To: Company
Announcements
Date: 17
May 2024
Company: Balanced
Commercial Property Trust Limited
LEI: 213800A2B1H4ULF3K397
Balanced
Commercial Property Trust Limited (the "Company” or
“BCPT”)
NAV
(unaudited) and Company Update
Headlines
-
Net Asset Value total
return of -1.1 per cent for the quarter ended 31 March 2024.
-
Share Price total return
of +14.3 per cent for the quarter ended 31
March 2024.
-
Disposal of two office
assets completed, raising proceeds of £54.6m at an aggregate
discount to valuation of 0.4 per cent (both disposals announced
previously).
-
18 leases and tenancy
agreements completed or renewed over the
quarter.
Net
Asset Value: total return of -1.1 per cent for the
quarter
The
unaudited net asset value (‘NAV’) per share of the Company as at
31 March 2024 was 107.3 pence. This represents a decrease of 2.3
per cent from the audited NAV per share as at 31 December 2023 of 109.8
pence and a NAV total return for the quarter of -1.1 per
cent.
The NAV
has been calculated under International Financial Reporting
Standards (‘IFRS’). It is based on the external valuation of the
Company’s property portfolio which has been prepared by CBRE
Limited.
The NAV
includes all income to 31 March 2024
and is calculated after deduction of all dividends paid prior to
that date.
Analysis
of Movement in NAV
The
following table provides an analysis of the movement in the
unaudited NAV per share for the period from 31 December 2023 to 31
March 2024 (including the effect of gearing):
|
£m
|
Pence
per share
|
%
of opening NAV per share
|
NAV
as at 31 December 2023
|
770.0
|
109.8
|
|
Unrealised
decrease in valuation of property portfolio
|
(11.4)
|
(1.6)
|
(1.5)
|
Realised
losses on property sales
|
(2.8)
|
(0.4)
|
(0.4)
|
Other net
revenue
|
6.0
|
0.8
|
0.7
|
Dividends
paid
|
(9.3)
|
(1.3)
|
(1.1)
|
NAV
as at 31 March 2024
|
752.5
|
107.3
|
(2.3)
|
The EPRA
Net Tangible Assets per share as at 31 March
2024 was 107.3 pence per share
(31 December 2023: 109.8 pence per share).
Market
Commentary
Whilst
uncertainty on the outlook and timing for interest rate cuts has
weighed on real estate capital markets, the pace of declines in
valuations has moderated. At the market level, the MSCI UK
Quarterly Index recorded capital growth of -0.7 per cent over the
first quarter of 2024. However, at the sector level performance is
significantly nuanced as those sectors supported by strong
occupational fundamentals, such as industrial & logistics and
retail warehousing, delivered capital growth.
Occupational
markets have remained resilient, despite the economic challenges,
delivering income growth of 3.4 per cent and rental value growth of
3.5 per cent over the 12 months to March.
Asset
management update
Over the
first quarter, 18 leases and tenancy agreements have been completed
or renewed. Notable transactions include:
-
St
Christopher’s Place, Central
London– Sunday
in Brooklyn have committed to a
15-year lease on a newly created anchor unit, at a rent in line
with estimated rental value (‘ERV’) and with the potential for a
further rental top-up based on the restaurant’s turnover. Recent
F&B lettings have increased the estate’s exposure to the sector
to 42 per cent by capital value. Currently 44 per cent of the space
available at the estate is under offer.
-
Cowdray
Centre, Colchester–
following the completion of a substantial refurbishment, MKM
Building Supplies have signed a new 20-year lease at a rent in line
with the unit’s ERV.
-
17A
Curzon Street, London W1– the
newly refurbished top-floor suite of this multi-let West End office
holding has been let on a new 5-year lease to Turcan Connell at a
rent of £131.50 per square foot, representing a marginal premium to
ERV.
-
7
Birchin Lane, London
EC3– this
multi-let City of London holding
has been subject to a phased refurbishment programme which has now
completed with the leasing of the final suite. The ground floor
suite has been let to Exquitech on a new 5-year lease at a rent of
£64.50 psf. The rent represents a marginal premium to the suite’s
ERV, and a 9.5 per cent premium to the pre-refurbishment
ERV.
The
portfolio vacancy rate increased marginally over the quarter,
rising from 6.7 per cent to 6.8 per cent by ERV. Of this, 4.6 per
cent is attributed to Stockley Park, Uxbridge, which is held as a
repurposing opportunity and 0.9 per cent is contractually committed
to occupiers.
Portfolio
valuation
Over the
quarter, the Company’s portfolio recorded a valuation decline of
1.6 per cent, with valuation yields moving as set out
below:
Portfolio
yield (%)
|
December
2023
|
March
2024
|
Net
initial yield
|
5.5
|
5.6
|
Equivalent
yield
|
6.5
|
6.7
|
Offices
saw a valuation decline of 4.3 per cent amid prevailing weak
investor sentiment towards the sector. The equivalent yield on the
office portfolio increased by 92 basis points to 9.1 per
cent.
St
Christopher’s Place experienced a valuation decline of 3.3 per
cent. The primary cause of this was the administration of The Body
Shop, who have ceased trading from their store at 372/374 Oxford
Street. This prominent corner unit is being actively marketed and
has received several offers to occupy, which are under
negotiation.
The retail
warehouse assets experienced a 2.4 per cent increase in value, as
prime market yields compressed over the quarter amid strong levels
of investor and occupational demand. The Company’s retail parks in
Newbury and Solihull are fully leased and offer an
attractive and robust grocery, discount and convenience-led tenant
roster. The equivalent yield on the retail warehouses sharpened by
12 basis points to 6.1 per cent.
Industrial
assets saw capital values fall marginally by 0.2 per cent as the
equivalent yield on the portfolio assets remained broadly stable at
6.1 per cent.
Investment
activity
As
previously announced, the Company successfully completed the
disposal of two office holdings in the first quarter:
-
2-4
King Street, London SW1 – a multi-let freehold of 15,000 sq
ft in London’s West End.
-
The
Leonardo Building, Crawley – a
headquarters office building of 110,000 sq ft, located on an out-of
town business park.
The sales
completed at an aggregate price of £54.6m, reflecting a discount to
the preceding valuation of 0.4 per cent. The pricing achieved on
these disposals reflects the quality of the real estate in the
portfolio which has strong underlying fundamentals.
The
Manager is continuing to actively review a pipeline of further
disposals from the office sector, as part of the Company’s strategy
to enhance the portfolio’s exposure to structurally supported
growth sectors and assets.
Share
Price
As at
31 March 2024, the share price was
81.4 pence per share, which
represented a discount of 24.1 per cent to the NAV per share. The
share price total return for the quarter to 31 March 2024 was 14.3 per cent.
Cash
and Borrowings
The
Company had £66.1 million of available cash as at 31 March 2024.
The
Company has a £260 million term loan in place with L&G which
matures in December 2024. The Company
signed up to a new debt facility in September 2023 which has been provided by
incumbent lender, Barclays Bank plc, and HSBC UK Bank plc. This
facility has been structured with two tranches, being (a) a £60
million Revolving Credit Facility (‘RCF’) and (b) a £260 million
Term Loan, which can only be drawn to refinance the existing
L&G Loan. Further to the sales highlighted above, the £30
million drawn down at 31 December
2023 was repaid during the quarter and as at 31 March 2024, the £60 million RCF remained
undrawn.
As at
31 March 2024, the Company’s loan to
value, net of cash was 20.4 per cent.
Dividend
The
Company paid three monthly property income distributions at a rate
of 0.44 pence per share during the
quarter.
Portfolio
Analysis – Sector Breakdown
|
Portfolio
Value
at 31 March 2024
£m
|
%
of portfolio at
31
March 2024
|
%
capital return (adjusted for sales and CAPEX)
|
Industrial
|
331.7
|
34.7
|
-0.2
|
South-East
|
59.0
|
6.2
|
0.8
|
Rest of
UK
|
272.7
|
28.5
|
-0.5
|
Offices
|
206.8
|
21.6
|
-4.3
|
West
End
|
54.7
|
5.7
|
1.7
|
South-East
|
15.9
|
1.7
|
-8.4
|
South-West
|
20.6
|
2.2
|
-11.2
|
Rest of
UK
|
97.0
|
10.1
|
-5.8
|
City
|
18.6
|
1.9
|
-0.9
|
Retail
|
183.0
|
19.1
|
-3.4
|
West
End
|
157.6
|
16.5
|
-3.9
|
South-East
|
25.4
|
2.6
|
-0.4
|
Retail
Warehouse
|
129.0
|
13.5
|
2.4
|
Alternatives
|
106.5
|
11.1
|
-1.9
|
Total
Property Portfolio
|
957.0
|
100.0
|
-1.6
|
Portfolio
Analysis – Geographic Breakdown
|
Market
Value
£m
|
%
of portfolio as at
31
March 2024
|
West
End
|
259.0
|
27.1
|
Midlands
|
238.3
|
24.9
|
South
East
|
222.4
|
23.2
|
North
West
|
127.5
|
13.3
|
Scotland
|
70.6
|
7.4
|
South
West
|
20.6
|
2.2
|
Rest of
London
|
18.6
|
1.9
|
Total
Property Portfolio
|
957.0
|
100.0
|
Top
Ten Investments
|
Sector
|
Properties
valued in excess of £200 million
|
|
London W1,
St Christopher’s Place Estate *
|
Mixed
|
Properties
valued between £50 million and £70 million
|
|
Solihull,
Sears Retail Park
|
Retail
Warehouse
|
Newbury,
Newbury Retail Park
|
Retail
Warehouse
|
Properties
valued between £40 million and £50 million
|
|
London
SW19, Wimbledon Broadway **
Winchester,
Burma Road
|
Mixed
Alternative
|
Properties
valued between £30 million and £40 million
Chorley,
Units 6 and 8 Revolution Park
Birmingham,
Unit 8 Hams Hall Distribution Park
Markham
Vale, Orion 1 & 2
Liverpool,
Unit 1, G.Park, Portal Way
Daventry,
Site E4, Daventry International Rail Freight Terminal
|
Industrial
Industrial
Industrial
Industrial
Industrial
|
|
|
*
Mixed use
property of retail, office and residential space.
** Mixed
use property of retail and leisure space.
Summary
Balance Sheet
|
£m
|
Pence
per share
|
%
of Net Assets
|
Property
Portfolio
|
957.0
|
136.4
|
127.2
|
Adjustment
for lease incentives
|
(14.7)
|
(2.1)
|
(2.0)
|
Fair
Value of Property Portfolio
|
942.3
|
134.3
|
125.2
|
Trade and
other receivables
|
26.1
|
3.7
|
3.4
|
Cash and
cash equivalents
|
66.1
|
9.4
|
8.8
|
Current
liabilities
|
(19.7)
|
(2.8)
|
(2.6)
|
Current
interest-bearing loan
|
(259.8)
|
(37.0)
|
(34.5)
|
Total
Assets less current liabilities
|
755.0
|
107.6
|
100.3
|
Non-current
liabilities
|
(2.5)
|
(0.3)
|
(0.3)
|
Net
Assets at 31 March 2024
|
752.5
|
107.3
|
100.0
|
The next
quarterly valuation of the property portfolio will be conducted by
CBRE Limited during June 2024 and it
is expected that the unaudited NAV per share as at 30 June 2024 will be announced in July 2024.
Subsequent
events
On
15 April 2024, the Company announced
that it had commenced a strategic review process (the 'Strategic
Review Announcement'). A copy of the Strategic Review Announcement
has been made available,
subject to certain restrictions relating to persons resident in
restricted jurisdictions, on the Company's website
(https://www.balancedcommercialproperty.co.uk).
Following
the quarter ended 31 March 2024, the
Company published its annual report and audited consolidated
financial statements in respect of the financial year ended
31 December 2023 ('2023 Annual
Report'). The 2023 Annual Report is also available for inspection
on the Company's website.
Important
information
The
information contained within this announcement is deemed by the
Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014. Upon the publication of
this announcement via Regulatory Information Service this inside
information is now considered to be in the public
domain.
Enquiries:
Richard Kirby
Columbia
Threadneedle REP AM plc
Tel: 0207
499 2244
Innes Urquhart
Winterflood
Securities Limited
Tel: 0203
100 0265
Dion Di Miceli / Tom
MacDonald / Stuart Muress /
James Atkinson
Barclays
Bank PLC
Tel: 0207
623 2323
BarclaysInvestmentCompanies@barclays.com