Strategic Report
Financial Statements
Additional Information
Governance
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
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