Strategic Report
Financial Statements
Additional Information
Governance
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
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