Net Asset Value

To:                   Company Announcements
Date:                29 October 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 September 2019 was 133.6 pence. This represents a decrease of 2.0 per cent from the unaudited NAV per share as at 30 June 2019 of 136.3 pence and a NAV total return for the quarter of -0.9 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 September 2019 and is calculated after deduction of all dividends paid prior to that date. As at 30 September 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 116.60 pence per share at 30 September 2019, which represented a discount of 12.7 per cent to the NAV per share announced above. The share price total return for the quarter was 5.7 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 30 June 2019 to 30 September 2019 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 30 June 2019	1,089.8	136.3
Unrealised decrease in valuation of property portfolio *	(20.1)	(2.5)	(1.9)
Realised gain on sale of property	0.8	0.1	0.1
Movement in fair value of interest rate swap	(0.1)	0.0	0.0
Other net revenue	9.9	1.2	0.9
Dividends paid	(12.0)	(1.5)	(1.1)
NAV as at 30 September 2019	1,068.3	133.6	(2.0)

* The ungeared decrease in the valuation of the property portfolio over the quarter to 30 September 2019 was 1.4%, after allowing for capital expenditure.

The net gearing at 30 September 2019 was 20.7%. #

# 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 September 2019 according to the MSCI UK Monthly Property Index for standing investments. All-property capital values fell by 0.7 per cent over the three-month period, with September 2019 representing the ninth consecutive month of decline.

The retail market continues to be affected by Company Voluntary Arrangements, administrations and store rationalisation programmes, with the sector delivering a quarterly total return of -1.5 per cent.

The office market outperformed all-property with mildly positive capital growth and a 1.4 per cent total return, which was led by London city offices. 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. Total returns in the alternatives sectors once again out-performed the all-property average at 1.5 per cent.

The quarter was again notable for the continued weakness in investment activity. Most parts of the market are now seeing below average levels of transactions, which has been the case throughout 2019.

Performance is being supported by the income return. This was unchanged in the quarter at 1.3 percent with income returning 5.3 per cent on an annual basis.

Performance

The property portfolio delivered a total return over the quarter of -0.2 per cent. The capital value of the portfolio decreased by 1.4 per cent.

The retail assets were worst hit with capital values falling 5.2 per cent in the retail warehouse sector. Newbury Retail Park and Solihull Retail Park both experienced valuation falls, wholly attributable to capitalisation rates moving out, despite the successful lettings contracted over the period.

The value of St Christopher’s Place fell 2.4 per cent as a result of the challenging environment on Oxford Street with estimated rental values falling and capitalisation rates adjusting outwards.

Investment Activity

There were no purchases during the quarter.

The sale of Phase I of the former Ozalid Works site in Colchester completed to Persimmon Homes at a gross price of £6.2 million, a £0.8 million uplift on the 30 June 2019 valuation of £5.4 million. The sale of Phase 2 of this site will complete July 2020.

Lease Activity

Leasing activity of note took place at Newbury Retail Park. There was a letting of the majority of the former Homebase unit to Lidl at a rent equating to £23 psf on a 25-year lease with CPI linked rent reviews (break at year 20). In addition, there was a letting of part of the former Mothercare unit (6,000 sq. ft.) to Deichman Shoes at £28 psf.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 30 September 2019	% like for like capital value shift (incl transactions)
Offices	547.8	40.4	0.2
West End	206.2	15.2	0.6
South East	91.0	6.7	-0.9
South West	33.4	2.5	0.0
Rest of UK	196.5	14.5	0.1
City	20.7	1.5	1.5
Retail	299.5	22.0	-3.1
West End	225.6	16.6	-4.2
South East	42.4	3.1	0.1
Rest of UK	31.5	2.3	-0.6
Industrial	242.8	17.9	-1.6
South East	30.1	2.2	-0.2
Rest of UK	212.7	15.7	-1.8
Retail Warehouse	139.1	10.1	-5.2
Alternatives	130.5	9.6	1.3
Total Property Portfolio	1,359.7	100.0	-1.4

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 30 September 2019
West End	491.9	36.2
South East	296.6	21.8
Scotland	174.1	12.8
North West	161.0	11.8
Midlands	156.5	11.5
South West	33.4	2.5
Eastern	25.5	1.9
Rest of London	20.7	1.5
Total Property Portfolio	1,359.7	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	1,359.7	170.1	127.3
Adjustment for lease incentives	(22.0)	(2.8)	(2.1)
Fair Value of Property Portfolio	1,337.7	167.3	125.2
Trade and other receivables	27.7	3.5	2.6
Cash and cash equivalents	30.5	3.8	2.9
Current Liabilities	(17.0)	(2.1)	(1.6)
Total Assets (less current liabilities)	1,378.9	172.5	129.1
Non-Current liabilities	(1.9)	(0.2)	(0.2)
Interest rate swap	(0.4)	(0.1)	(0.1)
Interest-bearing loans	(308.3)	(38.6)	(28.8)
Net Assets at 30 September 2019	1,068.3	133.6	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. There is an additional revolving credit facility of £50 million in place 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 December 2019 and it is expected that the unaudited NAV per share as at 31 December 2019 will be announced in January 2020.

This announcement contains inside information.

Enquiries:

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

Graeme Caton
Winterflood Securities Limited
Tel: [phone]