Trading update and NAV release

To:  Company Announcements
Date:  1 August 2022
Company:  Balanced Commercial Property Trust Limited
LEI:  213800A2B1H4ULF3K397

Subject:   NAV release for Balanced Commercial Property Trust Ltd (the "Company” or “BCPT”)

Headlines

• Net Asset Value total return of 4.0 per cent for the quarter ended 30 June 2022 (YTD total return 11.7 per cent)

• Share Price total return of -2.5 per cent for the quarter ended 30 June 2022 (YTD total return 8.3 per cent)

• A 6.7 per cent increase in the monthly dividend to 0.40 pence per share with effect from May 2022

Net Asset Value

The unaudited net asset value (‘NAV’) per share of the Company as at 30 June 2022 was 148.6 pence. This represents an increase of 3.2 per cent from the unaudited NAV per share as at 31 March 2022 of 144.0 pence and a NAV total return for the quarter of 4.0 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 30 June 2022 and is calculated after deduction of all dividends paid prior to that date. The EPRA Net Tangible Assets (NTA) per share as at 30 June 2022, which is adjusted to remove the fair value of the interest rate swap, was 148.4 pence per share.

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 2022 to 30 June 2022 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 31 March 2022	1,058.7	144.0
Unrealised increase in valuation of property portfolio	29.0	4.0	2.7
Movement in fair value of interest rate swap	0.2	0.0	0.0
Share buy-backs	(18.1)	0.7	0.5
Other net revenue	8.4	1.1	0.8
Dividends paid	(8.6)	(1.2)	(0.8)
NAV as at 30 June 2022	1,069.6	148.6	3.2

Valuation

The capital value of the Company's portfolio increased by 2.3 per cent over the quarter. The pace of valuation uplifts in the industrial and retail warehouse sectors slowed over the quarter as economic uncertainty grew and the markets experienced volatility off the back of high inflation and the outlook for interest rates. Increased cost of debt meant many previously motivated debt backed investors retreated or withdrew from the market.

Industrial and logistics, comprising 33.7 per cent of the portfolio, delivered the strongest gains in the quarter with values increasing by 5.0 per cent. This reflected some further yield compression albeit at much reduced rates. The occupational markets remain strong, demonstrated by rental value growth with the sector recording historically low rates of available of space.

Retail warehouses experienced a valuation uplift of 4.5 per cent. At Solihull Retail Park, unconditional agreements for lease were exchanged with Mountain Warehouse and Pure Gym and this Park is now fully leased.

St Christopher’s Place increased in value by 0.3 per cent. Activity and footfall continue to improve as office workers return and tourist visits increase. We are hopeful that this trend will continue throughout the year, supported by the planned September opening of Bond Street station on the Elizabeth Line.

The valuation of the office portfolio increased by 0.4 per cent reflecting minor valuation changes across the portfolio this quarter.

Share Price

As at 30 June 2022, the share price was 111.4 pence per share, which represented a discount of 25.0 per cent to the NAV per share. The share price total return for the quarter to 30 June 2022 was -2.5 per cent.

Cash and Borrowings

The Company had £86.4 million of available cash as at 30 June 2022 and has committed approximately £18.3 million of this to development opportunities. This is primarily at Burton-Upon-Trent and there is also a development at Estuary Business Park, Speke, Liverpool where construction cost is expected to be in the region of £4.8 million and a redevelopment of an obsolete warehouse unit at the Cowdray Centre, Colchester with costs estimated to be in the region of £5.7million.

There is a £260 million term loan in place with L&G which matures in December 2024. The Company also has a £50 million term loan with Barclays, along with an additional undrawn £50 million revolving credit facility. The Barclays facility expires on 31 July 2023, with the option of a one-year extension. As at 30 June 2022, the Company’s loan to value, net of cash (‘LTV’) was 17.3 per cent.

Dividend

The Company paid one monthly property income distribution at a rate of 0.375 pence per share and a further two monthly property income distributions at the increased rate of 0.40 pence per share during the quarter.

Share Buybacks

The Company has continued a share buyback programme during the quarter. 15,486,545 ordinary shares were purchased over the period and the programme is ongoing. As at 30 June 2022 the Company had 79,480,183 shares held in treasury (9.9 per cent of ordinary shares in issue), acquired at an average discount to NAV of 20.5 per cent.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 30 June 2022	% capital value shift (including purchases and CAPEX)
Offices	386.1	29.6	0.4
West End	89.6	6.9	1.8
South East	68.2	5.2	-0.9
South West	30.8	2.4	0.0
Rest of UK	177.7	13.6	-0.1
City	19.8	1.5	1.9
Retail	188.3	14.5	-0.2
West End	159.5	12.3	-0.3
South East	28.8	2.2	0.0
Industrial	439.1	33.7	5.0
South East	65.0	5.0	3.9
Rest of UK	374.1	28.7	5.1
Retail Warehouse	159.7	12.3	4.5
Alternatives	129.4	9.9	1.3
Total Property Portfolio	1,302.6	100.0	2.3

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 30 June 2022
West End	307.5	23.6
Midlands	317.8	24.4
South East	310.9	23.9
North West	178.5	13.7
Scotland	137.3	10.5
South West	30.8	2.4
Rest of London	19.8	1.5
Total Property Portfolio	1,302.6	100.0

Top Ten Investments

	Sector
Properties valued in excess of £200 million
London W1, St Christopher’s Place Estate *	Mixed
Properties valued between £70 million and £100 million
Newbury, Newbury Retail Park	Retail Warehouse
Solihull, Sears Retail Park	Retail Warehouse
Properties valued between £50 million and £70 million
Chorley, Unit 6 and 8 Revolution Park	Industrial
Winchester, Burma Road Liverpool, Unit 1, G.Park Markham Value, Orion 1 & 2 Daventry, Site E4, DIRFT	Alternative Industrial Industrial Industrial
Properties valued between £40 million and £50 million
Birmingham, Unit 8 Hams Hall London SW19, Wimbledon Broadway **	Industrial Mixed

*  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	1,302.6	181.0	121.8
Adjustment for lease incentives	(21.3)	(3.0)	(2.0)
Fair Value of Property Portfolio	1,281.3	178.0	119.8
Trade and other receivables	29.7	4.1	2.8
Cash and cash equivalents	86.4	12.0	8.1
Current Liabilities	(16.7)	(2.3)	(1.6)
Total Assets (less current liabilities)	1,380.7	191.8	129.1
Non-Current liabilities	(2.2)	(0.3)	(0.2)
Interest-bearing loans	(308.9)	(42.9)	(28.9)
Net Assets at 30 June 2022	1,069.6	148.6	100.0

The next quarterly valuation of the property portfolio will be conducted by CBRE Limited during September 2022 and it is expected that the unaudited NAV per share as at 30 September 2022 will be announced in October 2022.

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]