Strategic Report
Financial Statements
Additional Information
Governance
Property
5
Portfolio strategy Risk 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.
Risk trend
Mitigation The Group maintains a diversified portfolio in order to minimise exposure to any one geographical area or market sector.
Commentary 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.
Connected KPIs A C
Strategic pillar
3
1
2
6
Investment
Risk trend
Risk Investment decisions may be flawed as a result of incorrect assumptions, poor research or incomplete due diligence, leading to financial loss.
Mitigation The Executive Committee must approve all investment transactions over a threshold level, and significant transactions require Board approval. 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 Environmental factors and climate-related risks are becoming increasingly important in investment decisions.
Connected KPIs A C
Strategic pillar
3
1
2
7
Asset management
Risk trend
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.
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. 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.
Commentary Occupier engagement will remain important to successful asset management, particularly through the transition to net zero.
Connected KPIs C I J K
Strategic pillar
3
1
2
8
Valuation
Risk trend
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.
Connected KPIs A
Strategic pillar
3
1
2
C E
Picton Property Income Limited Annual Report 2022
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