Balanced Commercial Property Trust Ltd - NAV Release and Company Update

Headlines

• Net Asset Value total return of -1.1 per cent for the quarter ended 31 March 2024.

• Share Price total return of +14.3 per cent for the quarter ended 31 March 2024.

• Disposal of two office assets completed, raising proceeds of £54.6m at an aggregate discount to valuation of 0.4 per cent (both disposals announced previously).

• 18 leases and tenancy agreements completed or renewed over the quarter.

Net Asset Value: total return of -1.1 per cent for the quarter

The unaudited net asset value (‘NAV’) per share of the Company as at 31 March 2024 was 107.3 pence. This represents a decrease of 2.3 per cent from the audited NAV per share as at 31 December 2023 of 109.8 pence and a NAV total return for the quarter of -1.1 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 March 2024 and is calculated after deduction of all dividends paid prior to that date.

Analysis of Movement in NAV

The following table provides an analysis of the movement in the unaudited NAV per share for the period from 31 December 2023 to 31 March 2024 (including the effect of gearing):

The EPRA Net Tangible Assets per share as at 31 March 2024 was 107.3 pence per share (31 December 2023: 109.8 pence per share).

Market Commentary

Whilst uncertainty on the outlook and timing for interest rate cuts has weighed on real estate capital markets, the pace of declines in valuations has moderated. At the market level, the MSCI UK Quarterly Index recorded capital growth of -0.7 per cent over the first quarter of 2024. However, at the sector level performance is significantly nuanced as those sectors supported by strong occupational fundamentals, such as industrial & logistics and retail warehousing, delivered capital growth.

Occupational markets have remained resilient, despite the economic challenges, delivering income growth of 3.4 per cent and rental value growth of 3.5 per cent over the 12 months to March.

Asset management update

Over the first quarter, 18 leases and tenancy agreements have been completed or renewed. Notable transactions include:

• St Christopher’s Place, Central London– Sunday in Brooklyn have committed to a 15-year lease on a newly created anchor unit, at a rent in line with estimated rental value (‘ERV’) and with the potential for a further rental top-up based on the restaurant’s turnover. Recent F&B lettings have increased the estate’s exposure to the sector to 42 per cent by capital value. Currently 44 per cent of the space available at the estate is under offer.

• Cowdray Centre, Colchester– following the completion of a substantial refurbishment, MKM Building Supplies have signed a new 20-year lease at a rent in line with the unit’s ERV.

• 17A Curzon Street, London W1– the newly refurbished top-floor suite of this multi-let West End office holding has been let on a new 5-year lease to Turcan Connell at a rent of £131.50 per square foot, representing a marginal premium to ERV.

• 7 Birchin Lane, London EC3– this multi-let City of London holding has been subject to a phased refurbishment programme which has now completed with the leasing of the final suite. The ground floor suite has been let to Exquitech on a new 5-year lease at a rent of £64.50 psf. The rent represents a marginal premium to the suite’s ERV, and a 9.5 per cent premium to the pre-refurbishment ERV.

The portfolio vacancy rate increased marginally over the quarter, rising from 6.7 per cent to 6.8 per cent by ERV. Of this, 4.6 per cent is attributed to Stockley Park, Uxbridge, which is held as a repurposing opportunity and 0.9 per cent is contractually committed to occupiers.

Portfolio valuation

Over the quarter, the Company’s portfolio recorded a valuation decline of 1.6 per cent, with valuation yields moving as set out below:

Offices saw a valuation decline of 4.3 per cent amid prevailing weak investor sentiment towards the sector. The equivalent yield on the office portfolio increased by 92 basis points to 9.1 per cent.

St Christopher’s Place experienced a valuation decline of 3.3 per cent. The primary cause of this was the administration of The Body Shop, who have ceased trading from their store at 372/374 Oxford Street. This prominent corner unit is being actively marketed and has received several offers to occupy, which are under negotiation.

The retail warehouse assets experienced a 2.4 per cent increase in value, as prime market yields compressed over the quarter amid strong levels of investor and occupational demand. The Company’s retail parks in Newbury and Solihull are fully leased and offer an attractive and robust grocery, discount and convenience-led tenant roster. The equivalent yield on the retail warehouses sharpened by 12 basis points to 6.1 per cent.

Industrial assets saw capital values fall marginally by 0.2 per cent as the equivalent yield on the portfolio assets remained broadly stable at 6.1 per cent.

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