Trading Update

To:  Company Announcements

Date:  23 October 2020

Company:  BMO Commercial Property Trust Limited

LEI:  213800A2B1H4ULF3K397

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

Headlines

• Net Asset total return of -2.7 per cent for the quarter ended 30 September 2020

• Share Price total return of 3.3 per cent for the quarter ended 30 September 2020

• Rent collection currently received to date for quarter 2 of 84.2 per cent

• Rent collection currently received to date for quarter 3 of 83.1 per cent

• Rent collection currently received to date for quarter 4 of 79.4 per cent

• Agreed terms for the extension of a £100 million loan facility to 31 July 2022

• As at 30 September 2020, the void rate was 3.2%, unchanged from 30 June 2020

Net Asset Value

The unaudited net asset value (‘NAV’) per share of the Company as at 30 September 2020 was 116.9 pence. This represents a decrease of 3.1 per cent from the unaudited NAV per share as at 30 June 2020 of 120.7 pence and a NAV total return for the quarter of -2.7 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 valuation certificate no longer includes a ‘material uncertainty’ clause, which has been removed in-line with RICS guidance.

The NAV includes all income to 30 September 2020 and is calculated after deduction of all dividends paid prior to that date. The EPRA NAV as at 30 September 2020, which is adjusted to remove the fair value of the interest rate swap, was 116.9 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 June 2020 to 30 September 2020 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 30 June 2020	964.5	120.7
Unrealised decrease in valuation of property portfolio	(34.9)	(4.4)	(3.6)
Movement in fair value of interest rate swap	0.1	-	-
Other net revenue	8.4	1.1	0.9
Dividends paid	(4.0)	(0.5)	(0.4)
NAV as at 30 September 2020	934.1	116.9	(3.1)

Valuation

The capital return of the Company's portfolio was -2.8 per cent for the quarter. The retail and leisure sectors continue to be marked down, with the London assets at Conduit Street, St Christopher’s Place and Wimbledon Broadway falling by 16.5 per cent, 6.4 per cent and 5.0 per cent respectively. These decreases reflect a further outward adjustment in yields as well as adjustments to estimated rental values.

The valuation of our office portfolio fell by 1.8 per cent over the quarter where a downward adjustment was made on properties with shorter lease terms.

The industrial and logistics portfolio was robust and increased by 0.9 per cent in the quarter, reflecting the completion of a number of asset management initiatives, in particular the deferment of break clauses.

Share Price

As at 30 September 2020, the share price was 64.6 pence per share, which represented a discount of 44.7 per cent to the NAV per share. The share price total return for the quarter to 30 September 2020 was 3.3 per cent.

Rent Collection

The Company has a diverse tenant base across the portfolio and its Managers have continued to engage with many of them, assessing and responding to requests for support on a case by case basis. We summarise below our current rent collection outcome for Quarter 2 and 3 as well as providing an update on collection for Quarter 4.

Quarter 2 and 3 Collection (billed between 26 March 2020 and 1 September 2020)

To date the Company has collected 84.2 per cent of the rents due for Quarter 2 and 83.1 per cent for Quarter 3. The combined collection statistics for the two quarters are as follows:

Collection by sector:

	Rent Billed	Collected
	(£m)	(£m)	(%)
Industrial	6.6	6.4	96.4
Offices	13.8	13.0	94.4
Retail Warehouse	3.9	3.0	75.3
Retail	6.0	3.4	57.0
Alternatives	2.2	1.4	65.6
Total	32.5	27.2	83.7

Breakdown of uncollected rent:

Total Outstanding	Rent Billed
	(£m)	(%)
Agreed deferments	1.3	4.0
Rent waived	0.9	2.8
Monthly payments*	0.2	0.5
Unresolved / in discussion	2.9	9.0
Uncollected Rent	5.3	16.3

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

A significant proportion of the uncollected rent is unsurprisingly in the retail and leisure sectors comprising shops, restaurants, a cinema and gym. £4.0m of the uncollected amount relates to St Christopher’s Place, Wimbledon Broadway and Newbury Retail Park. Of the £2.9m where there has yet to be a resolution, discussions are well advanced with many tenants. There are however a minority of retailers who should be in a position to pay who are not engaging.

Quarter 4 Collection (billed between 29 September 2020 and 1 December 2020)

The total quarterly rental payments for Quarter 4 amount to c.£16.5 million. The Company has billed £9.4m of its Quarter 4 rent due from 29 September to date and has collected 79.4 per cent of this total amount (compared to 99.7 per cent for the same period last year and 68.5 per cent after the equivalent number of days in Quarter 3). The balance of rent will be billed on the relevant due dates during the course of October and November.

Collection by sector:

	Rent Billed	Collected
	(£m)	(£m)	(%)
Industrial	2.9	2.4	84.4
Offices	3.4	3.2	92.4
Retail Warehouse	0.4	0.2	56.6
Retail	1.7	0.9	53.7
Alternatives	1.0	0.7	74.3
Total	9.4	7.4	79.4

Breakdown of uncollected rent:

Total Outstanding	Rent Billed
	(£m)	(%)
Agreed deferments	0.2	2.2
Rent waived	0.1	0.6
Monthly payments*	0.4	4.6
Outstanding	1.3	13.2
Uncollected Rent	2.0	20.6

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

Trading and Development Activity

St Christopher’s Place Estate

Footfall growth across the estate, post lock down, remained relatively positive having hit 50 per cent or more of last year’s levels several times in September and October. The recent Government restrictions have now started to impact activity with a sense that customer sentiment, at least in the short term, has weakened.

By early October 24 retailers, who had closed during lockdown had re-opened although trading remains weak and is generally at no more than 40 per cent of 2019 trading levels.

18 of the food and beverage businesses were trading. The re-opening of the restaurants in James Street has been supported by the temporary closure of the street to vehicles which was agreed in conjunction with Westminster City Council and has enabled occupiers to maximise their use of outdoor dining areas and optimise social distancing requirements. The Eat out to Help Out scheme during August was particularly beneficial to restaurant turnover.

A surrender of the Carluccio’s lease was completed at the end of September simultaneously with a re-letting to San Carlo Holdings Ltd (part of the San Carlo restaurant group) on a new 15-year lease at rent in in excess of £400,000 pa. This will be a significant new operator for the estate, and it is encouraging that such a high-profile restaurateur recognises the long-term benefits and opportunity presented at the location.  

Work at 54/56 James Street is approaching completion and terms are being negotiated for the letting of the restaurant.

Retail Parks

On the two principal retail parks, several retailers have reported steadily increasing turnover since reopening in June 2020.

Having completed their shop fitting within the anticipated timeframe, Lidl opened their new 19,500 sq ft supermarket to the public on 8th October at Newbury Retail park. Early indications show a marked increase in vehicle numbers entering the retail park, which can mainly be attributed to the opening of the new Lidl store. A recent on-site inspection revealed that capacity within the main customer car park was at approximately 85 per cent. 

At Sears Retail Park, Solihull, the landlord’s works to construct a unit and refurbish the shopfront of a second one should be completed by Christmas 2020. Handover of the newly constructed unit to M&S is expected in early January 2021 and they should be ready to open their new flagship store after an 18-week fitting out period.

Offices

Following the successful settlement of a dilapidations claim with the former tenant, work to refurbish the two floors and the reception at Watchmoor Park, Camberley is on site in readiness for the new tenant to take occupation of the second floor prior to Christmas. This is a letting of 7,200 sq. ft. to Muller (Milk and More) and is at a rent of £23 psf for a term of 5 years with a tenant option to renew for a further 10 years.

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

Cash and Borrowings

The Company had approximately £31.9 million of available cash as at 30 September 2020. There is long-term debt in place with L&G which does not need to be refinanced until December 2024 and as announced on 12 October, the Company has recently extended the existing Barclays £50 million term loan, and the £50 million revolving credit facility to 31 July 2022, with the option of two further one-year extensions. This was previously due to expire on 21 June 2021. As at 30 September 2020, the Company’s loan to value (‘LTV’) was 22.9 per cent.

Dividend

A monthly dividend was reintroduced in August 2020 at a rate of 0.25 pence per share. The distribution will remain at this rate until further notice but will be kept under review in light of the significant economic risks and continuing uncertainty regarding the path of Covid-19. The Board is also mindful that REIT status requires the Company to distribute 90 per cent of net rental profits and compliance with this test is also a factor which will be monitored when considering the rate of future dividends.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 30 September 2020	% like for like capital value shift (excl transactions)
Offices	518.9	42.5	-1.9
West End	204.8	16.8	-1.7
South East	75.8	6.2	-3.8
South West	31.8	2.6	0.0
Rest of UK	186.7	15.3	-1.9
City	19.8	1.6	0.0
Retail	238.0	19.5	-8.2
West End	176.1	14.4	-10.4
South East	31.1	2.6	-4.2
Rest of UK	30.8	2.5	-0.5
Industrial	220.2	18.0	0.9
South East	28.9	2.4	2.3
Rest of UK	191.3	15.6	0.7
Retail Warehouse	118.2	9.7	-1.1
Alternatives	126.9	10.3	-0.7
Total Property Portfolio	1,222.2	100.0	-2.8

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 30 September 2020
West End	442.3	36.2
South East	251.9	20.6
Scotland	164.6	13.5
North West	150.5	12.3
Midlands	140.8	11.5
South West	31.8	2.6
Eastern	20.5	1.7
Rest of London	19.8	1.6
Total Property Portfolio	1,222.2	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
London SW19, Wimbledon Broadway **	Mixed
Properties valued between £40 million and £50 million
Solihull, Sears Retail Park	Retail Warehouse
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	1,222.2	152.9	130.8
Adjustment for lease incentives	(22.5)	(2.8)	(2.4)
Fair Value of Property Portfolio	1,199.7	150.1	128.4
Trade and other receivables	33.6	4.2	3.6
Cash and cash equivalents	31.9	4.0	3.4
Current Liabilities	(20.5)	(2.6)	(2.2)
Total Assets (less current liabilities)	1,244.7	155.7	133.2
Non-Current liabilities	(1.7)	(0.2)	(0.2)
Interest rate swap	(0.3)	0.0	0.0
Interest-bearing loans	(308.6)	(38.6)	(33.0)
Net Assets at 30 September 2020	934.1	116.9	100.0

The next quarterly valuation of the property portfolio will be conducted by CBRE Limited during December 2020 and it is expected that the unaudited NAV per share as at 31 December 2020 will be announced in January 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]