Net Asset Value(s)

To:                   Company Announcements

Date:                31 July 2019

Company:        BMO Commercial Property Trust Limited

LEI:                  213800A2B1H4ULF3K397

Subject:           Net Asset Value

Net Asset Value

The unaudited net asset value (‘NAV’) per share of the Group as at 30 June 2019 was 136.3 pence. This represents a decrease of -1.2 per cent from the unaudited NAV per share as at 31 March 2019 of 137.9 pence and a NAV total return for the quarter of -0.1 per cent.

The NAV has been calculated under International Financial Reporting Standards (‘IFRS’). It is based on the external valuation of the Group’s direct property portfolio prepared by CBRE Limited.

The NAV includes all income to 30 June 2019 and is calculated after deduction of all dividends paid prior to that date. As at 30 June 2019, no adjustments were required to the NAV in respect of dividends for which the share price had gone ex-dividend.

Share Price

The share price was 111.80 pence per share at 30 June 2019, which represented a discount of 18.0 per cent to the NAV per share announced above. The share price total return for the quarter was -5.3 per cent.

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 March 2019 to 30 June 2019 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 31 March 2019	1,102.6	137.9
Unrealised decrease in valuation of property portfolio *	(10.4)	(1.3)	(0.9)
Realised loss on sale of property	(0.6)	(0.1)	(0.1)
Movement in fair value of interest rate swap	(0.1)	0.0	0.0
Other net revenue	10.3	1.3	0.9
Dividends paid	(12.0)	(1.5)	(1.1)
NAV as at 30 June 2019	1,089.8	136.3	(1.2)

* The ungeared decrease in the valuation of the property portfolio over the quarter to 30 June 2019 was -0.8%, after allowing for capital expenditure.

The net gearing at 30 June 2019 was 20.4%. #

# Net gearing: (Borrowings – cash) ÷ total assets (less current liabilities and cash).

Market

The market delivered a 0.6 per cent all-property total return in the quarter ended June 2019 according to the MSCI UK Monthly Property Index for standing investments. All-property capital values fell by -0.7% over the three-month period, with June 2019 representing the eighth consecutive month of decline.

The retail market continued to be affected by Company Voluntary Arrangements, administrations and store rationalisation programmes. The sector delivered a quarterly total return of -0.9 per cent, with negative returns in most parts of the market. Central London shops were an exception delivering a modest 0.3 per cent total return.

The office market recorded a 0.9 per cent total return, led by offices outside Central London. This is slightly below the rate seen in the previous quarter. The industrial market continued to drive performance with a 1.7 per cent total return. This was in line with the previous quarter’s performance but represents a deceleration from the pace of the previous few years. The alternatives sector out-performed the all-property average.

The quarter was notable for the continued weakness in investment activity. Most parts of the market are now seeing below average levels of transactions.

Performance is being supported by the income return. This was unchanged in the quarter at 1.3 percent and was 5.2 per cent on an annual basis.

Performance

The Company’s portfolio delivered a total return of 0.3 per cent over the quarter. The capital value of the portfolio decreased by -0.8 per cent and the income return was 1.1 per cent.

The Company’s retail properties were the worst performing sector recording a total return of      -0.6 per cent. Within the retail sector, retail warehouses recorded a total return of -2.4 per cent with both Newbury Retail Park and Solihull Retail Park experiencing valuation falls of -3.5 per cent and -4.6 per cent respectively. These falls were attributable to market related capitalisation rates moving out, whilst the estimated rental values are supported by recent letting progress on the parks. The Managers continue to work on a number of initiatives to re-let the units affected by tenant defaults and these are progressing but still dependent upon securing revised planning consents.

The Company’s offices were the best performing sector producing a total return of 1.2 per cent. The portfolio void rate was 5.0 per cent.

Investment Activity

There were no sales or purchases during the quarter.

Leasing Activity

The letting of Unit 8 (ex-Poundworld) at Newbury Retail Park completed to Hobbycraft at a rent of £215,578 per annum.

The 4^th floor at 7 Birchin Lane was let at a rent of £152,955 per annum, whilst in July Leica Cameras completed a lease of the 4^th floor at 6-8 James Street at a rent of £121,500 per annum.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 30 June 2019	% like for like capital value shift (excl transactions)
Offices	546.6	39.5	0.3
West End	204.6	14.8	0.0
South East	91.9	6.6	1.0
South West	33.4	2.4	0.0
Rest of UK	196.3	14.2	0.2
City	20.4	1.5	-0.1
Retail	309.1	22.4	-1.0
West End	235.1	17.0	-1.2
South East	42.3	3.1	-1.9
Rest of UK	31.7	2.3	-0.4
Industrial	251.9	18.2	-0.8
South East	30.1	2.2	0.0
Rest of UK	221.8	16.0	-0.9
Retail Warehouse	146.6	10.6	-3.5
Alternatives	128.9	9.3	-0.1
Total Property Portfolio	1,383.1	100.0	-0.8

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 30 June 2019
West End	498.5	36.0
South East	298.8	21.6
Scotland	174.8	12.6
Midlands	164.8	11.9
North West	162.7	11.8
South West	33.3	2.4
Eastern	30.0	2.2
Rest of London	20.2	1.5
Total Property Portfolio	1.383.1	100.0

Top Ten Investments

	Sector
Properties valued in excess of £250 million
London W1, St Christopher’s Place Estate *	Mixed
Properties valued between £100 million and £150 million
London SW1, Cassini House, St James’s Street	Office
Properties valued between £50 million and £70 million
Newbury, Newbury Retail Park	Retail Warehouse
Solihull, Sears Retail Park	Retail Warehouse
London SW19, Wimbledon Broadway**	Mixed
Properties valued between £40 million and £50 million
Crawley, Leonardo House, Manor Royal	Office
Winchester, Burma Road	Alternative
Manchester, 82 King St	Office
Properties valued between £30 million and £40 million
Aberdeen, Unit 2 Prime Four Business Park, Kingswells	Office
Aberdeen, Unit 1 Prime Four Business Park, Kingswells	Office

*Mixed use property of retail, office, food/beverage and residential space.

**Mixed use property of retail, food/beverage and leisure space.

Summary Balance Sheet

	£m	Pence per share	% of Net Assets
Property Portfolio	1,383.1	173.0	126.9
Adjustment for lease incentives	(21.4)	(2.7)	(2.0)
Fair Value of Property Portfolio	1,361.7	170.3	124.9
Debtors	26.2	3.4	2.4
Cash	30.0	3.7	2.7
Current Liabilities	(17.5)	(2.2)	(1.6)
Total Assets (less current liabilities)	1,400.4	175.2	128.4
Non-Current liabilities	(2.1)	(0.3)	(0.2)
Interest rate swap	(0.2)	-	-
Interest-bearing loans	(308.3)	(38.6)	(28.2)
Net Assets at 30 June 2019	1,089.8	136.3	100.0

Borrowings

The Group’s borrowings consist of a £260 million loan with a term to 31 December 2024 and a fixed interest rate of 3.32 per cent per annum. The Group also has a £50 million bank loan with a term to 21 June 2021 on which the interest rate has been fixed, through an interest rate swap of the same notional value and duration, at 2.522 per cent per annum. In addition, the Board has agreed an additional revolving credit facility of £50 million with Barclays over the same period, to be used for ongoing working capital purposes and to provide the Group with the flexibility to acquire further property should the opportunity arise. This facility is currently undrawn.

The Group’s weighted average cost of debt is 3.3 per cent per annum.

Key Information

This statement and further information regarding the Company, including movements in the share price since the end of the period and the Group’s most recent annual and interim reports, can be found at the Company’s website bmocommercialproperty.com.

The next quarterly valuation of the property portfolio will be conducted by CBRE Limited during September 2019 and it is expected that the unaudited NAV per share as at 30 September 2019 will be announced in October 2019.

This announcement contains inside information.

Enquiries:

Richard Kirby
BMO REP Asset Management plc
Tel: [phone]

Graeme Caton
Winterflood Securities Limited
Tel: [phone]