NAV Release and Company Update
17/05/2024 07:00
To: Company Announcements
Date: 17 May 2024
Company: Balanced Commercial Property Trust Limited
LEI: 213800A2B1H4ULF3K397
Balanced Commercial Property Trust Limited (the "Company” or “BCPT”)
NAV (unaudited) and Company Update
Headlines
* Net Asset Value total return of -1.1 per cent for the quarter ended 31 March
2024.
* Share Price total return of +14.3 per cent for the quarter ended 31 March
2024.
* Disposal of two office assets completed, raising proceeds of £54.6m at an
aggregate discount to valuation of 0.4 per cent (both disposals announced
previously).
* 18 leases and tenancy agreements completed or renewed over the quarter.
Net Asset Value: total return of -1.1 per cent for the quarter
The unaudited net asset value (‘NAV’) per share of the Company as at 31
March 2024 was 107.3 pence. This represents a decrease of 2.3 per cent from
the audited NAV per share as at 31 December 2023 of 109.8 pence and a NAV
total return for the quarter of -1.1 per cent.
The NAV has been calculated under International Financial Reporting Standards
(‘IFRS’). It is based on the external valuation of the Company’s
property portfolio which has been prepared by CBRE Limited.
The NAV includes all income to 31 March 2024 and is calculated after deduction
of all dividends paid prior to that date.
Analysis of Movement in NAV
The following table provides an analysis of the movement in the unaudited NAV
per share for the period from 31 December 2023 to 31 March 2024 (including the
effect of gearing):
£m Pence per share % of opening NAV per share
NAV as at 31 December 2023 770.0 109.8
Unrealised decrease in valuation of property portfolio (11.4) (1.6) (1.5)
Realised losses on property sales (2.8) (0.4) (0.4)
Other net revenue 6.0 0.8 0.7
Dividends paid (9.3) (1.3) (1.1)
NAV as at 31 March 2024 752.5 107.3 (2.3)
The EPRA Net Tangible Assets per share as at 31 March 2024 was 107.3 pence per
share (31 December 2023: 109.8 pence per share).
Market Commentary
Whilst uncertainty on the outlook and timing for interest rate cuts has
weighed on real estate capital markets, the pace of declines in valuations has
moderated. At the market level, the MSCI UK Quarterly Index recorded capital
growth of -0.7 per cent over the first quarter of 2024. However, at the sector
level performance is significantly nuanced as those sectors supported by
strong occupational fundamentals, such as industrial & logistics and retail
warehousing, delivered capital growth.
Occupational markets have remained resilient, despite the economic challenges,
delivering income growth of 3.4 per cent and rental value growth of 3.5 per
cent over the 12 months to March.
Asset management update
Over the first quarter, 18 leases and tenancy agreements have been completed
or renewed. Notable transactions include:
* St Christopher’s Place, Central London– Sunday in Brooklyn have
committed to a 15-year lease on a newly created anchor unit, at a rent in line
with estimated rental value (‘ERV’) and with the potential for a further
rental top-up based on the restaurant’s turnover. Recent F&B lettings have
increased the estate’s exposure to the sector to 42 per cent by capital
value. Currently 44 per cent of the space available at the estate is under
offer.
* Cowdray Centre, Colchester– following the completion of a substantial
refurbishment, MKM Building Supplies have signed a new 20-year lease at a rent
in line with the unit’s ERV.
* 17A Curzon Street, London W1– the newly refurbished top-floor suite of
this multi-let West End office holding has been let on a new 5-year lease to
Turcan Connell at a rent of £131.50 per square foot, representing a marginal
premium to ERV.
* 7 Birchin Lane, London EC3– this multi-let City of London holding has been
subject to a phased refurbishment programme which has now completed with the
leasing of the final suite. The ground floor suite has been let to Exquitech
on a new 5-year lease at a rent of £64.50 psf. The rent represents a marginal
premium to the suite’s ERV, and a 9.5 per cent premium to the
pre-refurbishment ERV.
The portfolio vacancy rate increased marginally over the quarter, rising from
6.7 per cent to 6.8 per cent by ERV. Of this, 4.6 per cent is attributed to
Stockley Park, Uxbridge, which is held as a repurposing opportunity and 0.9
per cent is contractually committed to occupiers.
Portfolio valuation
Over the quarter, the Company’s portfolio recorded a valuation decline of
1.6 per cent, with valuation yields moving as set out below:
Portfolio yield (%) December 2023 March 2024
Net initial yield 5.5 5.6
Equivalent yield 6.5 6.7
Offices saw a valuation decline of 4.3 per cent amid prevailing weak investor
sentiment towards the sector. The equivalent yield on the office portfolio
increased by 92 basis points to 9.1 per cent.
St Christopher’s Place experienced a valuation decline of 3.3 per cent. The
primary cause of this was the administration of The Body Shop, who have ceased
trading from their store at 372/374 Oxford Street. This prominent corner unit
is being actively marketed and has received several offers to occupy, which
are under negotiation.
The retail warehouse assets experienced a 2.4 per cent increase in value, as
prime market yields compressed over the quarter amid strong levels of investor
and occupational demand. The Company’s retail parks in Newbury and Solihull
are fully leased and offer an attractive and robust grocery, discount and
convenience-led tenant roster. The equivalent yield on the retail warehouses
sharpened by 12 basis points to 6.1 per cent.
Industrial assets saw capital values fall marginally by 0.2 per cent as the
equivalent yield on the portfolio assets remained broadly stable at 6.1 per
cent.
Investment activity
As previously announced, the Company successfully completed the disposal of
two office holdings in the first quarter:
* 2-4 King Street, London SW1 – a multi-let freehold of 15,000 sq ft in
London’s West End.
* The Leonardo Building, Crawley – a headquarters office building of 110,000
sq ft, located on an out-of town business park.
The sales completed at an aggregate price of £54.6m, reflecting a discount to
the preceding valuation of 0.4 per cent. The pricing achieved on these
disposals reflects the quality of the real estate in the portfolio which has
strong underlying fundamentals.
The Manager is continuing to actively review a pipeline of further disposals
from the office sector, as part of the Company’s strategy to enhance the
portfolio’s exposure to structurally supported growth sectors and assets.
Share Price
As at 31 March 2024, the share price was 81.4 pence per share, which
represented a discount of 24.1 per cent to the NAV per share. The share price
total return for the quarter to 31 March 2024 was 14.3 per cent.
Cash and Borrowings
The Company had £66.1 million of available cash as at 31 March 2024.
The Company has a £260 million term loan in place with L&G which matures in
December 2024. The Company signed up to a new debt facility in September 2023
which has been provided by incumbent lender, Barclays Bank plc, and HSBC UK
Bank plc. This facility has been structured with two tranches, being (a) a
£60 million Revolving Credit Facility (‘RCF’) and (b) a £260 million
Term Loan, which can only be drawn to refinance the existing L&G Loan. Further
to the sales highlighted above, the £30 million drawn down at 31 December
2023 was repaid during the quarter and as at 31 March 2024, the £60 million
RCF remained undrawn.
As at 31 March 2024, the Company’s loan to value, net of cash was 20.4 per
cent.
Dividend
The Company paid three monthly property income distributions at a rate of 0.44
pence per share during the quarter.
Portfolio Analysis – Sector Breakdown
Portfolio Value at 31 March 2024 £m % of portfolio at 31 March 2024 % capital return (adjusted for sales and CAPEX)
Industrial 331.7 34.7 -0.2
South-East 59.0 6.2 0.8
Rest of UK 272.7 28.5 -0.5
Offices 206.8 21.6 -4.3
West End 54.7 5.7 1.7
South-East 15.9 1.7 -8.4
South-West 20.6 2.2 -11.2
Rest of UK 97.0 10.1 -5.8
City 18.6 1.9 -0.9
Retail 183.0 19.1 -3.4
West End 157.6 16.5 -3.9
South-East 25.4 2.6 -0.4
Retail Warehouse 129.0 13.5 2.4
Alternatives 106.5 11.1 -1.9
Total Property Portfolio 957.0 100.0 -1.6
Portfolio Analysis – Geographic Breakdown
Market Value £m % of portfolio as at 31 March 2024
West End 259.0 27.1
Midlands 238.3 24.9
South East 222.4 23.2
North West 127.5 13.3
Scotland 70.6 7.4
South West 20.6 2.2
Rest of London 18.6 1.9
Total Property Portfolio 957.0 100.0
Top Ten Investments
Sector
Properties valued in excess of £200 million
London W1, St Christopher’s Place Estate * Mixed
Properties valued between £50 million and £70 million
Solihull, Sears Retail Park Retail Warehouse
Newbury, Newbury Retail Park Retail Warehouse
Properties valued between £40 million and £50 million
London SW19, Wimbledon Broadway ** Winchester, Burma Road Mixed Alternative
Properties valued between £30 million and £40 million Chorley, Units 6 and 8 Revolution Park Birmingham, Unit 8 Hams Hall Distribution Park Markham Vale, Orion 1 & 2 Liverpool, Unit 1, G.Park, Portal Way Daventry, Site E4, Daventry International Rail Freight Terminal Industrial Industrial Industrial Industrial Industrial
* Mixed use property of retail, office and residential space.
** Mixed use property of retail and leisure space.
Summary Balance Sheet
£m Pence per share % of Net Assets
Property Portfolio 957.0 136.4 127.2
Adjustment for lease incentives (14.7) (2.1) (2.0)
Fair Value of Property Portfolio 942.3 134.3 125.2
Trade and other receivables 26.1 3.7 3.4
Cash and cash equivalents 66.1 9.4 8.8
Current liabilities (19.7) (2.8) (2.6)
Current interest-bearing loan (259.8) (37.0) (34.5)
Total Assets less current liabilities 755.0 107.6 100.3
Non-current liabilities (2.5) (0.3) (0.3)
Net Assets at 31 March 2024 752.5 107.3 100.0
The next quarterly valuation of the property portfolio will be conducted by
CBRE Limited during June 2024 and it is expected that the unaudited NAV per
share as at 30 June 2024 will be announced in July 2024.
Subsequent events
On 15 April 2024, the Company announced that it had commenced a strategic
review process (the 'Strategic Review Announcement'). A copy of the Strategic
Review Announcement has been made available, subject to certain restrictions
relating to persons resident in restricted jurisdictions, on the Company's
website (https://www.balancedcommercialproperty.co.uk).
Following the quarter ended 31 March 2024, the Company published its annual
report and audited consolidated financial statements in respect of the
financial year ended 31 December 2023 ('2023 Annual Report'). The 2023 Annual
Report is also available for inspection on the Company's website.
Important information
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014. Upon the publication of this announcement via Regulatory
Information Service this inside information is now considered to be in the
public domain.
Enquiries:
Richard Kirby
Columbia Threadneedle REP AM plc
Tel: 0207 499 2244
Innes Urquhart
Winterflood Securities Limited
Tel: 0203 100 0265
Dion Di Miceli / Tom MacDonald / Stuart Muress / James Atkinson
Barclays Bank PLC
Tel: 0207 623 2323
BarclaysInvestmentCompanies@barclays.com
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