Acquisition(s)

To:  RNS

Date:  17 January 2022

Company:  BMO Commercial Property Trust Limited

LEI Number:  213800A2B1H4ULF3K397 

Subject:  Acquisitions by BMO Commercial Property Trust Limited (“BCPT” or “the Company”)

BCPT acquires two logistics assets in December 2021 for £66 million and commits to two developments for £10.5 million originating from the Company’s existing portfolio.

• These initiatives accord with the strategy of re-cycling capital by increasing the Company’s exposure to the prime industrial and logistics sector with strong ESG credentials.
• The acquisitions represent the first phase of the re-investment of the gross sale proceeds of £199.5million generated from the sale of Cassini House, London and two retail warehouse assets in East Kilbride and Rochdale.
• The acquisitions are completed in parallel with a share buyback programme, with 48.3 million of the Company’s shares having been purchased since June 2021 at a cost of £47.4 million.
• The portfolio’s weighting to the industrial and logistics sector has increased to 30.6 per cent as at 31.12.21 compared to 19.1 per cent as at 31.12.2020.

The Company has acquired Orion One and Two, Markham Vale, Derbyshire for a price of £44.5million reflecting an initial yield of 3.7% and a low capital value of £148 per sq ft. The two newly built units were completed in April 2021 and are located within Derbyshire’s 200-acre flagship redevelopment scheme adjoining junction 29A of the M1 Motorway. Orion One extends to 224,424sq ft and is let to The National Lighting Company Limited on a lease term expiring in August 2031 at a rent of £1,289,000 per annum with a rent review at the 5^th year, linked to RPI and collared and capped at 1.50 – 3.50 per cent per annum. Orion Two comprises a smaller unit of 75,958 sq ft and is let to Smurfit Kappa UK Ltd on a lease expiring October 2031 (tenant break October 2026) at a commencing rent of £475,000 per annum, subject to a rent review in the fifth year. Both units have rent free periods in place, all of which expire during 2022. The units have been constructed to institutional standards and benefit from strong ESG credentials having achieved an EPC rating of A and BREEAM rating of very good.

The second acquisition is Unit 4, Quintus Business Park, Burton-Upon-Trent which is structured as a forward funding to develop a new logistics warehouse of 171,550 sq ft. The property has been pre-let to Werner UK Sales & Distribution Limited on a lease term upon completion of 15 years (tenant break after 10 years) at a rent of £1,072,000 per annum, with 5 yearly rent reviews linked to RPI and collared and capped at 2.00 - 4.00 per cent per annum. The purchase price is £21.5 million which equates to an initial yield of 4.84 per cent. The Company has acquired the land and met certain development costs incurred to date which amounts to £5.6 million of the purchase price. The development has achieved planning consent and is expected to complete in July 2022. The unit will have strong ESG credentials with an A rated EPC and a BREEAM Excellent rating being targeted.

During lockdown the Company delayed un-committed capital expenditure. In light of improving markets and outlook a number of opportunities in the existing portfolio have been reviewed with the confidence of progressing two larger projects. At Estuary Business Park, Speke, Liverpool the Company has committed to the speculative development of a 52,000 sq ft mid-box logistics unit on land already owned and adjoining an existing ownership. The total construction cost is expected to be in the region of £4.8 million with an income return on cost forecast to be c.6.50 per cent when let.

In Colchester the Company has secured planning consent to demolish an obsolete warehouse unit at the Cowdray Centre and the re-development of c.35,000 sq ft to form a new multi-unit trade counter park. This development will also be undertaken speculatively and will incur expenditure of c.£5.7million. It is expected a start on site will commence this quarter and early marketing has identified encouraging tenant demand.

Richard Kirby, Director, BMO Real Estate Partners, commented. “The acquisition of these two assets accords with the re-cycling of capital to increase BCPT’s exposure to prime, modern industrial and logistics assets in established locations with the added benefit of increasing BCPT’s tenant roster with leases linked to RPI and assets achieving strong underlying ESG credentials. The commitment to the developments at Colchester and Liverpool demonstrates further evidence of the value embedded within the existing portfolio. “