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Fund Profile

BMO Commercial Property 06 November 2019

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Balanced Commercial Property . The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

BMO Commercial Property Trust (BCPT) owns a high conviction portfolio of actively managed, core commercial property assets. The dividend has been maintained at 6p per annum since its launch in 2005, which amounts to a yield of 5.1% on the current share price. Dividends are paid monthly.

Manager Richard Kirby, who is a director of property funds at BMO Real Estate Partners, has been at the helm of the portfolio ever since it launched, and has maintained a concentrated portfolio of assets spread across the traditional property sectors but focused on central London, as well as the regions with the greatest growth potential in their local economies.

The portfolio’s biggest exposure (at approximately 20% of the portfolio) is St Christopher’s Place in London’s West End – a unique mix of retail and restaurant space just off Oxford Street. This contributes to an overall exposure of 59% of the portfolio invested in London and the South East. Richard believes this geographical concentration should translate into resilience in an economic downturn. The highest sector exposure is to offices and then to retail. We provide more details on the spread of the assets in the Portfolio section.

Richard believes the outlook for returns in the commercial property market is moderate in the near future, and has been focusing on asset management initiatives to generate returns from existing holdings rather than making new purchases. The trust has sold non-core assets over the past year and built up cash levels, reflecting the manager’s cautious stance and belief that we are in the latter stages of the economic and property cycle.

Over the summer of 2019 the discount widened significantly, from 11% at the start of the year to over 20%, although it has now come back down to 12%. As such, it remains significantly wider than the average of the AIC Property – UK Commercial sector (for more details, see the Discount section).

The trust has made significant moves to integrate ESG within its investment process in recent years, with BMO Real Estate Partners implementing a responsible property investment (RPI) strategy in 2017. We give full details in the ESG section.

Kepler View

BCPT offers core exposure to the UK commercial property market, with a portfolio tilted towards the more economically successful regions of the UK and with a balanced portfolio across all the core sectors. As such, it could be expected to be more defensive in its behaviour in an economic downturn, such as the manager believes we may be facing. The current discount incorporates a ‘Brexit premium’ which we believe may prove to be an interesting long-term entry point for discount players. Recent political sentiment has led to concerns about a hard Brexit receding, which for BCPT has meant that the discount has closed quite significantly from its widest point.

bull bear
Exposure to economically strong regions could provide defensive qualities Retail exposure could cause further write-downs
Good development potential in the trust's largest holdings Substantial structural gearing could be a headwind in a falling market
The trust's size provides a larger opportunity set and greater liquidity Concentration magnifies the risks to the portfolio from individual properties
Continue to Portfolio

Fund History

26 Feb 2024 Strong rental growth underlines the attractions of the right commercial properties
Even as property values fell again in Q4 2023, rental growth in 2023 was positive across all the main sectors of commercial property…
07 Feb 2024 Range anxiety
We look at what context we can gain from ten years of discount analysis…
05 Dec 2023 Don’t Panic!
Our analysts look for value against a backdrop of bombed out investment trust discounts…
29 Nov 2023 We need to talk about discounts
Discounts are the problem and the solution…
22 Nov 2023 Built to last
UK commercial property trusts have weathered a fierce storm, but our analysts think their fortunes may already have passed a nadir..
08 Nov 2023 Once more into the breach?
With yawning discounts across the board, some sectors have been hit harder than others - our analysts think there could be value there for those with the sangfroid to fight for it...
14 Nov 2023 Balanced Commercial Property and UK Commercial Property REIT
Dan Walsgrove and Will Fulton
Rewatch this webinar which is part of our November online event 'Discounted opportunities in a tough market'...
Watch Recording
14 Jun 2023 Let's go round again?
Discounts have ballooned across the investment trust world, but our analysis shows we've been here before...
12 Jun 2023 Fund Analysis
BCPT: active management, strategic assets, and monthly dividends…
31 May 2023 Dazed and confused
Property discounts remain stubbornly wide. Why is that and what would make them start to narrow?
27 Sep 2022 Fund Analysis
BCPT’s discount has reached extreme levels which look attractive on a long-term view...
08 Jun 2022 Safe as warehouses
We look into the attractions of the often-overlooked commercial property sector…
02 Mar 2022 Spread 'em!
We explore how much dispersion in returns of stocks drive the differing fortunes of trusts…
23 Feb 2022 Fund Analysis
BCPT has oceans of cash to invest and looks poised for a strong recovery…
01 Dec 2021 How to protect your portfolio from inflation
We highlight trusts which could appeal in an environment where 'transient' inflation is here to stay...
26 Apr 2021 Fund Analysis
BCPT now offers a dividend yield of 5.5%, having restored 70% of its pre-crisis payment…
17 Mar 2021 After the storm
We look at the outlook for dividends in the UK commercial property sector and consider how the portfolio of the future will look after COVID…
14 Jan 2021 Get 'em while they're hot!
We review the widest discounts in the investment trust universe and look at our selection of attractively cheap trusts…
01 Sep 2020 Fund Analysis
BCPT has reintroduced a dividend at 50% of the previous rate and offers a 4.6% annualised yield, paid monthly...
06 Nov 2019 Fund Analysis
The quality tilt of the portfolio could provide defensive qualities…
View all

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