy and create space for our occupiers
to succeed.
We believe that sustainability must be fully embedded
into all of our business activities.
Our sustainability policy guides our long-term sustainability
priorities, including tackling environmental challenges,
providing sustainable buildings for our occupiers and
engaging with our stakeholders.
We are a member of the Better Buildings Partnership
and a signatory to the Better Buildings Partnership
Climate Commitment.
Our strategy
In order to deliver on our purpose, we have in place
three distinct strategic pillars: Portfolio Performance,
Operational Excellence and Acting Responsibly. These
pillars include a range of strategic priorities which guide
the direction of our business and are regularly reviewed.
Read more on pages 20–21
Picton Property Income Limited Annual Report 2022
01
Our business
We acquire, create and manage buildings for around
400 occupiers across a wide range of businesses.
By applying insight, agility, and a personalised service,
we provide attractive, well-located spaces to help our
occupiers’ businesses succeed.
We have a long-term track record, outperforming the
MSCI UK Quarterly Property Index, over one, three, five
and ten years, and since inception.
Our diversified portfolio consists of 47 assets, valued at
£849 million as at 31 March 2022.
60%
Industrial
30%
Office
10%
Retail and Leisure
Read more on pages 12–13
Strategic ReportGovernanceFinancial StatementsAdditional Information Highlights
Financial highlights
Record results demonstrate success
of strategy and business model.
Read more on the following pages:
Portfolio Review on pages 32 to 43
Financial Review on pages 44 to 47
Strong financial performance
Outperforming property portfolio
Profit after tax
£147m
2022
2021
2020
34
23
Net assets
£657m
Property valuation
£849m
Total property return
24.3%
147
2022
2021
2020
657
528
509
2022
2021
2020
849
682
665
2022
2021
2020
7.3
5.3
24.3
Highest profit recorded
since launch in 2005
An increase of 24.4%
Like-for-like valuation increase
of 21%
Outperforming MSCI UK Quarterly
Property Index of 19.6%
Earning per share
27.0p
2022
2021
2020
6.2
4.1
Total return
28.3%
2022
2021
2020
6.6
4.5
NAV per share
120p
Like-for-like increase
in passing rent
Like-for-like increase in
estimated rental value
2.1%
5.4%
27.0
2022
2021
2020
120
97
93
2022
2021
2020
2.1
1.9
2022
2021
2020
1.1
1.3
1.2
5.4
Total shareholder return
‒ Outperformed MSCI UK Quarterly Property Index
18.7%
for ninth consecutive year
‒ Upper quartile outperformance against MSCI over
three, five and ten years, and since inception
28.3
2022
2021
2020
0.0
3.6
18.7
‒ Selective investment activity:
‒ Two industrial assets acquired for £25.0 million
‒ One retail asset disposal for £0.7 million,
16% ahead of March 2021 valuation
‒ Rent collection back to pre-pandemic levels
‒ Increased dividends paid of £18.4 million,
with dividend cover of 115%
‒ Loan to value ratio maintained at 21% with
significant headroom against loan covenants
‒ Refinanced existing debt facility increasing
borrowings by £49 million while reducing
the cost of debt and extending the term
02
Picton Property Income Limited Annual Report 2022
EPRA measures
120p
EPRA NTA
per share
(2021: 97p, 2020: 93p)
119p
EPRA NDV
per share
(2021: 93p, 2020: 88p)
131p
EPRA NRV
per share
(2021: 105p, 2020: 102p)
£21.2m
EPRA earnings
(2021: £20.1m, 2020: £19.9m)
3.9p
EPRA earnings
per share
(2021: 3.7p, 2020: 3.7p)
4.1%
EPRA net
initial yield
(2021: 4.8%, 2020: 4.8%)
4.8%
EPRA ‘topped-up’
net initial yield
(2021: 5.5%, 2020: 5.4%)
7.2%
EPRA
vacancy rate
(2021: 8.8%, 2020: 11.5%)
26.0%
EPRA cost ratio1
(2021: 26.9%, 2020: 28.3%)
19.9%
EPRA cost ratio2
(2021: 20.8%, 2020: 20.2%)
1 Including direct vacancy costs
2 Excluding direct vacancy costs
Occupier focused asset management Responsible stewardship
Occupancy
93%
2022
2021
2020
93
91
89
EPC rating
71%
2022
2021
2020
71
64
55
Net zero carbon
2040
Target date
Increased occupancy
Improved EPC ratings A-C
Asset management
transactions completed
76
Signatory to Better Buildings Partnership
Climate Commitment
‒ Pathway to net zero carbon published
‒ This covers both operational and
embodied emissions
‒ 34 lettings or agreements to lease, 8% ahead of ERV
‒ 21 lease renewals or regears, 3% ahead of ERV
‒ 12 rent reviews, 7% ahead of ERV
‒ 9 other asset management transactions
Invested into asset refurbishment,
upgrades and repositioning projects
£10m
Picton Property Income Limited Annual Report 2022
03
Strategic ReportGovernanceFinancial StatementsAdditional Information
Sustainability and Net Zero Carbon
London
Stanford Building
04
Picton Property Income Limited
Annual Report 2022
w Sustainable thinking,
responsible business
This year we published our
net zero carbon pathway and
became a signatory to the
Better Buildings Partnership
Climate Commitment.
2040
Net zero carbon
for operational and
embodied emissions
300kgCO2e/m2
Embodied carbon target
for major refurbishments
by 2040
Visit our website
picton.co.uk/sustainability
Read more in Being Responsible
section on pages 60–66
Our net zero carbon pathway
Our pathway sets out our approach to tackling
climate change and priority actions towards
decarbonising our portfolio.
We have committed to achieving net zero carbon
for our operational and embodied emissions by
2040, which is ten years ahead of the UK
Government target.
Our pathway sets out our plan to achieve net
zero carbon for both our own and our occupiers’
emissions by 2040 and our strategy for achieving
this. Our target covers the whole life carbon of our
assets, including the energy use of our occupiers.
To ensure credibility and transparency in our
approach, our net zero carbon pathway aligns with
the Better Buildings Partnership’s (BBP) Net Zero
Carbon Pathway Framework and the UK Green
Building Council’s (UKGBC) net zero carbon hierarchy.
To meet our commitment, we have set targets
for whole building energy efficiency for each
asset type and embodied carbon related to
major refurbishments.
By 2040, all operational emissions will be reduced
as much as possible through energy efficiency
measures and renewable energy, with any residual
emissions offset.
From 2040 onwards, all completed refurbishment
projects will have reduced their embodied and
operational carbon as much as possible, with any
residual emissions offset upon practical completion.
We value collaboration in driving industry-wide
change and facilitating knowledge-sharing on
best practice. To ensure our continued alignment with
the BBP requirements, we will continuously monitor
our performance and report annually on our progress.
Picton Property Income Limited Annual Report 2022
Picton Property Income Limited Annual Report 2022
05
05
wStrategic ReportGovernanceFinancial StatementsAdditional Information Chair’s Statement
A record year
for Picton
Our well-positioned portfolio
continues to deliver on our
longer-term track record
of outperformance.
I am delighted to
report that Picton has
delivered a total profit
of £147 million, resulting
in the most successful
year since our launch
in 2005.
Lena Wilson CBE
Chair
06
Picton Property Income Limited Annual Report 2022
I am delighted to report that Picton has delivered a total
profit of £147 million, resulting in the most successful year
since our launch in 2005.
As lockdown restrictions were lifted, the economy
rebounded. Driven by improving income and marked
capital growth, our portfolio was well positioned. The
majority of our assets saw a significant improvement
in value.
Almost all our key performance indicators have improved
from last year. Further details on these are set out later in
this Report.
Performance
We have delivered a total return of 28.3% alongside a
5.5% increase in EPRA earnings, which has enabled us
to increase dividends accordingly.
Our total shareholder return was 18.7% and whilst it saw
a healthy improvement during the year, like many listed
real estate companies, our share price currently remains
below our net asset value.
We have delivered property performance ahead of the
MSCI UK Quarterly Property Index. This continues to
reinforce our strong longer-term track record, achieving
upper quartile property performance against this Index
over three, five and ten years, and since inception.
Property portfolio
Our outperformance at a property level has principally
been driven by our high exposure to the industrial,
warehouse and logistics sector, but we have also
benefitted this year from a recovery in the value
of our retail warehouse assets. Performance in the
office sector has been more muted, but our focus
on asset management has helped to offset a wider
market slowdown.
Encouragingly we have had leasing success across all
three sectors, and grown occupancy to 93% from 91%
a year ago. This has had a positive impact in terms of
void holding costs, which will flow into future years.
In separate transactions, we acquired two multi-let
industrial assets and disposed of one small high street
retail asset. Although at the early stage of our asset
management plans, our acquisitions have already
delivered valuation and income growth.
Capital structure
During the year we have extended and increased
our longer-term borrowings by £49 million, insulating
the business from further rising borrowing costs.
Our new debt facility is at a lower cost than our
existing borrowings and we incurred one-off
costs in resetting the facility to a lower overall rate.
By substantially repaying our revolving credit facility,
we have future operational flexibility and firepower.
At the year-end borrowings totalled £219 million, with the
loan to value ratio broadly constant over the year at 21%.
Dividends
On the back of strong leasing activity and improving rent
collection, we have increased the dividend twice during
the period. We have restored our distributions back to
their pre-pandemic level and we can report a healthy
dividend cover of 115% over the period.
Our aim is to continue to grow dividends on a progressive
basis, which in the short-term will be driven by further
improvement in occupancy and rental growth,
predominantly coming from our industrial assets.
Sustainability
We have made significant progress on our sustainability
priorities, recently publishing our plan to become net
zero carbon by 2040.
Our net zero carbon pathway ambition of 2040 is ten
years ahead of the Government target and although our
initial focus will be on reducing Scope 1 and 2 emissions,
we intend to work with our occupiers to reduce the
most significant part of the portfolio’s emissions, which
come under Scope 3. We will report regularly on
our progress.
I am grateful to Maria Bentley who has agreed to act
as Board champion and oversee the work with the
Executive Committee on sustainability.
Outlook
We are acutely aware of the new challenges emerging
both directly and indirectly from the conflict in Ukraine.
Rising energy, food and commodity prices, along with
supply chain disruptions and labour market shortages
are becoming increasingly visible and will impact
economic growth.
We are already seeing rising interest rates and gilt yields
have risen this year. Real estate has both an income and
capital element and can offer inflation protection as
evidenced by our performance this year, particularly in
areas where supply is constrained, and demand enables
rents to continue to rise.
As a UK diversified REIT we have greater flexibility with
regard to asset selection giving us the ability to position
the portfolio for the long-term. We will continue to explore
opportunities for growth, but this must be on terms that
are attractive to our shareholders and with the right
quality of asset. We remain disciplined in our approach.
As in previous years we have invested in our assets and
upgraded the quality of accommodation. This approach
is increasingly relevant to a discerning occupier base, and
will enable us to grow income.
Whilst returns in 2022 are likely to soften from those seen
over this reporting period, we can be confident that we
have a portfolio that will continue to see further growth.
Lena Wilson CBE
Chair
25 May 2022
Picton Property Income Limited Annual Report 2022
07
Strategic ReportGovernanceFinancial StatementsAdditional Information Chief Executive’s Review
Strong operational
performance
A successful year of record profit
delivered against a backdrop of
reduced pandemic-related disruption.
08
Picton Property Income Limited Annual Report 2022
Growing occupancy and income profile
We have improved occupancy this year, which has led to
increased income. Our rent collection over the period has
averaged 98% and was close to 100% for the December
2021 and March 2022 quarters. This higher level of
income has enabled us to increase the dividend twice
during the year, which we cover in more detail in the
Financial Review.
Enhancing asset quality
During the year, we have invested £10 million in
upgrading our assets. The impact of some of this activity
is very obvious, such as the creation of Rum Runner
Works, at Regency Wharf, in Birmingham where we have
converted leisure space into offices; however, some of
the less visible work is equally important as it aligns to
our sustainability targets. For example, the complete
upgrade and removal of our gas-fired air-conditioning
system at 50 Farringdon Road, London, will help with
our net zero commitments and improve energy
efficiency for our occupiers.
In our refurbishments at Angel Gate, London, 180 West
George Street, Glasgow and Longcross, Cardiff, we have
also focused on improving occupier amenities, creating
more communal and informal space with outside areas
where possible.
Outperforming MSCI
We have outperformed the MSCI UK Quarterly Property
Index for the ninth consecutive year. This year, across
the Index, the range between lower quartile and upper
quartile returns was the widest on record at 10.7%.
We delivered a portfolio return of 24.3% compared to
the Index of 19.6% and upper quartile of 24.9%. Whilst
we are just below upper quartile for the year, we have
still delivered upper quartile returns against the Index
over three, five and ten years, and since inception.
Of note, our industrial assets delivered a total property
return of 38.2%, our retail assets delivered 25.6%, which
comprised retail warehousing delivering 33.4%, and our
office assets delivered 4.4%.
120p
Net asset value per share
27p
Earnings per share
We have outperformed
the MSCI UK Quarterly
Property Index for the
ninth consecutive year.
Michael Morris
Chief Executive
We have had a very successful year, delivering a record
profit against a backdrop of reduced pandemic-related
disruption. Our clear purpose and strategic priorities
have enabled us to focus on what matters.
To reflect the closer integration of sustainability into
our business model and our commitment to achieving
net zero carbon, we have redefined our Purpose, which
now states:
‘To be a responsible owner of commercial real estate,
helping our occupiers succeed and being valued by all
our stakeholders.’
We have also added two strategic priorities, specifically
relating to the work we are doing to reduce our impact
on climate change:
‒ Adapting to and mitigating the impact of climate
change; and,
‒ reducing emissions to become carbon net zero in
or before 2040.
This makes it clear that the focus of our sustainability
strategy is aligned with our occupiers and other
stakeholders.
Our strategic priorities are detailed on pages 20-21,
and a summary of our progress is detailed below.
Portfolio performance
Income and capital growth
We have seen exceptionally strong portfolio growth over
the period. This has been predominantly driven by our
industrial, warehouse and logistics assets where both
rental and capital values have continued to move higher.
Our retail portfolio, which now comprises 65% retail
warehouse assets, has also seen strong valuation growth,
with a reversal of some of the writedowns seen during the
pandemic. Our office assets have not seen the valuation
growth we might have expected, especially recognising
the leasing success in this sector. This in part reflects
perceived changes in working habits and costs associated
with improving sustainability credentials.
We will seek to offset increasing cost pressures where
we can attract premium rents, either due to limited
supply or by providing high quality space.
Picton Property Income Limited Annual Report 2022
09
Strategic ReportGovernanceFinancial StatementsAdditional Information Chief Executive’s Review continued
One of the advantages of our
diversified approach is our ability
to position the portfolio as market
conditions dictate.
Michael Morris
Chief Executive
Operational excellence
Efficient platform
We continue to run the business as efficiently as possible
and have maintained our cost ratio at 1.0%. We have a
small but very dedicated team and use external resource
as appropriate. We are not immune from rising costs and
it is clear that sustainability focused measures will add to
both our workload and costs. We expect to recruit further
this year to support our transition to net zero carbon.
Adaptable business model
One of the advantages of our diversified approach is our
ability to position the portfolio as market conditions
dictate. As returns become more convergent we are
looking more widely across sectors. During the year we
acquired two adjoining city centre industrial estates, off
attractive pricing. Our most recent acquisition post period
end was an office and retail asset in London.
This year we introduced SwiftSpace, our flexible lease
offering, in response to changes in occupier demand,
particularly as we face increased competition from
serviced office providers. Our solution provides fast,
flexible, inclusive leases, which we are offering in our
smaller multi-let offices.
Earnings growth
Our earnings per share of 27.0p are significantly higher
than the preceding year, reflecting the growth in the
portfolio value. Our EPRA earnings are 5.5% higher
reflecting the enhanced income position.
10
Picton Property Income Limited Annual Report 2022
Capital structure
We have recently completed the refinancing of one of
our long-term debt facilities, which not only increases the
maturity by four years until 2031, but also reduces the
overall interest rate. As part of the same transaction, we
increased our borrowings by £49 million, which has allowed
us to repay most of our revolving credit facility and gives
us future financial flexibility. Recognising the asset value
growth over the period, the loan to value ratio remained
stable at the year-end at 21%.
Growth and economies of scale
We have seen growth this year in two forms: firstly, the
valuation growth from the portfolio, which with the use
of gearing has increased net assets and secondly, through
acquisitions. We have made £25 million of acquisitions,
which are earnings accretive, although during the period
we have been impacted by stamp duty and other
transaction costs.
Within our Interim results, we expressed a desire to grow
and highlighted the wide discounts across the listed REIT
sector, as well as some of the challenges in the UK real
estate open ended sector, which are still prevalent. While
we have not yet concluded any transactions, we have been
proactive in our dialogue with suitable prospects. We will
continue to advocate for change, but remain selective to
ensure enhanced future performance.
Acting responsibly
Values and alignment
Ultimately, the performance of the business is delivered
by those who work here. Having a small team means
that we are able to operate quickly and efficiently with
clear objectives that are aligned to remuneration. Our
values of being principled, progressive and perceptive
have guided us through the challenges of this year.
We have broadened our team objectives and asked
everyone, irrespective of their role, to help to reduce
our impact on the environment.
Working closely with our occupiers
We have spent much of this year focused on a return to
normal working practices, as have our occupiers. We have
worked with many occupiers to help them rightsize their
business. This has enabled us to retain income and de-risk
future lease events. We have undertaken 12 transactions
where we have extended leases or enabled occupiers to
remain in our buildings.
24.3%
Total property return
28.3%
Total return
The team is aligned with the need to continue to
enhance the portfolio and mitigate any risks from
changing occupier habits or climate change. Our future
engagement with occupiers and communication
of our plan will be crucial moving forwards.
Macroeconomic events are likely to dampen a further
recovery in property values, but despite this we believe
that the right assets will remain attractive to occupiers
and investors alike. We have created a quality portfolio,
that is well managed and offers scope to continue
to grow both the income and capital position.
Michael Morris
Chief Executive
25 May 2022
Sustainability
We have devoted significant resource this year to further
integrating sustainability within our business model.
Specifically, much of the year was spent considering
climate-related risks and creating a plan to mitigate these.
In addition, we have been preparing our net zero carbon
pathway, which is now published, and sets out a clear
direction for the business as we aim to meet our 2040
target. The majority of the team have benefitted from
specific training in this area and contributed to the
formulation of our net zero carbon pathway. We have held
externally facilitated workshops on relevant sustainability
issues, alongside an internal workshop to ensure that the
team is appropriately briefed on our future plans.
Outlook
We are positive about our future. Although we have had
considerable letting success during the year, we can still
increase income by improving occupancy. Most of the
assets are now seeing stabilised or increasing values.
In the industrial sector, we are generally seeing rental
growth that is ahead of inflation and believe it is likely
that growth will continue, especially if construction
costs continue to rise and this impacts supply.
Picton Property Income Limited Annual Report 2022
11
Strategic ReportGovernanceFinancial StatementsAdditional Information Business Model
Our business model
Our business model creates value
through owning a portfolio that
generates a diversified and stable
income stream. We have the flexibility
to adapt to changing market conditions
and so deliver value to our stakeholders
through the property cycle.
What makes us different
Our long-term track record
of outperformance
We have outperformed the MSCI UK Quarterly
Property Index over one, three, five and ten
years, and since inception.
Read more on pages 32–33
Our diversified exposure to the UK
commercial property market, with flexibility
to adapt to changing market conditions
Our diversified property portfolio generates
income from around 400 occupiers across a
wide range of businesses, providing the
opportunity for income and capital growth.
Read more on pages 32–43
Our occupier focused and
responsible approach to business
Our occupier focused approach ensures we
actively manage our assets, maintain high
occupancy and create space for our occupiers
to succeed. Sustainability is integrated within
our business model and corporate strategy and
in the way we and our occupiers operate.
Read more on pages 60–66
12
Picton Property Income Limited Annual Report 2022
How we create value
01
Our business model is driven by knowledge,
expertise and research led decision making
Our in-depth understanding of the UK
commercial property market enables us to
identify and source value across different
sectors and reposition the portfolio through
the property cycle.
02 Stock selection and acquisition – buying
into growth assets, locations or sectors
We have established a diversified UK property
portfolio and while income focused, we will
consider opportunities where we can enhance
value and/or income.
03 Creating value through proactive
asset management
Our diverse occupier base generates a
stable income stream, which we aim
to grow through active management
and capturing market rental uplifts. Our
occupier focused, opportunity led approach
ensures we create space that meets our
occupiers’ needs in order to maintain high
levels of occupancy across the portfolio.
04 Selling assets to recycle into
better opportunities
We identify assets for disposal to
maximise value creation. Proceeds are
invested into new opportunities, or
used elsewhere within the Group.
nities
Selling assets to recycle
into better opportu
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Our business model
is driven by knowledge,
expertise and research
led decision making
03
Creating value through
proactive asset management
This is underpinned by:
Stakeholder
value
Shareholders
£147m
Profit after tax
Occupiers
93%
Occupancy
Communities
15
Charities supported
Our people
82%
Employee satisfaction score
The environment
71%
EPC ratings A-C
Risk management
Responsible stewardship
Our diverse portfolio and occupier
base spreads risk and generates a
stable income stream throughout the
property cycle. We adapt our capital
structure and use debt effectively
to achieve enhanced returns. We
maintain a covered dividend policy,
to generate surplus cash and allow
us to invest back into the portfolio.
We have a responsible and
ethical approach to business and
sustainability is embedded within our
corporate strategy. We understand
the impact of our business on the
environment and are committed
to creating and delivering value for
the benefit of all our stakeholders.
For more detailed
information on our
stakeholders, see our
Section 172 statement
on pages 58-59
Picton Property Income Limited Annual Report 2022
13
Strategic ReportGovernanceFinancial StatementsAdditional Information
Our Marketplace
Our marketplace
Inflationary pressures likely to subdue
post-pandemic recovery.
Economic backdrop
As Covid-19 concerns began to dissipate, the war in
Ukraine has become a fresh source of uncertainty.
The consequences of the sanctions on Russia and
embargo on Russian oil and gas are multifaceted. In the
UK, we are fortunately less reliant on Russian imports
than our neighbours in Europe but the added pressure
on household incomes as a result of commodity price
increases and persistent inflation will still be considerable.
UK GDP saw an annual rise of 7.4% in 2021 following a
-9.3% fall in 2020 and at the end of March 2022 was 0.7%
above its pre-pandemic level in December 2019. In the
short-term, the rate of economic recovery is expected to
be impacted on the supply side by disrupted supply chains
and shortages of goods and labour and on the demand
side by the cut in household incomes. Forecasters have
revised down their GDP growth expectations for 2022 to
reflect the impact of the crisis, which are now 3.8% for
2022 according to the Office for Budget Responsibility.
14
Picton Property Income Limited Annual Report 2022
Quantitative easing and Government stimulus during the
pandemic supported households and injected significant
capital into the economy. As lockdowns ended and more
and more businesses were able to reopen, consumer
demand increased but this was not always matched with
increases in supply, putting upward pressure on prices.
The 12-month CPI inflation rate hit a new 40-year high
of 9.0% in April 2022. The increase reflects the change
in Ofgem’s energy price cap in April causing a jump in
utility prices, alongside the rise in fuel and food prices as
the agriculture sector faced increasing cost pressures.
The Bank of England’s response to rising inflation has
been a series of base rate increases from a historic low
of 0.1% to 1.0% in May 2022, the highest level since
2009. Further rate increases are expected, together
with a programme of quantitative tightening.
Growth in average total pay (including bonuses) was
7.0% and growth in regular pay (excluding bonuses)
was 4.2% among employees in January to March
2022. In real terms, total pay increased on the year
by 1.4% and regular pay fell on the year by -1.2%.
In terms of demand, there is still momentum from the
reopening of the economy, particularly for the travel
industry which is one of the last to see restrictions
lifted. As workers have returned to the office, albeit
in a more flexible capacity, this will hopefully create
an increase in the consumption associated with
business travel, city centre retail and leisure activity.
Retail sales volumes are 4.1% above their level in February
2020, however did fall by -0.3% in the three months to April
2022, fuelling concerns that consumers are being hit by
affordability pressures. The proportion of online retail sales
stood at 27.0% in April 2022, remaining significantly higher
than the 19.9% level in February 2020 before the pandemic.
The end of the furlough scheme in September 2021 did
not have a significant impact on unemployment. The
unemployment rate has fallen below pre-pandemic
levels and job vacancies are at a record high. The
number of job vacancies in February 2022 to April
2022 rose to a new record of 1.3 million, an increase
of 0.5 million from its January to March 2020 level.
UK ten-year gilt yields have been on a generally upward
trajectory since December 2021, but remain relatively low
by historic standards.
House prices accelerated during the pandemic as changes
to the tax paid on property purchases were announced.
UK average house prices increased by 10.9% over the year
to February 2022. Rising interest rates are likely to dampen
the housing market to some extent in the short-term.
Despite the now more muted outlook for the UK economy
and the current inflationary environment, there are reasons
for cautious optimism. The Covid-19 pandemic has moved
into the rear-view mirror. With the vast majority of adults in
the UK fully vaccinated, restrictions have been lifted and
normality has largely resumed. In a global context the UK
remains a safe haven for international capital and posted
the strongest GDP growth of all the G7 economies in 2021.
UK property market
The speed and strength of the property market’s recovery
from the pandemic was better than expected. Although
the average returns are positive, there is still polarisation
between sectors and within subsectors, particularly retail.
According to the MSCI UK Quarterly Property Index,
commercial property delivered a total return of 19.6% for
the year ended March 2022, which compares to 1.1% for
the year ending March 2021. The stellar performance
was largely attributable to the continued growth in the
industrial sector and a recovery in values in the retail
warehouse subsector. All Property capital growth was
14.9% in the year to March 2022, significantly better than
the -3.2% recorded for the previous year. The income return
was 4.2%, slightly lower than the 4.5% recorded for the
preceding year.
The industrial sector had an extraordinarily strong year.
The industrial total return for the year ending March
2022 was 40.7%, with annual capital growth reaching
an all time high of 35.9% and an income return of 3.6%.
Industrial ERV growth for the period was 11.2%, with a
subsector range of 15.8% to 8.2%. Capital growth ranged
from 47.7% to 28.2% within subsectors. Equivalent yields for
industrial property now stand at 4.1% (March 2021: 5.0%).
The office sector continued to face a degree of
uncertainty over future demand levels and suffered an
additional setback in December 2021 as people were
once again advised to work from home in the face of
the Omicron wave. The office sector produced a total
return of 6.9% for the year to March 2022, comprising
3.2% capital growth and 3.7% income return. All
Office annual rental growth was 1.4% ranging from
2.4% to 0.9% within subsectors. Office capital growth
ranged from 6.5% to -0.6%. Equivalent yields for office
property now stand at 5.5% (March 2021: 5.8%).
The elevated rate of online sales over bricks and mortar
retail and oversupply of retail units continues to hamper
the retail sector as a whole, albeit some segments have
recently seen a return to positive capital growth. The retail
sector produced a total return of 14.9% for the year to
March 2022. This comprised capital growth of 8.9% and
income return of 5.6%. Rental values fell -2.0% over the
period, ranging from 0.6% to -7.0%. Retail subsector capital
growth ranged from 22.9% to -5.8%. The retail warehouse
subsector was the driver of growth, with increased demand
from investors pushing down yields. Equivalent yields for
all retail property now stand at 5.9% (March 2021: 6.7%).
According to Property Data, the total investment volume
for the year to March 2022 was £70.5 billion, a 66.5%
increase on the year to March 2021. The volume of
investment by overseas investors in the year to March 2022
was £33.0 billion, accounting for 46.8% of all transactions.
As the disruptive threat of the pandemic recedes, new
challenges for the property market are emerging from
the macroeconomic and geopolitical environment.
In times of uncertainty, UK property is often seen as a
safe haven for investment. During periods of increased
inflationary pressure property can provide a hedge in the
form of an opportunity to grow income through rental
growth and in turn generate capital growth. Certain
property types are more akin to acting as an inflation
hedge. At the current time, assets where demand is
strong and supply limited are likely to offer protection
through rising rental values, equally leases with fixed
or inflation linked leases will also provide support.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Our Marketplace continued
Market drivers
and impacts
The drivers of commercial property markets are complex
and can vary between sectors. The relationships between
the drivers described below are often interconnected, with
certain themes or trends spanning multiple drivers and
creating multifaceted impacts. For example, the systemic
shifts created by the Covid-19 pandemic, political unrest,
environmental degradation, social inequality, inflation,
and economic conditions have cross-dimensional
impacts on our operational environment.
Market driver
Socio-political
Impact
There is no doubt we are operating in a tumultuous period. With the
Covid-19 pandemic subsiding, the conflict and humanitarian crisis in
Ukraine and plight of refugees around the world are front and centre
of political agendas.
With the pandemic amplifying social injustices and inequalities, societal
value has moved up the corporate agenda. Companies are increasingly held
accountable for creating long-term positive impact to local communities and
the environment.
In the wake of the Covid-19 pandemic, global vaccine equality is vital
to help control the severity of future outbreaks and variants. In terms
of economic recovery, the pandemic amplified many social injustices,
from unemployment to access to affordable childcare, education and
health inequalities. There is growing recognition that we need to
transition to a fairer and greener economy.
Inflationary pressures and the rising cost of living are being felt by many.
Rising oil and energy prices have been amplified by the war in Ukraine
and sanctions on Russia.
The UK Government’s levelling up agenda involving investment in
infrastructure and creation of freeports will affect market drivers in
certain areas through tax benefits relating to property and business
rates, planning permission and tariffs.
Longer-term trends that impact the commercial property market
include but are not limited to; shifting global economic power, the
slowdown in economic growth in China and the impact on supply
chains of China’s zero Covid policy, the shifting demographics towards
an ageing population, the ongoing trend towards urbanisation and
the increasing population of cities.
Economic
The pandemic has changed the way in which we live, work and consume.
Certain trends, for example increased online retail spending and remote
working, are not expected to fully revert to pre-pandemic levels.
Remote working is evolving into a hybrid model, with many employers
wanting to stay flexible post-pandemic. This means not only working
from home, but flexitime, compressed hours, and other dynamic working
practices. For office occupiers this could mean changing requirements for
location, fit out, configuration and quality of space. The ‘new normal’ is still
being figured out and will depend on many factors, for example sector,
industry, workforce age/seniority level, company size and location.
In terms of demographics, the impacts of an ageing population are complex.
There are implications for the economy, labour force, fiscal balance and
real estate.
Urbanisation and population growth in cities brings a general increase in
demand for goods and services and for property from which to manufacture,
distribute and sell them.
The war in Ukraine poses multiple threats to the UK economy, from
trade links with Russia to a reduction in business and consumer
confidence, investment sensitivity to uncertainty and links to
inflation through rising energy costs and commodity prices.
The annual rate of inflation recently reached a 40-year high. The rising
price of gas and electricity following the increase in the cap on energy
prices and the rising price of motor fuel were significant contributors.
Any form of uncertainty has the potential to adversely impact economic growth.
The global pandemic is not over and there is the potential for further variants
to reduce vaccine efficacy and threaten public safety. In addition, some
aspects of the Brexit transition have not been finalised, the cost of living has
dramatically accelerated and heightened geopolitical tensions are not
conducive to improving business and consumer confidence. In times of
uncertainty, investors often turn to ‘real assets’ as a less volatile haven.
In addition, there was a transitory element to inflation, as it was anchored
to the pandemic years and the reopening of the economy following
lockdowns. Pay increases are not expected to keep pace, resulting in a
fall in real incomes. Property provides a hedge but for some sectors
more than others.
Despite the Omicron variant causing prolonged uncertainty in the winter
of 2021/22, GDP is now ahead of pre-pandemic levels. In the short-term,
it is expected that GDP growth will be dampened by heightened
inflation. There are also concerns on the supply side as bottlenecks due
to Covid-19, labour shortages and wider geopolitical issues affect the
global supply chain.
The degree to which real estate acts as an inflation hedge is a topic of debate.
Factors to consider are the length of investment period and point of
investment.
The speed at which rents keep pace varies across property sectors. For
example, recently, industrial rental growth has comfortably outpaced CPI
inflation. There is also a link with property values through rental and income
growth. The gap between property yields and risk-free gilt yields is a crucial
measure in the attractiveness of property investment.
The Bank of England has responded to rising inflation by increasing interest
rates, with further rises expected in the short-term. Despite the increases,
interest rates remain low by historic standards, leaving investors to search for
income in a low-rate environment.
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Picton Property Income Limited Annual Report 2022
Market driver
Impact
Occupational and investor demand
The property market is cyclical, with performance linked to economic
growth. The balance of supply and demand in the investment and
occupier markets impact pricing and rental growth respectively.
Historically, all property sectors have moved through cycles broadly in
unison; however, more recently there is a greater divergence between
sectors brought about by structural drivers. The Covid-19 pandemic
accelerated trends that affect the use of commercial property, for
example remote working and online retail.
Sustainability and climate change
Sustainability, climate change, extreme weather, biodiversity loss
and other environmental issues are amongst the largest risks we
are facing on a global scale. Time for change is limited and the real
estate industry has a significant part to play.
There is a need to transition to a low carbon economy. The Government
has set a target of bringing all UK greenhouse gas emissions to net zero
by 2050. Declaring a pathway to achieving net zero carbon, involving
reducing carbon emissions as much as possible and then offsetting any
residual emissions, is becoming common corporate practice.
The Task Force on Climate-related Financial Disclosures (TCFD) provides
a framework for reporting the physical and transition risks to companies
associated with climate change and provides transparency to
stakeholders.
Specific to the property industry, the legislation on minimum energy
efficiency standards (MEES) is changing. Landlords must understand
the new requirements and adapt where necessary to avoid stranded
asset risk.
There is growing recognition that the linear economy – take, make, waste;
is not sustainable and a more regenerative and restorative economy is
needed. Circular economy principles and systems aim to tackle waste
and pollution, reuse products and materials and regenerate nature.
Technology
In 2021 the MSCI Quarterly Property Index reported a huge increase in industrial
capital values, with robust occupier and investor demand and limited supply
resulting in surging rents and yield compression. Although it is not expected
that this pace will be maintained, demand from a wide range of occupiers is
likely to underpin this sector’s performance going forwards.
The role of the office is evolving. Although the Government advice to work
from home where possible has now been reversed, many office-based
businesses are still establishing a new normal and incorporating an element
of flexible working. The office as a place for collaboration and face-to-face
communication requires an adjusted fit out, incorporating more meeting
rooms and breakout space. Enticing office workers back to the office is
achieved through offering quality space in the best locations.
The various subsectors within the retail sector are at different stages of recovery.
Retail warehouses saw very robust performance in 2021, with capital growth
almost keeping pace with industrial. Other retail subsectors have not yet seen
a significant turn in fate.
It is expected that 2022 will begin to see a rebalancing of total returns and
more convergence of the main sectors.
The social and human cost of achieving success is increasingly considered.
Society is holding Governments and corporations accountable for the wider
impact of investment decisions.
Sustainability is becoming widely and fully embedded into corporate strategy,
business models and asset business plans.
TCFD is promoting the improvement and increased reporting of climate-
related financial information and enabling progress to be measured against
science-based targets. Complacency brings increased physical and
transitional risks and potentially stranded assets.
Measures to reduce the carbon emissions of a property portfolio, lift the EPC
profile and improve other sustainability credentials like biodiversity and
wellness bring both costs and opportunities to enhance value.
Collaboration is key. Engaging with industry stakeholders to share knowledge,
data and best practices accelerates progress. Engaging with occupiers on
Scope 3 emissions is vital to achieve a meaningful reduction in portfolio
emissions and progress along a pathway to net zero.
Applying circular economy principles to real estate helps to reduce embodied
carbon emissions through extending the lifecycle of a building, promoting
repurposing over demolition and reuse of materials over landfill.
The digitisation of real estate, increased use of data, advanced
analytics and automation are drivers of change in the built
environment.
The technology trends set to directly impact the property sector in the
short to medium-term are wide ranging, from smart building technology,
the 5G network, increased adoption of electric vehicles, Artificial
Intelligence, robotics, Big Data and cloud computing.
Competitiveness in a post-pandemic world will depend on a company’s
ability to thrive in the digital environment. The use of analytics to make
data-backed decisions provides confidence to investors.
Technology plays a significant role in driving positive change towards
sustainable buildings during each stage of a building’s life cycle.
Technological advances in construction, manufacture of materials,
energy usage and circular economy principles are all essential to
progress towards a low carbon economy.
Property sectors are all uniquely impacted by technological advances
in multiple areas, with each facing its own benefits and challenges.
Common problems in the industry include a reliance on legacy
systems, fragmented software solutions, lack of standardisation and
decentralised data platforms.
Remote working, flexible working and reduced business travel are facilitated
by the advancement of online communications platforms. Although
accelerated by the pandemic, these working patterns will continue in a
hybrid model.
Flexible workspaces require technology to be marketed and managed, to
remain competitive and provide an effective solution for businesses.
The UK Government’s agenda to ban sales of new combustion engines by
2030 will shape requirements for electric vehicle charging where we live,
work and shop, with implications for buildings, power supply and parking
arrangements. A longer-term consideration is the roll out of the 5G network,
enabling driverless vehicles.
There is a heightened need for data storage and datacentres. Big Data,
Artificial Intelligence, Machine Learning and cloud computing are shaping the
future of the workforce and the requirements for buildings in which they
operate. Bolstering cyber security and secure data storage is high on
corporate agendas.
For retailers, investment in online platforms and fulfilment is paramount.
The proportion of online spending has not reverted to pre-pandemic levels.
Longer-term, the increased use of robotics, electric industrial vehicles and
drones has the potential to impact the way online orders are fulfilled and
industrial property is occupied.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Our Marketplace continued
Throughout the year,
structural changes that were
accelerated by the pandemic
continued to create a
divergence in performance
between property sectors.
The industrial sector has benefitted from the increase in
online consumer spending to the detriment of traditional
retail, whilst enforced working from home during the
pandemic is likely to lead to a longer-term shift towards a
more hybrid model of home and office-based working.
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Picton Property Income Limited Annual Report 2022
Industrial
market trends
The 12 months to March 2022 was a record-breaking
year for the industrial sector, which saw capital values
increase by 35.9% – the highest annual growth recorded
for any sector across any year in the MSCI UK Quarterly
Property Index. Annual rental growth was also a record
for the sector at 11.2%, significantly higher than the
12-month CPI inflation rate of 7.0% for the same period.
The industrial sector has witnessed exceptional levels of
take-up for the last two years as it continues to benefit
from the accelerated shift to online spending, as well
as global supply chain disruptions which have created
a need for greater stock holding to maintain supply
chain resilience. On the supply side, development has
struggled to keep pace with demand, with the rising
cost of materials and labour shortages increasing
lead times and in turn supporting rental growth.
However, now more closely tied to levels of consumer
spending, like the retail sector, industrial may also be
adversely impacted if activity falls because of persistently
high levels of inflation. Industrial occupiers are also faced
with rising fuel and energy prices coupled with increasing
rents and the impending business rates revaluation in
2023, potentially putting pressure on profit margins.
The sector is experiencing strong investor demand
which has driven down yields. For the year to March
2022, the industrial sector accounted for 27% of total
investment volumes at a value of £19.2 billion. Standard
industrial units, particularly in London and the South East
are forecast to outperform the All Property average.
What this means for Picton
‒ We are primarily invested in multi-let industrial assets,
for which there continues to be healthy demand across
a wide range of occupiers. The portfolio remains well
positioned with limited exposure to large and online
driven distribution units.
‒ Our occupier focused approach has enabled us to
capitalise on strong demand for industrial property
and grow ERVs through new lettings, renewals and
rent reviews.
Our response to these trends
‒ We will continue to capture rental growth through
new lettings and proactive portfolio management.
‒ We will strategically maintain our overweight position
to the sector.
‒ We will continue to acquire complementary assets
where possible, whilst remaining selective given the
increase in pricing.
‒ We envisage only limited and selective disposals.
Office
market trends
Retail and Leisure
market trends
The success of home working during the pandemic
has not led to the mass exodus of office occupiers that
was feared by some. Office employees continue to
make incremental returns to the workplace and the
sector is gaining momentum. If the majority of the
workforce is in the office for at least part of the week
then significant downsizing is often not viable.
According to the MSCI UK Quarterly Property Index,
office capital values increased by 3.2% in the year to
March 2022 and rents grew by 1.4%.
Office take-up has been recovering steadily, particularly
in large city centres and central London markets. There
is a flight to quality and a shortage of Grade A space,
which is supporting rental growth at the top end of the
market. In addition, sustainability credentials are becoming
increasingly important to office occupiers, where the
property element of their operations is accountable for
a significant proportion of overall carbon emissions.
For the year to March 2022 the office sector accounted
for 30% of total investment volumes at a value of
£21.2 billion. Central London offices are forecast to
perform at around the All Property average whereas
provincial and out of town markets rank lower.
It has been a polarised year for the retail sector, with
retail warehouses at a different stage of recovery to
other subsectors. High streets and shopping centres
are still faced with a demand/supply imbalance and are
not forecast to see positive rental growth in the short-
term. The vacancy rate of retail warehouses is much
lower and rental decline has started to flatten out.
According to the MSCI UK Quarterly Property Index, retail
capital values increased by 8.9% in the year to March 2022
and rents fell by -2.0%. However, drilling down into the
retail warehouse subsector, here capital values increased
by 22.4%. Rents fell, albeit by a lower amount of -0.3%.
Retail occupiers are likely to bear the brunt of a reduction
in consumer spending as a result of cost of living increases.
Retail sales began to recover in early 2022 but have since
experienced a drop in volumes. The step change in the
percentage of retail sales occurring online has declined
from its early pandemic peak but not fully reverted to 2019
levels. On a positive note, the wave of CVAs that have been
so prevalent over the last few years seems to have receded.
Given the level of price and rental value correction that has
occurred across the retail sector, for investors searching for
income, high yielding retail assets in selective locations are
looking more attractive.
For the year to March 2022 the retail sector accounted for
only 12% of total investment volumes at a value of £8.3 billion.
Of this, 44% of investment activity was for retail warehouses,
where there has been increasingly strong investor sentiment.
What this means for Picton
What this means for Picton
‒ Our offices must continue to provide high quality space in
‒ Our occupier focused approach has enabled us to
the best locations.
‒ As the office sector continues to gain momentum, we
must continue to engage with our occupiers to ensure
their needs are met.
‒ We will need to provide more flexible leasing
arrangements reflecting current working practices.
‒ We must continue to address the need for sustainable
buildings and wellbeing within the office environment.
proactively manage our retail and leisure portfolio to
maximise occupancy.
‒ Where appropriate we have been able to reposition retail
space through change of use refurbishments.
Our response to these trends
Our response to these trends
‒ We will continue to actively manage the office portfolio
and engage with existing and potential occupiers to grow
occupancy and income.
‒ With revised pricing, we are cautiously optimistic with
regard to acquisitions in selective retail subsectors
and locations.
‒ We will promote our new flexible office leasing solution,
SwiftSpace, where appropriate.
‒ We will continue to upgrade space, focusing on amenities
and making improvements in energy efficiency.
‒ Due diligence and research will ensure that the office
portfolio is positioned in the most accessible and
desirable locations.
‒ We will be increasingly selective when considering
office acquisitions.
‒ With healthy demand for retail warehouse space, we
will strive to maintain occupancy and grow rents in
this subsector.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Our Strategy
Occupier focused,
Opportunity led.
Purpose
To be a responsible owner of commercial real estate,
helping our occupiers succeed and being valued by
all our stakeholders.
Strategy
Through our occupier focused, opportunity led
approach, we aim to be one of the consistently best
performing diversified UK REITs. In order to deliver
on our purpose, we have in place three distinct
strategic pillars: Portfolio Performance, Operational
Excellence and Acting Responsibly. These pillars
include a range of strategic priorities which guide the
direction of our business and are regularly reviewed.
This year we have added two further priorities within
Acting Responsibly. Progress against our strategic
priorities is set out in the Chief Executive’s Review.
Sustainable thinking, responsible business
Sustainability is embedded into all of our activities. A
responsible and ethical approach to business is essential
for the benefit of all our stakeholders and understanding
the long-term impact of our decisions will help us
to manage risk and continue to generate value.
Read more on pages 22–27
Read more about our KPIs on pages 28–31
and our Risks on pages 48–52
Portfolio
Performance
3
1
2
portfolio which provides
income and capital growth
and income profile
1 Creating and owning a
2 Growing occupancy
3 Enhancing asset quality,
4 Outperforming the
MSCI UK Quarterly
Property Index
providing space that exceeds
occupier expectations
Associated Risks
1 2 4 5 6 7 8
Connected KPIs
A C D G
I
J
20
Picton Property Income Limited Annual Report 2022
1
2
3
business model, adaptable
to market trends
platform, utilising technology
as appropriate
Operational
Excellence
1 Maintaining an efficient operating
2 Having an agile and flexible
3 Delivering
4 Having an appropriate
5 Growing to deliver
capital structure for the
market cycle
economies of scale
earnings growth
Acting
Responsibly
3
1
2
occupiers, shareholders
and other stakeholders
our company values, positive
working culture and
alignment of the team
1 Ensuring we maintain
2 Working closely with our
3 Ensuring sustainability is
4 Adapting to and mitigating the
5 Reducing our emissions to
integrated within our business
model and how we and our
occupiers operate
impact of climate change
become carbon net zero by 2040
Associated Risks
1 3 4 10 11
Connected KPIs
E F H
Associated Risks
4 6 7 9
Connected KPIs
B
K L
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Our Strategy in Action
22
Picton Property Income Limited Annual Report 2022
Madleaze and Mill Place Trading Estates
Industrial
acquisitions
In Gloucester, we acquired two
adjoining city centre industrial estates,
in separate transactions.
Madleaze Trading Estate was acquired in September 2021
and the adjacent Mill Place Trading Estate was acquired in
February 2022 for a combined £23.5 million plus costs.
This reflects a low capital value of £35 per sq ft.
Our combined ownership totals over 29 acres, with
670,000 sq ft of warehouse and ancillary accommodation
and a site coverage of 52%. The average rent on
acquisition was only £2.76 per sq ft.
On purchase there was 100,000 sq ft of vacant
accommodation to be upgraded or redeveloped across
both estates. We have already leased 22,000 sq ft of space
with very limited capital expenditure and have interest in
a further 21,000 sq ft.
Occupational demand is robust and there are
13 lease events in 2022, although we expect the majority
of occupiers to remain. There are numerous asset
management opportunities, noting the short weighted
average lease length. The central location of the site does
open the possibility of a larger mixed-use development
in the longer-term. We are exploring this whilst seeking
to increase the income and value through proactive
management and improving the appeal of the estates
to new and existing occupiers.
£23.5m
Purchase price
£1.4m
Passing rent at acquisition
3
1
2
Portfolio Performance
See more information on pages 20-21
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Strategic ReportGovernanceFinancial StatementsAdditional Information Our Strategy in Action continued
Rum Runner Works, Regency Wharf
Repositioning
assets
In Birmingham we have converted
vacant restaurants into Grade A
canalside office space.
We secured planning permission for change of use
for the building from leisure to offices and during the year
completed the project renaming it Rum Runner Works, as
it was once home to the historic Rum Runner nightclub.
We relocated an existing occupier which allowed us to
convert the canalside block into offices.
The building maintains a mix of period features and
modern design over 16,200 sq ft. Excellent floor-to-ceiling
heights, feature lighting, and exposed services give the
glass and steel construction an industrial feel reflective
of its manufacturing past. Terraces offer private outdoor
space with a view and the central courtyard makes it ideal
for events and functions.
The refurbishment was carried out in line with our
refurbishment guidelines, which have the aim of ensuring
sustainability is at the heart of the design process. The
building’s EPC rating was improved from an E to a B.
Natural gas was removed from the building and solar
panels were installed along with heat recovery systems.
The works were completed in late 2021 and the building
was shortlisted for the British Council for Offices Awards
2022. The estimated rental value has increased from £0.2
million per annum as leisure to £0.4 million per annum as
an office. We expect strong demand for a self-contained
Grade A building which offers unique space and good
sustainability credentials.
112%
Improvement in ERV
E to B
Upgraded minimum EPC rating
3
1
2
Portfolio Performance
and Acting Responsibly
See more information on pages 20-21
24
Picton Property Income Limited Annual Report 2022
Picton Property Income Limited Annual Report 2022
25
Strategic ReportGovernanceFinancial StatementsAdditional Information Our Strategy in Action continued
26
Picton Property Income Limited Annual Report 2022
Lyon Business Park, Barking
Growing occupancy
and income
Our industrial estate in Barking
has benefitted from strong occupational
demand despite three units becoming
vacant during the Covid-19 pandemic.
This estate was the most severely impacted property in
the portfolio in terms of loss of income through occupier
failures over the past two years.
During the year we refurbished and pre-let the largest unit
of 45,000 sq ft to a well-established catering company.
The unit was leased for a 15-year term certain at £0.6 million
per annum, 46% ahead of the previous passing rent and
5% ahead of the March 2021 ERV. The lease included our
standard green lease provisions.
A smaller unit became vacant in October and was leased,
with nominal expenditure, to an existing occupier on a
new five-year lease at £0.1 million per annum, 38% ahead
of the previous passing rent and 25% ahead of ERV. The
lease included our standard green lease provisions. The
occupier also extended their current lease, which expired
in two years, to five years with a rental uplift in 2024.
A further unit of 26,000 sq ft became vacant in November
and is currently being refurbished in line with our sustainable
refurbishment guidelines. We are targeting a B-rated EPC.
The previous occupier was paying a rent of £0.3 million per
annum and we believe we will achieve a new rent 25%
ahead of this on a new letting.
Three further leases were renewed securing £0.1 million
per annum, a 23% uplift on the previous passing rent
and in line with ERV.
45%
Increase in contracted rent on lettings
3
1
2
Portfolio Performance
See more information on pages 20-21
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Strategic ReportGovernanceFinancial StatementsAdditional Information Key Performance Indicators
Measuring
the success of
the business
We have a range of key
performance indicators that we
use to measure the performance
and success of the business.
We consider that industry standard measures, such
as those calculated by MSCI, are appropriate to use
alongside certain EPRA measures and others that are
relevant to us. In this regard, we consider that the EPRA
NTA per share, earnings per share and vacancy rate are
the most appropriate measures to use in assessing
our performance.
Key performance indicators are also used to determine
variable remuneration rewards for the Executive Directors
and the rest of the Picton team. The indicators used are
total return, total shareholder return, total property return
and EPRA earnings per share. This is set out more fully in
the Remuneration Report.
We are now reporting EPCs rated A-C and as with
occupancy this is expressed as a percentage of ERV.
We have amended the methodology to better reflect
the risks in relation to MEES.
For more information on EPRA Best Practices
Recommendations see pages 139–141
Remuneration Link
Strategic pillars
1
1
1
3
3
3
2
2
2
Portfolio Performance
Operational Excellence
Acting Responsibly
28
Picton Property Income Limited Annual Report 2022
Financial KPIs
Total return (%)
2022
2021
6.6
2020
4.5
A
28.3
Why we use this indicator
The total return is the key measure of the overall
performance of the Group. It is the change in the
Group’s net asset value, calculated in accordance
with IFRS, over the year, plus dividends paid.
The Group’s total return is used to assess
whether our aim to be one of the consistently
best performing diversified UK REITs is being
achieved, and is a measure used to determine
the annual bonus.
Our performance in 2022
Our total return this year was driven by strong
valuation gains and increased dividends.
3
1
2
Total shareholder return (%)
2022
2021
0.0
2020
3.6
B
18.7
Why we use this indicator
The total shareholder return measures
the change in our share price over the year
plus dividends paid. We use this indicator
because it is the return seen by investors on
their shareholdings.
Our total shareholder return relative to a
comparator group is a performance metric
used in the Long-term Incentive Plan.
Our performance in 2022
An increase in the share price over the year,
as the impacts of the pandemic receded,
together with increased dividends,
contributed to a return of 18.7%
3
1
2
Total property return (%)
2022
2021
2020
7.3
5.3
C
00.0
24.3
Loan to value ratio (%)
E
2022
2021
2020
21.2
20.9
21.7
Why we use this indicator
The total property return is the combined income
and capital return from our property portfolio for
the year, as calculated by MSCI. We use this
indicator because it shows the success of the
portfolio strategy without the impact of gearing
and corporate costs.
Our total property return relative to the MSCI UK
Quarterly Property Index is a performance
condition for both the annual bonus and the
Long-term Incentive Plan.
Why we use this indicator
The loan to value ratio is total Group borrowings,
net of cash, as a percentage of the total portfolio
value. This is a recognised measure of the
Company’s level of borrowings and is a measure
of financing risk. See the Supplementary
Disclosures section for further details.
Our performance in 2022
We have outperformed the MSCI UK Quarterly
Property Index for the ninth consecutive year,
delivering a return of 24.3% compared to the
Index return of 19.6% for the year. We have
also delivered upper quartile outperformance
against MSCI over three, five and ten years,
and since inception.
3
1
2
Our performance in 2022
The loan to value ratio has marginally
increased this year with the additional
borrowings drawn during the year offset
by the increase in the portfolio value.
Property income return (%)
D
Cost ratio (%)
2022
2021
2020
4.5
4.7
4.8
2022
2021
2020
1.0
1.0
1.1
Why we use this indicator
The property income return, as calculated
by MSCI, is the income return of the portfolio.
Income is an important component of total
return and our portfolio is biased towards
income generation.
Why we use this indicator
The cost ratio, recurring administration expenses
as a proportion of the average net asset value,
shows how efficiently the business is being run,
and the extent to which economies of scale are
being achieved. See the Supplementary
Disclosures section for further details.
3
1
2
F
Our performance in 2022
The income return for the year of 4.5%
was ahead of the MSCI UK Quarterly
Property Index of 4.2%, and we have also
outperformed over one, three, five and ten
years, and since inception.
3
1
2
Our performance in 2022
The cost ratio has been maintained at 1.0%
this year.
3
1
2
Picton Property Income Limited Annual Report 2022
29
Strategic ReportGovernanceFinancial StatementsAdditional Information Key Performance Indicators continued
EPRA KPIs
EPRA NTA per share (pence)
G
EPRA vacancy rate (%)
I
2022
2021
2020
120
97
93
2022
2021
2020
7.2
8.8
11.5
Why we use this indicator
The EPRA net tangible assets (NTA) per share,
calculated in accordance with EPRA, measures
the value of shareholders’ equity in the business.
We use this to measure the growth of the
business over time and regard this as the most
relevant net asset metric for the business.
Why we use this indicator
The vacancy rate measures the amount of
vacant space in the portfolio at the end of each
financial period, and over the long-term, is an
indication of the success of asset management
initiatives undertaken.
Our performance in 2022
The EPRA NTA per share has increased by
24.4% this year, due to valuation gains,
particularly in the industrial portfolio.
3
1
2
Our performance in 2022
Recently refurbished space has been let over
the year as Covid-19 restrictions were lifted
and occupiers seek best in class space.
3
1
2
EPRA earnings per share (pence)
H
2022
2021
2020
3.9
3.7
3.7
Why we use this indicator
The earnings per share, calculated in accordance
with EPRA, represents the earnings from core
operational activities and excludes investment
property revaluations, gains/losses on asset disposals
and any exceptional items. We use this because it
measures the operating profit generated by the
business from the core property rental business.
The growth in EPRA earnings per share is also a
performance measure used for the annual bonus
and the Long-term Incentive Plan.
Our performance in 2022
EPRA earnings per share has increased
to 3.9 pence as a consequence of higher
occupancy, reduced provisions against
income receivable and additional income
from property acquisitions.
3
1
2
30
Picton Property Income Limited Annual Report 2022
Non-financial KPIs
Retention rate (%)
J
Employee satisfaction (%)
L
2022
2021
2020
37
53
88
2022
2021
2020
82
85
83
Why we use this indicator
This provides a measure of income at risk and the
retention of that income during the year. This is
achieved through lease extensions or removal of
break options.
Why we use this indicator
We use this indicator to assess our performance
against one of our strategic objectives, to
nurture a positive culture reflecting the values
and alignment of the Picton team. The indicator
is based on the employee survey carried out
during the year.
Our performance in 2022
The lower retention rate principally reflects
pandemic-related voids.
Total ERV at risk due to lease expiries or break
options totalled £5.5 million, £1.2 million lower
than last year. Of the ERV at risk that was not
retained, 29% or £1.6 million of ERV was re-let to
a different occupier during the year.
3
1
2
Our performance in 2022
Although slightly lower this year, the
employee satisfaction score remains
very high.
3
1
2
EPC rating A-C (%)
K
2022
2021
2020
71
64
55
Why we use this indicator
Energy Performance Certificates (EPCs) indicate
how energy efficient a building could be by
assigning a rating from ‘A’ (very efficient) to ‘G’
(very inefficient).
From 2023 MEES regulations prohibit leasing
space that is F or G rated. It is proposed that from
2027 an EPC of at least a C rating will be required.
Our performance in 2022
The proportion of EPC ratings between A to C
has increased against the prior year and
makes up 71% of the portfolio. The remaining
29% is rated D or E.
3
1
2
Picton Property Income Limited Annual Report 2022
31
Strategic ReportGovernanceFinancial StatementsAdditional Information Portfolio Review
Portfolio overview
We are a diversified Real Estate Investment Trust
(REIT) investing in UK commercial property.
Our property portfolio consists of 47 assets with
currently 60% invested in the industrial sector.
Industrial
weighting
Office
weighting
Retail and Leisure
weighting
60%
South East
Rest of UK
30%
Central London
Rest of UK
South East
10%
Retail Warehouse
High Street Rest of UK
Leisure
11%
10%
9%
44%
16%
7%
2%
1%
Read more
on pages 38–39
Read more
on pages 40–41
Read more
on pages 42–43
Annualised total property return (%)
Picton MSCI UK Quarterly
Property Index
30
25
20
15
10
0
1 year
3 year
5 year
10 year
Since inception
32
Picton Property Income Limited Annual Report 2022
Portfolio summary
47
£849m
Number of assets
Value
93%
Occupancy
4.0%
Net initial yield
5.4%
4.7m sq ft
Reversionary yield
Area
Top ten occupiers
The largest occupiers, based as a percentage of contracted rent, as at 31 March 2022, are as follows:
Occupier
Public sector
Whistl UK Limited
B&Q Plc
The Random House Group Limited
Snorkel Europe Limited
XMA Limited
Portal Chatham LLP
DHL Supply Chain Limited
Hi-Speed Services Limited
Canterbury Christ Church University
Total
Contracted rent (£m)
2.3
1.6
1.2
1.2
1.2
1.0
0.9
0.8
0.7
0.7
11.6
%
5.0
3.6
2.8
2.6
2.6
2.2
2.1
1.7
1.5
1.5
25.6
Top ten assets
The largest assets, as at 31 March 2022, ranked by capital value, represent 55% of the total portfolio valuation and are
detailed below:
Assets
Acquisition
date
Property
type
Tenure
Approximate
area (sq ft)
Capital
value (£m)
No. of
occupiers
Occupancy
rate (%)
Parkbury Industrial Estate, Radlett, Herts.
03/2014
Industrial
Freehold
River Way Industrial Estate, Harlow, Essex
12/2006
Industrial
Freehold
Datapoint, Cody Road, London E16
05/2010
Industrial
Leasehold
Lyon Business Park, Barking
09/2013
Industrial
Freehold
Stanford Building, London WC2
05/2010
Office
Freehold
343,800
454,800
55,100
99,400
19,600
Shipton Way, Rushden
07/2014
Industrial
Freehold
312,900
Angel Gate, City Road, London EC1
Tower Wharf, Cheese Lane, Bristol
50 Farringdon Road, London EC1
10/2005
08/2017
10/2005
Office
Office
Freehold
Freehold
Office
Leasehold*
64,600
70,600
31,300
Sundon Business Park, Dencora Way, Luton
10/2005 Industrial
Freehold
127,800
>100
50-75
30-50
30-50
30-50
30-50
30-50
20-30
20-30
20-30
21
10
6
8
4
1
18
6
4
11
100
100
100
77
100
100
61
90
100
91
*Denotes leasehold interest in excess of 950 years.
Picton Property Income Limited Annual Report 2022
33
Strategic ReportGovernanceFinancial StatementsAdditional Information Portfolio Review continued
Proactive
management
Throughout the year we have
continued to engage with our
occupiers, invested into our assets
and driven forward our sustainability
priorities, which is at the forefront
of our thinking as we actively manage
the portfolio.
Driven by significant investor and occupier demand in
the industrial sector, combined with a rebound in the
retail warehousing sector, we have seen strong valuation
gains. We have had like-for-like increases in passing rent
and estimated rental value (ERV).
It has been another busy year in terms of the portfolio,
with 76 asset management transactions completed.
Our repositioning programme has especially helped us
secure new office occupiers seeking best in class space,
and this has resulted in an increase in occupancy over
the period to 93%, up from 91% in the prior year.
Our occupier focused approach has always been key to
enabling us to actively manage the portfolio. We are
guided by our Picton Promise of Action, Community,
Technology, Support and Sustainability. This philosophy
of working in collaboration with our occupiers is a
significant contributor to our long-term track record
of outperformance.
During the year we have launched SwiftSpace at several
of our office buildings, this initiative recognises that
flexibility and ease of occupation are particularly
important for some smaller businesses, and we are
offering bespoke leasing solutions to include fitted
space, inclusive rents and flexibility.
Performance
Our portfolio comprises 47 assets, with around 400
occupiers, and is valued at £849 million with a net initial
yield of 4.0% and a reversionary yield of 5.4%.
Our asset allocation, with 60% in industrial, 30% in office
and 10% in retail and leisure, combined with increasing
occupancy and transactional activity, has enabled us to
outperform the MSCI UK Quarterly Property Index over
the year.
Overall, the like-for-like valuation was up 21%, with the
industrial sector up 34%, offices up by 2% and retail
and leisure up by 17%. This compares with the MSCI
UK Quarterly Property Index recording a capital value
increase of 15% over the period.
The overall portfolio passing rent is £38.7 million, an
increase from the prior year of £2.2 million. On a like-for-
like basis the passing rent increased by 2% and the
contracted rent, which is the gross rent receivable after
lease incentives, increased by £2.7 million or 7%.
The March 2022 ERV of the portfolio is £49.8 million, an
increase from the prior year of 5% on a like-for-like basis.
We had positive growth in all three sectors, with the
industrial sector increasing 11% and the other two
sectors both up 1%.
We have set out below the principal activity in each of
the sectors in which we are invested and believe our
sector strategy and proactive occupier engagement
has delivered positive performance this year.
The industrial sector has had a very strong year, with
considerable investment demand, with multiple buyers
for well-located assets, resulting in further price growth.
A lack of supply, especially of multi-let estates, coupled
with increasing build costs, means that occupiers have
restricted choice when looking for a unit, which in turn
has driven strong rental growth across the country
and especially in London and the South East where
73% of our portfolio is located. As examples, the ERV
at Datapoint, London increased by 26%, Lyon Business
Park, Barking by 15% and River Way, Harlow by 11%.
The office sector is returning to a ‘new normal’ with
building occupancy improving, albeit on a more
flexible basis. Increasingly businesses are focused
on providing best in class space for their employees
with good sustainability characteristics. There is good
demand for Grade A space with take-up almost at
pre-pandemic levels, but poorer quality buildings are
struggling to attract occupiers.
34
Picton Property Income Limited Annual Report 2022
400
Occupiers
21%
Like-for-like valuation
increase
£38.7m
Passing rent
£49.8m
Estimated rental value
Picton Property Income Limited Annual Report 2022
35
Strategic ReportGovernanceFinancial StatementsAdditional Information Portfolio Review continued
Many companies are revising working patterns, with offices
being used two or three days a week and staff working
from home the rest of the time. We have invested
substantially into our office portfolio over the last few years,
which has meant we have best in class assets which we
have been able to lease during the year as well as retaining
existing occupiers.
Retail warehouse parks have performed strongly, and our
parks are busy with occupiers trading well. Investment
demand has resulted in price growth in 2021 and early
2022, however we have not yet seen significant rental
growth. This investor demand has not translated to the
high street, but there is activity at the prime end with the
indication that pricing has reached a floor for best in class
assets. The leisure market is returning to normal, with pubs
and restaurants reporting brisk trading.
We believe the portfolio remains well placed in respect of
our sector allocations. Combined with the quality of our
assets, we will be able to continue to drive performance
going forward.
Over the year we have invested £10 million into the
portfolio principally across eight key projects. These have
all been aimed at enhancing space to attract occupiers,
improve sustainability credentials and grow income.
A major renovation project was recently completed
at Rum Runner Works, Regency Wharf, Birmingham,
where we have converted leisure space to offices with
the development being shortlisted for the British Council
of Offices Awards 2022.
The air conditioning plant was replaced at 50 Farringdon
Road, while the building was fully leased. The system
has now been converted from gas to electric, reducing
carbon emissions and improving the EPC from a D to a B.
Our largest void is Angel Gate Office Village, London.
The property offers space for smaller businesses and
this market is beginning to pick up. We have upgraded
the common parts, installed an occupier lounge,
which is already very popular, and fitted out office
suites for immediate occupation in line with our
SwiftSpace concept.
Activity
We have had another good year in respect of asset
management transactions. We completed 12 rent reviews,
7% ahead of ERV, 21 lease renewals or regears, 3% ahead
of ERV and 34 lettings or agreements to lease, 8% ahead
of ERV. Two industrial assets were acquired for £23.5 million
plus costs and one retail asset disposed of for £0.7 million,
16% ahead of March 2021 valuation.
We are continually focused on futureproofing assets
from a sustainability perspective, which has resulted in
an improvement in our EPCs with 71% now rated C and
above. The average lot size of the portfolio is £18.1 million,
22% ahead of last year.
Our total void is £3.6 million per annum by ERV. By sector,
70% is in offices, 16% is in industrial and 14% is in retail
and leisure.
Retention rates and occupancy
Over the year, total ERV at risk due to lease expiries or break
options totalled £5.5 million, a reduction on the £6.6 million
in the year to March 2021.
We retained 37% of total ERV at risk in the year to March
2022. Of the ERV that was not retained, a further 29% or
£1.6 million was re-let to a different occupier during the year.
In addition, a further £2.1 million of ERV was retained by
either removing future breaks or extending future lease
expiries ahead of the lease event.
Occupancy has increased during the year from 91% to 93%,
which is ahead of the MSCI UK Quarterly Property Index of
92% at March 2022. The increase primarily reflects the
success of the refurbishment programmes in the office
sector, with occupiers seeking best in class space. In
addition, we have seen strong demand for our industrial
units and the retail portfolio remains well let. Industrial
occupancy is 98% (2021: 100%), office occupancy is
87% (2021: 82%) and retail and leisure occupancy is 93%
(2021: 92%).
At the year end, over half of our vacant buildings were
being refurbished, with the remainder available to let
and being actively marketed.
36
Picton Property Income Limited Annual Report 2022
Occupancy has increased during
the year from 91% to 93%,
reflecting the success of our
refurbishment programmes in
the office sector.
Jay Cable
Senior Director and Head of Asset Management
£18m
Average lot size of the portfolio
£10m
Invested into the portfolio
Outlook
As the UK opened up we saw a bounce in consumer
confidence and spending.
Subsequently, the war in Ukraine has caused a more
uncertain outlook with inflationary pressure and supply
chain issues being the immediate result. The war has not
had any direct repercussions on the property market to
date, however we are mindful of the fact that there could
be secondary impacts going forward.
Our net zero carbon pathway is in place, and we continue
to focus on sustainability and upgrading our buildings to
ensure they are attractive to occupiers.
We have had success in securing occupiers in all sectors,
with industrial demand remaining very strong. Our occupiers
remain key and we have long-standing relationships in place
with many of them, which enable us to work with and assist
businesses as they grow and contract.
As at 31 March 2022 the portfolio had £11.1 million of
reversionary income potential, £3.6 million from letting
the vacant space, £4.5 million from expiring rent free
periods and £3.0 million where the passing rent is below
market level.
Demand for our industrial properties continues to be
robust as proven by our high occupancy and growing ERVs.
With this sector accounting for 60% of the total portfolio by
value, we believe it will continue to contribute strongly to
our performance, with supply constraints likely to lead to
further rental growth.
The majority of office occupiers are now working on a
flexible basis, with staff coming into the office two or three
days a week. The longer-term implications differ from
business to business but we are not seeing a significant
reduction in overall floorspace. As we predicted, there
has been a flight to quality, with companies wanting to
upgrade their space to retain and attract staff. There is now
a limited supply of Grade A space, as the development
pipeline has slowed over the last two years, and this should
result in rental growth. Poor quality buildings are less in
demand, with many requiring significant expenditure to
incorporate sustainability requirements and make them
appealing to occupiers. We expect a significant proportion
of these buildings to be repurposed in due course.
Longevity of income
As at 31 March 2022, expressed as a percentage of
contracted rent, the average length of the leases to
the first termination was 4.8 years (2021: 4.9 years). This
is summarised as follows:
Retail warehousing, which makes up 65% of our retail
allocation, has seen a valuation rebound, with retailers
preferring out of town units to the high street. We have
succeeded in letting all of our vacant retail warehouse
units during the year and our parks are now fully leased.
0 to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
10 to 15 years
15 to 25 years
25 years and over
Total
%
11.4
12.9
15.4
20.8
9.3
23.2
5.7
0.1
1.2
100.0
We remain in a strong position with advantageous portfolio
weightings, good quality assets and a proven occupier
focused approach. Looking forward, we will continue to
grow occupancy and income, acquire value accretive
assets, engage with our occupiers, and invest further into
our properties.
Jay Cable
Senior Director and Head
of Asset Management
25 May 2022
Picton Property Income Limited Annual Report 2022
37
Strategic ReportGovernanceFinancial StatementsAdditional Information Portfolio Review continued
Industrial
The industrial sector accounts for 60%
of the portfolio and had the strongest
sector performance of the year.
Key metrics
£509.7m
Valuation
(2021: £360.7m)
£23.4m
Estimated rental value
(2021: £19.3m)
17
3.2m sq ft
Internal area
(2021: 2.6m sq ft)
98%
Occupancy
(2021: 100%)
£17.6m
Annual passing rent
(2021: £16.9m)
18
Number of assets
(2021: 16)
Locations
10
14
12
11 15
9
13
5
6
1
7
2
3
4
8
18
16
1
Parkbury Industrial Estate
Radlett
343,800 sq ft – Freehold
6
Sundon Business Park
Luton
127,800 sq ft – Freehold
11 Madleaze Trading Estate
Gloucester
303,100 sq ft – Freehold
16 Downmill Road
Bracknell
41,200 sq ft – Freehold
2 River Way Industrial Estate
Harlow
454,800 sq ft – Freehold
7 Nonsuch Industrial Estate
Epsom
41,400 sq ft – Leasehold
12 Easter Court
Warrington
81,800 sq ft – Freehold
3 Datapoint
London E16
55,100 sq ft – Leasehold
4
5
Lyon Business Park
Barking
99,400 sq ft – Freehold
Shipton Way
Rushden
312,900 sq ft – Freehold
8
9
The Business Centre
Wokingham
101,000 sq ft – Freehold
13 Swiftbox
Rugby
99,500 sq ft – Freehold
Trent Road
Grantham
336,100 sq ft – Leasehold
14 1&2 Kettlestring Lane
York
157,800 sq ft – Freehold
10 Vigo 250
Washington
246,800 sq ft – Freehold
15 Mill Place Trading Estate
Gloucester
366,200 sq ft – Leasehold
17 Abbey Business Park
Belfast
61,500 sq ft – Freehold
18 Magnet Trade Centre
Reading
13,700 sq ft – Freehold
38
Picton Property Income Limited Annual Report 2022
Continued strength in the investment market, driven
by strong occupational fundamentals, has resulted
in another very positive year for this sector. Strong
occupational demand, combined with active
management extending income and securing rental
uplifts, have all contributed to performance.
On a like-for-like basis, the value of our industrial assets
increased by £123.4 million or 34%. The passing rent was
£17.6 million at year end, with an ERV of £23.4 million.
Due to eight occupiers being in rent-free periods the
passing rent decreased by -5% on a like-for-like basis,
but on a contracted rent basis the rent increased by 8%.
The portfolio has an average weighted lease length of
4.2 years and £5.8 million of reversionary potential.
We have seen ERV growth of 11% across the
industrial portfolio, reflecting a supply constrained
market. Occupancy is 98%, with all of the vacant
units being refurbished.
Portfolio activity
Madleaze and Mill Place Trading Estates, located in
Gloucester city centre, were acquired in two separate
transactions, for a combined purchase price of £23.5
million or £35 per sq ft, considerably below replacement
cost. Our combined ownership now totals over 29 acres,
with 670,000 sq ft of warehouse and ancillary
accommodation, with a site coverage of 52%. The
average rent on acquisition was only £2.76 per sq ft with a
further 100,000 sq ft of vacant accommodation available
to upgrade or redevelop, subject to occupational
demand. We have already leased 22,000 sq ft without
any capital expenditure and are in discussions with a
number of occupiers in respect of either expansion
or relocation.
At Rugby, we let a 99,500 sq ft unit to a logistics operator
for ten years, subject to break. The lease commenced the
day after the existing occupier vacated, meaning there
were no void costs or capital expenditure. The new rent
agreed at £0.7 million per annum is 11% ahead of both
the previous passing rent and the ERV.
At Lyon Business Park, Barking we had an occupier
severely affected by the pandemic. We actioned a
landlord break option on the 45,000 sq ft unit, which
was subsequently refurbished and leased to a catering
company on a 15-year lease. The new rent of £0.6 million
per annum is 46% ahead of the previous passing rent
and 5% ahead of ERV. We renewed and extended three
further leases on the estate securing £0.1 million per
annum, 23% ahead of the previous passing rent and in
line with ERV. We recently had another pandemic related
void at the estate and have a 26,000 sq ft unit to lease,
which is currently being refurbished.
At The Business Centre, Wokingham, we have driven
income growth through agreeing two rent reviews,
increasing the passing rent by 26% to £0.4 million per
annum and leasing two units for a combined £0.1 million
per annum, 2% ahead of ERV. The estate is fully leased.
Lyon Business Park
Barking
At Dencora Way, Luton, we increased income through
settling a rent review, increasing the passing rent by 43%,
1% ahead of ERV and renewing two leases at a rent 30%
ahead of the previous passing rent. We leased one unit
for £0.1 million per annum, 9% ahead of ERV.
At Easter Court, Warrington, following the completion of
a rent review, we achieved a 47% uplift in rent, 3% ahead
of ERV. A further lease was renewed, increasing the
passing rent by 31% to £0.1 million per annum, 7% ahead
of ERV.
Outlook
The industrial sector has performed exceptionally well
this year, with continued strong demand, low vacancy
rates and rental growth. Where units have come back
due to occupiers relocating or insolvencies, we have
been able to promptly re-let them at higher rents,
post refurbishment.
We do not anticipate a material slowdown in
occupational demand, and combined with limited
availability and development pipeline, especially for
multi-let estates, we expect continued rental growth.
The focus going forward is to maintain high occupancy,
continue to capture rental growth, and work proactively
with our occupiers to unlock asset management
opportunities. We have 41 lease events forecast for the
coming year, and the overall ERV for these units is
10% higher than the current passing rent of £2.7 million.
This provides us with the opportunity to grow income
and value further.
Picton Property Income Limited Annual Report 2022
39
Strategic ReportGovernanceFinancial StatementsAdditional Information Portfolio Review continued
Office
The office sector accounts for 30%
of the portfolio and delivered positive
performance driven by leasing
activity and active management.
Key metrics
£251.1m
Valuation
(2021: £245.4m)
£19.3m
Estimated rental value
(2021: £19.0m)
0.8m sq ft
Internal area
(2021: 0.8m sq ft)
87%
Occupancy
(2021: 82%)
£14.0m
Annual passing rent
(2021: £13.1m)
15
Number of assets
(2021: 15)
8
12
15
7
11
3
9
10
13
1
14
2
4
6
5
Locations
1
Stanford Building
London WC2
19,600 sq ft – Freehold
2 Angel Gate
London EC1
64,600 sq ft – Freehold
3
4
Tower Wharf
Bristol
70,600 sq ft – Freehold
50 Farringdon Road
London, EC1
31,300 sq ft – Leasehold
5
30 & 50 Pembroke Court
Chatham
86,000 sq ft – Leasehold
9
401 Grafton Gate
Milton Keynes
57,400 sq ft – Freehold
6 Colchester Business Park
Colchester
150,500 sq ft – Leasehold
10 Trident House
St Albans
19,000 sq ft – Freehold
7 Metro
Manchester
71,000 sq ft – Freehold
11
Longcross
Cardiff
69,700 sq ft – Freehold
8
180 West George Street
Glasgow
52,200 sq ft – Freehold
12 Queens House
Glasgow
49,400 sq ft – Freehold
13 Atlas House
Marlow
24,800 sq ft – Freehold
14 Sentinel House
Fleet
33,500 sq ft – Freehold
15 Waterside House
Leeds
25,200 sq ft – Freehold
40
Picton Property Income Limited Annual Report 2022
The value of the office portfolio has increased on a
like-for-like basis by £5.7 million or 2% to £251.1 million
and the annual rental income increased by £0.8 million
or 6% to £14.0 million.
Occupancy within the office sector has increased from
82% to 87%. We have secured £2.9 million per annum
from lettings and have worked with our occupiers to
extend income elsewhere.
The office portfolio has an average weighted lease length
of 4.0 years and £5.3 million of reversionary potential. The
ERV has increased slightly over the year, which is mainly
due to regional offices with London being stable.
The impact of the global pandemic on working practices
continues to be felt, however this varies dramatically from
business to business. Occupational demand has picked
up, especially for better quality space as businesses
return to the office and review their requirements.
We have launched our SwiftSpace offering in order to
meet the need for more flexible space requirements
in a post-Covid-19 environment. From a regulatory
standpoint, the Welsh Government retained their work
from home policy until the end of our financial year, and
this had an impact on demand for our Cardiff building.
We invested £6.2 million into our office assets during
the period. Key projects were completed at Angel Gate,
London, 50 Farringdon Road, London, 180 West George
Street, Glasgow and Longcross, Cardiff.
Portfolio activity
At 50 Farringdon Road, London, we extended a lease,
due for expiry later this year. This was our largest lease
event in the office sector retaining £0.6 million per
annum, which is 2% ahead of ERV. The transaction
follows an upgrade of the heating and cooling system
last year, transitioning from gas to electric, reducing
carbon emissions from the building and upgrading the
EPC from a D to a B.
At 180 West George Street, Glasgow, following a
comprehensive refurbishment of the first, fifth and sixth
floors to include new external roof terraces, we leased all
three floors to separate occupiers, securing a combined
rent of £0.6 million per annum, 19% ahead of ERV. This is
a good example of occupiers seeking best in class space
for their employees.
In Chatham, we completed the letting of all the remaining
space at 50 Pembroke Court to NatWest at £0.3 million
per annum, 8% ahead of ERV, for a term of five years,
subject to break. In line with the occupier’s sustainability
policy the refurbished floor achieved a B-rated EPC.
Following the completion of the refurbishment of
Stanford Building, London, we leased the remaining two
office floors to a recruitment company, securing a rent of
£0.5 million per annum, 3% below ERV but reflecting a
longer ten-year lease commitment. We also leased the
flagship retail unit, which is covered in the Retail and
Leisure section.
At Colchester Business Park, we renewed three leases
securing a combined rent of £0.4 million per annum, an 11%
increase on the previous passing rent and 1% ahead of ERV.
Two large occupiers vacated towards year end, and we are
therefore refurbishing this space. We expect good levels of
demand on completion of the works.
At Grafton Gate, Milton Keynes, we retained an occupier
on lease expiry and removed two break options in return
for taking back one suite this summer. The combined
rent secured was £0.4 million per annum, 5% ahead
of ERV. One rent review was agreed, securing a 33%
increase to £0.2 million per annum, 4% ahead of ERV.
Our largest office void is Angel Gate, London, which has
suffered from smaller businesses choosing to work from
home during the pandemic and only now beginning to
look to return to the office. The common areas have been
redesigned and we have converted a ground floor office
suite into an occupier lounge that has proved attractive
to occupiers. We renewed two leases during the year for
a combined £0.2 million per annum, 19% ahead of ERV
and relocated four occupiers, all of whom upgraded
their space and we let one fully fitted suite, securing a
combined £0.4 million per annum, 5% ahead of ERV.
We are beginning to see enquiries rise and believe our
SwiftSpace option is attractive to occupiers looking for
this type of flexible space.
Outlook
As we predicted, we are seeing a flight to quality with
businesses looking for best in class space to attract their
employees back to the office.
The majority of businesses have moved to a flexible
working pattern, with employees working from home
one or two days a week. This means they still require
office space for all of their staff, and we have not seen
a lot of second hand space being put on the market.
Sustainability is an ever-increasing factor in choosing a
building and older stock, where the capital expenditure
required to upgrade is prohibitive, will be converted to
other uses. We have invested £15.2 million into our office
portfolio over the last three years, creating high quality
contemporary space with occupier amenities that offer
flexibility in workspace planning, meaning our buildings
are attractive to occupiers as demonstrated by our
leasing success.
We have 33 lease events forecast for the coming year,
with the current ERV for these units being 4% higher
than the current passing rent of £2.6 million and a 13%
void, with an ERV of £2.5 million, providing us with the
opportunity to significantly grow income and value.
Angel Gate
Refurbished offices
Picton Property Income Limited Annual Report 2022
41
Strategic ReportGovernanceFinancial StatementsAdditional Information
Portfolio Review continued
Retail and Leisure
The retail and leisure sector accounts for
10% of the portfolio and delivered a marked
improvement in performance over the year.
Key metrics
£88.5m
Valuation
(2021: £76.3m)
£7.1m
Estimated rental value
(2021: £7.1m)
0.7m sq ft
Internal area
(2021: 0.7m sq ft)
93%
Occupancy
(2021: 92%)
£7.1m
14
Annual passing rent
(2021: £6.4m)
Number of assets
(2021: 15)
Locations
12
8
11
10
1
4
13
14
5
7
2
3
9
6
1 Queens Road
Sheffield
105,600 sq ft – Freehold
5 Regency Wharf
Birmingham
42,200 sq ft – Leasehold
9
53-57 Broadmead
Bristol
13,200 sq ft – Leasehold
13 7-9 Warren Street
Stockport
8,700 sq ft – Freehold
2 Parc Tawe North Retail Park
Swansea
116,700 sq ft – Leasehold
3 Gloucester Retail Park
Gloucester
113,900 sq ft – Freehold
6
7
Thistle Express
Luton
81,600 sq ft – Leasehold
Scots Corner
Birmingham
25,500 sq ft – Freehold
10 78-80 Briggate
Leeds
7,700 sq ft – Freehold
11
17-19 Fishergate
Preston
52,300 sq ft – Freehold
4 Angouleme Retail Park
Bury
76,200 sq ft – Leasehold
8 Crown & Mitre Building
Carlisle
25,200 sq ft – Freehold
12 72-78 Murraygate
Dundee
9,700 sq ft – Freehold
14 6-12 Parliament Row
Hanley
17,300 sq ft – Freehold
42
Picton Property Income Limited Annual Report 2022
The value of the retail and leisure sector increased on a
like-for-like basis by £12.8 million or 17% with the majority
of the increase relating to our retail parks, which account
for 65% of this element of the portfolio. The annual rental
income increased by £0.8 million or 14% to £7.1 million.
The portfolio has an average weighted lease length of
8.1 years with the ERV being £7.1 million.
Investor demand for retail warehouse parks has
increased substantially over the last six months, resulting
in valuation increases on the back of yield movement.
While the sector remains more attractive to retailers
seeking accommodation, we have yet to see significant
rental growth coming through.
The high street is still struggling following the pandemic
with an oversupply in most markets. Shoppers are
however returning to city centres and local shopping is
still performing well, with signs of occupational demand
returning off rebased rents.
We have seen positive ERV growth of 1% across this
element of the portfolio and pleasingly we have been
able to increase occupancy during this period to 93%.
Our largest retail void is the office element of Regency
Wharf, Birmingham and we only have three vacant high
street shops, one is under offer, and we have interest in
the other two.
£2.5 million was invested into the retail portfolio during the
period, the majority into the Regency Wharf conversion.
Portfolio activity
At Stanford Building, London, we let the flagship retail
unit to Scotch & Soda, an international fashion retailer, for
ten years, subject to break. The rent of £0.5 million per
annum is 22% ahead of ERV. The lease starts in May 2022
and the incentive package was less than one year’s rent.
We had success at our retail parks, with a letting to the
UK Government in Swansea for a Job Centre, which
worked well in this end of terrace unit. We secured a
five-year lease, subject to break, at a rent of £0.1 million
per annum, in line with ERV. The park is fully leased with
occupiers including Lidl, FarmFoods, JD Gyms, and Pets
at Home.
At Angouleme Way Retail Park, Bury we leased the final
vacant unit to JD Gyms. We secured a ten-year term
certain at a rent of £0.2 million per annum, in line with
ERV. The park is fully leased with occupiers including
TK Maxx, Argos and JYSK.
At Scots Corner, Birmingham, where we have a parade of
local high street retail units with a Job Centre above, we
extended two leases for a combined rent of £0.1 million
per annum, which was 5% ahead of ERV. At the same
property we leased a unit securing a rent 23% ahead of
ERV. We have one unit to lease, and we have interest.
Stanford Building
London
Victoria Lane, Huddersfield, was sold in September. The
property consisted of three small retail units, with short
income to Argos, Savers, and Peacocks, but with Argos
vacating. The property was sold for £0.7 million, 16%
ahead of valuation, to the local council.
Outlook
The retail and leisure sector is stabilising following the
pandemic. Retail warehouse parks are trading well
and are in demand from investors. Although there
remains an oversupply of floorspace in the high street
and shopping centre subsectors, there are signs that
yields have reached a floor and there could be
opportunities in carefully selected prime assets.
Our portfolio is well leased, provides an attractive income
return and with 65% in the retail warehouse sector we
are strategically well placed. We have been successful in
securing new occupiers over the year and our parks have
remained busy. High street valuations, which have moved
down over the past few years, are now stabilising.
The inflationary pressures currently being felt may result
in a drop in consumer spending. Therefore, we remain
cautious within the sector and will be selective when
considering potential investments.
Picton Property Income Limited Annual Report 2022
43
Strategic ReportGovernanceFinancial StatementsAdditional Information Financial Review
Strong valuation and
earnings growth
This financial year we are reporting
a record profit of £147 million and
an increase in the net assets of over
24% to £657 million.
£147m
Profit for the year
£657m
Net Assets
44
Picton Property Income Limited Annual Report 2022
This financial year has seen a significant rebound in the
economy, with UK GDP returning above pre-pandemic
levels by the end of March 2022. However the conflict
in Ukraine has tempered the outlook, with rising inflation
expected to restrain growth in the short-term.
The total profit for the year was £147.4 million, up from
£33.8 million in 2021. Both income and capital elements
were ahead of the previous year’s position.
On the capital side, we saw very strong growth in our
industrial and retail warehouse assets, with the overall
valuation movement of £130 million for the year. The
like-for-like gain in the valuation of the property portfolio
was 21%.
Our EPRA earnings, comprising the operating results and
net interest expense, increased to £21.2 million for the
year, an increase of 5.5%. As discussed below, property
revenue rose by over £3 million compared to 2021, or over
7%. With the new acquisitions made in the year, plus the
one recently announced post year-end, we expect
revenue to move forward again next year.
We have raised the level of dividend twice in the year,
and this is now back to the pre-pandemic level.
The total return for the year was 28%, significantly
improving upon the 6.6% recorded last year.
Net asset value
The net assets of the Group increased to £657.1 million,
or 120 pence per share, which was a rise of 24.4% over
the year. The chart below shows the components of
this increase.
March 2021 net asset value
Income profit
Valuation movement
Debt prepayment fees
Share-based awards
Purchase of shares
Dividends paid
March 2022 net asset value
£m
528.2
21.2
130.2
(4.0)
0.6
(0.7)
(18.4)
657.1
We have raised the level of
dividend twice in the year.
Andrew Dewhirst
Finance Director
The following table reconciles the net asset value
calculated in accordance with International Financial
Reporting Standards (IFRS) with that of the European
Public Real Estate Association (EPRA).
2022
£m
2021
£m
2020
£m
Net asset value – IFRS and
EPRA NTA
657.1
528.2
509.3
Fair value of debt
(6.7)
(21.0)
(29.6)
EPRA NDV asset value
650.4
507.2
479.7
Net asset value per share
(pence)
EPRA net tangible asset
value per share (pence)
EPRA net disposal value
per share (pence)
120
120
119
97
97
93
93
93
88
Income statement
As noted above our results for the year are very strong.
Valuation gains are at a record level, but there has also
been growth in EPRA earnings, with an increase in
property income.
Total revenue from the property portfolio for the year
was £46.5 million, up from £43.3 million last year. Rental
income has increased by 9.8% compared to 2021, as a
result of the new acquisitions made during the year,
as well as the increased occupancy and reduced bad
debt provisions. On a like-for-like basis, rental income
increased by 9.5% compared to the previous year, on
an EPRA basis.
Rent collection has largely returned to pre-pandemic levels.
Property operating and void costs are slightly higher
than the previous year, at £4.9 million compared
to £4.6 million. Although occupancy has increased,
following a number of lettings towards the end of
the year, void holding costs are higher this year,
impacted by general inflationary pressure.
Administrative expenses for the year were £5.8 million,
compared to £5.4 million in 2021. Staff costs are some
6% higher compared to the previous year, reflecting
higher variable remuneration provisions as well as the
new fee and salary rates agreed for 2021/22. There
have been other additional costs this year relating to
developing the net zero carbon pathway and other
sustainability related issues.
Interest costs for this year are £8.5 million. This includes
the additional amortisation this year of costs associated
with the original Canada Life facility from 2012, which,
as set out below, has been extended this year. We have
also made drawdowns under our revolving credit facility,
although these were largely repaid within the year. As a
result of resetting the interest rate on our Canada Life
facility our cost of debt will be lower going forward.
Picton Property Income Limited Annual Report 2022
45
Strategic ReportGovernanceFinancial StatementsAdditional Information Financial Review continued
Capital gains on the portfolio were £130.2 million for the
year, including the gains on owner-occupied property.
There were strong valuation gains across the portfolio,
with the industrial and retail warehouse assets performing
particularly well. One disposal of a retail asset was made
during the year, realising a small gain compared to the
March 2021 valuation.
The total profit for the year was £147.4 million, up by over
300% compared to 2021.
Dividends
As the restrictions caused by the pandemic have eased
and our rent collection rate has risen, we have been able
to increase the quarterly dividend twice over the course
of the year, and have now returned to the pre-pandemic
rate of 0.875 pence per share. The full dividend for the year
was 3.375 pence per share, with total dividends paid out
of £18.4 million, compared to £15.0 million last year, an
increase of 23%. Dividend cover for the full year was 115%.
Our senior loan facility with Aviva reduced by the regular
amortisation, £1.3 million in the year.
The Group remained fully compliant with its loan
covenants throughout the year. During the year we utilised
our revolving credit facility to acquire the two industrial
assets mentioned above. Much of this has been repaid
using the proceeds from the new Canada Life borrowings.
At 31 March 2022 we had £4.9 million drawn under the
revolving credit facility, which had been used to fund
capital expenditure projects. The revolving credit facility,
originally for an initial term of three years, was extended by
a further year in 2021/22, and a further one-year extension
has now been granted, taking the maturity to 2025.
The fair value of our borrowings at 31 March 2022 was
£225.6 million, higher than the book amount. Lending
margins have fallen slightly compared to the previous year,
but gilt rates have risen more significantly.
A summary of our borrowings is set out below:
Investment properties
The appraised value of our investment property portfolio
was £849.3 million at 31 March 2022, up from £682.4 million
a year previously. We have made two acquisitions this year,
for a total consideration of £25.0 million, as well as a
disposal of one small retail property, for net proceeds of
£0.7 million. The two industrial acquisitions are discussed
in more detail in the Portfolio Review section. This year we
have invested £9.6 million of capital expenditure in the
portfolio. There have been a number of key refurbishment
projects undertaken this year, principally at Regency Wharf,
Birmingham, Longcross, Cardiff and at 50 Farringdon Road,
London. There were significant portfolio valuation gains
totalling £130.2 million this year, principally in the industrial
and retail warehouse sectors.
As last year, the value of the floor that we occupy at
Stanford Building, London, has been excluded from the
value of Investment Properties and included separately
with Property, Plant and Equipment. Any gains arising from
the revaluation of this element of the property are shown
within Other Comprehensive Income.
At 31 March 2022 the portfolio comprised 47 assets, with an
average lot size of £18.1 million.
A further analysis of capital expenditure, in accordance with
EPRA Best Practices Recommendations, is set out in the
Supplementary Disclosures section.
Borrowings
Total borrowings are now £218.8 million at 31 March 2022,
with the loan to value ratio at 21.2%. The weighted average
interest rate on our borrowings has reduced to 3.7%, while
the average loan duration is now 9.6 years.
In March, we extended and amended our Canada Life
facility. Previously the outstanding £80 million loan had a
maturity date of July 2027, which we have moved out to
July 2031. We have also borrowed an additional £49 million
under this facility, increasing the principal to £129 million,
and at the same time reducing the interest rate payable on
the full amount to 3.25%. As a result of resetting the rate on
the original principal we have incurred one-off prepayment
fees of £4.0 million.
Fixed rate loans (£m)
Drawn revolving facility
(£m)
Total borrowings (£m)
Borrowings net of cash
(£m)
Undrawn facilities (£m)
Loan to value ratio (%)
Weighted average interest
rate (%)
Average duration (years)
2022
213.9
4.9
218.8
2021
2020
166.2
167.5
–
–
166.2
167.5
180.3
142.8
143.9
45.1
21.2
3.7
9.6
50.0
20.9
4.2
8.9
49.0
21.7
4.2
9.9
Cash flow and liquidity
Our overall cash position increased by £15.1 million over
the year. This was partly due to the additional borrowings
that were received in March 2022, but additionally the
cash flow from operating activities was higher this year
at £20.0 million. Cash outflows from investing activities
was £33.8 million for the year, being the consideration
paid for the two new assets, plus £9.6 million of capital
expenditure. Dividends paid increased to £18.4 million.
Our cash balance at the year-end stood at £38.5 million,
compared to the previous year’s balance of £23.4 million.
Share capital
No new ordinary shares were issued during the year.
The Company’s Employee Benefit Trust acquired a further
750,000 shares, at a cost of £0.7 million, or 97 pence per
share, during the year. This was to satisfy the future vesting
of awards made under the Long-term Incentive Plan and
Deferred Bonus Plan, and now holds a total of 1,974,253
shares. As the Trust is consolidated into the Group’s results
these shares are effectively held in treasury and therefore
have been excluded from the net asset value and earnings
per share calculations, from the date of purchase.
Andrew Dewhirst
Finance Director
25 May 2022
46
Picton Property Income Limited Annual Report 2022
120p
NAV per share
(2021: 97p, 2020: 93p)
3.4p
Dividends per share
(2021: 2.8p, 2020: 3.5p)
115%
Dividend cover
(2021: 134%, 2020: 105%)
3.9p
EPRA earnings per share
(2021: 3.7p, 2020: 3.7p)
20.8%
Like-for-like valuation
gain
(2021: 3.2%, 2020: 1.4%)
EPRA Best Practices Recommendations
The EPRA key performance measures for the
year are set out on page 3 of the Report, with
more detail provided in the Supplementary
Disclosures section which starts on page 139.
Alternative performance measures
We use a number of alternative performance
measures (APMs) when reporting on the performance
of the business and its financial position. These
do not always have a standard meaning and
may not be comparable to those used by other
entities. However, we use industry standard
measures and terminology where possible.
In common with many other listed property
companies we report the EPRA performance
measures. We have reported these for a
number of years in order to provide a consistent
comparison with similar companies. In the
Additional Information section of this Report
we provide more detailed information and
reconciliations to IFRS where appropriate.
Our key performance indicators include three
of the key EPRA measures but also total return,
total property return, property income return,
total shareholder return, loan to value ratio,
cost ratio, occupier retention rate, employee
satisfaction and EPC ratings. The definition of these
measures, and the rationale for their use, is set
out in the Key Performance Indicators section.
EPRA’s mission
The European Public Real Estate Association’s
(EPRA) mission is to promote, develop and
represent the European public real estate sector.
As an EPRA member, we fully support the
EPRA Best Practices Recommendations which
recognise the key performance measures, as
detailed above. Specific EPRA metrics can be
found within the KPIs and Financial Review
sections of this Report with further disclosures
and supporting calculations on pages 139 to 141.
Picton Property Income Limited Annual Report 2022
47
Strategic ReportGovernanceFinancial StatementsAdditional Information Principal Risks
Managing risks
The Board recognises that there are
risks and uncertainties that could have
a material impact on the Group’s results.
Risk management provides a structured approach to
the decision making process such that the identified
risks can be mitigated and the uncertainty surrounding
expected outcomes can be reduced. The Board has
developed a risk management policy which it reviews
on a regular basis. The Audit and Risk Committee
carries out a detailed assessment of all risks, whether
investment or operational, and considers the
effectiveness of the risk management and internal
control processes. The Executive Committee is
responsible for implementing strategy within the
agreed risk management policy, as well as identifying
and assessing risk in day-to-day operational matters.
The management committees support the Executive
Committee in these matters. The small number of
employees and relatively flat management structure
allow risks to be quickly identified and assessed.
The Group’s risk appetite will vary over time and
during the course of the property cycle. The principal
risks – those with potential to have a material impact
on performance and results – are set out below,
together with mitigating controls.
The UK Corporate Governance Code requires the
Board to make a Viability Statement. This considers
the Company’s current position and principal and
emerging risks and uncertainties combined with an
assessment of the future prospects for the Company,
in order that the Board can state that the Company
will be able to continue its operations over the
period of their assessment. The statement is set in
the Director’s Report.
Principal risks and trends
Increasing
No change/stable
Decreasing
1 Political and economic
2 Market cycle
3 Regulatory and tax
4 Climate change resilience
5 Portfolio strategy
6 Investment
7 Asset management
8 Valuation
9 People
10 Finance strategy
11 Capital structure
48
Picton Property Income Limited Annual Report 2022
Covid-19 impacts
Risk management framework
The impacts of the Covid-19 pandemic have lessened over
the past year as restrictions have been lifted and the UK
economy has largely recovered, with GDP above pre-
pandemic levels. However, the longer-term implications
may be felt for some time. Government borrowing has
increased significantly during the pandemic which could
lead to higher taxes and lower growth. Other consequences
of the pandemic, such as flexible working and increased
online retailing, are unlikely to reverse.
Climate-related risks
The Board has carried out an assessment of the physical
and transition risks most relevant to the business, and
undertaken a review of its procedures for identifying
and managing those risks. This review made a number
of recommendations which will be implemented during
the coming year. More detail on the risk assessment and
scenario modelling is set out in the Task Force for Climate-
related Financial Disclosures section of the Report.
Emerging risks
During the year the Board has considered themes
where emerging risks or disrupting events may impact
the business. These may arise from behavioural changes,
political or regulatory changes, advances in technology,
environmental factors, economic conditions or
demographic changes. All emerging risks are reviewed
as part of the ongoing risk management process.
The principal emerging risks have been identified to be:
‒ rising inflation in the UK economy, caused by higher
energy, food and commodity prices;
‒ the legacy effects of the pandemic, which has
heightened awareness of social injustice and global
inequality, and the pressure on businesses to create
positive societal value;
‒ cyber security, heightened by the disruption during
the pandemic and greater home working;
‒ the increasing importance of sustainability issues to
all stakeholders;
‒ office working is evolving into a more flexible model,
making businesses reassess their space requirements;
‒ online retailing continues to reduce the demand for
physical space in the retail market;
‒ advances in technology are impacting both the real
estate sector, in areas such as smart building systems
and electric vehicle charging, and also occupiers’
businesses, changing their space requirements;
‒ changes in regulations are increasing environmental
standards and property owners must keep pace to
avoid the risk of stranded assets.
These emerging risks are covered in more detail in the
Marketplace section of the Report.
Read more on pages 16-17
Board
– Has overall responsibility for risk management
– Determines business model
– Considers risk appetite
Executive Committee
– Implements strategy
Audit and Risk
Committee
and risk policy
– Identifies and
assesses risks
– Carries out
risk mitigation
– Recommends risk
management policy
– Reviews internal controls
– Reviews detailed
risk matrix
– Considers principal
and emerging risks
Management Committees
– Review specific transaction risks
– Consider forthcoming legislation
– Review operational risk
The matrix below illustrates the assessment of the impact
and likelihood of each of the principal risks.
Corporate Strategy
Property
6
5
3
2
1
4
11
10
8
7
9
Financial
Operational
Principal risk likelihood
High Medium Low
Estimated risk
of occurrence within
next five years
0% to 10%
10% to 33%
Greater than 33%
Read more on pages 50-52
Picton Property Income Limited Annual Report 2022
49
Strategic ReportGovernanceFinancial StatementsAdditional Information Principal Risks continued
Corporate Strategy
1
Political and economic
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic pillar
The Board considers economic
conditions and market uncertainty
when setting strategy, considering
the financial strategy of the business
and in making investment decisions.
The recent and continuing conflict
in Ukraine has brought further
uncertainty to global markets.
Although UK GDP has recovered
to above pre-pandemic levels
there are still risks to the economy,
with inflation rising, higher energy
and commodity prices and supply
chain issues.
A G
H
B
C
Uncertainty in the UK economy,
whether arising from political
events or otherwise, brings risks
to the property market and to
occupiers’ businesses. This can
result in lower shareholder
returns, lower asset liquidity
and increased occupier failure.
2
Market cycle
3
1
2
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic pillar
The Board reviews the Group’s
strategy and business objectives
on a regular basis and considers
whether any change is needed,
in light of current and forecast
market conditions.
Uncertainty in the property market
has declined with the easing of
restrictions. There is still a marked
divergence in performance
across the market sectors, due
to structural differences.
C
D
The property market is cyclical
and returns can be volatile.
There is an ongoing risk that
the Company fails to react
appropriately to changing
market conditions, resulting
in an adverse impact on
shareholder returns.
3
Regulatory and tax
3
1
2
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic pillar
The Group could fail to comply
with legal, fiscal, health and safety
or regulatory matters which could
lead to financial loss, reputational
damage or loss of REIT status.
The Board and senior management
receive regular updates on relevant
laws and regulations.
The Group is a member of the BPF
and EPRA, and management
attend industry briefings.
4
There are no significant changes
expected to the regulatory
environment in which the
Group operates.
C
D
3
1
2
Climate change resilience
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic pillar
Failure to react to climate change
could lead to reputational
damage, loss of income and value
and being unable to attract
occupiers. Rising materials and
energy costs as a result of climate
change could give rise to asset
obsolescence.
Sustainability is embedded within
the Group’s business model
and strategy.
Climate change and other
sustainability issues are increasingly
important to all stakeholders.
We have published our pathway to
net zero carbon with a commitment
to become carbon net zero by 2040.
We have carried out an assessment
of the physical and transition
risks to the business under two
climate scenarios.
We have developed a refurbishment
checklist to apply to projects
ensuring environmental factors are
fully considered at all stages.
The UK Government has set a
net zero target of 2050 and has
implemented other regulations,
such as the Minimum Energy
Efficiency Standards, which are
relevant to the real estate industry.
Occupiers are developing their own
net zero strategies and demanding
energy efficient buildings as well as
more staff amenities.
A J
C
K
3
1
2
50
Picton Property Income Limited Annual Report 2022
Property
5
Portfolio strategy
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic pillar
The Group has an inappropriate
portfolio strategy, as a result of
poor sector or geographical
allocations, or holding obsolete
assets, leading to lower
shareholder returns.
6
Investment
Risk
Investment decisions may be
flawed as a result of incorrect
assumptions, poor research or
incomplete due diligence,
leading to financial loss.
The Group maintains a diversified
portfolio in order to minimise
exposure to any one geographical
area or market sector.
As stated above there is a
continued divergence across
sectors. The role of the office is
changing, and the retail sector
has longer-term structural issues
to address.
A
C
3
1
2
Mitigation
The Executive Committee must
approve all investment transactions
over a threshold level, and significant
transactions require Board approval.
Commentary
Environmental factors and
climate-related risks are becoming
increasingly important in
investment decisions.
Risk trend
Connected KPIs
Strategic pillar
A
C
3
1
2
A formal appraisal and due
diligence process is carried out for
all potential purchases including
environmental assessments.
A review of each acquisition is
performed within two years
of completion.
Commentary
Occupier engagement will remain
important to successful asset
management, particularly through
the transition to net zero.
Risk trend
Connected KPIs
Strategic pillar
C I J
3
1
K
2
Mitigation
Management prepare business
plans for each asset which are
reviewed regularly.
The Executive Committee must
approve all investment transactions
over a threshold level, and significant
transactions require Board approval.
Management maintain close contact
with occupiers and have oversight of
the Group’s Property Manager.
7
Asset management
Risk
Failure to properly execute asset
business plans or poor asset
management could lead to
longer void periods, higher
occupier defaults, higher arrears
and low occupier retention, all
having an adverse impact on
earnings and cash flow.
8
Valuation
Risk
A fall in the valuation of the
Group’s property assets could
lead to lower investment returns
and a breach of loan covenants.
Commentary
Investment markets have
returned to more normal
conditions as restrictions
have eased.
Mitigation
The Group’s property assets are valued
quarterly by an independent valuer
with oversight by the Property
Valuation Committee. Market
commentary is provided regularly
by the independent valuer.
The Board reviews financial forecasts
for the Group on a regular basis,
including sensitivity and adequate
headroom against financial covenants.
Risk trend
Connected KPIs
Strategic pillar
3
1
2
A
C
E
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Principal Risks continued
Operational
9
People
Risk
Mitigation
Commentary
Connected KPIs
Strategic Pillar
Risk trend
The Group relies on a small
team to implement the
strategy and run the day-to-day
operations. Failure to retain
or recruit key individuals with
the right blend of skills and
experience may result in poor
decision making and
underperformance.
The Board has a remuneration
policy in place which incentivises
performance and is aligned with
shareholders’ interests.
There is a Non-Executive Director
responsible for employee
engagement who provides regular
feedback to the Board.
The team has remained stable
throughout the year. The results
of the employee engagement
survey were again positive.
Flexible working arrangements
have been introduced following
employee feedback.
F
H L
3
1
2
Financial
10
Finance strategy
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic Pillar
The Group has a number of loan
facilities to finance its activities.
Failure to comply with
covenants or to manage
refinancing events could lead
to a funding shortfall for
operational activities.
11
Capital structure
The Group’s property assets are
valued quarterly by an independent
valuer with oversight by the Property
Valuation Committee. Market
commentary is provided regularly
by the independent valuer.
The Group has increased its
borrowings during the year but
still has good headroom under its
lending covenants. The revolving
credit facility has been extended
for a further year.
C
D
E
3
1
2
The Board reviews financial
forecasts for the Group on a regular
basis, including sensitivity against
financial covenants.
The Audit and Risk Committee
considers the going concern status
of the Group biannually.
Risk trend
Risk
Mitigation
Commentary
Connected KPIs
Strategic Pillar
The Group operates a geared
capital structure, which
magnifies returns from the
portfolio, both positive and
negative. An inappropriate level
of gearing relative to the
property cycle could lead to
lower investment returns.
The Board regularly reviews its
gearing strategy and debt maturity
profile, at least annually, in light of
changing market conditions.
Although borrowings have increased
the Group’s loan to value ratio has
remained low.
A G
C H
E
3
1
2
52
Picton Property Income Limited Annual Report 2022
TCFD Statement
This year, in order to fully comply with the requirements of the Task Force on
Climate-related Financial Disclosures (TCFD), we have carried out a review of
climate risk governance and a detailed assessment of the climate-related risks
relevant to the business under two distinct climate change scenarios. The risks
identified may be physical risks, caused by acute weather events or shifts in climate
patterns, or transition risks, resulting from the change to a lower carbon economy.
Recommendation
Commentary
Governance
The Board’s oversight of
climate-related risks and
opportunities
Responsibility for climate-related risk management ultimately lies with the Board. This encompasses
consideration of climate-related risks and extends to setting the Group’s risk appetite which defines the limits
of the Group’s activities. Climate risk and wider sustainability matters are overseen by the Audit and Risk
Committee which, in adopting the Risk Management Policy, is responsible for identifying and managing
climate-related risks to the Group. The Audit and Risk Committee ensures that the Risk Management Policy is
reviewed at least annually and revised as necessary to support our agile risk management approach.
The Audit and Risk Committee meets at least twice a year and the Chair is responsible for reporting the
Committee’s findings and recommendations to the Board after each meeting, including updates on the Group’s
overall risk appetite, risk profile and risks strategy, accounting for the current and prospective macroeconomic
and financial environment. This process led the Board to approve the implementation of our net zero carbon
target this year, in response to our growing recognition of potential transition risks, including our exposure to
higher energy prices and increasingly stringent building standards. This year we updated our Audit and Risk
Committee’s terms of reference to include climate-related responsibilities, such as using qualitative and
quantitative metrics as appropriate to identify, manage, monitor and oversee climate-related risks.
Management’s role in
assessing and managing
climate-related risks and
opportunities
The Responsibility Committee meets regularly to consider all aspects of sustainability and is responsible for
identifying and reporting any emerging climate-related risks and opportunities. This year we updated the
Committee’s Terms of Reference to reflect this. The Committee ensures compliance with all relevant ESG
standards and legislation, and provides regular updates to the Executive Committee.
A detailed overview
of our Governance
structure can be
found on page 80
The Executive Committee is responsible for identifying and evaluating risks, including climate-related risks,
arising from the implementation of the day-to-day operational activities of the Group. The Committee ensures
that physical and transition climate risks are evaluated and recorded in the Risk Matrix and Emerging Risks
Dashboard on a regular basis, and as appropriate, risks are escalated to the Board and Audit and Risk
Committee. Within the Risk Matrix, responsibility for oversight is assigned to an appropriate Committee or
individual. The Executive Committee maintains management and oversight of all risks identified and their
mitigating activities, and reports recommendations to the Board or the Audit and Risk Committee. The Terms of
Reference have been updated accordingly to reflect the Executive Committee’s enhanced responsibility for
oversight of climate-related risks.
As part of our climate risks assessment outlined below in Risk Management, we conducted a detailed climate
risk governance gap analysis, aligned with the TCFD recommendations, to understand the governance
structures we should install to govern, oversee and manage climate-related risks across all levels of the business.
Picton Property Income Limited Annual Report 2022
53
Strategic ReportGovernanceFinancial StatementsAdditional Information TCFD Statement continued
Recommendation
Commentary
Strategy
Climate-related risks and
opportunities identified over
the short, medium and
long-term
Through conducting a rigorous climate risk assessment, outlined under Risk Management below, we have
accurately identified the potential climate risks and opportunities facing our business. The table below outlines
the key physical and transition risks we have identified over the short-term (2020-2029), medium-term (2030-3039)
and long-term (>2040). Our heightened understanding of our climate risks has enabled us to employ a robust risk
management process to address possible impacts and we will be working to improve this process further over
the next year.
Time
horizon
Risk
Risk
description
Risk
impacts
Changes in
occupier/market
demand
Increased building
standards/
requirements
Short-
term:
2020-
2029
Financial
market impacts
Decarbonisation
and increased
energy demand/
cost
Flooding
Heat stress
Medium-
term:
2030-
2039
Extreme weather
events
Drought and water
stress
Long-
term:
2040-
2049
As markets shift towards low carbon
alternatives, climate resilient assets could
achieve a ‘green premium’ by outperforming
buildings that do not meet a higher
sustainability standard. Failure to adapt
could create competitive risk and tenant
default risk.
Policy mandates buildings and
developments to adhere to higher
standards, to improve efficiencies and
operational practice, and to embed climate
resilience on-site. Non-compliant assets
could experience reputational risk and
reduced occupier demand.
Financial market impacts could transpire
as market preferences shift towards low
carbon solutions and climate resilience,
or as a result of physical climate risks causing
macroeconomic impacts. Market shifts
could affect our ability to secure financial
capital, acquisition activities and asset values.
Increasing the share of renewable energy
sources and decarbonising energy-intensive
industries could intensify other transition
risks associated with reputation damage,
financial impacts and litigation risk.
Some of our assets are exposed to fluvial and
pluvial flooding risk, while our susceptibility
to coastal flooding is limited. This
encompasses risks associated with
disruption and damage that could lead to
high repair costs or stranded asset risk.
Rising temperatures and extreme
temperature highs puts pressure on both
our assets and people. Our concentration of
assets in Southern England increases our
susceptibility to this risk and to associated
costs, including premature material
replacement and increased cooling costs.
Extreme weather events, including storms,
heavy winds, heavy precipitation, drought
and snow could become more frequent and
severe, generating risks associated with asset
damage, regional infrastructure disruption,
stranded asset risk and high capital
expenditure costs to reinforce building
design.
Water becomes increasingly scarce, with
supply unable to meet demand. As
temperatures rise, average drought lengths
could increase, with implications on water
costs, supply chains and public health.
‒ Reduced asset values, ‘green
premium’ vs ‘brown
discount’
‒ Increased cost of
financial capital
‒ Occupier default risk causing
loss of income
‒ Increased capital
expenditure and retrofit
costs
‒ Increased operational costs,
including impacts from
increased cost of carbon
‒ Physical damage causing
costly repairs and clean-up
‒ Cost of mitigation measures
‒ Migration away from
vulnerable areas
‒ Decline in asset values or
stranded asset risk
‒ Litigation or reputational
risks if perceived to
inadequately prepare for
physical risks
‒ Supply chain, distribution
and regional infrastructure
disruption
Additionally, key opportunities we have identified include:
‒ The opportunity to secure occupiers, increase asset values and enhance our reputation by investing in
renewables, harnessing low carbon technologies and providing energy efficient buildings. This includes the
opportunities we expect to realise as we implement our net zero carbon pathway.
‒ Embedding resilience in our assets and business strategy by proactively assessing and managing identified
climate-related risks, gaining a competitive advantage and securing our long-term sustainability as a result.
54
Picton Property Income Limited Annual Report 2022
Recommendation
Commentary
Strategy continued
Impact of climate-related
risks and opportunities on
the organisation’s businesses,
strategy and financial
planning
The Board recognises that climate change will have an impact on our business and consequently we have
enhanced our business strategy and financial planning to account for climate-related considerations, including
the impact of climate-related risks on the Group’s current and future capital position. Having identified a broad
range of climate-related risks and opportunities, we have integrated climate-related considerations into our
business strategy in a number of ways.
A core strategic focus is enhancing and adapting our assets through refurbishment and energy efficiency
upgrades, and we consider a range of climate-related risks across each stage of the property lifecycle to
continue to strive towards futureproofing our assets. For example, at the acquisition due diligence stage, we
undertake on-site environmental assessments to identify risks associated with flooding and energy efficiency,
and we use these findings to inform our investment decisions.
We have strategies in place to take advantage of opportunities linked to the shift to a low carbon economy,
including assessments as part of our Sustainability Action Plan that establish the feasibility to roll out in use
certifications at our relevant assets and assessments as part of our Sustainable Refurbishment Guidelines to
assess net zero (operational and embodied) capacity.
Having conducted a rigorous climate risk assessment in early 2022 and developed our net zero carbon pathway,
we are informed of a breadth of opportunities to further embed strong sustainability performance into our
overall strategy. Throughout 2022 and beyond, we will begin implementing both climate resilience planning
and our net zero carbon pathway. Both of these will create fundamental shifts in our business.
Resilience of the organisation’s
strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or lower
scenario
The thorough climate risk assessment we undertook enabled us to understand and analyse our key material
climate-related risks against the time horizons described above. Obtaining this information allowed us to
understand a variety of mitigation measures to reduce our vulnerability and exposure to climate-related risks,
which will enable us to proactively manage them and improve our resilience. Moreover, a number of climate-
related risks (transition climate risks as well as physical risks associated with heat stress) will be effectively
managed as we implement our net zero carbon pathway. Our net zero carbon pathway is aligned with targets
for a 1.5°C scenario.
The scenarios we selected for our analysis were the Intergovernmental Panel on Climate Change (IPCC)
Representative Concentration Pathways RCP4.5 and RCP8.5, aligning with industry best practice and covering
the most likely range of average global temperature rises in the coming decades. Analysing these distinct
climate scenarios has enabled us to understand the wide scope of climate-related risks and opportunities for
the business and inform actions to support our resilience.
The RCP4.5 scenario models average temperature rise by 2100 of 1.7-3.2°C and describes increased policy action
over the coming decades aiming to meet the Paris Agreement. It therefore is characterised by transition risks,
although physical risks are still substantial with this level of warming. RCP8.5 represents a ‘no additional policy’
scenario and models average temperature rise by 2100 of 3.2-5.4°C. This scenario is characterised by very severe
physical climate risks.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information TCFD Statement continued
Recommendation
Commentary
Risk management
Describe the organisation’s
processes for identifying and
assessing climate-related risks
Describe the organisation’s
processes for managing
climate-related risks
Describe how processes for
identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management
We are acutely aware that climate change poses a threat to not only our business and sector but to the global
economy. In recognition, in early 2022 we conducted two parallel, rigorous climate scenario analysis exercises,
the first to model climate risks to our portfolio and the second to qualitatively assess the resilience of our overall
business strategy.
This assessment used two distinct, plausible scenarios established by the IPCC, one which considers a transition
to a lower carbon economy consistent with a 2°C or lower scenario (RCP4.5) and one which aligns with
heightened physical climate-related risks (RCP8.5). The scenarios were selected to test a range of likely
outcomes and identify material climate-related risks over the short, medium and long-term.
The first climate assessment considered our portfolio’s susceptibility to a range of climate-related risks, including
physical risks (for example flooding, heat stress and extreme weather events) and transition risks (for example
market risk and technology). Via this quantitative modelling assessment, we have been able to determine the
geographical distribution of our climate-related risks and opportunities and the potential financial losses and
gains to our portfolio, respectively, allowing us to focus on mitigation strategies at our most at-risk assets and
harness the available opportunities.
The second climate assessment involved in-depth analysis of the most up-to-date, peer-reviewed scientific
literature. Using this knowledge to determine the frequency, duration, velocity and financial impacts of a range
of climate-related risks, an overall likelihood and impact score was assigned to our business’ most material
climate risks, including an indication of when we can expect them to materialise. High impact opportunities
were also identified in relation to our business strategy.
We brought these together to identify our top climate-related risks and opportunities that then informed
detailed risk management recommendations.
Our risk matrix and emerging risk dashboard are updated annually and biannually, respectively, by the Executive
Committee to ensure that we remain attentive to the changing nature of these risks and to reflect evolving
stakeholder requirements and the wider macroeconomic and geopolitical landscape. The risk matrix identifies
individual climate-related risks and comprehensively outlines specific mitigation strategies to manage these
risks. Each risk is scored for its probability, risk impact and residual risk, and responsibility for oversight is detailed.
Based on materiality, risks are communicated across relevant levels of our business. The emerging risk
dashboard lists the most material risks we have identified and places risks against a timeline to highlight the
relative urgency of identified risks. We will be updating this to reflect the findings of the climate risk assessments
we undertook.
Rigorous risk management processes are present at each stage of the property lifecycle, with all activities taking
place within our defined risk appetite. During pre-acquisition due diligence, we conduct environmental
assessments to assess environmental risks and energy efficiency. These guide our investment decisions and
inform asset management planning. After acquisition, our Sustainability Refurbishment Guidelines integrate a
range of climate-related factors, including specifications around EPCs and net zero carbon readiness.
To enhance our ability to manage climate-related risks in occupier-controlled spaces, we have introduced green
lease clauses and are engaging with occupiers around their operational behaviour, energy efficiency and data
sharing. We will continue to undertake asset level ESG audits to identify opportunities to reduce energy
consumption and improve efficiencies. Together, these strategies inform our investment and capital allocation
activities, as well as acquisition and divestment decisions to maximise the overall performance and resilience of
our portfolio’s assets.
This year, we have committed to achieving net zero carbon by 2040 – a key step towards building our resilience
to transition risk impacts, including increased carbon costs and shifting market demand towards low carbon
buildings. Our net zero carbon pathway, published on our website, has full details. We are determined to
establish ambitious business strategies and processes to achieve this goal and we are allocating significant
investment to secure success.
The climate risk assessment process we have undertaken in 2021/22, described above, has informed detailed risk
management recommendations that we are reviewing and beginning to implement. We have a three-year
roadmap for implementing key actions that will set the foundations for prudent climate-related risk
management for the medium to long-term.
Climate-related risks and opportunities are fully integrated into our risk management processes. Over the course
of 2022, we will be integrating the outputs of the climate risk assessments into our risk management framework
and will be integrating key risks within the risk matrix and emerging risk dashboard owned by the Executive
Committee which is overseen by the Audit and Risk Committee and the Board.
56
Picton Property Income Limited Annual Report 2022
Recommendation
Commentary
Metrics and targets
Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process
We report in line with EPRA Sustainability Best Practices Recommendations for sustainability reporting and
issue our EPRA tables within our Sustainability Report. We provide information to our stakeholders on our
climate-related performance and activities by reporting on a range of metrics for resource consumption, energy
and carbon emissions across our portfolio.
These include:
‒ Total and like-for-like Scope 1 and 2 emissions and total Scope 3 emissions. Scope 3 emissions are reported
voluntarily and are calculated using internal expense reports alongside the emissions factors from the UK
Government’s GHG Conversion Factors for Company Reporting 2020;
‒ Total and like-for-like electricity consumed in kWh, including energy intensity in kWh/m2. We aim to have
automatic meter reads across the whole portfolio to enhance reliability of data and reporting accuracy;
‒ Energy intensities for Scope 1 and 2 emissions using the metric tCO2e/m2. We use the most widely applied
industry intensity ratios to aid transparency and comparability within the sector;
‒ Total and like-for-like water consumption, including occupier water consumption in absolute terms, for
each asset type; and
‒ Total and like-for-like waste disposal in tonnes, split into recycling, composting, recovery, incineration
and landfill.
To supplement our quantitative measures, we also assess key qualitative measures, including EPC ratings and
building certifications to build a holistic view of our portfolio’s performance.
As part of our net zero carbon pathway we will be implementing metrics, including:
‒ Portfolio on-site renewable energy capacity (MW)
‒ Renewable energy procurement %
‒ High quality renewable energy procurement %
‒ Major refurbishment embodied carbon intensity (tCO2e/m2 GIA)
‒ Minor development and fit out embodied carbon intensity (tCO2e/m2 GIA)
‒ Total portfolio embodied carbon development (tCO2e)
‒ Total carbon emissions offset (tCO2e)
Disclose Scope 1, Scope 2 and,
if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the
related risks
Describe the targets used by
the organisation to manage
climate-related risks and
opportunities and
performance against targets
We disclose Scope 1, 2 and 3 greenhouse gas emissions in our Annual Report and Sustainability Report.
We have provided trend analysis since 2019 to show progress and historical performance.
We have calculated and reported our emissions in line with the GHG Protocol Corporate Accounting and
Reporting Standard.
In recognition of the escalating concerns around climate change and our awareness that the real estate industry
is a major contributor to global GHG emissions, to target meaningful carbon reduction, we have developed a net
zero carbon pathway with the ambition to achieve net zero carbon by 2040.
As part of this strategy, since most of our emissions are attributed to landlord and occupier energy consumption,
we will be formulating energy efficiency measures and targets per asset type based on the UK Green Building
Council’s targets for offices and the Carbon Risk Real Estate Monitor (CRREM) 1.5°C Global Pathways’ aligned
targets for all other asset types. Additionally, we are pursuing an embodied carbon target of 300 kgCO2e/m2 by
2040 for major refurbishments. As best practice and further guidance emerges surrounding targets, we will
review our target to ensure its effectiveness for achieving our net zero carbon goal.
Having identified our key material climate-related risks and opportunities by conducting rigorous climate
risk assessments, we will develop additional appropriate metrics and targets against which to measure
our performance.
Picton Property Income Limited Annual Report 2022
57
Strategic ReportGovernanceFinancial StatementsAdditional Information Section 172 Statement
Section 172
As the Company is registered in Guernsey, the
UK Companies Act 2006 has no legal effect.
However, in accordance with the UK Corporate
Governance Code 2018 and as a matter of good
governance, the Directors, individually and
collectively as the Board, act as they consider most
likely to promote the success of the Company for
the benefit of shareholders as a whole.
Consideration of these factors and other relevant matters
is embedded into all Board decision making, strategy
development and risk assessment throughout the year.
We consider our key stakeholders to be our occupiers,
our people, our communities, our suppliers and our
shareholders. Working closely with our stakeholders falls
within one of our three strategic pillars set out within our
business model and strategy. The primary ways in which
the Board engages directly or delegates responsibility for
engagement to management are set out below.
Board engagement with stakeholders
Our shareholders
As owners of the business we rely on the support of our
shareholders and their views are important to us. The
long-term success of the business will deliver value for
shareholders. Senior management hold regular meetings
with shareholders and feedback from these meetings is
reported back to the Board. This feedback may be on
operational matters, financing strategy or dividend policy,
as examples. The Directors normally attend the Annual
General Meeting to meet with shareholders and to answer
any questions they may have.
Our occupiers
One of our key priorities is to work with our occupiers, so
that we can understand their needs and aim to meet their
current and future requirements. The Board has delegated
responsibility for engaging with occupiers to the asset
management team, who have ongoing communication
with occupiers, and use this information when making
proposals to the Board on investment transactions, such
as refurbishment projects or leasing events.
The Directors have regard to:
The likely long-term consequences of decisions
Read more on pages 74–79
The interests of its employees
Read more on page 65
The Company’s relationships with its suppliers,
customers and others
Read more on pages 64–65
The impact of the Company’s operations on the
community and the environment
Read more on pages 60–65
The Company’s reputation and maintaining a reputation
for high standards of business conduct
Read more on pages 68–82
The need to act fairly towards shareholders
Read more on pages 76–79
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Picton Property Income Limited Annual Report 2022
Our people
Our people are key to our success and we want them to
succeed both as individuals and as a team. One of our
Non-Executive Directors, Maria Bentley, has responsibility
for employee engagement. As well as carrying out a further
employee survey this year, Maria held a virtual meeting
with the team without the Executive Directors present.
A number of topics were discussed and the employees’
views were reported directly back to the rest of the Board.
Local communities and environment
We are committed to improving the impact of our
buildings on local communities, whether providing space
to local businesses, improving local areas or minimising
the environmental impact of buildings themselves. The
Board has established a Responsibility Committee, which
is chaired by one of the Executive Directors, to deal with
sustainability policy and initiatives on its behalf. The Board
reviews progress on sustainability matters and has
attended relevant workshops during the year.
Suppliers
We have in place a framework for conducting business
across the Group in a way that makes a positive
contribution to society, while minimising any negative
impact on people and the environment. The Board has
agreed the overall business framework and delegated its
implementation to the management team.
Considering stakeholders in key Board decision making
Set out below are examples of important decisions taken
during the year. These are decisions that are material to the
Group but also significant to any of our key stakeholders.
In its decision making the Board considered the feedback
from stakeholder engagement as well as the need to act
fairly between shareholders and to maintain high
standards of business conduct.
Actions
Publication of net zero
carbon pathway
The Board has been focused on sustainability issues throughout the year including
the development of the net zero carbon pathway and assessment of climate-related
risks to the business. The pathway has now been published with a target date of
becoming net zero carbon by 2040. The Board also agreed that Picton would
become a signatory to the Better Buildings Partnership Climate Commitment.
Review and increase of
dividend
The Board is aware of the value of regular dividend payments to shareholders and
reviews the level of dividend each quarter. As the level of rent collection has increased
during the year and returned to normal levels the Board has approved two increases
in dividend, restoring it to its pre-pandemic level.
Support given to
occupiers during the
pandemic
Flexible working
Although the impacts of the pandemic were receding the Board maintained a policy
of considering financial support to occupiers on a case-by-case basis.
Following last year’s employee engagement the Board agreed that the team would
be able to return to the office on a flexible basis, with some home working.
Consultation on
Remuneration Policy
Subsequent to the Annual General Meeting the Board has engaged further with
shareholders regarding the implementation of the Directors’ Remuneration Policy to
understand their views.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Being Responsible
Our responsible
and ethical approach
We believe that sustainability has to be fully
embedded into all of our activities.
Our sustainability framework
This year we have re-focused our sustainability priorities as
we have developed our approach and understanding of
our material issues. We have three core segments:
Governance and Advocacy, Environmental Focus and
Stakeholder Engagement. In this section we set out our key
achievements under each of these areas, but more detail
will be provided in our Sustainability Report.
This year we have published both our new sustainability
policy and our net zero carbon pathway.
Sustainable thinking, responsible business
Our sustainability policy guides our long-term sustainability
priorities, including tackling environmental challenges,
providing sustainable buildings for our occupiers and
engaging with our stakeholders.
E n v i r onmental focus
Net zero
carbon
Biodiversity
Sustainable
buildings
Water
consumption
Energy
efficiency
Materials
& waste
Leadership
Data
Sustainable thinking,
responsible business
G
o
v
e
r
n
a
n
c
e
&
a
d
v
o
c
a
c
y
Transparency
& reporting
Supplier & contractor
responsibility
Policies
Community
& social value
Health
& Safety
Employees
& skills
Occupier
satisfaction &
wellbeing
t
n
e
m
e
g
a
g
n
Stakeholder e
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Picton Property Income Limited Annual Report 2022
What we have achieved this year
‒ Developed and published our net zero
carbon pathway
‒ Became a signatory to the Better Buildings
Partnership Climate Commitment
‒ Improved portfolio EPC ratings
‒ Removed gas supplies from three assets
‒ Increased the number of green leases completed
‒ Introduced further biodiversity measures
‒ Reduced GHG emissions compared to 2019 baseline
‒ Undertook two energy efficiency audits at
office assets
What we will do next year
‒ Address the initial priorities in our net zero
carbon pathway
‒ Continue to improve data capture and increase
coverage across our portfolio
‒ Undertake five net zero carbon audits across
our portfolio
‒ Integrate findings from energy audits into longer-
term asset business plans
Environmental focus
This year we have been focused on two key projects to
help us address the issue of climate change adaptation
and mitigation. Firstly we have developed and published
our net zero carbon pathway, as discussed below, and we
have also carried out an assessment of climate-related
risks relevant to our business, and how we identify
and manage these. This is covered in the Managing
Risks section.
Net zero carbon pathway
We have committed to be net zero carbon for our
operational and embodied emissions by 2040.
We have developed our pathway so that it aligns with the
Better Buildings Partnership Net Zero Pathway Framework
and the UK Green Buildings Council’s net zero carbon
hierarchy. By 2040 all operational emissions arising from
our portfolio will be reduced as much as possible through
energy efficiency measures and the use of renewable
energy, with any residual emissions offset. From 2040
onwards, all completed refurbishment projects will have
reduced their embodied carbon as much as possible, with
any residual emissions offset upon practical completion.
We have defined our portfolio’s baseline carbon footprint,
using 2019 as the most representative recent year, to map
the emissions reductions required to meet our 2040 target.
As with similar property companies, the majority of our
emissions (76%) relate to the energy consumption of our
occupiers. Although not included in the baseline year
assessment, embodied carbon associated with
refurbishment activity has been projected for future years
and is a key part of our commitment.
We will continue to implement energy efficiency measures
across the portfolio in order to meet energy intensity
targets. We will also investigate on-site renewable energy
opportunities and procure remaining energy requirements
from high-quality renewable sources. For refurbishment
projects we will employ circular economy principles, so
reducing waste and demand for raw materials by keeping
resources in the value chain for as long as possible. Our
target is to reduce emissions on major refurbishments to
300 kgCO2e/m2. Finally we will source high quality carbon
offsets, aligned with the Oxford Principles for Net Zero
Aligned Offsetting. We have also become a signatory to the
Better Buildings Partnership Climate Commitment.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Being Responsible continued
Emission source
Combustion of fuel and operation of facilities
Electricity, heat, steam and cooling purchased for
own use
Total Scope 1 and 2
Business travel
Occupier data
Office premises
Landlord water and treatment
Landlord waste
Total Scope 3
Total all Scopes
2021
2020
2019
Absolute
GHG
emissions
(tCO2e)
GHG
intensity
(tCO2e/m2)
Absolute
GHG
emissions
(tCO2e)
GHG
intensity
(tCO2e/m2)
Absolute
GHG
emissions
(tCO2e)
GHG
intensity
(tCO2e/m2)
GHG
Scope
1
2
3
3
3
3
3
1,020
0.019
940
0.017
1,137
0.005
1,457
2,477
2
3,099
5
6
8
3,120
5,597
0.028
0.042
N/A
0.034
0.018
0.000
0.000
0.021
0.038
1,499
2,439
1
2,278
8
28
7
2,322
4,761
0.028
0.040
N/A
0.024
N/A
0.001
0.000
0.011
0.023
2,295
3,432
4
3,672
9
53
13
3,751
0.010
N/A
N/A
0.033
N/A
0.001
0.000
N/A
7,183
0.017
Greenhouse gas emissions
Scope 1
Our absolute Scope 1 emissions rose by 9% compared to the
previous year to 1,020 tCO2e. Similarly, our Scope 1 intensity
rose by 11%. This rise was to be expected as lockdown
restrictions eased further during 2021, with small increases
seen in many of our office assets. Compared to 2019
emissions, the last full reporting year prior to the pandemic
impacts on occupation, we have seen a -10% reduction.
We continue to explore energy efficiency measures
across our portfolio, with current studies being
undertaken at Colchester Business Park, Colchester, on
replacing the gas boilers with low carbon alternatives.
Scope 2
Our absolute Scope 2 emissions have decreased by -3%
this year, to 1,457 tCO2e, with our emission intensity staying
level. Energy efficiency projects at Stanford Building,
London, 50 Farringdon Road, London and Regency Wharf,
Birmingham, have helped reduce our Scope 2 emissions
despite the increasing occupancy levels following the
easing of lockdown restrictions. Compared to 2019, we
have seen a -37% reduction in emissions. This year we
are looking to continue refurbishing our properties, with
LED upgrade works at Parkbury Industrial Estate, Radlett,
a building management system upgrade at Metro,
Manchester and the continued roll out of Asset IQ across
suitable assets. For the first year, we have represented our
head office emission intensity due to occupying a floor
within the newly refurbished Stanford Building, London.
Scope 3
By far, the largest element of our Scope 3 emissions is
that of our occupiers. Data collection for the Annual
Report is presented at the time of writing, with final
data collection figures presented in our Sustainability
Report. We are targeting an increase in occupier data
collection compared to 2020 following the end of
lockdown restrictions. To help assist our engagement
with occupiers, we have installed a CBRE Host app at
Colchester Business Park, Colchester. In 2022 we will be
implementing the app at further sites, including Stanford
Building, London. We will also be starting an occupier
engagement workshop programme to encourage
collaboration opportunities with all of our occupiers.
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Picton Property Income Limited Annual Report 2022
We have also seen a small increase in business travel
emissions as our team have begun travelling more regularly
to our assets. We expect this to increase further in 2022
but continue to encourage sustainable forms of travel and
virtual meetings where possible. We have seen a -77%
reduction in water emissions, largely due to an improved
emission factor for 2021 reporting. We are investigating
the roll out of automatic meter readers to improve the
accuracy and reliability of water supplies we control.
Methodology
We have reported on all the emission sources required
under the core requirements of the EPRA Best Practices
Recommendations and have voluntarily disclosed business
travel, occupier, and own premises consumption (Scope
3) emissions. An operational control approach has been
adopted and all our properties are included. Figures
presented are absolute for utility and waste consumption
and relate only to utilities and waste removal we control.
Occupier-obtained consumption is included where
possible. We have calculated and reported our emissions
in line with the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition) and used emission
factors from the UK Government’s GHG Conversion Factors
for Company Reporting 2021. We have changed from
financial year to calendar year reporting to ensure we
have more time to collect occupier consumption data.
This is the first year we have calculated our intensity
measurements based on the area served by each meter, for
example whole site, common area or a specific floor within
an asset. External supplies have been excluded from the
intensity calculations. In order for an accurate comparison to
be made between reporting years, this approach has been
backdated to 2020 figures. We have continued to voluntarily
report on Scope 3 vehicle emissions. Vehicle emissions
were calculated using our vehicle expenses reports and
the vehicle emission factors from the UK Government
GHG Conversion Factors for Company Reporting 2021. We
have included occupier and own premises consumption
within the Scope 3 emissions, using emission factors from
UK Government’s GHG Conversion Factors for Company
Reporting 2021. Year-on-year, we will continue to update
previous reported figures if applicable to remove estimates
and ensure actual data is captured and reported.
Sustainable buildings
We are committed to monitoring and enhancing the
environmental performance of our buildings and ensuring
they are resilient to changes in both climate and the
regulatory environment. Over the year we undertook
energy audits at two buildings in order to identify
improvement measures and continue to develop our
strategy for onsite solar power and the introduction of
electric vehicle charging facilities. We will be undertaking
specific net zero carbon audits of four buildings over
the coming year. We have also been implementing our
refurbishment guidelines which were introduced in 2021,
utilising refurbishment opportunities to remove fossil
fuels from buildings at Regency Wharf, Birmingham,
Angel Gate, London and 50 Farringdon Road, London.
EPCs
This year we have amended the basis for reporting
our EPCs to better reflect risks and recognising the
diversified nature of the portfolio. Looking at the
percentage of EPC ratings by estimated rental value
(ERV) of our portfolio, 71% have an EPC rating of A-C,
29% are rated D or E and only 0.2% is rated F or G.
We continue to use lease events, common area works
and EPC renewals to implement improvement works
with the overall aim of continually improving our
EPC score and ensuring compliance with MEES.
Energy audits
During 2021 we undertook energy audits at 401 Grafton
Gate, Milton Keynes, and Atlas House, Marlow. Our planned
audits at 50 Farringdon Road, London and Longcross,
Cardiff have been postponed because of the works which
were being undertaken at these buildings to improve the
heating and cooling systems and remove their gas supplies.
Adjustments to systems recommended in these reports
have been undertaken. Whilst the impact of the pandemic
on building occupancy and systems operation makes
like-for-like comparison of energy consumption more
difficult, by comparing consumption figures in early 2022
(when office occupancy at our buildings was returning
to more normal levels) with levels in 2019, we can see
that consumption has fallen by as much as 35% at the
buildings, as a result of the audit recommendations.
In addition to the energy audits, over the year we
have also prepared high level sustainability action
plans at all our multi-let assets. These plans cover
areas including biodiversity and social amenities
as well as energy efficiency. Over 2022 we will
implement the improvement measures identified.
We will be undertaking net zero carbon audits
to establish a strategy for reducing carbon at a
representative sample of our building types at
Parkbury Industrial Estate, Radlett, Sundon Business
Park, Luton, Angouleme Way, Bury, 401 Grafton Gate,
Milton Keynes and 50 Pembroke Court, Chatham.
Green leases
We have continued to incorporate sustainability clauses
into our leases. During the year we have completed
another 42 green leases, bringing the total to over 30%
of all current leases in place.
Biodiversity
Biodiversity measures were rolled out across more
of our industrial estates during this year and we have
made this a topic for discussion at our occupier
meetings. Through doing this we have been able to
adjust our landscaping procedures for example at
Easter Court, Warrington where some grassed areas
have been turned over to wildflower growth.
The refurbishment at Regency Wharf, Birmingham,
included the installation of a green wall in the reception
area. We also expanded our beehive numbers with
a further installation at Metro, Manchester.
We have started to embrace the biodiversity measures
in the Better Buildings Partnership Responsible Property
Management Toolkit, for example by commissioning
more biodiversity surveys at locations such as Angel
Gate, London.
Water and waste
Carbon emissions associated with the purchase and
disposal of water are a low materiality issue for us in
comparison to our other emission sources such as
landlord and occupier energy consumption. We aim to
implement water-saving measures such as water sub-
metering, target-setting, new water-saving technology,
and recycled water use across the portfolio.
Picton Property Income Limited Annual Report 2022
63
Strategic ReportGovernanceFinancial StatementsAdditional Information Being Responsible continued
Stakeholder engagement
We have in place a framework for conducting business in
a way that makes a positive contribution to society, while
minimising the impact on people and the environment.
We are committed to engaging with our occupiers,
shareholders, suppliers and wider community and the
Board acts to promote the long-term success of the
business for the benefit of all our stakeholders.
Occupier engagement
We are always seeking to improve our occupiers’ experience,
which is why we created the Picton Promise: five key
commitments including Action, Community, Technology,
Support and Sustainability. Each commitment underpins
every aspect of the occupier experience we provide.
During 2021 we continued to maintain regular contact with
our occupiers through measures such as our occupier
meetings and ensured our buildings remained fully
accessible on a Covid-19 compliant basis.
We issued information packs to our office occupiers,
which helped them plan for their staff to return to the
workplace following the UK Government’s work from
home advice ending.
The completion of our new business hubs at Angel Gate,
London and Longcross, Cardiff, have allowed us to provide
more flexible services to occupiers at these locations.
We have recently launched our two new occupier
engagement apps at Colchester Business Park and Angel
Gate, which will help us to improve the effectiveness of
our communication at these locations.
Occupier and employee health and safety
Our health and safety record continued to be strong over
the year with no reportable accidents or health and safety
related incidents. We were 99% compliant in critical and
secondary documentation.
Our Health and Safety Committee meets every month to
ensure that compliance and performance is measured
appropriately for all our stakeholders, our employees,
occupiers, contractors, and other visitors to our buildings.
Our incident response and business continuity strategies
have been updated and we have reviewed the current
policies for all our managing agents.
What we have achieved this year
‒ Introduced new occupier amenities and improved
communication methods
‒ Introduced new supplier clauses and a due
diligence questionnaire to address modern
slavery risks
‒ Helped develop the BBP Responsible
Management Toolkit
‒ Made charitable donations of £16,000 to 15 charities
‒ Carried out an annual employee
engagement survey
‒ Returned to working in the office on a flexible basis
‒ Provided further sustainability training for the team
‒ Held two employee offsite days
What we will do next year
‒ Host occupier sustainability workshops
‒ Maintain a high level of Health and
Safety compliance
During the year, our team received training sessions on fire
safety as well as general health and safety updates.
‒ Continue the roll out of supplier modern slavery
clauses and due diligence questionnaires
Occupier wellbeing and satisfaction
Occupancy levels during much of 2021, particularly at our
offices, continued to be affected by the pandemic. As a
result, for much of this period our focus has been on
reassuring our occupiers that our buildings remain safe to
use and we have used our information packs and regular
occupier meetings to reinforce this.
The launch of our new occupier apps at Colchester
Business Park and Angel Gate, London were timed to
coincide with occupancy levels beginning to return to
normal levels. We have used these to promote a wide
range of occupier focused events structured around
64
Picton Property Income Limited Annual Report 2022
‒ Continue to roll out our occupier engagement plan
wellness for employees. Utilising the facilities at these
locations such as the communal space outside the Village
at Colchester and the business hub at Angel Gate, London
we have hosted many events. A wide ranging programme
is planned for 2022.
We plan to roll out more occupier apps at other locations
during 2022, using the experience which we gained from
the projects noted above.
Employees
We have a strong and open company culture with shared
values co-created by our employees. We value the
contributions made by the whole team and aim to nurture
a positive working environment.
Employee engagement
For the third year we have carried out an employee
engagement survey across the whole team, excluding the
Directors. Overall the scores were very positive, with over
half of the questions receiving Agree or Strongly Agree
responses. Issues that were raised by the team included:
‒ Training, particularly on sustainability, was well received
and considered to be relevant;
‒ Flexible working arrangements were valued, with a split
between working from home and in the office;
‒ Resourcing within the team given increasing demands
particularly around sustainability;
‒ Communication between the Board and team to be
reviewed; and
‒ Progress made against sustainability, and how this would
be resourced in the light of our net zero carbon pathway.
This year we held two offsite days for the team. The first
looked at how we could make improvements in the way
each team worked, while the second focused entirely on
sustainability priorities, including how the net zero carbon
pathway would be implemented and embedded into the
way we worked.
Diversity and inclusion
We value the contributions made by all of our team and
believe that a diverse workforce is key to maximising
business effectiveness. We aim to select, recruit, develop
and promote the very best people and are committed to
creating a workplace where everyone is treated with dignity
and respect, and where individual difference is valued.
We aim to maintain the right blend of skills, experience and
knowledge within the Board and the team. At the date of
this Report, the number of men and women employed by
the Group were:
Board
Rest of team
Total
Men
Women
4
4
8
2
3
5
Training and development
We want to encourage our employees to realise their
full potential by giving them access to development
and training opportunities.
This year the amount of training carried out by employees
was 1.6% on a time spent basis, in line with last year.
Employee development is based on the following
key principles:
‒ Development should be continuous; employees should
always be actively seeking to improve performance;
‒ Regular investment of time in learning is seen as an
essential part of working life; and
‒ Development needs are met by a mix of activities,
which include internal and external training courses,
structured ‘on the job’ experience and through
interaction with professional colleagues.
All of the Group’s employees have a formal performance
appraisal on an annual basis, together with a mid-year
review of their progress against objectives set at the start
of the year.
Community and social value
We are committed to supporting the local communities
where we own buildings. We aim to continually improve
the impact of our buildings within local communities
through not only providing space to local businesses and
charities, but also through the improvement of local areas
and minimising the environmental impact of buildings
themselves. Further details can be found in our community
and social value and charitable giving policies available on
our website.
We continue to support a variety of charities, and this year
made donations of over £16,000. We have a longstanding
relationship with children’s charity Coram and have recently
entered into a charity partnership with them, which will
increase our level of support through both donations and
volunteering opportunities. In October 2021 Tim Hamlin,
our Director of Asset Management, ran the London
Marathon with all donations going to Coram. Other
charities that we have supported this year include The
Funding Network and LandAid, and we have made
donations to current humanitarian crises.
We have maintained our occupier matched giving policy,
and also offer matched giving for employees who are
raising money for charity.
Suppliers and contractors
We expect high standards within our business and from
our suppliers.
This year we have reviewed our supplier base and assessed
the level of risk within our supply chain of exposure to
modern slavery and human trafficking. Almost all of our
suppliers are based in the UK and the majority are assessed
as low risk. We have developed a number of clauses and
these are being introduced into new contractual
arrangements. We have implemented a supplier due
diligence questionnaire which we are applying to all new
suppliers, and will roll this out across existing suppliers.
Picton Property Income Limited Annual Report 2022
65
Strategic ReportGovernanceFinancial StatementsAdditional Information Being Responsible continued
Governance
We are committed to transparent reporting so that
our stakeholders can make informed decisions.
We are a member of the Better Buildings Partnership
and continue to report annually to GRESB and EPRA.
Transparency and reporting
Our GRESB score for 2021 reduced from 65 to 61, and
to one green star from two. This was due to a number
of factors, including a fall in data coverage during the
pandemic. These issues have been addressed with
our sustainability advisers and we expect our score to
improve in 2022.
This year we have appointed JLL Upstream to carry out
data assurance on our published environmental data and
GRESB submission. This will provide greater validation of
our reported sustainability data.
Following the publication of our net zero carbon pathway
we have become a signatory to the Better Buildings
Partnership Climate Commitment.
What we have achieved this year
‒ Became a signatory to the Better Buildings
Partnership Climate Commitment
‒ Completed assessment of climate-related risks to
the business
‒ Achieved EPRA Gold awards for both Annual and
Sustainability Reports
‒ Appointed a third party to carry out data assurance
on our 2022 reporting
‒ Published our sustainability policy
What we will do next year
‒ Implementation of recommendations from climate-
risk assessment
‒ Complete data assurance on all 2022 sustainability
reporting
‒ Contribute to the Better Buildings Partnership
Real Estate Environmental Benchmark in respect
of our portfolio
We have maintained our Gold awards from EPRA for
both our 2021 Annual and Sustainability Reports.
‒ Ensure the issues identified with the 2021 GRESB
score are incorporated into the 2022 submission
Read more on Governance on pages 67-111
66
Picton Property Income Limited Annual Report 2022
We have a strategy focused
on delivering our purpose
Welcome to
Governance
The UK Corporate Governance
Code 2018 (the Code) applied for the
financial year ended 31 March 2022.
Our Statement of Compliance is
set out in the Directors’ Report on
page 109. A summary of the system
of governance adopted by the
Company and how we have applied
the principles of the Code are set out
in this section of the Annual Report.
Chair’s Introduction
68
An overview of our governance activities over the year
Board and Team
70 Board of Directors
72 Our Team
Leadership and Purpose
74
The Company’s purpose and values
75 Board and Committee attendance
75 Conflicts of interest
76
78
The Board’s activities during the year
How the Board has engaged with its stakeholders this year
Division of Responsibilities
80 The role of the Board and its Committees
81
The roles of each Director
Composition, Succession and Evaluation
82 Board composition and diversity
83 Nomination Committee Report
84 Board evaluation
Audit, Risks and Internal Controls
85 Overview of controls and risk management
86 Audit and Risk Committee Report
89 Property Valuation Committee Report
Remuneration Report
Introduction from the Chair of the Remuneration Committee
91
96 Remuneration at a glance
98 Directors’ Remuneration Policy
101 Annual Report on Remuneration
Directors’ Report
109 Directors’ Report
Picton Property Income Limited Annual Report 2022
67
Strategic ReportGovernanceFinancial StatementsAdditional Information Chair’s Introduction
Introduction to the Corporate
Governance Report
On behalf of the Board, I am pleased
to introduce our 2022 Corporate
Governance Report.
Dear Shareholder
This year we have transitioned to a more
normal working balance as we have moved
out of the Covid-19 pandemic. We have
maintained our schedule of Board and
Committee meetings throughout the year
and have started holding our main meetings
in person. We intend to continue with a
blend of physical and virtual meetings over
the coming year to maximise productivity
and social capital as a Board and with the
wider team.
As with last year we held our Annual
General Meeting virtually but also
included a presentation to shareholders
by the Executive team, which I hope
was useful and informative.
Visit our website picton.co.uk
68
Picton Property Income Limited Annual Report 2022
Our people and culture
This year we have started to return to office working, whilst
embracing more flexibility for our employees. The team are
currently working in the office three days a week, with two
from home. We will continue to keep this policy under
review. In last year’s employee survey, it was clear that
flexible arrangements were valued and that the team
would like to see them continued. Returning to physical
Board meetings has also given the Directors the opportunity
to meet the whole team on an informal basis, for the first
time since the pandemic started. I believe that this will
help us to maintain strong working relationships across the
whole team, including the Board.
We have again carried out an employee engagement
survey this year, and the feedback is set out on page 65.
Due to the small number of employees it is possible that
the results may be skewed from year-to-year, but overall
the feedback was very positive.
Our stakeholders
Our occupier focused approach is a key part of our
business culture. During the pandemic our engagement
with occupiers was invaluable, ensuring that appropriate
support was given when needed. We will continue to
maintain this approach, which will become increasingly
important as we seek to reduce carbon emissions, both
our own and those of our occupiers, along our net zero
carbon pathway.
Reporting
I am pleased to report that last year’s Annual Report and
Sustainability Report both received an EPRA Gold award,
reflecting our aim to report our activities and results clearly
and concisely.
Board evaluation
This year we have carried out a Board evaluation, the
results of which are set out in the Composition, Succession
and Evaluation section. It was appropriate that this year
should be an internal review, since I had recently joined as
Chair and the pandemic had created unusual working
conditions. Leading the evaluation myself also gave me the
opportunity for in-depth conversations with each Director.
We intend for the next Board evaluation to be carried
out externally.
Lena Wilson CBE
Chair
25 May 2022
This year we will hold our Annual
General Meeting in September,
earlier than usual.
Lena Wilson CBE
Chair
Board activities
Under the Leadership section of this Report we have
set out the activities of the Board and its Committees
during the year. We have had a busy and productive year,
with a particular focus on sustainability issues and the
development of our pathway to net zero carbon, which
is discussed more fully elsewhere within this Report and
our Sustainability Report.
Board composition
There have been no changes in the composition of the
Board this year.
UK Corporate Governance Code
Our Statement of Compliance with the Corporate
Governance Code is set out within the Directors’ Report.
I am pleased to report that we have fully complied with
the Code this year.
The following sections describe the workings of the
Board and the Committees and how these interact
with the provisions of the Corporate Governance Code.
Annual General Meeting
At last year’s Annual General Meeting we put forward our
new Directors’ Remuneration Policy to shareholders for
their approval. Although the new Policy received over
96% of votes in favour, our Annual Remuneration Report
for 2020/21, while still approved, received some 72% of
votes in favour. We recognised that the new remuneration
proposals for our Executive Directors were being made at
a time of increased sensitivities around executive pay, but
we believe that the proposals are fair and justified in our
particular circumstances. We have published an update to
the voting outcome, and within this year’s Remuneration
Report there is a full response set out.
This year we will hold our Annual General Meeting in
September, earlier than usual, and we will provide further
information on this shortly.
Picton Property Income Limited Annual Report 2022
69
Strategic ReportGovernanceFinancial StatementsAdditional Information Board of Directors
We have the relevant
skills and experience
for future growth.
Lena Wilson CBE
Chair
Chair of the Nomination
Committee
Mark Batten
Maria Bentley
Chair of the Audit and
Risk Committee
Senior Independent Director
Chair of the Remuneration
Committee
Appointed to the Board
January 2021
Appointed to the Board
October 2017
Appointed to the Board
October 2018
– Multi-disciplinary global career across private
most sub-sectors
Responsible for ensuring the Board is
effective in setting and implementing the
Company’s direction and strategy, including
reviewing and evaluating the performance of
the CEO.
Key strengths and skills
– Over a decade of Non-Executive, Senior
Independent Director and Chair experience
including FTSE 100 companies across the
financial and industrial sectors
and public sectors
– Experienced CEO leading organisations with
an international footprint
Principal external commitments
– Chair of Chiene + Tait LLP
– Non-Executive Director NatWest Group plc
– Non-Executive Director and Senior
Independent Director Argentex Group PLC
– Chair of AGS Group
Previous experience and appointments
– Chief Executive of Scottish Enterprise
– Senior Investment Advisor at the World Bank
– Non-Executive Director Intertek PLC
– Non-Executive Director Scottish
Power Renewables
Responsible for financial reporting and
accounting policies, audit strategy and the
evaluation of internal controls and risk
management systems.
Responsible for leading on the
recommendation of remuneration policies
and levels, for effective succession planning
and employee engagement.
Key strengths and skills
– Chartered Accountant and
restructuring specialist
Key strengths and skills
– Business head leading change across
global teams
– Extensive experience in banking, insurance,
real estate, debt structuring and restructuring
– Expertise in human resources
– Extensive experience in financial services
– Broad real estate knowledge, covering
Principal external commitments
– Chair, Assured Guaranty UK
– Non-Executive Director and Chair of the
Audit and Risk Committee – Reliance
National Insurance Company (Europe)
Principal external commitments
– Non-Executive Director of BlueBay Asset
Management LLP and Chair of the
Remuneration Committee
– Non-Executive Director of Daiwa Capital
Markets Europe Limited and Chair of the
Remuneration Committee
– Chair, Governing Body, Westminster School
– Non-Executive Director of Peel Hunt Limited
Previous experience and appointments
– Partner, PricewaterhouseCoopers
LLP (restructuring and corporate valuation
practices)
– Non-Executive Director, L&F Indemnity
– Senior adviser to UK Government
Investments
– Non-Executive adviser and Chair of the
Finance Committee, Royal Brompton and
Harefield NHS Clinical Group
Previous experience and appointments
– Senior Managing Director & Global Head
of HR, Wholesale & Head of HR EMEA at
Nomura International plc
– Group Managing Director & Global Head
of HR, UBS Investment Bank
– Managing Director, Global Head of HR
for Equities and Fixed Income, Goldman
Sachs International
70
Picton Property Income Limited Annual Report 2022
The Board is responsible for the long-term
success of the business, providing leadership
and direction with due regard and consideration
to all stakeholders in the business.
Richard Jones
Chair of the Property Valuation
Committee
Michael Morris
Chief Executive
Andrew Dewhirst
Finance Director
Appointed to the Board
September 2020
Appointed to the Board
October 2015
Appointed to the Board
October 2018
Responsible for overseeing the review of the
quarterly valuation process and making
recommendations to the Board as
appropriate.
Key strengths and skills
– Significant real estate investment experience
– Broad experience of property asset
management
Responsible for overall strategic direction and
execution of the Group’s business model.
Responsible for strategic financial planning
and reporting for the Group.
Key strengths and skills
– Successful track record of driving
investment strategy and delivering results
for shareholders
– Proven leadership skills
– In-depth understanding of real estate
Key strengths and skills
– Chartered accountant with extensive
experience in financial planning and
reporting
– In-depth knowledge of financial services,
capital markets and real estate funds
– Expertise in debt and equity financing
– Extensive experience of property valuation
equity capital markets
Principal external commitments
– Investment Committee of Henley
Secure Income Property Unit Trust
– Transport for London’s Commercial
Property Advisory Group
– Special Advisor to Clearbell UK Strategic Trust
Previous experience and appointments
– UK Managing Director on Aviva’s Investors’
Global Real Estate Board
– Special Director of Ribston UK Industrial
Property Unit Trust
– Non-Executive Director of Royal Brompton
and Harefield Hospital NHS Foundation Trust
Principal external commitments
None
Principal external commitments
None
Previous experience and appointments
– 25 years’ wide-ranging commercial real
Previous experience and appointments
– Director of Client Accounting at ING Real
estate market experience
Estate Investment Management
– Senior Director and Fund Manager at ING
Real Estate Investment Management
– Director at Hermes Administration Services
Picton Property Income Limited Annual Report 2022
71
Strategic ReportGovernanceFinancial StatementsAdditional Information
Our Team
With extensive experience across
real estate management and financial
services, our team have an in-depth
knowledge and understanding of the
UK commercial property market.
01
Louisa McAleenan
Research Analyst
06
Tim Hamlin
Director of Asset Management
Louisa has 15 years of experience in real estate
research and is responsible for all aspects of
research and analysis, contributing to the direction
of the Group’s investment strategy and is a
member of the Responsibility Committee.
Tim is a Chartered Surveyor with over 14 years
of real estate experience and is responsible
for creating and implementing asset level
business plans in line with the portfolio’s
strategic direction and is a member of the
Responsibility Committee.
07
Andrew Dewhirst
Finance Director
Responsible for the financial strategy and
reporting for the Group, Andrew has over 30 years
of experience within the financial services and real
estate sectors.
08
Jay Cable
Senior Director and Head of Asset Management
A Chartered Surveyor with over 20 years of real
estate experience, Jay has worked with the Group
since its launch in 2005. He is responsible for the
proactive asset management of the portfolio and
overseeing its strategic direction, and is a member
of the Executive Committee and the Transaction
and Finance Committee.
09
Lucy Stearman
Assistant Accountant
Lucy has over ten years of experience within
financial services and joined the Group in
April 2019 to assist with the accounting and
financial reporting.
02
James Forman
Director of Accounting
James is a Certified Accountant and has worked
with the Group since its launch in 2005 and has
over 20 years of experience in the real estate
sector. He is responsible for all the accounting and
financial reporting for the Group and is a member
of the Transaction and Finance Committee.
03
Mark Alder
Head of Occupier Services
Mark is a Chartered Surveyor with over 35 years
of property management experience. He is
responsible for delivering effective property
management and strengthening our relationship
with our occupiers.
04
Michael Morris
Chief Executive
Michael has over 25 years of experience within
the UK commercial property sector and is
responsible for the strategic direction and effective
execution of the Group’s business model.
05
Melissa Ricardo
Office Manager
Melissa joined in 2017 and is responsible for
the day-to-day management of the office
and oversees the administrative aspects of
the Company.
72
Picton Property Income Limited Annual Report 2022
01
02
03
04
05
06
07
08
09
Picton Property Income Limited Annual Report 2022
73
Strategic ReportGovernanceFinancial StatementsAdditional Information Leadership and Purpose
Leadership and purpose
Purpose
Our purpose is to be a responsible
owner of commercial real estate,
helping our occupiers succeed and
being valued by all our stakeholders.
The role of the Board
The Board is responsible for the long-term success of
the business. It provides leadership and direction, with
due regard to the views of all of the stakeholders in the
business. The Board operates in an open and transparent
way, and seeks to engage with its shareholders,
employees, occupiers and local communities.
The Board has full responsibility for the direction and
control of the business, and sets and implements
strategy, within a framework of strong internal controls
and risk management. It establishes the culture and
values of the Group.
The Board has a schedule of matters reserved for its
attention. This includes all acquisitions and significant
disposals, significant leasing transactions, dividend
policy, gearing and major expenditure.
The Board has collectively a range of skills and experience
that are complementary and relevant to the business.
These are set out in the biographies of the individual
Directors on pages 70 and 71.
Our culture and values
Principled
We are professional, diligent and strategic.
Demonstrated through our transparent reporting, occupier
focused approach, alignment with shareholders, delivery of
our Picton Promise, our commitment to sustainability and
positive environmental initiatives.
Perceptive
We are insightful, thoughtful and intuitive.
Demonstrated through our long-term track record,
our gearing strategy, diverse sector allocation and
engagement with our occupiers.
Progressive
We are forward-thinking, enterprising, and continually
advancing.
Demonstrated through our culture, work ethic, and
proactive asset management.
Board meetings
The Board has a regular schedule of meetings throughout
the year. There are normally two scheduled Board
meetings each quarter; the first to deal with regular
operational matters such as approval of the dividend
and to review key portfolio activity; and the second to
consider more strategic matters and thematic discussions.
Meetings are also scheduled for the approval of the
annual and half-year results. External advisers are invited
to attend Board meetings on a regular basis. Meetings
this year have been a mixture of in person and virtual.
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Picton Property Income Limited Annual Report 2022
Attendance at Board and Committee meetings
Board members
Date appointed
Board
Audit and Risk
Remuneration
Property
Valuation
Nomination
Lena Wilson
Michael Morris
Andrew Dewhirst
Mark Batten
Maria Bentley
Richard Jones
Total number of meetings
01.01.2021
01.10.2015
01.10.2018
01.10.2017
01.10.2018
01.09.2020
9/10
10/10
10/10
10/10
10/10
10/10
10
–
–
–
4/4
4/4
4/4
4
5/5
–
–
5/5
5/5
5/5
5
4/4
–
–
4/4
4/4
4/4
4
2/2
–
–
2/2
2/2
2/2
2
The above meetings were the scheduled Board and Committee meetings. Additional meetings were held to deal with
other matters as required and are not included above. Lena Wilson was unable to attend one Board meeting due to a
medical issue.
Board Committees
The Board has established four Committees:
Audit and Risk, Remuneration, Property Valuation and
Nomination. These are comprised entirely of Non-Executive
Directors and operate within defined terms of reference.
The terms of reference are available
on the Company’s website.
Conflicts of interest
Directors are required to notify the Company of any
potential conflicts of interest that they may have.
Any conflicts are recorded and reviewed by the Board
at each meeting. No conflicts have been recorded
during the year.
Picton Property Income Limited Annual Report 2022
75
Strategic ReportGovernanceFinancial StatementsAdditional Information Leadership and Purpose continued
Board activities in 2021/22
The Board met on ten occasions during the year, as well as having a more informal Strategy Day. Here we have set
out the key activities and approvals over the year. Throughout the year we have maintained a programme of Board
education within the schedule of regular meetings, with relevant external input. How the Board has engaged with all its
stakeholders is set out on pages 78 and 79, and consideration of Section 172 matters is described on pages 58 and 59.
2021
The following
recurring matters
were considered
and discussed at
these meetings
The Board
considered and
approved the
following matters
April/May
June/July
September
– Review of quarterly
management accounts
– Review of portfolio activity
– Review of portfolio and
– Review of portfolio and
financial forecasts
financial forecasts
– Market update from the
– Market update from the
– Review of quarterly
management accounts
– Review of portfolio
and financial forecasts
– Review of quarterly
management accounts
– Review of portfolio
and financial forecasts
– Review of portfolio activity
– Market update from the
– Review of portfolio activity
– Market update from the
Company’s brokers
– Report from the
Company Secretary
– Health and Safety matters
Company’s brokers
across the portfolio
– Report from the
– Review of the external auditor
Company Secretary
Company’s brokers
– Report from the
Company Secretary
Company’s brokers
– Report from the
Company Secretary
– Review of quarterly
management accounts
– Review of portfolio activity
– Health and safety matters
across the portfolio
– The quarterly dividend for the
January to March 2021 period at
the rate of 0.8 pence per share
– The disposal of Victoria
Street Huddersfield
– The updated Health and
– The Company’s Modern Slavery
Statement for the year ended
31 March 2021
– Acceptance of the
Safety policy
recommendation from the
Property Valuation Committee in
respect of the 31 March 2021
independent valuation
– The significant rent review at
Washington, Tyne and Wear.
– The new fee rates for the
Non-Executive Directors with
effect from 1 April 2021.
– The Annual Report for the year
ended 31 March 2021 and the
Stock Exchange announcement
of the results
– The Directors’
Remuneration Policy
– The salary and bonus awards for
the year ended 31 March 2021
– Deferred Bonus and LTIP share
awards for the team
– The acquisition of Madleaze
Trading Estate Gloucester
– The quarterly dividend for the
April to June 2021 period at an
increased rate of 0.85 pence
per share
– Acceptance of the
recommendation
from the Property
Valuation Committee
in respect of the 30 June 2021
independent valuation
– Corporate bonus objectives
for the Executive Directors
for 2021/22
– The quarterly dividend for
– The Half Year Report
– The quarterly dividend for the
– The acquisition of Charlotte
the July to September 2021
to 30 September 2021 and the
October to December 2021
Terrace London
period at the rate of 0.85 pence
Stock Exchange announcement
period, increasing the rate to
– The additional loan facility to
per share
of the results
0.875 pence per share
– Acceptance of the
– Capital expenditure at
– Acceptance of the
be provided by Canada Life,
and amendment to the terms
recommendation from the
180 West George Street Glasgow
recommendation from the
of the existing facility
Property Valuation Committee in
– The proposed net zero carbon
respect of the 31 December 2021
pathway, with a target date
independent valuation
of 2040
– The annual approval of policies
Property Valuation Committee in
respect of reappointments to the
various Committees
– Acceptance of the
recommendation from the
Nomination Committee in
respect of the 30 September
2021 independent valuation
– The updated ESG Policy
– The acquisition of Mill
Place Gloucester
The Board discussed
the following one-off
items of business
– Actions arising from the previous
Strategy Day and the agenda for
the forthcoming Strategy Day
– Initial salary review and bonus
– Consideration of a corporate
transaction proposal and
feedback received from
financial adviser
– Results and action points from
the previous Board evaluation
– Format of the forthcoming
Annual General meeting
proposals for the team
– Review of independent
– Options for increasing the
– Progress on the development
– The results of the Board
– Reviewed the feedback from
Group’s loan facilities
of the carbon net zero pathway
Evaluation and actions arising
the latest employee
– Consideration of resource
– Feedback from the Annual
– Review of feedback received on
engagement survey, and
within the team
General Meeting, and in particular
corporate proposal
considered actions arising
– Feedback from shareholders in
relation to the Policy consultation
benchmarking report on market
remuneration levels, both for
employees and directors
– The appointment of JLL as
consultant for the net zero and
TCFD projects
76
Picton Property Income Limited Annual Report 2022
– Making the Better Buildings
the communications received
Partnership Climate Change
from shareholders in respect of
Commitment once the net zero
the Remuneration report
pathway has been completed
– A presentation on property
– Arrangements for the
technology and how this could
forthcoming Annual
General Meeting
be of relevance to Picton
– Consideration of corporate
transaction proposal and
offer letter
– Review of quarterly
management accounts
– Review of portfolio and
– Review of portfolio and
financial forecasts
financial forecasts
– Review of portfolio activity
– Market update from the
– Market update from the
Company’s brokers
– Report from the
Company Secretary
Company’s brokers
– Report from the
Company Secretary
– Review of quarterly
management accounts
– Review of portfolio activity
– Health and safety matters
across the portfolio
The following
recurring matters
were considered
and discussed at
these meetings
The Board
considered and
approved the
following matters
– Acceptance of the
Safety policy
recommendation from the
– Deferred Bonus and LTIP share
Property Valuation Committee in
awards for the team
respect of the 31 March 2021
– The acquisition of Madleaze
independent valuation
Trading Estate Gloucester
– The significant rent review at
– The quarterly dividend for the
Washington, Tyne and Wear.
– The new fee rates for the
April to June 2021 period at an
increased rate of 0.85 pence
Non-Executive Directors with
per share
effect from 1 April 2021.
– The Annual Report for the year
ended 31 March 2021 and the
– Acceptance of the
recommendation
from the Property
Stock Exchange announcement
Valuation Committee
of the results
– The Directors’
in respect of the 30 June 2021
independent valuation
Remuneration Policy
– Corporate bonus objectives
– The salary and bonus awards for
for the Executive Directors
the year ended 31 March 2021
for 2021/22
The Board discussed
the following one-off
items of business
– Actions arising from the previous
– Consideration of a corporate
– Results and action points from
Strategy Day and the agenda for
transaction proposal and
the previous Board evaluation
the forthcoming Strategy Day
feedback received from
– Format of the forthcoming
– Initial salary review and bonus
financial adviser
Annual General meeting
proposals for the team
– Review of independent
– Feedback from shareholders in
benchmarking report on market
relation to the Policy consultation
remuneration levels, both for
employees and directors
– The appointment of JLL as
consultant for the net zero and
TCFD projects
October
December
2022
January
March
– Review of quarterly
management accounts
– Review of portfolio activity
– Health and Safety matters
across the portfolio
– Review of portfolio
and financial forecasts
– Market update from the
Company’s brokers
– Report from the
– Review of the external auditor
Company Secretary
– Review of quarterly
management accounts
– Review of portfolio activity
– Review of portfolio
and financial forecasts
– Market update from the
Company’s brokers
– Report from the
Company Secretary
– The quarterly dividend for the
– The disposal of Victoria
– The Company’s Modern Slavery
– The quarterly dividend for
– The Half Year Report
January to March 2021 period at
Street Huddersfield
Statement for the year ended
the rate of 0.8 pence per share
– The updated Health and
31 March 2021
the July to September 2021
period at the rate of 0.85 pence
per share
to 30 September 2021 and the
Stock Exchange announcement
of the results
– The quarterly dividend for the
October to December 2021
period, increasing the rate to
0.875 pence per share
– Acceptance of the
– Capital expenditure at
– Acceptance of the
180 West George Street Glasgow
recommendation from the
Property Valuation Committee in
respect of the 31 December 2021
independent valuation
recommendation from the
Property Valuation Committee in
respect of reappointments to the
various Committees
– Acceptance of the
recommendation from the
Nomination Committee in
respect of the 30 September
2021 independent valuation
– The updated ESG Policy
– The acquisition of Mill
Place Gloucester
– The acquisition of Charlotte
Terrace London
– The additional loan facility to
be provided by Canada Life,
and amendment to the terms
of the existing facility
– The proposed net zero carbon
pathway, with a target date
of 2040
– The annual approval of policies
– Options for increasing the
Group’s loan facilities
– Progress on the development
of the carbon net zero pathway
– Consideration of resource
– Feedback from the Annual
within the team
– Making the Better Buildings
Partnership Climate Change
Commitment once the net zero
pathway has been completed
– Arrangements for the
forthcoming Annual
General Meeting
General Meeting, and in particular
the communications received
from shareholders in respect of
the Remuneration report
– A presentation on property
technology and how this could
be of relevance to Picton
– Consideration of corporate
transaction proposal and
offer letter
– The results of the Board
– Reviewed the feedback from
Evaluation and actions arising
– Review of feedback received on
corporate proposal
the latest employee
engagement survey, and
considered actions arising
Picton Property Income Limited Annual Report 2022
77
Strategic ReportGovernanceFinancial StatementsAdditional Information Leadership and Purpose continued
Engagement
with stakeholders
We believe that taking into account the views
of our key stakeholders is critical to the long-term
success of the business. We engage with all of our
stakeholders to understand what is important to them.
The following table sets out our key stakeholders
and how we effectively engage with them.
Our section 172 statement for the year ended 31 March
2022 is on pages 58 to 59 and sets out how some
of the key decisions made by the Board during the
year were guided by stakeholder engagement.
78
Picton Property Income Limited Annual Report 2022
Stakeholders and what is important to them
How we engage
What we have done this year
Our people
‒ Fair and equal treatment
‒ Career development
‒ Fair pay and conditions
‒ Good work/life balance
‒ Positive work culture and values
We have a small team and engage regularly with them.
We have returned to the office this year on a flexible basis,
We have an appraisal process where each member of the
so that the team spend three days a week in the office.
team will discuss their performance and objectives with
The results of the employee survey showed the team
their line manager twice a year. We carry out an annual
remained positive and morale was good.
employee survey, and the results of this are discussed at a
meeting held with our designated Non-Executive Director
for employee engagement, Maria Bentley.
Local communities
and charities
‒ Local employment opportunities
‒ Positive contribution to local economy
‒ Safe and clean environment
We are committed to improving local communities
Our charitable donations for the year were £16,000. We
where we own buildings, whether providing space to
supported a range of charities, including the children’s
local businesses, improvement of local areas or
charity Coram. Tim Hamlin, our Director of Asset
minimising the environmental impact of buildings
Management, successfully completed the London
Marathon in October, raising funds for Coram.
themselves. We engage through our charity and
community initiatives and through our occupier
engagement programme.
Our occupiers
‒ Cost effective space suited to their needs
‒ Fair lease terms
‒ Well-managed, efficiently run and
sustainable buildings
‒ Good relationships
One of our key priorities is to work with our occupiers, so
We have continued our engagement with occupiers this
that we can understand their needs and aim to meet
year as the impacts of the pandemic have still been felt.
their current and future requirements. Our asset
We have also engaged with occupiers on the impacts of
managers, guided by our Picton Promise, maintain
climate change, and what actions can be taken to
regular contact with occupiers and discuss with them any
improve energy efficiency at our properties and reducing
issues regarding the buildings and any future plans we
carbon emissions.
have. Our Head of Occupier Services has developed an
occupier engagement programme and attends occupier
meetings and other events. We send out an occupier
newsletter regularly with relevant and helpful information.
Our investors
‒ Clear strategy
‒ Regular dividends
‒ Financial performance
‒ Clear and transparent reporting
We value the views of all our shareholders and senior
We have increased the dividend on two occasions this year,
management hold regular meetings to update
and we have now restored it back to the pre-pandemic
shareholders on progress and activity. We issue regular
level, as our rent collection rates have returned to normal.
investor updates with key financial highlights and updates
on the portfolio. Our website provides investors with up-
to-date information about the Group. This year we again
held the Annual General Meeting as a closed meeting but
hope in the future that we will be able to return to open
meetings and would welcome shareholder attendance.
We sought consultation from our major shareholders
regarding our new Directors’ Remuneration Policy ahead
of it being put to the Annual General Meeting. We have
subsequently had further discussions with shareholders
following the meeting and will consult further ahead of
this year’s Annual General Meeting.
Suppliers
‒ Prompt payment
‒ Fair terms of business
‒ Long-term relationships
We seek to maintain productive and long-term
relationships with our business partners. We have
in place a framework for conducting business
across the Group in a way that makes a positive
contribution to society, while minimising any
negative impact on people and the environment
We have continued to ensure that our suppliers are paid
promptly and within payment terms.
Stakeholders and what is important to them
How we engage
What we have done this year
Our people
‒ Fair and equal treatment
‒ Career development
‒ Fair pay and conditions
‒ Good work/life balance
‒ Positive work culture and values
We have a small team and engage regularly with them.
We have an appraisal process where each member of the
team will discuss their performance and objectives with
their line manager twice a year. We carry out an annual
employee survey, and the results of this are discussed at a
meeting held with our designated Non-Executive Director
for employee engagement, Maria Bentley.
We have returned to the office this year on a flexible basis,
so that the team spend three days a week in the office.
The results of the employee survey showed the team
remained positive and morale was good.
Local communities
and charities
‒ Local employment opportunities
‒ Positive contribution to local economy
‒ Safe and clean environment
We are committed to improving local communities
where we own buildings, whether providing space to
local businesses, improvement of local areas or
minimising the environmental impact of buildings
themselves. We engage through our charity and
community initiatives and through our occupier
engagement programme.
Our charitable donations for the year were £16,000. We
supported a range of charities, including the children’s
charity Coram. Tim Hamlin, our Director of Asset
Management, successfully completed the London
Marathon in October, raising funds for Coram.
Our occupiers
‒ Cost effective space suited to their needs
‒ Fair lease terms
‒ Well-managed, efficiently run and
sustainable buildings
‒ Good relationships
One of our key priorities is to work with our occupiers, so
that we can understand their needs and aim to meet
their current and future requirements. Our asset
managers, guided by our Picton Promise, maintain
regular contact with occupiers and discuss with them any
issues regarding the buildings and any future plans we
have. Our Head of Occupier Services has developed an
occupier engagement programme and attends occupier
meetings and other events. We send out an occupier
newsletter regularly with relevant and helpful information.
We have continued our engagement with occupiers this
year as the impacts of the pandemic have still been felt.
We have also engaged with occupiers on the impacts of
climate change, and what actions can be taken to
improve energy efficiency at our properties and reducing
carbon emissions.
Our investors
‒ Clear strategy
‒ Regular dividends
‒ Financial performance
‒ Clear and transparent reporting
We value the views of all our shareholders and senior
management hold regular meetings to update
shareholders on progress and activity. We issue regular
investor updates with key financial highlights and updates
on the portfolio. Our website provides investors with up-
to-date information about the Group. This year we again
held the Annual General Meeting as a closed meeting but
hope in the future that we will be able to return to open
meetings and would welcome shareholder attendance.
We have increased the dividend on two occasions this year,
and we have now restored it back to the pre-pandemic
level, as our rent collection rates have returned to normal.
We sought consultation from our major shareholders
regarding our new Directors’ Remuneration Policy ahead
of it being put to the Annual General Meeting. We have
subsequently had further discussions with shareholders
following the meeting and will consult further ahead of
this year’s Annual General Meeting.
Suppliers
‒ Prompt payment
‒ Fair terms of business
‒ Long-term relationships
We seek to maintain productive and long-term
relationships with our business partners. We have
in place a framework for conducting business
across the Group in a way that makes a positive
contribution to society, while minimising any
negative impact on people and the environment
We have continued to ensure that our suppliers are paid
promptly and within payment terms.
Picton Property Income Limited Annual Report 2022
79
Strategic ReportGovernanceFinancial StatementsAdditional Information Division of Responsibilities
The role of the Board and its Committees
The Board
Chair: Lena Wilson CBE
Comprises: 2 Executive Directors and 4 Non-Executive Directors
Responsibilities:
– Direction and control of the business
– Overall long-term success
– Sets and implements strategy
– Establishes the culture and values of the business
– Promotes wider stakeholder relationships
Board Committees
Audit and Risk
Chair:
Mark Batten
Remuneration
Chair:
Maria Bentley
Property Valuation
Chair:
Richard Jones
Nomination
Chair:
Lena Wilson CBE
Comprises:
3 Non-Executive Directors
Comprises:
4 Non-Executive Directors
Comprises:
4 Non-Executive Directors
Comprises:
4 Non-Executive Directors
Responsibilities:
– Oversees financial
reporting
– Monitors risk
management
– Reviews system of
internal controls
– Evaluates external auditor
Responsibilities:
– Determines
remuneration policy
– Sets remuneration of
Executive Directors
– Reviews remuneration
of whole workforce
– Approves bonus
and LTIP awards
Responsibilities:
– Oversees the
independent
valuation process
– Recommends the
appointment and
remuneration
of the valuer
– Ensures compliance with
applicable standards
Responsibilities:
– Recommends Board
appointments
– Considers succession
planning
– Board evaluation
– Board composition
and diversity
Management Committees
Executive Committee
Chair: Michael Morris
Comprises: 2 Executive Directors and 1 senior executive
Responsibilities:
– Implementation of strategy
– Manages operations
– Day-to-day management of the business
– Employee remuneration and development
Transaction and Finance
Chair: Michael Morris
Responsibility
Chair: Andrew Dewhirst
Comprises: 2 Executive Directors and senior management
Comprises: 1 Executive Director and senior management
Responsibilities:
– Reviews and recommends portfolio transactions
– Monitors portfolio costs
– Reviews compliance with lending covenants
Responsibilities:
– Determines sustainability policy and strategy
– Monitors compliance with relevant standards and legislation
– Oversees Health and Safety Committee
– Approves sustainability reporting
– Employee wellbeing
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Picton Property Income Limited Annual Report 2022
Responsibilities of the Directors
The roles and responsibilities of each of the Directors are explained below:
Role
Chair
Lena Wilson CBE
Chief Executive
Michael Morris
Responsibilities
‒ Leads the Board
‒ Responsible for overall Board effectiveness
‒ Promotes Company culture and values
‒ Sets the agenda and tone of Board discussions
‒ Ensures that all Directors receive full and timely information to enable effective
decision making
‒ Promotes open debate at meetings
‒ Ensures effective communication with stakeholders
‒ Fosters productive relationships between Executive and Non-Executive Directors
‒ Develops and recommends strategy to the Board
‒ Responsible for the implementation of strategy set by the Board
‒ Manages the business on a day-to-day basis
‒ Manages communication with shareholders and ensures that their views are
represented to the Board
Senior Independent Director
Mark Batten
‒ Leads the evaluation of the Chair
‒ Available for communication with shareholders when other channels are not
appropriate
Non-Executive Directors
Mark Batten
Maria Bentley
Richard Jones
Executive Director
Andrew Dewhirst
‒ Bring independent judgement and scrutiny to the decisions of the Board
‒ Bring a range of skills and experience to the deliberations of the Board
‒ Monitor business progress against agreed strategy
‒ Review the risk management framework and the integrity of financial information
‒ Determine the remuneration policy for the Group and approve performance
targets in line with strategy
‒ Supports the Chief Executive in the formulation of strategy
‒ Manages the financial operations of the Group
‒ Develops and maintains the system of financial controls within the Group
‒ Recommends the risk management framework to the Audit and Risk Committee
and the Board
Picton Property Income Limited Annual Report 2022
81
Strategic ReportGovernanceFinancial StatementsAdditional Information Composition, Succession and Evaluation
Board composition
and diversity
These charts set out the Board’s composition,
tenure and diversity characteristics.
The Board currently comprises the Chair, two Executive
Directors and three independent Non-Executive
Directors. The Non-Executive Directors bring a variety
of skills and business experience to the Board. Their
role is to bring independent judgement and scrutiny
to the recommendations of the Executive Directors.
Each of the Non-Executive Directors is considered
to be independent in character and judgement.
As at 31 March 2022 the Board comprised 50%
independent Non-Executive Directors.
The biographies of the Directors can be found
on pages 70 and 71, which set out their skills and
experience, and their membership of each of
the Committees.
82
Picton Property Income Limited Annual Report 2022
Function
Non-Executive Chair – 1 (17%)
Executive Directors – 2 (33%)
Independent Non-Executive
Directors – 3 (50%)
Tenure
0 to 3 years – 2 (33%)
3 to 6 years – 3 (50%)
6 to 9 years – 1 (17%)
Diversity
Male – 4 (67%)
Female – 2 (33%)
Age
45 to 50 years – 1 (17%)
55 to 60 years – 1 (17%)
60 to 65 years – 4 (66%)
Nomination Committee
The members of the Nomination
Committee are Lena Wilson,
Richard Jones, Mark Batten
and Maria Bentley.
The role of the Committee is to consider the
size, structure and composition of the Board
to ensure that it has the right balance of skills,
knowledge, experience and diversity to carry
out its duties and provide effective leadership.
In making any new appointment the Board
will consider a number of factors, but
principally the skills and experience that will
be relevant to the specific role and that will
complement the existing Board members.
It is also the Committee’s role to consider
succession planning for the Board and for
the Executive team, and to lead on the
appointment process, ensuring that this
is formal, rigorous and transparent.
The Committee makes recommendations
to the Board regarding the composition
of the Remuneration, Audit and Risk,
Nomination and Property Valuation
Committees, taking into account
individuals’ time commitments
and experience.
Picton Property Income Limited Annual Report 2022
83
Strategic ReportGovernanceFinancial StatementsAdditional Information Audit, Risks and Internal Controls
Audit, risks and
internal controls
The Board has established procedures to manage
risk, oversee the framework of internal controls
and determine its risk appetite to achieve its long-
term strategic objectives.
The Board and the Audit and Risk Committee are
responsible for ensuring that the Group has an effective
internal control and risk management system and that
the Annual Report provides a fair reflection of the
Group’s activities during the year following its review of
the methodology.
The Property Valuation Committee has oversight of
the independent valuers and the valuation process.
It recommends the adoption of the quarterly valuations
by the Board, following its review of the methodology
and assumptions used by CBRE Limited, the
independent valuers.
the internal control systems in place. The Board
continues to place reliance on the Company’s
Administrator’s internal control systems.
These systems are designed to ensure effective and
efficient operations, internal control and compliance
with laws and regulations. In establishing the
systems of internal control, regard is paid to the
materiality of relevant risks, the likelihood of costs
being incurred and costs of control. It follows,
therefore, that the systems of internal control can
only provide reasonable, but not absolute, assurance
against the risk of material misstatement or loss.
The effectiveness of the internal control systems is
reviewed annually by the Audit and Risk Committee
and the Board. The Audit and Risk Committee has a
discussion annually with the auditor to ensure that there
are no issues of concern in relation to the audit opinion
on the financial statements and representatives of
senior management are excluded from that discussion.
Internal control and risk management
The Board is responsible for establishing and
maintaining the Group’s system of internal controls and
reviewing its effectiveness. Internal control systems are
designed to manage the achievement of business
objectives, rather than eliminate the failure to achieve
them and can only provide reasonable, and not absolute,
assurance against material misstatement or loss. They
have therefore established an ongoing process designed
to meet the particular needs of the Group in managing
the risks to which it is exposed, consistent with the
guidance provided by the Turnbull Committee. Such
review procedures have been in place throughout the
full financial year, and up to the date of the approval of
the financial statements, and the Board is satisfied with
their effectiveness.
This process involves a review by the Board of the control
environment within the Group’s service providers to
ensure that the Group’s requirements are met.
The Group does not have an internal audit function.
Given the scale of the Group’s operations, the Board
determined that additional procedures carried
out by the external auditor in conjunction with
the audit of the Group’s accounts would provide
the Board with sufficient assurance regarding
Picton Property Income Limited Annual Report 2022
85
Strategic ReportGovernanceFinancial StatementsAdditional Information Audit, Risks and Internal Controls continued
Audit and Risk
Committee
The Audit and Risk Committee is
chaired by Mark Batten. The other
members of the Committee are
Richard Jones and Maria Bentley.
Meetings of the Audit and Risk Committee are attended
by the Group’s Finance Director and other members of
the finance team, and the external auditor. The external
auditor is given the opportunity to discuss matters
without management presence.
The Committee was satisfied
that the 2022 Annual Report
is fair, balanced and
understandable.
Mark Batten
Chair of the Audit
and Risk Committee
86
Picton Property Income Limited Annual Report 2022
Terms of reference
The Committee’s terms of reference include consideration
of the following issues:
‒ Financial reporting, including significant accounting
judgements and accounting policies;
‒ Development of a comprehensive Risk Management
Policy for the adoption by the Group;
‒ Evaluation of the Group’s risk profile and risk
appetite, and whether these are aligned with its
investment objectives;
‒ Ensuring that key risks, including climate-related risks,
are being effectively identified, measured, managed,
mitigated and reported;
‒ Internal controls, controls testing and risk
management systems;
‒ The Group’s relationship with the external auditor,
including effectiveness and independence;
‒ Internal audit; and
‒ Reporting responsibilities.
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Activity
The Audit and Risk Committee met four times during
the year ended 31 March 2022 and considered the
following matters:
‒ External audit strategy and plan;
‒ Audit and accounting issues of significance;
‒ The Annual and Interim Reports of the Group;
‒ Reports from the external auditor;
‒ The effectiveness of the audit process and the
independence of KPMG Channel Islands Limited;
‒ Review of the Group’s Risk Management Policy
and appetite;
‒ Review of the risk matrix and mitigating controls;
‒ Review of internal audit services; and
‒ Stock Exchange announcements.
Financial reporting and significant reporting matters
The Committee considers all financial information
published in the annual and half-year financial statements
and considers accounting policies adopted by the Group,
presentation and disclosure of the financial information
and the key judgements made by management in
preparing the financial statements.
The Directors are responsible for preparing the Annual
Report. At the request of the Board, the Committee
considered whether the 2022 Annual Report was fair,
balanced and understandable and whether it provided
the necessary information for shareholders to assess the
Group’s strategy, business model and performance.
The key area of judgement that the Committee considered
in reviewing the financial statements was the valuation of
the Group’s investment properties.
The valuation is conducted on a quarterly basis by
independent valuers and is subject to oversight by the
Property Valuation Committee. It is a key component of the
annual and half-year financial statements and is inherently
subjective, requiring significant judgement. Members of
the Property Valuation Committee, together with members
of the Picton team, meet with the independent valuer on a
quarterly basis to review the valuations and underlying
assumptions, including the year-end valuation process. The
Chair of the Property Valuation Committee reported to the
Audit and Risk Committee at its meeting in April 2022 and
confirmed that the following matters had been considered
in discussions with the independent valuers:
‒ Property market conditions;
‒ Yields on properties within the portfolio;
‒ Letting activity and vacant properties;
‒ Covenant strength and lease lengths;
‒ Estimated rental values; and
‒ Comparable market evidence.
The Audit and Risk Committee reviewed the Report
from the Chair of the Property Valuation Committee
including the assumptions applied to the valuation and
considered their appropriateness, as well as considering
current market trends and conditions, and valuation
movements compared to previous quarters. The
Committee considered the valuation and agreed that
this was appropriate for the financial statements.
The Committee was satisfied that the 2022 Annual Report
is fair, balanced and understandable and included the
necessary information as set out above, and it has
confirmed this to the Board.
Risk Management Policy
The Committee has considered and developed a
comprehensive Risk Management Policy which has
been adopted by the Group.
The purpose of the Risk Management Policy is to
strengthen the proper management of risks through
proactive risk identification, measurement, management,
mitigation and reporting in respect of all activities
undertaken by the Group. The Risk Management Policy is
intended to:
‒ Ensure that major risks are reported to the Board
for review;
‒ Result in the management of those risks that may
significantly affect the pursuit of the stated strategic
goals and objectives;
‒ Embed a culture of evaluation and identify risks at
multiple levels within the Group; and
‒ Meet legal and regulatory requirements.
Internal controls and internal audit
The Board is responsible for the Company’s internal control
system and for reviewing its effectiveness. It has therefore
established a process designed to meet the particular
needs of the Company in managing the risks to which it
is exposed.
Picton Property Income Limited Annual Report 2022
87
Strategic ReportGovernanceFinancial StatementsAdditional Information Annual auditor assessment
On an annual basis, the Committee assesses the
qualifications, expertise and independence of the
Group’s external auditor, as well as the effectiveness of
the audit process. It does this through discussion and
enquiry with senior management, review of a detailed
assessment questionnaire and confirmation from
the external auditor. The Committee also considers
the external audit plan, setting out the auditor’s
assessment of the key audit risk areas and reporting
received from the external auditor in respect of both
the half-year and year-end reports and accounts.
As part of the review of auditor independence and
effectiveness, KPMG Channel Islands Limited have
confirmed that:
‒ They have internal procedures in place to identify any
aspects of non-audit work which could compromise
their role as auditor and to ensure the objectivity of the
audit report;
‒ The total fees paid by the Group during the year do not
represent a material part of their total fee income; and
‒ They consider that they have maintained their
independence throughout the year.
In evaluating KPMG Channel Islands Limited, the
Committee completed its assessment of the external
auditor for the financial period under review. It has satisfied
itself as to their qualifications and expertise and remains
confident that their objectivity and independence are not
in any way impaired by reason of the non-audit services
which they provide to the Group.
KPMG Channel Islands Limited have been auditor to the
Group since the year ended 31 December 2009. They were
reappointed as the Group’s auditor following a tender
process in February 2020. The current audit engagement
partner, Deborah Smith, has now served five years as audit
partner, and will rotate away from the audit after this year.
The Committee recommends that KPMG Channel Islands
Limited are recommended for reappointment at the next
Annual General Meeting.
Mark Batten
Chair of the Audit and Risk Committee
25 May 2022
Audit, Risks and Internal Controls continued
As part of this process, a risk matrix has been prepared
that identifies the Company’s key functions and the
individual activities undertaken within those functions.
From this, the Board has identified the Company’s
principal risks and the controls employed to manage
those risks. These are reviewed at each Audit and Risk
Committee meeting. Also, the Committee has agreed
a programme of additional controls testing which is
carried out by the external auditor, in order to provide
the Board with comfort that the controls are operating
as intended and have been in place throughout the
year. The Board also monitors the performance of the
Company against its strategy and receives regular reports
from management covering all business activities.
The Committee has received and reviewed a copy
of CBRE Limited’s Real Estate Accounting Services –
Service Organisation Control Report as at 31 December
2021, prepared in accordance with International
Standard on Assurance Engagements 3402, in
respect of property management accounting services
provided to Picton Property Income Limited.
The Committee has reviewed the current arrangements
in place for the testing of internal controls and has
recommended to the Board that an internal audit
service provided by a third party would provide
greater assurance that the Group’s internal controls are
robust and are operating effectively. The Committee
intends to make an appointment shortly for a third
party provider to undertake internal audit services on
behalf of the Group for the financial year 2022/23.
Independence of auditor
It is the policy of the Group that non-audit work will
not be awarded to the external auditor if there is a risk
their independence may be conflicted. The Committee
monitors the level of fees incurred for non-audit services to
ensure that this is not material, and obtains confirmation,
where appropriate, that separate personnel are involved
in any non-audit services provided to the Group. The
Committee must approve in advance all non-audit
assignments to be carried out by the external auditor.
The fees payable to the Group’s auditor and its member
firms are as follows:
Audit fees
Interim review fees
Non-audit fees
2022
£000
174
16
16
206
2021
£000
174
16
16
206
The non-audit fees include £16,000 for additional controls
testing, carried out by KPMG Channel Islands Limited.
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Picton Property Income Limited Annual Report 2022
Property Valuation
Committee
The Property Valuation Committee
is chaired by Richard Jones.
The other members of the Committee
are Lena Wilson, Mark Batten
and Maria Bentley.
Picton Property Income Limited Annual Report 2022
89
Strategic ReportGovernanceFinancial StatementsAdditional Information Audit, Risks and Internal Controls continued
Terms of reference
The Committee shall review the quarterly valuation
reports produced by the independent valuers before
their submission to the Board, looking in particular at:
‒ Significant adjustments from previous quarters;
‒ Individual property valuations;
‒ Commentary from management;
‒ Significant issues that should be raised with
management;
‒ Material and unexplained movements in the Company’s
net asset value;
‒ Compliance with applicable standards and guidelines;
‒ Reviewing findings or recommendations of the
valuers; and
‒ The appointment, remuneration and removal of the
Company’s valuers, making such recommendations to
the Board as appropriate.
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Activity
The Committee met four times during the year ended
31 March 2022. Members of the Property Valuation
Committee, together with management, met with the
independent valuer each quarter to review the valuations
and considered the following matters:
‒ Property market conditions and trends;
‒ Movements compared to previous quarters;
‒ Yields on properties within the portfolio;
‒ Letting activity and vacant properties;
‒ Covenant strength and lease lengths;
‒ Estimated rental values; and
‒ Comparable market evidence.
The Committee was satisfied with the valuation process
throughout the year.
The Committee was satisfied with
the valuation process throughout
the year.
Richard Jones
Chair of the Property Valuation Committee
External valuer
CBRE Limited are appointed as the external valuer of
the Group and they carry out a valuation of the Group’s
property assets each quarter, the results of which are
incorporated into the Group’s half-year and annual financial
statements, and the quarterly net asset statements. The
valuations are done in accordance with the Royal Institution
of Chartered Surveyors Red Book valuation standards.
The Committee reviewed the performance of the valuer
and recommended that the appointment be continued
for a further 12 months.
The Committee is aware of the recent RICS Review of
Real Estate Investment Valuations and the proposed
recommendations. We have responded to the consultation
and will be monitoring the results.
Richard Jones
Chair of the Property Valuation Committee
25 May 2022
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Picton Property Income Limited Annual Report 2022
Remuneration Report
Remuneration Committee
The Remuneration Committee is chaired
by Maria Bentley. The other members
of the Committee are Lena Wilson,
Mark Batten and Richard Jones.
Other attendees at Committee meetings during the
year were Michael Morris and Andrew Dewhirst.
Neither participated in discussions relating to their
own remuneration.
Our objective is to provide
straightforward remuneration
packages for our Executive
Directors, fair and reasonable
for all stakeholders.
Maria Bentley
Chair of the
Remuneration Committee
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Terms of reference
The Committee’s terms of reference are available on
the Company’s website. The principal functions of the
Committee as set out in the terms of reference include
the following matters:
‒ Review the ongoing appropriateness and relevance of
the Directors’ Remuneration Policy;
‒ Determine the remuneration of the Chairman,
Executive Directors and such members of the executive
management as it is designated to consider;
‒ Review the design of all share incentive plans for
approval by the Board; and
‒ Appoint and set the terms of reference for any
remuneration consultants.
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Advisers
During the year, Deloitte LLP has provided independent
advice in relation to market data, share valuations, share
plan administration and content of the Remuneration
Report. Total fees for the year were £36,150 (calculated
on a time spent basis). Deloitte LLP is a founding
member of the Remuneration Consultants Group and,
as such, voluntarily operates under the code of conduct
in relation to executive remuneration consulting in
the UK. In addition, Deloitte also provided taxation
services and advice to the Company during the year. The
Committee has reviewed the nature of this additional
advice and is satisfied that it does not compromise
the independence of the advice that it has received.
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Picton Property Income Limited Annual Report 2022
Annual statement
Dear Shareholders
Introduction
On behalf of the Board, I am pleased to introduce the
Remuneration Committee report for the year ended
31 March 2022.
This report comprises three sections:
‒ This annual statement;
‒ A Summary of the Directors’ Remuneration Policy; and
‒ The Annual Report on Remuneration for the year ended
31 March 2022.
The Committee met five times during the year and set out
below is a summary of its activity.
Implementation of the Remuneration Policy in 2022/23
Our objective is to provide straightforward remuneration
packages for our Executive Directors, fair and reasonable
for all stakeholders, which are designed so as to attract
and retain the right talent and to fairly reward delivery of
strategic priorities and enhanced shareholder value. In
last year’s Remuneration Report, I explained why we had
not met aspects of this objective. I also set out a three-
year transitional plan to address those issues whereby
the Executive Directors’ remuneration packages would
be adjusted to more fairly reflect their responsibilities as
Directors of a listed company (an adjustment that did not
take place when we transitioned to a UK REIT in 2018). That
transitional plan was the subject of a prior consultation
in early 2021 with larger shareholders, proxy agencies
and other stakeholders and I would like to again thank
all those who were willing to engage in this exercise.
At the 2021 Annual General Meeting, we sought
shareholder support for our transitional three-year plan.
The resolution approving the new Remuneration Policy
had near unanimous support (97% in favour) but the
resolution approving the Remuneration Report for the year
ended 31 March 2021 was passed albeit with lower overall
support (72% in favour).
The Committee was pleased by the high level of
shareholder support for the new Policy and also that
a majority of shareholders were supportive of the
Remuneration Report. The Remuneration Committee gave
careful consideration to executive remuneration during
the early part of 2021 and sought external input including a
prior consultation with larger shareholders, proxy agencies
and other stakeholders prior to determining its proposals
for Executive Directors under the new Remuneration
Policy. The views of all our shareholders are important to
us and as such we have taken feedback from shareholders
whom we are were aware voted against the Remuneration
Report resolution to better understand their specific
concerns. The feedback that we received indicated some
concerns primarily related to the proposed phased three-
year transition of the Executive Directors’ remuneration
packages and specifically to the proposed percentage
salary increases, despite the proposed reduction in annual
variable pay, which was intended to offset these increases.
In order to appropriately align
executive remuneration with
business performance we
incorporate KPIs within our
incentive schemes.
Maria Bentley
Chair of the Remuneration Committee
Recognising these concerns, the Committee has carefully
considered the Company’s and the Executive Directors’
performance in the last year to ensure that the approved
Policy terms for 2022/23 remain appropriate.
The key performance highlights noted
by the Committee included:
‒ The Group’s profit for the year was £147 million, giving
a total return of 28%, significantly higher than the
previous year;
‒ The Group’s net asset value increased by 24% to £657
million, or 120 pence per share;
‒ The total property return was ahead of the MSCI UK
Quarterly Property Index for the year, and our long-term
record of outperformance has been maintained over
one, three, five and ten years, and since inception;
‒ EPRA earnings rose by 5% compared to 2020/21,
reflecting an increase in occupancy, reduced provisions
against debtors and additional income from
acquisitions;
‒ Dividends were increased twice during the year,
returning to the pre-pandemic level;
‒ One of the loan facilities was re-financed, increasing
the term and re-setting the interest to a lower rate;
‒ The net zero carbon pathway has been published;
‒ An assessment of the Group’s climate-related risks has
been undertaken;
‒ The proportion of the portfolio’s EPC ratings (A to C) has
increased to 71% from 64% last year;
‒ The number of green leases in place increased by 42
over the year, and
‒ Scope 1 and 2 greenhouse gas emissions fell by -27%
compared to the 2019 baseline.
The Committee is satisfied that it is appropriate for the
second stage of the transition to proceed. Accordingly,
as outlined in last year’s Remuneration Report, the base
salaries of the Chief Executive and Finance Director will be
increased by 15% to £330,625 and £224,825 respectively
from 1 April 2022 and their annual bonus opportunity for
2022/23 will be reduced to 155% of salary (2021/22: 165%).
The Committee will undertake a similar review next year
ahead of the proposed final stage of the transitional plan.
Group performance and alignment
We have set out on pages 28 to 31, the key performance
indicators (KPIs) that we currently use to monitor the
success of the business. In order to appropriately align
executive remuneration with business performance we
incorporate KPIs within our incentive schemes. In both
2021/22 and 2022/23 the KPIs that we are using to
determine variable remuneration are set out below.
Measure
Comparator
Annual bonus
Total return
Relative to
comparator group
(30%
weighting)
Long-term
Incentive Plan
Total
property
return
Total
shareholder
return
EPRA EPS
Relative to MSCI
UK Quarterly
Property index
Relative to
comparator group
Absolute target
range
(30%
weighting)
(33%
weighting)
(33%
weighting)
(33%
weighting)
The remaining 40% of the annual bonus is determined by
corporate objectives.
Annual bonus awards for 2021/22
The Executive Directors were set a number of challenging
targets for this year, comprising a combination of financial
measures and corporate and personal objectives.
The two financial measures were total return and total
property return. The actual outcomes are set out in the
Annual Remuneration Report, but the overall result was
that the Directors earned an estimated 46% of the
maximum award available under these financial measures.
The corporate objectives were set to ensure that specific
key strategic targets were reached. These included targets
relating to ESG matters, such as the publication of a net
zero carbon pathway. The Committee considered that
the Executive Directors had largely met the corporate
objectives, evidenced by the record profit, growth in
earnings and environmental progress. More detail is
provided later in this Remuneration Report, but overall
the Committee considered that outcomes of 90% of
the maximum award for the two Executive Directors
were merited against the corporate objectives.
In aggregate, annual bonus awards for the two Executive
Directors are 64% of the maximum award (2020/21 – 76%
of maximum).
The Committee considered the formulaic bonus outcome
in the context of the Group’s overall performance for
the year. The key highlights of performance for the year are
set out earlier in this Statement.
The Committee concluded that it was satisfied the
formulaic bonus outcome was a fair reflection of overall
Group performance during the past financial year.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
In my role as designated Non-Executive Director with
responsibility for employee engagement I had an informal
meeting with the whole team, excluding the Executive
Directors, in May 2021, which covered a number of
topics including the remuneration process and how the
Committee considered market data and other factors in
determining salary and bonus awards. Additionally, we
have carried out the annual employee survey, the results
of which are set out elsewhere in the Report.
Corporate Governance Code 2018
We have considered the provisions of the 2018 Code in
respect of remuneration and believe that our approach
remains compliant. In particular, we operate a consistent
level of pension provision across our workforce; LTIP awards
are only released to Executive Directors five years after
award; and malus and clawback provisions apply to all
incentive awards. We have provisions in the rules of our
remuneration share plans that prevent, other than in
exceptional circumstances, accelerated vesting of awards
when an employee leaves Picton. We also have post-
employment shareholding guidelines in place.
Long-term Incentive Plan awards
(performance period to 31 March 2022)
The awards made under the Long-term Incentive Plan
(LTIP) in June 2019 were based on three performance
conditions measured over the three-year period ended
on 31 March 2022. The LTIP provides the link between the
long-term success of the Company and the remuneration
of the whole team. The Committee has assessed the
extent to which these three performance conditions have
been met.
The three equally weighted performance conditions were
total shareholder return, total property return and growth
in EPRA earnings per share. The actual outcomes for these
conditions are set out in the Annual Remuneration Report
and give rise to an overall award of 54% of the maximum
granted. As explained above, the Committee concluded
that it was satisfied the formulaic outcome was a fair
reflection of overall Group performance over the
performance period.
Employee remuneration and engagement
As in prior years, the Committee received an independent
benchmarking report covering each of the roles,
which detailed market trends. Having considered
the report, the Committee determined that, for the
team as a whole (excluding the Executive Directors),
there would be an overall average rise of 8.8% in base
salaries with effect from 1 April 2022. The average
employee bonus (excluding the Executive Directors)
increased by 13.2% reflecting alignment between
employee pay and our strong business performance.
94
Picton Property Income Limited Annual Report 2022
Our remuneration structure will
be in accordance with the Policy
for the year to 31 March 2023.
Maria Bentley
Chair of the Remuneration Committee
The awards under the Long-term Incentive Plan will be at
a level consistent with last year. For the awards to be made
in June 2022 for the three-year period to 31 March 2025
we will retain the three performance measures used
previously, being:
‒ Total shareholder return, compared to a
comparator group
‒ Total property return, compared to the
MSCI UK Quarterly Property Index
‒ Growth in EPRA earnings per share
For the growth in EPRA earnings per share, we intend to
use an absolute range of targets based on forecasts over
the performance period.
As a Committee, we are committed to ongoing dialogue
with our shareholders and welcome any feedback
regarding our remuneration practices. We look forward
to receiving your continued support at the forthcoming
Annual General Meeting.
Maria Bentley
Chair of the Remuneration Committee
25 May 2022
The remuneration arrangements provide alignment with
shareholders through the use of financial metrics and
corporate objectives. All members of the team participate
in the annual bonus and LTIP, not just the Executive
Directors. The Remuneration Policy and its components
are clearly set out in this Report and the rules of the
variable remuneration schemes are available to the whole
team. We use standard performance metrics, which are
also key performance indicators for the business, to
determine awards. There are clear target and maximum
levels for each metric.
The Committee believes that the variable remuneration
schemes in place are fair and proportionate and align the
remuneration of the team with the Group’s performance.
We are also satisfied that the remuneration structure does
not encourage inappropriate risk-taking. The Committee
does retain discretion over formulaic outcomes if it
considers that these are not a fair reflection of the
Group’s performance.
Implementation of Policy
Our remuneration structure will be in accordance with
the Policy for the year to 31 March 2023.
The bonus deferral policy for Executive Directors will
continue, with 50% of any annual bonus award being
deferred into Picton shares for a period of two years before
vesting. The maximum annual bonus potential for 2022/23
will fall to 155% from 165% of base salary for the Executive
Directors as outlined above. As in previous years the annual
bonus will be determined 60% by financial metrics and
40% by corporate objectives. For 2022/23 we will continue
to use two financial metrics, being total return, relative to a
comparator group, and total property return, relative to
the MSCI UK Quarterly Property Index.
Picton Property Income Limited Annual Report 2022
95
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Remuneration at a glance
The components of remuneration for 2021/22 are:
Fixed pay
Read more
on pages 101–107
Base salary
Benefits
Pension contributions
Variable pay
The annual bonus for 2021/22 is determined by:
The LTIP is based on three financial metrics,
each measured over three years:
rate objectiv e s
o
p
r
o
c
d
n
a
l
a
n
o
s
r
e
P
4%
4%
6%
30%
33%
33%
6%
2%
4%
6%
8%
Annual
(and deferred)
bonus
Up to 50% of the
annual bonus is deferred
into shares which will vest
in two years’ time
30%
i
F
n
a
n
c
i
a
l c
o
n
ditions
Long-term
Incentive Plan
(LTIP)
33%
Personal and corporate objectives
Improve occupancy and income profile
Devise and publish net zero carbon pathway
Improve portfolio environmental factors
Embed Picton flexi-leasing on smaller assets
Complete key refurbishment projects on
budget and on time
Consider options to improve operating
efficiency
Positive stakeholder engagement
Identify and evaluate growth opportunities
Financial conditions
Total return
Total property return
Growth in EPRA earnings per share
96
Picton Property Income Limited Annual Report 2022
The single figure of remuneration for the Directors for the year 2021/22 (in £ thousands) is:
Chief Executive
Finance Director
Non-Executive Directors
195
830
302
497
288
2
43
333
127
196
227
559
332
205
2
29
198
3
279
276
x
x
x
x
Salary
Benefits
Pension
Annual bonus
Long-term
Incentive Pay
Total fixed
Total variable
The potential remuneration of the Executive Directors for the year to 31 March 2023 is:
The following charts show the composition of
the Executive Directors’ remuneration at three
performance levels:
‒ Fixed pay – base salary from 1 April 2022, benefits and
pension salary supplement of 15% of base salary
‒ On target – fixed pay plus target vesting for
the annual bonus (at 50% of maximum opportunity
for illustrative purposes) and threshold vesting for
the LTIP (at 25% of maximum award)
‒ Maximum – fixed pay plus maximum vesting for both
the annual bonus (155% of base salary) and the LTIP
(125% (Chief Executive) and 110% (Finance Director) of
base salary)
‒ Maximum with share price growth – maximum
scenario incorporating assumption of 50% share
price growth during LTIP vesting period
Other than where stated, the charts do not incorporate
share price growth or dividend equivalent awards.
Chief Executive
Finance Director
100%
£382K
100%
£261K
52%
34%
14%
£741K
53%
35%
12%
£497K
29%
39%
32%
£1,307K
30%
41%
29%
£856K
25%
34%
27%
14%
£1,514K
27%
35%
25%
13%
£980K
Total fixed
Annual bonus
LTIP
Share growth
Percentage change in remuneration
The table below shows the percentage change in total remuneration for each of the Directors between the years 2019/20
to 2020/21 and 2020/21 to 2021/22 compared to the average remuneration of the employees of the Group.
Change from 31 March 2021 to 31 March 2022
Change from 31 March 2020 to 31 March 2021
Base salary/ Fees
Benefits
Annual bonus Base salary/ Fees
Benefits
Annual bonus
Michael Morris
Andrew Dewhirst
Lena Wilson
Mark Batten
Maria Bentley
Richard Jones
Nicholas Thompson
Roger Lewis
Average of all other employees
15.0%
15.0%
11.2%
10.5%
16.7%
16.7%
n/a
n/a
6.4%
15.8%
16.1%
–
–
–
–
n/a
n/a
15.0%
-9.4%
-9.4%
–
–
–
–
n/a
n/a
13.2%
0%
0%
n/a
0%
0%
n/a
0%
0%
4.6%
0.6%
0.8%
n/a
–
–
n/a
–
–
8.1%
14.4%
8.6%
n/a
–
–
n/a
–
–
15.4%
The Non-Executive Director fees were last reviewed in 2018, and then in 2021.
Picton Property Income Limited Annual Report 2022
97
Strategic ReportGovernanceFinancial StatementsAdditional Information
Remuneration Report continued
Summary of Directors’
Remuneration Policy
Principles
The objective of the Group’s Remuneration Policy is to have a simple and transparent remuneration structure aligned
with the Group’s strategy.
The Group aims to provide a remuneration package which will retain Directors who possess the skills and experience
necessary to manage the Group and maximise shareholder value on a long-term basis. The Remuneration Policy aims to
incentivise Directors by rewarding performance through enhanced shareholder value.
A summary of the Directors’ Remuneration Policy approved by shareholders at the 2021 Annual General Meeting is set
out below. The full Policy is contained in our 2021 Annual Report which is available on our website at www.picton.co.uk.
Executive Directors’ Remuneration Policy Table
Base salary
Purpose
Operation
A base salary to attract and retain Executives of appropriate quality to deliver the Group’s strategy.
Base salaries are normally reviewed annually with changes effective on 1 April. When setting base
salaries the Committee will consider relevant market data, as well as the scope of the role and the
individual’s skills and experience.
Maximum
No absolute maximum has been set for Executive Director base salaries.
Any annual increase in salaries is set at the discretion of the Remuneration Committee taking
into account the factors stated in this table and the following principles:
– Salaries would typically be increased at a rate consistent with the average employee
salary increase.
– Larger increases may be considered appropriate in certain circumstances (including, but
not limited to, a change in an individual’s responsibilities or in the scale of their role or in
the size and complexity of the Group).
– Larger increases may also be considered appropriate if a Director has been initially appointed
to the Board at a lower than typical salary.
Performance measures None
Clawback
Pension
Purpose
Operation
Maximum
None
Part of competitive remuneration package.
The Company has established defined contribution pension arrangements for all employees.
For Executive Directors the Company pays a monthly salary supplement in lieu of Company
pension contributions.
A consistent rate of pension provision (15% of base salary) applies to all employees including
Executive Directors.
Performance measures None
Clawback
None
98
Picton Property Income Limited Annual Report 2022
Benefits
Purpose
Operation
Part of a competitive remuneration package.
This principally comprises:
– Private medical insurance
– Life assurance
– Permanent health insurance
The Committee may agree to provide other benefits as it considers appropriate.
Maximum
Benefits are provided at market rates.
Performance measures None
Clawback
Annual bonus
Purpose
Operation
Maximum
Performance measures
Clawback
Long-term Incentive Plan
Purpose
Operation
None
A short-term incentive to reward Executive Directors on meeting the Company’s annual financial
and strategic targets and on their personal performance.
The Committee may determine that up to 50% of the annual bonus will be paid in the Company’s
shares and deferred for two years. Dividend equivalents will be paid at the end of the deferral
period (in the form of shares or cash).
The maximum bonus permitted under the Policy will be 175% of base salary. The level of bonus
opportunity within this maximum will be determined by the Committee each year. In 2022/23,
the maximum opportunity will be limited to 155% of base salary.
The annual bonus is based on a range of financial, strategic, ESG, operational and individual
targets (measured over a period of up to one year) set by the Committee. The weightings will
also be determined annually to ensure alignment with the Company’s strategic priorities
although at least 50% of the award will be assessed on corporate financial measures.
For corporate financial measures, 50% of the maximum bonus opportunity will be payable for
on target performance and, if applicable, up to 25% for threshold performance.
Malus and clawback provisions may be applied in the event (within two years of bonus
determination/grant of the deferred bonus shares) of a material misstatement of the audited
financial results, an error in assessing a performance condition applicable to the award or in the
information or assumptions on which the award was granted or is released, a material failure of
risk management, material misconduct on the part of the award holder or a corporate failure.
A long-term incentive plan to align Executive Directors’ interests with those of shareholders and
to promote the long-term success of the Company.
Awards are granted annually usually in the form of a conditional share award or nil cost option.
Awards will normally vest at the end of a three-year period subject to meeting the performance
conditions and continuing employment.
The Remuneration Committee may award dividend equivalents (in the form of shares or cash)
on awards that vest.
The Committee will usually apply a holding period of a further two years to awards that vest.
Maximum
Annual awards with a maximum value of up to 150% of base salary may be made.
Performance measures
Clawback
Vesting will be subject to performance conditions, aligned to the corporate strategy, as
determined by the Committee on an annual basis. There will be three performance conditions,
each measured over a three-year performance period. Each condition will be equally weighted,
but the Committee has the flexibility to vary this for each award.
For threshold levels of performance up to 25% of the award vests, rising usually on a straight-line
basis to 100% for maximum performance.
Malus and clawback provisions may be applied in the event (within five years of grant) of a material
misstatement of the audited financial results, an error in assessing a performance condition
applicable to the award or in the information or assumptions on which the award was granted or
is released, a material failure of risk management, material misconduct on the part of the award
holder or a corporate failure.
Picton Property Income Limited Annual Report 2022
99
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Shareholding guidelines
Purpose
Operation
To align Executive Directors with the interests of shareholders.
Whilst in employment, Executive Directors are expected to build up and thereafter maintain a
minimum shareholding equivalent to 200% of base salary.
The Committee will review progress towards the guideline on an annual basis and has the
discretion to adjust the guideline in what it feels are appropriate circumstances.
Executive Directors will also be expected to remain compliant with the above guideline for a
period of two years post-employment.
Maximum
Not applicable
Performance measures Not applicable
Clawback
Not applicable
Non-Executive Directors Policy Table
Fees
Purpose
Operation
To provide competitive Director fees.
Annual fee for the Chair, and annual base fees for other Non-Executive Directors.
Additional fees for those Directors with additional responsibilities such as chairing a Board
Committee. All fees will be payable monthly in arrears in cash.
Fees will usually be reviewed independently every three years.
The independent Non-Executive Directors are not eligible to receive share options or other
performance-related elements or receive any other benefits other than where travel to the
Company’s registered office is recognised as taxable benefit in which case a Non-Executive
Director may receive the grossed-up costs of travel as a benefit. Non-Executive Directors are
entitled to reimbursement of reasonable expenses.
Maximum
The Company’s Articles set an annual limit for the total of Non-Executive Directors’ remuneration
of £300,000.
Performance measures None
Clawback
Notes to table:
None
1. The Committee may amend or substitute any performance condition(s) if one or more events occur which cause it to determine that an amended or substituted performance
condition would be more appropriate, provided that any such amended or substituted performance condition would not be materially less difficult to satisfy than the original
condition (in its opinion). The Committee may adjust the calculation of performance targets and vesting outcomes (for instance for material acquisitions, disposals or
investments and events not foreseen at the time the targets were set) to ensure they remain a fair reflection of performance over the relevant period. The Committee also
retains discretion to make downward or upward adjustments resulting from the application of the performance measures if it considers that an adjustment is appropriate (for
example, if the outcomes are not deemed by the Committee to be a fair and accurate reflection of business performance). In the event that the Committee was to make an
adjustment of this sort, a full explanation would be provided in the next Remuneration Report.
2. Performance measures – annual bonus. The annual bonus measures are reviewed annually and chosen to focus executive rewards on delivery of key financial targets for the
forthcoming year as well as key strategic or operational goals relevant to an individual. Specific targets for bonus measures are set at the start of each year by the Remuneration
Committee based on a range of relevant reference points, including for Group financial targets, the Company’s business plan and are designed to be appropriately stretching.
3. The Committee may amend the terms of awards granted under the share schemes referred to above in accordance with the rules of the relevant plans.
4. Performance measures – LTIP. The LTIP performance measures will be chosen to provide alignment with our longer-term strategy of growing the business in a sustainable
manner that will be in the best interests of shareholders and other key stakeholders in the Company. Targets are considered ahead of each grant of LTIP awards by the
Remuneration Committee taking into account relevant external and internal reference points and are designed to be appropriately stretching.
5. The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions available to it in connection with
such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the payment were agreed (i) before the Policy set out above came
into effect, provided that the terms of the payment were consistent with the shareholder approved Remuneration Policy in force at the time they were agreed; or (ii) at a time
when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a
Director of the Company. For these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms
of the payment are ‘agreed’ at the time the award is granted.
6. The Committee may make minor amendments to the Remuneration Policy for regulatory, exchange control, tax or administrative purposes or to take account of a change in
legislation, without obtaining shareholder approval for that amendment.
Policy for other employees
Remuneration for other employees broadly follows the same principles as for Executive Directors. A significant element
of remuneration is linked to performance measures. All employees usually participate in the Long-term Incentive Plan,
and in the annual bonus. The weighting of individual and corporate measures is dependent on an individual’s role.
The Committee does not formally consult with employees when determining Executive Director pay. However, the
Committee is kept informed of general management decisions made in relation to employee pay and is conscious of
the importance of ensuring that its pay decisions for Executive Directors are regarded as fair and reasonable within
the business.
100
Picton Property Income Limited Annual Report 2022
Annual Report
on Remuneration
The table below sets out the total remuneration receivable by each of the Directors who held office during the year to
31 March 2022, with a comparison to the previous financial year:
Salary/
fees
£000
Benefits
£000
Pension
salary
supplement
£000
Total
fixed
£000
Annual
bonus
£000
Deferred
bonus
£000
Long-term
Incentive
Plan
£000
Total
variable
£000
Executive
Michael Morris
Andrew Dewhirst
Non-Executive
Lena Wilson
Mark Batten
Maria Bentley
Richard Jones
Nicholas Thompson
Roger Lewis
Nicholas Wiles
Total (audited)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
288
250
196
170
117
21
53
48
53
45
53
26
–
82
–
22
–
6
760
670
2
2
2
2
3
–
–
–
–
–
–
–
–
–
–
–
–
–
7
4
43
38
29
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
333
290
227
198
120
21
53
48
53
45
53
26
–
82
–
22
–
6
151
167
103
113
151
166
102
113
195
213
127
125
497
546
332
351
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
72
64
839
738
254
280
253
279
322
338
829 1,668
897 1,635
Total
£000
830
836
559
549
120
21
53
48
53
45
53
26
–
82
–
22
–
6
Lena Wilson and Richard Jones were new appointments to the Board during the financial year to 31 March 2021.
Benefits for the Executive Directors comprise private medical insurance and life assurance. Non-Executive Directors are
reimbursed expenses incurred in connection with travel and attendance at Board meetings. These expenses are taxable
where the meetings take place at the Company’s main office. The Company settles the tax on behalf of the Non-
Executive Directors.
Executive Directors receive a salary supplement of 15% of base salary in lieu of company pension contributions.
The above figures for 2021 for the Executive Directors for annual bonus and LTIP awards have been re-stated. The
estimated figures for annual bonus included in last year’s report were £348,600 (Michael Morris) and £237,000 (Andrew
Dewhirst). The estimates included an outcome of 100% for the relative total return metric. The final outcome was
determined to be 82% and the awards were adjusted to £332,600 (Michael Morris) and £226,000 (Andrew Dewhirst).
The above 2021 LTIP figures for the Executive Directors have been restated to reflect the actual share price at vesting
(87.1 pence) rather than the average for the quarter ended 31 March 2021 (84.7 pence). This restatement represents an
increase in the value of the 2021 LTIP awards of £5,000 for Michael Morris and of £3,000 for Andrew Dewhirst.
The value of LTIP awards for 2022 is based on the number of shares to be awarded to the Executive Directors in respect of
the June 2019 LTIP awards and the average share price over the quarter ended 31 March 2022 of 100.06 pence, and the
estimated value of dividend equivalents.
Picton Property Income Limited Annual Report 2022
101
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Annual bonus for 2021/22
The annual bonus for the year ended 31 March 2022 for the Executive Directors was based on a combination of financial
metrics (60%) and corporate objectives (40%).
The targets set for the year ended 31 March 2022 and the assessment of actual performance achieved are set out in the
table below.
The financial metrics comprised two equally weighted components: total return relative to a comparator group of similar
companies, set out later in this Report; and total property return compared to the MSCI UK Quarterly Property Index.
At the date of this Report not all of the companies in the total return comparator group had announced their results
to 31 March 2022 and the Committee has estimated, based on the results to date, that this condition will not be met,
resulting in an award of 0%. The Committee will determine the actual outcome of this condition once all companies have
reported, and any adjustment required between the estimate and actual will be made in next year’s Remuneration
Report. There will be no payout of the bonus until a finalised result can be confirmed.
Performance condition
Basis of calculation
Range
Actual
Awarded (%
of maximum)
Awarded (%
of salary)
Total return versus
comparator group
Bonus weighting: 30%
Total property return
versus MSCI Index
Bonus weighting: 30%
Less than median – 0%
Equal to median – 50%
Equal to upper quartile – 100%
Less than median – 0%
Equal to median – 50%
Equal to upper quartile – 100%
Not yet available
28.3%
0%
(estimate)
0%
(estimate)
Median 20.9%
24.3%
92.5%
45.8%
Upper quartile
24.9%
The corporate objectives for the Executive Directors for the year to 31 March 2022 were determined by the Remuneration
Committee and accounted for 40% of the maximum award.
The corporate objectives applying to both Executives, and the assessment of performance against these, are as follows:
Performance condition
Assessment
Improve occupancy and income
profile
Bonus weighting: 8%
Occupancy has increased from 91% to 93% and rental income
has increased by nearly 10% this year. EPRA earnings have risen
by 5%.
Awarded
(% of maximum)
Awarded (%
of salary)
100%
13.2%
Devise and publish net zero
carbon pathway
The net zero carbon pathway has been completed and was
published in April 2022.
95%
9.4%
Bonus weighting: 6%
Improve portfolio environmental
factors
Bonus weighting: 4%
The portfolio’s EPC weightings have improved this year, with 71%
rated A to C on an ERV basis. There are 42 more green leases in
place. Scope 1 and 2 GHG emissions have reduced by over 27%
compared to the 2019 baseline. More biodiversity initiatives have
been introduced.
90%
5.9%
Embedded Picton flexileasing on
smaller assets
SwiftSpace was developed and launched in the year and five
short form leases have been completed at four properties.
70%
2.3%
Bonus weighting: 2%
Complete key refurbishment
projects on budget and on time
Bonus weighting: 6%
Some projects have been subject to inflationary increases and
additional works in certain cases. Key projects at Regency Wharf,
Birmingham and at 180 West George Street, Glasgow have been
completed on time and on budget.
Consider options to improve
operating efficiencies
Bonus weighting: 6%
The Group’s weighted average interest rate has been reduced to
3.7% following the refinancing of the Canada Life facility. The
EPRA cost ratios are both lower this year, although the Group
cost ratio remained at 1.0%.
Positive stakeholder engagement
Bonus weighting: 4%
The dividend has now been restored to its pre-pandemic level,
and there has been positive share price growth. Employee
satisfaction remains high at 82%.
80%
7.9%
85%
8.4%
90%
5.9%
Identify and evaluate growth
opportunities
Opportunities have been considered and progressed during the
year.
90%
5.9%
Bonus weighting: 4%
102
Picton Property Income Limited Annual Report 2022
As discussed in the Committee Chair’s statement on pages 91 to 95, the Committee considered the formulaic bonus
outcome in the context of the Group’s overall performance for the year and concluded that it was satisfied that the
formulaic bonus outcome was a fair reflection of overall Group performance during the year. The Committee was also
satisfied that the above performance was achieved within an acceptable risk profile.
Subject to the estimated total return component noted above, the overall annual bonus outcome for the Executive
Directors is, therefore, as follows:
Michael Morris
Andrew Dewhirst
Financial
metrics (out of
maximum
60%)
Corporate
objectives (out
of maximum
40%)
27.8
27.8
35.8
35.8
Overall
bonus % of
maximum
63.6
63.6
Bonus %
of salary
Total bonus
£
104.9
104.9
301,500
205,000
In accordance with the Directors’ Remuneration Policy the Committee has determined that 50% of the annual bonuses
awarded to the Executive Directors should be deferred and payable in shares in two years’ time. Dividend equivalents will
accrue on the shares and these will be paid in cash when the awards vest.
Long-term Incentive Plan
The LTIP awards granted on 19 June 2019 were subject to performance conditions for the three years ended 31 March
2022. The performance conditions and the actual performance for these were as follows:
Performance condition
Basis of calculation
Range
Total shareholder return
versus comparator group
Total property return
versus MSCI Index
Growth in EPRA EPS
Less than median – 0%
Equal to median – 25%
Equal to upper quartile – 100%
Less than median – 0%
Equal to median – 25%
Equal to upper quartile – 100%
Less than 3% per annum – 0%
Equal to 3% per annum – 25%
Equal or greater than 9% per
annum – 100%
Actual
18.4%
Weighting
(% of award)
Awarded
(% of
maximum)
33.3%
62.5%
Median – 5.0%
Upper quartile – 31.8%
Median – 7.7%
Upper quartile – 9.7%
12.0%
(above upper
quartile)
33.3%
100%
3% – 4.65p
9% – 5.51p
3.88p
33.3%
0%
The Committee was satisfied that the above performance was achieved within an acceptable risk profile. As discussed in
the Committee Chair’s statement on pages 91 to 95, the Committee considered the formulaic LTIP outcome in the
context of the Group’s overall performance over the performance period and concluded that it was satisfied the formulaic
outcome was a fair reflection of overall Group performance during the period. Based on the vesting percentage above,
the shares awarded and their estimated values, using an average share price of 100.06 pence for the quarter ended
31 March 2022, are:
Director
Michael Morris
Andrew Dewhirst
Maximum
number of
shares at grant
Number of
shares vesting
Number of
lapsed shares
328,153
214,218
177,760
116,041
150,393
98,177
Estimated
value1,2
£
194,980
127,280
1. The estimated value includes dividend equivalent awards which will be made in relation to vested LTIP awards at the point of vesting. The value of the dividend equivalent
awards is £17,109 (Michael Morris) and £11,169 (Andrew Dewhirst).
2. £8,586 (Michael Morris) and £5,605 (Andrew Dewhirst) of this value relates to share price growth since the date of grant.
The following awards in the Long-term Incentive Plan were granted to the Executive Directors on 22 June 2021:
Michael Morris
Andrew Dewhirst
Number of
shares
Basis
(% of salary)
403,339
241,358
125%
110%
Face value
per share
(£)
0.8910
0.8910
Award
face value
(£)
Performance period
359,375
1 April 2021 to 31 March 2024
215,050
1 April 2021 to 31 March 2024
Threshold
vesting
25%
25%
Picton Property Income Limited Annual Report 2022
103
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
The face value is based on a weighted average price per share, being the average of the closing share prices over the
three business days immediately preceding the award date. Awards will vest after three years subject to continued service
and the achievement of three equally weighted performance conditions (relative total shareholder return, relative total
property return and EPRA EPS). The vesting schedule for the relative measures will be as applied to the June 2019 LTIP set
out above. The EPS element will vest at 25% for achievement of EPRA EPS of 3.85 pence in the year ended 31 March 2024
increasing on a straight line basis to 100% vesting for EPRA EPS of 4.25 pence.
Any LTIP vesting will also be subject to the Remuneration Committee confirming that, in its assessment, the vesting
outturn was achieved within an acceptable risk profile.
The Executive Directors have the following outstanding share awards under the Long-term Incentive Plan and Deferred
Bonus Plan:
Date of grant
Performance period
Market value
on date of
grant
At 1 April
2021
Granted in
year
Exercised in
year
Lapsed in
year
As at
31 March
2022
Michael Morris
2018 LTIP
8 June 2018
2019 LTIP
19 June 2019
2020 LTIP
29 June 2020
2021 LTIP
22 June 2021
2019 DBP
19 June 2019
2020 DBP
29 June 2020
2021 DBP
22 June 2021
Andrew Dewhirst
2018 LTIP
8 June 2018
2019 LTIP
19 June 2019
2020 LTIP
29 June 2020
2021 LTIP
22 June 2021
2019 DBP
19 June 2019
2020 DBP
29 June 2020
2021 DBP
22 June 2021
1 April 2018 to
31 March 2021
1 April 2019 to
31 March 2022
1 April 2020 to
31 March 2023
1 April 2021 to
31 March 2024
1 April 2018 to
31 March 2019
1 April 2019 to
31 March 2020
1 April 2020 to
31 March 2021
1 April 2018 to
31 March 2021
1 April 2019 to
31 March 2022
1 April 2020 to
31 March 2023
1 April 2021 to
31 March 2024
1 April 2018 to
31 March 2019
1 April 2019 to
31 March 2020
1 April 2020 to
31 March 2021
90.80p
330,396
95.23p
328,153
70.73p
309,275
–
–
–
89.10p
–
403,339
95.23p
175,137
70.73p
215,333
–
–
89.10p
–
186,666
(220,264)
(110,132)
–
–
–
–
(175,137)
–
–
–
–
–
–
–
–
328,153
309,275
403,339
–
215,333
186,666
1,358,294
590,005
(395,401)
(110,132) 1,442,766
(129,222)
(64,611)
–
90.80p
193,833
95.23p
214,218
70.73p
185,070
–
–
–
89.10p
–
241,358
–
–
–
95.23p
116,758
70.73p
154,312
–
–
89.10p
–
126,933
(116,758)
–
–
–
–
–
–
–
–
214,218
185,070
241,358
–
154,312
126,933
Awards under the Long-term Incentive Plan normally vest three years after the grant date. Awards from 2019 onwards
are subject to a further two-year holding period. Awards under the Deferred Bonus Plan normally vest two years after
the grant date.
864,191
368,291
(245,980)
(64,611)
921,891
104
Picton Property Income Limited Annual Report 2022
Comparator group
The Committee has agreed that the following companies will be used as a comparator group for the total shareholder
return and total return metrics in determining variable remuneration for 2022/23 awards. A smaller group is used for the
total return metric due to the different reporting periods of some companies.
Total shareholder
return
Total return
Company
AEW UK REIT plc
BMO Commercial Property Trust Limited
BMO UK Real Estate Investments Limited
Capital & Regional plc
Custodian REIT plc
Ediston Property Investment Company PLC
Industrial REIT Limited
NewRiver REIT PLC
Regional REIT Limited
Schroder Real Estate Investment Trust Limited
Standard Life Investments Property Income Trust Limited
Supermarket Income REIT PLC
UK Commercial Property REIT Limited
Warehouse REIT plc
The above group was also used for previous awards with the following amendments:
‒ Supermarket Income REIT and Warehouse REIT were added to the group for awards made from 2019 onwards;
‒ McKay Securities PLC was included in the group for awards made up to and including 2021;
‒ Hansteen Holdings plc and Mucklow (A.&J.) PLC were additionally included in the group for awards made up to and
including 2019; and
‒ LondonMetric Property PLC and RDI REIT plc were additionally included in the group for awards made up to and
including 2020.
Statement of Directors’ shareholdings
Directors and employees are encouraged to maintain a shareholding in the Company’s shares to provide alignment with
investors.
The numbers of shares beneficially held by each Director (including connected persons) as at 31 March 2022, were as follows:
Michael Morris
Andrew Dewhirst
Lena Wilson
Mark Batten
Maria Bentley
Richard Jones
Holding as a
% of salary
Outstanding
LTIP awards
Outstanding
DBP awards
184
167
1,040,767
401,999
640,646
281,245
Beneficial
holding
2022
537,673
332,113
30,000
–
74,436
53,845
Beneficial
holding
2021
328,485
201,978
30,000
–
74,436
53,845
The percentage holding for the Executive Directors is based on base salaries as at 31 March 2022 and a share price of
£0.983. The beneficial holdings of shares include any held by connected persons.
Executive Directors are required to maintain a shareholding of 200% of base salary and both Directors are currently in the
process of building up to that level. The Executive Directors intend to retain at least 50% of any share awards (post-tax)
until the guidelines are met.
There have been no changes in these shareholdings between the year-end and the date of this report.
Payments to past Directors or payments for loss of office
There were no payments to past Directors or payments for loss of office to Directors during the year ended 31 March 2022.
Picton Property Income Limited Annual Report 2022
105
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Historical total shareholder return performance
The graph below shows the Company’s total shareholder return (TSR) since 31 March 2012 as represented by share price
growth with dividends reinvested, against the FTSE All-Share Index and the FTSE EPRA NAREIT UK Index. These indices
have been chosen as they provide comparison against relevant sectoral and pan-sectoral benchmarks.
TSR chart
500
450
400
350
300
250
200
150
100
50
M ar 2 012
S e p 2 012
M ar 2 013
S e p 2 013
M ar 2 014
S e p 2 014
M ar 2 015
S e p 2 015
M ar 2 016
S e p 2 016
M ar 2 017
S e p 2 017
M ar 2 018
S e p 2 018
M ar 2 019
S e p 2 019
M ar 2 0 2 0
S e p 2 0 2 0
M ar 2 0 21
S e p 2 0 21
M ar 2 0 22
Key:
Picton
FTSE EPRA NAREIT UK
FTSE All-Share
The table below shows the remuneration of the Chief Executive for the past four years, together with the annual bonus
percentage and LTIP vesting level. The Company has only had a Chief Executive since 1 October 2018 and therefore the
table below shows his remuneration for the past four years.
2022
2021
2020
2019
Total
remuneration
(£000)
Annual bonus
(% of maximum)
LTIP vesting
(% of maximum
award)
830
836
769
920
64%
76%
70%
79%
54%
67%
67%
83%
Relative importance of spend on pay
The table below shows the expenditure and percentage change in staff costs compared to other key financial indicators.
Employee costs
Dividends
EPRA earnings
31 March 2022
£000
31 March 2021
£000
3,415
18,425
21,188
3,219
15,002
20,072
%
change
6.1%
22.8%
5.6%
106
Picton Property Income Limited Annual Report 2022
Implementation of Remuneration Policy in 2022/23
Executive Directors
Base salaries
Michael Morris (Chief Executive) – £330,625
Andrew Dewhirst (Finance Director) – £224,825
Pension and
benefits
15% salary supplement in lieu of pension plus standard
other benefits
Annual bonus*
Maximum bonus of 155% of salary with 50% of any bonus
deferred in shares for two years
60% of bonus to be determined by corporate financial
metrics of relative total return and relative total property
return (using the same performance target ranges as in
2021/22) with the remaining 40% determined by corporate
and personal measures
Change from prior year
As outlined in last year’s Remuneration
Report base salaries for the Executive
Directors are being transitioned over a
three-year period – 2022/23 will be the
second year of that transition. The average
increase for the rest of the workforce is
8.8%.
No change. All employees receive company
pension contributions at the rate of 15% of
base salary or 15% salary supplement in lieu
of company contributions.
As outlined in last year’s Remuneration
Report the maximum bonus potential for
Executive Directors will decrease from
165% of salary to 155% of salary this year.
LTIP*
Award of shares worth:
No change
‒ Michael Morris (Chief Executive) 125% of salary
‒ Andrew Dewhirst (Finance Director) 110% of salary
Shares released after three-year performance and two-year
holding period. Vesting of shares based equally on relative
total shareholder return, relative total property return and
growth in EPRA earnings per share measures. Target ranges
for the relative measures are as set out on page 103.
Targets for the EPS measure for the year ended 31 March
2025 are:
Less than 4.15 pence per share – 0%
Equal to 4.15 pence per share – 25%
Greater than 4.50 pence per share – 100%
A result between 4.15 pence and 4.50 pence will be
calculated on a straight-line basis between 25% and 100%
Non-Executive Directors
Fees
Chair – £116,800
Director – £45,000
Supplementary fee for Committee Chairs – £7,500
No change.
* The Remuneration Committee has discretion to override the formulaic outcomes in both the annual bonus and LTIP.
The Committee also confirms that performance has been achieved within an acceptable risk profile before payouts are
made. Incentive payouts are subject to malus and clawback provisions.
Picton Property Income Limited Annual Report 2022
107
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Statement of voting at the last Annual General Meeting
The following table sets out the voting for the Remuneration Report and Remuneration Policy, which were approved by
shareholders at the Annual General Meeting held on 17 November 2021, representing 63% of the issued share capital of
the Company.
For
Against
Votes cast
Withheld
Remuneration Report
Remuneration Policy
Votes cast
%
Votes cast
246,927,948
72.2 333,280,593
95,213,590
27.8
12,044,009
%
96.5
3.5
342,141,538
100.0 345,324,602
100.0
3,487,899
304,835
Discussion of the vote relating to the Remuneration Report resolution and subsequent actions taken by the Board are set
out in the Committee Chair’s statement.
Maria Bentley
Chair of the Remuneration Committee
25 May 2022
108
Picton Property Income Limited Annual Report 2022
Directors’ Report
Directors’ Report
The Directors of Picton Property Income Limited present
the Annual Report and audited financial statements for the
year ended 31 March 2022.
Listing
The Company is listed on the main market of the London
Stock Exchange.
The Company is registered under the provisions of the
Companies (Guernsey) Law, 2008.
Principal activity
The principal activity of the Group is commercial property
investment in the United Kingdom.
Results and dividends
The results for the year are set out in the Consolidated
Statement of Comprehensive Income.
The Company is a UK Real Estate Investment Trust (REIT)
and must distribute to its shareholders at least 90% of the
profits on its property rental business for each accounting
period as a Property Income Distribution (PID).
As set out in Note 10 to the consolidated financial
statements, the Company has paid four interim dividends
in the year, one at 0.8 pence per share, two at 0.85 pence
per share and one at 0.875 pence per share, making a total
dividend for the year ended 31 March 2022 of 3.375 pence
per share (2021: 2.75 pence). All four interim dividends were
paid as PIDs.
Directors
The Directors of the Company who served throughout the
year are:
‒ Lena Wilson
‒ Maria Bentley
‒ Mark Batten
‒ Andrew Dewhirst
‒ Richard Jones
‒ Michael Morris
The Directors’ interests in the shares of the Company as at
31 March 2022 are set out in the Remuneration Report.
All of the Directors will offer themselves for re-election at
the forthcoming Annual General Meeting.
2018 UK Corporate Governance Code Compliance
Statement
The Board confirms that for the year ended 31 March 2022
the principles of good corporate governance contained in
the 2018 UK Corporate Governance Code have been
consistently applied.
The Company is fully compliant with the Code.
Share capital
The issued share capital of the Company as at 31 March
2022 was 547,605,596 (2021: 547,605,596) ordinary shares of
no par value, including 1,974,253 ordinary shares which are
held by the Trustee of the Company’s Employee Benefit
Trust (2021: 2,052,269 ordinary shares).
The Directors have authority to buy back up to 14.99% of
the Company’s ordinary shares in issue, subject to the
renewal of this authority from shareholders at each Annual
General Meeting. Any buy-back of ordinary shares is, and
will be, made subject to Guernsey law, and the making and
timing of any buy-backs are at the absolute discretion of
the Board. No ordinary shares were purchased under this
authority during the year.
At the 2021 Annual General Meeting shareholders gave the
Directors authority to issue up to 54,760,558 shares (being
10% of the Company’s issued share capital as at 15 October
2021) without having to first offer those shares to existing
shareholders. No ordinary shares have been issued under
this authority, which expires at this year’s Annual General
Meeting and resolutions will be proposed for its renewal.
Shares held in the Employee Benefit Trust
The Trustee of the Picton Property Income Limited Long-
term Incentive Plan holds 1,974,253 ordinary shares in the
Company in a trust to satisfy awards made under the
Long-term Incentive Plan and the Deferred Bonus Plan.
During the year the Trustee acquired 750,000 ordinary
shares at an average price of 97.2 pence per share. The
Trustee has waived its right to receive dividends on the
shares it holds.
Statement of going concern
The Directors have focused on assessing whether the going
concern basis remains appropriate for the preparation of
the financial statements for the year ended 31 March 2022.
In making their assessment the Directors have considered
the principal and emerging risks relating to the Group, its
loan covenants, access to funding and liquidity position.
They have also considered a number of scenarios in
particular regarding the impact of different levels of rent
collection across the portfolio and over varying timescales,
and the potential consequences on financial performance,
asset values, capital projects and loan covenants. Leasing
and investment transactions have been assumed to be
curtailed throughout the assessment period. Future lease
events over the assessment period have been considered
on a case-by-case basis to determine the range of most
likely outcomes. More details regarding the Group’s business
activities, together with the factors affecting performance,
investment activities and future development are set out in
the Strategic Report.
Picton Property Income Limited Annual Report 2022
109
Strategic ReportGovernanceFinancial StatementsAdditional Information These matters were assessed over the period to 31 March
2027 and will continue to be assessed over rolling five-year
periods.
The Directors consider that the stress testing performed
was sufficiently robust that even under extreme conditions
the Company remains viable.
Based on their assessment, and in the context of the
Group’s business model and strategy, the Directors expect
that the Group will be able to continue in operation and
meet its liabilities as they fall due over the five-year period
to 31 March 2027.
Substantial shareholdings
Based on notifications received and on information
provided by the Company’s brokers, the Company
understands the following shareholders held a beneficial
interest of 3% or more of the Company’s issued share
capital as at 5 May 2022.
Investec Wealth & Investment Limited
Ameriprise Financial Inc.
BlackRock Inc.
The Vanguard Group Inc.
Tilney Smith & Williamson
Brewin Dolphin Limited
% of issued
share capital
16.2
9.3
5.6
4.1
3.8
3.2
Directors’ Report continued
Further information on the financial position of the Group,
including its liquidity position, borrowing facilities and debt
maturity profile, is set out in the Financial Review and in the
consolidated financial statements.
Under all of these scenarios the Group has sufficient cash
resources to continue its operations, and remain within its
loan covenants, for a period of at least 12 months from the
date of these financial statements.
Based on their assessment and knowledge of the portfolio
and market, the Directors have therefore continued to
adopt the going concern basis in preparing the financial
statements.
Viability assessment and statement
The UK Corporate Governance Code requires the Board to
make a ‘viability statement’ which considers the Company’s
current position and principal and emerging risks and
uncertainties combined with an assessment of the future
prospects for the Company, in order that the Board can
state that the Company will be able to continue its
operations over the period of their assessment.
The Board conducted this review over a five-year timescale,
considered to be the most appropriate for long-term
investment in commercial property. The assessment has
been undertaken taking into account the principal and
emerging risks and uncertainties faced by the Group which
could impact its investment strategy, future performance,
loan covenants and liquidity.
The major risks identified were those relating to rising
inflation, geopolitical tensions and the legacy effects of the
Covid-19 pandemic on the UK economy and commercial
property market over the period of the assessment. In the
ordinary course of business, the Board reviews a detailed
financial model on a quarterly basis, including forecast
market returns. This model allows for different assumptions
regarding lease expiries, breaks and incentives. For the
purposes of the viability assessment of the Group, the
model covers a five-year period and is stress tested under
various scenarios.
The Board considered a number of scenarios and their
impact on the Group’s property portfolio and financial
position. These scenarios included different levels of rent
collection, occupier defaults, void periods and incentives
within the portfolio, and the consequential impact on
property costs and loan covenants. All lease events and
assumptions were reviewed over the period under the
different scenarios including their impact on revenue and
cash flow. Forecast movements in capital values were
included in these scenarios including their potential impact
on the Group’s loan covenants. The Group’s long-term loan
facilities are contracted to be in place throughout the
assessment period, while the Board has assumed that the
Group will continue to have access to its short-term
facilities. The Board considered the impact of these
scenarios on its ability to continue to pay dividends at
different rates over the assessment period.
110
Picton Property Income Limited Annual Report 2022
Disclosure of information to auditor
The Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s auditor is unaware and each Director has
taken all the steps that he or she ought to have taken as a
Director to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is
aware of that information.
Auditor
KPMG Channel Islands Limited (the ‘Auditor’) has expressed
its willingness to continue in office as the Company’s
auditor and a resolution proposing its reappointment will
be submitted at the Annual General Meeting.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they are
required to prepare the financial statements in accordance
with International Financial Reporting Standards, as issued
by the IASB, and applicable law.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of its profit or loss for that period.
In preparing these financial statements, the Directors are
required to:
‒ select suitable accounting policies and then apply them
consistently;
‒ make judgements and estimates that are reasonable,
relevant and reliable;
‒ state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
‒ assess the Group and Company’s ability to continue as a
going concern, disclosing, as applicable, matters related
to going concern; and
‒ use the going concern basis of accounting unless they
either intend to liquidate the Group or the Company or
to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping proper
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that its financial statements
comply with the Companies (Guernsey) Law, 2008. They
are responsible for such internal controls as they determine
are necessary to enable the preparation of the financial
statements that are free from material misstatement,
whether due to fraud or error, and have a general
responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website, and for the
preparation and dissemination of financial statements.
Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ responsibility statement in respect of the
Annual Report and financial statements
We confirm that to the best of our knowledge:
‒ the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company; and
‒ the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Issuer, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual Report and accounts, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
By Order of the Board
Andrew Dewhirst
25 May 2022
Picton Property Income Limited Annual Report 2022
111
Strategic ReportGovernanceFinancial StatementsAdditional Information Welcome to
our Financial
Statements
This section sets out the Group’s
Financial Statements for the year
ended 31 March 2022.
Financial Statements
Independent Auditor’s Report
113
117 Consolidated Statement of Comprehensive Income
118 Consolidated Statement of Changes in Equity
119 Consolidated Balance Sheet
120 Consolidated Statement of Cash Flows
121 Notes to the Consolidated Financial Statements
Additional Information
139 Supplementary Disclosures
143 Property Portfolio
144 Five Year Financial Summary
145 Glossary
146 Financial Calendar
147 Shareholder Information
112
Picton Property Income Limited Annual Report 2022
Financial Statements Independent Auditor’s Report
to the Members of Picton Property Income Limited
Our opinion is unmodified
We have audited the consolidated financial statements of
Picton Property Income Limited (the “Company”) and its
subsidiaries (together, the “Group”), which comprise the
consolidated balance sheet as at 31 March 2022, the
consolidated statements of comprehensive income,
changes in equity and cash flows for the year then ended,
and notes, comprising significant accounting policies and
other explanatory information.
In our opinion, the accompanying consolidated
financial statements:
‒ give a true and fair view of the financial position of the
Group as at 31 March 2022, and of the Group’s financial
performance and cash flows for the year then ended;
‒ are prepared in accordance with International
Financial Reporting Standards; and
‒ comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities are described below. We have fulfilled
our ethical responsibilities under, and are independent
of the Company and Group in accordance with, UK
ethical requirements including the FRC Ethical Standard
as required by the Crown Dependencies’ Audit Rules
and Guidance. We believe that the audit evidence we
have obtained is a sufficient and appropriate basis for
our opinion.
Key audit matters: our assessment of the risks of
material misstatement
Key audit matters are those matters that, in our
professional judgement, were of most significance in
the audit of the consolidated financial statements and
include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and
informing our opinion thereon, and we do not provide a
separate opinion on these matters. In arriving at our audit
opinion above, the key audit matter was as follows
(unchanged from 2021):
Valuation of investment
properties
£830 million (2021:
£665.4 million)
Refer to page 87 of the
Audit and Risk Committee
Report, Note 2 significant
accounting policies and
Note 13 investment
properties disclosures
The risk
Our response
Basis:
The Group’s investment
properties accounted for
93% (2021: 93%) of the
Group’s total assets as at 31
March 2022. The fair value of
investment properties at 31
March 2022 was assessed by
the Board of Directors based
on independent valuations
prepared by the Group’s
third party independent
valuer (the ‘Valuer’).
Risk:
The valuation of the Group’s
investment properties is a
significant area of our audit
given that it represents the
majority of the total assets of
the Group and in view of the
significance of the estimates
and judgements that may be
involved in the determination
of their fair value.
Our audit procedures included:
Control Evaluation:
We assessed the design, implementation and operating
effectiveness of controls over the valuation of investment
properties including the capture and recording of information
contained in the lease database for investment properties.
Evaluating experts engaged by management:
We assessed the competence, capabilities and objectivity of
the Valuer. We also assessed the independence of the Valuer
by considering the scope of their work and the terms of their
engagement.
Evaluating assumptions and inputs used in the valuation:
With the assistance of our own real estate valuation specialist
we assessed the valuations prepared by the Valuer by:
‒ evaluating the appropriateness of the valuation
methodologies and assumptions used
‒ undertaking discussions on key findings with the Valuer
and challenging the valuations based on market
information and knowledge
We also compared a sample of the key inputs used to
calculate the valuations such as annual rent and tenancy
contracts for consistency with other audit findings.
Assessing disclosures:
We also considered the Group’s investment property
valuation policies and their application as described in the
notes to the consolidated financial statements for compliance
with IFRS in addition to the adequacy of disclosures in Note 13
in relation to fair value of the investment properties.
Picton Property Income Limited Annual Report 2022
113
Strategic ReportGovernanceFinancial StatementsAdditional Information Independent Auditor’s Report
to the Members of Picton Property Income Limited continued
Our application of materiality and an overview of the
scope of our audit
Materiality for the consolidated financial statements as a
whole was set at £8.96 million, determined with reference
to a benchmark of group total assets of £895.8 million, of
which it represents approximately 1.0% (2021: 1%).
from these risks individually and collectively against the
level of available financial resources indicated by the
Group’s financial forecasts.
We considered whether the going concern disclosure in
Note 2 to the financial statements gives a full and accurate
description of the Directors’ assessment of going concern.
In line with our audit methodology, our procedures on
individual account balances and disclosures were
performed to a lower threshold, performance materiality,
so as to reduce to an acceptable level the risk that
individually immaterial misstatements in individual
account balances add up to a material amount across the
financial statements as a whole. Performance materiality
for the Group was set at 75% (2021: 75%) of materiality for
the financial statements as a whole, which equates to £6.72
million. We applied this percentage in our determination of
performance materiality because we did not identify any
factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £447,000,
in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality
level specified above, which has informed our identification
of significant risks of material misstatement and the
associated audit procedures performed in those areas as
detailed above.
The group team performed the audit of the Group as if
it was a single aggregated set of financial information.
The audit was performed using the materiality level set
out above and covered 100% of total group revenue,
total group profit before tax, and total group assets
and liabilities.
Going concern
The Directors have prepared the consolidated financial
statements on the going concern basis as they do not
intend to liquidate the Group or the Company or to cease
their operations, and as they have concluded that the
Group and the Company’s financial position means that
this is realistic. They have also concluded that there are
no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for
at least a year from the date of approval of the consolidated
financial statements (the ‘going concern period’).
In our evaluation of the Directors’ conclusions, we
considered the inherent risks to the Group and the
Company’s business model and analysed how those risks
might affect the Group and the Company’s financial
resources or ability to continue operations over the going
concern period. The risks that we considered most likely to
affect the Group and the Company’s financial resources or
ability to continue operations over this period were:
‒ Availability of capital to meet operating costs and other
financial commitments;
‒ The ability to successfully refinance or repay debt; and
‒ The ability of the Company to comply with
debt covenants
We considered whether these risks could plausibly affect
the liquidity in the going concern period by comparing
severe, but plausible downside scenarios that could arise
114
Picton Property Income Limited Annual Report 2022
Our conclusions based on this work:
‒ we consider that the Directors’ use of the going
concern basis of accounting in the preparation of
the consolidated financial statements is appropriate;
‒ we have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the
Group and the Company’s ability to continue as a
going concern for the going concern period; and
‒ we have nothing material to add or draw attention to in
relation to the Directors’ statement in the notes to the
consolidated financial statements on the use of the
going concern basis of accounting with no material
uncertainties that may cast significant doubt over the
Group and the Company’s use of that basis for the
going concern period, and that statement is materially
consistent with the consolidated financial statements
and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the above
conclusions are not a guarantee that the Group and the
Company will continue in operation.
Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(‘fraud risks’) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or
provide an opportunity to commit fraud. Our risk
assessment procedures included:
‒ enquiring of management as to the Group’s policies
and procedures to prevent and detect fraud as well as
enquiring whether management have knowledge of
any actual, suspected or alleged fraud;
‒ reading minutes of meetings of those charged with
governance; and
‒ using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards, we perform procedures
to address the risk of management override of controls, in
particular the risk that management may be in a position
to make inappropriate accounting entries. On this audit
we do not believe there is a fraud risk related to revenue
recognition because the Group’s revenue streams are
simple in nature with respect to accounting policy choice,
and are easily verifiable to external data sources or
agreements with little or no requirement for estimation
from management. We did not identify any additional
fraud risks.
Financial Statements We performed procedures including:
‒ Identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified
entries to supporting documentation; and
‒ incorporating an element of unpredictability in our
audit procedures.
Identifying and responding to risks of material
misstatement due to non-compliance with laws
and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the consolidated financial statements from our sector
experience and through discussion with management
(as required by auditing standards), and from inspection
of the Group’s regulatory and legal correspondence,
if any, and discussed with management the policies
and procedures regarding compliance with laws and
regulations. As the Group is regulated, our assessment
of risks involved gaining an understanding of the control
environment including the entity’s procedures for
complying with regulatory requirements.
The Group is subject to laws and regulations that directly
affect the consolidated financial statements including
financial reporting legislation and taxation legislation and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related
financial statement items.
The Group is subject to other laws and regulations
where the consequences of non-compliance could
have a material effect on amounts or disclosures in the
consolidated financial statements, for instance through
the imposition of fines or litigation or impacts on the
Group and the Company’s ability to operate. We identified
financial services regulation as being the area most likely
to have such an effect, recognising the regulated nature of
the Group’s activities and its legal form. Auditing standards
limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of
management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the consolidated financial
statements, even though we have properly planned and
performed our audit in accordance with auditing
standards. For example, the further removed non-
compliance with laws and regulations is from the events
and transactions reflected in the consolidated financial
statements, the less likely the inherently limited procedures
required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk
of non-detection of fraud, as this may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all
laws and regulations.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in
the annual report but does not include the consolidated
financial statements and our auditor’s report thereon. Our
opinion on the consolidated financial statements does not
cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact. We have nothing to
report in this regard.
Disclosures of emerging and principal risks and longer
term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’
disclosures in respect of emerging and principal risks and
the viability statement, and the consolidated financial
statements and our audit knowledge. We have nothing
material to add or draw attention to in relation to:
‒ the Directors’ confirmation within the Viability
assessment and statement (page 110) that they have
carried out a robust assessment of the emerging and
principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency or liquidity;
‒ the emerging and principal risks disclosures describing
these risks and explaining how they are being managed
or mitigated;
‒ the Directors’ explanation in the Viability assessment
and statement (page 110) as to how they have assessed
the prospects of the Group, over what period they have
done so and why they consider that period to be
appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as
they fall due over the period of their assessment,
including any related disclosures drawing attention to
any necessary qualifications or assumptions.
We are also required to review the Viability assessment
and statement, set out on page 110 under the Listing Rules.
Based on the above procedures, we have concluded that
the above disclosures are materially consistent with the
consolidated financial statements and our audit
knowledge.
Picton Property Income Limited Annual Report 2022
115
Strategic ReportGovernanceFinancial StatementsAdditional Information Independent Auditor’s Report
to the Members of Picton Property Income Limited continued
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the consolidated
financial statements and our audit knowledge.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the consolidated
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by
persons other than the Company’s members as a body
This report is made solely to the Company’s members, as
a body, in accordance with section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Deborah Smith
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
25 May 2022
Based on those procedures, we have concluded that each of
the following is materially consistent with the consolidated
financial statements and our audit knowledge:
‒ the Directors’ statement that they consider that the
annual report and consolidated financial statements
taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy;
‒ the section of the annual report describing the work of
the Audit Committee, including the significant issues
that the audit committee considered in relation to the
financial statements, and how these issues were
addressed; and
‒ the section of the annual report that describes the
review of the effectiveness of the Company’s risk
management and internal control systems.
We are required to review the part of Corporate
Governance Statement relating to the Company’s
compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
review. We have nothing to report in this respect.
We have nothing to report on other matters on which
we are required to report by exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008
requires us to report to you if, in our opinion:
‒ the Company has not kept proper accounting
records; or
‒ the consolidated financial statements are not in
agreement with the accounting records; or
‒ we have not received all the information and
explanations, which to the best of our knowledge
and belief are necessary for the purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on
page 111, the Directors are responsible for: the preparation
of the consolidated financial statements including being
satisfied that they give a true and fair view; such internal
control as they determine is necessary to enable the
preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or
error; assessing the Group and Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going
concern basis of accounting unless they either intend to
liquidate the Group or the Company or to cease operations,
or have no realistic alternative but to do so.
116
Picton Property Income Limited Annual Report 2022
Financial Statements Consolidated statement of comprehensive income
for the year ended 31 March 2022
Income
Revenue from properties
Property expenses
Net property income
Expenses
Administrative expenses
Total operating expenses
Operating profit before movement on investments
Investments
Profit on disposal of investment properties
Investment property valuation movements
Total profit on investments
Operating profit
Financing
Interest received
Interest paid
Debt prepayment fees
Total finance costs
Profit before tax
Tax
Profit after tax
Other comprehensive income
Revaluation of owner-occupied property
Total other comprehensive income for the year
Total comprehensive income for the year
Earnings per share
Basic
Diluted
Notes
2022
£000
2021
£000
3
4
46,543
(11,098)
43,331
(9,877)
35,445
33,454
6
(5,755)
(5,388)
(5,755)
(5,388)
29,690
28,066
13
42
13 129,801
868
12,861
129,843
13,729
159,533
41,795
8
18
–
(8,502)
(4,045)
5
(7,999)
–
(12,547)
(7,994)
9
146,986
–
146,986
33,801
–
33,801
14
434
434
–
–
147,420
33,801
11
11
27.0p
26.9p
6.2p
6.2p
All items in the above statement derive from continuing operations.
All of the profit and total comprehensive income for the year is attributable to the equity holders of the Company.
Notes 1 to 27 form part of these consolidated financial statements.
Picton Property Income Limited Annual Report 2022
117
Strategic ReportGovernanceFinancial StatementsAdditional Information Consolidated statement of changes in equity
for the year ended 31 March 2022
Balance as at 31 March 2020
Profit for the year
Dividends paid
Share-based awards
Purchase of shares held in trust
Balance as at 31 March 2021
Profit for the year
Dividends paid
Share-based awards
Purchase of shares held in trust
Other comprehensive income for the year
Share
capital
£000
Retained
earnings
£000
Other
reserves
£000
Revaluation
reserve
£000
Total
£000
Notes
164,400 345,667
33,801
(15,002)
–
–
–
–
–
–
164,400 364,466
– 146,986
(18,425)
–
–
–
–
–
–
–
10
7
10
7
14
(784)
–
–
758
(643)
(669)
–
–
668
(730)
–
– 509,283
33,801
–
(15,002)
–
758
–
(643)
–
– 528,197
– 146,986
(18,425)
–
668
–
(730)
–
434
434
Balance as at 31 March 2022
164,400 493,027
(731)
434 657,130
Notes 1 to 27 form part of these consolidated financial statements.
118
Picton Property Income Limited Annual Report 2022
Financial Statements Consolidated balance sheet
as at 31 March 2022
Non-current assets
Investment properties
Property, plant and equipment
Total non-current assets
Current assets
Accounts receivable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Accounts payable and accruals
Loans and borrowings
Obligations under leases
Total current liabilities
Non-current liabilities
Loans and borrowings
Obligations under leases
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Other reserves
Revaluation reserve
Total equity
Net asset value per share
Notes
2022
£000
2021
£000
13 830,027 665,418
4,111
14
4,383
834,410 669,529
15
16
22,850
38,547
19,584
23,358
61,397
42,942
895,807 712,471
17
18
22
(19,138)
(1,068)
(114)
(18,805)
(944)
(107)
(20,320)
(19,856)
18 (215,764)
22
(2,593)
(162,711)
(1,707)
(218,357)
(164,418)
(238,677)
(184,274)
657,130 528,197
20 164,400 164,400
493,027 364,466
(669)
–
(731)
434
657,130 528,197
23
120p
97p
These consolidated financial statements were approved by the Board of Directors on 25 May 2022 and signed on its
behalf by:
Andrew Dewhirst
Director
25 May 2022
Notes 1 to 27 form part of these consolidated financial statements.
Picton Property Income Limited Annual Report 2022
119
Strategic ReportGovernanceFinancial StatementsAdditional Information Consolidated statement of cash flows
for the year ended 31 March 2022
Operating activities
Operating profit
Adjustments for non-cash items
Interest received
Interest paid
Tax received
Increase in accounts receivable
Increase/(decrease) in accounts payable and accruals
Cash inflows from operating activities
Investing activities
Purchase of investment properties
Capital expenditure on investment properties
Disposal of investment properties
Purchase of tangible assets
Cash outflows from investing activities
Financing activities
Borrowings repaid
Borrowings drawn
Debt prepayment fees
Financing costs
Purchase of shares held in trust
Dividends paid
Cash inflows/(outflows) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Notes
2022
£000
2021
£000
159,533
21 (129,010)
–
(8,102)
–
(3,305)
897
41,795
(12,964)
5
(7,515)
56
(1,983)
(825)
20,013
18,569
13
13
14
(25,005)
(9,551)
726
(3)
–
(4,961)
3,928
(268)
(33,833)
(1,301)
18
18
18
18
7
10
(26,917)
79,545
(4,045)
(419)
(730)
(18,425)
(1,258)
–
–
(574)
(643)
(15,002)
29,009
(17,477)
15,189
23,358
(209)
23,567
Cash and cash equivalents at end of year
16
38,547
23,358
Notes 1 to 27 form part of these consolidated financial statements.
120
Picton Property Income Limited Annual Report 2022
Financial Statements Notes to the consolidated financial statements
for the year ended 31 March 2022
1. General information
Picton Property Income Limited (the ‘Company’ and together with its subsidiaries the ‘Group’) was established on
15 September 2005 as a closed ended Guernsey domiciled investment company and entered the UK REIT regime on
1 October 2018. The consolidated financial statements are prepared for the year ended 31 March 2022 with comparatives
for the year ended 31 March 2021.
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared on a going concern basis and adopt the historical cost basis, except for
the revaluation of investment properties. Historical cost is generally based on the fair value of the consideration given in
exchange for the assets. The financial statements, which give a true and fair view, are prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the IASB and the Companies (Guernsey) Law, 2008.
The Directors have assessed whether the going concern basis remains appropriate for the preparation of the financial
statements. They have reviewed the Group’s principal and emerging risks, existing loan facilities, access to funding and
liquidity position and then considered a number of scenarios around different levels of rent collection, (and the potential
consequences on financial performance), asset values, capital projects and loan covenants. Under all of these scenarios
the Group has sufficient resources to continue its operations, and remain within its loan covenants, for a period of at least
12 months from the date of these financial statements.
Based on their assessment and knowledge of the portfolio and market, the Directors have therefore continued to adopt
the going concern basis in preparing the financial statements.
The financial statements are presented in pounds sterling, which is the Company’s functional currency. All financial
information presented in pounds sterling has been rounded to the nearest thousand, except when otherwise indicated.
New or amended standards issued
The accounting policies adopted are consistent with those of the previous financial period, as amended to reflect the
adoption of new standards, amendments and interpretations which became effective in the year as shown below.
‒ Interest Rate Benchmark Reform – Phase 2
‒ Covid-19 Related Rent Concessions (Amendment to IFRS 16)
The adoption of these standards has had no material effect on the consolidated financial statements of the Group.
At the date of approval of these financial statements there are a number of new and amended standards in issue but not
yet effective for the financial year ended 31 March 2022 and thus have not been applied by the Group.
‒ Classification of liabilities as current or non-current (Amendments to IAS 1)
‒ Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
‒ Definition of Accounting Estimate (Amendment to IAS 8)
‒ Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendment to IFRS 10 and IAS 28)
‒ Onerous Contracts – Cost of fulfilling a Contract (Amendments to IAS 37)
‒ Annual Improvements to IFRS Standards 2018-2020
The adoption of these new and amended standards, together with any other IFRSs or IFRIC interpretations that are not
yet effective, are not expected to have a material impact on the financial statements of the Group.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates
and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of estimates about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Significant judgements and estimates
Judgements made by management in the application of IFRSs that have a significant effect on the financial statements
and major sources of estimation uncertainty are disclosed in Note 13.
The critical estimates and assumptions relate to the investment property and owner-occupied property valuations
applied by the Group’s independent valuer. Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects
both current and future years.
Picton Property Income Limited Annual Report 2022
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Strategic ReportGovernanceFinancial StatementsAdditional Information 2. Significant accounting policies continued
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company at the reporting date. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect these returns through its control over the entity.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the Group. These financial statements include the results of the
subsidiaries disclosed in Note 12. All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Fair value hierarchy
The fair value measurement for the Group’s assets and liabilities is categorised into different levels in the fair value
hierarchy based on the inputs to valuation techniques used. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level 3: unobservable inputs for the asset or liability.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during
which the transfer has occurred.
Investment properties
Freehold property held by the Group to earn income or for capital appreciation, or both, is classified as investment
property in accordance with IAS 40 ‘Investment Property’. Property held under head leases for similar purposes is also
classified as investment property. Investment property is initially recognised at purchase cost plus directly attributable
acquisition expenses and subsequently measured at fair value. The fair value of investment property is based on a
valuation by an independent valuer who holds a recognised and relevant professional qualification and who has recent
experience in the location and category of the investment property being valued.
The fair value of investment properties is measured based on each property’s highest and best use from a market
participant’s perspective and considers the potential uses of the property that are physically possible, legally permissible
and financially feasible.
The fair value of investment property generally involves consideration of:
‒ Market evidence on comparable transactions for similar properties;
‒ The actual current market for that type of property in that type of location at the reporting date and current market
expectations;
‒ Rental income from leases and market expectations regarding possible future lease terms;
‒ Hypothetical sellers and buyers, who are reasonably informed about the current market and who are motivated, but
not compelled, to transact in that market on an arm’s length basis; and
‒ Investor expectations on matters such as future enhancement of rental income or market conditions.
Gains and losses arising from changes in fair value are included in the Consolidated Statement of Comprehensive Income
in the year in which they arise. Purchases and sales of investment property are recognised when contracts have been
unconditionally exchanged and the significant risks and rewards of ownership have been transferred.
An investment property is derecognised for accounting purposes upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the item) is included in the Consolidated
Statement of Comprehensive Income in the year the asset is derecognised. Investment properties are not depreciated.
The majority of the investment properties are charged by way of a first ranking mortgage as security for the loans made
to the Group; see Note 18.
122
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 2. Significant accounting policies continued
Property, plant and equipment
Owner-occupied property
Owner-occupied property is stated at its revalued amount, which is determined in the same manner as investment
property. It is depreciated over its remaining useful life (in this case 40 years) with the depreciation included in
administrative expenses. On revaluation, any accumulated depreciation is eliminated against the gross carrying amount
of the property concerned, and the net amount restated to the revalued amount. Subsequent depreciation charges are
adjusted based on the revalued amount. Any difference between the depreciation charge on the revalued amount and
that which would have been charged under historic cost is transferred between the revaluation reserve and retained
earnings as the property is used. Any gain arising on this remeasurement is recognised in profit or loss to the extent that it
reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive
income and presented in the revaluation reserve. Any loss is recognised in profit or loss. However, to the extent that an
amount is included in the revaluation surplus for that property, the loss is recognised in other comprehensive income and
reduces the revaluation surplus within equity.
Plant and equipment
Plant and equipment is depreciated on a straight-line basis over the estimated useful lives of each item of plant and
equipment. The estimated useful lives are between three and five years.
Leases
Where the Group holds interest in investment properties other than as freehold interests (e.g. as a head lease), these are
accounted for as right of use assets, which is recognised at its fair value on the Balance Sheet, within the investment
property carrying value. Upon initial recognition, a corresponding liability is included as a finance lease liability. Minimum
lease payments are apportioned between the finance charge and the reduction of the outstanding liability so as to
produce a constant periodic rate of interest on the remaining finance lease liability. Contingent rent payable, being the
difference between the rent currently payable and the minimum lease payments when the lease liability was originally
calculated, are charged as expenses within property expenditure in the years in which they are payable.
The Group leases its investment properties under commercial property leases which are held as operating leases. An
operating lease is a lease other than a finance lease. A finance lease is one whereby substantially all the risks and rewards
of ownership are passed to the lessee. Lease income is recognised as income on a straight-line basis over the lease term.
Direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased
asset and recognised as an expense over the lease term on the same basis as the lease income. Upon receipt of a
surrender premium for the early termination of a lease, the profit, net of dilapidations and non-recoverable outgoings
relating to the lease concerned, is immediately reflected in revenue from properties if there are no relevant conditions
attached to the surrender.
Cash and cash equivalents
Cash includes cash in hand and cash with banks. Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash with original maturities in three months or less and that are subject to an
insignificant risk of change in value.
Income and expenses
Income and expenses are included in the Consolidated Statement of Comprehensive Income on an accruals basis. All of
the Group’s income and expenses are derived from continuing operations.
Lease incentive payments are amortised on a straight-line basis over the period from the date of lease inception to the
end of the lease term and presented within accounts receivable. Lease incentives granted are recognised as a reduction
of the total rental income, over the term of the lease.
Property operating costs include the costs of professional fees on letting and other non-recoverable costs.
The income charged to occupiers for property service charges and the costs associated with such service charges are
shown separately in Notes 3 and 4 to reflect that, notwithstanding this money is held on behalf of occupiers, the ultimate
risk for paying and recovering these costs rests with the property owner.
Employee benefits
Defined contribution plans
A defined contribution plan is a retirement benefit plan under which the Company pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution pension plans are recognised as an expense in the Consolidated Statement of Comprehensive
Income in the periods during which services are rendered by employees.
Picton Property Income Limited Annual Report 2022
123
Strategic ReportGovernanceFinancial StatementsAdditional Information 2. Significant accounting policies continued
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing
plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.
Share-based payments
The fair value of the amounts payable to employees in respect of the Deferred Bonus Plan, when these are to be settled
in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees
become unconditionally entitled to payment. Where the awards are equity settled, the fair value is recognised as an
expense, with a corresponding increase in equity. The liability is remeasured at each reporting date and at settlement
date. Any changes in the fair value of the liability are recognised under the category staff costs in the Consolidated
Statement of Comprehensive Income.
The grant date fair value of awards to employees made under the Long-term Incentive Plan is recognised as an expense,
with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is
adjusted to reflect the number of awards for which the related non-market performance conditions are expected to be
met, such that the amount ultimately recognised is based on the number of awards that meet the related non-market
performance conditions at the vesting date. For share-based payment awards with market conditions, the grant date fair
value of the share-based awards is measured to reflect such conditions and there is no adjustment between expected
and actual outcomes.
The cost of the Company’s shares held by the Employee Benefit Trust is deducted from equity in the Consolidated
Balance Sheet. Any shares held by the Trust are not included in the calculation of earnings or net assets per share.
Dividends
Dividends are recognised in the period in which they are declared.
Accounts receivable
Accounts receivable are stated at their nominal amount as reduced by appropriate allowances for estimated irrecoverable
amounts. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime
expected impairment provision for all applicable accounts receivable. Bad debts are written off when identified.
Loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue
costs associated with the borrowing. After initial recognition, loans and borrowings are subsequently measured at
amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs,
and any discount or premium on settlement. Gains and losses are recognised in profit or loss in the Consolidated
Statement of Comprehensive Income when the liabilities are derecognised for accounting purposes, as well as through
the amortisation process.
Assets classified as held for sale
Any investment properties on which contracts for sale have been exchanged but which had not completed at the period
end are disclosed as properties held for sale. Investment properties included in the held for sale category continue to be
measured in accordance with the accounting policy for investment properties.
Other assets and liabilities
Other assets and liabilities, including trade creditors, accruals, other creditors, and deferred rental income, which are not
interest bearing are stated at their nominal value.
Share capital
Ordinary shares are classified as equity.
Revaluation reserve
Any surplus or deficit arising from the revaluation of owner-occupied property is taken to the revaluation reserve.
Taxation
The Group elected to be treated as a UK REIT with effect from 1 October 2018. The UK REIT rules exempt the profits of the
Group’s UK property rental business from UK corporation and income tax. Gains on UK properties are also exempt from
tax, provided they are not held for trading. The Group is otherwise subject to UK corporation tax.
124
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 2. Significant accounting policies continued
Principles for the Consolidated Statement of Cash Flows
The Consolidated Statement of Cash Flows has been drawn up according to the indirect method, separating the cash
flows from operating activities, investing activities and financing activities. The net result has been adjusted for amounts
in the Consolidated Statement of Comprehensive Income and movements in the Consolidated Balance Sheet which
have not resulted in cash income or expenditure in the related period.
The cash amounts in the Consolidated Statement of Cash Flows include those assets that can be converted into cash
without any restrictions and without any material risk of decreases in value as a result of the transaction.
3. Revenue from properties
Rents receivable (adjusted for lease incentives)
Surrender premiums
Dilapidation receipts
Other income
Service charge income
Rents receivable have been adjusted for lease incentives recognised of £2.8 million (2021: £2.0 million).
4. Property expenses
Property operating costs
Property void costs
Recoverable service charge costs
2022
£000
2021
£000
40,133
59
21
118
6,212
36,558
202
1,195
82
5,294
46,543
43,331
2022
£000
2,477
2,409
6,212
11,098
2021
£000
2,384
2,199
5,294
9,877
5. Operating segments
The Board is responsible for setting the Group’s strategy and business model. The key measure of performance used by
the Board to assess the Group’s performance is the total return on the Group’s net asset value. As the total return on the
Group’s net asset value is calculated based on the net asset value per share calculated under IFRS as shown at the foot of
the Consolidated Balance Sheet, assuming dividends are reinvested, the key performance measure is that prepared
under IFRS. Therefore, no reconciliation is required between the measure of profit or loss used by the Board and that
contained in the financial statements.
The Board has considered the requirements of IFRS 8 ‘Operating Segments’. The Board is of the opinion that the Group,
through its subsidiary undertakings, operates in one reportable industry segment, namely real estate investment, and
across one primary geographical area, namely the United Kingdom, and therefore no segmental reporting is required.
The portfolio consists of 47 commercial properties, which are in the industrial, office, retail and leisure sectors.
6. Administrative expenses
Director and staff costs
Auditor’s remuneration
Other administrative expenses
2022
£000
3,415
206
2,134
5,755
2021
£000
3,219
206
1,963
5,388
Picton Property Income Limited Annual Report 2022
125
Strategic ReportGovernanceFinancial StatementsAdditional Information 6. Administrative expenses continued
Auditor’s remuneration comprises:
Audit fees:
Audit of Group financial statements
Audit of subsidiaries’ financial statements
Audit-related fees:
Review of half-year financial statements
Non-audit fees:
Additional controls testing
7. Director and staff costs
Wages and salaries
Non-Executive Directors’ fees
Social security costs
Other pension costs
Share-based payments – cash settled
Share-based payments – equity settled
2022
£000
2021
£000
92
82
16
190
16
16
206
2022
£000
1,765
275
402
27
201
745
3,415
92
82
16
190
16
16
206
2021
£000
1,724
250
358
28
166
693
3,219
The emoluments of the Directors are set out in detail within the Remuneration Committee report, including the audited
totals on page 101.
Employees participate in two share-based remuneration arrangements: the Deferred Bonus Plan and the Long-term
Incentive Plan (the ‘LTIP’).
For all employees, a proportion of any discretionary annual bonus will be an award under the Deferred Bonus Plan. With
the exception of Executive Directors, awards are cash settled and vest after two years. The final value of awards is
determined by the movement in the Company’s share price and dividends paid over the vesting period. For Executive
Directors, awards are equity settled and also vest after two years. On 22 June 2021, awards of 531,108 notional shares were
made which vest in June 2023 (2021: 599,534 notional shares). The next awards are due to be made in June 2022 for
vesting in June 2024.
The table below summarises the awards made under the Deferred Bonus Plan. Employees have the option to defer the
vesting date of their awards for a maximum of seven years.
Vesting date
31 March 2020
19 June 2021
29 June 2022
22 June 2023
Units
at 31 March
2020
Units
granted in
the year
Units
cancelled in
the year
Units
redeemed
in the year
Units
at 31 March
Units
granted
2021
in the year
Units
cancelled
in the year
Units
redeemed
in the year
242,509
438,907
–
–
– 599,534
–
–
681,416 599,534
–
–
–
–
–
(242,509)
–
– 438,907
– 599,534
–
–
–
–
– 531,108
(242,509) 1,038,441 531,108
–
–
–
–
–
–
(438,907)
–
–
(438,907) 1,130,642
Units
at 31 March
2022
–
–
599,534
531,108
The Group also has a Long-term Incentive Plan for all employees which is equity settled. Awards are made annually and
vest three years from the grant date. Vesting is conditional on three performance metrics measured over each three-year
period. Awards to Executive Directors are also subject to a further two-year holding period. On 22 June 2021, awards for a
maximum of 1,107,155 shares were granted to employees in respect of the three-year period ending on 31 March 2024. In
the previous year, awards of 860,740 shares were made on 29 June 2020 for the period ending 31 March 2023.
126
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 7. Director and staff costs continued
The three performance metrics are:
‒ Total shareholder return (TSR) of Picton Property Income Limited, compared to a comparator group of similar listed
companies;
‒ Total property return (TPR) of the property assets held within the Group, compared to the MSCI UK Quarterly Property
Index; and
‒ Growth in EPRA earnings per share (EPS) of the Group.
The fair value of share grants is measured using a combination of a Monte Carlo model for the market conditions (TSR)
and a Black-Scholes model for the non-market conditions (TPR and EPS). The fair value is recognised over the expected
vesting period. For the awards made during this year and the previous year the main inputs and assumptions of the
models, and the resulting fair values, are:
Assumptions
Grant date
Share price at date of grant
Exercise price
Expected term
Risk-free rate – TSR condition
Share price volatility – TSR condition
Median volatility of comparator group – TSR condition
Correlation – TSR condition
TSR performance at grant date – TSR condition
Median TSR performance of comparator group at grant date – TSR condition
Fair value – TSR condition (Monte Carlo method)
Fair value – TPR condition (Black-Scholes model)
Fair value – EPS condition (Black-Scholes model)
22 June 2021 29 June 2020
68.4p
Nil
3 years
(0.05)%
24.2%
24.5%
37.8%
(11.4)%
(10.7)%
26.7p
68.4p
68.4p
87.3p
Nil
3 years
0.23%
28.3%
31.8%
29.4%
0.3%
10.7%
37.7p
87.3p
87.3p
The Trustee of the Company’s Employee Benefit Trust acquired 750,000 ordinary shares during the year for £730,000
(2021: 958,000 shares for £643,000).
The Group employed nine members of staff at 31 March 2022 (2021: ten). The average number of people employed by the
Group for the year ended 31 March 2022 was ten (2021: nine).
8. Interest paid
Interest payable on loans
Interest on obligations under finance leases
Non-utilisation fees
2022
£000
8,134
129
239
8,502
2021
£000
7,574
114
311
7,999
The loan arrangement costs incurred to 31 March 2022 are £3,325,000 (2021: £4,590,000). These are amortised over the
duration of the loans with £967,000 amortised in the year ended 31 March 2022 and included in interest payable on loans
(2021: £531,000).
9. Tax
The charge for the year is:
Tax expense in year
Total tax charge
2022
£000
2021
£000
–
–
–
–
Picton Property Income Limited Annual Report 2022
127
Strategic ReportGovernanceFinancial StatementsAdditional Information 9. Tax continued
A reconciliation of the tax charge applicable to the results at the statutory tax rate to the charge for the year is as follows:
Profit before taxation
Expected tax charge on ordinary activities at the standard rate of taxation of 19% (2021: 19%)
Less:
UK REIT exemption on net income
Revaluation movement not taxable
Gains on disposal not taxable
Total tax charge
2022
£000
2021
£000
146,986
33,801
27,927
6,422
(3,257)
(24,662)
(8)
(3,813)
(2,444)
(165)
–
–
As a UK REIT, the income profits of the Group’s UK property rental business are exempt from corporation tax, as are any
gains it makes from the disposal of its properties, provided they are not held for trading. The Group is otherwise subject to
UK corporation tax at the prevailing rate.
As the principal company of the REIT, the Company is required to distribute at least 90% of the income profits of the
Group’s UK property rental business. There are a number of other conditions that are also required to be met by the
Company and the Group to maintain REIT tax status. These conditions were met in the year and the Board intends to
conduct the Group’s affairs such that these conditions continue to be met for the foreseeable future. Accordingly,
deferred tax is no longer recognised on temporary differences relating to the property rental business.
10. Dividends
Declared and paid:
Interim dividend for the period ended 31 March 2020: 0.625 pence
Interim dividend for the period ended 30 June 2020: 0.625 pence
Interim dividend for the period ended 30 September 2020: 0.7 pence
Interim dividend for the period ended 31 December 2020: 0.8 pence
Interim dividend for the period ended 31 March 2021: 0.8 pence
Interim dividend for the period ended 30 June 2021: 0.85 pence
Interim dividend for the period ended 30 September 2021: 0.85 pence
Interim dividend for the period ended 31 December 2021: 0.875 pence
2022
£000
2021
£000
–
–
–
–
4,365
4,644
4,640
4,776
3,409
3,410
3,819
4,364
–
–
–
–
18,425
15,002
The interim dividend of 0.875 pence per ordinary share in respect of the period ended 31 March 2022 has not been
recognised as a liability as it was declared after the year-end. This dividend of £4,774,000 will be paid on 31 May 2022.
11. Earnings per share
Basic and diluted earnings per share is calculated by dividing the net profit for the year attributable to ordinary
shareholders of the Company by the weighted average number of ordinary shares in issue during the year, excluding the
average number of shares held by the Employee Benefit Trust for the year. The diluted number of shares also reflects the
contingent shares to be issued under the Long-term Incentive Plan.
The following reflects the profit and share data used in the basic and diluted profit per share calculation:
Net profit attributable to ordinary shareholders of the Company
from continuing operations (£000)
Weighted average number of ordinary shares for basic profit per share
Weighted average number of ordinary shares for diluted profit per share
2022
2021
147,420
33,801
545,904,197 545,590,722
547,295,589 546,793,381
128
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 12. Investments in subsidiaries
The Company had the following principal subsidiaries as at 31 March 2022 and 31 March 2021:
Name
Place of incorporation
Ownership proportion
Picton UK Real Estate Trust (Property) Limited
Picton (UK) REIT (SPV) Limited
Picton (UK) Listed Real Estate
Picton UK Real Estate (Property) No 2 Limited
Picton (UK) REIT (SPV No 2) Limited
Picton Capital Limited
Picton (General Partner) No 2 Limited
Picton (General Partner) No 3 Limited
Picton No 2 Limited Partnership
Picton No 3 Limited Partnership
Picton Financing UK Limited
Picton Financing UK (No 2) Limited (established on 28 February 2022)
Picton Property No 3 Limited
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
England & Wales
Guernsey
Guernsey
England & Wales
England & Wales
England & Wales
England & Wales
Guernsey
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The results of the above entities are consolidated within the Group financial statements.
Picton UK Real Estate Trust (Property) Limited and Picton (UK) REIT (SPV) Limited own 100% of the units in Picton (UK)
Listed Real Estate, a Guernsey Unit Trust (the ‘GPUT’). The GPUT holds a 99.9% interest in both Picton No 2 Limited
Partnership and Picton No 3 Limited Partnership, the remaining balances are held by Picton (General Partner) No 2
Limited and Picton (General Partner) No 3 Limited respectively.
13. Investment properties
The following table provides a reconciliation of the opening and closing amounts of investment properties classified as
Level 3 recorded at fair value.
Fair value at start of year
Capital expenditure on investment properties
Acquisitions
Disposals
Transfer to owner-occupied property
Acquisition of right of use asset
Realised gains on disposal
Unrealised movement on investment properties
Fair value at the end of the year
Historic cost at the end of the year
The fair value of investment properties reconciles to the appraised value as follows:
Appraised value
Valuation of assets held under head leases
Owner-occupied property
Lease incentives held as debtors
Fair value at the end of the year
2022
£000
2021
£000
665,418 654,486
4,961
–
(3,928)
(3,830)
–
868
12,861
9,551
25,005
(687)
–
897
42
129,801
830,027 665,418
654,370 625,359
2022
£000
2021
£000
849,325 682,410
1,313
(3,830)
(14,475)
2,237
(4,168)
(17,367)
830,027 665,418
The investment properties were valued by independent valuers, CBRE Limited, Chartered Surveyors, as at 31 March 2022
and 31 March 2021 on the basis of fair value in accordance with the version of the RICS Valuation – Global Standards
(incorporating the International Valuation Standards) and the UK national supplement (the Red Book) current as at the
valuation date. The total fees earned by CBRE Limited from the Group are less than 5% of their total UK revenue.
The fair value of the Group’s investment properties has been determined using an income capitalisation technique,
whereby contracted and market rental values are capitalised with a market capitalisation rate. The resulting valuations are
cross-checked against the equivalent yields and the fair market values per square foot derived from comparable market
transactions on an arm’s length basis.
Picton Property Income Limited Annual Report 2022
129
Strategic ReportGovernanceFinancial StatementsAdditional Information 13. Investment properties continued
In addition, the Group’s investment properties are valued quarterly by CBRE Limited. The valuations are based on:
‒ Information provided by the Group including rents, lease terms, revenue and capital expenditure. Such information is
derived from the Group’s financial and property systems and is subject to the Group’s overall control environment.
‒ Valuation models used by the valuers, including market-related assumptions based on their professional judgement
and market observation.
The assumptions and valuation models used by the valuers, and supporting information, are reviewed by senior
management and the Board through the Property Valuation Committee. Members of the Property Valuation Committee,
together with senior management, meet with the independent valuer on a quarterly basis to review the valuations and
underlying assumptions, including considering current market trends and conditions, and changes from previous
quarters. The Board will also consider whether circumstances at specific investment properties, such as alternative uses
and issues with occupational tenants, are appropriately reflected in the valuations. The fair value of investment properties
is measured based on each property’s highest and best use from a market participant’s perspective and considers the
potential uses of the property that are physically possible, legally permissible and financially feasible.
As at 31 March 2022 and 31 March 2021 all of the Group’s properties, including owner-occupied property, are Level 3 in the
fair value hierarchy as it involves use of significant judgement. There were no transfers between levels during the year and
the prior year. Level 3 inputs used in valuing the properties are those which are unobservable, as opposed to Level 1
(inputs from quoted prices) and Level 2 (observable inputs either directly, i.e. as prices, or indirectly, as derived from prices).
Information on these significant unobservable inputs per sector of investment properties is disclosed as follows:
Appraised value (£000)
Area (sq ft, 000s)
Range of unobservable inputs:
Gross ERV (sq ft per annum)
– range
– weighted average
Net initial yield
– range
– weighted average
Reversionary yield
– range
– weighted average
True equivalent yield
– range
– weighted average
2022
2021
Office
Industrial
251,125
828
509,730
3,240
Retail and
Leisure
88,470
692
Office
Industrial
245,385
828
360,740
2,570
Retail and
Leisure
76,285
706
£10.96 to
£82.32
£35.10
£2.82 to
£26.77
£11.47
£3.23 to
£28.49
£11.83
0.92% to
9.00%
4.64%
0.00% to
6.75%
3.25%
3.07% to
25.00%
7.33%
4.29% to
9.63%
7.00%
3.04% to
7.37%
4.24%
6.19% to
12.89%
7.42%
4.09% to
9.95%
6.49%
3.00% to
7.00%
4.11%
6.25% to
13.02%
7.55%
£11.00 to
£78.05
£34.10
0.00% to
7.98%
4.35%
4.34% to
10.83%
7.02%
4.42% to
9.95%
6.82%
£3.75 to
£21.18
£10.39
£3.46 to
£29.65
£11.84
2.79% to
7.63%
4.38%
3.68% to
8.59%
4.97%
3.73% to
8.39%
5.02%
3.07% to
29.58%
7.64%
7.01% to
26.95%
7.95%
7.80% to
14.03%
8.99%
An increase/decrease in ERV will increase/decrease valuations, while an increase/decrease to yield decreases/increases
valuations. We have reviewed the ranges used in assessing the impact of changes in unobservable inputs on the fair value
of the Group’s property portfolio and concluded these were still reasonable. The table below sets out the sensitivity of the
valuation to changes of 50 basis points in yield.
Sector
Industrial
Office
Retail and Leisure
Movement
2022 Impact on valuation
2021 Impact on valuation
Increase of 50 basis points
Decrease of 50 basis points
Increase of 50 basis points
Decrease of 50 basis points
Increase of 50 basis points
Decrease of 50 basis points
Decrease of £55.2m
Increase of £69.0m
Decrease of £11.9m
Increase of £12.5m
Decrease of £5.1m
Increase of £5.9m
Decrease of £36.3m
Increase of £45.4m
Decrease of £20.3m
Increase of £24.5m
Decrease of £5.2m
Increase of £6.7m
130
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 14. Property, plant and equipment
Property, plant and equipment principally comprises the fair value of owner-occupied property. The fair value of these
premises is based on the appraised value at 31 March 2022.
At 1 April 2020
Additions
Depreciation
Revaluation
At 31 March 2021
Additions
Depreciation
Revaluation
At 31 March 2022
15. Accounts receivable
Tenant debtors (net of provisions for bad debts)
Lease incentives
Other debtors
Owner
Occupied
Property
£000
Plant and
equipment
£000
–
3,830
–
–
3,830
–
(96)
434
4,168
20
268
(7)
–
281
3
(69)
–
215
Total
£000
20
4,098
(7)
–
4,111
3
(165)
434
4,383
2022
£000
4,618
17,367
865
2021
£000
4,326
14,475
783
22,850
19,584
The estimated fair values of receivables are the discounted amount of the estimated future cash flows expected to be
received and the approximate value of their carrying amounts.
Amounts are considered impaired using the lifetime expected credit loss method. Movement in the balance considered
to be impaired has been included in the Consolidated Statement of Comprehensive Income. As at 31 March 2022, tenant
debtors of £302,000 (2021: £1,874,000) were considered impaired and provided for.
16. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2022
£000
2021
£000
38,542
5
23,353
5
38,547
23,358
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made
for varying periods of between one day and one month depending on the immediate cash requirements of the Group
and earn interest at the respective short-term deposit rates. The carrying amounts of these assets approximate to their fair
value.
17. Accounts payable and accruals
Accruals
Deferred rental income
VAT liability
Trade creditors
Other creditors
2022
£000
4,994
8,399
1,638
357
3,750
2021
£000
4,496
7,596
1,780
596
4,337
19,138
18,805
Picton Property Income Limited Annual Report 2022
131
Strategic ReportGovernanceFinancial StatementsAdditional Information 18. Loans and borrowings
Current
Aviva facility
Capitalised finance costs
Non-current
Canada Life facility
Aviva facility
NatWest revolving credit facility
Capitalised finance costs
Maturity
2022
£000
2021
£000
–
–
1,372
(304)
1,068
1,314
(370)
944
24 July 2031 129,045
24 July 2032
83,518
26 May 2025
4,900
–
(1,699)
80,000
84,894
–
(2,183)
215,764 162,711
216,832 163,655
The following table provides a reconciliation of the movement in loans and borrowings to cash flows arising from
financing activities.
Balance at start of year
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of loans and borrowings
Financing costs paid
Other changes
Amortisation of financing costs
Change in accrued financing costs
Balance as at 31 March
2022
£000
2021
£000
163,655 165,136
79,545
(26,917)
(419)
52,209
967
1
968
–
(1,258)
(574)
(1,832)
531
(180)
351
216,832 163,655
The Group has refinanced its existing loan facility with Canada Life increasing borrowings to £129.0 million and extending
the maturity date until July 2031. Interest is now fixed at 3.25% (previously 4.08%) over the remaining life of the loan. A
debt prepayment fee of £4.0 million was incurred during the year to reset the interest rate on the existing debt. The loan
agreement has a loan to value covenant of 65% and an interest cover test of 1.75. The loan is secured over the Group’s
properties held by Picton No 2 Limited Partnership and Picton UK Real Estate Trust (Property) No 2 Limited, valued at
£415.2 million (2021: £330.0 million).
Additionally, the Group has a £95.3 million term loan facility with Aviva Commercial Finance Limited which matures in
July 2032. The loan is for a term of 20 years and was fully drawn on 24 July 2012 with approximately one-third repayable
over the life of the loan in accordance with a scheduled amortisation profile. The Group has repaid £1.3 million in the year
(2021: £1.3 million). Interest on the loan is fixed at 4.38% over the life of the loan. The facility has a loan to value covenant
of 65% and a debt service cover ratio of 1.4. The facility is secured over the Group’s properties held by Picton No 3 Limited
Partnership and Picton Property No 3 Limited, valued at £208.1 million (2021: £184.9 million).
The Group also has a £50 million revolving credit facility (‘RCF’) with National Westminster Bank Plc which matures in
May 2025. There is currently £4.9 million drawn under the facility, interest is charged at 150 basis points over SONIA from
20 January 2022 (previously 150 basis points over LIBOR) on drawn balances and there is an undrawn commitment fee of
60 basis points. The facility is secured on properties held by Picton UK Real Estate Trust (Property) Limited, valued at
£163.2 million (2021: £131.7 million).
The fair value of the drawn loan facilities at 31 March 2022, estimated as the present value of future cash flows discounted
at the market rate of interest at that date, was £225.6 million (2021: £187.2 million). The fair value of the secured loan
facilities is classified as Level 2 under the hierarchy of fair value measurements.
There were no transfers between levels of the fair value hierarchy during the current or prior years.
The weighted average interest rate on the Group’s borrowings as at 31 March 2022 was 3.7% (2021: 4.2%).
132
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 19. Contingencies and capital commitments
The Group has entered into contracts for the refurbishment of six properties with commitments outstanding at 31 March
2022 of approximately £2.4 million (2021: £6.7 million). No further obligations to construct or develop investment property
or for repairs, maintenance or enhancements were in place as at 31 March 2022 (2021: £nil).
20. Share capital and other reserves
Authorised:
Unlimited number of ordinary shares of no par value
Issued and fully paid:
547,605,596 ordinary shares of no par value (31 March 2021: 547,605,596)
Share premium
The Company has 547,605,596 ordinary shares in issue of no par value (2021: 547,605,596).
No new ordinary shares were issued during the year ended 31 March 2022.
Ordinary share capital
Number of shares held in Employee Benefit Trust
Number of ordinary shares
2022
£000
2021
£000
–
–
–
–
164,400 164,400
2022
Number of shares
2021
Number of shares
547,605,596
(1,974,253)
547,605,596
(2,052,269)
545,631,343
545,553,327
The fair value of awards made under the Long-term Incentive Plan is recognised in other reserves.
Subject to the solvency test contained in the Companies (Guernsey) Law, 2008 being satisfied, ordinary shareholders are
entitled to all dividends declared by the Company and to all of the Company’s assets after repayment of its borrowings
and ordinary creditors. The Trustee of the Company’s Employee Benefit Trust has waived its right to receive dividends on
the 1,974,253 shares it holds but continues to hold the right to vote. Ordinary shareholders have the right to vote at
meetings of the Company. All ordinary shares carry equal voting rights.
The Directors have authority to buy back up to 14.99% of the Company’s ordinary shares in issue, subject to the annual
renewal of the authority from shareholders. Any buy-back of ordinary shares will be made subject to Guernsey law, and
the making and timing of any buy-backs will be at the absolute discretion of the Board.
21. Adjustment for non-cash movements in the cash flow statement
Profit on disposal of investment properties
Movement in investment property valuation
Share-based provisions
Depreciation of tangible assets
2022
£000
(42)
(129,801)
668
165
2021
£000
(868)
(12,861)
758
7
(129,010)
(12,964)
Picton Property Income Limited Annual Report 2022
133
Strategic ReportGovernanceFinancial StatementsAdditional Information 22. Obligations under leases
The Group has entered into a number of head leases in relation to its investment properties. These leases are for fixed
terms and subject to regular rent reviews. They contain no material provisions for contingent rents, renewal or purchase
options nor any restrictions outside of the normal lease terms.
Lease liabilities in respect of rents on leasehold properties were payable as follows:
Future minimum payments due:
Within one year
In the second to fifth years inclusive
After five years
Less: finance charges allocated to future periods
Present value of minimum lease payments
The present value of minimum lease payments is analysed as follows:
Current
Within one year
Non-current
In the second to fifth years inclusive
After five years
2022
£000
2021
£000
185
740
9,083
10,008
(7,301)
2,707
116
466
7,150
7,732
(5,918)
1,814
2022
£000
2021
£000
114
114
107
107
410
2,183
2,593
2,707
379
1,328
1,707
1,814
Operating leases where the Group is lessor
The Group leases its investment properties under commercial property leases which are held as operating leases.
At the reporting date, the Group’s future income based on the unexpired lease length was as follows (based on annual
rentals):
Within one year
One to two years
Two to three years
Three to four years
Four to five years
After five years
2022
£000
2021
£000
41,928
39,244
35,416
29,972
24,748
99,788
37,744
33,954
32,008
27,937
23,235
91,294
271,096 246,172
These properties are measured under the fair value model as the properties are held to earn rentals. Commercial
property leases typically have lease terms between five and ten years and include clauses to enable periodic upward
revision of the rental charge according to prevailing market conditions. Some leases contain options to break before the
end of the lease term.
23. Net asset value
The net asset value per share calculation uses the number of shares in issue at the year-end and excludes the actual
number of shares held by the Employee Benefit Trust at the year-end; see Note 20.
134
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 24. Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, accounts receivable, secured loans, obligations
under head leases and accounts payable that arise from its operations. The Group does not have exposure to any
derivative financial instruments. Apart from the secured loans, as disclosed in Note 18, the fair value of the financial assets
and liabilities is not materially different from their carrying value in the financial statements.
Categories of financial instruments
31 March 2022
Financial assets
Debtors
Cash and cash equivalents
Financial liabilities
Loans and borrowings
Obligations under head leases
Creditors and accruals
31 March 2021
Financial assets
Debtors
Cash and cash equivalents
Financial liabilities
Loans and borrowings
Obligations under head leases
Creditors and accruals
Held at
fair value
through
profit or
loss
£000
Financial
assets and
liabilities at
amortised
cost
£000
Total
£000
–
–
–
5,483
38,547
5,483
38,547
44,030
44,030
– 216,832 216,832
2,707
–
9,101
–
2,707
9,101
– 228,640 228,640
Held at
fair value
through
profit or
loss
£000
Financial
assets and
liabilities at
amortised
cost
£000
Total
£000
–
–
–
5,109
23,358
5,109
23,358
28,467
28,467
– 163,655 163,655
1,814
–
9,429
–
1,814
9,429
– 174,898 174,898
Notes
15
16
18
22
17
Notes
15
16
18
22
17
25. Risk management
The Group invests in commercial properties in the United Kingdom. The following describes the risks involved and the
risk management framework applied by the Group. Senior management reports regularly both verbally and formally to
the Board, and its relevant committees, to allow them to monitor and review all the risks noted below.
Capital risk management
The Group aims to manage its capital to ensure that the entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through optimising its capital structure. The Board’s policy is to maintain a
strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the
business.
The capital structure of the Group consists of debt, as disclosed in Note 18, cash and cash equivalents and equity
attributable to equity holders of the Company, comprising issued share capital, reserves, retained earnings and
revaluation reserve. The Group is not subject to any external capital requirements.
The Group monitors capital on the basis of its gearing ratio. This ratio is calculated as the principal borrowings
outstanding, as detailed under Note 18, divided by the gross assets. There is a limit of 65% as set out in the Articles of
Association of the Company. Gross assets are calculated as non-current and current assets, as shown in the Consolidated
Balance Sheet.
Picton Property Income Limited Annual Report 2022
135
Strategic ReportGovernanceFinancial StatementsAdditional Information 25. Risk management continued
At the reporting date the gearing ratios were as follows:
Total borrowings
Gross assets
Gearing ratio (must not exceed 65%)
2022
£000
2021
£000
218,835 166,208
895,807 712,471
24.4%
23.3%
The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders. The Group
has managed its capital risk by entering into long-term loan arrangements with different maturities, which will enable the
Group to manage its borrowings in an orderly manner over the long-term. The Group also has a revolving credit facility
which provides greater flexibility in managing the level of borrowings.
The Group’s net debt to equity ratio at the reporting date was as follows:
Total liabilities
Less: cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio at end of year
2022
£000
2021
£000
238,677 184,274
(23,358)
(38,547)
200,130 160,916
657,130 528,197
0.30
0.30
Credit risk
The following tables detail the balances held at the reporting date that may be affected by credit risk:
31 March 2022
Financial assets
Tenant debtors
Cash and cash equivalents
31 March 2021
Financial assets
Tenant debtors
Cash and cash equivalents
Held at
fair value
through
profit
or loss
£000
Financial
assets and
liabilities at
amortised
cost
£000
Total
£000
–
–
–
4,618
38,547
4,618
38,547
43,165
43,165
Held at
fair value
through
profit
or loss
£000
Financial
assets and
liabilities at
amortised
cost
£000
Total
£000
–
–
–
4,326
23,358
4,326
23,358
27,684
27,684
Notes
15
16
Notes
15
16
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure to and credit
ratings of, its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties.
Tenant debtors consist of a large number of occupiers, spread across diverse industries and geographical areas. Ongoing
credit evaluations are performed on the financial condition of tenant debtors and, where appropriate, credit guarantees or
rent deposits are acquired. Rent collection is outsourced to managing agents who report regularly on payment
performance and provide the Group with intelligence on the continuing financial viability of occupiers. The Group does
not have any significant concentration risk whether in terms of credit risk exposure to any single counterparty or any
group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties
are banks with strong credit ratings assigned by international credit rating agencies.
136
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 25. Risk management continued
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents
the Group’s maximum exposure to credit risk. The Board continues to monitor the Group’s overall exposure to credit risk.
The Group has a panel of banks with which it makes deposits, based on credit ratings assigned by international credit
rating agencies and with set counterparty limits that are reviewed regularly. The Group’s main cash balances are held with
National Westminster Bank Plc (‘NatWest’), Nationwide International Limited (‘Nationwide’) and Lloyds Bank Plc (‘Lloyds’).
Insolvency or resolution of the bank holding cash balances may cause the Group’s recovery of cash held by them to be
delayed or limited. The Group manages its risk by monitoring the credit quality of its bankers on an ongoing basis.
NatWest, Nationwide and Lloyds are rated by all the major rating agencies. If the credit quality of any of these banks were
to deteriorate, the Group would look to move the relevant short-term deposits or cash to another bank. Procedures exist
to ensure that cash balances are split between banks to minimise exposure. At 31 March 2022 and at 31 March 2021,
Standard & Poor’s short-term credit rating for each of the Group’s bankers were A-1.
There has been no change in the fair values of cash or receivables as a result of changes in credit risk in the current or
prior periods, due to the actions taken to mitigate this risk, as stated above.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board, which has put in place an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity
management requirements. The Group’s liquidity risk is managed on an ongoing basis by senior management and
monitored on a quarterly basis by the Board by maintaining adequate reserves and loan facilities, continuously
monitoring forecasts, loan maturity profiles and actual cash flows and matching the maturity profiles of financial assets
and liabilities for a period of at least 12 months.
The table below has been drawn up based on the undiscounted contractual maturities of the financial assets/(liabilities),
including interest that will accrue to maturity.
31 March 2022
Cash and cash equivalents
Debtors
Capitalised finance costs
Obligations under head leases
Fixed interest rate loans
Floating interest rate loans
Creditors and accruals
31 March 2021
Cash and cash equivalents
Debtors
Capitalised finance costs
Obligations under head leases
Fixed interest rate loans
Floating interest rate loans
Creditors and accruals
Less than
1 year
£000
38,547
5,483
304
(185)
(8,524)
(113)
(9,101)
1 to 5
years
£000
More than
5 years
£000
Total
£000
–
–
934
(740)
38,547
–
5,483
–
2,003
765
(10,008)
(9,083)
(37,049) (242,891) (288,464)
(5,144)
(9,101)
(5,031)
–
–
–
26,411
(41,886) (251,209) (266,684)
Less than
1 year
£000
23,358
5,109
370
(116)
(8,332)
(300)
(9,429)
1 to 5
years
£000
More than
5 years
£000
Total
£000
–
–
1,355
(466)
(33,329)
(346)
–
–
–
828
(7,150)
(184,927)
–
–
23,358
5,109
2,553
(7,732)
(226,588)
(646)
(9,429)
10,660
(32,786)
(191,249)
(213,375)
The Group expects to meet its financial liabilities through the various available liquidity sources, including a secure rental
income profile, asset sales, undrawn committed borrowing facilities and, in the longer-term, debt refinancing.
Market risk
The Group’s activities are primarily within the real estate market, exposing it to very specific industry risks.
The yields available from investments in real estate depend primarily on the amount of revenue earned and capital
appreciation generated by the relevant properties as well as expenses incurred. If properties do not generate sufficient
revenues to meet operating expenses, including debt service costs and capital expenditure, the Group’s operating
performance will be adversely affected.
Revenue from properties may be adversely affected by the general economic climate, local conditions such as oversupply
of properties or a reduction in demand for properties in the market in which the Group operates, the attractiveness of the
properties to occupiers, the quality of the management, competition from other available properties and increased
operating costs.
Picton Property Income Limited Annual Report 2022
137
Strategic ReportGovernanceFinancial StatementsAdditional Information 25. Risk management continued
In addition, the Group’s revenue would be adversely affected if a significant number of occupiers were unable to pay rent
or its properties could not be rented on favourable terms. Certain significant expenditure associated with investment in
real estate (such as external financing costs and maintenance costs) is generally not reduced when circumstances cause a
reduction in revenue from properties. By diversifying in regions, sectors, risk categories and occupiers, senior
management expects to mitigate the risk profile of the portfolio effectively. The Board continues to oversee the profile of
the portfolio to ensure risks are managed.
The valuation of the Group’s property assets is subject to changes in market conditions. Such changes are taken to the
Consolidated Statement of Comprehensive Income and thus impact on the Group’s net result. A 5% increase or decrease
in property values would increase or decrease the Group’s net result by £42.5 million (2021: £34.1 million).
Interest rate risk management
Interest rate risk arises on interest payable on the revolving credit facility only. The Group’s senior debt facilities have fixed
interest rates over the terms of the loans. The amount drawn under the revolving credit facility makes up a small
proportion of the overall debt, therefore the Group has limited exposure to interest rate risk on its borrowings and no
sensitivity is presented.
Interest rate risk
The following table sets out the carrying amount, by maturity, of the Group’s financial assets/(liabilities).
31 March 2022
Floating
Cash and cash equivalents
Secured loan facilities
Fixed
Secured loan facilities
Obligations under leases
31 March 2021
Floating
Cash and cash equivalents
Fixed
Secured loan facilities
Obligations under leases
Less than
1 year
£000
1 to 5
years
£000
More than
5 years
£000
Total
£000
38,547
–
–
(4,900)
–
–
38,547
(4,900)
(1,372)
(114)
(6,127) (206,436) (213,935)
(2,707)
(2,183)
(410)
37,061
(11,437) (208,619) (182,995)
Less than
1 year
£000
1 to 5
years
£000
More than
5 years
£000
Total
£000
23,358
–
–
23,358
(1,314)
(107)
(5,867)
(379)
(159,027)
(1,328)
(166,208)
(1,814)
21,937
(6,246)
(160,355)
(144,664)
Concentration risk
As discussed above, all of the Group’s investments are in the UK and therefore the Group is exposed to macroeconomic
changes in the UK economy. Furthermore, the Group derives its rental income from around 400 occupiers with the single
largest occupier accounting for only 5.0% of the Group’s annual contracted rental income.
Currency risk
The Group has no exposure to foreign currency risk.
26. Related party transactions
The total fees earned during the year by the Non-Executive Directors of the Company amounted to £275,000
(2021: £250,000). As at 31 March 2022, the Group owed £nil to the Non-Executive Directors (2021: £nil).
Picton Property Income Limited has no controlling parties.
27. Events after the Balance Sheet date
A dividend of £4,774,000 (0.875 pence per share) was approved by the Board on 26 April 2022 and will be paid on 31 May 2022.
The Group has completed on the acquisition of one property for £13.7 million.
138
Picton Property Income Limited Annual Report 2022
Financial StatementsNotes to the consolidated financial statements continuedfor the year ended 31 March 2022 Supplementary disclosures (unaudited)
for the year ended 31 March 2022
The European Public Real Estate Association (EPRA) is the industry body representing listed companies in the real estate
sector. EPRA publishes Best Practices Recommendations (BPR) to establish consistent reporting by European property
companies. Further information on the EPRA BPR can be found at www.epra.com.
EPRA earnings per share
EPRA earnings represents the earnings from core operational activities, excluding investment property revaluations and
gains/losses on asset disposals. It demonstrates the extent to which dividend payments are underpinned by recurring
operational activities.
Profit for the year after taxation
Exclude:
Investment property valuation movement
Gains on disposal of investment properties
Debt prepayment fees
EPRA earnings
Weighted average number of shares in issue (000s)
EPRA earnings per share
2022
£000
2021
£000
2020
£000
146,986
33,801
22,508
(129,801)
(42)
4,045
(12,861)
(868)
–
882
(3,478)
–
21,188
20,072
19,912
545,904 545,591 544,193
3.9p
3.7p
3.7p
EPRA NRV per share
The EPRA net reinstatement value measure highlights the value of net assets on a long-term basis. Assets and liabilities
that are not expected to crystallise in normal circumstances such as the fair value of financial derivatives and deferred
taxes on property valuation surpluses are therefore excluded. Since the aim of the metric is to also reflect what would be
needed to recreate the Company through the investment market based on its current capital and financing structure,
related costs such as real estate transfer taxes should be included.
Balance Sheet net assets
Purchasers’ costs
Fair value of debt
Deferred tax
EPRA NRV
Shares in issue (000s)
EPRA NRV per share
2022
£000
2021
£000
2020
£000
657,130 528,197 509,283
44,847
46,029
–
–
–
–
57,449
–
–
714,579 574,226 554,130
545,631 545,553 545,502
131p
105p
102p
EPRA NTA per share
The EPRA net tangible assets calculation assumes entities buy and sell assets, thereby crystallising certain levels of
deferred tax liability. EPRA NTA is regarded as the most relevant metric for the business as this focuses on reflecting a
company’s tangible assets.
2022
£000
2021
£000
2020
£000
Balance Sheet net assets
Fair value of financial instruments
Deferred tax
EPRA NTA
Shares in issue (000s)
EPRA NTA per share
657,130 528,197 509,283
–
–
–
–
–
–
657,130 528,197 509,283
545,631 545,553 545,502
120p
97p
93p
Picton Property Income Limited Annual Report 2022
139
Strategic ReportGovernanceFinancial StatementsAdditional Information Supplementary disclosures (unaudited) continued
for the year ended 31 March 2022
EPRA NDV per share
The EPRA net disposal value shows the impact to shareholder value if company assets are sold and/or liabilities are not
held until maturity.
Balance Sheet net assets
Fair value of debt
EPRA NDV
Shares in issue (000s)
EPRA NDV per share
2022
£000
2021
£000
2020
£000
657,130 528,197 509,283
(29,569)
(21,012)
(6,766)
650,364 507,185
479,714
545,631 545,553 545,502
119p
93p
88p
EPRA net initial yield (NIY)
EPRA NIY is calculated as the annualised rental income based on the cash rents passing at the Balance Sheet date, less
non-recoverable property operating expenses, divided by the gross market valuation of the properties.
Investment property valuation
Allowance for estimated purchasers’ costs
Gross up property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
EPRA net initial yield
2022
£000
2021
£000
2020
£000
849,325 682,410 664,615
44,847
46,029
57,449
906,774 728,439 709,462
38,676
(1,721)
36,955
4.1%
36,504
(1,860)
36,236
(2,017)
34,644
34,219
4.8%
4.8%
EPRA ‘topped-up’ net initial yield
The EPRA ‘topped-up’ NIY is calculated by making an adjustment to the EPRA NIY in respect of the expiration of rent-free
periods (or other unexpired lease incentives such as discounted rent periods and step rents).
EPRA NIY annualised net rents
Annualised cash rent that will apply at expiry of lease incentives
Topped-up annualised net rents
EPRA ‘topped-up’ NIY
2022
£000
36,955
6,415
43,370
4.8%
2021
£000
2020
£000
34,644
5,411
34,219
3,910
40,055
38,129
5.5%
5.4%
EPRA vacancy rate
The EPRA vacancy rate is the estimated rental value (ERV) of vacant space divided by the ERV of the whole property,
expressed as a percentage.
Annualised potential rental value of vacant premises
Annualised potential rental value for the complete property portfolio
EPRA vacancy rate
2022
£000
3,594
49,776
7.2%
2021
£000
2020
£000
3,980
45,357
5,179
45,224
8.8%
11.5%
140
Picton Property Income Limited Annual Report 2022
Additional Information EPRA cost ratio
The EPRA cost ratio reflects the overheads and operating costs as a percentage of the gross rental income.
Property operating costs
Property void costs
Administrative expenses
Less:
Ground rent costs
EPRA costs (including direct vacancy costs)
Property void costs
EPRA costs (excluding direct vacancy costs)
Gross rental income
Less ground rent costs
Gross rental income
EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding direct vacancy costs)
2022
£000
2,477
2,409
5,755
(283)
10,358
(2,409)
7,949
40,133
(283)
39,850
26.0%
19.9%
2021
£000
2,384
2,199
5,388
2020
£000
2,293
3,005
5,563
(207)
(259)
9,764
(2,199)
7,565
36,558
(207)
10,602
(3,005)
7,597
37,780
(259)
36,351
37,521
26.9%
28.3%
20.8%
20.2%
Capital expenditure
The table below sets out the capital expenditure incurred over the financial year, in accordance with EPRA Best Practices
Recommendations.
Acquisitions
Development
Like-for-like portfolio
Other
Total capital expenditure
2022
£000
25,005
–
9,551
–
34,556
2021
£000
–
–
4,961
–
4,961
Like-for-like rental growth
The table below sets out the like-for-like rental growth of the portfolio, by sector, in accordance with EPRA Best Practices
Recommendations.
Like-for-like rental income
Properties acquired
Properties sold
Offices
Industrial
Retail and Leisure
Total
2022
£000
14,363
–
–
14,363
2021
£000
13,720
–
(1)
13,719
2022
£000
17,400
523
–
17,923
2021
£000
16,254
–
–
16,254
2022
£000
7,752
–
95
7,847
2021
£000
6,124
–
461
6,585
2022
£000
39,515
523
95
2021
£000
36,098
–
460
40,133
36,558
Picton Property Income Limited Annual Report 2022
141
Strategic ReportGovernanceFinancial StatementsAdditional Information Supplementary disclosures (unaudited) continued
for the year ended 31 March 2022
Loan to value
The loan to value ratio (LTV) is calculated by taking the Group’s total borrowings, net of cash, as a percentage of the total
portfolio value.
Total borrowings
Less:
Cash and cash equivalents
Total net borrowings
Investment property valuation
Loan to value
2022
£000
2021
£000
2020
£000
218,835 166,207 167,465
(38,547)
(23,358)
(23,567)
180,288 142,849 143,898
849,325 682,410 664,615
21.2%
20.9%
21.7%
Cost ratio
The cost ratio is based on historical information and provides shareholders with an indication of the likely level of cost of
managing the Group. The cost ratio uses the annual recurring administrative expenses as a percentage of the average net
asset value over the period.
Administrative expenses
Average net asset value over the year
Cost ratio
2022
£000
5,755
2021
£000
2020
£000
5,388
5,563
598,022 514,574 511,868
1.0%
1.0%
1.1%
142
Picton Property Income Limited Annual Report 2022
Additional Information Property portfolio
Properties valued in excess of £100 million
Properties valued between £5 million and £10 million
‒ Parkbury Industrial Estate, Radlett, Herts.
‒ Angouleme Retail Park, George Street, Bury, Greater
Manchester
‒ Trident House, Victoria Street, St Albans, Herts.
‒ Longcross, Newport Road, Cardiff
‒ Queens House, St Vincent Place, Glasgow
‒ Regency Wharf, Broad Street, Birmingham
‒ Atlas House, Third Avenue, Marlow, Bucks.
‒ Thistle Express, The Mall, Luton, Beds.
‒ Sentinel House, Harvest Crescent, Fleet, Hants.
Properties valued under £5 million
‒ Scots Corner, High Street, Kings Heath, Birmingham
‒ Crown & Mitre Complex, English Street, Carlisle, Cumbria
‒ Waterside House, Kirkstall Road, Leeds
‒ Abbey Business Park, Mill Road, Newtownabbey, Belfast
‒ 53-57 Broadmead, Bristol
‒ Magnet Trade Centre, 6 Kingstreet Lane, Winnersh,
Reading
‒ 78-80 Briggate, Leeds
‒ 17-19 Fishergate, Preston, Lancs.
‒ 72-78 Murraygate, Dundee
‒ 7-9 Warren Street, Stockport
‒ 6-12 Parliament Row, Hanley, Staffs.
Properties valued between £50 million and £75 million
‒ River Way Industrial Estate, River Way, Harlow, Essex
Properties valued between £30 million and £50 million
‒ Datapoint, Cody Road, London E16
‒ Lyon Business Park, Barking, Essex
‒ Stanford Building, Long Acre, London WC2
‒ Express Business Park, Shipton Way, Rushden,
Northants.
‒ Angel Gate, City Road, London EC1
Properties valued between £20 million and £30 million
‒ Tower Wharf, Cheese Lane, Bristol
‒ 50 Farringdon Road, London EC1
‒ Sundon Business Park, Dencora Way, Luton, Beds.
‒ 30 & 50 Pembroke Court, Chatham, Kent
‒ Nonsuch Industrial Estate, Kiln Lane, Epsom, Surrey
‒ The Business Centre, Molly Millars Lane, Wokingham,
Berks.
‒ Grantham Book Services, Trent Road, Grantham, Lincs.
Properties valued between £10 million and £20 million
‒ Colchester Business Park, The Crescent, Colchester,
Essex
‒ Metro, Salford Quays, Manchester
‒ B&Q, Queens Road, Sheffield
‒ Parc Tawe North Retail Park, Link Road, Swansea
‒ Vigo 250, Birtley Road, Washington, Tyne and Wear
‒ 180 West George Street, Glasgow
‒ Gloucester Retail Park, Eastern Avenue, Gloucester
‒ Madleaze Trading Estate, Bristol Road, Gloucester
‒ 401 Grafton Gate East, Milton Keynes, Bucks.
‒ Easter Court, Europa Boulevard, Warrington
‒ Swiftbox, Haynes Way, Rugby, Warwickshire
‒ Units 1 & 2, Kettlestring Lane, York
‒ Mill Place Trading Estate, Bristol Road, Gloucester
‒ Units 1 & 2, Western Industrial Estate, Downmill Road,
Bracknell, Berks.
Picton Property Income Limited Annual Report 2022
143
Strategic ReportGovernanceFinancial StatementsAdditional Information
Five year financial summary
Income statements
Net property income
Administrative expenses
Exceptional costs
Net finance costs
Income profit before tax
Tax
Income profit
Property gains and losses
Revaluation of owner-occupied property
Debt prepayment fee
Profit/loss after tax
Dividends paid
Balance Sheets
Investment properties
Borrowings
Other assets and liabilities
Net assets
Net asset value per share (pence)
EPRA net tangible asset per share (pence)
Earnings per share (pence)
Dividends per share (pence)
Dividend cover (%)
Share price (pence)
All figures are in £ million unless otherwise stated.
2022
2021
2020
2019
2018
35.4
(5.7)
–
29.7
(8.5)
21.2
–
21.2
129.8
0.4
(4.0)
147.4
18.4
33.5
(5.4)
–
28.1
(8.0)
20.1
–
20.1
13.7
–
–
33.8
15.0
33.6
(5.6)
–
28.0
(8.2)
19.8
0.1
19.9
2.6
–
–
22.5
19.0
38.3
(5.6)
(0.2)
32.5
(9.1)
23.4
(0.5)
22.9
11.3
–
(3.2)
31.0
18.9
38.5
(5.3)
(0.3)
32.9
(9.7)
23.2
(0.5)
22.7
41.5
–
–
64.2
18.5
2022
2021
2020
2019
2018
830.0
(216.8)
43.9
665.4
(166.2)
29.0
654.5
(167.5)
22.3
676.1
(194.7)
18.0
670.7
(214.0)
30.7
657.1
528.2
509.3
499.4
487.4
120
120
27.0
3.4
115
98.3
97
97
6.2
2.8
134
85.8
93
93
4.1
3.5
105
89.0
93
93
5.7
3.5
122
89.2
90
90
11.9
3.4
122
84.3
144
Picton Property Income Limited Annual Report 2022
Additional Information Glossary
Annual rental income
Cash rents passing at the Balance Sheet date.
Contracted rent
Cost ratio
DTR
Dividend cover
The contracted gross rent receivable which becomes payable after all the occupier
incentives in the letting have expired.
Total operating expenses, excluding one-off costs, as a percentage of the average net
asset value over the period.
Disclosure and Transparency Rules, issued by the United Kingdom Listing Authority.
EPRA earnings divided by dividends paid.
Earnings per share (EPS)
Profit for the period attributable to equity shareholders divided by the average number
of shares in issue during the period.
EPC
EPRA
Estimated rental value (ERV)
Fair value
Energy performance certificate.
European Public Real Estate Association, the industry body representing listed
companies in the real estate sector.
The external valuers’ opinion as to the open market rent which, on the date of the
valuation, could reasonably be expected to be obtained on a new letting or rent review
of a property.
The estimated amount for which a property should exchange on the valuation date
between a willing buyer and a willing seller in an arm’s length transaction after the
proper marketing and where parties had each acted knowledgeably, prudently and
without compulsion.
Fair value movement
An accounting adjustment to change the book value of an asset or liability to its fair
value.
FRI lease
Group
IASB
IFRS
Initial yield
Lease incentives
MEES
MSCI
NAV
A lease which imposes full repairing and insuring obligations on the tenant, relieving the
landlord from all liability for the cost of insurance and repairs.
Picton Property Income Limited and its subsidiaries.
International Accounting Standards Board.
International Financial Reporting Standards.
Annual cash rents receivable (net of head rents and the cost of vacancy), as a percentage
of gross property value, as provided by the Group’s external valuers. Rents receivable
following the expiry of rent-free periods are not included.
Incentives offered to occupiers to enter into a lease. Typically this will be an initial
rent-free period, or a cash contribution to fit-out. Under accounting rules the value of the
lease incentives is amortised through the Income Statement on a straight-line basis until
the lease expiry.
Minimum Energy Efficiency Standards.
An organisation supplying independent market indices and portfolio benchmarks to the
property industry.
Net asset value is the equity attributable to shareholders calculated under IFRS.
Over-rented
Space where the passing rent is above the ERV.
Property income return
The ungeared income return of the portfolio as calculated by MSCI.
Reversionary yield
The estimated rental value as a percentage of the gross property value.
TCFD
Task Force on Climate-related Financial Disclosures.
Total property return
Combined income and capital return from the property portfolio.
Total return
The change in the Group’s net asset value, in accordance with IFRS, plus dividends paid.
Total shareholder return
Measures the change in share price over the year plus dividends paid.
Weighted average debt maturity Each tranche of Group debt is multiplied by the remaining period to its maturity and the
result is divided by total Group debt in issue at the period end.
Weighted average interest rate
The Group loan interest per annum at the period end, divided by total Group debt in
issue at the period end.
Weighted average lease term
The average lease term remaining to first break, or expiry, across the portfolio weighted
by contracted rental income.
Picton Property Income Limited Annual Report 2022
145
Strategic ReportGovernanceFinancial StatementsAdditional Information Financial calendar
Annual results announced
Annual results posted to shareholders
June 2022 NAV announcement
Annual General Meeting
2022 half-year results to be announced
December 2022 NAV announcement
26 May 2022
June 2022
July 2022
September 2022
November 2022
January 2023
Dividend payment dates
August/November/February/May
146
Picton Property Income Limited Annual Report 2022
Additional Information Shareholder information
Directors
Lena Wilson (Chair)
Mark Batten
Maria Bentley
Andrew Dewhirst
Richard Jones
Michael Morris
Registered office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Registered Number: 43673
UK office
Stanford Building
27A Floral Street
London
WC2E 9EZ
T: 020 7628 4800
E: enquiries@picton.co.uk
Administrator and Secretary
Northern Trust International Fund Administration
Services (Guernsey) Limited
PO Box 255, Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
T: 01481 745001
E: team_picton@ntrs.com
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
T: 0370 707 4040
E: info@computershare.co.je
Corporate brokers
JP Morgan Securities Limited
25 Bank Street
London
E14 5JP
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Independent auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Media
Tavistock Communications
1 Cornhill
London
EC3V 3ND
T: 020 7920 3150
E: james.verstringhe@tavistock.co.uk
Solicitors
As to English law
Norton Rose Fulbright LLP
3 More London Riverside
London
SE1 2AQ
As to English property law
DLA Piper UK LLP
Walker House
Exchange Flags
Liverpool
L2 3YL
As to Guernsey law
Carey Olsen
PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
Property valuer
CBRE Limited
Henrietta House
Henrietta Place
London
W1G 0NB
Tax adviser
Deloitte LLP
Hill House
1 Little New Street
London
EC4A 3TR
Shareholder enquiries
All enquiries relating to holdings in Picton Property Income
Limited, including notification of change of address, queries
regarding dividend payments or the loss of a certificate,
should be addressed to the Company’s registrars.
Website
The Company has a corporate website which contains
more detailed information about the Group.
www.picton.co.uk
Picton Property Income Limited Annual Report 2022
147
Strategic ReportGovernanceFinancial StatementsAdditional Information Notes
148
Picton Property Income Limited Annual Report 2022
Picton Property Income Limited
Stanford Building
27A Floral Street
London
WC2E 9EZ
020 7628 4800
www.picton.co.uk
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