Picton Property Income Limited Annual Report 2024

Occupier focused, Opportunity led.

Future-proofing our portfolio, unlocking value

Through our occupier focused, opportunity led approach, we aim to be one of the consistently best performing diversified UK REITs listed on the London Stock Exchange. To us this means being a responsible owner of commercial real estate, helping our occupiers succeed and being valued by all our stakeholders.

Strategic Report 01 Business Overview 02 Highlights 04 Purpose 05 Strategy 06 Business Model

08 Future-proofing our Portfolio 16 Chief Executive’s Review 20 Key Performance Indicators

24 Our Marketplace 28 Portfolio Review 38 Financial Review 42 Principal Risks 47 TCFD Statement 56 Being Responsible:

Sustainability Reporting

Governance 78 Chair’s Introduction 80 Governance at a Glance 82 Board of Directors 84 Our Team

86 Leadership and Purpose 90 Section 172 Statement 94 Division of Responsibilities 96 Composition, Succession and Evaluation 103 Audit, Risk and Internal Control 109 Remuneration Report 131 Independent Auditor’s Report 135 Consolidated Statement of Comprehensive Income 136 Consolidated Statement of Changes in Equity 137 Consolidated Balance Sheet 138 Consolidated Statement of Cash Flows 139 Notes to the Consolidated Financial Statements Additional Information 158 EPRA BPR and Supplementary Disclosures 162 Property Portfolio 163 Five Year Financial Summary 164 Glossary 167 Financial Calendar 168 Shareholder Information 128 Directors’ Report Financial Statements

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Governance

Financial Statements

Additional Information

Strategic Report

Business Overview

4.0p EPRA earnings per share 114% Dividend cover

3.5p Dividends paid per share 96p NAV per share

Performance summary

These results demonstrate that we have been able to grow EPRA earnings despite the impacts of inflation, higher interest rates and a weaker economic backdrop. This year, helped by our industrial exposure and strategy to reposition non-core office assets for alternative uses, our portfolio has outperformed the MSCI UK Quarterly Property Index. This marks our eleventh consecutive year of outperformance and maintains our track record of upper quartile performance since launch in 2005. We have a resilient business model with long-term fixed rate financing, and we are confident in our ability to capture the significant income upside potential from our portfolio. I am pleased that we were able to announce in April a near 6% dividend increase. Lena Wilson CBE Chair

Read more in our Chair’s Introduction to the Governance Report on pages 78–79

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Highlights

Highlights 2023/2024

Robust financial performance delivering EPRA earnings growth

£524m Net asset value 96p NAV per share £745m Portfolio valuation

£19m Dividends paid 114% Dividend cover £22m EPRA earnings

Valuable long-term debt structure

28% Loan to value 93% Borrowings At fixed interest rates 3.9% Weighted average interest rate 7.2 years Debt maturity profile 101p EPRA Net Disposal Value (per share) Reflecting fair value of debt

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Financial Statements

Additional Information

Strategic Report

80% EPC ratings A-C Improved from 76% in 2023 16% Reduction in Scope 1 & 2 emissions compared to 2019 baseline 184% Increase in solar capacity compared to 2023 £4.5m Invested into upgrading over 20 assets 62% Occupier energy data coverage 99% Of leases contained green clauses Continued sustainability progress towards net zero carbon targets

Outperforming property portfolio with improving income and reversionary potential

Continued MSCI outperformance for the eleventh consecutive year and long-term upper quartile outperformance since launch

3% increase in passing rent, contracted rent and ERV 99% Rent collection 93% Occupancy (Excluding assets held for sale) 29% Reversionary potential (Above current passing rent) Diversified income stream with over

Repositioning our portfolio to improve income and occupancy

4.5% increase in net property income 26 Lettings 3% ahead of March 2023 ERV 31 Lease renewals/regears 2% ahead of March 2023 ERV 13 Rent reviews 2% ahead of March 2023 ERV

All figures are stated as at 31 March 2024 or for the year ended 31 March 2024 unless otherwise stated. Comparative figures are for the year ended 31 March 2023. The Financial Statements are prepared under IFRS. We use a number of alternative performance measures (APMs) when reporting on the performance of the business and its financial position. In common with many other listed property companies, we report the EPRA performance measures. In the Additional Information section of this report on pages 158–161 we provide more detailed information and reconciliations to IFRS where appropriate.

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Purpose

Our purpose Our purpose is to be a responsible owner of commercial real estate, helping our occupiers succeed and being valued by all our stakeholders.

Our values

Creating stakeholder value Shareholders £19m Dividends paid Occupiers £4.5m Invested into upgrading properties Communities 15 Charities supported Our people 86% Employee satisfaction score The environment 80% EPC ratings A-C

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, our dynamic positioning of the portfolio, and engagement with our occupiers. Progressive We are forward-thinking, enterprising, and continually advancing. Demonstrated through our culture, work ethic, and proactive asset management.

For more detailed information on our stakeholders, see our Section 172 Statement on pages 90–91

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Financial Statements

Additional Information

Strategic Report

Strategy

Through our occupier focused, opportunity led approach, we aim to be one of the consistently best performing diversified UK REITs, creating value for our shareholders. Our strategic priorities guide the direction of our business and are reviewed annually. Our strategic priorities

Portfolio Performance / Manage the portfolio to provide income and capital growth / Grow occupancy and income profile / Enhance asset quality and create space that meets evolving occupier expectations / Outperform the MSCI UK Quarterly Property Index

Operational Excellence / Run an efficient and innovative operating platform

Acting Responsibly / Reduce our emissions to become net zero carbon by 2040 / Actively engage with our occupiers, shareholders, communities and other stakeholders / Promote our company values, nurture a positive working culture, and alignment of the team / Ensure the long-term success of the business with strong governance and transparent reporting

/ Adapt to market trends with an agile and flexible business model / Deliver earnings growth / Maintain appropriate capital structure for the market cycle / Pursue opportunities for growth to deliver economies of scale

For details on the associated risks see pages 42–46

For details on connected KPIs see pages 20–23

For details on our strategic progress see the Chief Executive’s Review on pages 16–19

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Business Model

Our business model

How we create value

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.

Knowledge, expertise and research led decision making

Selling assets to recycle into better opportunities

Asset selection and acquisition

Creating value through proactive asset management

This is underpinned by: Risk management

Responsible stewardship 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 acting for the benefit of all our stakeholders.

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 a surplus which we can invest back into the portfolio.

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Financial Statements

Additional Information

Strategic Report

01 Knowledge, expertise and

What makes us different

Long-term outperformance through a diversified approach We have a long-term performance track record, outperforming the MSCI UK Quarterly Property Index for eleven consecutive years. We own a diverse range of assets which enables us to position the portfolio as market conditions dictate and have delivered upper quartile performance over three, five and ten years, and since launch in 2005.

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 Asset 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

Read more on pages 56–77

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Future-proofing our Portfolio

Portfolio at a glance £745m Portfolio valuation 59% Industrial weighting 30% Office weighting 11% Retail and Leisure weighting 49 Assets 400 Occupiers

Future-proofing our portfolio, unlocking value

We own a portfolio strategically positioned to capture income and capital growth, currently weighted towards the industrial sector. Our agile business model provides flexibility to adapt to evolving market trends over the long-term as demonstrated by our track record of upper quartile outperformance against the MSCI UK Quarterly Property Index.

Key Our strategic priorities

Portfolio Performance

Operational Excellence

Acting Responsibly

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Financial Statements

Additional Information

Strategic Report

Investing in our assets to improve sustainability credentials We are committed to improving the environmental performance of our buildings and ensuring these are future-proofed and meet our evolving occupier requirements. Read more on pages 14–15

Our occupier focused approach ensures we engage with our occupiers to create spaces to meet their evolving requirements, help their businesses succeed and maintain high occupancy across the portfolio. We are opportunity led and our business model provides flexibility to adapt to evolving market trends. Alongside our proactive asset management and disciplined approach to capital structure, we have delivered outperformance and a consistently higher income return than the MSCI Quarterly Property Index over the long-term. We are committed to acting responsibly and have a target to become net zero carbon by 2040, which we believe is essential for the benefit of all our stakeholders.

Unlocking value with alternative use strategies Recognising the changing office sector landscape, we have made good progress on repositioning our portfolio to secure more valuable alternative uses at some of our office assets. Read more on pages 10–11

Strategic priority 1 2 3

Capturing reversionary potential with proactive asset management

With occupational demand remaining positive within the industrial sector, we have been able to capture rental growth. Over the year, we have successfully increased income through our proactive approach to asset management. Read more on pages 12–13

Strategic priority 1 2 3

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Future-proofing our Portfolio / Continued

Office to alternative use strategy – repositioning the portfolio

Since the pandemic, the office sector has evolved, with occupier demands and preferences changing, following remote and hybrid working arrangements and different workplace dynamics. While it is clear that well-located, amenity rich, sustainable space is still in demand, it is building specific, with secondary space struggling to attract occupiers without significant capital expenditure.

Recognising these changes in the office sector, we have made significant progress exploring and securing more valuable alternative uses at selected office assets. Several of our properties have alternative use potential, and we have agreed sales to developers in respect of two of them as well as securing a healthcare occupier at a third following receipt of planning.

Longcross, Cardiff We have exchanged contracts to sell a partially vacant accommodation developer. The transaction is conditional on planning permission and vacant possession. The sale price is dependent on the exact planning consent obtained and in particular upon the number of rooms secured. The base price was 16% ahead of the March 2023 valuation and we expect to benefit from an overage payment once planning is secured. We will retain a small income-producing industrial unit and car parking site that will be sold separately in due course. To facilitate the disposal, we have completed a number of transactions that have ensured we can secure vacant possession in 2024. We expect planning to be secured in the fourth quarter of 2024. Accounting for 12% Of the total portfolio void 16% Base price ahead of the March 2023 valuation office building to an experienced student

Strategic priority 1 2 3

We have made significant progress securing more valuable alternative uses.

Michael Morris Chief Executive

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Financial Statements

Additional Information

Strategic Report

Angel Gate, London During the year, we obtained residential consent via permitted development rights on 30,000 sq ft of vacant office space. This was made possible during a period when the Article 4 restrictions had lapsed, however, from September 2023, any further conversion of office space to residential was restricted by an updated Article 4 Direction. We engaged directly with both the local and national planning authorities. As a result of this proactive approach, the new Article 4 Direction was modified to remove the entire 1.7 acre site from this restriction, unlocking a further 34,000 sq ft of space for residential conversion. Having secured the site’s full residential conversion potential, this has enabled us to sell the property to a residential developer. Contracts were exchanged in March with the sale completing post year-end. While we worked through the planning position, we were able to maintain occupancy at an average of 50%, ensuring positive cash flow from the asset. 19% Of the total portfolio void Accounting for

Colchester Business Park At Colchester Business Park, we have leased a vacant office suite to a healthcare occupier at a rent of £0.1 million per annum, which is in line with ERV. The lease completed following receipt of planning permission for change of use and once the associated conditions were satisfied.

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Future-proofing our Portfolio / Continued

44% Uplift on the previous passing rent further rental growth. The unit is being refurbished in line with our sustainable refurbishment guidelines. We have relocated an occupier to our estate in Luton, meaning we now have one vacant unit we are refurbishing. This will be the first open market letting since 2019 on the estate and we believe will provide Parkbury, Radlett At our largest asset in Radlett, we have captured rental growth at lease events over the year. A rent review was settled with a trade supplier to the professional audio, broadcast, light and power industries where the rent was increased by 56% to £0.1 million per annum. We agreed a renewal with a cosmetics business, who renewed for ten years, subject to break, at a rent of £0.2 million per annum, an uplift of 44% on the previous passing rent. The combined new rent was in line with ERV.

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.

Occupational demand in the industrial sector remains positive and we are continuing to capture rental growth. A lack of supply, especially of multi-let estates, coupled with increasing build costs, means that occupiers have restricted choice when looking for space, which has driven rental growth across the country.

Strategic priority 1 2 3

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Financial Statements

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Strategic Report

River Way, Harlow In Harlow, we enabled a food packaging provider to expand into an adjoining unit that we had comprehensively refurbished after a previous occupier vacated, improving its environmental credentials and EPC rating from a D to an A. This secured higher, longer-term income across both units, with the new rent increasing by 47% on their existing unit and 57% ahead of the rent the previous occupier was paying on the additional unit.

47% Higher passing rent

38% Rent increase to £1.6 million per annum 8% Rent ahead of ERV Ten-year lease at a rent of £0.7 million per annum

Grantham distribution warehouse

A rent review was settled with a book distributor where the rent was increased by 38% to £1.6 million per annum, 8% ahead of ERV. We are in discussions with the occupier to extend the lease and carry out sustainability improvements to the unit.

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Future-proofing our Portfolio / Continued

Sustainable refurbishments: investing in our buildings

£4.5m Invested across the portfolio 80% EPC ratings A–C

We are committed to enhancing the environmental performance of our buildings to improve their operational efficiency and to ensure that they meet refurbishment guidelines, when space becomes vacant, we seek to improve its sustainability credentials in terms of certification, services, structure and building resilience. Where possible, we aim to remove gas fired systems and install solar on roofs to provide on-site renewable energy, with five projects having been completed this year. occupier requirements. In line with our sustainable

Sentinel House, Fleet In Fleet, which is leased to a serviced office provider, we extended their lease by a further five years, to 2030. We agreed a small rental uplift in 2025 to £0.5 million per annum, 4% ahead of ERV. The reversionary lease included our standard green lease clauses, and we arranged for solar panels to be installed, with the cost being deducted from the incentive being given to the occupier. In addition, we have added insulation to the property and refurbished the windows. The building achieved an A rated EPC and the works align with our net zero commitments as well as reducing our occupier’s running costs.

Strategic priority 1 2 3

4% Rent ahead of ERV

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Financial Statements

Additional Information

Strategic Report

£0.2m Savings by reusing the air-conditioning equipment from Cardiff

Easter Court, Warrington

As part of the full refurbishment works at Unit 1, we removed gas heating systems from the warehouse and replaced the roof. The office area, common areas and warehouse area have all been fitted with new LED lighting. We also installed solar panels on the roof to provide on- site renewable energy and allow excess electricity to be fed back into the grid which will help to reduce the operational emissions of the unit. These refurbishments have improved the EPC rating of the building to an A rating. We subsequently leased the unit to a national car dealership at a rent of £0.1 million per annum, which was in line with ERV.

The circular economy

We have agreed to sell Longcross, Cardiff and as part of the agreement, we are permitted to strip the building of any internal finishes. We are reusing 20,000 sq ft of carpet, a modern air-conditioning system, lights and furniture which will be used in the refurbishment of two other office buildings in Colchester and Bristol. By reusing the air-conditioning unit, we estimate this will save £0.2 million with further cost savings from repurposing the fixtures and fittings.

As part of our net zero carbon pathway, we are embracing the circular economy principles to reuse, recycle and repurpose where possible.

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Chief Executive’s Review

Well-positioned and resilient portfolio

We have grown rental income, capturing and improving reversionary potential during the year.

Michael Morris Chief Executive

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Governance

Financial Statements

Additional Information

Strategic Report

We have successfully continued our long-term track record of outperformance through our proactive approach to asset management.

We have operated with a well-covered dividend of 114% (covered for the twelfth consecutive year) and earlier this month we were able to announce a near 6% uplift, increasing the dividend above its pre-pandemic level. Our share price performance over the year has been weaker, with a total shareholder return of -1%. At the year- end our discount to net asset value was 32%, but encouragingly this has narrowed in recent weeks, in part reflecting some of the positive activity that we have been able to announce. Portfolio Performance Outperforming property portfolio We have again outperformed the MSCI UK Quarterly Property Index, now for the eleventh consecutive year and we continue to deliver upper quartile performance since launch in 2005. Our diversified approach and long-term track record highlight the benefits of being able to adapt the portfolio to changing market conditions. Growing occupancy and income We have taken steps to reposition the portfolio, through our alternative use strategy, looking to reduce our office exposure. During the year, we exchanged contracts to sell two part-vacant office buildings, both at premiums to the preceding valuation. One disposal completed following the year-end and the other is conditional upon planning permission which is expected to be obtained during the next financial year. Headline occupancy remained stable at 91%. Occupancy in our industrial and retail assets was more than 97%, but offices remained lower, in part due to market conditions, and also the need to obtain vacant possession on some assets in order to maximise disposal proceeds. Excluding the two assets held for sale at the year- end, occupancy rose to 93%. We have been able to grow rental income and capture some of the reversionary potential in the portfolio through leasing activity and rent reviews during the year, particularly in the industrial assets, and further details are within the Portfolio Review section.

This year, we have increased both rental income and the reversionary potential of our portfolio, despite the impact of higher costs, and we have also been able to grow our EPRA earnings. The business is well-positioned with valuable long-term fixed rate debt and we continue to outperform the MSCI UK Quarterly Property Index. Despite a challenging economic backdrop we have achieved letting success across all areas of the portfolio and extended or increased income, capturing reversionary potential and demonstrating rental growth within the portfolio. The team has worked incredibly hard and I would like to thank them for their individual and collective contributions over the last 12 months as we have continued to make good progress with our strategic priorities. Performance We have seen considerably more stability in the property market, however, it has not been an easy operating environment with the ongoing impact of rising interest rates affecting sentiment and activity. Our portfolio valuation reduced from £766 million to £745 million or 2.8% over the year, contributing to a decline in net assets of 4.2% to £524 million or 96 pence per share. Encouragingly our net assets showed stability between December 2023 and March 2024, the first time since the 2022 disruption in bond markets. Despite this, we have improved many key metrics over the year. Most notably, we have increased the passing rent, contracted rent and also the reversionary potential of the portfolio by 3%.

£745m Portfolio valuation 96p Net asset value per share 4.0p EPRA earnings per share

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Chief Executive’s Review / Continued

Operational excellence The long-term success we have had at a property level has also been mirrored with prudent management of our balance sheet. We have been able to repay our revolving credit facility using proceeds from an asset sale, post year-end. At the time of writing, our revolving credit facility of £50.0 million remains fully undrawn and we will be exploring options to extend this ahead of its maturity next year. We have a valuable debt structure with 100% of our long-term debt fixed for over seven years and at an average interest rate of 3.7%, well below the prevailing market rate. The fair value of our debt book is not reflected in our reported net assets, but in our EPRA NDV which is 5% higher or 101 pence per share.

During the year, we incurred a number of non-recurring costs to further develop and improve the operation of the business. Effective from October, we internalised our company secretarial function, which has improved our corporate governance and our overall operational effectiveness. We have also recruited a new Chief Financial Officer, Saira Johnston, as successor to Andrew Dewhirst who retired at the end of the financial year. Andrew has been with the Company since 2011 and will be greatly missed by the team. We are looking forward to working with Saira who has a proven track record in real estate finance. Despite the inflationary pressures on costs generally and an increase in these one-off costs, we have been able to grow EPRA earnings by 2.2% over the year.

We have a valuable debt structure with 100% of our long-term debt fixed for over seven years.

Michael Morris Chief Executive

101p EPRA NDV per share 28% Loan to value

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Governance

Financial Statements

Additional Information

Strategic Report

We considered multiple opportunities during the year and specifically had extensive discussions in 2023 about a possible combination with UK Commercial Property REIT, which we were disappointed to be unable to progress. We still believe there is merit in consolidation, and equally that there is a place for a well-managed diversified REIT that can adapt to changing market conditions. While the rationale for merging was to capitalise on our internalised management model and track record, allowing shareholders to benefit from the economies of scale, we believe this corporate activity also had some adverse short- term impact on our share price. Outlook 2024 appears to have started with considerably more momentum than the preceding year and this has been apparent in the continued rental growth and stabilisation in capital growth as captured in the MSCI indices. The occupier markets remain more resilient than some had expected and we have a good pipeline of activity across all areas of the portfolio. Our approach capitalises on real estate being an ever-evolving asset class, with buildings continually adapted, upgraded or repurposed to meet changing occupier demand. There remains significant income upside within the portfolio, whether that is captured directly at rent review or lease expiry or through the recycling of assets and reinvestment. Our priority in the short-term is continuing to grow EPRA earnings while focusing on improving our share price rating to be more reflective of the performance and potential of the business.

Acting responsibly We have continued to invest in our portfolio to ensure not only that it meets the needs of today’s occupiers but is also future- proofed and helps us achieve our net zero carbon commitments. We have invested in our assets and improved our portfolio EPCs with 80% of the portfolio now rated A–C. This is yet another year-on- year improvement and compares with 55% A–C rated in 2020. We have made good progress in removing gas installations and converting heating to electrical systems across five assets. This is reflected in the 10% reduction in like-for-like Scope 1 emissions in the year. We have installed more on-site renewables in the form of solar this year than in any preceding period; an increase in capacity of 184%. committed to act in the interests of all stakeholders and recognise the need to remain relevant to shareholders. Much has been written about the challenges with the UK listed markets generally. Real estate businesses have been impacted by the rising interest rate environment and wide share price discounts have led to consolidation, acquisitions and managed wind-downs. Consolidation and growth The Board and the team are

Our priority is to continue to grow EPRA earnings while focusing on improving our share price rating to be more reflective of the potential of the business.

Michael Morris Chief Executive

Michael Morris Chief Executive 22 May 2024

Picton Property Income Limited / Annual Report 2024

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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.

Financial KPIs Total return (%) -0.9%

Total shareholder return (%) -1.0%

Total property return (%) 1.6%

2024 2023 2022

-0.9

-1.0

1.6

-13.9

-26.4

-8.7

28.3

18.7

24.3

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.

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.

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.

1 2 3

Our performance in 2024 We have grown EPRA earnings this year, but this has been offset by the adverse valuation movements over the year.

Our performance in 2024 In line with the property sector generally, our share price has declined over the year.

Our performance in 2024 We have outperformed the MSCI UK Quarterly Property Index for the eleventh consecutive year, delivering a return of 1.6% compared to the Index return of -1.0% for the year. We have also delivered upper quartile outperformance against MSCI over three, five and ten years, and since launch in 2005.

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Financial Statements

Additional Information

Strategic Report

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 net tangible asset per share (EPRA NTA), 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.

Our strategic priorities

Portfolio Performance

Operational Excellence

Acting Responsibly

For more information on EPRA Best Practices Recommendations see pages 158–161 Remuneration Link

Property income return (%) 5.1%

Loan to value ratio (%) 27.9%

Cost ratio (%) 1.2%

2024 2023 2022

5.1

27.9

1.2

4.4

26.7

1.0 1.0

4.5

21.2

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 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.

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.

1 2 3

Our performance in 2024 The income return for the year of 5.1% was ahead of the MSCI UK Quarterly Property Index of 4.7%, and we have also outperformed over three, five and ten years, and since launch in 2005.

Our performance in 2024 The loan to value ratio has increased slightly over the year with the adverse valuation movements. After the year-end, we have reduced this measure through the repayment of our revolving credit facility.

Our performance in 2024 The cost ratio has increased over the year, predominantly due to the reduction in net assets over the period, rising staff costs and additional resource.

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Key Performance Indicators / Continued

EPRA KPIs EPRA NTA per share (pence) 96p

EPRA earnings per share (pence) 4.0p

EPRA vacancy rate (%) 9.2%

2024 2023 2022

96 100

4.0

9.2

3.9 3.9

9.5

120

7.2

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 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

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.

used for the annual bonus and the Long-term Incentive Plan.

1 2 3

Our performance in 2024 The EPRA NTA per share has declined slightly this year as a result of the adverse valuation movements, despite earnings growth.

Our performance in 2024 EPRA earnings per share have grown this year to 4.0 pence per share, reflecting growth in income.

Our performance in 2024 Our vacancy rate has remained stable this year. However, it has improved subsequent to the year-end with the sale of a part-vacant office building, in line with our alternative use strategy.

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Additional Information

Strategic Report

Non-financial KPIs Retention rate (%) 76%

EPC rating A-C (%) 80%

Employee satisfaction (%) 86%

2024 2023 2022

82 82

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 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 1 April 2023, Minimum Energy Efficiency Standards (MEES) regulations prohibited leasing space that is F or G rated, unless an exemption certificate applies. The minimum EPC rating is likely to be raised further, with the UK Government consulting on proposals to require a minimum of C by 1 April 2028, and B by 1 April 2030.

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 team. The indicator is based on the employee survey carried out during the year.

1 2 3

Our performance in 2024 Our significantly higher retention rate reflects our proactive approach to asset management and engagement with our occupiers. Total ERV at risk due to lease expiries or break options totalled £6.4 million, higher than last year. This excludes office buildings where we have kept space vacant for alternative uses.

Our performance in 2024 The proportion of EPC ratings between A–C has increased against the prior year and makes up 80% of the portfolio. The remaining 20% is rated D or E.

Our performance in 2024 Our employee satisfaction score has increased this year with very positive team sentiment.

Picton Property Income Limited / Annual Report 2024

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Our Marketplace

Lower interest rates will fuel economic recovery

According to the ONS, retail sales volumes have been on a downward trajectory since April 2021, whereas retail sales values have been rising, which reflects the impact of inflation. Looking at the quarter to March 2024, retail sales volumes did increase by 1.9% compared to the previous three months, following the low sales volumes over the Christmas period. Going forwards, households benefitting from falling inflation and interest rates should support consumer spending. The short to medium-term economic outlook offers signs of cautious optimism. Downside risks remain, particularly in relation to geopolitical instability in the Middle East and eastern Europe, which could potentially fuel inflationary pressures. The timing of and scale of the Bank of England’s interest rate cuts are highly dependent on the trajectory of inflation and strength of the labour market in the coming months.

Economic backdrop After a challenging 2023, the UK economy appears to be improving, with inflation falling and the Bank of England widely anticipated to commence base rate cuts in the second half of 2024. This expected reduction in interest rates should continue the positive momentum in terms of improving business, investor and consumer confidence, as the cost of debt and cost of living pressures continue to ease. Despite increases in long-term UK Government bond yields over the year, paralleled by similar rises in property yields, there are signs of stabilisation emerging. The economy has already recovered from the mild technical recession of 2023, with the Office for National Statistics estimating encouragingly strong GDP growth of 0.6% for the first three months of 2024. In terms of output, both services and production contributed positively to the recovery, recording growth of 0.7% and 0.8% respectively. Output from construction fell -0.9%, which somewhat reflects the bad weather conditions that affected the building sector during this period. In terms of expenditure, increases in the volume of net trade, household and Government spending contributed to economic growth. Inflation has fallen a long way from its forty-year peak of 11.1% in October 2022, with the annual increase in the consumer prices index in March 2024 at 3.2%. Core inflation (excluding energy, food and tobacco prices), which has been more stubborn, reduced to 4.2% in March 2024.

There has recently been some softening within the labour market, with the unemployment level increasing to 4.3%, and job vacancy numbers on a downward trend, however real wage growth is now positive and has remained so since June 2023. As at March 2024, wage growth in real terms was 2.0% per annum for regular pay and 1.7% per annum for total pay. The housing market has remained resilient in the face of rising interest rates, and house price growth has started to re-emerge, with new mortgage rates down from the peak of summer 2023. According to the Halifax House Price Index, house prices grew 1.1% in the year to April 2024. Widespread loan defaults and forced sales have not been a feature of this downturn, partly due to stricter lending criteria and high levels of employment in comparison to previous market cycles.

0.6% Increase in UK GDP in the three months to March 2024

Picton Property Income Limited / Annual Report 2024 24

Governance

Financial Statements

Additional Information

Strategic Report

MSCI UK Quarterly Property Index Annual Capital Growth (%)

MSCI UK Quarterly Property Index Annual Estimated Rental Value Growth (%)

40 30 20 10 0 -10 -20 -30 -40

-5

-10

-15

All

Retail

Office

Industrial

All

Retail

Office

Industrial

UK property market For the year to March 2024, the property market remained subdued as the impact of higher interest rates continued to be felt. The MSCI UK Quarterly Property Index reported an All Property total return of -1.0%, comprising -5.5% capital growth and 4.7% income return. This was a significant improvement on the -12.6% total return for the year to March 2023. In March 2024, the MSCI All Property equivalent yield was 6.6% (March 2023: 6.2%). The occupier market has recently shown more resilience than the investment market, with All Property ERV growth for the year to March 2024 recorded at 3.7% (March 2023: 3.5%). The All Property averages mask nuances at sector and sub-sector levels, with polarisation remaining a key theme. The charts above show annual capital growth and ERV growth recorded by the MSCI UK Quarterly Property Index, with all property depicted in the bars and the sectors with the markers. Of the three main sectors, industrial was the best performer, both in terms of investment returns and rental growth. Standard industrial market fundamentals are particularly favourable, with continued healthy demand for well-placed units and low levels of supply. The MSCI Industrial total return for the year to March 2024 was 4.4%, comprising capital growth of 0.0% and an income return of 4.3%.

Looking at sub-sectors, capital growth ranged from -0.9% for Distribution Warehouses to 1.7% for Standard Industrial – London. In March 2024 the MSCI Industrial equivalent yield was 6.0% (March 2023: 5.7%). Industrial rental growth for the year to March 2024 was 6.5% and strong in all sub-sectors, ranging from 5.7% for Standard Industrial – Rest of UK to 7.0% for Standard Industrial – London. The office sector is still undergoing a period of recalibration, with increasing refurbishment and upgrading costs, combined with weaker and more selective occupational demand, impacting both pricing and investor sentiment. The MSCI Office total return for the year to March 2024 was -9.5%, comprising -13.1% capital growth and 4.1% income return. Office capital growth was negative across all sub- sectors, ranging from -18.7% in the Rest of London to -9.9% in Central London. In March 2024 the MSCI Office equivalent yield was 7.6% (March 2023: 6.7%). Office rental growth for the year to March 2024 was 2.8% and positive for all sub-sectors, ranging from 0.5% for the Rest of London to 4.6% in Central London, however, these rental growth numbers do not reflect capital invested into upgrading space. The retail sector has shown signs of stabilisation, aided by easing inflation and a recovery in real earnings positively impacting consumer confidence. However, store closures and CVAs still remain a feature of the market and not all sub-sectors are recovering at the same pace.

The MSCI Retail total return for the year to March 2024 was -0.2%, comprising capital growth of -5.9% and income return of 6.0%. Retail capital growth ranged from -8.3% to -1.0% between sub-sectors; Supermarkets experienced the strongest fall in capital values, whereas Out of Town Shopping Centres was the best performer. In March 2024, the MSCI Retail equivalent yield was 6.8% (March 2023: 6.6%). Retail ERV growth was 1.0%, with sub-sectors ranging from -1.6% for Shopping Centres – In Town to 3.7% for Department Stores. During the year there has been lacklustre transactional activity, due to the increased cost of debt and falling capital values. MSCI recorded £40.1 billion of investment transactions for the year to March 2024, which is 27% down on the £55.4 billion recorded for the year to March 2023 and 51% lower than the £82.1 billion transacted in the year to March 2022. Transactions in the industrial sector had the highest weighting, comprising 24% of the total. With interest rates anticipated to reduce from the second half of 2024 and increased liquidity in the lending market, it is expected that trading activity will begin to pick up as we head towards the end of the year.

Picton Property Income Limited / Annual Report 2024

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Our Marketplace / Continued

Market drivers

Theme

Impact on investment markets

Geopolitical drivers: / Conflict / Uncertainty / Supply chain disruption / Energy prices

High levels of geopolitical uncertainty can have an adverse impact on investment markets. Geopolitical tension and conflict have the potential to create disruption, cause price shocks, and increase the risk premium. However, the UK is an attractive location for investors in a global context, offering high levels of transparency, governance and stability. The UK is ranked first in the latest JLL Global Transparency Index.

Economic drivers: / GDP growth / Inflation / Interest rates / Business and consumer confidence

The pace at which the Bank of England increased the base rate between January 2022 and August 2023 in response to soaring inflation caused uncertainty in the Government bond markets. CPI inflation reached a peak of 11.1% in October 2022 and remained elevated for longer than expected. Long-term gilt yields rose, which narrowed the gap between the risk-free rate and property yields. A correction followed, causing commercial property values to fall. Investment volumes are adversely impacted by high levels of uncertainty and an increase in the cost of debt. Higher costs increase the hurdle rate an investment is required to achieve, affecting feasibility. During 2023, UK commercial property investment volumes were significantly below average. CPI inflation has fallen to 3.2% as at March 2024 and the Bank of England base rate has been held at 5.25% since August 2023. It is expected that the Bank of England will start to reduce the base rate in the second half of 2024. The commercial property market is cyclical due to a variety of factors, for example demand supply dynamics, economic conditions, the impact of inflation on construction costs, and property yields compared to bond yields. This cyclicality is a driver of capital markets, given that timing of investment decisions can have a significant impact on returns. The different sectors within commercial property can be at different points in the cycle, therefore a diversified approach can bring the benefit of reduced risk over the longer-term. Factors considered under the umbrella term of Environmental, Social and Governance are playing an increasingly vital role in investment pricing and decision making. Assets which are decarbonised, energy efficient, carry a high EPC rating and a low level of physical risk are more likely to command a ‘green premium’, whereas a ‘brown discount’ can be applicable to assets of the opposite calibre. Assets which are not decarbonised, carrying physical risks from the impacts of climate change, or transition risks through not conforming with regulation and legislation, are at risk of becoming stranded. Investors are also driven by social issues, and want to be seen to be making a real positive impact rather than greenwashing. Property owners who do not balance different stakeholders’ needs, or nature and the built environment risk scrutiny. Technology drivers affecting capital markets could be in the form of constructs driving structural changes, like the evolution of General Purpose AI, Machine Learning, Big Data and the digitalisation of society, which have the potential to affect how and where we work, live and spend recreational time, and therefore which property sectors will win or lose as a result. AI and Big Data are likely to give a competitive advantage to those who use these tools to make investment decisions. AI also carries wider risks, for example in the form of cyber insecurity, job losses, social risk and information inaccuracy. Investors who fail to account for these may be compromised in the longer-term. More specifically, assets which have technological capability and supporting infrastructure are likely to be more investable than those that fall short or are reliant on legacy systems.

Property cycles: / Sector differences / Stages of recovery

ESG drivers: / Environmental factors / Climate change / Biodiversity / Social impact / Governance

Technology drivers: / AI

/ PropTech / Big Data / Digitalisation of society / Supply chain optimisation / Rapid pace of change

Picton Property Income Limited / Annual Report 2024 26

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