f&c commercial property trust ltd (fcpt)...past performance should not be seen as an indication...

30 June 2020

BMO CommercialProperty Trust Ltd

(BCPT)

CM021629

Alhambra House, Glasgow

Richard Kirby

Richard KirbyDirector, Property Funds

Matthew HowardDirector, Property Funds

Scott MacraeInvestment Trusts

Peter TaylorInvestment Trusts

Investment risks

2

The value of directly held property reflects the opinion of valuers and is reviewed periodically. These assets can also be illiquid and significant or persistent redemptions may require the manager to sell properties at a lower market value adversely affecting the value of your investment.

The value of investments and income derived from them can go down as well as up as a result of market movements and investors may get back less than the original amount invested.

Estimates and forecasts are provided for illustrative purposes only; they are not a guarantee of future performance and should not be relied upon for any investment decisions. Estimates are based on assumptions and subject to change without notice.

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Annual Report - headline numbers

Property Market Overview - post March 2020

BMO Commercial Property Trust Performance in 2020

UK Property Market - looking forward

Agenda

4

BMO Commercial Property TrustAnnual Report Key Financial Data

Source: BCPT Annual Report & Consolidated Accounts 2019

Past performance should not be seen as an indication of future performance.

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Source: BCPT Annual Report & Consolidated Accounts 2019Past performance should not be seen as an indication of future performance.

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Source: BCPT Annual Report & Consolidated Accounts 2019Past performance should not be seen as an indication of future performance.

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Property Market Overview – post March 2020

Sources: Property Data June 2020, CBRE Prime Rents & Yields Q1 2020, Avison Young Nine Report Q1 2020, M&G Press Release January 2020, Savills, IPE March 2020, EG 18th March 2020,

Knight Frank April, 2020 Citywire, June 2020, IPF Consensus Forecasts May 2020, FT JuBigne 2020

Asked to predict when capital values are likely to return to pre-COVID-19 levels, none predict recovery within the next two years. “Ex-London we do not expect Retail to ever get back to its previous highs.”

UK transaction volume was an above average £15bn in

Q1 2020

Travelodge set to launch CVA in effort to end rent stand-off

CBRE reported that UK prime industrial

rents rose by 1.9% in Q1

The UK [regional] office vacancy rate is at its lowest level in 15 years and well below the long-term average.

Can’t pay, won’t pay –rent collection rates (21 days) 57% total - 39% in

retail, 31% in leisure

UK property funds suspend as valuations hit with ‘material uncertainty’

UK REITs lose £20bn of market value’ (mid-March)

June quarterly rent likely to be even more of a pinch point, cash positions will worsen

Despite positive sentiment towards much of the market outside of retail around the turn of the year, the arrival of Covid 19 has delivered unprecedented challenges for UK Real Estate.

Headlines

Q1 showed some promise, Covid has delivered a different reality

Punishing time for shares in student property owners …

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https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=newssearch&cd=&cad=rja&uact=8&ved=0ahUKEwiO3aKx1vzpAhUeQkEAHeLYBlsQqQIILigAMAE&url=https%3A%2F%2Fwww.ft.com%2Fcontent%2F945e703a-a0ca-4d28-aabf-95d2445b4fda&usg=AOvVaw2FlUfbLw3NDlMbCCFFrhJ-

Performance deteriorated sharply in March, driven by falling capital values at the All Property level

Quarterly total returns are now negative. Q1 2020 was the sixth consecutive quarter of negative capital growth with yields expanding in the main sectors. Rents were trending slightly negative hit by retail weakness. Income underpinsperformance. March end timing is key. Monthly data post period points to further capital falls ….

Sources: MSCI UK Quarterly Property Digest (Standing Investments) March 2020, MSCI UK Monthly Property Digest March 2020The MSCI performance data as quoted in this document is calculated net of operating costs


2.2 2.3 2.52.9

1.9 1.71.4

0.8 0.4 0.5 0.3 0.0 - 1.4

- 3.0

- 2.0

- 1.0

0.0

1.0

2.0

3.0

4.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

Three- Month All-Property Total Returns per cent

Income Return Capital Growth Total Return

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Dislocation. Industrials lead the way. Retail under continued pressure

South East Industrial & Logistics assets have been the strongest performers over the year delivering 7.0%. City and Provincial Offices also performed well, both delivering 5.0%. Shopping Centres are the laggards. Growing concern for Alternatives, Leisure and Hospitality …..

Past performance should not be seen as an indication of future performance.Source: MSCI UK Monthly Property Digest March 2020

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

StandardRetail - South

East

StandardRetail - Rest of

UK

ShoppingCentre

RetailWarehouse

Office - City Office - WestEnd & Mid

Town

Office - Restof South East

Office - Rest ofUK

Industrial -South East

Industrial -Rest of UK

Alternatives All-Property

12 month total return by segment - March 2020 per cent

Income Return Market Value Rental Growth Equivalent Yield Impact Total Return

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Monthly data post the March Quarter points to a pickup in the pace of capital falls

The impact of the Covid 19 lockdown and the lack of transaction evidence around the quarter date demanded the imposition of Material Uncertainty clauses in valuations across all sectors. Some deals have now completed at discounted levels, and with sentiment uncertain, we have seen values start to move.

Sources: MSCI UK Monthly Property Digest May 2020The MSCI performance data as quoted in this document is calculated net of operating costs


• Not all sectors have been impacted in the same manner.

• Retail remains severely challenged with rent collection under significant pressure.

• The expected deterioration in the leisure, F&B, student and hospitality sectors has started to feed through into the overall numbers. This is reflected in the aggregated ‘Alternatives’ performance, with the strongly negative performance of some of these groups shielded by more favourable Alternative subsectors.

• Long Income, Industrials & Logistics, Healthcare and Residential Build To Rent have remained relatively resilient with continued, albeit reduced, deal flow.

• Frequency and a comparable method of valuation has a smoothing effect on returns.

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COVID-19 Affecting both the occupier and investment markets

Sources: Remit Consulting April 2020, Property Data June 2020 £m Left hand scale, Number right hand scale, as at 16th June 2020.

Retail, leisure and hospitality have been the most severely affected in terms of both rent transaction volumes and collection, with industrials and offices relatively resilient. Rent collection could come under more pressure in the June quarter. Valuers will be tasked with valuing assets before collection statistic become fully evident.

0102030405060708090

100

Retail Offices Industrial Residential Mixed All 2020 All 2019

Rent Collection Rates - March Quarter - per cent

Due Date +7 days

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UK property continues to offer an attractive premium over fixed income

13

Source: MSCI UK Property Index, Datastream as at May 2020. FTSE International Limited (“FTSE”) © FTSE 2020.

The yield margin above gilts is now at historic highs though the market looks poorer value against UK Equities. Lower for longer forecasts imply continued support for pricing but risks to revenue from Coronavirus disruption should not be under estimated. Almost uniquely, at present, implied yield is not the same as income delivered. Dividends from both UK equities and Listed real estate are under pressure.


Income return January 2000 to April 2020

Classification: only to be shown if not publicBMO Commercial Property Trust

One Cathedral Square, BristolComprehensively refurbished prime regional city centre

office let to University of Bristol and Dyson Technologies

A diversified balanced UK portfolio investing in prime property in core locations

BMO Commercial Property TrustKey information

Portfolio statistics• Launched: 18/3/2005• NAV (per share) at launch: 97.0p• IFRS NAV” per share at 31 March 2020: 124.3p (-5.0%)• Trading level: 74.5p (31/03/20)• Discount: 40.1 per cent (31/03/20)• Portfolio Valuation: £1,294.8m (31/03/20) • Target Dividend: Currently suspended• Current Dividend yield: 0%

Objective

To provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in adiversified UK Commercial portfolio

Manager information• Fund Manager: Richard Kirby, MRICS• Deputy Fund Manager: Matthew Howard, MRICS• Independent Non-Executive Board

Portfolio characteristics• Balanced UK portfolio • 36 assets (core & core-plus) including Offices, Retail, Industrial and

Alternative sectors • Institutional sustainable locations• Average lease length: 6.3 years (assuming all breaks exercised)• Portfolio void rate: 3.2% of ERV

One Cathedral Square, Bristol

The Hive, Estuary Business Park, Liverpool

Newbury Retail Park, Berkshire

Some of our buildings

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Performance ReviewAnnualised Total Return

* Benchmark: Estimated IPD Quarterly UniverseReturns are shown in GBP, gross of management fees and corporate expenses. Returns over one year are annualised. Inception date: June 2005

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Past performance should not be seen as an indication of future performance.The performance figures are shown gross of fees. The effect of fees or costs will be to lower the figures shown.

Source: BMO Real Estate Partners as at 31 March 2020

Gross performance

-2.91

2.37

5.13

8.55 8.86

0.45

4.635.91

8.52 8.01

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

1 Year 3 Years 5 Years 7 Years 10 Years

%

Fund Benchmark*

Year 12m - March 2016 12m - March 2017 12m - March 2018 12m - March 2019 12m - March 2020 (%) (%) (%) (%) (%)

BCPT Total return 12.2 6.7 8.4 2.0 -2.9

Benchmark 11.3 4.6 10.1 4.6 -0.5

Classification: only to be shown if not public

Borrowings and Corporate

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BMO Commercial Property Trust

• Gearing− Net Gearing 22.6% (31 March 2020)

• Long-term borrowings− Debt drawn down from Legal & General: £260m and a 10-year

term maturing 31 December 2024− Interest rate fixed at an all-in rate of 3.32%− A long-term loan on attractive terms

• Barclays Bank PLC financing arrangements− Current expiry date of £50m term loan facility and additional

revolving credit facility £50m is 21 June 2021.− Negotiations with regard to an extension of this loan and

facility are well advanced.

• Total borrowings − The current drawn down borrowings amount to £310 million− The weighted average interest rate on the Group's total

current borrowings is 3.3%

• Management fees− Revised arrangement from 1 January 2017. Performance fee

removed. Base fee 0.55% pa of gross assets (reduced to 0.525% on assets between £1.5 - £2.0 billion and 0.5% in excess of £2 billion)

• Board composition− John Wythe appointed 11 September 2018. Long career with

Prudential Property Investment, now M&G Real Estate. He is currently Chairman of the Trustees of the Portman Estate

− Linda Wilding appointed 3 June 2019 – ex MD private equity division of Mercury Asset Management

− Chris Russell, David Preston, Peter Cornell all retired from the Board 30 May 2019

− Martin Moore appointed Chairman 3 June 2019− Company now complies with the Hampton Alexander

recommendation

• UK REIT status− Company converted to the UK REIT regime 3 June 2019

Prime Four – Unit 3Aberdeen

11-12 Lochside PlaceEdinburgh Park

BMO Commercial Property TrustDividend Payments

• March 2020 monthly dividend payment of 0.5 pence per ordinary share was paid to shareholders on 31 March 2020.

• On the 16 April 2020 the Board announced that due to the significant uncertainty and the expected impact of COVID-19 on future rental receipts, particularly in relation to the Group's retail and leisure tenants, the temporary suspension of its future monthly dividend payments in order to strengthen cash reserves and protect the long-term value of the Group.

• The Board currently intends to re-introduce distributions when conditions improve and believe that the portfoliois well positioned to begin its recovery once the temporary restrictions surrounding COVID-19 are lifted.

• It is the intention of the Board to provide further Group updates as the situation evolves.

• Key to informing any decision is the actual rent collection of the Group.

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BMO Commercial Property TrustCorporate Borrowings and Covenants

• The Group has approximately £20 million of available cash and an undrawn revolving credit facility of £50 million.

• The Group's long-term debt with L&G and loan facility with Barclays do not need to be refinanced until December 2024 and June 2021 respectively. As at 31 March 2020, the Group’s loan to value (‘LTV’) was 22.6 per cent.

• There have been no covenant breaches.

• The Group continues to comfortably meet its covenants on the £260 million long-term loan with L&G at the current time.

• There is also significant headroom on the loan to value covenant of the £50 million loan facility with Barclays, which relates to the St Christopher’s Place assets. The interest cover test is expected to become more challenging given the tenant base has been closed during lockdown. This particular covenant test has been discussed with Barclays who are supportive.

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- Ozalid Works, Colchester (I)- Cowdray Centre, Colchester (O)- Stockley Park, Uxbridge (O)-16 Conduit Street, London, W1 (O)- The Broadway, Wimbledon (A/L)- 7 Birchin Lane, London EC3 (O)- 2-4 King Street, London, SW1 (O)- St Christopher’s Place, London W1 (R/O/A/L)- Cassini House, London, SW1 (O)- 17a Curzon Street, London W1 (O)

- Newbury Retail Park (R)- Thames Valley Park 1, Reading (O)- Winchester University, Burma Road (A/L)- Strategic Park, Southampton (I)- Watchmoor Park, Camberley (O)- Affinity Point, Camberley (I)- The Leonardo Building, Crawley, (O)

- Revolution Park, Chorley, Lancashire (I) - Dane Street, Rochdale (R)- Estuary Business Park, Liverpool (I)- G Park, Liverpool (A/L)- 82 King Street, Manchester (O)

- 11-12 Lochside Place, Edinburgh Park (O)- Alhambra House, Glasgow (O)- Prime Four Business Park, Aberdeen (O)- B&Q, East Kilbride (R)

North West

South East

Scotland

Midlands

Our buildingsPortfolio key features

- Sears Retail Park, Solihull (R)- Oakenshaw Road, Solihull (R)- Plot 4 DIRFT, Daventry (I)- Hams Hall, National Dist. Centre, Birmingham (I)

South East

Source: BMO Global Asset Management, BMO Real Estate Partners as at 31 March 2020

Offices Industrial Alternatives/Lifestyle Retail

- One Cathedral Square (O)

South West

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Sector and regional breakdownPortfolio key features

The portfolio is well diversified by sector and geography, with a relatively high weighting to the South East


Segment split Geographical split

No exposure to shopping centres

St. Christopher’s Place and Wimbledon

Limited exposure to City of London

>

No exposure to Wales or North East

>

City1.6%

West End36.8%

South East21.4%

South West2.5%

Eastern2.0%

East Midlands2.0%

West Midlands8.8%

North West11.9%

Scotland13.1%

St Retail - South East

18.7%

St Retail - Rest of UK2.4%

Retail Warehouse

9.7%

Offices - City1.6%

Offices - West End

16.1%Offices - South East6.7%

Offices - Rest of UK

17.4%

Industrial -South East

4.2%

Industrial - Rest of UK13.3%

Other9.9%

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Specific risk36 properties externally valued £1,294.8m (31/03/2020)

Portfolio key features

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No.1 property by valueSt Christopher’s Place: 23%

No.1 tenant by rent paidArtemis Investment Management LLP: 4.2%

Top 10 tenant at ‘maximum’ riskMothercare UK Limited: 2.6%

Top 10 Tenants by rent paid Risk %Artemis Investment Management LLP Negligible 4.2%Apache North Sea Limited Low 4.0%GB Gas Holdings Limited Low 3.9%CNOOC Petroleum Europe Limited Low 3.9%Kimberly-Clark Limited Low 3.7%Virgin Atlantic Limited Low 3.7%JP Morgan Chase Bank Limited Unscored 3.0%Transocean Drilling U.K. Limited Low Medium 2.8%University of Winchester Negligible 2.8%Mothercare UK Limited* Maximum 2.6%Total 34.6%

Top 10 Properties by value Sector ValueLondon W1, St Christopher's Place Estate Retail >£250mLondon SW1, Cassini House, 57-59 St James' St Offices >£100mNewbury, Newbury Retail Park Retail Whse £50m-£75mLondon SW19, Wimbledon Broadway Retail £50m-£75mSolihull, Sears Retail Park, Marshall Lake Rd Retail Whse £25m-£50mCrawley, The Leonardo Building, Manor Royal Offices £25m-£50mWinchester, Student Accommodation, Burma Road Other £25m-£50mManchester, 82 King Street Offices £25m-£50mAberdeen, Unit 2 Prime Four Business Park Offices £25m-£50mAberdeen, Unit 1 Prime Four Business Park Offices £25m-£50m

*has a rental guarantee from a Mothercare company not in administration

Portfolio key featuresVoid Profile

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Vacant area: 3.2% by ERV


A 5,850 sq. ft. vacant unit currently under offer to a well known retailer.

We currently have 7,000 sq. ft. under offer to an F&B business on a 10 year term at a rent above ERV. This lease has progressed during lockdown.

Camberley

Newbury

Property Area (sq. ft.) ERV (£)

Camberley, Watchmoor Park 24,398 458,000

Newbury, Newbury Retail Park 15,300 400,000

Colchester, The Cowdray Centre, Cowdray Ave. 60,402 349,900

Liverpool, Units 2 & 4, Estuary Business Park 47,500 297,000

London W1, 17A Curzon Street 3,261 290,500

London W1, St Christopher's Place 3,173 280,300

Solihull, Oakenshaw Road 7,735 162,000

London SW1, Cassini House, 57-59 St James' St 7 CPS 35,000

Manchester, 82 King Street 1,416 7,175

London EC3, 7 Birchin Lane 1,105 3,720

Total 164,297 2,283,595

We have recently completed a lease to let Mitsui Fudosan who took the 6th floor at £106 per sq.ft., setting a new rental high for this prime St James asset. The property is now fully let.

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Asset ManagementRecent Activity

In early June 2020 we completed the landlord’s works and handed the unit over to Lidl tocommence their internal fit out. The new store is due to open later this summer. In February2020 Deichmann Shoes took occupation of part of the former Mothercare unit on a 10 yearlease.

Construction works for the new M&S general store commenced earlier this year. Throughcareful planning and observing government guidelines the contractors were able to makecontinued progress during the lockdown. We are now only 6 weeks behind program and aimto hand the store over to M&S in Q1 2021.

Cassini House, London SW1

Sears Retail Park, Solihull

Newbury Retail Park

The logistics property is let to Mothercare with a global company guarantee. The tenant hasrecently sub-let to Clipper logistics on a short-term basis to service an NHS contract during thepandemic.

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Asset ManagementRecent Activity

The newly built property remains in marketing but we have recently let the yard on a short termlicence at a peppercorn rent to Bidfood who are providing care packs to vulnerable peopleduring the pandemic in association with the Department for Environment, Food and RuralAffairs.

During 2019 we sold the first phase of a vacant plot of land to Persimmon Homes for c. £6.0m.The sale of the second phase will complete at the end of July for c. £5.5m.

DIRFT

Colchester, Ozalid Works

Hurricane 47, Speke

The Company has collected 78% of rent due over quarter 2, with a further 1% of monthly payment due imminently.

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Asset ManagementRent Collection

78.5%

0.8%

20.7%

BCPT Rent Collection - Overall

Rent Received

Outstanding MonthlyRent Payments

Rent Deferment/RentFree/OutstandingAgreement

The remaining 21% accounts for rent not paid in the quarter. The majority of this will be deferred rent to be paid at a later date with a smaller portion of temporary rent free concessions. Within the 21% there are a number of outstanding agreements relating to rent concessions which we expect to be agreed during Q3.

The Company has collected 78% of rent due over quarter 2, St Christopher’s Place has skewed the overall collection downwards with 31% of Q2 rents being received to date. Owing to the leisure/food & beverage nature of a large proportion of the tenants we have intentionally delayed agreements until these businesses re-open in order to then agree the appropriate level of concession. Therefore we expect much of Q2 outstanding rent to be received during Q3.

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Asset ManagementRent Collection by Sector

Source: BMO Real Estate Partners, June 2020

31.7%

68.3%

St. Christopher’s Place

Rent Received


73.9%

6.2%

20.0%

Retail Warehouse

Rent Received

Outstanding Monthly RentPayments


94.6%

5.4%

Offices

Rent Received


92.7%

7.3%Industrial

Rent Received



ESG considerations at BMO REP

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Responsible Investing (‘RI’)

Corporate Framework

https://www.bmogam.com/commercial-property-trust

• BCPT Board ultimately overseas ESG framework

• Reference and support from BMO GAM RI team

• BMO REP ESG Committee convenes on quarterly basis to review legislative drivers and industry sentiment to ensure relevance of policy and direction

• ESG culture integrated across all business sectors and included in personal objectives

• Property level ESG appraisals reviewed annually and incorporated into individual asset level business plans

• Describes the Company’s RPI strategy and priorities

• Presents key ESG performance data for the reporting year and future targets

• Provides an overview of key ESG risks facing the property portfolio

The Company’s latest ESG report published

Case Studies

London W1, 71-77 Wigmore StreetRefurbishment of mixed-use asset at SCP• Comprehensive energy strategy including real

time consumption display for occupiers• BREEAM rating of Very Good• Green roof to promote biodiversity

London SW1, Cassini HouseRefurbishment of prime West End offices• Extensive use of durable, low maintenance and

locally sourced materials • EPC improvement from E to high C• Enhanced cycling facilities through additional

racks, lockers, showers and repair station

Edinburgh, Nevis HouseShell and core head office refurbishment • EPC improvement from E to B+• BREEAM certification to Very Good standard• Renewable electricity from roof mounted solar PV • Plug & Play electrical distribution system for

future flexibility


Delivering sustainable assets today and for the future

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• Increased occupier demand

• Lower voids• Lower holding costs• Lower service charges

RESPONSIBLEINVESTMENT

Less risk of lease break• Quality of life / wellbeing• Improved company image

– environment/social issues

• Lower operational costs

• Reduced capital expenditure

• Less regulatory risk• Higher residual value –

less depreciation / obsolescence

• Transactionable • Enhanced lettability• Removal of ‘brown

discounting’

More liquid

>

Lower yields / higher prices

>

Increased productivity>

Higher rents>

Our approach is focussed on managing ESG risks and opportunities, about engaging and collaborating with our stakeholders, about understanding value drivers and ensuring that asset worth is preserved and enhanced


Incorporating ESG through fund activities

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• ESG in Investment Committee approvals• Annual fund-level ESG Reports• Stakeholder engagement, investor briefs• Public Disclosure, TCFD statements• GRESB participation, CDP submission

ENVIRONMENTAL

Safety, security, wellbeing and prosperity

GOVERNANCETransparency, engagement and disclosure

Energy, water, wasteand responsible consumption

SOCIAL• Living Wage Accreditation• Occupier satisfaction surveys• Safety and security protocols• Community engagement strategy• Sustainable supply chain strategy

• ISO14001 environmental management system• Reduction targets and strategies for key impacts• Renewable energy mix• Climate resilience modelling• Net zero carbon pathway

LEADERSHIP Measures through which we demonstrate effective management of ESG matters

INVESTMENT PROCESS Procedures through which we integrate ESG into the investment process

PORTFOLIO Attendance to material ESG performance and risk across the assets

TRANSPARENCY Approach to investor reporting and public disclosure on relevant ESG factors

>

>

>

>


https://thenounproject.com/term/plant/29976


Incorporating ESG through the property lifecycle

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7 DisposeRefurbishOperateConstructDesignAcquire

Build beyond current standards

Regular efficiency analysis

Due-diligence checklists

Green Certifications

Investment Committee sign-

off

Refurbishment Brief

Readiness-for-sale

ESG OBJECTIVES• Acquire properties thoughtfully• Design and construct buildings responsibly• Manage and operate assets responsibly• Create value within communities

Development Brief

Green lease clauses

SUSTAINABILITY FEATURED WITHIN OPERATIONAL CHECKS & BALANCES

PHASE

Supply chain standards

Data Management Platform & Reporting

Classification: only to be shown if not publicBMO Commercial Property Trust

Estuary Business Park, Liverpool

UK Property Market –Looking forward

The Economic Outlook

Source: ONS, Consensus Economics May 2020

Recession appears inevitable in 2020. Recovery projected in 2021 but there are doubts about the speed and trajectoryof the upturn. The downturn is expected to be deeper than in the global financial crisis (GFC). Despite low correlationwith other asset classes, Real Estate returns are correlated with GDP, particularly the Office market.

Source: Consensus Economics May 2020

Forecasts are provided for illustrative purposes only; are not a guarantee of future performance; should not be relied upon for any investment decisions; and are subject to change without notice.

-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0

2020 2021

Consensus Real GDP Forecast - per cent

UK France Germany W Europe US-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

UK Real GDP - Historic and Forecast per cent

33

Income – under threat this time?

With greater impact being felt in the ‘real economy’, forecasts are for a more severe loss of income in this downturnand a less pronounced recovery at the all-property level. Income stream forecast are negative until 2025 at the all-property level.

Source: Property Market Analysis (PMA) March 2020

- 3.0- 2.0- 1.0 0.0 1.0 2.0 3.0 4.0 5.0

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Income Streams GFC actual and COVID-19 Forecasts Compared per cent

Income Growth Historic 2007-16

PMA Income Growth Historic + Forecasts 2018-2027

34*

Property market forecasts – path of returns

35

Future path of returns highly uncertain but capital values and rents will be under pressure. PMA demonstrates the recent downgrade to expectations triggered by the lockdown and forecasts of associated global recession. Important to distinguish short termism from embedded structural challenge.

Property Market Forecasts - IPF Forecasts by Sector

Source: IPF May 2020Forecasts are provided for illustrative purposes only; are not a guarantee of future performance; should not be relied upon for any investment decisions; and are subject to change without notice.

Polarisation likely to persist. We favour Industrial/distribution and Offices plus some Alternatives. Retail continues as the laggard though there remains scope for income led returns once values and rents rebase, though this could take some time. Retail warehousing may present an opportunity. Prospects for Leisure, Hospitality and Student look poor in the short term.

-1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0

Shopping centres

Standard retail

Retail warehouses

All property

West End offices

All offices

City offices

All industrial

IPF Consensus Forecast Total Returns by Segment Five Years to end 2024 per cent per annum

36

• The market is slowing, and like all markets remains extremely uncertain at the present time. Cashflow is king. Counterparty risk to the fore.

• The shape of the recovery will depend upon the timing of a return to the ‘new normal’ which in itself will continue to deliver a ‘partial economy’ in the near term with operational challenges to many occupiers. Additional uncertainties such as Brexit, US, China and the structural challenges to the retail market should not be forgotten.

• There has been no exuberance in values since 2016 at the All Property level with Brexit having dampened the cycle. New construction/supply limited, outside of the logistics market.

• Behavioural challenges evident in the Office, Leisure and hospitality markets. Digitalisation of the economy - accelerating structural change. Opportunities will present themselves.

• Industrial is the star performer but caution on over exuberance.

• Sector and stock selection of increasing importance. No forced selling evidenced in the market to date.

UK Property Summary

Cassini House, London SW1

37

• Preserve cash and postpone non-essential capital expenditure. The Company’s cash position is sound but uncertainties over Q2 and Q3 income requires a prudent and defensive approach to cash preservation.

• Reinstate a dividend. Once the picture relating to Q3 rent collection is clearer the Company can consider the timing of a possible reinstatement of a dividend.

• Negotiations are well advanced to extend the £100m Barclays facility.

• Rent Collection. Focus on income and continue close engagement with our tenants. Successfully conclude outstanding rent concessions and repayment agreements for Q2 and Q3 with businesses adversely affected by the Covid-19 pandemic.

• Safe management. Continue the sound planning and implementation of the safe re-opening and operation of our assets in line with government best practice guidelines.

• Continue to drive business plans and asset management initiatives where relevant, focusing on the long term performance of UK commercial real estate.

• Continue to manage and invest in our core real estate assets and locations with strong underlying residual values.

• Beyond the current challenges look to deliver income growth and capitalise on opportunities brought about by the rapid changes enforced by the pandemic.

• There will be a further market update in July.

BCPT Near Term Strategy

38

Disclaimer

For professional investors only

This financial promotion is issued for marketing and information purposes only by BMO Global Asset Management in the UK.

BMO Commercial Property Trust Limited is an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.English language copies of the key information document (KID) can be obtained from BMO Global Asset Management, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 0044 (0) 20 7011 4444, email: [email protected] or electronically at www.bmogam.com. Please read before taking any investment decision.

The information provided in the marketing material does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds.

The funds or securities referred to herein are not sponsored, endorsed, issued, sold or promoted by MSCI, and MSCI bears no liability with respect to any funds or securities or any index on which such funds or securities are based. The prospectus contains a more detailed description of the limited relationship MSCI has with BMO Asset Management Limited and any related funds.

©2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by BMO Global Asset Management (Swiss) GmbH, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA). Telephone calls may be recorded.

© 2020 BMO Real Estate Partners LLP. Registered in England and Wales with number OC338377. Registered Office: 7 Seymour Street, London W1H 7JW. BMO REP Asset Management plc is a subsidiary of BMO Real Estate Partners LLP and are members of the BMO Financial Group, which is itself wholly-owned by the Bank of Montreal.

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mailto:[email protected]

http://www.bmogam.com/

Contact us

©2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by BMO Global Asset Management (Swiss) GmbH, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

Extensive worldwide investment capabilities

• Total focus on clients

• Comprehensive range of products and solutions

• Defined expertise – including a suite of specialist investment boutiques

BMO Global Asset Management (EMEA) – Head OfficeExchange House Primrose Street London EC2A 2NYTel: +44 (0) 20 7628 8000

bmogam.com

BMO Global Asset Management – Edinburgh6th Floor, Quartermile4, 7a Nightingale Way, Edinburgh EH3 9EGTel: +46 (0) 207 628 8000

CM021629 UK 06/2020

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f&c commercial property trust ltd (fcpt)...past performance should not be seen as an indication...

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