Net Asset Value(s)

To:                   Company Announcements

Date:                6 February 2020

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 31 December 2019 was 130.9 pence. This represents a decrease of 2.0 per cent from the unaudited NAV per share as at 30 September 2019 of 133.6 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 31 December 2019 and is calculated after deduction of all dividends paid prior to that date. As at 31 December 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 115.60 pence per share at 31 December 2019, which represented a discount of 11.7 per cent to the NAV per share announced above. The share price total return for the quarter was 0.4 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 September 2019 to 31 December 2019 (including the effect of gearing):

	£m	Pence per share	% of opening NAV per share
NAV as at 30 September 2019	1,068.3	133.6
Unrealised decrease in valuation of property portfolio *	(19.5)	(2.4)	(1.8)
Movement in fair value of interest rate swap	0.1	0.0	0.0
Other net revenue	9.8	1.2	0.9
Dividends paid	(12.0)	(1.5)	(1.1)
NAV as at 31 December 2019	1,046.7	130.9	(2.0)

* The ungeared decrease in the valuation of the property portfolio over the quarter to 31 December 2019 was 1.4%, after allowing for capital expenditure.

The net gearing at 31 December 2019 was 21.3%. #

# Net gearing: (Borrowings – cash) ÷ total assets (less current liabilities and cash).

Market

UK commercial real estate delivered a total return of 0.3 per cent over the quarter according to the MSCI UK Monthly Index. All property capital values fell by 1.0 per cent.

Retail properties continue to be impacted by both the distress in the occupier markets and a re-rating of pricing. Capital values fell by 4.4 per cent over the period. The office and industrial sectors were reasonably solid, recording positive total returns of 1.5 per cent and 1.9 per cent respectively.

Activity in the capital markets increased post the General Election with a flurry of deals completing prior to the year end.

Performance

The Company’s property portfolio delivered an ungeared total return of -0.3 per cent over the quarter to December.

The portfolio suffered a 1.4 per cent fall in capital values with the retail properties and other commercial properties let to retailers, suffering the largest fall in values. The most significant falls were as follows:

• The Crescent, Wimbledon, had the estimated rental value of the retail units reduced and the capitalisation rate moved out 60 basis points, equating to a fall in value of 6.1 per cent.
• Capitalisation rates continued to move out in the retail warehouse sector resulting in the Company’s two largest retail warehouses at Newbury and Solihull falling in value by a combined 3.4 per cent.
• The value of St. Christopher’s Place fell 0.8 per cent due to the continued re-basing of rental values along Oxford Street with the value of the remainder of the Estate largely holding firm.
• The logistics portfolio was adversely affected by the property at Daventry which is let to Mothercare. The property benefits from a rental guarantee from a Mothercare company not in Administration, but the valuers moved the yield out by 75 basis points (12 per cent fall in capital value) to reflect the uncertainty surrounding the covenant.

Investment Activity

There were no sales or purchases during the quarter.

Lease Activity

Of particular note post the quarter end was the completion of an unconditional letting to Marks & Spencer at Sears Retail Park, Solihull, significantly expanding the retailers existing presence on the park. The lease is for a redeveloped 35,000 sq. ft store which was formerly a Homebase. This is on a 20-year lease (breaks year 10 and 15) at an uplift on the previous passing rent.

As part of the redevelopment, the new store will be combined with Marks & Spencer’s adjacent Food Hall. The combined store will create an 82,000 sq. ft. store incorporating General Merchandise, a larger Food Hall, as well as a Marks & Spencer Café. It is expected that the new premises will be handed over to M&S for fit out upon completion of the redevelopment at the end of 2020. This is a high-profile initiative which reflects Marks & Spencer’s satisfaction with the location and supports the ongoing appetite from selected retail brands for the right space, in the right locations.

Construction works have started at Newbury Retail Park to create new stores for Lidl and Deichman Shoes and it is hoped these new lettings will attract other new retailers to the park.

The void rate on the Company’s portfolio was 4.8 per cent as at 31 December 2019, prior to the new letting at Solihull. There are also other important lettings close to contracting.

Portfolio Analysis – Sector Breakdown

	Portfolio Value £m	% of portfolio as at 31 December 2019	% like for like capital value shift (incl transactions)
Offices	548.8	40.9	0.2
West End	207.6	15.5	0.7
South East	89.9	6.7	-1.2
South West	33.4	2.5	0.0
Rest of UK	197.2	14.7	0.3
City	20.7	1.5	0.0
Retail	292.5	21.8	-2.4
West End	222.8	16.6	-1.5
South East	38.3	2.9	-9.7
Rest of UK	31.4	2.3	-0.4
Industrial	236.6	17.5	-2.6
South East	30.1	2.2	0.2
Rest of UK	206.5	15.3	-2.9
Retail Warehouse	134.2	10.0	-3.5
Alternatives	130.5	9.8	0.0
Total Property Portfolio	1,342.6	100.0	-1.4

Portfolio Analysis – Geographic Breakdown

	Market Value £m	% of portfolio as at 31 December 2019
West End	490.4	36.5
South East	289.5	21.6
Scotland	174.0	13.0
North West	159.6	11.9
Midlands	149.1	11.1
South West	33.4	2.5
Eastern	25.9	1.9
Rest of London	20.7	1.5
Total Property Portfolio	1,342.6	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	1,342.6	168.0	128.3
Adjustment for lease incentives	(22.4)	(2.8)	(2.1)
Fair Value of Property Portfolio	1,320.2	165.2	126.2
Trade and other receivables	28.5	3.6	2.6
Cash and cash equivalents	25.9	3.2	2.5
Current Liabilities	(17.2)	(2.2)	(1.6)
Total Assets (less current liabilities)	1,357.4	169.8	129.7
Non-Current liabilities	(2.1)	(0.3)	(0.2)
Interest rate swap	(0.2)	0.0	0.0
Interest-bearing loans	(308.4)	(38.6)	(29.5)
Net Assets at 31 December 2019	1,046.7	130.9	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 March 2020 and it is expected that the unaudited NAV per share as at 31 March 2020 will be announced in April 2020.

This announcement contains inside information.

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

Graeme Caton
Winterflood Securities Limited
Tel: [phone]