UK Commercial Property Trust has reported a 5.2% total return on net assets for the first half of 2015 and a share price return of 5.4% as the shares moved from a 6.3% to a 6.7% premium. The return was behind their MSCI benchmark (MSCI Balanced Monthly & Quarterly Funds, formerly known as the IPD Balanced Monthly & Quarterly Funds) which returned 6.2%. The dividend for the period is 1.84p, down from 2.2325p in the previous year. On an EPRA basis, the NAV rose to 85.3p from 83.7p.
Within the portfolio they made a number of disposals of properties they felt no longer suited their return objectives. In January, the sale of Pall Mall Court in Manchester and The Sovereign Centre, Weston-super-Mare for prices in line with valuation, moderated the Company’s shopping centre exposure. In June it was announced that the Company had sold 134-138 North Street, Brighton and agreed to the sale of 176-206 Kensington High Street, London, in two separate transactions. The total consideration for these two retail assets was £82.7m which was marginally ahead of their aggregate valuation as at 31 March 2015. The sale of Brighton combined profit-taking with the removal of a property with a low capital value from the portfolio, while the sale of Kensington High Street, into a strong investment market and after the implementation of a number of asset management initiatives, removed a large, low yielding asset with limited future rental growth and total return prospects. Following the period end, the Company purchased Eldon House, a 44,000 sq.ft office investment in the City of London, in an off market transaction for a price of £28.6m (incl. stamp duty). With a net initial yield of 4.6% and low rental rates relative to the market, this transaction gives the Company exposure to the vibrant City of London office sector through a property which is extremely well located given its proximity to two Crossrail stations and which offers a number of asset management opportunities.
It is expected that after the completion of the sale of Kensington High Street (pictured), the Company will have free cash of c£133m.
UK Commercial Property refinanced its £80m Lloyds facility which was due to expire in June 2015 with a £100m loan from Cornerstone Real Estate Advisers LLP, a member of the MassMutual Financial Services Group. The Company also negotiated down the interest rate payable on the existing £150m Barclays loan facility and extended this out to April 2020 from May 2018. As a result of this, the Company repaid the existing swaps in place and took out a new swap to match the extended maturity on this loan. In addition, the Company also secured a low cost £50m Revolving Credit Facility with Barclays which, although currently unutilised, provides the Investment Manager with a further, easily accessible resource should opportunities arise. The effect of these re-financings was to lower the blended rate of interest payable by the Company from 3.85% to 2.89%, resulting in interest savings of £1.6m a year, even given the increased borrowing. They say UK Commercial Property continues to be the lowest geared in its peer group with gross gearing standing at 18.5% as at 30 June 2015 (Net gearing: 9.6%).
UKCM : UK Commercial Property has firepower for new acquisitions