Reopening helps lift BMO Commercial Property Trust’s fortunes

The highly-rated trust says it will continue to use proceeds from the sale of properties in its portfolio to buy back shares.

BMO Commercial Property Trust (LSE:BCPT) generated a share price total return of 16.3% in the first six months of 2021, according to its latest half-year results.

In comparison, the MSCI UK Quarterly Property Index produced a return of 5.3% and the FTSE All-Share Index 11.1% over the same period.          

From the start of the year to the end of June, the trust, a member of interactive investor’s Super 60 list of rated funds, also saw a net asset value (NAV) total return of 8% over the period. This means that the trust has seen its discount narrow.

However, as the results also show, the trust was still sitting on a relatively large discount of 27.4% at the end of the first six months of the year.

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The trust says it will continue to use proceeds from the sale of properties in its portfolio to buy back shares to narrow the discount if it persists. The trust’s board is currently in the process of buying back more shares following the sale of its East Kilbride property. So far, 6 million shares have been bought. The programme is ongoing.

Rent collections have improved as the UK’s economy has continued to open up. The results note that it has been a challenging time for many of the tenants of the properties the trust owns. The trust also says: “The level of collection has gradually improved now that government restrictions have been removed and for the second quarter of 2021 the level of collection currently stands at 91.6%.”

The trust’s manager Richard Kirby commented: “It has been a strong six months for the portfolio following a difficult period, particularly with regards to our retail properties. There has been positive momentum which should serve us well in the future, as our asset management activity at the retail parks is breathing new life into these investments, whilst St. Christopher’s Place is starting to show signs of recovery. The outlook for the next six months is more positive, but there are challenges to be carefully navigated.”

Dzmitry Lipski, head of fund research at interactive investor noted: “With rent collections continuing to improve, the portfolio is well positioned to benefit from the full reopening of offices, retail and restaurants.”

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“Despite challenges, the long-term fundamental case for property as an asset class remains intact. Yields and valuations still look attractive relative to other asset classes, and property remains a solid option to generate income and diversify an investor’s portfolios.”

“The recent suspensions of open-ended property funds shows the closed-ended fund structure seems most appropriate to access illiquid assets such as property.”