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30 June 2020
BMO CommercialProperty Trust Ltd
(BCPT)
CM021629
Alhambra House, Glasgow
Richard Kirby
Richard KirbyDirector, Property Funds
Matthew HowardDirector, Property Funds
Scott MacraeInvestment Trusts
Peter TaylorInvestment Trusts
Investment risks
2
The value of directly held property reflects the opinion of valuers and is reviewed periodically. These assets can also be illiquid and significant or persistent redemptions may require the manager to sell properties at a lower market value adversely affecting the value of your investment.
The value of investments and income derived from them can go down as well as up as a result of market movements and investors may get back less than the original amount invested.
Estimates and forecasts are provided for illustrative purposes only; they are not a guarantee of future performance and should not be relied upon for any investment decisions. Estimates are based on assumptions and subject to change without notice.
3
Annual Report - headline numbers
Property Market Overview - post March 2020
BMO Commercial Property Trust Performance in 2020
UK Property Market - looking forward
Agenda
4
BMO Commercial Property TrustAnnual Report Key Financial Data
Source: BCPT Annual Report & Consolidated Accounts 2019
Past performance should not be seen as an indication of future performance.
5
BMO Commercial Property TrustAnnual Report Key Financial Data
Source: BCPT Annual Report & Consolidated Accounts 2019Past performance should not be seen as an indication of future performance.
6
BMO Commercial Property TrustAnnual Report Key Financial Data
Source: BCPT Annual Report & Consolidated Accounts 2019Past performance should not be seen as an indication of future performance.
7
Property Market Overview – post March 2020
Sources: Property Data June 2020, CBRE Prime Rents & Yields Q1 2020, Avison Young Nine Report Q1 2020, M&G Press Release January 2020, Savills, IPE March 2020, EG 18th March 2020,
Knight Frank April, 2020 Citywire, June 2020, IPF Consensus Forecasts May 2020, FT JuBigne 2020
Asked to predict when capital values are likely to return to pre-COVID-19 levels, none predict recovery within the next two years. “Ex-London we do not expect Retail to ever get back to its previous highs.”
UK transaction volume was an above average £15bn in
Q1 2020
Travelodge set to launch CVA in effort to end rent stand-off
CBRE reported that UK prime industrial
rents rose by 1.9% in Q1
The UK [regional] office vacancy rate is at its lowest level in 15 years and well below the long-term average.
Can’t pay, won’t pay –rent collection rates (21 days) 57% total - 39% in
retail, 31% in leisure
UK property funds suspend as valuations hit with ‘material uncertainty’
UK REITs lose £20bn of market value’ (mid-March)
June quarterly rent likely to be even more of a pinch point, cash positions will worsen
Despite positive sentiment towards much of the market outside of retail around the turn of the year, the arrival of Covid 19 has delivered unprecedented challenges for UK Real Estate.
Headlines
Q1 showed some promise, Covid has delivered a different reality
Punishing time for shares in student property owners …
8
Performance deteriorated sharply in March, driven by falling capital values at the All Property level
Quarterly total returns are now negative. Q1 2020 was the sixth consecutive quarter of negative capital growth with yields expanding in the main sectors. Rents were trending slightly negative hit by retail weakness. Income underpinsperformance. March end timing is key. Monthly data post period points to further capital falls ….
Sources: MSCI UK Quarterly Property Digest (Standing Investments) March 2020, MSCI UK Monthly Property Digest March 2020The MSCI performance data as quoted in this document is calculated net of operating costs
Past performance should not be seen as an indication of future performance.
2.2 2.3 2.52.9
1.9 1.71.4
0.8 0.4 0.5 0.3 0.0 - 1.4
- 3.0
- 2.0
- 1.0
0.0
1.0
2.0
3.0
4.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20
Three- Month All-Property Total Returns per cent
Income Return Capital Growth Total Return
9
Dislocation. Industrials lead the way. Retail under continued pressure
South East Industrial & Logistics assets have been the strongest performers over the year delivering 7.0%. City and Provincial Offices also performed well, both delivering 5.0%. Shopping Centres are the laggards. Growing concern for Alternatives, Leisure and Hospitality …..
Past performance should not be seen as an indication of future performance.Source: MSCI UK Monthly Property Digest March 2020
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
StandardRetail - South
East
StandardRetail - Rest of
UK
ShoppingCentre
RetailWarehouse
Office - City Office - WestEnd & Mid
Town
Office - Restof South East
Office - Rest ofUK
Industrial -South East
Industrial -Rest of UK
Alternatives All-Property
12 month total return by segment - March 2020 per cent
Income Return Market Value Rental Growth Equivalent Yield Impact Total Return
10
Monthly data post the March Quarter points to a pickup in the pace of capital falls
The impact of the Covid 19 lockdown and the lack of transaction evidence around the quarter date demanded the imposition of Material Uncertainty clauses in valuations across all sectors. Some deals have now completed at discounted levels, and with sentiment uncertain, we have seen values start to move.
Sources: MSCI UK Monthly Property Digest May 2020The MSCI performance data as quoted in this document is calculated net of operating costs
Past performance should not be seen as an indication of future performance.
• Not all sectors have been impacted in the same manner.
• Retail remains severely challenged with rent collection under significant pressure.
• The expected deterioration in the leisure, F&B, student and hospitality sectors has started to feed through into the overall numbers. This is reflected in the aggregated ‘Alternatives’ performance, with the strongly negative performance of some of these groups shielded by more favourable Alternative subsectors.
• Long Income, Industrials & Logistics, Healthcare and Residential Build To Rent have remained relatively resilient with continued, albeit reduced, deal flow.
• Frequency and a comparable method of valuation has a smoothing effect on returns.
11
COVID-19 Affecting both the occupier and investment markets
Sources: Remit Consulting April 2020, Property Data June 2020 £m Left hand scale, Number right hand scale, as at 16th June 2020.
Retail, leisure and hospitality have been the most severely affected in terms of both rent transaction volumes and collection, with industrials and offices relatively resilient. Rent collection could come under more pressure in the June quarter. Valuers will be tasked with valuing assets before collection statistic become fully evident.
0102030405060708090
100
Retail Offices Industrial Residential Mixed All 2020 All 2019
Rent Collection Rates - March Quarter - per cent
Due Date +7 days
12
UK property continues to offer an attractive premium over fixed income
13
Source: MSCI UK Property Index, Datastream as at May 2020. FTSE International Limited (“FTSE”) © FTSE 2020.
The yield margin above gilts is now at historic highs though the market looks poorer value against UK Equities. Lower for longer forecasts imply continued support for pricing but risks to revenue from Coronavirus disruption should not be under estimated. Almost uniquely, at present, implied yield is not the same as income delivered. Dividends from both UK equities and Listed real estate are under pressure.
Past performance should not be seen as an indication of future performance.
Income return January 2000 to April 2020
Classification: only to be shown if not publicBMO Commercial Property Trust
One Cathedral Square, BristolComprehensively refurbished prime regional city centre
office let to University of Bristol and Dyson Technologies
A diversified balanced UK portfolio investing in prime property in core locations
BMO Commercial Property TrustKey information
Portfolio statistics• Launched: 18/3/2005• NAV (per share) at launch: 97.0p• IFRS NAV” per share at 31 March 2020: 124.3p (-5.0%)• Trading level: 74.5p (31/03/20)• Discount: 40.1 per cent (31/03/20)• Portfolio Valuation: £1,294.8m (31/03/20) • Target Dividend: Currently suspended• Current Dividend yield: 0%
Objective
To provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in adiversified UK Commercial portfolio
Manager information• Fund Manager: Richard Kirby, MRICS• Deputy Fund Manager: Matthew Howard, MRICS• Independent Non-Executive Board
Portfolio characteristics• Balanced UK portfolio • 36 assets (core & core-plus) including Offices, Retail, Industrial and
Alternative sectors • Institutional sustainable locations• Average lease length: 6.3 years (assuming all breaks exercised)• Portfolio void rate: 3.2% of ERV
One Cathedral Square, Bristol
The Hive, Estuary Business Park, Liverpool
Newbury Retail Park, Berkshire
Some of our buildings
15
Performance ReviewAnnualised Total Return
* Benchmark: Estimated IPD Quarterly UniverseReturns are shown in GBP, gross of management fees and corporate expenses. Returns over one year are annualised. Inception date: June 2005
16
Past performance should not be seen as an indication of future performance.The performance figures are shown gross of fees. The effect of fees or costs will be to lower the figures shown.
Source: BMO Real Estate Partners as at 31 March 2020
Gross performance
-2.91
2.37
5.13
8.55 8.86
0.45
4.635.91
8.52 8.01
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
1 Year 3 Years 5 Years 7 Years 10 Years
%
Fund Benchmark*
Year 12m - March 2016 12m - March 2017 12m - March 2018 12m - March 2019 12m - March 2020 (%) (%) (%) (%) (%)
BCPT Total return 12.2 6.7 8.4 2.0 -2.9
Benchmark 11.3 4.6 10.1 4.6 -0.5
Classification: only to be shown if not public
Borrowings and Corporate
17
BMO Commercial Property Trust
• Gearing− Net Gearing 22.6% (31 March 2020)
• Long-term borrowings− Debt drawn down from Legal & General: £260m and a 10-year
term maturing 31 December 2024− Interest rate fixed at an all-in rate of 3.32%− A long-term loan on attractive terms
• Barclays Bank PLC financing arrangements− Current expiry date of £50m term loan facility and additional
revolving credit facility £50m is 21 June 2021.− Negotiations with regard to an extension of this loan and
facility are well advanced.
• Total borrowings − The current drawn down borrowings amount to £310 million− The weighted average interest rate on the Group's total
current borrowings is 3.3%
• Management fees− Revised arrangement from 1 January 2017. Performance fee
removed. Base fee 0.55% pa of gross assets (reduced to 0.525% on assets between £1.5 - £2.0 billion and 0.5% in excess of £2 billion)
• Board composition− John Wythe appointed 11 September 2018. Long career with
Prudential Property Investment, now M&G Real Estate. He is currently Chairman of the Trustees of the Portman Estate
− Linda Wilding appointed 3 June 2019 – ex MD private equity division of Mercury Asset Management
− Chris Russell, David Preston, Peter Cornell all retired from the Board 30 May 2019
− Martin Moore appointed Chairman 3 June 2019− Company now complies with the Hampton Alexander
recommendation
• UK REIT status− Company converted to the UK REIT regime 3 June 2019
Prime Four – Unit 3Aberdeen
11-12 Lochside PlaceEdinburgh Park
BMO Commercial Property TrustDividend Payments
• March 2020 monthly dividend payment of 0.5 pence per ordinary share was paid to shareholders on 31 March 2020.
• On the 16 April 2020 the Board announced that due to the significant uncertainty and the expected impact of COVID-19 on future rental receipts, particularly in relation to the Group's retail and leisure tenants, the temporary suspension of its future monthly dividend payments in order to strengthen cash reserves and protect the long-term value of the Group.
• The Board currently intends to re-introduce distributions when conditions improve and believe that the portfoliois well positioned to begin its recovery once the temporary restrictions surrounding COVID-19 are lifted.
• It is the intention of the Board to provide further Group updates as the situation evolves.
• Key to informing any decision is the actual rent collection of the Group.
18
BMO Commercial Property TrustCorporate Borrowings and Covenants
• The Group has approximately £20 million of available cash and an undrawn revolving credit facility of £50 million.
• The Group's long-term debt with L&G and loan facility with Barclays do not need to be refinanced until December 2024 and June 2021 respectively. As at 31 March 2020, the Group’s loan to value (‘LTV’) was 22.6 per cent.
• There have been no covenant breaches.
• The Group continues to comfortably meet its covenants on the £260 million long-term loan with L&G at the current time.
• There is also significant headroom on the loan to value covenant of the £50 million loan facility with Barclays, which relates to the St Christopher’s Place assets. The interest cover test is expected to become more challenging given the tenant base has been closed during lockdown. This particular covenant test has been discussed with Barclays who are supportive.
19
Classification: only to be shown if not public
- Ozalid Works, Colchester (I)- Cowdray Centre, Colchester (O)- Stockley Park, Uxbridge (O)-16 Conduit Street, London, W1 (O)- The Broadway, Wimbledon (A/L)- 7 Birchin Lane, London EC3 (O)- 2-4 King Street, London, SW1 (O)- St Christopher’s Place, London W1 (R/O/A/L)- Cassini House, London, SW1 (O)- 17a Curzon Street, London W1 (O)
- Newbury Retail Park (R)- Thames Valley Park 1, Reading (O)- Winchester University, Burma Road (A/L)- Strategic Park, Southampton (I)- Watchmoor Park, Camberley (O)- Affinity Point, Camberley (I)- The Leonardo Building, Crawley, (O)
- Revolution Park, Chorley, Lancashire (I) - Dane Street, Rochdale (R)- Estuary Business Park, Liverpool (I)- G Park, Liverpool (A/L)- 82 King Street, Manchester (O)
- 11-12 Lochside Place, Edinburgh Park (O)- Alhambra House, Glasgow (O)- Prime Four Business Park, Aberdeen (O)- B&Q, East Kilbride (R)
North West
South East
Scotland
Midlands
Our buildingsPortfolio key features
- Sears Retail Park, Solihull (R)- Oakenshaw Road, Solihull (R)- Plot 4 DIRFT, Daventry (I)- Hams Hall, National Dist. Centre, Birmingham (I)
South East
Source: BMO Global Asset Management, BMO Real Estate Partners as at 31 March 2020
Offices Industrial Alternatives/Lifestyle Retail
- One Cathedral Square (O)
South West
20
Classification: only to be shown if not public
Sector and regional breakdownPortfolio key features
The portfolio is well diversified by sector and geography, with a relatively high weighting to the South East
Source: BMO Real Estate Partners as at 31 March 2020
Segment split Geographical split
No exposure to shopping centres
St. Christopher’s Place and Wimbledon
Limited exposure to City of London
>
No exposure to Wales or North East
>
City1.6%
West End36.8%
South East21.4%
South West2.5%
Eastern2.0%
East Midlands2.0%
West Midlands8.8%
North West11.9%
Scotland13.1%
St Retail - South East
18.7%
St Retail - Rest of UK2.4%
Retail Warehouse
9.7%
Offices - City1.6%
Offices - West End
16.1%Offices - South East6.7%
Offices - Rest of UK
17.4%
Industrial -South East
4.2%
Industrial - Rest of UK13.3%
Other9.9%
21
Classification: only to be shown if not public
Specific risk36 properties externally valued £1,294.8m (31/03/2020)
Portfolio key features
22
Source: BMO Real Estate Partners as at 31 March 2020
No.1 property by valueSt Christopher’s Place: 23%
No.1 tenant by rent paidArtemis Investment Management LLP: 4.2%
Top 10 tenant at ‘maximum’ riskMothercare UK Limited: 2.6%
Top 10 Tenants by rent paid Risk %Artemis Investment Management LLP Negligible 4.2%Apache North Sea Limited Low 4.0%GB Gas Holdings Limited Low 3.9%CNOOC Petroleum Europe Limited Low 3.9%Kimberly-Clark Limited Low 3.7%Virgin Atlantic Limited Low 3.7%JP Morgan Chase Bank Limited Unscored 3.0%Transocean Drilling U.K. Limited Low Medium 2.8%University of Winchester Negligible 2.8%Mothercare UK Limited* Maximum 2.6%Total 34.6%
Top 10 Properties by value Sector ValueLondon W1, St Christopher's Place Estate Retail >£250mLondon SW1, Cassini House, 57-59 St James' St Offices >£100mNewbury, Newbury Retail Park Retail Whse £50m-£75mLondon SW19, Wimbledon Broadway Retail £50m-£75mSolihull, Sears Retail Park, Marshall Lake Rd Retail Whse £25m-£50mCrawley, The Leonardo Building, Manor Royal Offices £25m-£50mWinchester, Student Accommodation, Burma Road Other £25m-£50mManchester, 82 King Street Offices £25m-£50mAberdeen, Unit 2 Prime Four Business Park Offices £25m-£50mAberdeen, Unit 1 Prime Four Business Park Offices £25m-£50m
*has a rental guarantee from a Mothercare company not in administration
Portfolio key featuresVoid Profile
23
Vacant area: 3.2% by ERV
Source: BMO Real Estate Partners as at 31 March 2020
A 5,850 sq. ft. vacant unit currently under offer to a well known retailer.
We currently have 7,000 sq. ft. under offer to an F&B business on a 10 year term at a rent above ERV. This lease has progressed during lockdown.
Camberley
Newbury
Property Area (sq. ft.) ERV (£)
Camberley, Watchmoor Park 24,398 458,000
Newbury, Newbury Retail Park 15,300 400,000
Colchester, The Cowdray Centre, Cowdray Ave. 60,402 349,900
Liverpool, Units 2 & 4, Estuary Business Park 47,500 297,000
London W1, 17A Curzon Street 3,261 290,500
London W1, St Christopher's Place 3,173 280,300
Solihull, Oakenshaw Road 7,735 162,000
London SW1, Cassini House, 57-59 St James' St 7 CPS 35,000
Manchester, 82 King Street 1,416 7,175
London EC3, 7 Birchin Lane 1,105 3,720
Total 164,297 2,283,595
We have recently completed a lease to let Mitsui Fudosan who took the 6th floor at £106 per sq.ft., setting a new rental high for this prime St James asset. The property is now fully let.
24
Asset ManagementRecent Activity
In early June 2020 we completed the landlord’s works and handed the unit over to Lidl tocommence their internal fit out. The new store is due to open later this summer. In February2020 Deichmann Shoes took occupation of part of the former Mothercare unit on a 10 yearlease.
Construction works for the new M&S general store commenced earlier this year. Throughcareful planning and observing government guidelines the contractors were able to makecontinued progress during the lockdown. We are now only 6 weeks behind program and aimto hand the store over to M&S in Q1 2021.
Cassini House, London SW1
Sears Retail Park, Solihull
Newbury Retail Park
The logistics property is let to Mothercare with a global company guarantee. The tenant hasrecently sub-let to Clipper logistics on a short-term basis to service an NHS contract during thepandemic.
25
Asset ManagementRecent Activity
The newly built property remains in marketing but we have recently let the yard on a short termlicence at a peppercorn rent to Bidfood who are providing care packs to vulnerable peopleduring the pandemic in association with the Department for Environment, Food and RuralAffairs.
During 2019 we sold the first phase of a vacant plot of land to Persimmon Homes for c. £6.0m.The sale of the second phase will complete at the end of July for c. £5.5m.
DIRFT
Colchester, Ozalid Works
Hurricane 47, Speke
The Company has collected 78% of rent due over quarter 2, with a further 1% of monthly payment due imminently.
26
Asset ManagementRent Collection
78.5%
0.8%
20.7%
BCPT Rent Collection - Overall
Rent Received
Outstanding MonthlyRent Payments
Rent Deferment/RentFree/OutstandingAgreement
The remaining 21% accounts for rent not paid in the quarter. The majority of this will be deferred rent to be paid at a later date with a smaller portion of temporary rent free concessions. Within the 21% there are a number of outstanding agreements relating to rent concessions which we expect to be agreed during Q3.
The Company has collected 78% of rent due over quarter 2, St Christopher’s Place has skewed the overall collection downwards with 31% of Q2 rents being received to date. Owing to the leisure/food & beverage nature of a large proportion of the tenants we have intentionally delayed agreements until these businesses re-open in order to then agree the appropriate level of concession. Therefore we expect much of Q2 outstanding rent to be received during Q3.
27
Asset ManagementRent Collection by Sector
Source: BMO Real Estate Partners, June 2020
31.7%
68.3%
St. Christopher’s Place
Rent Received
Rent Deferment/RentFree/OutstandingAgreement
73.9%
6.2%
20.0%
Retail Warehouse
Rent Received
Outstanding Monthly RentPayments
Rent Deferment/RentFree/OutstandingAgreement
94.6%
5.4%
Offices
Rent Received
Rent Deferment/RentFree/OutstandingAgreement
92.7%
7.3%Industrial
Rent Received
Rent Deferment/RentFree/OutstandingAgreement
Classification: only to be shown if not public
ESG considerations at BMO REP
28
Responsible Investing (‘RI’)
Corporate Framework
https://www.bmogam.com/commercial-property-trust
• BCPT Board ultimately overseas ESG framework
• Reference and support from BMO GAM RI team
• BMO REP ESG Committee convenes on quarterly basis to review legislative drivers and industry sentiment to ensure relevance of policy and direction
• ESG culture integrated across all business sectors and included in personal objectives
• Property level ESG appraisals reviewed annually and incorporated into individual asset level business plans
• Describes the Company’s RPI strategy and priorities
• Presents key ESG performance data for the reporting year and future targets
• Provides an overview of key ESG risks facing the property portfolio
The Company’s latest ESG report published
Case Studies
London W1, 71-77 Wigmore StreetRefurbishment of mixed-use asset at SCP• Comprehensive energy strategy including real
time consumption display for occupiers• BREEAM rating of Very Good• Green roof to promote biodiversity
London SW1, Cassini HouseRefurbishment of prime West End offices• Extensive use of durable, low maintenance and
locally sourced materials • EPC improvement from E to high C• Enhanced cycling facilities through additional
racks, lockers, showers and repair station
Edinburgh, Nevis HouseShell and core head office refurbishment • EPC improvement from E to B+• BREEAM certification to Very Good standard• Renewable electricity from roof mounted solar PV • Plug & Play electrical distribution system for
future flexibility
Classification: only to be shown if not public
Delivering sustainable assets today and for the future
29
Responsible Investing (‘RI’)
• Increased occupier demand
• Lower voids• Lower holding costs• Lower service charges
RESPONSIBLEINVESTMENT
Less risk of lease break• Quality of life / wellbeing• Improved company image
– environment/social issues
• Lower operational costs
• Reduced capital expenditure
• Less regulatory risk• Higher residual value –
less depreciation / obsolescence
• Transactionable • Enhanced lettability• Removal of ‘brown
discounting’
More liquid
>
Lower yields / higher prices
>
Increased productivity>
Higher rents>
Our approach is focussed on managing ESG risks and opportunities, about engaging and collaborating with our stakeholders, about understanding value drivers and ensuring that asset worth is preserved and enhanced
Classification: only to be shown if not public
Incorporating ESG through fund activities
30
• ESG in Investment Committee approvals• Annual fund-level ESG Reports• Stakeholder engagement, investor briefs• Public Disclosure, TCFD statements• GRESB participation, CDP submission
ENVIRONMENTAL
Safety, security, wellbeing and prosperity
GOVERNANCETransparency, engagement and disclosure
Energy, water, wasteand responsible consumption
SOCIAL• Living Wage Accreditation• Occupier satisfaction surveys• Safety and security protocols• Community engagement strategy• Sustainable supply chain strategy
• ISO14001 environmental management system• Reduction targets and strategies for key impacts• Renewable energy mix• Climate resilience modelling• Net zero carbon pathway
LEADERSHIP Measures through which we demonstrate effective management of ESG matters
INVESTMENT PROCESS Procedures through which we integrate ESG into the investment process
PORTFOLIO Attendance to material ESG performance and risk across the assets
TRANSPARENCY Approach to investor reporting and public disclosure on relevant ESG factors
>
>
>
>
Responsible Investing (‘RI’)
Classification: only to be shown if not public
Incorporating ESG through the property lifecycle
31
Responsible Investing (‘RI’)
7 DisposeRefurbishOperateConstructDesignAcquire
Build beyond current standards
Regular efficiency analysis
Due-diligence checklists
Green Certifications
Investment Committee sign-
off
Refurbishment Brief
Readiness-for-sale
ESG OBJECTIVES• Acquire properties thoughtfully• Design and construct buildings responsibly• Manage and operate assets responsibly• Create value within communities
Development Brief
Green lease clauses
SUSTAINABILITY FEATURED WITHIN OPERATIONAL CHECKS & BALANCES
PHASE
Supply chain standards
Data Management Platform & Reporting
Classification: only to be shown if not publicBMO Commercial Property Trust
Estuary Business Park, Liverpool
UK Property Market –Looking forward
The Economic Outlook
Source: ONS, Consensus Economics May 2020
Recession appears inevitable in 2020. Recovery projected in 2021 but there are doubts about the speed and trajectoryof the upturn. The downturn is expected to be deeper than in the global financial crisis (GFC). Despite low correlationwith other asset classes, Real Estate returns are correlated with GDP, particularly the Office market.
Source: Consensus Economics May 2020
Forecasts are provided for illustrative purposes only; are not a guarantee of future performance; should not be relied upon for any investment decisions; and are subject to change without notice.
-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0
2020 2021
Consensus Real GDP Forecast - per cent
UK France Germany W Europe US-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
UK Real GDP - Historic and Forecast per cent
33
Income – under threat this time?
With greater impact being felt in the ‘real economy’, forecasts are for a more severe loss of income in this downturnand a less pronounced recovery at the all-property level. Income stream forecast are negative until 2025 at the all-property level.
Source: Property Market Analysis (PMA) March 2020
- 3.0- 2.0- 1.0 0.0 1.0 2.0 3.0 4.0 5.0
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Income Streams GFC actual and COVID-19 Forecasts Compared per cent
Income Growth Historic 2007-16
PMA Income Growth Historic + Forecasts 2018-2027
34*
Property market forecasts – path of returns
35
Future path of returns highly uncertain but capital values and rents will be under pressure. PMA demonstrates the recent downgrade to expectations triggered by the lockdown and forecasts of associated global recession. Important to distinguish short termism from embedded structural challenge.
Property Market Forecasts - IPF Forecasts by Sector
Source: IPF May 2020Forecasts are provided for illustrative purposes only; are not a guarantee of future performance; should not be relied upon for any investment decisions; and are subject to change without notice.
Polarisation likely to persist. We favour Industrial/distribution and Offices plus some Alternatives. Retail continues as the laggard though there remains scope for income led returns once values and rents rebase, though this could take some time. Retail warehousing may present an opportunity. Prospects for Leisure, Hospitality and Student look poor in the short term.
-1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0
Shopping centres
Standard retail
Retail warehouses
All property
West End offices
All offices
City offices
All industrial
IPF Consensus Forecast Total Returns by Segment Five Years to end 2024 per cent per annum
36
• The market is slowing, and like all markets remains extremely uncertain at the present time. Cashflow is king. Counterparty risk to the fore.
• The shape of the recovery will depend upon the timing of a return to the ‘new normal’ which in itself will continue to deliver a ‘partial economy’ in the near term with operational challenges to many occupiers. Additional uncertainties such as Brexit, US, China and the structural challenges to the retail market should not be forgotten.
• There has been no exuberance in values since 2016 at the All Property level with Brexit having dampened the cycle. New construction/supply limited, outside of the logistics market.
• Behavioural challenges evident in the Office, Leisure and hospitality markets. Digitalisation of the economy - accelerating structural change. Opportunities will present themselves.
• Industrial is the star performer but caution on over exuberance.
• Sector and stock selection of increasing importance. No forced selling evidenced in the market to date.
UK Property Summary
Cassini House, London SW1
37
• Preserve cash and postpone non-essential capital expenditure. The Company’s cash position is sound but uncertainties over Q2 and Q3 income requires a prudent and defensive approach to cash preservation.
• Reinstate a dividend. Once the picture relating to Q3 rent collection is clearer the Company can consider the timing of a possible reinstatement of a dividend.
• Negotiations are well advanced to extend the £100m Barclays facility.
• Rent Collection. Focus on income and continue close engagement with our tenants. Successfully conclude outstanding rent concessions and repayment agreements for Q2 and Q3 with businesses adversely affected by the Covid-19 pandemic.
• Safe management. Continue the sound planning and implementation of the safe re-opening and operation of our assets in line with government best practice guidelines.
• Continue to drive business plans and asset management initiatives where relevant, focusing on the long term performance of UK commercial real estate.
• Continue to manage and invest in our core real estate assets and locations with strong underlying residual values.
• Beyond the current challenges look to deliver income growth and capitalise on opportunities brought about by the rapid changes enforced by the pandemic.
• There will be a further market update in July.
BCPT Near Term Strategy
38
Disclaimer
For professional investors only
This financial promotion is issued for marketing and information purposes only by BMO Global Asset Management in the UK.
BMO Commercial Property Trust Limited is an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.English language copies of the key information document (KID) can be obtained from BMO Global Asset Management, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 0044 (0) 20 7011 4444, email: [email protected] or electronically at www.bmogam.com. Please read before taking any investment decision.
The information provided in the marketing material does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds.
The funds or securities referred to herein are not sponsored, endorsed, issued, sold or promoted by MSCI, and MSCI bears no liability with respect to any funds or securities or any index on which such funds or securities are based. The prospectus contains a more detailed description of the limited relationship MSCI has with BMO Asset Management Limited and any related funds.
©2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by BMO Global Asset Management (Swiss) GmbH, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA). Telephone calls may be recorded.
© 2020 BMO Real Estate Partners LLP. Registered in England and Wales with number OC338377. Registered Office: 7 Seymour Street, London W1H 7JW. BMO REP Asset Management plc is a subsidiary of BMO Real Estate Partners LLP and are members of the BMO Financial Group, which is itself wholly-owned by the Bank of Montreal.
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Contact us
©2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by BMO Global Asset Management (Swiss) GmbH, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).
Extensive worldwide investment capabilities
• Total focus on clients
• Comprehensive range of products and solutions
• Defined expertise – including a suite of specialist investment boutiques
BMO Global Asset Management (EMEA) – Head OfficeExchange House Primrose Street London EC2A 2NYTel: +44 (0) 20 7628 8000
bmogam.com
BMO Global Asset Management – Edinburgh6th Floor, Quartermile4, 7a Nightingale Way, Edinburgh EH3 9EGTel: +46 (0) 207 628 8000
CM021629 UK 06/2020
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