Trading update and NAV

To  Company Announcements
Date  27 January 2022
Company  BMO Commercial Property Trust Limited
LEI  213800A2B1H4ULF3K397

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

Headlines

• Net Asset total return of 4.8 per cent for the quarter ended 31 December 2021 (YTD 18.9 per cent)

• Share Price total return of 10.2 per cent for the quarter ended 31 December 2021 (YTD 37.8 per cent)

• A 7.1 per cent increase in the monthly dividend to 0.375 pence per share with effect from November 2021

• As of 31 December 2021, the void rate was 2.0 per cent

• Completed £66 million of property acquisitions as part of the strategy to adjust sector weightings

• The portfolio’s weighting to the industrial and logistics sector has increased to 30.6 per cent as at 31 December 2021 compared to 19.1 per cent as at 31 December 2020.

Net Asset Value

The unaudited net asset value (‘NAV’) per share of the Company as at 31 December 2021 was 135.1 pence. This represents an increase of 3.9 per cent from the unaudited NAV per share as at 30 September 2021 of 130.0 pence and a NAV total return for the quarter of 4.8 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 2021 and is calculated after deduction of all dividends paid prior to that date. The EPRA Net Tangible Assets (NTA) per share as at 31 December 2021, which is adjusted to remove the fair value of the interest rate swap, was 135.1 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 2021 to 31 December 2021 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 30 September 2021	1,010.8	130.0
Unrealised increase in valuation of property portfolio	30.0	3.9	3.0
Movement in fair value of interest rate swap	0.3	-	-
Share buy-backs	(24.4)	1.1	0.8
Other net revenue	9.2	1.2	0.9
Dividends paid	(8.4)	(1.1)	(0.8)
NAV as at 31 December 2021	1,017.5	135.1	3.9

Valuation

The capital value of the Company's portfolio increased by 2.7 per cent over the quarter. The valuation reflected a similar theme to the previous quarter with industrial, logistics and retail warehouses driving performance as a result of rental growth and further yield compression.  Industrial and logistics delivered the strongest gains in the portfolio with values increasing 7.9% after allowing for two acquisitions detailed below. The outlook for the Company’s retail parks continues to improve with visitor numbers in the quarter exceeding pre-Covid levels and the valuations increasing by 7.1 per cent.

St Christopher’s Place fell in value by 1.5 per cent due to its holding on Oxford Street which remains a challenged market. Even with the restrictions put in place following Omicron, footfall on the estate was equivalent to the same period in 2019. This is encouraging and it is anticipated that following the lifting of these restrictions’ visitor numbers will rebound further.  

The valuation of the office portfolio was broadly flat.

Share Price

As at 31 December 2021, the share price was 105.0 pence per share, which represented a discount of 22.3 per cent to the NAV per share. The share price total return for the quarter to 31 December 2021 was 10.2 per cent.

Rent Collection

Rent collection statistics are close to pre-pandemic levels and the resolution of historical rent arrears continues to progress. Collection for the most recent quarter is at 97.9 per cent to date and collection rates since the impact of Covid-19 came into full force is now at 93.9 per cent.

Trading Activity

Acquisitions

In accordance with the strategy to increase BCPT’s exposure to prime, modern industrial and logistics assets in established locations and as previously announced, the Company completed the acquisition of two properties during the quarter.

The Company acquired Orion One and Two, Markham Vale, Derbyshire for a price of £44.5 million reflecting an initial yield of 3.7%. The two newly built units were completed in April 2021 and are located within Derbyshire’s 200-acre flagship redevelopment scheme adjoining junction 29A of the M1 Motorway. The units have been constructed to institutional standards and benefit from strong ESG credentials having achieved an EPC rating of A and BREEAM rating of very good.

The acquisition of Unit 4, Quintus Business Park, Burton-Upon-Trent is structured as a forward funding to develop a new logistics warehouse of 171,550 sq ft. The purchase price is £21.5 million which equates to an initial yield of 4.84 per cent with the property being pre-let. The Company has acquired the land and met certain development costs incurred to date which amounts to £5.6 million of the purchase price. The development has achieved planning consent and is expected to complete in July 2022. The unit will have strong ESG credentials with an A rated EPC and a BREEAM Excellent rating being targeted.

Cash and Borrowings

The Company had £138.1 million of available cash as at 31 December 2021 and has committed approximately £27.3 million to development opportunities. This is primarily at Burton-Upon-Trent as referenced above but there is also a speculative 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 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 additional undrawn £50 million revolving credit facility. The Barclays facility expires on 31 July 2023, with the option of one further one-year extension. As at 31 December 2021, the Company’s loan to value, net of cash (‘LTV’) was 14.4 per cent.

 

Dividend

The Company paid a dividend at a rate of 0.35 pence per share for October and two dividends at a rate of 0.375 pence per share for November and December (7.1 per cent increase). The level of dividend will be kept under review and the opportunity for a further increase will be assessed as the Company reinvests the surplus cash from recent sales.

Share Buybacks

The Company has continued a share buyback programme during the quarter using some of the proceeds from property sales. 24,279,424 ordinary shares were purchased over the period and the programme is ongoing. As at 31 December the Company had 46,260,278 shares held in treasury (5.8 per cent of ordinary shares in issue), acquired at an average discount to NAV of 22.3 per cent.
 

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 31 December 2021	% capital value shift (including purchases and CAPEX)
Offices	387.7	32.3	0.2
West End	88.0	7.4	2.6
South East	70.1	5.8	-0.9
South West	29.9	2.5	0.0
Rest of UK	180.3	15.0	-0.5
City	19.4	1.6	0.0
Retail	187.5	15.6	-2.2
West End	158.7	13.2	-2.2
South East	28.8	2.4	-2.4
Industrial	367.6	30.6	7.9
South East	57.7	4.8	6.5
Rest of UK	309.9	25.8	8.2
Retail Warehouse	130.7	10.9	7.0
Alternatives	127.3	10.6	1.7
Total Property Portfolio	1,200.8	100.0	2.7

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 31 December 2021
West End	305.2	25.4
South East	288.1	24.0
Midlands	257.1	21.4
North West	160.7	13.4
Scotland	140.4	11.7
South West	29.9	2.5
Rest of London	19.4	1.6
Total Property Portfolio	1,200.8	100.0

Top Ten Investments

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

*  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	1,200.8	159.5	117.9
Adjustment for lease incentives	(20.4)	(2.7)	(2.0)
Fair Value of Property Portfolio	1,180.4	156.8	115.9
Trade and other receivables	28.2	3.7	2.8
Cash and cash equivalents	138.1	18.3	13.6
Current Liabilities	(18.5)	(2.5)	(1.8)
Total Assets (less current liabilities)	1,328.2	176.4	130.5
Non-Current liabilities	(2.1)	(0.3)	(0.2)
Interest-bearing loans	(308.6)	(41.0)	(30.3)
Net Assets at 31 December 2021	1,017.5	135.1	100.0

The next quarterly valuation of the property portfolio will be conducted by CBRE Limited during March 2022 and it is expected that the unaudited NAV per share as at 31 March 2022 will be announced in April 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]