Interactive Investor

Balanced Commercial Property Trust to consider sale as part of review

As part of a strategic review, the real estate investment trust (REIT) said it will consider all options including a sale or winding down of the portfolio.

16th April 2024 12:00

by Kyle Caldwell from interactive investor

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The board of Balanced Commercial Property Trust Ord (LSE:BCPT) is considering its future, which could result in a sale as it looks to “enhance value for shareholders”.

As part of a strategic review, the real estate investment trust (REIT) said it will consider all options including winding down the portfolio, changing investment strategy or fund firm, and whether to take further actions to tackle its wide discount (currently -27.9%).

The trust, managed by one of the most experienced property teams, led by Richard Kirby, is a one of interactive investor’s Super 60 list of investment ideas. Following the announcement of the review, the ii analyst team have put it under review. 

While the trust says a sale is part of all options, the REIT is not currently in discussions with any potential suitors.

The strategic review, expected to be completed in the third quarter of 2024, comes ahead of a continuation vote for the investment trust later this year.

In common with other property funds, interest rate rises since the end of 2021 have hurt the asset class. The rate rises have caused bond yields to rise, which has given income-seeking investors more choice. With lower-risk assets such as cash and short-dated UK government bonds offering yields of around 4.5% to 5%, income investors are less incentivised to take on greater levels of risk.

In addition, commercial property is a bellwether for the wider economy, meaning it is an economically sensitive asset class. With economic growth sluggish, many investors are cautious about investing in bricks and mortar.

Over one year, BCPT’s share price is down -4%, but over three years performance is better, with a return of 19.2%. Over five years, however, it is down -13.4%.

The trust, which pays income monthly, provides exposure to prime UK commercial property with a bias towards central London and the South East. Its dividend yield is 6.4%.

However, the discount to its net asset value (NAV) remains wide. The board of BCPT does not believe the discount reflects the current value of the underlying property assets.

Paul Marcuse, chair of Balanced Commercial Property Trust, said: “Following a very challenging period for REITs during the Covid-19 pandemic and subsequent economic and geopolitical events, BCPT has been repositioning the portfolio away from less attractive sectors and realising cash to facilitate strategic options for the company. We believe our monthly dividend offers an attractive level of regular income to shareholders.

“We recognise, however, despite recent improvements in the companys share rating, that the share price remains at a material discount to the companys net asset value. In line with our commitment to do the right thing for our shareholders as a whole, we have commenced this strategic review to determine the best way to enhance value for shareholders, after which the independent board will determine the best way forward.

“We welcome the views of all our shareholders during this consultation period and will carefully take those opinions into consideration before announcing our next steps. The company will continue to explore all options available to enhance value for its shareholders.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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