Net Asset Value

To:                   Company Announcements

Date:                9 May 2019

Company:          F&C 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 31 March 2019 was 137.9 pence. This represents a decrease of 1.4 per cent from the audited NAV per share as at 31 December 2018 of 139.8 pence and a NAV total return for the quarter of -0.3 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 31 March 2019 and is calculated after deduction of all dividends paid prior to that date. As at 31 March 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 119.60 pence per share at 31 March 2019, which represented a discount of 13.3 per cent to the NAV per share announced above. The share price total return for the quarter was -2.9 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 December 2018 to 31 March 2019 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 31 December 2018	1,117.4	139.8
Unrealised decrease in valuation of property portfolio *	(12.1)	(1.6)	(1.2)
Realised gain on sale of property	0.3	0.0	0.0
Movement in fair value of interest rate swap	(0.3)	0.0	0.0
Other net revenue	9.3	1.2	0.9
Dividends paid	(12.0)	(1.5)	(1.1)
NAV as at 31 March 2019	1,102.6	137.9	(1.4)

* The ungeared decrease in the valuation of the property portfolio over the quarter to 31 March 2019 was 0.9%, after allowing for capital expenditure.

The net gearing at 31 March 2019 was 20.2%. #

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

Market

The polarisation of performance between different segments of the property market continued over the quarter. Once again industrials and distribution out-performed, although a 1.7 per cent total return compared with 3.4 per cent three months earlier, suggests momentum is easing.

The retail sectors remained challenged, with total returns recording a negative 1.3 per cent. There was poor sentiment among both occupiers and investors as the Company Voluntary Arrangements (CVA’s) and store rationalisations continue. Although Central London and more affluent towns have been less hard-hit, the problems affecting the sector are now widespread. Shopping centres, department stores and secondary regional shops have been especially impacted.

The Central London office market has seen a slight cooling, attributable to Brexit related uncertainties, political risk and forthcoming changes to capital gains taxation for overseas investors. Consequently, Central London offices registered a 0.9 per cent total return, down from 1.3 per cent in December.  Regional offices proved more resilient recording 1.4 per cent. Alternatives produced a 1.2 per cent total return.

Performance

The Company’s portfolio delivered a total return of 0.1 per cent over the quarter. The capital value of the portfolio decreased by 0.9 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    -0.9 per cent. Specifically, the Company’s largest retail warehouse asset at Newbury experienced further valuation falls of 7.2 per cent. This is attributable to capitalisation rates moving out with the negative sentiment to the sub-sector. This property has been impacted by CVA’s and most notably with Homebase. The initiatives identified to attract new retailers to this property including securing revised planning consents are being progressed and have advanced over the quarter.

The value of St. Christopher’s Place also fell as a result of yields increasing on the Oxford Street properties. 

Investment Activity

In January the Company completed the strategic sale of two office buildings in Reading (Thames Valley Park One and Two) at a combined sale price £24.5 million. These non-core disposals addressed the Company’s largest void exposure by rental value, released capital to be invested in income producing properties, significantly reduces non-recoverable expenditure and removes a future substantive capital expenditure requirement of approximately £8.0 million.

The sale of Building A, Watchmoor Park, Camberley also completed at a net sale price of £3.9 million. This property comprises a 24,000 sq ft multi -let office building with a 7,570 sq ft vacant floor located on an out of town business park. This sale follows the sale of the adjacent Building B which completed last year.

Following the disposal of the properties at Reading, the void rate as at 31 March 2019 was 4.9 per cent (31 December 2018 – 8.5 per cent). The sale at Camberley will reduce this to 4.7 per cent.

Leasing Activity

The letting of the extensively refurbished 4^th and 5^th floors at Cassini House, London SW1 completed at a rent of £1,438,000 per annum subject to 12 months’ rent free.

In April the refurbishment of Nevis and Ness, House Edinburgh Park completed, and the property was handed over to Diageo to undertake their works. The lease is scheduled to complete in November.

Portfolio Analysis – Sector Breakdown

	Portfolio  Value £m	% of portfolio as at 31 March 2019	% like for like capital value shift (excl transactions)
Offices	548.9	39.4	0.5
West End	204.3	14.7	1.7
South East	95.0	6.8	-0.8
South West	33.4	2.4	0.0
Rest of UK	195.9	14.0	-0.3
City	20.3	1.5	-0.4
Retail	312.3	22.4	-2.5
West End	237.4	17.0	-2.6
South East	43.1	3.1	-2.6
Rest of UK	31.8	2.3	-1.7
Industrial	254.1	18.2	-0.3
South East	30.1	2.2	0.0
Rest of UK	224.0	16.0	-0.4
Retail Warehouse	151.8	10.8	-2.5
Alternatives	129.1	9.2	0.3
Total Property Portfolio	1,396.2	100.0	-0.9

Portfolio Analysis – Geographic Breakdown

	Market  Value £m	% of portfolio as at 31 March 2019
West End	500.7	35.9
South East	305.1	21.7
Scotland	174.7	12.5
Midlands	169.1	12.1
North West	162.8	11.7
South West	33.4	2.4
Eastern	30.1	2.2
Rest of London	20.3	1.5
Total Property Portfolio	1,396.2	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	1,396.2	174.6	126.6
Adjustment for lease incentives	(21.3)	(2.7)	(1.9)
Fair Value of Property Portfolio	1,374.9	171.9	124.7
Debtors	24.9	3.0	2.2
Cash	30.8	3.9	2.8
Current Liabilities	(17.9)	(2.2)	(1.6)
Total Assets (less current liabilities)	1,412.7	176.6	128.1
Non-Current liabilities	(1.8)	(0.2)	(0.2)
Interest rate swap	(0.2)	-	-
Interest-bearing loans	(308.1)	(38.5)	(27.9)
Net Assets at 31 March 2019	1,102.6	137.9	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 fccpt.co.uk.

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

This announcement contains inside information.

Enquiries:

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

Graeme Caton
Winterflood Securities Limited
Tel: [phone]