Company search
To: RNS
Date: 30 September 2021
From: BMO Commercial Property Trust Limited
LEI: 213800A2B1H4ULF3K397
(Classified Regulated Information, under DTR 6 Annex 1 Section 1.2)
Interim Report for the Period ended 30 June 2021
Headlines
· Share price total return* of 16.3 per cent for the period.
· Net asset value total return* of 8.0 per cent for the period.
· Dividend yield* of 4.6 per cent based on 30 June 2021 share price
· 91.6 per cent rent collection currently received since the onset of the pandemic in April 2020 to June 2021.
· As at 30 June 2021, the void rate was 1.9 per cent, excluding property being developed or refurbished, which compares to a rate of 2.9 per cent at the start of the calendar year.
· Completed a £19 million property disposal, with further sales of £199.5 million in September 2021 as part of the strategy to adjust sector weightings.
· The Company’s portfolio produced a total return* of 6.9 per cent versus the MSCI UK Quarterly Property Index (‘MSCI’) return of 5.3 per cent.
· Asset management initiatives across the portfolio driving strong occupancy and value.
· Continued progress on ESG initiatives and establishing our net zero carbon pathway.
* See Alternative Performance Measures
Chairman’s Statement
As we move towards the end of the third quarter of 2021, it is a good time to pause for reflection on the journey so far over the first six months of the year. It has been challenging for all, on a personal and professional level, as many took on additional roles as educators and carers, while navigating a working world from a desk removed from our traditional office location.
The health crisis accelerated many of the existing trends, it did not create them, and so, while we are dealing with things that are changing more quickly than in the past, a lot of them are not new. Understanding long-term fundamentals and what this means for society and, by implication, real estate is important and helps us see through the mist and informs our decisions for the long-term.
The health crisis is not yet behind us, but there has been positive progress. Lockdown restrictions have been lifted, vaccination numbers have surpassed expectations and the economy has moved into expansion mode as consumers spend some of their forced lockdown savings while the government quite rapidly responded with fiscal and monetary support. All this to say that we are not out of the woods just yet, but perhaps the path ahead is a clearer one to navigate than six months ago.
The all-property total return for the three months to June was 3.4 per cent and in the twelve months to June was 6.5 per cent. Industrial continued to be a favoured sector, showing its resilience with a 7.5 per cent total return over the last quarter, buoyed by the further shift to online sales. While retail continues to struggle, it moved from a negative annual return to a 1.7 per cent positive return in the quarter to June with shopping centres and shops dragging down the performance of supermarkets and retail warehouses. Offices slowly gathered pace as businesses were generally more encouraging of employees to return to workplaces.
Performance for the period
Against this backdrop, the Company’s share price total return to shareholders over the six-months to 30 June 2021 was 16.3 per cent. The share price at the period-end was 90.6p, representing a discount of 27.4 per cent to the Net Asset Value (‘NAV’) per share of 124.8p. The increase in the share price is welcome although the discount is still wide and we are very intent on taking action to try and narrow this further over the coming months as the Company implements its future investment strategy and continues with its share buyback programme. At the time of writing, the share price is 95.7p*. (* Closing price as at 28 September 2021)
The NAV total return over the six months was 8.0 per cent. The following table provides an analysis of the movement in the NAV per share for the period:
| Pence | |
| NAV per share as at 31 December 2020 | 117.5 |
| Unrealised increase in valuation of direct property portfolio | 6.2 |
| Realised gain on sale of direct property portfolio | 0.2 |
| Capital expenditure on properties | (0.2) |
| Share buybacks | 0.3 |
| Other net revenue | 2.9 |
| Dividends paid | (2.1) |
| NAV per share as at 30 June 2021 | 124.8 |
The total return from the underlying portfolio was 6.9 per cent, outperforming the MSCI Quarterly Property Universe total return of 5.3 per cent. The income return from the portfolio over the period was 2.8 per cent, and the capital return was 4.1 per cent. The weakest sector in the MSCI Quarterly Universe was retail with the strongest returns coming from industrials, driven by rental growth and further yield compression.
Rent Collection
It has continued to be a challenging time for many of the Company’s tenants and a priority of the Manager has been rent collection. The Company has a diverse tenant base across the portfolio and the Manager has been proactively engaged with many of them, assessing and responding to requests for support on a case by case basis.
The level of collection has gradually improved now that government restrictions have been removed and for the second quarter of 2021 the level of collection currently stands at 91.6 per cent. This number is expected to increase further with discussions still ongoing with some tenants. More detailed information is available in the Managers’ Review.
A similar pattern of collection has been experienced post period end with rental collections for the third quarter currently at 91.7 per cent.
Sales
Consistent with the strategy of adopting a higher level of activity within the portfolio as the Company moves to recycle capital and adjust sector weightings, the Company sold the retail warehouse located in East Kilbride, Scotland in May 2021 for a total consideration of £19 million, reflecting an increase of 9.2 per cent over the external valuation as at 31 December 2020. The property was let to B&Q Limited for one of its large format stores on a lease due to expire in November 2029.
In September 2021, the Company sold an office, Cassini House, located in St. James’, London. The property is a prime multi-let freehold office building and represented the second largest holding in the portfolio. This was sold for a total consideration of £145.5 million, reflecting a substantial increase of 18.5 per cent over the year-end valuation as at 31 December 2020. The disposal represents the culmination of a long-term business plan which involved a complete refurbishment, introduction of new tenants and re-gearing of leases. Also in September, the Company sold a retail warehouse in Rochdale. This was sold for a total consideration of £35 million, reflecting an increase of 11.8 per cent over the year-end valuation as at 31 December 2020.
Share Buybacks
As previously indicated, priority will be given to using sales proceeds to buyback shares in the Company if the high level of discount persists and if the Board believes that this course of action is in the best interests of all shareholders. Accordingly, the Board resolved to commence a share buyback programme following the East Kilbride sale and had purchased 6 million shares by the period end with the shares being held in treasury. This programme is ongoing.
Cash and Borrowings
The Company had approximately £56 million of available cash as at 30 June 2021 and an undrawn revolving credit facility of £50 million. The long-term debt with L&G does not need to be refinanced until December 2024 and we have recently agreed terms to extend the existing Barclays £50 million term loan, and the £50 million revolving credit facility, previously due to expire on 31 July 2022. This has been extended to 31 July 2023, with the option of a further one-year extension. As at 30 June 2021, the Company’s loan to value (‘LTV’) was 20.4 per cent and the Company complied with its banking covenants.
Dividends
The Company paid six interim dividends of 0.35 pence per share during the period, totalling 2.1 pence per share and has continued to pay monthly dividends at this rate since the period end. The Board remains mindful of the importance of income to many shareholders and the monthly dividend rate remains under review as rent collection statistics improve and greater certainty is reached on the prospects for our tenants.
Environmental, Social and Governance (ESG)
The Managers and Board maintain a strong commitment to adopting high ESG standards, an ambition only heightened by today’s exceptional circumstances. We are pleased with continued progress over the period which is referenced in detail later in this interim report. Further detailed insight into our performance will be provided in our 2021 ESG Report due in April 2022.
BMO
Our Manager is part of BMO Global Asset Management which is ultimately owned by the Bank of Montreal. It was announced on 12 April 2021 that Bank of Montreal has agreed to sell its European, Middle East and African (EMEA) asset management activities to Ameriprise Financial Inc. This sale is expected to conclude towards the end of 2021. For the UK element of this transaction the new owners will be Columbia Threadneedle, a subsidiary of Ameriprise. Columbia Threadneedle does not have an Investment Trust business in the UK and the Board has been informed that this will be a welcome addition to its portfolio. Both companies have confirmed the importance of maintaining the stability and continuity of the teams which presently support your Company, but the change of ownership and subsequent developments are issues that the Board will monitor closely in the coming months.
Board Changes
Martin Moore retired as Chairman of the Group at the last AGM on 17 June 2021, having served on the Board for just over 10 years. Martin’s contribution was substantial, and I would like to thank him for his dedication and commitment throughout.
I have taken over as Chairman following Martin’s retirement and look forward to the exciting challenge that lies ahead. Hugh Scott-Barrett, who joined the Board on 4 January 2021, has replaced me as Senior Independent Director.
Outlook
The world now is in a fundamentally different place than it was six months ago with large swathes of the population vaccinated and lockdown restrictions generally lifted. We have seen Government stimulus for the economy with most support schemes in place until the autumn.
The continued march of e-commerce is likely to continue and the restructuring of supply chains, to allow companies to establish and/or facilitate an omni-channel platform, will determine the survival of some and the demise of others, all the while supporting unrelenting demand for the wider industrial sector. Some haze exists as to exactly what the office sector will look like in the future, but there is more clarity, and a general leaning of companies to adopting a hybrid model with more areas in offices dedicated to creative and social space. But one size does not fit all, and a sensible, tailored approach is needed as each business and its people are different.
In recognising the short-term impact of holding high cash balances, the Company has made good progress in implementing the investment strategy as highlighted in the 2020 Annual Report. Consistent with this strategy, we have completed three important disposals worth £199.5 million during recent months as we move to recycle capital and adjust sector weightings. The Company is carefully considering the best use of the proceeds of the recent sales, including attractive investment opportunities, share buybacks and capital expenditure opportunities in the existing portfolio where planning consent has been achieved, as well as future ESG related expenditure.
As the economy continues to re-open and recover, the Board believes the Company should benefit from the underlying quality of the existing assets in the portfolio, as demonstrated by the uplift in valuations experienced in the most recent quarter.
Paul Marcuse
Chairman
Performance Summary
| Half year ended 30 June 2021 | |||
| Total Returns for the period * | |||
| Net asset value per share | 8.0% | ||
| Ordinary Share price | 16.3% | ||
| Portfolio | 6.9% | ||
| MSCI UK Quarterly Property Index | 5.3% | ||
| FTSE All-Share Index | 11.1% | ||
| Half year ended 30 June 2021 | Year ended 31 December 2020 | % change |
|
| Capital Values | |||
| Total assets less current liabilities (£’000) | 1,300,699 | 1,249,861 | 4.1% |
| Net asset value per share | 124.8p | 117.5p | 6.2% |
| Ordinary Share price | 90.6p | 80.0p | 13.3% |
| EPRA Net Tangible Assets per share* | 124.8p | 117.6p | 6.2% |
| FTSE All-Share Index | 4,014.74 | 3,673.63 | 9.3% |
| Ordinary share price discount to net asset value per share* | (27.4)% | (31.9)% | |
| Net Gearing * | 20.4% | 22.6% | |
| Half year ended 30 June 2021 | Half year ended 30 June 2020 | ||
| Earnings and Dividends | |||
| Earnings per Ordinary Share | 9.1p | (8.8)p | |
| Dividends per Ordinary Share | 2.1p | 1.5p | |
| EPRA Earnings per Ordinary Share | 2.9p | 2.4p | |
| Dividend yield * | 4.6% | 2.4% | |
Sources: BMO Investment Business, MSCI Inc and Refinitiv Eikon * See Alternative Performance Measures |
|||
Managers’ Review
Property Market Review
The second quarter of 2021 marked a turning point for real estate. The all-property total return improved dramatically in the three months to June 2021 posting 3.4 per cent, the strongest quarterly return performance for six years. Rental value growth at the all-property level, appears to have turned a corner and is positive at the all-property level, the first time in positive territory since late 2018. This recent performance is encouraging and gives grounds for cautious optimism although we are mindful that the full effects of the health crisis have yet to play out.
The industrial sector was the driving force behind this performance with Q2 recording the second highest quarterly return ever recorded for the sector. There were no meaningful regional disparities with all areas of the UK showing strong returns.
Retail also posted a positive total return in Q2, the first positive performance from the sector for three years, driven by retail warehouses. Shops and shopping centres are still both negative but there are signs of stabilisation.
Offices increased during the period with West End valuations improving as overseas investors looked to deploy capital into the sector.
Inevitably the occupational market has been impacted by Covid-19 restrictions with both winners and losers. The industrial sector, in particular logistics, urban and big box, have seen upward pressure on rents as occupational demand rises, vacancy is squeezed, and speculative construction struggling to keep pace with active requirements. Office occupiers, especially those with looming lease renewals are pushing for shorter lease terms and are either unable or unwilling to commit to lengthy terms unless substantial incentives are available. Headline office rents for well-located quality stock are stable for now, but with vacancy expected to rise over the remainder of the year, pressure will mount, and larger incentive packages could be on offer. Secondary and tertiary properties are most likely to see rental declines as space proves harder to let.
Retail will be interesting to watch as the government, for the second time, extended a ban on commercial evictions until 25 March 2022. This largely delayed resolution on the issue of rent arrears to be negotiated between tenant and landlord. The last three months have been important to the sector with improving sentiment and accelerating consumer demand both positives. However, costs are rising, furlough schemes are coming to an end and shortages of staff are intensifying. Not all retail is the same, and while footfall in shops and shopping centres is rising, this is from a low base. Retail warehouses/parks are leading the way with the accessibility, outdoor space and free parking favouring these schemes. Those that are food anchored will perform better, as will those with strong catchment areas and a convenience element to them.
Turning to the investment market, at the halfway stage of 2021, the significant story is the resurgence of the UK, which overtook Germany to become Europe’s most invested-in real estate market. The second quarter investment volume reached £15.7bn, demonstrating the resilience of the UK property market and bringing the total for the first half of the year to £27bn. There is a clear preference for those sectors that are underpinned by their ability to offer long-term, defensive income plays such as industrial, residential and supermarkets. Importantly offices are gaining ground with more clarity emerging on the way offices will be used in the future.
Valuation and Portfolio
The six-month total return from the portfolio was 6.9 per cent compared with the MSCI return of 5.3 per cent. Capital growth from the portfolio was 4.1 per cent compared with the MSCI return of 3.0 per cent. The Company’s industrial and logistics properties experienced strong growth due to a combination of both further yield compression and the asset management initiatives detailed below. Whilst the valuation of retail assets has been challenging it is notable that the Company’s retail warehouses have now recorded their third successive quarter of increasing values. The retail, hospitality and leisure sectors were more resilient as lockdown restrictions were lifted.
The office portfolio valuations experienced in Central London improved as a weight of capital from overseas investors was directed towards the sector. There were some valuation falls in the South East and regionally on those properties with shorter lease terms.
| Geographical Analysis (% of total property portfolio) | |
| 30 June 2021 (%) |
|
| South East | 19.8 |
| London – West End | 34.8 |
| Eastern | 1.8 |
| Midlands | 14.4 |
| Scotland | 11.3 |
| North West | 14.0 |
| Rest of London | 1.5 |
| South West | 2.4 |
Source: BMO REP
| Sector Analysis (% of total property portfolio) | |
| 30 June 2021 (%) |
|
| Offices | 41.2 |
| Retail | 15.2 |
| Retail Warehouses | 11.5 |
| Industrial | 22.1 |
| Alternative | 10.0 |
Source: BMO REP
Income Analysis and Voids
We started the year with a void rate of 2.9 per cent and following leasing activity this has reduced this to 1.9 per cent, excluding property being developed or refurbished. As previously reported, there is still an expectation that voids will increase as the full economic impact of Covid-19 takes its toll.
The Property Manager has an in-house team which provides a full service across rent demand, credit control, service charge administration and purchase ledger. The team remains extremely focussed on rent collection and continues to engage with tenants to provide support where necessary on a case-by-case basis and to document outstanding agreements. Since the Government removed restrictions in the summer, we have seen tenants more motivated to seek to resolve their financial situations by reaching agreements.
Rent collection was 91.8 per cent for the period with further receipts expected.
| Collection by sector: | |||
| Rent Billed (£m) | Collected (£m) | % | |
| Industrial | 6.4 | 6.3 | 98.8 |
| Offices | 14.6 | 14.3 | 98.6 |
| Retail Warehouses | 3.8 | 3.6 | 95.9 |
| Retail | 5.8 | 3.7 | 62.8 |
| Alternatives | 2.2 | 2.1 | 96.2 |
| Total | 32.8 | 30.0 | 91.8 |
Overall rent collection since the start of the pandemic is currently at 91.6 per cent.
| Lease Expiry Profile | ||
| At 30 June 2021 the weighted average lease length for the portfolio, assuming all break options are exercised, was 6.0 years. | ||
| % of leases expiring (weighted by rental value) | 30 June 2021 (%) |
31 December 2020 (%) |
| 0 – 5 years | 51.6 | 48.2 |
| 5 – 10 years | 29.2 | 32.8 |
| 10 – 15 years | 12.5 | 12.6 |
| 15 – 25 years | 6.7 | 6.4 |
Source: BMO REP
Industrial & Logistics
During the last six months we have experienced significant success in completing a number of excellent, value accretive asset management opportunities within this segment of the portfolio.
We completed the lease re-gear with Kimberly-Clark at their 368,000 sq ft logistics facility at Revolution Park, Chorley. This lease was due to expire in June 2021, and the re-gear saw the tenant sign a new 12 year lease (with a break option at the end of the 7th year), and fixed annual uplifts of 2 per cent, which resulted in a valuation uplift of 32.3 per cent. A reversionary lease also completed with DHL Supply Chain Limited at G Park, Liverpool, a 360,000 sq. ft. distribution warehouse. A new 10-year lease was agreed from March 2021 with a tenant break at the end of the fifth year and the new rent reflected an uplift in excess of 10 per cent on the previous rent. DHL were granted a 6 months rent-free period by way of 12 months at half rent. This resulted in a valuation uplift of £4.5 million (7.5 per cent). These were the two largest leases due to expire in 2021 and it is reassuring that both existing tenants have renewed their leases and the Company has de-risked the portfolio to these events.
We also negotiated the settlement of the rent review at a 270,000 sq ft facility in Hams Hall, Birmingham, Nestlé’s Purina pet food distribution hub. The review resulted in a 29.3 per cent increase in the passing rent, which resulted in an immediate valuation increase of 11.0 per cent. The Company also owns two other properties at Hams Hall and the new rental level negotiated had a positive impact on the valuation of these units.
In March 2021 Mothercare assigned their lease of their distribution warehouse at DIRFT, Daventry to Ceva Logistics, one of the largest third-party logistics operators in Europe. Entering into a direct contractual relationship with a tenant that has a superior credit rating had a significant impact on value.
In February 2021, a new letting of Hurricane 47, Estuary Business Park, Liverpool contracted to an online rug retailer. Kukoon Rugs entered into a 15-year lease (tenant break at 10 years) at a rent of £290,000 per annum and were granted 9 months’ rent free.
At the Cowdray Centre, Colchester we had deferred commencing the development of a new 30,000 sq ft trade scheme due to Covid-19. Having undertaken a review, it is expected we will commit to the first phase of this development shortly.
Retail and Retail Warehouses
Newbury Retail Park
In February contracts were exchanged with TJ Morris, trading as Home Bargains, to take 20,000 sq ft formerly occupied by New Look and Next on a new 20-year lease (no breaks) at a rent of £17.50 per sq. ft. Construction work to combine the two units have completed and Home Bargains are targeting an opening date of 16th October. This new store will be an added attraction to the Park being a further move towards convenience-based retailing which is expected to be more sustainable in out of town locations.
Other asset management initiatives are in advanced negotiations and supporting planning applications have been submitted to facilitate these.
Solihull Retail Park
The construction of the new Marks & Spencer store unit and the refurbishment of the shopfront of the Food Hall completed in January on programme and to budget. M&S opened this new flagship store in June and report that the new concept is trading extremely well. The store has attracted an increased footfall to the Park and the car park is operating to near full capacity. The new lease is at a rent of £1.373 million per annum.
We have secured a change of use for the vacant former Multi York unit and it is now under offer to a Gym operator which will bring a new use onto the Park.
St. Christopher’s Place Estate
Since the relaxation of lockdown restrictions on 12 April 2021, all tenants have re-opened at St Christopher’s Place, although a small number of tenants have been forced to close for short periods of time due to staffing issues.
In the first 21 weeks since reopening in April 2021, footfall numbers have remained relatively strong; averaging 67 per cent of the same period in 2019 and reaching a similar level to the national average for high streets of 71 per cent. These levels are particularly positive when considered against the wider West End comparative with an average of 46 per cent, which remains suppressed due to the lack of international tourists and the office workers visiting the area. In 2019, over 50 per cent of West End footfall was international.
The end of restrictions in mid-July coincided with the traditional summer holidays and so, with many Londoners escaping the city, the potential boost to visitor numbers and trade has at times been hampered. With the arrival of the school term, it is expected that office workers will return to the West End although the frequency is likely to be below pre-pandemic levels, as businesses support a hybrid of working between the home and office.
Looking ahead, the traditional Christmas peak is much anticipated by retailers and hospitality, to claw back some of the lost trade over the past 18 months.
As previously reported, a number of restaurant lettings have been secured and in recent months James Street has welcomed the new openings of Crome, Papa-dum and Sidechick. The opening of Isola by San Carlo is expected in the coming weeks which will be transformative for the piazza area.
Festok, the artisan ice-cream brand opened at St Christopher’s Place in time for Summer, and Emma Hyacinth, the ladies shoe retailer, will open imminently in their enlarged shop on St Christopher’s Place. Terms are being worked up with a small number of exclusive brands to ‘Pop-up’ on the estate, enhancing the tenant line up and to drive customers to the estate.
From 6 September, we saw the return of many office workers to the West End. As a result, St Christopher’s Place came the closest yet to matching 2019 footfall levels, hitting 85 per cent of the same week in 2019 versus the 56 per cent across the wider West End.
Offices
Two events completed in quarter two. At Alhambra House in Glasgow there was the completion of a lease extension with JP Morgan until 30 June 2023. The office building extends to c100,000 sq ft and for the period of the lease extension the annualised rent will be £2,5 million, an uplift of £0.5 million on the passing rent.
At 17A Curzon Street in London there was the completion of a letting of the 2nd floor to MA Family Office Ltd. The new 5-year lease has a tenant break after the third year and a rent of £130,350 per annum was agreed. The letting demonstrates the increase in occupier activity in major cities as restrictions ease.
The Alternatives property sector
Alternatives relate to the purpose-built student accommodation in Winchester, residential properties at St. Christopher’s Place and the leisure units at Wimbledon Broadway. Winchester continues to benefit from a long lease and annual RPI linked rent reviews. The University have paid their rent in full and on time. The occupation levels of the short-term residential units at St Christopher’s Place has continued to improve whilst the leisure operators at Wimbledon are now able to trade.
Sales and Capital Receipts
Although it happened after the period end, it is important to mention that the Company has recently disposed of its second largest asset, Cassini House, St James Street, London SW1 at a price of £145.5 million which represented a net initial yield of 3.2 per cent. The sale price reflected an increase of 10.6 per cent over the period end valuation at 30 June 2021 and an increase of 18.5 per cent over the valuation as at 31 December 2020. The sale was the culmination of the asset plan to comprehensively refurbish the property, renew existing leases and re-let other floors all at rents in excess of £100 per sq ft and to dispose of the asset into an extremely strong and competitive Central London investment market. Also in September, the Company sold a retail warehouse in Rochdale. This was sold for a total consideration of £35 million, reflecting an increase of 11.8 per cent over the year-end valuation as at 31 December 2020.
In May the Company announced the sale of a solus retail warehouse located in East Kilbride, Scotland for a total consideration of £19 million, reflecting an increase of 9.2 per cent over the external valuation at 31 December 2020. The property is let to B&Q Limited for one of its large format stores on a lease due to expire in November 2029.
All of the sales are entirely consistent with the strategy of adjusting sector weightings by recycling capital.
A capital receipt of £2.42 million was received from the long leaseholder of a number of residential units at St Christopher’s Place as a result of the completion of a statutory lease enfranchisement process to extend the leases. This covered 24 flats located in Greengarden House subject to leases which were due to expire in 2077 at nil rent. Under a statutory process the leases have been extended for a further 90 years until 2167.
Outlook
The last Covid-19 restrictions were lifted on 19 July 2021, providing a boost to the economy and expectations of pre-pandemic levels of activity returning towards the end of the year. However, headwinds remain, and the rising number of Covid-19 cases poses a downside risk to the outlook. Many consumers have saved over the past year, leaving them in in a strong position to support the recovery by taking on new credit and spending some of their excess savings.
Inflation rose in June as sectors previously closed due to the pandemic reopened and have started to raise prices. The expectation is for these effects to only have a temporary impact on inflation and it will gradually return towards the Bank of England’s 2 per cent medium-term inflation target. The expectation is for the Bank of England to look through the temporary increase in inflation, keeping short-term interest rates on hold.
The outlook for the next six months is more positive, but there are challenges to be carefully navigated. There are also some changes that are here to stay, more embedded in everyday life. An increased online consumption and on a more frequent basis has been an obvious effect of the pandemic. More flexible working patterns, and not just in or out of the office but over multiple jurisdictions is something the legal world needs to grapple with. Attracting and retaining talent will become harder and more costly as convenience becomes more important and people live with more fluidity. Town centres will need to be creative and innovative to survive and above all, we as investors will need to be fleet of foot to adapt to the increasingly rapid changing environment.
It has been a strong six-months for the portfolio following a difficult period, particularly with regards to our retail properties. This underperformance was exacerbated by the pandemic with our hospitality and in-town retail tenants finding conditions particularly difficult. There has been positive momentum which should serve us well in the future as the asset management activity at the retail parks is breathing new life into these investments and St. Christopher’s Place is starting to show signs of recovery. The Company has made good progress with its strategy to re-balance the portfolio following £199.5 million of targeted sales above their latest valuations. The Manager is actively sourcing appropriate investments to further reposition the portfolio in the coming months.
Richard Kirby and Matthew Howard
Fund Managers
BMO REP Asset Management plc
Environmental, Social and Governance (ESG)
Highlights for the six-month period to 30 June 2021
The coronavirus pandemic remains a significant disruptor in business and life and presents an ongoing reminder of the power of nature. At the same time, topics such as the decline in biodiversity and climate change impacts continue to attract attention and concern from both scientists and legislators. Unprecedented events over the last six months - from record temperatures at the higher latitudes of the northern hemisphere to heavy rainfall and flooding in Europe and central London – serve to remind us of the fragility of the earth and our collective responsibility towards its protection.
As a Board, we continue to give considerable attention to our ESG commitments and support to our Property Manager in responding proactively to this important requirement. We have been attentive to market sentiment and to stakeholder expectations. With global attention focusing on the climate talks in Glasgow later this year, our focus will revolve around net zero carbon, and to establishing the Company’s strategy and ambition for achieving this position. We aim to publish our target date and pathway for success in the latter half of 2021.
· The Company submitted to the 2021 GRESB (Global Real Estate Sustainability Benchmark) survey on schedule for both real estate and public disclosure modules. Results are due to be published on 1 October.
· The Company also submitted to the full tier of the CDP climate change module on schedule, with these results due to published by the end of the year.
· For its 2020 ESG Report, and for the third year in succession, the Company achieved a Gold Award for alignment to the 3rd Edition of the EPRA Sustainability Best Practice Recommendations.
· Whilst cognisant of some ongoing distortion to consumption patterns on account of fluctuating occupancy levels due to Covid-19, compared to the six-month period to 30 June 2020, the Company has seen:
•• 5.7per cent like-for-like increase in energy consumption #
•• 5.2 per cent increase in absolute energy consumption
•• 0.5 per cent like-for-like reduction in carbon emissions #
•• 1.0per cent absolute reduction in carbon emissions
•• 11.0 per cent increase in energy intensity
•• 21.1 per cent like-for-like and absolute increase in water consumption #
These movements are not attributable to any particular asset but rather a reflection of positive and negative variations across the portfolio, measured and compared during times of unpredictable and varying occupations, governed to a large extent by periods of full and partial lockdown restrictions over the respective reporting timelines.
· The Company has improved visibility around its waste data collection and management processes across the portfolio where the landlord has operational control and responsibility for dealing with waste. We have determined that a very small amount of sanitary waste emanating from our office in Bristol is going to landfill and we have requested that this is redirected to incineration. Otherwise, over 99 per cent of waste is averted from landfill.
· Determined by number of directly managed assets, 100 per cent of sites within the portfolio are paying the real living wage to all service provider employees within scope in line with our target ambition of 100 per cent by the end of 2021.
· The distribution profile of Energy Performance Certificate (EPC) ratings remain broadly unchanged across the portfolio taking certificate expiry and renewal into account, ratings being in place for 100 per cent of demises.
· Improvements in EPC ratings have been realised through a number of refurbishment opportunities, for example with retail units 1a, 1b, 3 and 4 at Newbury Retail Park and unit 1 at Sears Retail Park Solihull where the existing C grades have each been improved to B ratings, whilst at the reconfigured residential spaces at 56 James Street, St Christopher’s Place one D and four C ratings have been upgraded to one C and five B ratings.
· The Company continues to monitor its tenant mix as part of its commitment to minimising leasing exposure to organisations connected to the production, storage, distribution or use of Controversial Weapons*. At the period ending 30 June 2021 zero per cent of rental income was attributable to organisations that appear on the exclusion lists managed by BMO Global Asset Management.
# Like-for-like: consumption values at an asset level are included into like-for-like change calculations if data availability is for two consecutive years.
* Including cluster munitions, anti-personnel mines and biochemical weapons as covered by the 1972 Biological and Toxic Weapons Convention, the 1997 Chemical Weapons Convention, the 1999 Anti-Personnel Mine Ban Convention, and the 2008 Convention on Cluster Munitions.
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2021
| Notes | Six months | Six months | Year to | |
| to 30 June | to 30 June | 31 December | ||
| 2021 | 2020 | 2020* | ||
| £‘000 | £‘000 | £‘000 | ||
| Revenue | ||||
| Rental income | 32,415 | 32,572 | 65,273 | |
| Other income | 3 | 3,008 | - | - |
| Total revenue | 35,423 | 32,572 | 65,273 | |
| Gains / (losses) on investments properties | ||||
| Unrealised gains/(losses) on revaluation of investment properties | 6 | 47,981 | (89,198) | (121,306) |
| Gain/(loss) on sale of investment properties realised | 6 | 1,353 | - | (22) |
| Total income | 84,757 | (56,626) | (56,055) | |
| Expenditure | ||||
| Investment management fee | (3,411) | (3,444) | (6,692) | |
| Other expenses | 4 | (2,260) | (4,072) | (9,448) |
| Total expenditure | (5,671) | (7,516) | (16,140) | |
| Operating profit / (loss) before finance costs and taxation | 79,086 | (64,142) | (72,195) | |
| Net finance costs | ||||
| Interest receivable | 1 | 49 | 49 | |
| Finance costs | (5,638) | (5,463) | (11,210) | |
| (5,637) | (5,414) | (11,161) | ||
| Profit / (loss) before taxation | 73,449 | (69,556) | (83,356) | |
| Taxation | (656) | (465) | (890) | |
| Profit / (loss) for the period | 72,793 | (70,021) | (84,246) | |
| Other comprehensive income | ||||
| Items that are or may be reclassified subsequently to profit or loss |
||||
| Movement in fair value of effective interest rate swap | 237 | (222) | (20) | |
| Total comprehensive income for the period | 73,030 | (70,243) | (84,266) | |
| Basic and diluted earnings per share | 5 | 9.1p | (8.8)p | (10.5)p |
All of the profit and total comprehensive income for the period is attributable to the owners of the Group.
All items in the above statement derive from continuing operations.
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2021
| Notes | 30 June 2021 £’000 |
30 June 2020 £’000 |
31 Dec 2020* £’000 |
|
| Non-current assets | ||||
| Investment properties | 6 | 1,234,898 | 1,231,458 | 1,205,293 |
| Trade and other receivables | 24,540 | 20,283 | 20,593 | |
| 1,259,438 | 1,251,741 | 1,225,886 | ||
| Current assets | ||||
| Investment properties held for sale | 6 | - | 5,235 | - |
| Trade and other receivables | 11,096 | 13,809 | 11,589 | |
| Taxation receivable | 134 | 132 | 134 | |
| Cash and cash equivalents | 56,187 | 22,835 | 34,896 | |
| 67,417 | 42,011 | 46,619 | ||
| Total assets | 1,326,855 | 1,293,752 | 1,272,505 | |
| Current liabilities | ||||
| Trade and other payables | (25,709) | (18,615) | (22,644) | |
| (25,709) | (18,615) | (22,644) | ||
| Non-current liabilities | ||||
| Trade and other payables | (2,098) | (1,692) | (1,677) | |
| Interest-bearing loans | (308,614) | (308,547) | (308,303) | |
| Interest rate swap | - | (439) | (237) | |
| (310,712) | (310,678) | (310,217) | ||
| Total liabilities | (336,421) | (329,293) | (332,861) | |
| Net assets | 990,434 | 964,459 | 939,644 | |
| Represented by: | ||||
| Share capital | 7 | 7,934 | 7,994 | 7,994 |
| Special reserves | 584,193 | 589,593 | 589,593 | |
| Capital reserves | 278,227 | 261,023 | 228,893 | |
| Hedging reserve | - | (439) | (237) | |
| Revenue reserve | 120,080 | 106,288 | 113,401 | |
| Equity shareholders’ funds | 990,434 | 964,459 | 939,644 | |
| Net asset value per share | 8 | 124.8p | 120.7p | 117.5p |
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2021
Share Capital £’000 |
Special Reserves £’000 |
Capital Reserves £’000 |
Hedging Reserve £’000 |
Revenue Reserve £’000 |
Total £’000 |
||
| Notes | |||||||
| At 1 January 2021 | 7,994 | 589,593 | 228,893 | (237) | 113,401 | 939,644 | |
Total comprehensive income for the period |
|||||||
| Profit for the period | - | - | - | - | 72,793 | 72,793 | |
| Movement in fair value of interest rate swap | - |
- |
- |
237 |
- |
237 |
|
| Gains on sale of investment properties realised | 6 |
- |
- |
1,353 |
- |
(1,353) |
- |
| Transfer in respect of unrealised gains on investment properties | 6 |
- |
- |
47,981 |
- |
(47,981) |
- |
| Total comprehensive income for the period | - |
- |
49,334 |
237 |
23,459 |
73,030 |
|
| Transactions with owners of the Company recognised directly in equity | |||||||
| Shares held in Treasury | 7 |
(60) |
(5,400) |
- |
- |
- |
(5,460) |
| Dividends paid | 2 | - | - | - | - | (16,780) | (16,780) |
| At 30 June 2021 | 7,934 | 584,193 | 278,227 | - | 120,080 | 990,434 |
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2020
Share Capital £’000 |
Special Reserves £’000 |
Capital Reserves £’000 |
Hedging Reserve £’000 |
Revenue Reserve £’000 |
Total £’000 |
||
| Notes | |||||||
| At 1 January 2020 | 7,994 | 589,593 | 350,221 | (217) | 99,101 | 1,046,692 | |
Total comprehensive income for the period |
|||||||
| Loss for the period | - | - | - | - | (70,021) | (70,021) | |
| Movement in fair value of interest rate swap | - |
- |
- |
(222) |
- |
(222) |
|
| Transfer in respect of unrealised losses on investment properties | 6 |
- |
- |
(89,198) |
- |
89,198 |
- |
| Total comprehensive income for the period | - |
- |
(89,198) |
(222) |
19,177 |
(70,243) |
|
| Transactions with owners of the Company recognised directly in equity | |||||||
| Dividends paid | 2 | - | - | - | - | (11,990) | (11,990) |
| At 30 June 2020 | 7,994 | 589,593 | 261,023 | (439) | 106,288 | 964,459 |
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 2020*
Share Capital £’000 |
Special Reserves £’000 |
Capital Reserves £’000 |
Hedging Reserve £’000 |
Revenue Reserve £’000 |
Total £’000 |
||
| Notes | |||||||
| At 1 January 2020 | 7,994 | 589,593 | 350,221 | (217) | 99,101 | 1,046,692 | |
Total comprehensive income for the year |
|||||||
| Loss for the year | - | - | - | - | (84,246) | (84,246) | |
| Movement in fair value of interest rate swaps | - |
- |
- |
(20) |
- |
(20) |
|
| Transfer in respect of unrealised losses on investment properties | 6 |
- |
- |
(121,306) |
- |
121,306 |
- |
| Losses on sale of investment properties realised | 6 |
- |
- |
(22) |
- |
22 |
- |
| Total comprehensive income for the year | - |
- |
(121,328) |
(20) |
37,082 |
(84,266) |
|
| Transactions with owners of the Company recognised directly in equity | |||||||
| Dividends paid | 2 | - | - | - | - | (22,782) | (22,782) |
| At 31 December 2020 | 7,994 | 589,593 | 228,893 | (237) | 113,401 | 939,644 |
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2021
Notes |
Six months to 30 June 2021 |
Six months to 30 June 2020 | Year to 31 December 2020* |
|
| £’000 | £’000 | £’000 | ||
| Cash flows from operating activities | ||||
| Profit / (loss) for the period before taxation | 73,449 | (69,556) | (83,356) | |
| Adjustments for: | ||||
| Finance costs | 5,638 | 5,463 | 11,210 | |
| Interest receivable | (1) | (49) | (49) | |
| Unrealised (gains)/losses on revaluation of investment properties | 6 |
(47,981) |
89,198 |
121,306 |
| (Gains)/losses on sale of investment properties realised | (1,353) | - | 22 | |
| (Increase) in operating trade and other receivables | (3,454) | (5,786) | (3,972) | |
| Increase in operating trade and other payables | 3,486 | 991 | 5,087 | |
| Cash generated from operations | 29,784 | 20,261 | 50,248 | |
| Interest received | 1 | 49 | 49 | |
| Interest and bank fees paid | (5,567) | (5,231) | (10,528) | |
| Taxation paid | (656) | (465) | (890) | |
| (6,222) | (5,647) | (11,369)) | ||
| Net cash inflow from operating activities | 23,562 | 14,614 | 38,879 | |
| Cash flows from investing activities | ||||
| Sale of investment properties | 6 | 21,421 | - | 5,585 |
| Capital expenditure of investment properties | 6 | (1,452) | (5,683) | (12,080) |
| Net cash inflow / (outflow) from investing activities | 19,969 | (5,683) | (6,495) | |
| Cash flows from financing activities | ||||
| Dividends paid | 2 | (16,780) | (11,990) | (22,782) |
| Issue costs from Barclays £100m loan facility extension | - | - | (600) | |
| Shares held in Treasury | 7 | (5,460) | - | - |
| Net cash outflow from financing activities | (22,240) | (11,990) | (23,382) | |
| Net increase / (decrease) in cash and cash equivalents | 21,291 | (3,059) | 9,002 | |
| Opening cash and cash equivalents | 34,896 | 25,894 | 25,894 | |
| Closing cash and cash equivalents | 56,187 | 22,835 | 34,896 | |
* These figures are audited
BMO Commercial Property Trust Limited
Notes to the Consolidated Financial Statements
for the six months to 30 June 2021
1. General information and basis of preparation
The condensed consolidated financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom Financial Conduct Authority and IAS 34 ‘Interim Financial Reporting’ as adopted by the EU. The condensed consolidated financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2020, which were prepared under full IFRS as adopted by the European Union requirements and The Companies Law (Guernsey), 2008. The accounting policies used in the preparation of the condensed consolidated financial statements are consistent with those of the consolidated financial statements of the Group for the year ended 31 December 2020. The Group’s entry to UK REIT Regime was effective from 3 June 2019. The Group’s rental profits arising from both income and capital gains are exempt from UK corporation tax from that date, subject to the Group’s continuing compliance with the UK REIT rules. These condensed interim financial statements have been reviewed, not audited.
After making enquiries and bearing in mind the nature of the Company’s business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the next twelve months. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Group, forecast rental income and other forecast cash flows. The Group has agreements relating to its borrowing facilities with which it has complied during the period. Based on the information the Directors believe that the Group has the ability to meet its financial obligations as they fall due for the foreseeable future, which is considered to be for a period of at least twelve months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern basis in preparing the accounts.
These condensed interim financial statements were approved for issue on 29 September 2021.
2. Dividends and property income distributions (PID) gross of income tax
| Six months to 30 June 2021 | Six months to 30 June 2021 | Six months to 30 June 2020 | Six months to 30 June 2020 | Year to 31 December 2020 | Year to 31 December 2020 | ||
| PID Rate (pence) |
£’000 |
PID Rate (pence) |
£’000 |
PID Rate (pence) |
£’000 |
||
| In respect of the previous period: | |||||||
| Ninth interim | 0.35 | 2,798 | 0.50 | 3,997 | 0.50 | 3,997 | |
| Tenth interim | 0.35 | 2,798 | 0.50 | 3,997 | 0.50 | 3,997 | |
| Eleventh interim | 0.35 | 2,798 | 0.50 | 3,996 | 0.50 | 3,996 | |
| Twelfth interim | 0.35 | 2,798 | - | - | - | - | |
| In respect of the period under review: |
|||||||
| First interim | 0.35 | 2,798 | - | - | - | - | |
| Second interim | 0.35 | 2,790 | - | - | - | - | |
| Third interim | - | - | - | - | - | - | |
| Fourth interim | - | - | - | - | 0.25 | 1,998 | |
| Fifth interim | - | - | - | - | 0.25 | 1,998 | |
| Sixth interim | - | - | - | - | 0.25 | 1,998 | |
| Seventh interim | - | - | - | - | 0.25 | 1,999 | |
| Eighth interim | - | - | - | - | 0.35 | 2,799 | |
| 2.10 | 16,780 | 1.50 | 11,990 | 2.85 | 22,782 |
The payment of property income distributions were suspended between April and August 2020.
Property Income Distributions paid/announced subsequent to the period end were:
| Record date | Payment date | Rate (pence) | |
| Third interim dividend | 16 July 2021 | 30 July 2021 | 0.35 |
| Fourth interim dividend | 13 August 2021 | 31 August 2021 | 0.35 |
| Fifth interim dividend | 10 September 2021 | 30 September 2021 | 0.35 |
Although these payments relate to the period ended 30 June 2021, under IFRS they will be accounted for in the period during which they are declared.
3. Other income
On 2 March 2021, GB Gas Holdings Limited at 3 The Square, Stockley Park, Uxbridge paid £3 million surrender premium to the Group.
4. Other expenses
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | ||
£’000 |
£’000 |
£’000 |
||
| Direct operating expenses of rental property | 1,566 | 1,223 | 2,799 | |
| Surrender payment to lessee | - | - | 30 | |
| Credit loss provision* | (56) | 2,100 | 5,062 | |
| Valuation and other professional fees | 245 | 245 | 498 | |
| Directors’ fees | 143 | 124 | 249 | |
| Administration fee | 78 | 78 | 156 | |
| Depositary fee | 70 | 73 | 143 | |
| Other | 214 | 229 | 511 | |
| 2,260 | 4,072 | 9,448 |
* The credit loss provision is rent and service charge receivable that was greater than three months overdue.
The basis of payment for the Directors’ and investment management fees are detailed within the consolidated financial statements of the Group for the year ended 31 December 2020.
5. Earnings per share
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | ||
| Net profit/(loss) attributable to ordinary shareholders (£’000) | 72,793 |
(70,021) |
(84,246) |
|
| Earnings return per share – pence | 9.1p | (8.8)p | (10.5)p | |
| Weighted average of ordinary shares in issue during the period | 798,723,703 |
799,366,108 |
799,366,108 |
|
Earnings for the six months to 30 June 2021 should not be taken as guide to the results for the year to 31 December 2021.
6. Investment properties
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | |
| Non-current assets – Investment properties | £’000 | £’000 | £’000 |
| Freehold and leasehold properties | |||
| Opening fair value | 1,205,293 | 1,314,973 | 1,314,973 |
| Sales – proceeds | (21,421) | - | - |
| - (loss) on sale | (2,308) | - | - |
| Capital expenditure | 1,692 | 5,683 | 11,626 |
| Unrealised losses realised during the period | 3,661 | - | - |
| Unrealised gains on investment properties | 59,865 | 2,969 | 15,922 |
| Unrealised losses on investment properties | (11,884) | (92,167) | (137,228) |
| Closing fair value | 1,234,898 | 1,231,458 | 1,205,293 |
| Historic cost at the end of the period | 937,643 | 953,738 | 959,680 |
| Current assets – Investment properties held for sale | |||
| Freehold properties | |||
| Opening fair value | - | 5,235 | 23,562 |
| Sales – proceeds | - | - | (5,585) |
| - gain on sale | - | - | 4,005 |
| Capital expenditure | - | - | 372 |
| Unrealised lossesrealised during the period | - | - | (4,027) |
| Closing fair value | - | 5,235 | - |
| Historic cost at the end of the period | - | 1,208 | - |
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | |
| £’000 | £’000 | £’000 | |
| (Losses) / gains on sale | (2,308) | - | 4,005 |
| Unrealised gains / (losses) realised during the period | 3,661 | - | (4,027) |
| Gains/(losses) on sales of investment properties realised | 1,353 | - | (22) |
The fair value of investment properties reconciled to the appraised value as follows:
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | |
| £’000 | £’000 | £’000 | |
| Appraised value prepared by CBRE excluding assets classified as held for sale | 1,261,550 |
1,253,725 |
1,227,900 |
| Lease incentives held as debtors | (26,652) | (22,267) | (22,607) |
| Closing fair value | 1,234,898 | 1,231,458 | 1,205,293 |
The assets classified as held for sale reconciled to the appraised value as follows:
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | |
| £’000 | £’000 | £’000 | |
| Appraised value prepared by CBRE of assets classified as held for sale | - |
5,585 |
- |
| Selling costs of assets held for sale | - | (350) | - |
| Closing fair value | - | 5,235 | - |
All the Group’s investment properties were valued as at 30 June 2021 by RICS Registered Valuers working for CBRE Limited (‘CBRE’), commercial real estate advisors, acting in the capacity of a valuation adviser to the AIFM. All such valuers are Chartered Surveyors, being members of the Royal Institution of Chartered Surveyors (‘RICS’).
CBRE completed the valuation of the Group’s investment properties at 30 June 2021 on a fair value basis and in accordance with The RICS Valuation – Global Standards (incorporating the International Valuation Standards) and UK national supplement (“the Red Book”) current as at the valuation date.
There were no significant changes to the valuation process, assumptions and techniques used during the period, further details on which were included in note 8 of the consolidated financial statements of the Group for the year ended 31 December 2020.
As at 30 June 2021, all of the Group’s properties are Level 3 in the fair value hierarchy as it involves the use of significant unobservable inputs and there were no transfers between levels during the period. Level 3 inputs used in valuing the properties are those which are unobservable, as opposed to Level 1 (inputs from quoted prices) and Level 2 (observable inputs either directly i.e. as priced, or indirectly, i.e. derived from prices).
7. Share capital
| Six months to 30 June 2021 | Six months to 30 June 2021 | Six months to 30 June 2020 | Six months to 30 June 2020 | Year to 31 December 2020 | Year to 31 December 2020 | |
| No. of shares | £’000 | No. of shares | £’000 | No. of shares | £’000 | |
| Allotted, called-up and fully paid | ||||||
| Opening Ordinary shares of 1p each | 799,366,108 |
7,994 |
799,366,108 |
7,994 |
799,366,108 |
7,994 |
| Held in treasury | (6,000,000) | (60) | - | - | - | - |
| Closing Ordinary shares of 1p each | 793,366,108 |
7,934 |
799,366,108 |
7,994 |
799,366,108 |
7,994 |
Under the Company’s Articles of Incorporation, the Company may issue an unlimited number of Ordinary Shares. The Company issued nil Ordinary Shares during the period (2020: nil) raising net proceeds of £nil (2020: £nil).
The Company purchased 6,000,000 (2020:nil) Ordinary Shares during the period which are held in treasury.
8. Net asset value per share
| Six months to 30 June 2021 | Six months to 30 June 2020 | Year to 31 December 2020 | |||
| Net asset value per ordinary share – pence | 124.8p | 120.7p | 117.5p | ||
| Net assets attributable at the period end (£’000) | 990,434 | 964,459 | 939,644 | ||
| Number of ordinary shares in issue at the period end | 793,366,108 | 799,366,108 | 799,366,108 | ||
9. Related party transactions
The Directors of the Company received fees for their services and dividends from their shareholdings in the Company. No fees remained payable at the period end.
10. Capital commitments
The Group had capital commitments totalling £nil as at 30 June 2021 (30 June 2020: £9,800,000; 31 December 2020: £5,200,000).
11. List of Subsidiaries
The Group results consolidate the results of the following companies:
- FCPT Holdings Limited (the parent company of F&C Commercial Property Holdings Limited and Winchester Burma Limited)
- F&C Commercial Property Holdings Limited (a company which invests in properties)
- SCP Estate Holdings Limited (the parent company of SCP Estate Limited and Prime Four Limited)
- SCP Estate Limited (a company which invests in properties)
- Prime Four Limited (a company which invests in properties)
- Winchester Burma Limited (a company which invests in properties)
- Leonardo Crawley Limited (a company which invests in properties)
All of the above-named companies are registered in Guernsey.
The Group’s ultimate parent company is BMO Commercial Property Trust Limited.
12. Subsequent events
On 12 April 2021, BMO announced its intention to sell its EMEA Asset Management business to Ameriprise Financial Inc, complementing its global asset management business, Columbia Threadneedle Investments. The sale is subject to regulatory consents and closing conditions which is expected to conclude in Q4 2021. This post balance sheet event does not adjust the financial statements.
On 7 September 2021, the Group sold the office located in London SW1, Cassini House for a total consideration of £145.5 million.
On 8 September 2021, the Group extended the loan facility with Barclays Bank PLC to 31 July 2023. A Restated Facility Agreement was entered into to deal with the cessation of the publication of LIBOR rates and its replacement with a risk-free rate, to be the Sterling Overnight Index Average (“SONIA”). Additional security was provided in the form of two properties to allow immediate access to the full £50 million of the currently undrawn revolving credit facility and the Company also entered into a new £50 million interest rate swap to fix the interest payable on the term loan up to 31 July 2023.
On 22 September 2021, the Group sold the retail warehouse located in Rochdale for a total consideration of £35 million.
Other than as noted above, there are no other significant events between the period-end and the date of approval of these financial statements which would require a change to or disclosure in the financial statements.
13. Forward looking statements
Certain statements in this report are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. Accordingly, undue reliance should not be placed on forward looking statements.
Statement of Principal Risks and Uncertainties
The Company’s assets comprise mainly of direct investments in UK commercial property. Its principal risks are therefore related to the commercial property market in general, particularly the structural changes in the retail and office markets. Other risks faced by the Company include market, geopolitical, investment and strategic, regulatory, environmental, taxation, management and control, operational, and financial risks. The Company is also exposed to risks in relation to its financial instruments. These risks, and the way in which they are managed, are described in more detail under the heading ‘Principal Risks and Risk Management’ within the Business Model and Strategy in the Company’s Annual Report for the year ended 31 December 2020. The Company’s principal risks have not changed since the date of that report and are not expected to change for the remainder of the Company’s financial year although liquidity risk has been managed down following recent property sales.
Statement of Directors’ Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
• the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union;
• the Chairman’s Statement and Managers’ Review (together constituting the Interim Management Report) together with the Statement of Principal Risks and Uncertainties above include a fair review of the information required by the Disclosure and Transparency Rules (‘DTR’) 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and
• the Chairman’s Statement together with the condensed set of consolidated financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
On behalf of the Board
Paul Marcuse
Director
BMO Commercial Property Trust Limited
Independent Review Report to BMO Commercial Property Trust Limited
Our conclusion
We have reviewed BMO Commercial Property Trust Limited’s (the "Company") interim condensed set of consolidated interim financial statements (the "interim financial statements") for the six-month period ended 30 June 2021. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
• the condensed consolidated balance sheet as of 30 June 2021;
• the condensed consolidated statement of comprehensive income for the six-month period then ended;
• the condensed consolidated statement of changes in equity for the six-month period then ended;
• the condensed consolidated statement of cash flows for the six-month period then ended; and
• the notes, comprising a summary of significant accounting policies and other explanatory information.
The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Company is The Companies (Guernsey) Law, 2008 and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Our responsibilities and those of the Directors
The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Alternative Performance Measures
The Company uses the following Alternative Performance Measures (‘APMs’). APMs do not have a standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities. Further details of the APMs methodology are available in the Company’s Annual Report for the year ended 31 December 2020.
Discount or Premium – the share price of an Investment Company is derived from buyers and sellers trading their shares on the stock market. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers than buyers. Shares trading at a price above the NAV per share, are said to be at a premium.
Dividend Cover – The percentage by which Profits for the period (less gains/losses on investment properties) cover the dividend paid.
A reconciliation of dividend cover is shown below:
| 30 June 2021 |
30 June 2020 | |||
£’000 |
£’000 |
|||
| Profit / (loss) for the period | 72,793 | (70,021) | ||
| Add back: | Unrealised (gains)/losses on revaluation of investment properties | (47,981) |
89,198 |
|
| (Gains) on sales of investment properties realised | (1,353) | - | ||
| Other Income | (3,008) | - | ||
| Profit before investment gains and losses | (a) | 20,451 | 19,177 | |
| Dividends | (b) | 16,780 | 11,990 | |
| Dividend Cover percentage (c = a/b) | (c) | 121.9 | 159.9 | |
Dividend Yield – The dividends paid during the period divided by the share price at the period end. An analysis of dividends is contained in note 2 to the accounts.
Net Gearing – Borrowings less cash divided by total assets (less current liabilities and cash).
Portfolio (Property) Capital Return – The change in property value during the period after taking account of property purchases and sales and capital expenditure, calculated on a quarterly time-weighted basis. The calculation is carried out by MSCI Inc.
Portfolio (Property) Income Return – The income derived from a property during the period as a percentage of the property value, taking account of direct property expenditure, calculated on a quarterly time-weighted basis. The calculation is carried out by MSCI Inc.
Portfolio (Property) Total Return – Combining the Portfolio Capital Return and Portfolio Income Return over the period, calculated on a quarterly time-weighted basis. The calculation is carried out by MSCI Inc.
Total Return – The theoretical return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets, respectively, on the date on which they were quoted ex-dividend.
EPRA Net Tangible Assets – Assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax.
EPRA Earnings – EPRA earnings represents the earnings from core operational activities, excluding investment property revaluations and gain/losses on asset disposals. It demonstrates the extent to which dividend payments are underpinned by recurring operational activities.
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Tel: 01481 745324
Fax: 01481 745051
Richard Kirby
BMO REP Asset Management plc
Tel: 0207 499 2244
Graeme Caton
Winterflood Securities Limited
Tel: 0203 100 0268
The full interim report for the period to 30 June 2021 will be sent to shareholders and will be available for inspection at Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the Company, and from the Company’s website: www.bmocommercialproperty.com
