Balanced Commercial Property Trust: Q2 trading update

interactive investor comments on figures from the Super 60 trust.

Balanced Commercial Property Trust's (LSE:BCPT)’s net asset value (NAV) is currently at 148.6 pence – representing an increase of 3.2% over the quarter. In addition, the share price total return was -2.5% over the quarter.

NAV total return was 4% over the quarter, and the NAV total return year-to-date stands at 11.7%. This was driven by valuation movements, and the valuation of the portfolio saw an uplift of 2.3% over Q2 (slower than Q1) as there was evidence of capital markets slowing in the second quarter of the year.

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Current premium/discount

The trust, a member of interactive investor’s Super 60, was under review from July 2020 to November 2020 due to uncertainty surrounding income payments and the wide discount to NAV. However, the discount has notably reduced, to -25% as at the time of the trading update. 

At its peak, the discount surpassed -60% for a brief time in early 2020, and generally traded below -40% until 2021. However, the discount has now recovered, and its 5-year monthly average discount stands at roughly -17% (according to Morningstar, as at June 2022). 

At its peak, the discount surpassed -60% for a brief time in early 2020, and often traded below -40% until 2021.

Industrials, logistics, and retail warehouse sectors drive growth 

Looking more in-depth at the trust’s portfolio - industrials and logistics were the highest performers, enjoying a 5% increase in capital values over Q2. Notably, however, this growth was still slower than Q1, which was 12.1%. The second-best performing sector was retail warehouses at 4.5% capital increase – again, slower than the relevant increase in Q1. 

Year-to-date, one-year, and three-year performance have all surpassed a benchmark of the FTSE EPRA Nareit, with significantly less drawdown as the Covid-19 pandemic hit.

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Commenting on BCPT’s trading update, Dzmitry Lipski, Head of Funds Research, interactive investor, explains: “Balanced Commercial Property Trust has performed well over the short term, as a top-quartile performer versus its peer group AIC sector (UK Commercial Property), over Year-to-Date (as at 30/06/2022).”

“This performance shows the trust positioned itself well for the macro downturn in Q2 2022, where growth in property valuations slowed greatly, as the trust increased its allocation to industrials to make up roughly a third of the portfolio. This position played out well in Q1 especially, but also in Q2.”

“Looking ahead, the higher interest environment may create increased opportunities for the trust. The trust provides exposure to prime UK commercial property and is managed by one of the most experienced teams, led by Richard Kirby. The trust has produced strong returns over the year and its yield is relatively attractive for income investors. The low correlation between property and more conventional assets such as equities and bonds mean that the inclusion of a property fund within a portfolio can bring significant diversification benefits."