Trading update and NAV release

To:  Company Announcements

Date:  29 January 2021

Company:  BMO Commercial Property Trust Limited

LEI:  213800A2B1H4ULF3K397

Subject:   Trading update and NAV release for BMO Commercial Property Trust Ltd (the "Company”)

Headlines

· Net Asset total return of 1.2 per cent for the quarter ended 31 December 2020

· Share Price total return of 25.3 per cent for the quarter ended 31 December 2020

· Combined rent collection received to date for quarter’s 2 to 4 of 2020 at 87.1 per cent

· Rent collection currently received to date for quarter 1 2021 of 75.1 per cent

· As at 31 December 2020, the void rate was 2.9 per cent, reduced from 3.2% at the previous quarter end due to a letting at Watchmoor Park, Camberley.

Net Asset Value

The unaudited net asset value (‘NAV’) per share of the Company as at 31 December 2020 was 117.5 pence. This represents an increase of 0.5 per cent from the unaudited NAV per share as at 30 September 2020 of 116.9 pence and a NAV total return for the quarter of 1.2 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 December 2020 and is calculated after deduction of all dividends paid prior to that date. The EPRA NAV per share as at 31 December 2020, which is adjusted to remove the fair value of the interest rate swap, was 117.5 pence.

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 September 2020 to 31 December 2020 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 30 September 2020	934.1	116.9
Unrealised increase in valuation of property portfolio	2.7	0.2	0.2
Movement in fair value of interest rate swap	0.1	-	-
Other net revenue	9.5	1.2	1.0
Dividends paid	(6.8)	(0.8)	(0.7)
NAV as at 31 December 2020	939.6	117.5	0.5

Valuation

The capital return of the Company's portfolio was 0.2 per cent for the quarter. The industrial and logistics portfolio performed strongly, increasing by 6.7 per cent in the quarter. This not only reflected strong evidence from the capital markets supporting further yield compression in the sector but also the completion of a notable lease re-gearing and substantive progress on a number of other lease events.

The retail and leisure sectors continue to be marked down, with the London assets at St Christopher’s Place and Wimbledon Broadway falling by 3.6 per cent and 6.5 per cent respectively. These decreases reflect a further outward adjustment in yields as well as adjustments to estimated rental values. The retail warehouse portfolio did, however, increase in value by 3.4 per cent reflecting the completion of a number of asset management initiatives, in particular the building works for the new Marks and Spencer store at Solihull.

The valuation of the office portfolio fell marginally during the quarter, with positive returns from the West End being offset by valuation falls in the south east and regions, specifically on properties with shorter lease terms.

Share Price

As at 31 December 2020, the share price was 80.0 pence per share, which represented a discount of 31.9 per cent to the NAV per share. The share price total return for the quarter to 31 December 2020 was 25.3 per cent.

Rent Collection

We summarise below our current rent collection outcome for Q2 to 4 2020 as well as providing an update on collection for Quarter 1 of 2021.

Q2 to Q4 2020 Collection (billed between 26 March 2020 and 1 December 2020)

Overall collection for the nine-month period is at 87.1 per cent and the breakdown is detailed below:

	Rent Billed	Collected
	(£m)	(%)
Quarter 2	16.3	86.5
Quarter 3	16.3	86.3
Quarter 4	16.5	88.6
Total	49.1	87.1

Collection by sector:

	Rent Billed	Collected
	(£m)	(£m)	(%)
Industrial	10.0	9.9	99.4
Offices	20.7	19.7	95.3
Retail Warehouse	5.8	4.9	83.0
Retail	9.2	5.8	63.1
Alternatives	3.4	2.5	73.5
Total	49.1	42.8	87.1

Breakdown of uncollected rent:

Total Outstanding	Rent Billed
	(£m)	(%)
Agreed deferments	1.2	2.5
Rent waived	0.8	1.7
Bad Debts	0.1	0.2
Monthly payments*	0.1	0.2
Unresolved / in discussion	4.1	8.3
Uncollected Rent	6.3	12.9

*  tenants who have been billed for the quarter but are paying in monthly instalments.

There remains a significant proportion of uncollected rent in the retail and leisure sectors of the portfolio. Since early November, London has been placed under varying levels of Government restrictions and non-essential retail, restaurants and leisure at St Christopher’s Place and Wimbledon have only been able to open for approximately 2 weeks since then. This extended period of closure has created an extremely challenging position for the occupiers; losing the peak trading period and the opportunity to begin to recover previously lost sales. These restrictions have been extended to the rest of the UK as the country went into full lockdown. At the present time, there is no certainty on timings of the lifting of Government restrictions and when non-essential retail, restaurants and leisure will be able to re-open. It is an extremely challenging environment in which to secure rent collection and the Managers’ continue to engage with tenants to deliver constructive outcomes and provide support where it is deemed appropriate.

Q1 2021 Collection (due to be billed between 25 December 2020 and 1 March 2021)

The total quarterly rental payments for Quarter 1 amount to c.£16.5 million. The Company has billed £12.9m of its Quarter 1 rent due from 25 December to date and has collected 75.1 per cent of this total amount (compared to 96.4 per cent for the same period last year and 75.9 per cent after the equivalent number of days in Quarter 4). The balance of rent will be billed on the relevant due dates during the course of January and February.

Collection by sector:

	Rent Billed	Collected
	(£m)	(£m)	(%)
Industrial	3.0	2.6	86.3
Offices	5.0	4.4	89.4
Retail Warehouse	1.1	0.7	60.0
Retail	2.9	1.2	42.8
Alternatives	0.9	0.8	80.4
Total	12.9	9.7	75.1

Breakdown of uncollected rent:

Total Outstanding	Rent Billed
	(£m)	(%)
Agreed deferments	0.1	0.6
Rent waived	0.1	0.6
Monthly payments*	0.8	6.0
Outstanding	2.2	17.7
Uncollected Rent	3.2	24.9

*  tenants who have been billed for the quarter but are paying in monthly instalments.

Trading and Development Activity

St Christopher’s Place Estate

Notwithstanding the challenges highlighted above, there has been some successful activity centred around the repositioning of James Street with the following leasing activity;

· 36 James St: following the surrender of the T Burrows lease, a new letting completed to ‘Chrome’.

· Exchanged on a new letting to ‘Papa-dum’ at 20 James St, which is expected to complete by end Q1 2021.

· The contractor completed building works at 54/56 James St and a new letting to ‘Sidechick’ has exchanged, with completion targeted by end Q1 2021. This restaurant is a new concept from the owners of Patty and Bun, an existing tenant on the Estate, and underwrites their support for the location.

· Secured a new letting of office space at 3-5 Barrett Street and completed a number of lease renewals with office tenants.

We are encouraged by these new leases which give an indication that some occupiers are looking beyond the short-term challenges presented by Covid for the Estate to the opportunities that should exist longer term.

Retail Parks

On the two principal retail parks, Sears Retail Park, Solihull and Newbury Retail Park, Newbury, most retailers reported a pre-Christmas spike in turnover after re-opening following the end of the second lockdown period. Car parks at both locations were busy and occasionally bordering on full capacity at Solihull. Unfortunately, this was short lived for non-essential retailers, especially at Newbury where they were forced to close again on 20 December 2020 having been classified in Tier 4. Those with a robust omni-channel offer and “click and collect service” have continued to fare better.

At Sears Retail Park, Solihull, the landlord’s works to construct the new M&S store and refurbish the shopfront of the Food Hall unit adjoining this have now been completed.  The new M&S store was handed over to commence shop-fitting on 19 January 2021. M&S is expected to be ready to open their new flagship store in June 2021.

There is some new retailer interest in the vacant units at Newbury and at Solihull. Two of the retail units at Newbury, making up 20,000 sq. ft of retail space, are now under offer with contracts due to exchange imminently.

Industrial and Logistics

A reversionary lease completed with the existing tenant at G Park, Liverpool, a 360,000 sq ft distribution warehouse. The 10-year lease with DHL Supply Chain Limited from March 2021 has the benefit of a tenant break at the end of the fifth year and the rent contracted at £5.25 sq ft reflects an uplift in excess of 10 per cent on the current rent. DHL were granted a 6 months rent-free period by way of 12 months at half rent. As a result, the valuation improved by £4.475m over the quarter and the Company has de-risked the portfolio to its second largest lease expiry in 2021. Good progress has also been made on a number of other leasing events.

Offices

Work to refurbish the two floors and the reception at Watchmoor Park, Camberley completed and Muller (Milk and More) entered into the lease of the 7,200sq ft second floor at a rent of £23 psf for a term of 5 years with a tenant option to renew for a further 10 years. At 2-4 King Street, London SW1, a lease re-gear with one of the tenant’s resulted in a further 5-year term certain on two of the floors.

Capital Expenditure

Uncommitted capital expenditure continues to be deferred for the time being.

Cash and Borrowings

The Company had approximately £34.9 million of available cash as at 31 December 2020. There is long-term debt in place with L&G which does not need to be refinanced until December 2024. The Company also has a Barclays £50 million term loan along with an undrawn £50 million revolving credit facility which is available upon the satisfaction of the relevant conditions to drawdown. The Barclays facility expires on 31 July 2022, with the option of two further one-year extensions. As at 31 December 2020, the Company’s net loan to value (‘LTV’) was 22.6 per cent.

Dividend

An increase in the monthly dividend was introduced from December 2020 at a rate of 0.35 pence per share. The latest statistics regarding the increased spread of Covd-19 and the consequent lockdown has put additional strain on many of our tenants and the future remains uncertain. Notwithstanding this, the Company expects to continue to pay monthly dividends at this rate for the foreseeable future, although the Board will monitor rental receipts and earnings closely and keep the dividend under review.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 31 December 2020	% like for like capital value shift (excl transactions)
Offices	518.2	42.2	-0.1
West End	206.5	16.8	0.8
South East	75.3	6.1	-0.7
South West	31.4	2.6	-1.2
Rest of UK	185.3	15.1	-0.7
City	19.7	1.6	-0.5
Retail	226.7	18.5	-4.8
West End	166.4	13.5	-5.7
South East	29.0	2.4	-6.9
Rest of UK	31.3	2.6	1.8
Industrial	234.9	19.1	6.7
South East	28.8	2.3	-0.4
Rest of UK	206.1	16.8	7.8
Retail Warehouse	122.3	10.0	3.4
Alternatives	125.8	10.2	-0.9
Total Property Portfolio	1,227.9	100.0	0.2

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 31 December 2020
West End	434.3	35.4
South East	249.3	20.3
Scotland	163.7	13.3
North West	156.4	12.7
Midlands	151.7	12.4
South West	31.4	2.6
Eastern	21.4	1.7
Rest of London	19.7	1.6
Total Property Portfolio	1,227.9	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
Properties valued between £40 million and £50 million
London SW19, Wimbledon Broadway **	Mixed
Winchester, Burma Road	Alternative
Properties valued between £30 million and £40 million
Manchester, 82 King St	Office
Crawley, Leonardo House, Manor Royal	Office
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	1,227.9	153.6	130.7
Adjustment for lease incentives	(22.7)	(2.8)	(2.4)
Fair Value of Property Portfolio	1,205.2	150.8	128.3
Trade and other receivables	32.3	4.0	3.4
Cash and cash equivalents	34.9	4.4	3.7
Current Liabilities	(22.6)	(2.8)	(2.4)
Total Assets (less current liabilities)	1,249.8	156.4	133.0
Non-Current liabilities	(1.7)	(0.2)	(0.2)
Interest rate swap	(0.2)	(0.1)	0.0
Interest-bearing loans	(308.3)	(38.6)	(32.8)
Net Assets at 31 December 2020	939.6	117.5	100.0

The next quarterly valuation of the property portfolio will be conducted by CBRE Limited during March 2021 and it is expected that the unaudited NAV per share as at 31 March 2021 will be announced in April 2021.

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
BMO REP Asset Management plc
Tel: [phone]

Graeme Caton
Winterflood Securities Limited
Tel: [phone]