Interim Report for the Period ended 30 June 2023
14/09/2023 07:00
Date: 14 September 2023
From: Balanced Commercial Property Trust Limited
LEI: 213800A2B1H4ULF3K397
(Classified Regulated Information, under DTR 6 Annex 1 Section 1.2)
Interim Report for the Period ended 30 June 2023
Headlines
* Net asset value total return* of +0.8 per cent for the 6 months ended 30
June 2023 (H1 2022: +11.7 per cent).
* Share price total return* of -23.0 per cent for the 6 months ended 30 June
2023 (H1 2022: +8.3 per cent).
* Monthly dividend to be increased by 10.0 per cent to 0.44 pence per share
from October 2023.
* Cash dividend cover was 117.6 per cent (H1 2022: 97.1 per cent)
* Post period-end the Company signed up to a New Debt Facility provided by
incumbent lender Barclays and a new lender HSBC. Additional information can
be found in the Chairman's Statement and Note 14.
* Portfolio return* of +1.5 per cent over the 6 months to June 2023 versus the
MSCI UK Quarterly Property Index return of +0.3 per cent.
* 40 leasing initiatives contracted over the six-month period, accounting for
an income stream of £4.1 million per annum.
* See Alternative Performance Measures
Chairman’s Statement
Following a particularly turbulent 2022, the first half of 2023 represented a
more stable environment for real estate capital values.
While consensus has begun to move away from the UK economy falling into
recession, the macroeconomic environment is not overly favourable, with high
inflation and high debt costs impacting economic growth. This rise in interest
rates has led to less investment activity, and this lack of liquidity within
the property capital markets continues to bear on investor sentiment.
Whilst most real estate sectors have remained relatively stable throughout
2023 to date, a significant portion of the office sector remains under
pressure, experiencing the greatest decline of all sectors in capital values
over the six months. On a brighter note, occupational markets across the
other sectors have continued to show resilience and sustained activity despite
the wider economic pressures.
Company Performance
Against this economic and property market backdrop, the Company has delivered
a positive net asset value (‘NAV’) total return of 0.8 per cent for the
six months. The NAV per share as at 30 June 2023 was 117.1 pence, down 1.2 per
cent from 118.5 pence per share as at 31 December 2022.
The share price discount to NAV stood at 43.5 per cent at the end of the
period and the negative sentiment towards the real estate sector continues to
affect the rating of the shares. The Board believes that the action that has
been taken in the refinancing of its debt reduces near term uncertainty and
provides flexibility to reduce gearing in the Company and support the dividend
increase.
The following table provides an analysis of the movement in the NAV per share
during the period.
Pence
NAV per share as at 31 December 2022 118.5
Unrealised decrease in valuation of property portfolio (1.5)
Movement in interest rate swap (0.1)
Other net revenue 2.6
Dividends paid (2.4)
NAV per share as at 30 June 2023 117.1
Portfolio Performance
The Company’s portfolio delivered a total return of 1.5 per cent over the
first six months of the year, outperforming the MSCI UK Quarterly Property
Index to June 2023 (‘MSCI’) return of 0.3 per cent. Relative
outperformance was driven by a capital return of -1.1 per cent against the
Index return of -2.0 per cent and an income return of 2.6 per cent against the
Index at 2.3 per cent.
In a low-growth environment such as this, income becomes the primary driver of
total return. It is therefore pleasing to report that 40 leasing initiatives
and lease events have been concluded over the six-month period, accounting for
a contracted income stream of £4.1 million per annum, with a further 19 lease
initiatives completing post-period and representing an income stream of £3.8
million per annum. The Manager highlights in the Managers’ Review the
potential for further income reversion in the portfolio.
The main drag on performance has been the portfolio’s exposure to the office
sector, particularly select regional office markets and those buildings on
shorter leases. Although the Company decided to reduce its office exposure
through the sale of Cassini House in 2021, and while our office assets have
generally been backed by positive tenant demand, overall sentiment to this
sector of the market cannot be ignored. The Manager is therefore reviewing the
portfolio weighting and is actively looking to further reduce the Company’s
office exposure.
Borrowings
The Board has been reviewing financing options available to the Company on its
debt, as its £260 million term loan with L&G is due to mature in December
2024. The Company also has a £50 million term loan with Barclays which is
fully drawn down, along with an additional undrawn £50 million revolving
credit facility (“RCF”) which expires on 31 July 2024 (the term loan and
the RCF together being the “Barclays Debt Facility”).
The Board engaged EY Capital & Debt Advisory to act as Independent Financial
Advisor in assessing the financing options available.
Following the conclusion of this exercise, we are pleased to announce the
signing of a new, initially two-year debt facility provided by incumbent
lender, Barclays, and a new lender, HSBC. The new debt facility has been
structured with two tranches, being (a) a £60 million RCF and (b) a committed
£260 million Term Loan, which can only be drawn to refinance the existing
£260 million L&G Loan. Each tranche of the new facility can be repaid at any
time. The current Barclays Debt Facility will be repaid, in full, and
cancelled on 14 September 2023, with £30 million of the RCF tranche of the
new debt facility being drawn down on the same date.
The new debt facility enables the Company to retain the competitively priced
L&G Loan which is fixed at 3.32 per cent up to its existing 31 December 2024
maturity, whilst also ensuring the future liquidity needs of the Company are
fully funded at an acceptable commitment fee, removing near term refinancing
risk. The new debt facility includes two one-year extension options that allow
the Company the flexibility to extend it with the agreement of Barclays and
HSBC, with the first option available to be requested from 1 February 2024.
The Board believes that the new debt facility represents a successful outcome
for the Company as it provides certainty of financing beyond the 2024
continuation vote while retaining the lower-cost fixed rate L&G Loan up to its
final maturity date. It avoids having to fix longer-term debt at current rates
whilst not precluding any future financing options and/or gearing targets in
the light of any future disposals. This new facility therefore provides the
Company with greater flexibility and optionality.
As at 30 June 2023, the Company’s loan to value, net of cash (‘LTV’) was
23.7 per cent and the weighted average interest rate on the Group’s total
current borrowings was 3.6 per cent.
Dividends and Dividend Increase
The Company paid six interim dividends totalling 2.4 pence per share during
the period, being six monthly dividends of 0.4 pence per share. The level of
dividend cover for the period was 117.6 per cent on a cash basis. In line with
its commitment to keep the level of dividend under review, the Board is
pleased to report its intention to increase the level of the monthly dividend
by 10.0 per cent to 0.44 pence per share with effect from the October 2023
distribution.
Environmental, Social and Governance (‘ESG’)
The Board remains committed to achieving Net Zero Carbon by 2040 or sooner.
Detailed analysis and modelling of emissions reduction trajectories, which has
been delivered through planned asset level interventions, has been a core
feature of ESG activities in this period. The Board and Managers believe that
the portfolio is well placed to deliver on its net zero carbon ambition within
a business-as-usual context. The Managers and Board continue to pay attention
to all material ESG matters.
Outlook
Whilst inflationary pressures in the wider economy have begun to ease, the
headline rate of inflation remains elevated, and core inflation remains above
the consensus forecast. At this point, it is unclear if we will see further
increases to the base rate of interest in the short term in what remains an
uncertain economic environment for business and consumer confidence.
Long-term interest rates are expected to settle at a higher level than those
seen over recent years. This may constrain any prospective recovery in real
estate capital values in the near term. It is possible that investment
activity will remain subdued as buyers become increasingly selective in the
search for attractive long-term returns in a low-growth, high inflation
environment. We are also likely to see a greater divergence in sector
allocation within real estate and a definitive preference for higher quality
assets, or those that can be repositioned to provide increasingly demanded ESG
credentials.
Preservation and creation of income continues to be key to performance. The
portfolio continues to offer reversionary potential and significant
opportunities for proactive management to drive income and related capital
growth which will be critical in underpinning performance for the remainder of
the year and into 2024, when we hope to see a recovery in the wider property
market if the economic environment improves.
Paul Marcuse
Chairman
13 September 2023
Performance Summary
Half year ended 30 June 2023 Half year ended 30 % change
June 2022
Total Returns for the period *
Net asset value per share +0.8% +11.7% -10.9%
Ordinary Share price -23.0% +8.3% -31.3%
Portfolio +1.5% +9.7% -8.2%
MSCI UK Quarterly Property Index +0.3% +7.8% -7.5%
FTSE All-Share Index +2.6% -4.6% +7.2%
Half year ended 30 June 2023 Year ended % change
31 December 2022
Capital Values
Total assets less current liabilities (£’000) 1,133,223 1,093,103 +3.7%
Net asset value per share 117.1p 118.5p -1.2%
EPRA Net Tangible Assets per share* 117.1p 118.4p -1.1%
Ordinary Share price 66.2p 88.5p -25.2%
FTSE All-Share Index 4,096.3 4,075.1 +0.5%
Ordinary share price discount to net asset value per share* (43.5)% (25.3)% -18.2%
Net Gearing * 23.7% 23.4% +0.3%
Earnings and Dividends
Earnings per Ordinary Share 1.1p 14.4p
EPRA Earnings per Ordinary Share 2.6p 2.3p
Dividends per Ordinary Share 2.4p 2.3p
Dividend yield * 7.3% 4.1%
Sources: Columbia Threadneedle Investment Business, MSCI Inc and Refinitiv Eikon
* See Alternative Performance Measures
Managers’ Review
Property Market Review
The first half of 2023 has seen a return of relative stability, with the
all-property equivalent yield moving out by just 18 basis points over the
period.
Interest rates and the high cost of debt have remained at the forefront of
investment considerations as the rate of inflation peaked over the period at
10.4 per cent in February 2023. While the rate of inflation has moderated
since, the headline level remains high, and the Bank of England’s monetary
response has proven slow to cool pricing pressures. Consequent increases in
the cost of debt have added a further layer of caution to investment
underwriting given uncertainty around interest rates. This economic
environment has resulted in muted activity in the real estate investment
markets. Whilst there is no shortage of capital available for deployment into
key sectors such as industrial, retail warehousing and alternatives,
investment markets have been impacted by a lack of available stock, with
investment volumes in H1 2023 down 53 per cent year on year, and down 27 per
cent on H2 2022.
Against this backdrop, the MSCI UK Quarterly Property Index generated a
subdued total return of 0.3 per cent over the 6 months, constrained by a
capital return of -2.0 per cent. However, the headline position belies a
significant divergence at the sector and sub-sector level.
This has been most notable in the office sector, where the popularity of
hybrid working strategies has brought about a structural reduction in occupier
demand. However, corporates are increasingly seeking to tempt employees back
to the office and consequently occupier demand has been strongly focussed on
high-quality accommodation in locations offering attractive amenity. This has
served to reinforce the now-established bifurcation between prime and
secondary accommodation. Retail warehousing remains the favoured sub-sector,
delivering the highest total return over the six-month period. With large,
flexible units, the sector forms a key part of an omni-channel retailing
platform and we have consequently seen demand from an increasingly wide
variety of well-capitalised retailers. Offering a yield advantage over other
sectors, investor appetite for retail warehousing has remained robust but
constrained by a lack of available supply.
The wider retail sector has seen a more benign period with both rents and
yields having been substantially rebased across the sector in prior years.
Central London in particular has seen renewed levels of occupier demand as
rents have been reset to more viable levels and accompanied by significant
reductions in business rates, combining to materially decrease occupational
costs and boost retailer profitability.
Whilst demand for logistics space has fallen from the highs seen during the
pandemic, the sector’s fundamentals remain robust with demand stemming from
a diverse range of occupiers within a well-balanced market. Supply has been
constrained by a lack of speculative development due to tighter lending
conditions and inflated construction costs. However, there is also evidence of
occupiers trading down the quality spectrum in order to benefit from lesser
rents and a slightly more muted rental growth outlook. We are yet to see a
full recovery in pricing following outward prime yield movement of 150 basis
point in H2 2022, with yields softening by 25 basis points over H1 2023,
reflecting hesitancy within an uncertain economic environment.
Portfolio performance
The total return from the portfolio was 1.5 per cent over the six months,
compared with the MSCI return of 0.3 per cent.
The portfolio outperformed MSCI on both capital and income returns over the
period. Capital growth from the portfolio was -1.1 per cent compared with the
MSCI return of -2.0 per cent, while the portfolio generated a 2.6 per cent
income return against the Index at 2.3 per cent.
Capital Growth
Over the period, the equivalent yield on the portfolio softened from 5.9 per
cent to 6.2 per cent.
Retail warehousing was the Company’s strongest performing sector, delivering
capital growth of 7.1 per cent and a total return of 10.3 per cent. The
Company’s assets represent prime holdings that have already transitioned to
a robust tenant line-up. The appeal of these high-quality assets to the
investment market has been supplemented by asset management to generate a 7.1
per cent uplift in passing rent over the period.
The Company’s industrial holdings delivered capital growth of 2.2 per cent
over the period and a total return of 4.6 per cent. These assets offer
attractive growth prospects with reversionary income potential. Strong levels
of occupational activity are crystallising this growth into both income and
capital performance with four leasing initiatives contracting over the six
months, at an average 2.2 per cent premium to the estimated rental value
(‘ERV’).
The mixed-use asset at St Christopher’s Place, London produced a total
return of 0.1 per cent as it continues to recover post Covid. A marginally
negative capital performance of -1.5 per cent was driven by the holding’s
exposure to the office sector, which makes up circa 16 per cent of the
asset’s capital value.
The performance of the Company’s office holdings was the main drag on
performance, as the sector delivered negative capital growth of -7.5 per cent
and a total return of -4.6 per cent. Over the period, investor sentiment
towards this sector has deteriorated markedly.
Balanced Commercial Property Trust MSCI UK Quarterly Index
Sector Income Return (%) Capital Return (%) Total Return (%) Total Return (%)
All Retail 2.4 0.9 3.3 2.0
Offices 3.2 -7.5 -4.6 -4.5
Industrial 2.3 2.2 4.6 2.8
Alternatives 2.4 0.9 3.3 0.4
All Property 2.6 -1.1 1.5 0.3
Income Return
Over the six-month period, the passing rent across the portfolio grew by 4.1
per cent.
While the vacancy rate rose from 5.9 per cent by ERV to 7.2 per cent over the
period, 2.0 per cent of this is contractually committed and completion of
these leases will ultimately see the vacancy rate fall to 5.2 per cent. The
portfolio’s key vacancy is an office at Stockley Park, Uxbridge, which
accounts for 4.4 per cent of the void rate. We are currently working alongside
a prospective occupier to deliver a value-accretive repositioning development,
to convert the building to a medical use.
The weighted average unexpired lease term (WAULT) for the portfolio stands at
4.7 years assuming all break options are actioned. While income duration is
preferred from a capital resilience perspective, this must be balanced against
the opportunity to leverage lease events to crystallise rental growth into
income performance, which is particularly critical in the prevailing market
conditions. The portfolio offers an overall potential income reversion of
circa 18 per cent and the WAULT offers the opportunity to release this latent
value. This is particularly relevant within the industrial portfolio, where
the income reversion is approximately 40 per cent and the WAULT 3.7 years.
Approximately 30 per cent of the portfolio’s income profile is supported
through the presence of fixed-uplifts and partial inflationary linked rent
review mechanisms within occupational leases.
Geographical Analysis (% of total property portfolio)
30 June 2023 (%)
London – West End 27.7
South East 23.4
Midlands 22.4
North West 12.1
Scotland 10.4
South West 2.3
Rest of London 1.7
Source: Columbia Threadneedle REP AM plc
Sector Analysis (% of total property portfolio)
30 June 2023 (%)
Industrial 29.9
Offices 29.6
Retail 17.3
Retail Warehouses 12.6
Alternative 10.6
Source: Columbia Threadneedle REP AM plc
Income Analysis and Voids
Lease Expiry Profile
At 30 June 2023 the weighted average lease length for the portfolio, assuming all break options are exercised, was 4.7 years (31 December 2022: 5.2 years).
% of leases expiring (weighted by rental value) 30 June 2023 (%) 31 December 2022 (%)
0 – 5 years 62.9 58.1
5 – 10 years 26.2 30.3
10 – 15 years 6.5 6.4
15 – 25 years 4.4 5.2
Source: Columbia Threadneedle REP AM plc
Asset Management
Industrial and logistics
The industrial and logistics sector has remained a key driver of performance
for the Company. While the occupational market has experienced a slight
cooling, the Company’s assets have seen rental growth of 3.1 per cent over
the period and a number of highly accretive asset management initiatives have
been delivered, crystallising both income and capital performance.
Hurricane 52, Estuary Business Park, Liverpool
The speculative development of this highly specified 52,500 sq ft logistics
unit reached practical completion in August 2022. Following a competitive
best-bids process, the unit was let in July 2023 to clothing manufacturer
Montirex on a 10-year lease (break at year 5) at a rent showing a 7.2 per cent
premium to the ERV. As at 30 June, this property represented the portfolio’s
second largest single void by ERV, making the letting an important initiative
that resulted in it being the portfolio’s top performer, delivering a total
return of 17.5 per cent over the six months.
The Cowdray Centre, Colchester
This multi-let estate continues to see buoyant levels of occupier activity,
supported by a phased programme of refurbishment which is driving renewed
occupier demand, rental growth and value appreciation. MKM Building Supplies
have exchanged a 20-year Agreement for Lease (break year 15) on Unit 1 Mason
Road, at a rent in line with ERV and showing a premium to the rent agreed on
the adjacent unit in December 2022. Elsewhere on the estate, a lease renewal
on 13 Mason Road (Jayar Components) and a rent review on 3 Mason Road (Rexel
UK) were concluded at a combined premium of 46 per cent above the previous
passing rent. This accretive asset management activity has underpinned a
robust total return of 4.1 per cent from the asset over the six months.
8 Hams Hall Distribution Park, Birmingham
This bespoke facility of 264,000 sq ft is occupied by Nestle Purina until
March 2025. In August, Nestle completed a 10 year (break year 5) reversionary
lease from March 2025 in exchange for a 3.5 month rent free period. The rent
review now due in 2025 is expected to yield a significant uplift in passing
rent.
Units 1 & 2 Strategic Park, Southampton
This two-unit scheme is subject to a significant refurbishment to enhance the
specification of the units and its ESG credentials. The works are due to
complete in September 2023 and both units are subject to leasing offers.
Retail Warehousing
A highly successful leasing strategy was delivered at the Company’s retail
warehousing assets in 2022, securing full occupation of both holdings and
solidifying a robust grocery, discount and convenience-led tenant roster. This
has positioned these holdings to be the primary drivers of portfolio
outperformance moving into 2023 as new leases have completed, generating a 7.1
per cent increase in the rental income from the parks over the six-month
period.
JD Sports, Cancer Research and Mountain Warehouse have all opened for trade in
the first half of 2023, while Tim Horton will be opening in Newbury later in
the year.
Offices
Despite a very challenging period for offices and amid a tenant flight to
quality we concluded six leasing initiatives in the first half of the year
representing a rent roll of £1.7m. This activity supported a 6.3 per cent
uplift in passing rent from the office portfolio, in turn driving income
outperformance from the assets.
7 Birchin Lane, London EC3
The portfolio’s sole City of London holding has been subject to a phased
programme of refurbishment, delivering Category A ‘Plug & Play’ space
along with upgraded ESG credentials including a B-rated EPC. This investment
has proven highly successful as two of these refurbished suites have let over
the period attracting premium rents.
King Street, Manchester
This core Manchester multi-let holding benefits from a prime location and the
building continues to see robust levels of occupier activity, remaining fully
occupied as existing occupiers commit to the building. Part of the eighth
floor was surrendered and simultaneously relet to an existing occupier, Markel
Insurance, maintaining occupancy and the income stream. In tandem, Markel
Insurance agreed a rental uplift at their outstanding September 2021 rent
review on their eleventh floor. Elsewhere in the building, Lloyds Bank and
Foresight Group both committed to additional 5-year terms on their respective
suites, supporting the continued appeal of this high-quality asset.
Retail
St Christopher’s Place (mixed-use F&B, retail, residential and offices)
The Company’s flagship asset is a unique property; a prime Central London
estate comprising 172 lettable units and 40 buildings, diversified across the
retail, leisure, residential and office sectors.
The property continues to recover, delivering a positive total return over the
six months to June. The strategy for St Christophers is firmly focussed on
growth with three key initiatives in place:
* Enhancing the Food & Beverage (“F&B”) offering at the estate.
The conversion of traditional retail to F&B drives investment fundamentals
through superior rents, longer leases and sharper capitalisation rates, while
also enhancing the consumer experience and occupier dynamics of the estate.
Since the start of the year, the F&B offering has overtaken retail as the
primary use class at the estate with three new F&B leases completing, two more
under offer and a conditional agreement exchanged with the vegan restaurant
concept Mildreds for a new anchor unit at the estate. The exposure to the F&B
sector has increased from 26.8 per cent to 32.4 per cent over the period.
* The recovery of Oxford Street.
The reduction of business rates by an average of 40 per cent, the opening of
Crossrail’s Elizabeth Line and the emergence of a rebased rental tone has
boosted occupier demand for Oxford Street. Since the turn of the year, fifteen
permanent leasing deals have completed, bringing a diversification of uses to
the street, while the number of immediately available units on Oxford Street
is now at half the level it was in the aftermath of the pandemic. Post period,
we have completed a lease renewal with Aldo at 372 Oxford Street, agreeing a
new 5-year lease on a stepped rent averaging more than double the current
passing rent.
* SCP as a West End office hub.
Occupier demand for smaller floorplates is predominantly centred on fully
fitted ‘Plug & Play’ space. Fitted space increases the optionality for
occupier demand and materially reduces void periods, rent free periods and
achieves higher rents. Whilst promoting the estate as an office campus, we are
proactively repositioning suites to meet this key source of demand, seeking to
convert 25 per cent of the office exposure in the short term to benefit from
these superior investment credentials. Since the turn of the year, four office
leases have completed and there are a further three under offer.
Alternatives
The portfolio’s alternatives holdings include the purpose-built student
accommodation in Winchester, residential properties at St Christopher’s
Place and the leisure units at Wimbledon Broadway (a gym and cinema).
The residential element of St Christopher’s Place is substantial, accounting
for 4.8 per cent of the value of the Company’s portfolio. The residential
element of the asset continues to deliver excellent growth, with annual net
income in the 12 months to June 2023 up 41 per cent year-on-year.
Strategic Portfolio Initiatives
The portfolio offers attractive reversionary potential alongside ample
opportunity for the delivery of value-add initiatives. A key strategic focus
is to maintain low vacancy, crystalise rental growth into income and boost
capital growth through the delivery of priority development projects in
Stockley Park, Uxbridge and Strategic Park in Southampton.
The recovery of the real estate markets will be driven by select growth
sectors and we have established a capital reallocation strategy to reduce the
portfolio’s exposure to the office sector. A number of assets have been
targeted for disposal and we are proactively seeking to focus strategy on key
growth sectors and assets as we align the portfolio to deliver long-term
relative outperformance.
Outlook
The economic backdrop has improved over the period. Having peaked in October
2022, the inflation rate appears to have hit an inflexion point, registering a
fall to 6.8 per cent in July 2023, the lowest level since March 2022. While
the lagging effects of higher interest rates may yet hit consumer confidence,
consumer spending has thus far supported two quarters of marginal growth in
GDP. The economic consensus now expects the UK to avoid entering recession,
which is lending support to corporate strategies and growth. Across the
sectors, occupational markets have remained robust, with income proving the
driver of positive total returns over the period.
Weak investor sentiment will prevail in this economic uncertainty, and, at the
market level, it is likely that investment volumes will remain subdued by
historical standards. Benign capital markets will put the emphasis on the
importance of income as the primary driver of total returns. Across the
sectors, the occupational markets have proven resilient. However, it is those
sectors offering both stability of income and the potential to enhance income
that will lead the real estate market to recovery.
Richard Kirby and Dan Walsgrove
Columbia Threadneedle REP AM plc
13 September 2023
Environmental, Social and Governance (ESG)
Environmental and Social Performance
Six months to 30 June 2023 Six months to 30 June 2022 Year to
31 December 2022
Carbon emissions (Scope 1 & 2) (tonnes Co2e) 795^ 915^ 1,437 This indicates the absolute amount of greenhouse gas emissions associated with the landlord’s operational activities across the portfolio.
Proportion of demises with EPC ratings of A & B (%) 25 17 16 This provides an indication of the level of exposure to higher theoretical energy efficiency attributes of the property assets.
Health & Safety 0 0 0 Number of notifiable incidents or statutory health and safety breaches in the managed portfolio.
^ Unaudited
Highlights for the six-month period to 30 June 2023
This half year has been no different to recent previous periods in terms of
witnessing major catastrophic incidences associated with climate change across
the globe. Whilst UK weather patterns in the past few months may have been
tempered by the position of the jet stream, other territories in relatively
close geographic proximity have not been so fortunate with overbearing heat
stresses and devastating wildfires a feature of recent times. Such incidents
serve to strengthen the Company's resolve and whilst its individual
contribution to climate action in a global context may be small, its relevance
to all our stakeholders remains firmly engrained in our mindset, evidenced by
our continued attention and focus to understanding and acting upon the risks
and opportunities associated with energy demand, clean energy supplies and
carbon emissions.
The Board is pleased to have seen the programme of asset level net zero carbon
assessments across the portfolio concluded at the turn of the year. The
information established during this process has, together with the application
of certain assumptions and proxy values, allowed for subsequent detailed
modelling and sensitivity testing around the future emissions profile of the
assets, based on planned and potential interventions. Together with a parallel
exercise covering transition towards more energy efficient assets, the Company
is well positioned to adhere to the commitments made in its carbon strategy
and pathway.
In the meantime, we have continued to pursue our regular core activities:
* The Company's ESG Committee formally met in March and May to review progress
against sustainability related initiatives and targets.
* The Company submitted to the 2023 GRESB (Global Real Estate Sustainability
Benchmark) survey on schedule for both real estate and public disclosure
modules. Results are due to be published on 1 October.
* The Company also submitted to the full tier of the CDP climate change module
on schedule, with these results due to published by the end of the year.
* For its 2022 ESG Report, and for the fifth year in succession, the Company
achieved a Gold Award for alignment to the 3rd Edition of the EPRA
Sustainability Best Practice Recommendations.
Whilst some residual distortion to consumption patterns may still remain on
account of occupational trends post-pandemic, the Company has nevertheless
seen:
* a 3% decrease in landlord controlled absolute energy consumption
* a 4% decrease in like-for-like landlord controlled energy intensity
* a 13% decrease in absolute landlord controlled carbon emissions
The reductions in absolute energy consumption are a reflection of blended
performance across the portfolio, whilst reductions in carbon emissions can be
partly attributed to ongoing decarbonisation of the electricity network as
well as lower energy demands at asset level.
* Determined by the number of directly managed assets, 100 per cent of sites
within the portfolio are paying the real living wage to all service provider
employees within scope in line with our target ambition of 100 per cent by the
end of 2021.
* The distribution of Energy Performance Certificate (EPC) ratings, as a
reflection of the energy efficiency credentials of assets across the
portfolio, continues to improve. At individual demise level, exposure to lower
F&G ratings is minimal at four, which together with three expired
certificates, represents units that are either very long leasehold or
currently vacant and identified for refurbishment. Exposure to higher A&B
ratings has similarly improved, covering 90 demises in total, being 54.9% by
Estimated Rental Value or 57.9% by Net Lettable Area.
* The Company continues to monitor its tenant mix as part of its commitment to
minimising leasing exposure to organisations connected to the production,
storage, distribution or use of Controversial Weapons. At the period ending 30
June 2023 zero per cent of rental income was attributable to organisations
that appear on the exclusion lists managed by Columbia Threadneedle Global
Asset Management.
Statement of Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company relate to the
following risk categories: investment performance; discount/premium; financial
management and product strategy. A detailed explanation of the risks and
uncertainties in each of these categories can be found under the heading
‘Principal Risks and Future Prospects’ within the Strategic Report in the
Company’s Annual Report for the year ended 31 December 2022. The Company’s
principal risks remain valid and are expected to be so for the remainder of
the Company’s financial year.
Statement of Directors’ Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
• the condensed set of unaudited consolidated financial statements has been
prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as
adopted by the European Union;
• the Chairman’s Statement and Managers’ Review (together constituting
the Interim Management Report) together with the Statement of Principal Risks
and Uncertainties above include a fair review of the information required by
the Disclosure and Transparency Rules (‘DTR’) 4.2.7R, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of consolidated financial
statements; and
• the Chairman’s Statement together with the condensed set of unaudited
consolidated financial statements include a fair review of the information
required by DTR 4.2.8R, being related party transactions that have taken place
in the first six months of the current financial year and that have materially
affected the financial position or performance of the Company during that
period, and any changes in the related party transactions described in the
last Annual Report that could do so.
On behalf of the Board
Paul Marcuse
Director
13 September 2023
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2023
Notes Six months Six months Year to
to 30 June to 30 June 31 December
2023 2022 2022*
£‘000 £‘000 £‘000
Revenue
Rental income 29,915 29,432 58,676
Other income - 42 42
Total revenue 29,915 29,474 58,718
(Losses)/gains on investment properties
Unrealised (losses)/gains on revaluation of investment properties 5 (10,719) 89,314 (129,096)
Losses on sale of investment properties realised 5 - (5) (5)
Total income 19,196 118,783 (70,383)
Expenditure
Investment management fee (3,089) (3,535) (6,861)
Other expenses 3 (3,820) (3,297) (6,479)
Total expenditure (6,909) (6,832) (13,340)
Operating profit/(loss) before finance costs and taxation 12,287 111,951 (83,723)
Net finance costs
Interest income 1,062 44 807
Finance costs (5,494) (5,642) (11,116)
(4,432) (5,598) (10,309)
Profit/(loss) before taxation 7,855 106,353 (94,032)
Taxation - (345) (345)
Profit/(loss) for the period 7,855 106,008 (94,377)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Movement in fair value of effective interest rate swap (843) 733 723
Total comprehensive income for the period 7,012 106,741 (93,654)
Basic and diluted earnings per share 4 1.1p 14.4p (13.1)p
EPRA earnings per share 2.6p 2.3p 4.8p
All of the profit and total comprehensive income for the period is
attributable to the owners of the Group.
All items in the above statement derive from continuing operations.
* These figures are audited.
Balanced Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2023
Notes 30 June 2023 £’000 30 June 2022 £’000 31 Dec 2022* £’000
Non-current assets
Investment properties 5 1,067,556 1,281,289 1,075,082
Trade and other receivables Interest rate swap asset 7 16,974 - 19,857 1,199 20,372 -
1,084,530 1,302,345 1,095,454
Current assets
Trade and other receivables 13,725 8,857 12,811
Interest rate swap asset 7 187 - 1,030
Cash and cash equivalents 54,804 86,412 54,837
68,716 95,269 68,678
Total assets 1,153,246 1,397,614 1,164,132
Current liabilities
Trade and other payables Interest rate swap liability (20,023) - (16,679) (159) (21,140) -
Interest-bearing loan - - (49,889)
(20,023) (16,838) (71,029)
Non-current liabilities
Trade and other payables (2,262) (2,167) (2,250)
Interest-bearing loans 7 (309,320) (309,047) (259,388)
(311,582) (311,214) (261,638)
Total liabilities (331,605) (328,052) (332,667)
Net assets 821,641 1,069,562 831,465
Represented by:
Share capital 8 7,994 7,199 7,994
Special reserves 485,840 507,416 485,840
Capital reserves 210,446 439,575 221,165
Hedging reserve 187 1,040 1,030
Revenue reserve 117,174 114,332 115,436
Equity shareholders’ funds 821,641 1,069,562 831,465
Net asset value per share 9 117.1p 148.6p 118.5p
EPRA net tangible assets per share 117.1p 148.4p 118.4p
* These figures are audited.
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2023
Share Capital £’000 Special Reserves £’000 Capital Reserves £’000 Hedging Reserve £’000 Revenue Reserve £’000 Total £’000
Notes
At 1 January 2023 7,994 485,840 221,165 1,030 115,436 831,465
Total comprehensive income for the period
Profit for the period - - - - 7,855 7,855
Movement in fair value of interest rate swap - - - (843) - (843)
Transfer in respect of unrealised losses on investment properties 5 - - (10,719) - 10,719 -
Total comprehensive income for the period - - (10,719) (843) 18,574 7,012
Transactions with owners of the Company recognised directly in equity
Dividends paid 2 - - - - (16,836) (16,836)
At 30 June 2023 7,994 485,840 210,446 187 117,174 821,641
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2022
Share Capital £’000 Special Reserves £’000 Capital Reserves £’000 Hedging Reserve £’000 Revenue Reserve £’000 Total £’000
Notes
At 1 January 2022 7,531 544,813 350,266 307 114,603 1,017,520
Total comprehensive income for the period
Profit for the period - - - - 106,008 106,008
Movement in fair value of interest rate swap - - - 733 - 733
Losses on sale of investment properties realised 5 - - (5) - 5 -
Transfer in respect of unrealised gains on investment properties 5 - - 89,314 - (89,314) -
Total comprehensive income for the period - - 89,309 733 16,699 106,741
Transactions with owners of the Company recognised directly in equity
Buybacks to Treasury 8 (332) (37,397) - - - (37,729)
Dividends paid 2 - - - - (16,970) (16,970)
At 30 June 2022 7,199 507,416 439,575 1,040 114,332 1,069,562
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 2022*
Share Capital £’000 Special Reserves £’000 Capital Reserves £’000 Hedging Reserve £’000 Revenue Reserve £’000 Total £’000
Notes
At 1 January 2022 7,531 544,813 350,266 307 114,603 1,017,520
Total comprehensive income for the year
Loss for the year - - - - (94,377) (94,377)
Movement in fair value of interest rate swaps - - - 723 - 723
Transfer in respect of unrealised losses on investment properties 5 - - (129,096) - 129,096 -
Losses on sale of investment properties realised 5 - - (5) - 5 -
Total comprehensive income for the year - - (129,101) 723 34,724 (93,654)
Transactions with owners of the Company recognised directly in equity
Transfer from share capital to special reserve 463 (463) - - - -
Buybacks to Treasury Dividends paid 8 2 - - (58,510) - - - - - - (33,891) (58,510) (33,891)
At 31 December 2022 7,994 485,840 221,165 1,030 115,436 831,465
* These figures are audited.
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2023
Notes Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022*
£’000 £’000 £’000
Profit/(loss) for the period before taxation 7,855 106,353 (94,032)
Adjustments for:
Finance costs 5,494 5,642 11,116
Interest income (1,062) (44) (807)
Unrealised losses/(gains) on revaluation of investment properties 5 10,719 (89,314) 129,096
Losses on sale of investment properties realised 5 - 5 5
Decrease/(increase) in operating trade and other receivables 2,478 (563) (5,032)
(Decrease)/increase in operating trade and other payables (1,085) (966) 3,412
Cash generated from operations 24,399 21,113 43,758
Interest received 1,062 44 807
Interest and bank fees paid (5,235) (5,708) (10,987)
Taxation paid - (345) (345)
(4,173) (6,009) (10,525)
Net cash inflow from operating activities 20,226 15,104 33,233
Cash flows from investing activities Purchase of investment properties 5 (602) - (812)
Capital expenditure of investment properties 5 (2,591) (12,074) (23,258)
Net cash outflow from investing activities (3,193) (12,074) (24,070)
Cash flows from financing activities
Dividends paid 2 (16,836) (16,970) (33,891)
Issue costs for loan facilities (230) - (6)
Buybacks to Treasury 8 - (37,729) (58,510)
Net cash outflow from financing activities (17,066) (54,699) (92,407)
Net decrease in cash and cash equivalents (33) (51,669) (83,244)
Opening cash and cash equivalents 54,837 138,081 138,081
Closing cash and cash equivalents 54,804 86,412 54,837
* These figures are audited
Balanced Commercial Property Trust Limited
Notes to the Consolidated Accounts
for the six months to 30 June 2023
1. General information and basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom Financial Conduct Authority and IAS 34 ‘Interim Financial
Reporting’ as adopted by the EU. The condensed consolidated financial
statements do not include all of the information required for a complete set
of IFRS financial statements and should be read in conjunction with the
consolidated financial statements of the Group for the year ended 31 December
2022, which were prepared under full IFRS as adopted by the European Union
requirements and The Companies Law (Guernsey), 2008. The accounting policies
used in the preparation of the condensed consolidated financial statements
have not varied in any material way from those of the consolidated financial
statements of the Group for the year ended 31 December 2022. These condensed
interim accounts have not been audited. The Group’s entry to UK REIT Regime
was effective from 3 June 2019. The Group’s rental profits arising from both
income and capital gains are exempt from UK corporation tax from that date,
subject to the Group’s continuing compliance with the UK REIT rules.
2. Dividends and property income distributions (PID) gross of income tax
Six months to 30 June 2023 Six months to 30 June 2023 Six months to 30 June 2022 Six months to 30 June 2022 Year to 31 December 2022 Year to 31 December 2022
PID Rate (pence) £’000 PID Rate (pence) £’000 PID Rate (pence) £’000
In respect of the previous period:
Ninth interim 0.40 2,806 0.375 2,816 0.375 2,817
Tenth interim 0.40 2,806 0.375 2,803 0.375 2,804
Eleventh interim 0.40 2,806 0.375 2,773 0.375 2,774
Twelfth interim 0.40 2,806 0.375 2,758 0.375 2,758
In respect of the period under review:
First interim 0.40 2,806 0.40 2,920 0.40 2,920
Second interim 0.40 2,806 0.40 2,900 0.40 2,899
Third interim - - - - 0.40 2,862
Fourth interim - - - - 0.40 2,833
Fifth interim - - - - 0.40 2,806
Sixth interim - - - - 0.40 2,806
Seventh interim - - - - 0.40 2,806
Eighth interim - - - - 0.40 2,806
2.40 16,836 2.30 16,970 4.70 33,891
Property Income Distributions paid/announced subsequent to the period end
were:
Record date Payment date Rate (pence)
Third interim dividend 14 July 2023 31 July 2023 0.40
Fourth interim dividend 11 August 2023 31 August 2023 0.40
Fifth interim dividend 15 September 2023 29 September 2023 0.40
Although these payments relate to the period ended 30 June 2023, under IFRS
they will be accounted for in the period during which they are declared.
3. Other expenses
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
£’000 £’000 £’000
Direct operating expenses of let rental property 1,030 1,716 3,546
Direct operating expenses of vacant property Impairment provision 1,533 375 1,219 (505) 1,709 (478)
Valuation and other professional fees 171 252 438
Directors’ fees 153 145 271
Administration fee 95 80 161
Other 463 390 832
3,820 3,297 6,479
The basis of payment for the Directors’ and administration fees are detailed
within the consolidated financial statements of the Group for the year ended
31 December 2022.
4. Earnings per share
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Net profit/(loss) attributable to ordinary shareholders (£’000) 7,855 106,008 (94,377)
Earnings return per share – pence 1.1p 14.4p (13.1)p
Weighted average of ordinary shares in issue during the period 701,550,187 737,305,791 720,956,458
Earnings for the six months to 30 June 2023 should not be taken as guide to
the results for the year to 31 December 2023.
5. Investment properties
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Non-current assets – Investment properties £’000 £’000 £’000
Freehold and leasehold properties
Opening fair value 1,075,082 1,180,486 1,180,486
Sales - loss on sale - (5) (5)
Capital expenditure Purchase of investment properties 2,591 602 11,429 65 23,258 439
Unrealised gains on investment properties 20,029 91,006 94
Unrealised losses on investment properties (30,748) (1,692) (129,190)
Closing fair value 1,067,556 1,281,289 1,075,082
Historic cost at the end of the period 932,115 916,724 928,922
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
£’000 £’000 £’000
Unrealised gains 20,029 91,006 94
Unrealised losses (30,748) (1,692) (129,190)
Unrealised (losses) / gains on revaluation of investment properties (10,719) 89,314 (129,096)
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
£’000 £’000 £’000
Losses on sale - (5) (5)
Losses on sales of investment properties realised - (5) (5)
The fair value of investment properties reconciled to the appraised value as
follows:
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
£’000 £’000 £’000
Appraised value prepared by CBRE 1,088,875 1,302,560 1,097,100
Lease incentives held as debtors (21,319) (21,271) (22,018)
Closing fair value 1,067,556 1,281,289 1,075,082
All the Group’s investment properties were valued as at 30 June 2023 by RICS
Registered Valuers working for CBRE Limited (‘CBRE’), commercial real
estate advisors, acting in the capacity of a valuation adviser to the AIFM.
All such valuers are Chartered Surveyors, being members of the Royal
Institution of Chartered Surveyors (‘RICS’).
CBRE completed the valuation of the Group’s investment properties at 30 June
2023 on a fair value basis and in accordance with The RICS Valuation –
Global Standards (incorporating the International Valuation Standards) and UK
national supplement (“the Red Book”).
There were no significant changes to the valuation process, assumptions and
techniques used during the period, further details on which were included in
note 9 of the consolidated financial statements of the Group for the year
ended 31 December 2022.
6. Fair value measurements
The fair value measurements for financial assets and financial liabilities are
categorised into different levels in the fair value hierarchy based on the
inputs to valuation techniques used. The different levels are defined as
follows:
* Level 1 – Unadjusted, fully accessible and current quoted prices in active
markets for identical assets or liabilities. Examples of such instruments
would be investments listed or quoted on any recognised stock exchange.
* Level 2 – Quoted prices for similar assets or liabilities, or other
directly or indirectly observable inputs which exist for the duration of the
period of investment. Examples of such instruments would be those for which
the quoted price has been suspended, forward exchange rate contracts and
certain other derivative instruments. The interest rate swap entered into to
hedge the interest on the £50 million bank loan and the Barclays bank loan
are included in Level 2. The L&G loan would also be classified as Level 2.
* Level 3 – External inputs are unobservable. Fair value is the
Directors’ best estimate, based on advice from relevant knowledgeable
experts, use of recognised valuation techniques and on assumptions as to what
inputs other market participants would apply in pricing the same or similar
instruments.
All of the Group’s investments in direct property are included in Level 3 as
it involves the use of significant inputs. There were no transfers between
levels of the fair value hierarchy during the six-month period ended 30 June
2023.
Other than the fair values stated in the table below, the fair value of all
other financial assets and liabilities is not materially different from their
carrying value in the financial statements.
30 June 2023 £’000 30 June 2022 £’000 31 December 2022 £’000
L&G Loan 2024* 267,156 271,536 269,430
*The fair value of the interest-bearing L&G Loan is based on the yield on the
Treasury 2.75% 2024 which would be used as the basis for calculating the early
repayment of such loan plus the appropriate margin.
The Group’s financial risk management objectives and policies are consistent
with those disclosed in the consolidated financial statements as at and for
the year ended 31 December 2022.
7. Interest-bearing loans and interest rate swap
£260 million L&G loan
The Group entered into a £260 million ten-year term loan facility agreement
with Legal & General Pensions Limited (“L&G”). The transaction was
conducted by L&G’s lending arm, LGIM Commercial Lending Limited. The loan
has a maturity date of 31 December 2024.
Interest is payable on this loan from the commitment date, quarterly in
arrears, at a fixed rate of 3.32 per cent per annum for the duration of the
loan. The loan is secured by means of a fixed and floating charge over the
whole of the assets of the Secured Group (which at 30 June 2023, comprised
FCPT Holdings Limited, F&C Commercial Property Holdings Limited and Winchester
Burma Limited) (see note 13). Post period-end, the Company signed up to a
New Debt Facility and this is detailed in note 14.
Barclays £50 million term loan and £50 million revolving credit facility
On 3 April 2023, the Group signed up to a one-year extension in respect of its
£50 million term loan facility and £50 million revolving credit facility
with Barclays Bank PLC (“Barclays”). Both facilities were extended to
expire on 31 July 2024. Post period-end, the Company signed up to a new Debt
Facility with both Barclays and a new lender, HSBC and this is detailed in
note 14.
For the six months ended 30 June 2023, interest accrued on the bank loan at a
variable rate, based on SONIA plus margin and was paid quarterly in arrears.
The margin was 1.85 per cent per annum. The revolving credit facility which
was undrawn at 30 June 2023 paid an undrawn commitment fee of 0.74 per cent
per annum.
Interest Rate Swap
The Group entered into a £50 million interest rate swap effective from
September 2021 in connection with the Barclays term facility. The hedge was
achieved by matching notional amount of the swap with the loan principal.
The interest rate swap expired on 31 July 2023. Interest on the swap was
received at a variable rate calculated on the same SONIA basis as for the bank
loan (as detailed above but excluding the margin) and was paid quarterly at a
fixed rate of 0.517 per cent per annum. This fixed the interest rate for the
£50 million term loan at 2.367 per cent.
The fair value of the asset in respect of the interest rate swap at 30 June
2023 was £187,000 (30 June 2022: £1,199,000; 31 December 2022: £1,030,000)
which is based on the marked to market value.
8. Share capital
Listed Held in In Issue
Treasury
Number £’000 Number £’000 Number £’000
Allotted, called up and fully paid Ordinary shares of 1 pence each
Balance at 1 January 2023 799,366,108 7,994 (97,815,921) (979) 701,550,187 7,015
Balance at 30 June 2023 799,366,108 7,994 (97,815,921) (979) 701,550,187 7,015
The Company did not purchase any Ordinary Shares during the period (30 June
2022: 33,219,905 at a cost of £37,729,000; 31 December 2022: 51,555,643 at a
cost of £58,510,000).
9. Net asset value per share
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Net asset value per ordinary share – pence 117.1p 148.6p 118.5p
Net assets attributable at the period end (£’000) 821,641 1,069,562 831,465
Number of ordinary shares in issue at the period end 701,550,187 719,885,925 701,550,187
10. Going Concern
After making enquiries and bearing in mind the nature of the Company’s
business and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for the next twelve months.
As set out in the Articles of Incorporation the Directors shall put an
ordinary resolution to shareholders on continuation of the Company at a
general meeting which has to be held in 2024 and the Directors will advise on
a date for the meeting in due course. In assessing the going concern basis
of accounting the Directors have had regard to the guidance issued by the
Financial Reporting Council. They have considered the current cash position of
the Group, forecast rental income and other forecast cash flows. The Group has
agreements relating to its borrowing facilities with which it has complied
during the period. Post period-end, the Company has entered into a new debt
facility as detailed in note 14. Based on the information the Directors
believe that the Group has the ability to meet its financial obligations as
they fall due for the foreseeable future, which is considered to be for a
period of at least twelve months from the date of approval of the financial
statements. For this reason, they continue to adopt the going concern basis in
preparing the accounts.
11. Related party transactions
The Directors of the Company, who are considered to be the Group’s key
management personnel, received fees for their services and dividends from
their shareholdings in the Company. No fees remained payable at the period
end.
12. Capital commitments
The Group had capital commitments totalling £5,777,000 as at 30 June 2023 (30
June 2022: £18,900,000; 31 December 2022: £4,000,000).
1.
List of Subsidiaries
The Group results consolidate the results of the following companies:
- FCPT Holdings Limited (the parent company of F&C Commercial Property
Holdings Limited and Winchester Burma Limited)
- F&C Commercial Property Holdings Limited (a company which invests in
properties)
- SCP Estate Holdings Limited (the parent company of SCP Estate Limited and
Prime Four Limited)
- SCP Estate Limited (a company which invests in properties)
- Prime Four Limited (a company which invests in properties)
- Winchester Burma Limited (a company which invests in properties)
- Leonardo Crawley Limited (a company which invests in properties)
All of the above-named companies are registered in Guernsey.
The Group’s ultimate parent company is Balanced Commercial Property Trust
Limited.
1.
Subsequent events
On 13 September 2023, the Company signed up to a New Debt Facility provided by
incumbent lender, Barclays Bank plc (“Barclays”), and a new lender, HSBC
UK Bank plc (“HSBC”).
The New Debt Facility has been structured with two tranches, being (a) a £60
million Revolving Credit Facility (“RCF”) and (b) a £260 million Term
Loan (the “Term Loan”), which can only be drawn to refinance the existing
£260 million Term Loan facility (the “L&G Loan”) provided by LGIM
Commercial Lending Limited (“L&G”). The current £100 million debt
facility from Barclays (the “Barclays Loan”) will be repaid and cancelled
on 14 September 2023, with £30 million of the RCF tranche being drawn down on
the same day. The New Debt Facility is secured initially over the Barclays
Loan security portfolio and upon drawing the Term Loan and subsequent
repayment of the L&G Loan, the security portfolio provided to L&G will be
secured to Barclays and HSBC. No additional security is to be provided beyond
the current arrangements.
The New Debt Facility is a bespoke structure which permits the Company to
retain the competitively priced L&G Loan up to it is existing 31 December 2024
maturity, whilst also ensuring the liquidity needs of the business are fully
funded at an acceptable commitment cost whilst removing near term refinancing
risk. The New Debt Facility has a headline interest margin of 180bps, lower
than the Barclays Loan which was 185bps. It also includes two one-year
extension options that allow the Company flexibility to extend the facility
with the consent of its lenders, with the first option available to be
requested from 1 February 2024.
Alternative Performance Measures
The Company uses the following Alternative Performance Measures (‘APMs’).
APMs do not have a standard meaning prescribed by GAAP and therefore may not
be comparable to similar measures presented by other entities.
Discount or Premium – the share price of an Investment Company is derived
from buyers and sellers trading their shares on the stock market. This price
is not identical to NAV. If the share price is lower than the NAV per share,
the shares are trading at a discount. This could indicate that there are more
sellers than buyers. Shares trading at a price above the NAV per share, are
said to be at a premium.
Six months to 30 June 2023 Pence Six months to 30 June 2022 Pence Year to 31 December 2022 Pence
Net Asset Value per share (a) 117.1 148.6 118.5
Share price per share (b) 66.2 111.4 88.5
Discount (c=(b-a)/a) (c) (43.5)% (25.0)% (25.3)%
Dividend Cover on a cash basis – The percentage by which Profits for the
year (less gains/losses on investment properties) adjusted by capital and
rental lease incentives amortisation and interest bearing loans amortisation
of set-up costs cover the dividends paid.
Six months to 30 June 2023 £’000 Six months to 30 June 2022 £’000 Year to 31 December 2022 £’000
Profit/(loss) for the period 7,855 106,008 (94,377)
Add back: Unrealised losses/(gains) on revaluation of investment properties 10,719 (89,314) 129,096
Losses on sales of investment properties realised - 5 5
Capital and rental lease incentives amortisation 945 (635) 155
Interest bearing loans amortisation of set-up costs 273 407 642
Profit before investment gains and losses and amortisation (a) 19,792 16,471 35,521
Dividends (b) 16,836 16,970 33,891
Dividend Cover on a cash basis (c = a/b) (c) 117.6% 97.1% 104.8%
Accounting Dividend Cover – The percentage by which profits for the year
(less gains/losses on investment properties and non-recurring other income)
cover the dividend paid.
Six months to 30 June 2023 £’000 Six months to 30 June 2022 £’000 Year to 31 December 2022 £’000
Profit/(loss) for the period 7,855 106,008 (94,377)
Add back: Unrealised losses/(gains) on revaluation of investment properties 10,719 (89,314) 129,096
Losses on sales of investment properties realised - 5 5
Other income - (42) (42)
Profit before investment gains and losses (a) 18,574 16,657 34,682
Dividends (b) 16,836 16,970 33,891
Accounting Dividend Cover (c = a/b) (c) 110.3% 98.2% 102.3%
Dividend Yield – The dividends paid during the period divided by the share
price at the period end. An analysis of dividends is contained in note 2.
Net Gearing – Borrowings less cash divided by total assets (less current
liabilities and cash).
Six months to 30 June 2023 £’000 Six months to 30 June 2022 £’000 Year to 31 December 2022 £’000
Interest-bearing bank loans 310,000 310,000 310,000
Less cash and cash equivalents (54,804) (86,412) (54,837)
Total (a) 255,196 223,588 255,163
Total assets less current liabilities and cash (b) 1,078,419 1,294,364 1,088,155
Net Gearing (c=a/b) (c) 23.7% 17.3% 23.4%
Portfolio (Property) Capital Return – The change in property value during
the period after taking account of property purchases and sales and capital
expenditure, calculated on a quarterly time-weighted basis. The calculation is
carried out by MSCI Inc.
Portfolio (Property) Income Return – The income derived from a property
during the period as a percentage of the property value, taking account of
direct property expenditure, calculated on a quarterly time-weighted basis.
The calculation is carried out by MSCI Inc.
Portfolio (Property) Total Return – Combining the Portfolio Capital Return
and Portfolio Income Return over the period, calculated on a quarterly
time-weighted basis. The calculation is carried out by MSCI Inc.
Total Return – The theoretical return to shareholders calculated on a per
share basis by adding dividends paid in the period to the increase or decrease
in the Share Price or NAV. The dividends are assumed to have been reinvested
in the form of Ordinary Shares or Net Assets, respectively, on the date on
which they were quoted ex-dividend.
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
NAV per share at the start of the period (p) 118.5 135.1 135.1
NAV per share at the end of the period (p) 117.1 148.6 118.5
Change in the period -1.2% +10.0% -12.3%
Impact of dividend reinvestments +2.0% +1.7% +3.1%
NAV total return for the period +0.8% +11.7% -9.2%
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Share price per share at the start of the period (p) 88.5 105.0 105.0
Share price per share at the end of the period (p) 66.2 111.4 88.5
Change in the period -25.2% +6.1% -15.7%
Impact of dividend reinvestments +2.2% +2.2% +4.0%
Share price total return for the period -23.0% +8.3% -11.7%
EPRA Performance Measures
EPRA earnings and EPRA earnings per share – EPRA earnings represents the
earnings from core operational activities, excluding investment property
revaluations and gains/losses on asset disposals. It demonstrates the extent
to which dividend payments are underpinned by recurring operational
activities.
Six months to 30 June 2023 £’000 Six months to 30 June 2022 £'000 Year to 31 December 2022 £'000
Profit/(loss) per IFRS income statement 7,855 106,008 (94,377)
Exclude:
Unrealised losses/(gains) on investment properties 10,719 (89,314) 129,096
Losses on sales of investment properties - 5 5
EPRA earnings 18,574 16,699 34,724
Weighted average number of shares in issue (000's) 701,550 737,306 720,956
EPRA earnings per share (pence per share) 2.6 2.3 4.8
EPRA Net Tangible Assets - Assumes that entities buy and sell assets, thereby
crystallising certain levels of unavoidable deferred tax.
Six months to 30 June 2023 £’000 Six months to 30 June 2022 £'000 Year to 31 December 2022 £'000
IFRS NAV 821,641 1,069,562 831,465
Fair value of interest rate swaps (187) (1,040) (1,030)
Net assets used in per share calculation 821,454 1,068,522 830,435
Shares in issue (000's) 701,550 719,886 701,550
EPRA assets per share (pence per share) 117.1 148.4 118.4
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Tel: 01481 745324
Fax: 01481 745051
Richard Kirby
Columbia Threadneedle REP AM plc
Tel: 0207 499 2244
The full interim report for the period to 30 June 2023 will be sent to
shareholders and will be available for inspection at Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the
Company, and from the Company’s website: balancedcommercialproperty.co.uk
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