15 April 2024
For Immediate Release
Balanced Commercial Property Trust Limited
(“BCPT” or the “Company”)
Strategic Review and Commencement of Formal Sale Process and Offer Period
The Board announces that it is undertaking a strategic review to consider the future of the Company and will further explore all of the various strategic options available to enhance value for shareholders. This includes a sale but the Company is not in discussions with any potential offeror at the time of this announcement.
Background
Since its launch, BCPT has pursued its investment objective of providing shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
BCPT’s portfolio has outperformed its benchmark index, the MSCI UK Quarterly Property index, on a total return basis over the one and three year periods and since the portfolio’s inception to 31 December 2023. The Company has a progressive dividend policy and raised its monthly dividend by 10 per cent. in October 2023 to its current level, 0.44 pence per share. On an annual basis, this represented a dividend yield of 6.7 per cent. as at 12 April 2024. The dividends paid by the Company during the financial year ended 31 December 2023 were fully covered. The share price discount to net asset value has narrowed from 42 per cent. to 28 per cent. over the six months to 12 April 2024.
The Company’s investment manager (the “Manager“), with the support of the Company’s independent board of directors (the “Board“), has been rebalancing the Company’s portfolio through its successful and ongoing strategic disposal programme. This has reduced the portfolio’s exposure to the underperforming office sector and has resulted in the Company’s industrial portfolio, which has significant rental reversion, becoming the Company’s largest sector weighting. The Company will soon publish its annual report and audited financial statements for the year ended 31 December 2023 which will provide further details of the Manager’s asset management activity and the Company’s ESG initiatives.
As announced in September 2023, following a review of the Company’s financing options the Company entered into a new, initially two-year debt facility comprising a £260 million term loan, which can only be drawn to refinance the Company’s existing £260 million term loan which is due to mature in December 2024 (the “L&G Loan“), and a £60 million revolving credit facility (together, the “New Debt Facility“). The New Debt Facility enables the Company to retain the competitively priced L&G Loan up to its maturity date, whilst providing the Company with flexibility and optionality.
The Board believes that BCPT offers an attractive investment proposition: a diversified portfolio of high-quality assets, with an income-focussed, total return strategy supported by active and opportunistic management initiatives. The Company also offers the scale that is lacking in its smaller peers. However, the Board also recognises that the Company currently faces significant challenges with a difficult near-term economic and property market backdrop in a higher interest rate environment and the current dislocation in capital markets. Despite the Manager delivering steady portfolio performance over recent years, and the share price discount having narrowed, the Company’s shares continue to trade at a material discount to their net asset value, which the Board does not believe reflects the current value of the underlying property assets, nor the longer-term prospects of the portfolio.
Strategic Review
The Company’s articles of incorporation require that the Company hold a continuation vote in 2024 (the “Continuation Vote“). The Board has been carefully considering for some time, with its advisers, its strategic options to enhance value for its shareholders. As a result of these deliberations, the Board has determined that it would be in the best interests of shareholders as a whole that it formalise these deliberations into a strategic review process (the “Strategic Review“), which will take into account the views of all shareholders. The outcome of the Strategic Review is expected to be announced in Q3 2024, and thereafter the Continuation Vote would also be held.
As part of the Strategic Review, the Board will consider all options including, but not limited to, continuing the Company with further actions to narrow the discount; selling the Company’s portfolio or subsidiaries (or portion thereof); returning capital to shareholders; changing the Company’s investment strategy and/or management arrangements; commencing a managed wind down; selling the entire issued share capital of the Company (which would be conducted under the framework of a “formal sale process” in accordance with the City Code on Takeovers and Mergers (the “Code“)) or undertaking some other form of consolidation, combination, merger or comparable corporate action.
Further details relating to the formal sale process are set out in the section titled “Formal Sale Process and Code considerations” below.