Interim Report for the Period ended 30 June 2024
12/09/2024 07:00
Date: 12 September 2024
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 2024
Headlines
* See below for recommended all-cash acquisition of the Company and dividends
update.
* Earnings per Ordinary Share of -2.0 pence per share for the six-months ended
30 June 2024 (H1 2023: 1.1 pence per share)
* Net asset value per Ordinary Share was 105.1 pence as at 30 June 2024
(31 December 2023: 109.8 pence)
* Net asset value total return* of -1.9 per cent for the 6 months ended 30
June 2024 is calculated assuming dividends are re-invested (H1 2023: +0.8 per
cent).
* Share price total return* of +13.0 per cent for the 6 months ended 30 June
2024 (H1 2023: -23.0 per cent).
* Cash dividend cover for the 6 months ended 30 June 2024 was 107.6 per cent
(H1 2023: 117.6 per cent)
* During the six-months ended 30 June 2024, disposed of two office holdings at
an aggregate sales price of £53.8 million, 3.9 per cent below valuation as at
31 December 2023. Further detail can be found in the Managers’ Review
below. A further three office disposals were completed post period-end with an
aggregate sales price of £60.7 million. These disposals are part of the
strategic repositioning of the portfolio and were in line with the 30 June
2024 valuations.
* Portfolio return of -0.5 per cent over the 6 months to June 2024 (H1 2023:
1.5 per cent) versus the MSCI UK Quarterly Property Index return of 1.8 per
cent. (H1 2023: 0.3 per cent).
* See Alternative Performance Measures
Chairman’s Statement
The real estate sector spent much of the first half of the year awaiting
greater clarity on the path of interest rates. This August saw the end of the
tightening cycle as the Bank of England delivered a 0.25 per cent cut to the
base rate. Prior to this cut, there were some signs of renewed investor
appetite, and whilst still modest, there has been an increase in transaction
volumes over the first six months of the year compared to the last six months
of 2023.
Whilst geopolitical challenges persist, this modest increase in activity can
perhaps be attributed to the expectation of a more stable market backdrop. The
UK economy expanded moderately in the first two quarters of 2024, following a
shallow technical recession in the second half of 2023. The inflation rate hit
the Bank of England’s 2.0 per cent target rate in May for the first time
since July 2021, and political uncertainty reduced with the election of a
Labour Party governing with a significant majority.
The second quarter of 2024 saw the MSCI UK Quarterly Property Index (‘the
Index’) return to capital growth for the first time since June 2022, with
the industrial and retail warehousing sectors benefitting most notably.
However, it is income that has been the consistent driver of total returns in
recent periods, as occupational markets have generally proven to be more
resilient than many expected despite the challenges posed to the UK economy
and consumers.
Company Performance
Against this economic and property market backdrop, the Company has delivered
a net asset value (‘NAV’) total return of -1.9 per cent for the six months
to 30 June 2024. The NAV per share as at 30 June 2024 was 105.1 pence, down
4.3 per cent from 109.8 pence per share as at 31 December 2023.
The share price performed strongly over the period with a positive total
return of 13.0 per cent for the six months and the discount to NAV narrowing
to 24.6 per cent at the period end, compared to 34.0 per cent at 31 December
2023.
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 2023 109.8
Unrealised decrease in valuation of property portfolio (3.8)
Losses on sale of investment properties realised (0.4)
Other net revenue 2.1
Dividends paid (2.6)
NAV per share as at 30 June 2024 105.1
Portfolio Performance
The Company’s portfolio delivered a negative total return of 0.5 per cent
over the first six months of the year, underperforming the Index return of
1.8 per cent.
While the portfolio delivered income outperformance, a capital return of -3.3
per cent against the Index return of -0.6 per cent dragged performance at the
portfolio level. This underperformance can primarily be attributed to the
portfolio’s exposure to offices, and particularly its regional business
parks, a sector with a challenged outlook.
The Company has sought to address the level of its exposure to offices, and a
number of disposals have been completed as we seek to align the portfolio
towards favoured growth sectors. The portfolio carried a weighting towards the
office sector as at 30 June 2024 of 19.9 per cent (31 December 2023: 26.5 per
cent.). There were £53.8 million of sales during the period at a 3.9 per
cent. discount to the year-end valuation and the office exposure has fallen to
14.3 per cent on completion of recently announced disposals post-period of
£60.7 million which were sold in line with their 30 June 2024 valuations.
This compares to an Index exposure of 22.7 per cent.
These sales have raised significant cash, underlining the liquidity of the
assets.
Performance has been strongest from retail warehousing where yields continue
to tighten, given the high level of investment demand and low vacancy rates in
the sector. The Company’s two retail parks have therefore witnessed capital
growth in the period, with these assets being fully let to a strong tenant
base.
Cash and Borrowings
The Company had £67.3 million of available cash as at 30 June 2024. All cash
balances were held in interest-bearing deposit accounts with competitive
variable interest rates. Following the post period end office sales, the
Company currently has c.£120 million of available cash.
The Company has a £260 million term loan in place with L&G which matures in
December 2024 (the ‘L&G Loan’). 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. The £60 million RCF is currently undrawn,
with proceeds from the office sales used to pay back the £30 million drawn
down at the start of the period. The new debt facility is available until
13 September 2025 with the option of two one-year extensions (subject to
lender approval and the first of which would have to be requested by 15
November 2024). As at 30 June 2024, the Company’s loan to value, net of
cash, was 20.7 per cent.
Strategic Review
Further to the Strategic Review launched in April this year, the Company
announced on 4 September 2024 that it had reached agreement on the terms of a
recommended all-cash acquisition by Starling Bidco Limited (a newly formed
company incorporated owned by funds managed, controlled or advised by Starwood
Capital or its affiliates) (‘Bidco’), pursuant to which Bidco will acquire
the entire issued and to be issued ordinary share capital of the Company
(the “Acquisition”). The Acquisition is conditional on, among other
things, the approval of the Company’s shareholders at a Court meeting and an
extraordinary general meeting. For full details of the Acquisition, please
refer to the Rule 2.7 announcement published by Bidco and the Company on
4 September 2024, available through the Company’s website at
https://www.columbiathreadneedle.co.uk/bcpt-strategic-review/. Further details
will be set out in the scheme document which will be sent to shareholders
within 28 days of the firm offer announcement of 4 September 2024 (although
this timing can be extended in certain circumstances).
Dividend
The Company paid six interim dividends of 0.44 pence per share during the
period, totalling 2.64 pence per share, an increase of 10 per cent on the
equivalent period in 2023. The level of dividend cover for the period was
107.6 per cent on a cash basis.
In the light of the proposed Acquisition, the Board does not intend to declare
or pay any further dividends prior to the Acquisition becoming effective
(which is expected to occur in the fourth quarter of 2024), save to the extent
required to ensure compliance with the REIT regime.
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 has been
undertaken and performance against pathway continues to be regularly reviewed.
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. Ongoing
progress is summarised later in this report whilst more detailed insight is
provided in the 2023 ESG Report, published in April 2024.
Outlook
Amid cautious optimism in the capital markets, and a more supportive economic
backdrop, there are tentative signs that the outlook for certain real estate
sectors may be beginning to turn. While the geopolitical landscape remains
volatile, a number of market participants are beginning to look to the next
stage of the cycle.
The Managers have made progress in repositioning the portfolio which has
increased the Company’s exposure to those sectors which are projected to
offer the most favourable performance outlook.
Paul Marcuse
Chairman
11 September 2024
Forward looking statements
Certain statements in this report are forward looking statements. By their
nature, forward looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially
from those expressed or implied by those statements. Forward looking
statements regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the future.
Accordingly, undue reliance should not be placed on forward looking
statements.
Performance Summary
Half year ended Half year ended % change
30 June 30 June 2023
2024
Total Returns for the period *
Net asset value per share -1.9% +0.8% -2.8%
Ordinary Share price +13.0% -23.0% +36.0%
Portfolio -0.5% +1.5% -2.0%
MSCI UK Quarterly Property Index +1.8% +0.3% +1.5%
FTSE All-Share Index +7.4% +2.6% +4.8%
Half year ended Year ended % change
30 June 31 December 2023
2024
Capital Values
Total assets less current liabilities (£’000) 740,656 799,590 -7.4%
Net asset value per share 105.1p 109.8p -4.4%
EPRA Net Tangible Assets per share* 105.1p 109.8p -4.4%
Ordinary Share price 79.2p 72.5p +9.2%
FTSE All-Share Index 4,451.9 4,232.0 +5.2%
Ordinary share price discount to net asset value per share* (24.6)% (34.0)% +9.4%
Net Gearing * 20.6% 24.4% -3.7%
Earnings and Dividends Half year ended 30 June 2024 Half year ended 30 June 2023
Earnings per Ordinary Share (2.0)p 1.1p
EPRA Earnings per Ordinary Share 2.1p 2.6p
Dividends per Ordinary Share 2.64p 2.4p
Dividend yield * 6.7% 7.3%
Sources: Columbia Threadneedle Investment Business, MSCI Inc and Refinitiv Eikon.
* See Alternative Performance Measures
Managers’ Review
• Portfolio total return of -0.5 per cent over the 6 months to June,
compared to the MSCI UK Quarterly Property Index (‘Index’) return of 1.8
per cent.
• Underperformance primarily attributable to the capital performance of
the portfolio’s office holdings.
• The portfolio has delivered income outperformance against MSCI of 47
basis points over the 6 months and generated an annualised income premium of
94 basis points
• £53.8 million of office disposals during the period.
• Total office sales in 2024 have raised cash proceeds of £114.5 million
(£60.7 million of which was post the period-end) at an average discount to
the then preceding valuation of 4.1 per cent.
• Portfolio exposure to the office sector fell to 14.3 per cent on
completion of post-period end disposals, against an Index exposure of 22.7 per
cent.
Property Market Review
As performance headwinds have proved more persistent than anticipated, the
first six months of 2024 have not been easy for the UK real estate sector.
However, optimism has built as the year has progressed and the macroeconomic
environment has stabilised. For over two years, the fortunes of real estate
have been strongly influenced by the inflationary backdrop, but we have now
seen the interest rate cycle peak at 5.25 per cent and the first cut of 0.25
per cent was announced in August 2024. In addition, a layer of domestic
political uncertainty has been removed with the Labour Party win in the July
election.
As the economic backdrop and wider sentiment have improved, the real estate
sector may have reached an inflection point. The second quarter of 2024 saw
the Index generate a positive capital return for the first time since June
2022, underpinning a total return of 1.3 per cent, the strongest quarterly
return delivered for 24 months.
As pricing has stabilised, investor confidence has returned for favoured
sectors, being those where strong occupational fundamentals are supportive of
income resilience and growth. Retail warehousing is the lead indicator of
nascent pricing recovery with market yields hardening whilst the industrial
and operational alternative sectors have also seen an improved depth of
investor demand. There are, however, further capital value declines
anticipated in less-favoured sectors, primarily across offices, but
particularly in the secondary office markets where vacancy continues to rise.
While sentiment may be improving, investment volumes remained subdued over the
first half of 2024. This was on account of continued uncertainty surrounding
the economic outlook, combined with a highly constrained availability of stock
within the favoured sectors into which investors are willing to deploy ‘dry
powder’ which is available across both the institutional and private
markets.
Investment activity totalled circa £20 billion in H1 2024, which is over 50
per cent lower than the volumes seen in H1 2022 (being the last comparable
period prior to the current phase of market correction). Residential was the
most traded sector as investors turn to resilient, counter-cyclical sectors
able to offer an inflation hedge. The occupational fundamentals of the retail
warehousing sub-sector, where vacancy rates remained at near-record lows, have
also supported strong levels of investor demand given the sector’s critical
role within omni-channel retailing, lower occupational cost base and resilient
discount/convenience led occupier pool. The industrial sector continues to
benefit from robust levels of investor demand, supported by a strong
occupational market and aided by a notable re-pricing from previous highs.
While rental growth has cooled from the record levels seen in 2021/2022, the
outlook is positive as void rates remain below long-term averages, and the
development pipeline remains limited with major occupiers such as Amazon
increasing occupational take-up in anticipation of wider economic recovery.
The office sector remains challenged, despite the hybrid working model showing
signs of stabilising. Such a structural shift carries a delayed impact and
continues to lead to the rationalisation of office space as corporates
reassess operational models. There is, however, a clear focus on
best-in-class, amenity-rich Grade A office space aimed at attracting and
retaining a highly skilled workforce. Such assets have seen some liquidity,
with a handful of transactions offering a degree of pricing transparency at
the prime end of the market.
Geographical Analysis (% of total property portfolio)
30 June 2024 (%)
London – West End 27.6
Midlands 25.5
South East 23.6
North West 13.2
Scotland 6.1
South West 2.0
Rest of London 2.0
Source: Columbia Threadneedle REP AM plc
Sector Analysis (% of total property portfolio)
30 June 2024 (%)
Industrial 35.2
Offices 19.8
Retail 19.5
Retail Warehouses 14.1
Alternative 11.4
Source: Columbia Threadneedle REP AM plc
Lease Expiry Profile
At 30 June 2024 the weighted average lease length for the portfolio, assuming all break options are exercised, was 4.6 years (31 December 2023: 4.7 years).
% of leases expiring (weighted by rental value) 30 June 2024 (%) 31 December 2023 (%)
0 – 5 years 71.9 64.9
5 – 10 years 19.2 24.0
10 – 15 years 7.5 9.6
15 – 25 years 1.4 1.5
Source: Columbia Threadneedle REP AM plc
Capital Growth
Over the period, portfolio yields have moved as follows:
Net initial yield Equivalent yield Reversionary yield
June 24 (%) Dec 23 (%) June 24 (%) Dec 23 (%) June 24 (%) Dec 23 (%)
Industrial 4.2 4.5 6.1 6.0 6.4 6.3
Offices 8.0 7.4 10.0 8.2 10.6 8.4
Retail* 4.1 4.7 5.2 5.1 5.0 4.8
Retail Warehousing 6.2 6.3 5.9 6.2 5.8 6.1
Alternatives 4.8 4.8 4.7 4.7 4.6 4.6
Portfolio 5.2 5.5 6.7 6.5 6.4 6.2
*including St Christopher’s Place
Portfolio performance
The Company’s portfolio has delivered a total return of -0.5 per cent over
the 6-month period, compared to an Index return of 1.8 per cent.
While the portfolio’s income return of 2.9 per cent delivered 47 basis
points of outperformance over the Index, capital growth of -3.3 per cent
versus the Index at -0.6 acted as a drag at the portfolio level.
The portfolio saw capital returns of -3.3 per cent, against the Index return
of -0.6 per cent. Portfolio performance was impacted heavily by the office
holdings, which suffered capital declines of 16.1 per cent over the 6-months.
In particular, the Company’s exposure to the regional office sub-sector was
a strong drag on performance, experiencing capital declines of 20.9 per cent,
with the sub-sector acutely impacted by investment illiquidity and constrained
transaction volumes in the context of a challenged performance outlook.
The office portfolio performance relative to the Index is noteworthy, as the
portfolio’s return of -16.1 per cent lagged the Index return of
-2.8 per cent by more than 13 per cent. Having exposed many of the office
properties to the market, the mark down in these valuations is a reflection of
the level of investor interest and offers received.
More positively, the two prime retail parks in the portfolio have continued to
outperform with a total return of 9.3 per cent against 5.1 per cent reported
by the Index. These parks are thriving and continue to benefit from being
fully-let to a diverse, high-quality tenant base.
Returns for the six-months ended 30 June 2024
Balanced Commercial Property Trust MSCI UK Quarterly Index
Sector Income Return (%) Capital Return (%) Total Return (%) Total Return (%)
All Retail 2.6 -0.2 2.4 3.0
Offices 4.7 -16.1 -12.0 -0.7
Industrial 2.3 -0.2 2.0 3.0
Alternatives 2.6 -0.1 2.4 1.6
All Property 2.9 -3.3 -0.5 1.8
Income Return
The portfolio is generating an income advantage, recording a 47-basis point
premium over the Index for the 6-month period and an annualised premium of 94
basis points.
Active asset management is critical to maintaining and driving the
portfolio’s income profile, through unlocking the portfolio’s income
reversion. A total of 37 leases and tenancy agreements completed over the six
months, accounting for a contracted income stream of £4.7 million. Within
this total, sixteen open market lettings were agreed and contracted at rents
in line with the valuation ERV at the end of 2023.
This has helped support net operating income growth across the portfolio of
5.7 per cent over the last twelve months, outperforming the Index return of
3.5 per cent.
Lease events offer the opportunity to crystalise the portfolio’s potential
into income growth.
With a weighted average unexpired lease term (‘WAULT’) of 4.6 years, the
portfolio’s leasing profile has an attractive mix of income duration from
its higher yielding assets and the opportunity to realise performance from its
growth assets. The key to unlocking the reversion within the portfolio lies in
the industrial assets, which offer an income reversion in excess of 50 per
cent. Including rent reviews and lease events, the WAULT on the industrial
portfolio is 2.1 years, which provides the opportunity for the reversion to be
delivered at lease events in the near term.
Approximately 23 per cent of the Company’s income profile is subject to
contractual uplifts offering guaranteed income growth. Index-linked rent
reviews support 11 per cent of the income, while 12 per cent is subject to
contractual
fixed uplifts.
The portfolio vacancy rate rose from 6.7 per cent by Estimated Rental Value
(‘ERV’) to 9.4 per cent. The increase is due to JP Morgan vacating
Alhambra House, Glasgow upon lease expiry. Excluding the two vacant HQ office
buildings in Glasgow and Stockley Park, both of which are subject to the
execution of asset management strategies, the portfolio vacancy rate stands at
1.7 per cent.
Investment Activity
We continue to make progress on executing a portfolio rebalancing strategy,
designed to reduce the Company’s exposure to the office sector and align the
portfolio for the delivery of enhanced returns.
Since the end of December 2023, we have successfully completed the disposal of
five offices, three of which exchanged after the period end. These are as
follows:
• 2-4 King Street, London SW1 – a multi-let holding of 14,600 sq ft in
London’s West End. Sale completed January 2024.
• The Leonardo Building, Crawley – a 110,000 sq ft business park
headquarters office occupied by Virgin Atlantic Limited. Sale completed
February 2024.
• 7 Birchin Lane, London EC3 – a multi-let City of London office of
22,300 sq. ft. Sale completed July 2024.
• 82 King Street, Manchester - a multi-let city-centre office holding of
83,500 sq. ft. and the largest single office remaining in the portfolio. Sale
exchanged July 2024 and completed in September 2024.
• 17A Curzon Street, London W1 – a low yielding, multi-let office of
10,800 sq ft in London’s West End. Sale completed August 2024.
In total, we have executed seven disposals from the office portfolio since the
start of December 2023, raising aggregate proceeds totalling £129.5 million
at an average discount to the preceding valuation of 4.1 per cent.
The pricing achieved on these disposals reflects the liquidity and quality of
the real estate in the portfolio. Despite the challenging capital markets this
has enabled us to successfully dispose of holdings across the office sector,
including capital-heavy multi-let assets, the structurally challenged regional
business park segment and the low-yielding Central London markets.
The assets sold were targeted for disposal on account of a risk-adjusted
hold/sell analysis based on performance outlook. Following completion of the
disposals, the portfolio’s exposure to the office sector has fallen to
14.3 per cent, compared to the Index exposure of 22.7 per cent and we believe
that the portfolio is well positioned to deliver enhanced shareholder returns.
Asset Management
In the context of income-driven total returns, active asset management is the
key determinant of relative outperformance, enabling rental growth to be
converted into income while also generating capital growth through the
enhancement of the underlying assets.
The portfolio offers a wealth of opportunity for the delivery of value-add
initiatives.
Industrial and logistics
The Company’s industrial and logistics assets offer an attractive day one
income reversion in excess of 50 per cent of the passing rent. A number of
highly accretive asset management initiatives have been executed over the year
to date. Notable successes included:
Units 1 & 2 Strategic Park, Southampton
The major refurbishment of this two-unit industrial scheme completed in
October 2023 and both units became fully leased during the first half of 2024.
The completion of a new 15-year lease to Oil Spill Response and 10-year lease
to the UK F50 sailing team brought the project to a successful conclusion,
delivering:
• Income performance, increasing the Company’s income by more than £1.4
million per annum and generating an uplift to the previous combined passing
rent of 27.5 per cent.
• Capital performance, underpinning 680 basis points of total return
outperformance over the sector benchmark in the 24-month period since vacant
possession was obtained to facilitate the redevelopment, and
• ESG enhancements with A-rated EPCs, a BREEAM Very Good certification and
a full solar photovoltaic system installed on the roof.
The Cowdray Centre, Colchester
This multi-let estate continues to see buoyant levels of occupier activity,
supported by a phased programme of refurbishments which has driven rental
growth and value appreciation.
The asset offers a day one income reversion of approximately 70 per cent and
the staggered nature of the leasing profile allows activity to exploit this
growth. Notable events over the period include:
• Pickfords Move Management entered into a new 5-year lease of 16 Mason
Road at a rent in line with the unit’s ERV and representing a 52 per cent
premium to the previous passing rent.
• MKM Building Supplies entered into a new 20-year lease (break year 15) of
1 Mason Road, a newly refurbished unit, increasing the income profile by
£275,000 per annum.
The estate also comprises a development site where planning consent has been
secured for a trade-centre scheme and the construction package is currently
out to tender.
Retail Warehousing
The Company’s two prime parks have been successfully repositioned to a
grocery, discount and convenience-focussed line up, which is driving strong
footfall, trading performance and occupier demand. Both parks remain fully
leased and we are progressing a number of asset management strategies to
further curate the tenant mix.
Strong occupancy, supported by latent tenant demand, and a stable and growing
income profile which has seen the passing rent from the parks increase by 1.9
per cent over the year to date and by 10.6 per cent over the last 12 months.
Offices
The completion of a number of asset management projects has enabled us to
optimise value on disposal by selling at an optimal point within the asset
life cycle.
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 B-rated EPCs. In April 2024, the
final refurbished suite was leased at a premium to ERV and 10.0 per cent ahead
of the pre-refurbishment ERV. This supported the disposal of the asset at a
value reflecting the benefit of full occupation at a strong rental tone.
17A Curzon Street, W1C
The newly refurbished top-floor suite of this multi-let West End office
holding was leased in March 2024 at a record rent for the building and the
fourth-floor tenant entered into a 3-year reversionary lease, extending their
commitment to 2028. Delivery of the business plan secured an enhanced income
profile ahead of disposal of the asset in August 2024.
Retail
St Christopher’s Place (the ‘Estate’) (mixed-use Food & Beverage
(‘F&B’), retail, residential and offices)
The Company’s largest 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 as follows:
Sector Exposure (% of asset capital value)
Retail 22.6
Food & beverage 41.5
Offices 15.0
Residential 20.9
During 2024, London’s West End retail market has seen the tide turn.
Occupier activity has rebounded amid recovering consumer confidence, improving
footfall, growing tourist numbers and a significant rebasing of occupational
costs following the business rates revaluation.
As a result, vacancy rates in the prime West End have fallen to 4.3 per cent,
below their pre-pandemic levels. As reduced vacancy has met with strong
occupier demand, core West End rental values have increased significantly.
Amid this encouraging backdrop of recovery and growth, St Christopher’s
Place delivered a positive quarterly capital return in June 2024, and its
strongest quarterly total return performance of +1.0 per cent since September
2022.
Asset management update
West End retail suffered in the wake of the pandemic, and, amid a challenging
market backdrop, the Estate saw its vacancy rate rise from 2.1 per cent in
December 2019 to 10.1 per cent in December 2023.
Over the course of 2024, the vacancy rate has dropped back to 8.2 per cent at
the Estate, 75 per cent of which is under offer or subject to contractual
commitment. The net effective vacancy rate should therefore fall back towards
its pre-Covid level.
The curation of tenant mix has remained at the forefront of our strategic
thinking to ensure that we are leveraging consumer and market dynamics to
position the Estate for continued success. To this end, the conversion of
traditional retail to F&B has been key. The F&B sector has not only proven
highly resilient to recent economic challenges, it also drives investment
fundamentals through superior rents, turnover-linked rental top-ups, longer
leases and sharper capitalisation rates. This also enhances the consumer
experience and trading dynamics of the estate.
Over the course of the period, the Estate’s exposure to the F&B sector has
increased from 31.2 per cent to 41.5 per cent as 4 key F&B occupational deals
completed:
• Sunday in Brooklyn exchanged an agreement for lease at 10/12 James Street
and 13/14 Gees Court, a newly created anchor unit running from James Street
through to Gees Court. This signature letting will revitalise two key entrance
points to the estate.
• Noreen, a new Middle Eastern restaurant concept, exchanged an agreement
for lease at 28-32 St Christopher’s Place, a substantial double-fronted unit
in the heart of the Estate.
• Bar Kroketa, a Spanish restaurant and bar concept, and Morena, an all-day
dining concept with a Latin-American inspired menu, have both agreed new
leases.
The leases were contracted within 0.7 per cent of the units’ ERVs and all
four contain turnover top-up provisions likely to see the rents receivable
exceed ERV.
While there remains strong latent demand from the F&B sector, we believe that
we are now approaching a critical mass of F&B offering at the Estate. This has
provided a platform for income growth through competitive tension and allows
us to turn our strategic focus to other growth opportunities offered across
the Estate.
Alternatives
The portfolio’s alternatives holdings include the purpose-built student
accommodation in Winchester (which is subject to a long-term, ndex-linked
lease to the university) the leisure units at Wimbledon Broadway (a gym and
cinema) and the residential properties at St Christopher’s Place. The
residential element of St Christopher’s Place accounts for 5.1 per cent of
the value of the Company’s portfolio.
Outlook
The macroeconomic environment has shown marked improvement over the course of
the year to date as the UK economy returned to growth quickly following the
technical recession of 2023. A new government prioritising economic growth has
been elected with a strong majority and inflation has steadily receded back
towards the Bank of England’s target of 2 per cent.
Investor sentiment has strengthened against this economic backdrop. Occupier
markets have weathered recent challenges, and this has helped anchor real
estate yields.
Amid improving capital and resilient occupier markets, the latent risk of
widespread market distress linked to debt maturity has subsided. While
refinancing challenges had been feared to be a major downside risk to the
wider real estate sector, only pockets of distress have materialised. This
distress has been focussed on localised submarkets and on assets facing
functional irrelevance amid long-term structural shifts.
The benefits of a looser monetary policy should drive a wider market recovery.
While we expect pricing at the market level to bottom-out over the course of
2024, the positive impact of monetary loosening is unlikely to be seen until
2025. Income returns continue to drive performance, whilst yield-driven
capital returns are likely to be limited in the near-term. This will drive the
continued divergence in returns across the sectors within UK commercial
property, determined primarily by the strength of the underlying occupational
markets and their ability to generate real rental growth.
Stock selection remains critical, not only between sectors but also based on
asset fundamentals. Investor demand will focus on quality assets in sectors
supported by long-term thematic drivers, capable of delivering accretive asset
management, underpinning returns.
In this context, the BCPT portfolio is well positioned. Strategic disposals
have tilted the portfolio towards the growth sectors of industrial and retail
warehousing (accounting for half of the portfolio). Residual assets within the
office portfolio offer upside potential through the delivery of value-add
strategies and the Company’s largest asset in St Christopher’s Place has
returned to capital growth, founded on strong asset management capitalising on
market recovery.
Richard Kirby and Dan Walsgrove
Columbia Threadneedle REP AM plc
11 September 2024
Environmental, Social and Governance (ESG)
The Board assesses its performance in meeting the Company’s objective
against the following key measures. Commentary can be found in the
Chairman’s Statement, Managers’ Review and Environmental, Social and
Governance Report.
Environmental and Social Performance
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Carbon emissions (Scope 1 & 2) (tonnes Co2e) 806 795 1,603 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 (%) 28 25 28 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.
Highlights for the six-month period to 30 June 2024
The Manager has launched a portfolio-wide biodiversity initiative to improve
biodiversity characteristics across the existing portfolio, recognising that
asset value, reputation and image, health and wellbeing, and community
engagement can all benefit from improved attention to underlying biodiversity
factors. The Company has appointed an external consultant to undertake a
phased approach in determining biodiversity status and potential opportunities
for improvement.
Over the first half of the year, we have continued to pursue a number of key
ESG initiatives:
• 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 2024 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 2024.
• The Company is preparing to submit 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 2023 ESG Report, and for the sixth year in succession, the
Company achieved a Gold Award for alignment to the 3rd Edition of the EPRA
Sustainability Best Practice Recommendations.
The Company has committed to reduce landlord emissions year-on-year. However,
emissions are impacted by externalities, primarily prevailing local weather
patterns and occupier preferences, which are subject to change and variation
on a yearly basis. In this context, the Company reports the following
comparisons against the previous year’s corresponding period, on a like for
like basis and accounting for assets sold:
• a 1.7% increase in landlord-controlled absolute energy consumption
• a 6% increase in landlord-controlled energy intensity
• a 2% increase in absolute landlord-controlled carbon emissions
The near-level position of absolute energy consumption is driven by a 10%
decrease in landlord-controlled absolute gas consumption balanced with a 10%
increase in landlord-controlled electricity consumption. Performance movement
is broadly balanced across the portfolio of assets.
Determined by the number of directly managed assets, 100% of sites within the
portfolio are paying the real living wage to all service provider employees
within scope in line with our target ambition.
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 three, which together with three expired
certificates, represents units that are either very long leasehold or
currently vacant and awaiting refurbishment. Exposure to higher A&B ratings
has moderately improved, covering 94 demises in total, being 52.9% of the
total portfolio by Estimated Rental Value or 57.1% by Net Lettable Area.
The Company continues to monitor its tenant mix as part of its commitment to
avoiding leasing exposure to organisations connected to the production,
storage, distribution or use of controversial weapons. At the period ending
30 June 2024, 0% 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 2023. The
Company’s principal risks remain valid assuming no change in the Company’s
status and are expected to be so for the remainder of the Company’s
financial year.
Further information on the Acquisition announcement can be found in the
Chairman’s Statement. There is currently no certainty as to the outcome of
this proposed transaction. The Board’s assessment of going concern can be
found in note 1 to the Condensed Consolidated Financial Statements.
Statement of Directors’ Responsibilities in Respect of the Interim Report
We are responsible for preparing this Condensed Interim Report and Accounts in
accordance with
applicable law and regulations. The Directors confirm that to the best of
their knowledge:
• the condensed interim report and accounts 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 consolidated financial
statements and a description of the principal risks and uncertainties of the
remaining six months of the year; and
• the Chairman’s Statement together with the condensed 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.
On behalf of the Board
Paul Marcuse
Director
11 September 2024
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2024
Notes Six months Six months Year to
to 30 June to 30 June 31 December
2024 2023 2023*
£‘000 £‘000 £‘000
Revenue
Rental income 26,438 29,915 59,228
Other income 67 - 119
Total revenue 26,505 29,915 59,347
Losses on investment properties
Unrealised losses on revaluation of investment properties 5 (26,007) (10,719) (56,940)
Losses on sale of investment properties realised 5 (2,816) - (4,533)
Total (loss)/ income (2,318) 19,196 (2,126)
Expenditure
Investment management fee (2,682) (3,089) (5,968)
Other expenses 3 (4,068) (3,820) (7,336)
Total expenditure (6,750) (6,909) (13,304)
Operating (loss)/ profit before finance costs and taxation (9,068) 12,287 (15,430)
Net finance costs
Interest income 1,627 1,062 2,051
Finance costs (6,752) (5,494) (12,617)
(5,125) (4,432) (10,566)
(Loss)/ profit before taxation (14,193) 7,855 (25,996)
Taxation - - (71)
( Loss)/ profit for the period (14,193) 7,855 (26,067)
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) (843)
Total comprehensive (loss)/ income for the period (14,193) 7,012 (26,910)
Basic and diluted earnings per share 4 (2.0)p 1.1p (3.7)p
EPRA earnings per share 2.1p 2.6p 5.1p
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.
The accompanying notes below are an integral part of the above statement.
Balanced Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2024
Notes 30 June 2024 £’000 30 June 2023 £’000 31 Dec 2023* £’000
Non-current assets
Investment properties 5 868,258 1,067,556 936,993
Trade and other receivables 17,236 16,974 14,354
885,494 1,084,530 951,347
Current assets
Investment properties held for sale 59,993 - 71,277
Trade and other receivables 8,515 13,725 12,005
Interest rate swap asset - 187 -
Cash and cash equivalents 67,305 54,804 41,717
135,813 68,716 124,999
Total assets 1,021,307 1,153,246 1,076,346
Current liabilities
Trade and other payables (20,807) (20,023) (17,067)
Interest-bearing loan (259,844) - (259,689)
(280,651) (20,023) (276,756)
Non-current liabilities
Trade and other payables (3,331) (2,262) (2,774)
Interest-bearing loans 7 - (309,320) (26,777)
(3,331) (311,582) (29,551)
Total liabilities (283,982) (331,605) (306,307)
Net assets 737,325 821,641 770,039
Represented by:
Share capital 8 7,994 7,994 7,994
Special reserves 485,840 485,840 485,840
Capital reserves 130,869 210,446 159,692
Hedging reserve - 187 -
Revenue reserve 112,622 117,174 116,513
Equity shareholders’ funds 737,325 821,641 770,039
Net asset value per share 9 105.1p 117.1p 109.8p
EPRA net tangible assets per share 105.1p 117.1p 109.8p
* These figures are audited.
The accompanying notes below are an integral part of the above statement.
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2024
Share Capital £’000 Special Reserves £’000 Capital Reserves £’000 Revenue Reserve £’000 Total £’000
Notes
At 1 January 2024 7,994 485,840 159,692 116,513 770,039
Total comprehensive income for the period
Loss for the period – – – (14,193) (14,193)
Losses on sale of investment properties realised 5 – – (2,816) 2,816 –
Transfer in respect of unrealised losses on investment properties 5 – – (26,007) 26,007 –
Total comprehensive loss for the period – – (28,823) 14,630 (14,193)
Transactions with owners of the Company recognised directly in equity
Dividends paid 2 - - - (18,521) (18,521)
At 30 June 2024 7,994 485,840 130,869 112,622 737,325
The accompanying notes below are an integral part of the above statement.
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
e accompanying notes below are an integral part of the above statement.
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 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 year
Loss for the year - - - - (26,067) (26,067)
Movement in fair value of interest rate swaps - - - (843) - (843)
Transfer in respect of unrealised losses on investment properties 5 - - (56,940) - 56,940 -
Losses on sale of investment properties realised 5 - - (4,533) - 4,533 -
Transfer of loss on maturity of interest rate swap - - - (187) 187 -
Total comprehensive income for the year - - (61,473) (1,030) 35,593 (26,910)
Transactions with owners of the Company recognised directly in equity
Dividends paid 2 - - - - (34,516) (34,516)
At 31 December 2023 7,994 485,840 159,692 - 116,513 770,039
* These figures are audited.
The accompanying notes below are an integral part of the above statement.
Balanced Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2024
Notes Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023*
£’000 £’000 £’000
Cash flows from operating activities
(Loss)/profit for the period before taxation (14,193) 7,855 (25,996)
Adjustments for:
Finance costs 6,752 5,494 12,617
Interest income (1,627) (1,062) (2,051)
Unrealised losses on revaluation of investment properties 5 26,007 10,719 56,940
Losses on sale of investment properties realised 5 2,816 - 4,533
Decrease in operating trade and other receivables 3,163 2,478 6,840
Increase/ (decrease) in operating trade and other payables 4,654 (1,085) (4,013)
Cash generated from operations 27,572 24,399 48,870
Interest received 1,319 1,062 2,035
Finance costs paid (5,640) (5,235) (10,902)
Taxation paid - - (71)
(4,321) (4,173) (8,938)
Net cash inflow from operating activities 23,251 20,226 39,932
Cash flows from investing activities Purchase of investment properties 5 - (602) (884)
Capital expenditure of investment properties 5 (2,897) (2,591) (8,021)
Sale of investment properties 5 53,755 - 14,300
Net cash inflow/ (outflow) from investing activities 50,858 (3,193) 5,395
Cash flows from financing activities
Dividends paid 2 (18,521) (16,836) (34,516)
Issue costs for loan facilities - (230) (3,931)
Repayment of loans (30,000) - (50,000)
Drawdown of loans - - 30,000
Net cash outflow from financing activities (48,521) (17,066) (58,447)
Net increase/ (decrease) in cash and cash equivalents 25,588 (33) (13,120)
Opening cash and cash equivalents 41,717 54,837 54,837
Closing cash and cash equivalents 67,305 54,804 41,717
* These figures are audited
The accompanying notes below are an integral part of the above statement.
Balanced Commercial Property Trust Limited
Notes to the Consolidated Accounts
(unaudited) for the six months to 30 June 2024
1. General information and basis of preparation
The condensed consolidated interim 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 European Union. The
condensed consolidated
financial statements do not include all of the information required for a
complete set of International
Financial Reporting Standards (‘IFRS’) financial statements and should be
read in conjunction with the
consolidated financial statements of the Group for the year ended 31 December
2023, 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 2023. These condensed
interim accounts
have been reviewed, not 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.
Critical accounting estimates and assumptions
Management makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below:
- The fair value of investment properties and investment properties held
for sale is determined by using valuation techniques. For further details of
the estimates and assumptions made, see note 1(f) and 9. The Group uses
external professional valuers to determine the relevant amounts.
New standards and interpretations
The following new standard and amendments to standards are mandatory for the
first time for the financial year beginning January 1, 2024 and have been
endorsed by the European Union:
- Amendments to IAS 1 "Presentation of Financial Statements: Classification
of Liabilities as current or non- current" (effective January 1, 2024), affect
only the presentation of liabilities in the statement of financial position -
not the amount or timing of recognition of any asset, liability income or
expenses, or the information that entities disclose about those items.
- Amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial
Instruments: Disclosures”: Supplier Finance Arrangements. The amendment
describes the characteristics for which reporters will have to provide
additional disclosures regarding the impact of supplier finance arrangements
on liabilities, cash flows and exposure to liquidity risk.
- Amendments to IFRS 16 “Leases”: Lease Liability in a Sale and Leaseback
(effective January 1, 2024). The amendments explain how an entity accounts for
a sale and leaseback after the date of the transaction, specifically where
some or all of the lease payments are variable lease payments that do not
depend on an index or rate.
These changes in accounting policy did not result in a material change in
information in the interim consolidated financial statements.
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 from
the date of approval of the financial statements. In assessing the going
concern basis of accounting the Directors have had regard to the guidance
issued by the Financial Reporting Council. They have reviewed detailed cash
flow, income and expense projections to assess the Company’s ability to pay
its operational expenses, loan interest and dividends. The Directors have
examined significant areas of possible financial risk including cash and cash
requirements, refinancing of loans and review of the debt covenants, in
particular those relating to loan to value and interest cover.
The Company currently has a £260 million term loan in place with L&G which is
due to expire on 31 December 2024. The Company also has an undrawn loan in
place with Barclays and HSBC in the form of a committed term loan which can
only be drawn down to pay back the L&G loan. This facility is available until
13 September 2025 with the option for two one-year extensions (subject to
lender approval and the first of which would have to be requested by 15
November 2024). The Company currently has c.£120 million of cash in hand and
has a portfolio of investment properties of £883 million as at the date of
this report, based on the latest 30 June 2024 valuation adjusted for
post-period disposals of £60.7 million. Should the Board decide not to take
up the extension option or if a request to extend the facility is not approved
by the lender and alternative financing is not available, the Board is
confident that the Company has sufficient time available to sell properties
from within the existing portfolio, the proceeds of which, when combined with
current cash reserves, could be used to repay all outstanding borrowings in
the next 12 months. For this reason, the Board does not consider that the
maturity of the external debt facilities represents a material uncertainty
over the Company’s ability to continue as a going concern.
While the Board is confident that the Company will have sufficient financial
resources to meet its obligations due within 12 months from the date of
approval of the financial statements, it announced on 4 September 2024 that,
further to the Strategic Review launched in April this year, it had reached
agreement on the terms of a recommended all-cash acquisition by Starlight
Bidco Limited (“Bidco”) pursuant to which Bidco will acquire the entire
issued and to be issued ordinary share capital of the Company (the
“Acquisition”). The Acquisition is conditional on, among other things, the
approval of the Company’s shareholders at a Guernsey Court meeting and an
extraordinary general meeting.
The outcome of the aforementioned meetings (expected to be held in the fourth
quarter of 2024) to make the Acquisition effective represents a material
uncertainty which may cast significant doubt on the Company’s ability to
continue as a going concern. If the Acquisition is not approved by
shareholders, the Company will continue to operate in the normal course of
business whilst continuing to assess its strategic options.
As disclosed in the 31 December 2023 annual report, the Continuation Vote is
also due to take place in 2024. In the light of the proposed Acquisition, and
based on the expected timetable, the Board does not expect to hold the
Continuation Vote prior to the Acquisition becoming effective. However, if the
Continuation Vote takes place and is not passed by shareholders then the Board
will be required to bring proposals to shareholders that may include a
restructuring or wind down of the Company in its current form. The Directors
note that the ultimate decision on the future state of the Company is outside
the control of the Directors. The uncertain future outcome of the Continuation
Vote and the impact this has on the Company’s future state indicates the
existence of a material uncertainty that may cast significant doubt on the
Company’s ability to continue as a going concern.
Notwithstanding these material uncertainties, the Directors have reasonable
expectation that the Company will continue to operate and meet its liabilities
as they fall due and therefore the Board has concluded that it remains
appropriate to continue to prepare the financial statements on a going concern
basis. In reaching this conclusion, the Board has come to the view that, as
the Acquisition or the outcome of any Continuation Vote is contingent on
shareholder approval and the Company is considered solvent in all other
regards, going concern remains the most appropriate basis for preparation.
2. Dividends and property income distributions (PID) gross of income tax
Six months to 30 June 2024 Six months to 30 June 2024 Six months to 30 June 2023 Six months to 30 June 2023 Year to 31 December 2023 Year to 31 December 2023
PID Rate (pence) £’000 PID Rate (pence) £’000 PID Rate (pence) £’000
In respect of the previous period:
Ninth interim 0.44 3,087 0.40 2,806 0.40 2,806
Tenth interim 0.44 3,086 0.40 2,806 0.40 2,806
Eleventh interim 0.44 3,087 0.40 2,806 0.40 2,806
Twelfth interim 0.44 3,087 0.40 2,806 0.40 2,806
In respect of the period under review:
First interim 0.44 3,087 0.40 2,806 0.40 2,806
Second interim 0.44 3,087 0.40 2,806 0.40 2,806
Third interim - - - - 0.40 2,806
Fourth interim - - - - 0.40 2,806
Fifth interim - - - - 0.40 2,806
Sixth interim - - - - 0.44 3,087
Seventh interim - - - - 0.44 3,087
Eighth interim - - - - 0.44 3,088
2.64 18,521 2.40 16,836 4.92 34,516
Property Income Distributions paid/announced subsequent to the period end
were:
Record date Payment date Rate (pence)
Third interim dividend 12 July 2024 31 July 2024 0.44
Fourth interim dividend 16 August 2024 30 August 2024 0.44
Although these payments relate to the period ended 30 June 2024, under IFRS
they will be accounted for in the period during which they are declared.
3. Other expenses
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£’000 £’000 £’000
Direct operating expenses of let rental property 1,449 1,030 2,167
Direct operating expenses of vacant property Impairment (reversal)/ provision 1,461 (196) 1,533 375 2,561 538
Valuation and other professional fees 314 171 593
Directors’ fees 136 153 288
Administration fee 95 95 191
Other 559 463 998
Professional fees accrued to date in relation to the strategic review 250 - -
4,068 3,820 7,336
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 2023.
4. Earnings per share
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Net (loss)/profit attributable to ordinary shareholders (£’000) (14,193) 7,855 (26,067)
Earnings return per share – pence (2.0)p 1.1p (3.7)p
Weighted average of ordinary shares in issue during the period 701,550,187 701,550,187 701,550,187
Earnings for the six months to 30 June 2024 should not be taken as guide to
the results for the year to 31 December 2024.
5. Investment properties
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Non-current assets – Investment properties £’000 £’000 £’000
Freehold and leasehold properties
Opening fair value 1,008,270 1,075,082 1,075,082
Sales - proceeds (53,755) - (14,300)
Sales - profit/ (loss) on sale 2,730 - (12,896)
Capital expenditure Purchase of investment properties 2,559 - 2,591 602 8,358 603
Unrealised (gains)/ losses realised during the year (5,546) - 8,363
Unrealised gains on investment properties 13,204 20,029 20,781
Unrealised losses on investment properties (39,211) (30,748) (77,721)
Transfer to assets classified as held for sale (59,993) - (71,277)
Closing fair value 868,258 1,067,556 936,993
Historic cost at the end of the period 807,294 932,115 850,793
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£’000 £’000 £’000
Unrealised gains 13,204 20,029 20,781
Unrealised losses (39,211) (30,748) (77,721)
Unrealised losses on revaluation of investment properties (26,007) (10,719) (56,940)
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£’000 £’000 £’000
Gains/ (losses) on sale 2,730 - (12,896)
Unrealised (losses)/ gains realised during the year (5,546) - 8,363
Losses on sales of investment properties realised (2,816) - (4,533)
The fair value of investment properties reconciled to the appraised value as
follows:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£’000 £’000 £’000
Appraised value prepared by CBRE 882,690 1,088,875 952,400
Lease incentives held as debtors (14,432) (21,319) (15,407)
Closing fair value 868,258 1,067,556 936,993
The fair value of investment properties held for sale, reconciled to the
appraised value as follows:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£’000 £’000 £’000
Appraised value prepared by CBRE 60,650 – 74,800
Lease incentives held as debtors (657) – (3,523)
Closing fair value 59,993 – 71,277
All the Group’s investment properties were valued as at 30 June 2024 by
RICS Registered Valuers working for CBRE Limited (‘CBRE’), commercial real
estate advisors, acting in the capacity of a valuation adviser to the AIFM.
CBRE completed the valuation of the Group’s investment properties at
30 June 2024 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 ended 30 June 2024, further details of
which were included in note 9 of the consolidated financial statements of the
Group for the year ended 31 December 2023.
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 Barclays/HSBC bank loan is
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
2024.
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 2024 £’000 30 June 2023 £’000 31 December 2023 £’000
L&G Loan 2024* 260,000 271,536 260,000
*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 2023.
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 2024, comprised
FCPT Holdings Limited, F&C Commercial Property Holdings Limited and Winchester
Burma Limited – see Note 13).
£320 million Barclays/HSBC facility
On 13 September 2023, the Company signed up to a two-year New Debt Facility
provided by incumbent lender, Barclays Bank plc (“Barclays”), and a new
lender, HSBC UK Bank plc (“HSBC”).
The 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 facility is available until 13
September 2025 with the option of two one-year extensions (subject to lender
approval and the first of which would have to be requested by 15 November
2024).
The RCF is secured by the way of a fixed and floating charge over the whole of
the assets of SCP Estate Holdings Limited, SCP Estate Limited and Prime Four
Limited (‘the SCP Group’), whose assets consist of the properties held at
St. Christopher’s Place Estate, London W1 and two office properties in
Aberdeen. The RCF is currently undrawn, with the £30 million drawn at 31
December 2023 being repaid following sales during the period. 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. The rate of interest on
the term loan should be fixed with an interest rate swap. No additional
security is to be provided beyond the current arrangements. The new term loan
has an undrawn commitment fee of 0.45 per cent per annum until 13 September
2024, which increases to 0.63 per cent thereafter. The revolving credit
facility has an undrawn commitment fee of 0.63 per cent per annum.
The New Debt Facility is a bespoke structure which permits the Company to
retain the competitively priced L&G Loan up to its 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 interest accrues on the New Debt Facility at a variable rate based
on SONIA plus a headline interest margin of 1.80 per cent per annum. Interest
should be fixed with an interest rate swap on at least 60 per cent of the term
loan. 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 currently available to be requested.
8. Share capital
Listed Held in Treasury In Issue (excluding Treasury shares)
Number £’000 Number £’000 Number £’000
Allotted, called up and fully paid Ordinary shares of 1 pence each
Balance at 1 January 2024 799,366,108 7,994 (97,815,921) (979) 701,550,187 7,015
Balance at 30 June 2024 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
2023: nil; 31 December 2023: nil).
9. Net asset value per share
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Net asset value per ordinary share – pence 105.1p 117.1p 109.8p
Net assets attributable at the period end (£’000) 737,325 821,641 770,039
Number of ordinary shares in issue at the period end 701,550,187 701,550,187 701,550,187
10. Related party transactions
The Directors of the Company are considered to be the Group’s key management
personnel. The Directors receive aggregated remuneration for services as
Directors and for which there are no outstanding balances at the period end.
There have been no transactions with related parties during the first six
months of the current financial year that have materially affected the
financial position or performance of the Company during the period and there
have been no changes in the related party transactions described in the last
Annual Report that could do so.
11. Capital commitments
The Group had no material capital commitments at 30 June 2024 (30 June 2023:
£5,777,000; 31 December 2023: £nil).
12. 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.
13. Subsequent events
Since the period end, the Company has completed the sales of the following
offices buildings:
• 7 Birchin Lane, London EC3 – a multi-let City of London office
of 22,300 sq. ft. Sale completed July 2024.
• 17A Curzon Street, London W1 – a low yielding, multi-let office of
10,800 sq ft in London’s West
End. Sale completed August 2024.
• 82 King Street, Manchester – a multi-let city-centre office holding of
83,500 sq. ft. and the largest single office remaining in the portfolio. Sale
exchanged July 2024 and completed in September 2024.
On 4 September 2024 it was announced that, further to the Strategic Review
launched in April this year, the Company had reached agreement on the terms of
a recommended all-cash acquisition by Starlight Bidco Limited (“Bidco”)
pursuant to which Bidco will acquire the entire issued and to be issued
ordinary share capital of the Company (the “Acquisition”). The Acquisition
is conditional on, among other things, the approval of the Company’s
shareholders at a Court meeting and an extraordinary general meeting.
The aforementioned meetings are expected to be held in the fourth quarter of
2024. If the Acquisition is not approved by shareholders, the Company will
continue to operate in the normal course of business whilst continuing to
assess its strategic options.
Independent review report to Balanced Commercial Property Trust Limited
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Balanced Commercial Property Trust Limited condensed
consolidated interim financial statements (the "interim financial statements")
in the interim report of Balanced Commercial Property Trust Limited for the
6-month period ended 30 June 2024 (the “period”).
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard 34,
‘Interim Financial Reporting’,as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
The interim financial statements comprise:
· the condensed consolidated balance sheet as at 30 June 2024;
· the condensed consolidated statement of comprehensive income
for the period then ended;
· the condensed consolidated statement of cash flows for the
period then ended;
· the consolidated condensed statement of changes in equity for
the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report have been
prepared in accordance with International Accounting Standard 34, ‘Interim
Financial Reporting’,as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410, ‘Review of Interim Financial Information Performed by the
Independent Auditor of the Entity’ issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and, consequently, does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Emphasis of Matter - Material Uncertainty Related to Going Concern
We draw attention to note 1 to the consolidated financial statements, which
indicates two material events which may impact the future of the company. 1)
Continuation Vote is due to be held during 2024. If the Continuation Vote
takes place and is not passed by shareholders then the Board will be required
to bring proposals to shareholders that may include a restructuring or wind
down of the company in its current form.
2) An all-cash acquisition offer made by a third party to acquire the
company’s entire issued and to be issued ordinary share capital (the
“Acquisition”). The Acquisition is subject to shareholder approval, and if
the Acquisition is approved by the shareholders there is significant
uncertainty concerning the future direction of the company.
As stated in note 1 these events or conditions along with other matters set
forth in note 1, indicate that material uncertainties exist that may cast
significant doubt on the company’s ability to continue as a going concern.
Our conclusion is not modified in respect of this matter.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with International
Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the
European Union and the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim report based on our review. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom’s Financial Conduct Authority and for no other purpose.
We do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
11 September 2024
(a) The maintenance and integrity of the Balanced
Commercial Property Trust Limited website is the responsibility of the
directors; the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation Guernsey governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
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 2024 Pence Six months to 30 June 2023 Pence Year to 31 December 2023 Pence
Net Asset Value per share (a) 105.1 117.1 109.8
Share price per share (b) 79.2 66.2 72.5
Discount (c=(b-a)/a) (c) (24.6)% (43.5)% (34.0)%
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 2024 £’000 Six months to 30 June 2023 £’000 Year to 31 December 2023 £’000
(Loss)/ profit for the period (14,193) 7,855 (26,067)
Add back: Unrealised losses on revaluation of investment properties 26,007 10,719 56,940
Losses on sales of investment properties realised 2,816 - 4,533
Loss on maturity of interest rate swap - - 187
Capital and rental lease incentives amortisation 4,091 945 3,346
Interest bearing loans amortisation of set-up costs 1,201 273 953
Set up costs written-off on £100m Barclays loan - - 167
Set-up costs of loan extension and £320m Barclays/HSBC loan - - (3,931)
Profit before investment gains and losses and amortisation (a) 19,922 19,792 36,128
Dividends (b) 18,521 16,836 34,516
Dividend Cover on a cash basis (c = a/b) (c) 107.6% 117.6% 104.7%
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 2024 £’000 Six months to 30 June 2023 £’000 Year to 31 December 2023 £’000
(Loss)/ profit for the period (14,193) 7,855 (26,067)
Add back: Unrealised losses on revaluation of investment properties 26,007 10,719 56,940
Losses on sales of investment properties realised 2,816 - 4,533
Loss on maturity of interest rate swap - - 187
Other income (67) - (119)
Profit before investment gains and losses (a) 14,563 18,574 35,474
Dividends (b) 18,521 16,836 34,516
Accounting Dividend Cover (c = a/b) (c) 78.6% 110.3% 102.8%
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 to
the financial statements.
Net Gearing – Borrowings less cash divided by total assets (less current
liabilities and cash).
Six months to 30 June 2024 £’000 Six months to 30 June 2023 £’000 Year to 31 December 2023 £’000
Interest-bearing bank loans 260,000 310,000 290,000
Less cash and cash equivalents (67,305) (54,804) (41,717)
Total (a) 192,695 255,196 248,283
Total assets less current liabilities and cash (excluding current interest-bearing loans) (b) 932,595 1,078,419 1,017,562
Net Gearing (c=a/b) (c) 20.7% 23.7% 24.4%
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 2024 Six months to 30 June 2023 Year to 31 December 2023
NAV per share at the start of the period (p) 109.8 118.5 118.5
NAV per share at the end of the period (p) 105.1 117.1 109.8
Change in the period -4.3% -1.2% -7.3%
Impact of dividend reinvestments +2.4% +2.0% +4.0%
NAV total return for the period -1.9% +0.8% -3.3%
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Share price per share at the start of the period (p) 72.5 88.5 88.5
Share price per share at the end of the period (p) 79.2 66.2 72.5
Change in the period +9.2% -25.2% -18.1%
Impact of dividend reinvestments +3.8% +2.2% +5.6%
Share price total return for the period +13.0% -23.0% -12.5%
EPRA Performance Measures
The European Public Real Estate Association (EPRA) is the industry body
representing listed companies in the real estate sector. EPRA publishes Best
Practice Recommendations (BPR) to establish consistent reporting by European
property companies.
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 2024 £’000 Six months to 30 June 2023 £'000 Year to 31 December 2023 £'000
Loss/(profit) per IFRS income statement (14,193) 7,855 (26,067)
Exclude:
Unrealised losses on investment properties 26,007 10,719 56,940
Losses on sales of investment properties realised 2,816 - 4,533
Loss on maturity of interest rate swap - - 187
EPRA earnings 14,630 18,574 35,593
Weighted average number of shares in issue (000's) 701,550 701,550 701,550
EPRA earnings per share (pence per share) 2.1 2.6 5.1
EPRA Net Tangible Assets - Assumes that entities buy and sell assets, thereby
crystallising certain levels of unavoidable deferred tax.
Six months to 30 June 2024 £’000 Six months to 30 June 2023 £'000 Year to 31 December 2023 £'000
IFRS NAV 737,325 821,641 770,039
Fair value of interest rate swaps – (187) -
Net assets used in per share calculation 737,325 821,454 770,039
Shares in issue (000's) 701,550 701,550 701,550
EPRA assets per share (pence per share) 105.1 117.1 109.8
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 2024 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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