To: Company
Announcements
Date: 2
February 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 -2.4 per cent for the quarter ended 31 December 2023.
-
Share Price total return
of 8.9 per cent for the quarter ended 31
December 2023.
-
Successful disposal of 3
office holdings at an aggregate price of £42.8m and a discount to
September valuation of 0.3 per cent, reducing portfolio office
exposure to 24.4 per cent.
-
Further portfolio
rebalancing and strategic disposals anticipated, targeting assets
where value can be crystallised following the successful delivery
of asset business plans.
-
Portfolio passing rent up
1.2 per cent and Estimated Rental Value (ERV) up 0.9 per cent over
the quarter, as 12 occupational transactions
completed.
-
Refurbishment of Strategic
Park, Southampton completed and
both units let post-period, delivering a 12-month total return of
13.4 per cent alongside attractive ESG credentials and an enhanced
exposure to the industrial & logistics sector. The
refurbishment resulted in an uplift of 27.5 per cent to the
previous combined passing rent.
Net Asset Value:
total return of -2.4 per cent for the
quarter
The unaudited net asset
value (`NAV') per share of the Company as at 31 December 2023 was 109.8
pence. This represents a decrease of 3.6 per cent from the
unaudited NAV per share as at 30 September
2023 of 113.9 pence and a NAV
total return for the quarter of -2.4 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 December 2023 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 30 September 2023
to 31 December 2023 (including the
effect of gearing):
|
£m
|
Pence per
share
|
% of opening NAV
per share
|
NAV as at 30
September 2023
|
798.8
|
113.9
|
|
Unrealised decrease in
valuation of property portfolio
|
(26.0)
|
(3.7)
|
(3.3)
|
Realised losses on
property sales
|
(1.7)
|
(0.2)
|
(0.2)
|
Other net
revenue
|
8.3
|
1.1
|
1.0
|
Dividends
paid
|
(9.3)
|
(1.3)
|
(1.1)
|
NAV as at 31
December 2023
|
770.1
|
109.8
|
(3.6)
|
The EPRA Net Tangible
Assets per share as at 31 December
2023 was 109.8 pence per share
(30 September 2023: 113.9 pence per share).
Investment Market
Commentary
Despite an improving
macroeconomic backdrop, the real estate sector has seen a slight
softening in pricing over the final quarter of 2023 as the MSCI UK
Monthly Property Index recorded capital value falls of 2.6 per
cent. This was primarily on account of limited transactional
activity with investment volumes down by nearly 50 per cent
year-on-year. Buyers continue to exercise caution in the face of
elevated interest rates and a challenging debt market, whilst
sellers adopt a wait-and-see approach amid strengthening rhetoric
around the timing of any cuts to the base rate.
Transactional
Activity and Disposal Programme Update: £42.8m of Offices
Sold
As previously announced,
the Company successfully completed the sale of three office
holdings during December and January as part of its stated strategy
to reduce the portfolio's exposure to the office sector. Following
these disposals, BCPT's exposure to offices has now been reduced to
24.4 per cent.
The sales
were:
-
Nevis & Ness House, Edinburgh Park,
Edinburgh - a 42,000 sq ft
headquarters office occupied by Diageo Scotland
Limited.
-
Building 4, Prime Four
Business Park, Aberdeen - a 25,000
sq ft training centre occupied by Maersk Training UK
Limited.
-
2-4 King Street, London SW1 - a multi-let freehold of 15,000 sq
ft in London's West
End.
The sales completed at an
aggregate price of £42.8 million, representing a 0.3% discount to
the September 2023 independent
valuation, the latest valuation prior to the assets being launched
to market. The pricing achieved on these disposals reflects the
quality of the real estate in the portfolio which has strong
underlying fundamentals, supporting relative resilience and
liquidity.
The Manager is continuing
to actively review a pipeline of further disposals from both the
office and other sectors, targeting assets where value can be
crystallised following the successful delivery of asset business
plans, as part of the Company's strategy to enhance the portfolio's
exposure to structurally supported growth sectors and
assets.
Portfolio
Valuation: -2.6 per cent capital return
Over the quarter, the
Company's portfolio recorded a valuation decline of 2.6 per cent,
with the valuation yields moving as below:
Portfolio
yield
|
September
2023
|
December
2023
|
Net initial yield
(%)
|
5.4
|
5.5
|
Equivalent yield
(%)
|
6.4
|
6.5
|
At the sector level, the
portfolio's office assets saw a valuation decline of 5.4 per cent
as the equivalent yield on the portfolio moved out by 30 basis
points to 8.2 per cent. Weak investor sentiment towards the sector
in general, particularly the out-of-town business park segment, can
be contrasted against an occupational market that continues to
demonstrate resilience for high quality assets in stronger
locations.
Retail warehouse assets
experienced a valuation fall of 4.6 per cent, driven by market-led
yield shifts as the valuer moved prime sector yields out by 25
basis points. The equivalent yield on these holdings is now 6.2 per
cent. The Company's retail parks are fully occupied by a
discount/convenience-led tenant roster, and benefit from affluent
catchments, offering an attractive and sustainable income
profile.
St Christopher's Place saw
a valuation decline of 1.5 per cent over the quarter driven by its
office and residential exposures. The active repositioning of
traditional retail to food & beverage uses continues to gather
momentum, lending support to both capital and rental values within
the retail and leisure segments of the holding.
Industrial assets
experienced a capital fall of 0.9 per cent, with marginal yield
softening being offset by continued rental value growth, as the
equivalent yield on the portfolio moved out by 14 basis points to
6.0 per cent. However, there remain strong occupational dynamics in
the industrial portfolio, offering a valuation income reversion in
excess of 40 per cent of the current passing rent, which the
Company will look to crystallise through active asset
management.
Asset Management
Update
We remain in an
environment of constrained capital growth where income drives total
returns and relative outperformance is predicated on active asset
management delivering both income and capital
growth.
Importantly the 12
occupational transactions completed over the quarter resulted in a
1.2 per cent increase in portfolio passing rent (on a like-for-like
basis). Of particular note:
-
Strategic Park,
Southampton - the speculative
refurbishment of this two-unit logistics scheme completed in
October 2023 and both units have now
been committed at rents ahead of proforma ERVs. The refurbishment
resulted in an uplift of 27.5 per cent to the previous combined
passing rent and generated capital growth of 15.7 per cent over a
twelve-month period. There were also significant ESG enhancements
with A-rated EPCs, a BREEAM Very Good certification and a full
solar photovoltaic system installed on the roof. The solar
installation is forecast to produce an additional operational
income return of circa 7.5 per cent.
-
7 Birchin Lane,
London
EC3 - this City of London office holding is subject to a
phased `Plug & Play' refurbishment to enhance occupier demand,
rental tone and ESG credentials. Redmayne
Bentley have completed a new 5-year lease (break in year 3)
of the newly refurbished 1st floor with the rent at a premium of
17.6 per cent to the suite's ERV prior to the
refurbishment.
-
The Cowdray
Centre, Colchester
- a multi-let
industrial estate where The Range have renewed and entered into a
new 15-year lease at a rent representing a 9.1 per cent premium to
ERV, in exchange for a 14-month rent free period taken as a stepped
rent. The Cowdray Carpet Centre also completed a lease renewal,
taking a new 10-year lease (5th year break) at a rent representing
a 106 per cent uplift to the previous passing rent, in exchange for
a 6-month rent-free period.
The portfolio vacancy rate
remained stable over the quarter at 6.7 per cent, of which 0.6 per
cent is contractually committed and 4.3 per cent is attributable to
Stockley Park, Uxbridge, which is held for strategic
repurposing.
Share Price: 8.9
per cent total return for the Quarter
As at 31 December 2023, the share price was
72.5 pence per share, which
represented a discount of 34.0 per cent to the NAV per share. The
share price total return for the quarter to 31 December 2023 was 8.9 per
cent.
Cash and
Borrowings
The Company had £41.7
million of available cash as at 31 December
2023.
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.
At
31 December 2023, £30 million of the
RCF was drawn.
As at 31 December 2023, the Company's loan to value,
net of cash was 24.4 per cent.
Dividend
The Company paid monthly
property income distributions at a rate of 0.44 pence per share during the
quarter.
Portfolio Analysis
- Sector Breakdown
|
Portfolio
Value at 31
December 2023
£m
|
% of portfolio
at
31 December
2023
|
% capital value
shift (including purchases and CAPEX)
|
Offices
|
271.9
|
26.5
|
-5.4
|
West End
|
82.0
|
8.0
|
-2.7
|
South-East
|
45.0
|
4.4
|
-4.9
|
South-West
|
23.2
|
2.3
|
-2.7
|
Rest of
UK
|
103.0
|
10.0
|
-9.1
|
City
|
18.7
|
1.8
|
-0.7
|
Retail
|
189.3
|
18.4
|
0.1
|
West End
|
163.8
|
15.9
|
0.1
|
South-East
|
25.5
|
2.5
|
-0.2
|
Industrial
|
331.8
|
32.3
|
-0.9
|
South-East
|
57.9
|
5.6
|
4.5
|
Rest of
UK
|
273.9
|
26.7
|
-1.9
|
Retail
Warehouse
|
125.8
|
12.3
|
-4.6
|
Alternatives
|
108.4
|
10.5
|
-2.8
|
Total Property
Portfolio
|
1,027.2
|
100.0
|
-2.6
|
Sector Breakdown
post completion of office sale in January
2024
|
% of
portfolio
|
Offices
|
24.4
|
Retail
|
19.0
|
Industrial
|
33.2
|
Retail
Warehouse
|
12.6
|
Alternatives
|
10.8
|
Total
|
100.0
|
Portfolio Analysis
- Geographic Breakdown
|
Market
Value
£m
|
% of portfolio as
at
31 December
2023
|
West End
|
294.4
|
28.7
|
South
East
|
248.1
|
24.2
|
Midlands
|
238.9
|
23.3
|
North
West
|
128.2
|
12.5
|
Scotland
|
75.6
|
7.3
|
South
West
|
23.2
|
2.2
|
Rest of
London
|
18.8
|
1.8
|
Total Property
Portfolio
|
1,027.2
|
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
|
1,027.2
|
146.4
|
133.4
|
Adjustment for lease
incentives
|
(18.9)
|
(2.7)
|
(2.5)
|
Fair Value of
Property Portfolio
|
1,008.3
|
143.7
|
130.9
|
Trade and other
receivables
|
26.4
|
3.8
|
3.4
|
Cash and cash
equivalents
|
41.7
|
5.9
|
5.4
|
Current
liabilities
|
(17.0)
|
(2.4)
|
(2.2)
|
Total Assets less
current liabilities
|
1,059.4
|
151.0
|
137.5
|
Non-current
liabilities
|
(2.8)
|
(0.4)
|
(0.3)
|
Non-current
interest-bearing loans
|
(286.5)
|
(40.8)
|
(37.2)
|
Net Assets at 31
December 2023
|
770.1
|
109.8
|
100.0
|
The next quarterly
valuation of the property portfolio will be conducted by CBRE
Limited during March 2024 and it is
expected that the unaudited NAV per share as at 31 March 2024 will be announced in April 2024.
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